<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 1998
REGISTRATION NO. 333-63241
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ARGOSY EDUCATION GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
ILLINOIS 36-2855674 610000
(STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY STANDARD
JURISDICTION OF IDENTIFICATION NO.) INDUSTRIAL
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
TWO FIRST NATIONAL PLAZA
20 SOUTH CLARK STREET, 3RD FLOOR
CHICAGO, ILLINOIS 60603
TELEPHONE: (312) 899-9900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
MICHAEL C. MARKOVITZ
CHAIRMAN
TWO FIRST NATIONAL PLAZA
20 SOUTH CLARK STREET, 3RD FLOOR
CHICAGO, ILLINOIS 60603
TELEPHONE: (312) 899-9900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
MARK B. TRESNOWSKI LAWRENCE D. LEVIN
GERALD T. NOWAK MARK D. WOOD
KIRKLAND & ELLIS KATTEN MUCHIN & ZAVIS
200 EAST RANDOLPH DRIVE 525 WEST MONROE STREET, SUITE 1600
CHICAGO, ILLINOIS 60601 CHICAGO, ILLINOIS 60661
TELEPHONE: (312) 861-2000 TELEPHONE: (312) 902-5200
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 14, 1998
PROSPECTUS
SHARES
ARGOSY EDUCATION GROUP, INC.
CLASS A COMMON STOCK
--------
All of the shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), of Argosy Education Group, Inc. (the "Company") offered hereby
(the "Offering") are being offered by the Company.
Prior to the Offering there has been no public market for the Class A Common
Stock. It is currently estimated that the initial public offering price will be
between $ and $ per share. See "Underwriting" for information
relating to the factors to be considered in determining the initial public
offering price. Application has been made for inclusion of the Class A Common
Stock on the Nasdaq National Market under the symbol "ARGY."
Upon completion of the Offering, the Company will have shares of
Class A Common Stock and shares of Class B Common Stock, par value $.01
per share ("Class B Common Stock"), outstanding. The Company's Class A Common
Stock and Class B Common Stock (collectively, the "Common Stock") are
substantially identical except with respect to voting power and conversion
rights. The Class A Common Stock is entitled to one vote per share, and the
Class B Common Stock is entitled to ten votes per share. Immediately after the
Offering, Michael C. Markovitz, the Company's founder and Chairman, will own
100% of the Class B Common Stock (representing approximately % of the
aggregate voting power of the Common Stock, assuming no exercise of the
Underwriters' over-allotment option) and thus will control all matters
submitted to a vote of the holders of Common Stock. Each share of Class B
Common Stock converts automatically into one share of Class A Common Stock upon
sale or other transfer to a party other than a Permitted Transferee (as defined
herein). See "Description of Capital Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF MATERIAL RISKS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
Total (3)......................... $ $ $
- ------------------------------------------------------------------------------
</TABLE>
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(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses of the Offering, estimated at $ , payable
by the Company.
(3) The Company's sole shareholder has granted the Underwriters a 30-day option
to purchase up to an aggregate of additional shares of Class A
Common Stock on the same terms and conditions as the securities offered
hereby solely to cover over-allotments, if any. See "Underwriting." If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Selling Shareholder will be
$ , $ and $ , respectively. Proceeds to Company will not be
affected by exercise of the over-allotment option.
--------
The shares of Class A Common Stock are being offered by the several
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for
the shares of Class A Common Stock offered hereby will be available for
delivery on or about , 1999 at the offices of Salomon Smith Barney Inc.,
333 West 34th Street, New York, New York 10001.
--------
SALOMON SMITH BARNEY ABN AMRO INCORPORATED
, 1999
<PAGE>
[Inside front cover art]
Pictures of the Company's facilities and students together with the following
text:
ARGOSY
EDUCATION
GROUP
Argosy Education Group is a leading provider of for-profit postgraduate
education with a primary focus on doctoral level programs. The Company's
mission is to provide academically-oriented, practitioner-focused education in
fields with numerous employment opportunities and strong student demand.
AMERICAN SCHOOLS OF
PROFESSIONAL PSYCHOLOGY
ASPP grants postgraduate level degrees in a variety of specialties within the
field of clinical psychology. The Company offers a doctorate in clinical
psychology, master's of arts degrees in clinical psychology and professional
counseling and a master's of science degree in health services administration.
UNIVERSITY OF SARASOTA
U of S grants postgraduate and bachelor's level degrees in education, business
and behavioral science. Certain of the programs consist of an innovative
combination of distance learning and personal interaction, allowing students
to complete a significant percentage of the preparatory work for each course
at home in advance of an intensive in-person instructional period, typically
scheduled during breaks in the academic year.
MEDICAL INSTITUTE OF MINNESOTA
MIM offers associate degrees in a variety of allied health care fields. MIM
offers programs leading to certification as a veterinary technician,
diagnostic medical sonographer, histotechnician, medical assistant, medical
laboratory technician or radiologic technologist.
PRIMETECH INSTITUTE
PrimeTech offers diploma programs in network engineering, internet
engineering, software programming and paralegal studies.
VENTURA GROUP
Ventura publishes materials and holds workshops in select cities across the
United States to prepare individuals to take various national and state
administered oral and written health care licensure examinations in the fields
of psychology, social work, counseling, marriage and family therapy, and
marriage, family and child counseling.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK, INCLUDING BY OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING
SYNDICATE COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
Prospective investors should consider carefully, among other things, the
information set forth under "Risk Factors" in this Prospectus. Unless otherwise
noted or where the context otherwise requires, all information herein (i) gives
effect to a -for-one stock split of all outstanding shares of common stock
and the subsequent conversion of all outstanding shares of common stock into
shares of Class B Common Stock and authorization of the Class A Common Stock
(such stock split, authorization and conversion are collectively referred to in
this Prospectus as the "Stock Conversion") and (ii) does not give effect to the
exercise of the Underwriters' over-allotment option. As used in this
Prospectus, unless the context indicates otherwise, the term "Company" refers
to Argosy Education Group, Inc. and its subsidiaries, including all of their
schools and campuses; the term "school" means a campus or group of campuses
known by a single name (such as the American Schools of Professional Psychology
or the University of Sarasota); the term "campus" means a single location of
any school (such as the Rolling Meadows campus of the Illinois School of
Professional Psychology); and the term "institution" means a main campus and
its additional locations, as such are defined under regulations of the United
States Department of Education ("DOE"). References to fiscal years refer to the
Company's fiscal years ended September 30, 1994, eleven months ended August 31,
1995 and fiscal years ended August 31, 1996, 1997 and 1998.
THE COMPANY
The Company is a leading provider of for-profit postgraduate education with a
primary focus on doctoral level programs. The Company's mission is to provide
academically-oriented, practitioner-focused education in fields with numerous
employment opportunities and strong student demand. The Company's schools offer
programs in clinical psychology, education, business, allied health professions
and information technology and are approved and accredited to offer doctoral,
master's, bachelor's and associate degrees as well as to award diplomas. At
August 31, 1998, approximately 60% of the Company's students were enrolled in
doctoral programs. In 1997, the Company graduated approximately 335 clinical
psychology doctoral students out of approximately 4,000 clinical psychology
doctoral degrees conferred nationwide. The Company operates 14 campuses in
eight states and the Province of Ontario, Canada, with a total of approximately
4,500 students, representing 47 states and 30 foreign countries, enrolled as of
August 31, 1998. The Company's net revenue has grown from $8.1 million in
fiscal 1993 to $29.4 million in fiscal 1998, representing a compound annual
growth rate of approximately 29%.
The Company was founded in 1975, when the Company's Chairman, Michael C.
Markovitz, Ph.D., recognized a demand for a non-research oriented professional
school that would educate and prepare students for careers as clinical
psychology practitioners. To address this demand, the Company started the
Illinois School of Professional Psychology in Chicago, Illinois in 1976 and, in
its first year of operations, received several thousand applications for
admission to a class of 70 students for the doctorate in clinical psychology
("PsyD") degree. The continuing demand for high quality, practitioner-focused
psychology postgraduate education led the Company to expand the renamed
American Schools of Professional Psychology ("ASPP") to nine campuses located
across the United States. In response to a broader demand for quality career
education, the Company has expanded beyond the psychology curriculum with the
acquisitions of: (i) the University of Sarasota ("U of S"), a degree-granting
institution focusing primarily on postgraduate business and education (March
1992); (ii) the Medical Institute of Minnesota ("MIM"), a degree-granting
institution focusing on a variety of allied health professions (February 1998);
and (iii) PrimeTech Institute ("PrimeTech"), an institution granting diplomas
in computer programming and other aspects of information technology and in
paralegal studies (November 1998).
3
<PAGE>
In addition, the Company became the largest provider of postgraduate psychology
license examination preparation courses and materials in the United States by
its acquisition of the Ventura test preparation business ("Ventura") in August
1997. Through Ventura, the Company also provides professional licensure
examination materials and workshops for social work; marriage, family and child
counseling; marriage and family therapy; and counseling certification
examinations nationwide.
The Company operates the following schools:
. American Schools of Professional Psychology grants doctoral and master's
degrees in clinical psychology and related disciplines at nine campuses
located in Illinois (2), Minnesota, Georgia, Virginia, Hawaii, Arizona,
Florida and California. ASPP is accredited by the North Central
Association of Colleges and Schools ("NCA"), and four of its campuses are
accredited by the American Psychological Association ("APA"). ASPP's net
tuition revenue has grown from $7.1 million for fiscal 1993 to $17.6
million for fiscal 1998, representing a compound annual growth rate of
approximately 20%.
. University of Sarasota grants doctoral, master's and bachelor's degrees
at two campuses located in Sarasota and Tampa, Florida, and is preparing
to operate a campus in Southern California pending regulatory approval. U
of S is accredited by the Southern Association of Colleges and Schools
("SACS"). U of S's net tuition revenue has grown from $1.1 million for
fiscal 1993 to $5.5 million for fiscal 1998, representing a compound
annual growth rate of approximately 38%.
. Medical Institute of Minnesota grants associate degrees at one campus in
Minneapolis, Minnesota. MIM is institutionally accredited by the
Accrediting Bureau of Health Education Schools ("ABHES"), and
additionally holds individual programmatic accreditation appropriate to
each degree program offered. MIM's net tuition revenue was $2.5 million
for the seven-month period from February 3, 1998 (the date of
acquisition) to August 31, 1998.
. PrimeTech Institute awards diplomas at two campuses in Ontario, Canada,
and is preparing to operate a campus in Scarborough, Ontario pending
regulatory approval. PrimeTech's net tuition revenue was $2.7 million for
the ten-month period ended September 30, 1998.
In addition, Ventura publishes materials and holds workshops in select cities
across the United States to prepare individuals to take various national and
state administered oral and written health care licensure examinations in
psychology and other mental health disciplines. Ventura's net revenue was $3.8
million for the year ended August 31, 1998.
BUSINESS STRATEGY
The Company's mission is to provide academically-oriented, practitioner-
focused education in fields with numerous employment opportunities and strong
student demand. The key elements of the Company's business strategy are as
follows:
Focusing on Advanced Degrees. The Company is a leading for-profit provider of
postgraduate education in the United States. Approximately 60% of the Company's
students are enrolled in doctoral programs, with an additional 18% pursuing
master's degrees and the remainder pursuing bachelor's or associate degrees or
diplomas. Management believes that the Company's emphasis on advanced degree
programs provides greater predictability of tuition revenue and reduces
recruitment cost per enrolled student, as compared to lower level degree
programs, due to a number of factors, including the longer term of most
advanced degree programs, the higher student retention rates experienced in
more advanced degree programs and the narrower target markets for advanced
degree programs.
Focusing on Curricula with Practical Professional Applications. The Company
was founded to respond to a demand for postgraduate education which focuses on
practical professional applications instead of research.
4
<PAGE>
The Company's academic programs are designed to prepare students to work in
their chosen professions immediately upon graduation. This practitioner-focused
approach provides the additional benefits of attracting highly motivated
students and increasing student retention and graduate employment.
Refining and Adapting Educational Programs. Each of the Company's schools
strives to meet the changing needs of its students and changes in the
employment markets by regularly refining and adapting its existing educational
programs. To do so, the Company has implemented its Program for Institutional
Effectiveness Review ("PIER"). PIER is designed to provide periodic feedback
from senior management, faculty and students with a view toward consistently
improving the quality of each school's academic programs.
Emphasizing School Management Autonomy and Accountability. The Company
operates with a decentralized management structure in which local campus
management is empowered to make most of the day-to-day operating decisions at
each campus and is primarily responsible for the profitability and growth of
that campus. At the same time, the Company provides each of its schools with
certain services that it believes can be performed most efficiently and cost-
effectively by a centralized office. Such services include marketing,
accounting, information systems, financial aid processing and administration of
regulatory compliance. The Company believes this combination of decentralized
management and certain centralized services significantly increases its
operational efficiency.
GROWTH STRATEGY
The Company's objective is to achieve growth in revenue and profits while
consistently maintaining the integrity and quality of its academic programs.
The key elements of the Company's growth strategy are as follows:
Expanding Program Offerings. The Company continually engages in the
development of new and the expansion of existing curricular offerings at the
doctoral, master's, bachelor's, associate and diploma levels. Of the 17 degree-
granting programs currently offered by the Company, five have been introduced
since 1995. For example, in 1995 the Company introduced its doctorate in
business administration ("DBA") program to provide students with advanced level
business training and in 1997 the Company initiated its master's of science in
health services administration ("MSHSA") program to provide students with
training and problem solving skills from the areas of both business and social
sciences. Once new programs have proven successful at one school, the Company
seeks to expand them to its other schools which offer related programs.
Adding New Campuses. The Company seeks to expand its presence into new
geographic locations. Six of the Company's 14 campuses were developed by the
Company, either as new campuses or as additional locations of existing
campuses. The Company continually evaluates new locations for developing
additional campuses and believes that significant opportunities exist for doing
so. For example, of the 21 metropolitan areas in the United States with a
population in excess of two million persons, nine do not have a graduate school
of professional psychology that awards the PsyD degree.
Emphasizing Student Recruitment and Retention. The Company believes that it
can increase total enrollment at its campuses through the implementation of an
integrated marketing program that utilizes direct response and direct sales to
college and high school counselors. The Company has hired a marketing
professional at each of its campuses to focus both the marketing campaign and
overall recruitment effort of each campus within its targeted market. The
Company also believes it can increase its profitability through improvements in
student retention rates, as the cost of efforts to keep current students in
school are less than the expense of attracting new students.
5
<PAGE>
Expanding into Related Educational Services. The Company believes that
significant opportunities exist in providing educational services that are
related to its current program offerings. For example, through Ventura, the
Company has become a leading provider of test preparation programs for
psychology licensure examinations. These programs bring the Company in contact
with a significant number of current and future psychology practitioners, which
the Company believes can offer an opportunity to market additional educational
programs in the future.
Acquisitions. The Company believes that, in both the for-profit and not-for-
profit postgraduate education industry, most schools are small, stand-alone
entities without the benefits of centralized professional management, scale
economies in purchasing and advertising or the financial strength of a well-
capitalized parent company. The Company intends to capitalize on this
fragmentation by acquiring and consolidating attractive schools and educational
programs. The Company has acquired eight of its 14 campuses, five of which were
for-profit and three of which were not-for-profit, and the Ventura test
preparation business. The Company believes there are significant opportunities
to acquire schools which can serve as platforms for program and campus
expansion. Prime acquisition candidates are those that have the potential to be
quickly developed into profitable, accredited, degree-granting schools offering
programs consistent with the Company's mission.
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock offered by
the Company...................... shares
Common Stock to be outstanding
after the Offering:
Class A Common Stock............ shares (1)
Class B Common Stock............ shares
Total......................... shares
Use of Proceeds by the Company.... Repayment of certain indebtedness of the
Company, including notes payable to the
Company's sole shareholder, and for general
corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol........................... "ARGY"
</TABLE>
- --------
(1) Excludes an aggregate of shares which, prior to the consummation of
the Offering, will be reserved for issuance under the Company's 1998 Stock
Plan and Employee Stock Purchase Plan (each as defined below and
collectively, the "Stock Plans"). See "Management--Stock Plans."
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth certain consolidated financial and other
operating data for the Company. This information should be read in conjunction
with the consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, PRO FORMA
------------------------- AS ADJUSTED
1996 1997 1998 1998 (1)
------- ------- ------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER
SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue................. $17,840 $20,460 $29,352
Operating expenses:
Cost of education.......... 9,370 10,661 15,075
Selling expenses........... 263 516 1,102
General and administrative
expenses.................. 5,174 5,432 9,104
Related party expense (2).. 1,710 993 2,271
------- ------- ------- ---
Total operating expenses. 16,517 17,602 27,552
------- ------- -------
Income from operations...... 1,323 2,858 1,800
Interest income (expense),
net........................ 249 390 (244)
Other income (expense), net. 21 (48) (12)
------- ------- -------
Income before provision for
income taxes (3)........... 1,593 3,200 1,544
Provision for income taxes
(3)........................ 30 37 29
------- ------- ------- ---
Net income.................. $ 1,563 $ 3,163 $ 1,515
======= ======= ======= ===
Basic and diluted earnings
per share (4)(5):
Historical................. $ 938 $ 1,899 $ 909
Pro forma as adjusted......
Weighted average common
shares outstanding--basic
and diluted (4)(5)......... 1,666 1,666 1,666
OTHER DATA:
EBITDA (6).................. $ 1,722 $ 3,296 $ 2,738
EBITDA margin (6)........... 9.7% 16.1% 9.3%
Cash flows from:
Operating activities....... $ 2,736 $ 3,908 $ 2,582
Financing activities....... (124) 5,193 (3,853)
Investing activities....... (392) (9,123) (226)
Student population (7)...... 2,858 3,253 4,514
Number of campuses (8)...... 8 8 10
</TABLE>
<TABLE>
<CAPTION>
AS OF AUGUST 31, 1998
-----------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
ACTUAL (9) (9)(10)
------- --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments..................................... $ 3,843 $ 3,843
Working capital.................................. 2,459 (6,952)
Total assets..................................... 23,475 18,077
Long-term debt (excluding current maturities).... 5,165 5,165
Shareholders' equity (deficit)................... 8,922 (213)
</TABLE>
7
<PAGE>
- --------
(1) Pro forma for (i) the elimination of the management fee the Company paid
to MCM Management Corporation ("Management Corp") of approximately
$2,271,000; (ii) an increase in general and administrative expenses
reflecting compensation to be paid to Dr. Markovitz under the terms of his
employment agreement, which would have been approximately $200,000 in
fiscal 1998; and (iii) a provision for federal and state corporate income
taxes at a combined effective income tax rate of 40%, and as adjusted for
the Offering and the application of the net proceeds therefrom as
described under "Use of Proceeds," as if such transactions had occurred on
September 1, 1997.
(2) Represents amounts paid to Management Corp., an affiliate of Michael C.
Markovitz, for services rendered by Dr. Markovitz during the period
presented. Dr. Markovitz is the sole shareholder and employee of
Management Corp. Dr. Markovitz did not receive any compensation for
services rendered to the Company, other than through this management fee.
Through Management Corp., Dr. Markovitz provides services characteristic
of a chief executive officer, including strategic direction and oversight
for the Company, daily management oversight and consultation on business
acquisitions and other corporate business matters. Following the Offering,
Dr. Markovitz will serve as the Company's Chairman and perform the
services Management Corp. performed in the past as an employee of the
Company. Dr. Markovitz will enter into an employment agreement that
provides for an initial annual base salary of $200,000 plus performance-
based compensation, which is currently expected to be paid in the form of
stock options. Dr. Markovitz's anticipated cash compensation has been
classified as general and administrative expenses in the pro forma as
adjusted statement of operations data.
(3) Prior to the Offering, the Company was an S corporation and not subject to
federal (and certain state) corporate income taxes.
(4) Weighted average common shares outstanding used in computing historical
and pro forma basic and diluted earnings per share consists of only actual
common shares outstanding, as the Company has no common stock equivalents.
(5) Pro forma as adjusted weighted average common shares outstanding for the
year ended August 31, 1998 reflects the issuance in the Offering of
shares attributable to distributions paid in excess of earnings
and the repayment of indebtedness as described in "Use of Proceeds," as if
the Offering had occurred at the beginning of the period presented.
(6) "EBITDA" equals income from operations plus depreciation and amortization.
EBITDA margin is EBITDA as a percentage of net revenue. EBITDA and EBITDA
margin are presented because such data is used by certain investors to
assess liquidity and ability to generate cash. The Company considers
EBITDA to be an indicative measure of the Company's operating performance
because EBITDA can be used to measure the Company's ability to service
debt, fund capital expenditures and expand its business; however, such
information should not be considered as an alternative to net income,
operating profit, cash flows from operations, or any other operating or
liquidity performance measure prescribed by generally accepted accounting
principles ("GAAP"). Cash expenditures for various long-term assets,
interest expense and income taxes that have been and will be incurred are
not reflected in the EBITDA presentation and could be material to an
investor's understanding of the Company's liquidity and profitability. The
Company's calculation of EBITDA may not be comparable to that of other
companies.
(7) Reflects actual student population as of the end of the period indicated,
not including participants in Ventura test preparation programs.
(8) Reflects the total number of campuses operated by the Company as of the
end of the period indicated.
(9) Gives effect to (i) the conversion of the Company from an S corporation to
a C corporation and (ii) the payment of the Distribution (as defined),
which would have been approximately $9.7 million, as if such transactions
had occurred on August 31, 1998.
(10) As adjusted for the Offering and the application of the net proceeds
therefrom as described under "Use of Proceeds," as if such transactions
had occurred on August 31, 1998.
8
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the
Company and its business before purchasing any shares of Class A Common Stock
offered hereby. This Prospectus contains certain forward-looking statements
that are based on the beliefs of, as well as assumptions made by and
information currently available to, the Company's management. The words
"believe," "anticipate," "intend," "estimate," "expect" and similar
expressions are intended to identify such forward-looking statements, but are
not the exclusive means of identifying such statements. Such statements
reflect the current views of the Company or its management and are subject to
certain risks, uncertainties and assumptions, including, but not limited to,
those set forth in the following risk factors. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, the Company's actual results, performance or achievements in 1998
and beyond could differ materially from those expressed in, or implied by,
such forward-looking statements. Subject to its obligations under federal
securities laws, the Company undertakes no obligation to release publicly any
revisions to any such forward-looking statements that may reflect events or
circumstances after the date of this Prospectus.
SUBSTANTIAL DEPENDENCE ON STUDENT FINANCIAL AID; POTENTIAL ADVERSE EFFECTS OF
REGULATION
Students attending the Company's schools finance their education through a
combination of individual resources (including earnings from full or part-time
employment), government-sponsored financial aid and other sources, including
family contributions and scholarships provided by the Company. The Company
estimates that over 51% of the students at its U.S. schools receive some
government-sponsored (federal or state) financial aid. For fiscal 1998,
approximately 46%, or $13.0 million, of the Company's net tuition revenue (on
a cash basis) was derived from some form of such government-sponsored
financial aid received by the students enrolled in its schools. In addition,
approximately 70% of the students attending PrimeTech receive Canadian
government-sponsored financial aid. A reduction in U.S. or Canadian government
funding levels could lead to lower enrollments at the Company's schools and
require the Company to seek alternative sources of financial aid for its
students. If student enrollments are lowered or such alternative sources
cannot be arranged, the Company's business, results of operations and
financial condition would be materially and adversely affected.
POTENTIAL ADVERSE EFFECTS OF FAILURE TO COMPLY WITH U.S. FINANCIAL AID
REQUIREMENTS
The Company and its U.S. schools are subject to extensive regulation by
federal and state governmental agencies and accrediting bodies. In particular,
the Higher Education Act of 1965, as amended (the "HEA"), and the regulations
promulgated thereunder by the DOE subject the Company's U.S. schools to
significant regulatory scrutiny on the basis of numerous standards that
schools must satisfy in order to participate in the various federal student
financial assistance programs under Title IV of the HEA (the "Title IV
Programs"). Among other things, the standards under the HEA and its
implementing regulations with which the Company's U.S. institutions must
comply: (i) require each institution to maintain a rate of default by its
students on federally guaranteed or funded student loans that is below a
specified rate, (ii) limit the proportion of an institution's net revenues
that may be derived from the Title IV Programs, (iii) establish certain
financial responsibility and administrative capability standards, (iv) provide
that an institution or its parent corporation which engages in certain types
of transactions that would result in a change in ownership and control of that
institution or corporation must reestablish the institution's eligibility for
Title IV Program funds, (v) prohibit the payment of certain incentives to
personnel engaged in student recruiting and admissions activities related to
educational programs eligible for Title IV Program funds and (vi) require
certain short-term educational programs to achieve stringent completion and
placement outcomes in order to be eligible for Title IV Program funds. Under
the HEA and its implementing regulations, certain of these standards must be
complied with on an institutional basis. For purposes of these standards, the
regulations define an institution as a main campus and its additional
locations, if any. Under this definition, each of the Company's U.S. campuses
is a separate institution.
9
<PAGE>
The Company is required to engage an independent auditor to conduct a
compliance review of each U.S. institution's Title IV Program operations and
to submit the results of such audits to the DOE on an annual basis. The
Company has complied with its obligations in this regard on a timely basis.
Based upon the most recent annual compliance audits of the Company's U.S.
institutions and upon other reviews and audits by independent and governmental
entities relating to compliance with the requirements established by the HEA
and the regulations thereunder, the Company's institutions have been found to
be in substantial compliance with the requirements for participating in the
Title IV Programs, and the Company believes that its institutions continue to
be in substantial compliance with those requirements. The Company believes its
institutions to be in substantial compliance with the Title IV requirements
because there are no areas of material non-compliance that would bring into
question the continued eligibility of the Company's institutions to
participate in Title IV Programs.
Under the rule limiting the amount of net revenues that may be derived from
the Title IV Programs, commonly referred to as the "85/15 Rule," an
institution would be disqualified from participation in those programs if more
than 85% of its net revenues (on a cash basis) in any fiscal year was derived
from the Title IV Programs. The Company has calculated that, since this
requirement took effect in 1995, none of the Company's U.S. institutions
derived more than 80% of its net revenue (on a cash basis) from the Title IV
Programs for any fiscal year, and that for fiscal 1998 the range for the
Company's U.S. institutions that participated in Title IV Programs was from
approximately 48% to approximately 77%. Congress has recently enacted
legislation that will change the 85/15 Rule to a "90/10 Rule." See "Risk That
Legislative Action Will Reduce Financial Aid Funding or Increase Regulatory
Burden."
The HEA also mandates specific regulatory responsibilities for each of the
following components of the higher education regulatory triad: (i) the federal
government through the DOE; (ii) the non-governmental accrediting agencies
recognized by the DOE; and (iii) state postsecondary education regulatory
bodies. As in the case of the HEA and its implementing regulations, the
regulations, standards and policies of the accrediting agencies and state
education regulatory bodies frequently change, and changes in, or new
interpretations of, applicable laws, regulations, standards or policies could
have a material adverse effect on the schools' accreditation, authorization to
operate in various states, permissible activities, receipt of funds under the
Title IV Programs or costs of doing business. The Company's failure to
maintain or renew any required regulatory approvals, accreditations or
authorizations would have a material adverse effect on the Company's business,
results of operations and financial condition. See "Financial Aid and
Regulation--Federal Oversight of the Title IV Programs--Increased Regulatory
Scrutiny."
In the event of a failure of the Company to comply with applicable Title IV
Program requirements, the affected institution could be required to repay
improperly disbursed Title IV Program funds and could be assessed an
administrative fine of up to $25,000 per violation of Title IV Program
requirements. In addition, the DOE could transfer that institution from the
"advance" system of payment of Title IV Program funds, under which an
institution requests and receives funding from the DOE in advance based on
anticipated needs, to the "reimbursement" or cash monitoring system of
payment, under which an institution must disburse funds to students and
document their eligibility for Title IV Program funds before receiving funds
from the DOE or from Federal Family Education Loan ("FFEL") program lenders.
Violations of Title IV Program requirements could also subject an institution
or the Company to sanctions under the False Claims Act as well as other civil
and criminal penalties. Penalties under the False Claims Act can amount to up
to $10,000 per violation, in addition to treble damages which may be sought by
the government as a result of the action constituting the false claim. The
failure by any of the Company's institutions to comply with applicable
federal, state or accrediting agency requirements could result in the
limitation, suspension or termination of that institution's ability to
participate in the Title IV Programs or the loss of state licensure or
accreditation. Any such event could have a material adverse effect on the
Company's business, results of operations or financial condition. There are no
proceedings for any such purposes pending against any of the Company's
institutions, and the Company has no reason to believe that any such
proceeding is contemplated. See "Financial Aid and Regulation--Federal
Oversight of the Title IV Programs."
10
<PAGE>
RISK THAT LEGISLATIVE ACTION WILL REDUCE FINANCIAL AID FUNDING OR INCREASE
REGULATORY BURDEN
On October 1, 1998, legislation was enacted which reauthorized the student
financial assistance programs of the HEA ("1998 Amendments"). Regulations to
implement the 1998 Amendments are subject to negotiated rulemaking and,
therefore, the Amendments will likely not become effective until July 1, 2000.
The 1998 Amendments will continue many of the current requirements for student
and institutional participation in the Title IV Programs. The 1998 Amendments
also will change or modify some requirements. These changes and modifications
include increasing the revenues that an institution may derive from Title IV
funds from 85% to 90% and revising the requirements pertaining to the manner
in which institutions must calculate refunds to students. The 1998 Amendments
also contain a provision that will prohibit institutions that are ineligible
for participation in Title IV loan programs due to student default rates in
excess of applicable thresholds from participating in the Pell Grant program.
Other changes expand participating institutions' ability to appeal loss of
eligibility owing to such default rates. The 1998 Amendments will further
permit an institution to avoid the interruption of eligibility for the Title
IV Programs upon a change of ownership which results in a change of control by
submitting a materially complete application for recertification of
eligibility within 10 business days of such a change of ownership. The Company
does not believe that the 1998 Amendments will adversely or materially affect
its business operations. None of the Company's institutions derives more than
80% of its revenue from Title IV funds and no institution has student loan
default rates in excess of current thresholds. The Company also believes that
its current refund policy satisfies the new refund requirements.
The process of reauthorizing the HEA by the U.S. Congress takes place
approximately every five years. The Title IV Programs are subject to
significant political and budgetary pressures during and between
reauthorization processes. There can be no assurance that government funding
for the Title IV Programs will continue to be available or maintained at
current levels. A reduction in government funding levels could lead to lower
enrollments at the Company's schools and require the Company to seek
alternative sources of financial aid for students enrolled in its schools.
Given the significant percentage of the Company's net revenue that is
indirectly derived from the Title IV Programs, the loss of or a significant
reduction in Title IV Program funds available to students at the Company's
schools would have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, there can be no
assurance that current requirements for student and institutional
participation in the Title IV Programs will not change or that one or more of
the present Title IV Programs will not be replaced by other programs with
materially different student or institutional eligibility requirements.
POTENTIAL LOSS OF STUDENT FINANCIAL AID IN THE EVENT OF FAILURE TO MEET
FINANCIAL RESPONSIBILITY STANDARDS
The HEA and its implementing regulations establish specific standards of
financial responsibility that must be satisfied in order to qualify for
participation in the Title IV Programs. Under standards effective prior to
July 1, 1998, and which may continue to be applied to demonstrate financial
responsibility for an institution's fiscal year beginning on or after July 1,
1997 and on or before June 30, 1998, an institution must: (i) have an acid
test ratio (defined as the ratio of cash, cash equivalents and current
accounts receivable to current liabilities) of at least 1:1 at the end of each
fiscal year, (ii) have a positive tangible net worth at the end of each fiscal
year and (iii) not have a cumulative net operating loss during its two most
recent fiscal years that results in a decline of more than 10% of the
institution's tangible net worth at the beginning of that two-year period. In
order to make this determination, the DOE requires an institution to submit
annual audited financial statements prepared on an accrual basis. As of August
31, 1998, the Company and each of its institutions were in full compliance
with the HEA financial responsibility standards.
An institution that is determined by the DOE not to meet any one of the
standards of financial responsibility is nonetheless entitled to participate
in the Title IV Programs if it can demonstrate that it is financially
responsible on an alternative basis. An institution may do so by posting
surety, either in an amount equal to 50% (or greater, as the DOE may require)
of total Title IV Program funds received by students enrolled at such
institution during the prior year or in an amount equal to 10% (or greater, as
the DOE may require) of such prior year's funds if the institution also agrees
to provisional certification and to transfer to the reimbursement or cash
monitoring
11
<PAGE>
system of payment for its Title IV Program funds. The DOE has interpreted this
surety condition to require the posting of an irrevocable letter of credit in
favor of the DOE. Under a separate standard of financial responsibility, if an
institution has made late Title IV Program refunds to students in its prior
two years, the institution is required to post a letter of credit in favor of
the DOE in an amount equal to 25% of total Title IV Program refunds paid by
the institution in its prior fiscal year. None of the Company's institutions
has made late Title IV Program refunds requiring it to post a letter of credit
in favor of the DOE.
In November 1997, the DOE issued new regulations, which took effect July 1,
1998 and revised the DOE's standards of financial responsibility. These new
standards replace the numeric tests described above with three different
ratios: an equity ratio, a primary reserve ratio and a net income ratio, which
are weighted and added together to produce a composite score for the
institution. The Company and each of its institutions may demonstrate
financial responsibility by meeting the new standards or the old standards for
fiscal years that began on or after July 1, 1997 but on or before June 30,
1998.
The new standards employ a ratio methodology under which an institution need
only satisfy a single standard--the composite score standard. The ratio
methodology takes into account an institution's total financial resources and
provides a combined score of the measures of those resources along a common
scale (from negative 1.0 to positive 3.0). It allows a relative strength in
one measure to mitigate a relative weakness in another measure.
If an institution achieves a composite score of at least 1.5, it is
financially responsible without further oversight. If an institution achieves
a composite score from 1.0 to 1.4, it is in the "zone," is subject to
additional monitoring, and may continue to participate as a financially
responsible institution for up to three years. Additional monitoring may
require the school to (i) notify the DOE, within 10 days of certain changes,
such as an adverse accrediting action; (ii) file its financial statements
earlier than the six month requirement following the close of the fiscal year;
and (iii) subject the school to a cash monitoring payment method. If an
institution achieves a composite score below 1.0, it fails to meet the
financial responsibility standards unless it qualifies under the provisions of
an alternative standard (i.e., letter of credit equal to 50% of the Title IV
program funds expended from the prior fiscal year or equal to at least 10% of
the Title IV program funds expended from the prior fiscal year and provisional
certification status). The institution may also be placed on the cash
monitoring payment method or the reimbursement payment method.
The Company applied these new regulations to the Company's financial
statements as of August 31, 1998 and determined that the Company and each of
its institutions satisfied the new standards. The composite score and the
individual score for each of the three ratios, for the Company and each of its
institutions is set forth below.
<TABLE>
<CAPTION>
PRIMARY NET
COMPOSITE RESERVE EQUITY INCOME
SCORE RATIO RATIO RATIO
--------- ------- ------ ------
<S> <C> <C> <C> <C>
The Company..................................... 1.52 .42 .28 .82
Institutions:
ASPP.......................................... 2.13 .75 .75 .63
U of S........................................ 1.50 .31 .29 .90
MIA........................................... 1.97 .90 .92 .15
</TABLE>
POTENTIAL LOSS OF STUDENT FINANCIAL AID IN THE EVENT OF HIGH STUDENT LOAN
DEFAULT RATES
The Company is substantially dependent on continued participation by its
institutions in the student loan programs included in the Title IV Programs.
For fiscal 1998 federally guaranteed or funded student loans represented
approximately 46%, or $13.0 million, of the Company's net U.S. tuition revenue
(on a cash basis). Under the HEA, an institution could lose its eligibility to
participate in some or all of the Title IV Programs if the rate of defaults of
its students on their FFEL loans (referred to as the "cohort default rate")
exceeds specified rates for specified periods of time. An institution's annual
cohort default rate on FFEL loans, including a
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<PAGE>
"weighted average" cohort default rate for institutions that participate in
this loan program, is calculated as the rate at which borrowers scheduled to
begin repayment on such loans in one year default on those loans by the end of
the following year. If an institution's cohort default rate is 25% or greater
in any one of the three most recent federal fiscal years, the DOE may
determine that the institution lacks administrative capability and may place
that institution on "provisional certification" status for up to four years.
Provisional certification does not limit an institution's access to Title IV
Program funds, but does subject that institution to closer review by the DOE
and possible summary adverse action if that institution commits violations of
Title IV Program requirements. If an institution has cohort default rates of
25% or greater for three consecutive federal fiscal years, that institution
will no longer be eligible to participate in the FFEL programs for the
remainder of the federal fiscal year in which the determination of
ineligibility is made and for the two subsequent federal fiscal years. An
institution whose cohort default rate for any federal fiscal year exceeds 40%
may have its eligibility to participate in all of the Title IV Programs
limited, suspended or terminated. In addition, if an institution's cohort
default rate for loans under the Federal Perkins Loan ("Perkins") program
exceeds 15% for any federal award year, the DOE may determine that the
institution lacks administrative capability and place the institution on
provisional certification status for up to three years. None of the Company's
institutions has published FFEL or Perkins cohort default rates of 15% or
greater for any of the past three federal fiscal years. In 1995, the range of
FFEL cohort default rates of the Company's institutions was from 2.2% to
10.9%. The range of preliminary FFEL cohort default rates of the Company's
institutions for fiscal 1996 was from zero to 7.4%. See "Financial Aid and
Regulation--Federal Oversight of the Title IV Programs--Cohort Default Rates."
LOSS OF STUDENTS, FACULTY AND FINANCIAL AID PROGRAM PARTICIPATION IN THE EVENT
OF A FAILURE TO MAINTAIN ACCREDITATIONS
The Company believes that the accreditation of its institutions is a
significant factor in its students' decisions to attend, and in its faculty
members' decisions to teach at, the Company's schools. Any failure to maintain
accreditation could have a material adverse effect on the Company's ability to
attract and retain qualified students and faculty. In addition, in order to
participate in the Title IV Programs, an institution must be accredited by an
accrediting agency recognized by the DOE. Accreditation is a non-governmental
process through which an institution submits to qualitative review by an
organization of peer institutions, based on the standards of the accrediting
agency and the stated aims and purposes of the institution. Certain states
also require institutions to maintain accreditation as a condition of
continued authorization to grant degrees. In addition, certain states require
various health professionals, including clinical psychologists, to have
graduated from a school with professional accreditation in order to qualify
for a license to practice in such state. Each of the Company's U.S.
institutions is accredited by an accrediting agency recognized by the DOE and
certain of the campuses maintain programmatic accreditation from the
applicable professional organization, such as the American Psychological
Association. The HEA requires accrediting agencies recognized by the DOE to
review and monitor many aspects of an institution's operations and to take
appropriate action when the institution fails to comply with the accrediting
agency's standards. Any failure of the Company's institutions to maintain
their accreditations would have a material adverse effect on the Company's
business, results of operations and financial condition. See "Financial Aid
and Regulation--Accreditation."
DISCONTINUANCE OF OPERATIONS AND LOSS OF FINANCIAL AID PROGRAM PARTICIPATION
IN THE EVENT OF A FAILURE TO MAINTAIN STATE LICENSES OR AUTHORIZATIONS
In order to operate and award degrees and diplomas, and to participate in
the Title IV Programs, a campus must be licensed or authorized to offer its
programs of instruction by the relevant agencies of the state in which such
campus is located. Each state has its own standards and requirements for
licensure or authorization, which vary substantially among the states.
Typically, state laws require that a campus demonstrate that it has the
personnel, resources and facilities appropriate to its instructional programs.
Each of the Company's U.S. campuses is licensed or authorized by the relevant
agencies of the state in which such campus is located. Additionally, if any of
the Company's campuses were to lose its state license or authorization, such
campus would not only lose its eligibility to participate in the Title IV
Programs, but would be required to discontinue
13
<PAGE>
operations. Although the Company believes that all of its campuses maintain
adequate personnel, resources and facilities, the loss by any of the Company's
institutions of their state licenses or authorizations would have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Financial Aid and Regulation--State Authorization."
LOSS OF FINANCIAL AID PROGRAM PARTICIPATION IN THE EVENT OF A CHANGE OF
OWNERSHIP OR CONTROL
When an institution undergoes a "change of ownership" that results in a
"change of control," as defined in the HEA and applicable regulations, that
institution becomes ineligible to participate in the Title IV Programs and may
receive and disburse only certain previously committed Title IV Program funds
to its students until it has applied for and received recertification from the
DOE. This standard applies both to the Company and to any institution acquired
by the Company. Approval of an application for recertification must be based
upon a determination by the DOE that the institution under its new ownership
is in compliance with the requirements of institutional eligibility. The time
required to act on such an application can vary substantially and may take
several months. If an institution is recertified following a change of
ownership, it will be on a provisional basis. Provisional certification does
not limit an institution's access to Title IV Program funds, but does subject
that institution to closer review by the DOE and possible summary adverse
action if that institution commits violations of Title IV Program
requirements. The 1998 Amendments, which will not likely become effective
until July 1, 2000, will permit an institution to avoid the interruption of
eligibility for the Title IV Programs upon a change of ownership which results
in a change of control by submitting a materially complete application for
recertification of eligibility within 10 business days of such a change of
ownership.
Under the HEA and its implementing regulations, a "change of ownership"
resulting in a "change in control" would occur upon the transfer of a
controlling interest in the voting stock of an institution or such
institution's parent corporation. With respect to a publicly-traded
corporation, which the Company will be following consummation of the Offering,
a change of ownership resulting in a change in control occurs when there is an
event that would obligate that corporation to file a Current Report on Form 8-
K with the Securities and Exchange Commission (the "Commission") disclosing a
change of control. A change of ownership and control also could require an
institution to reaffirm its state authorization and accreditation. The
requirements of states and accrediting agencies with jurisdiction over the
Company's schools vary widely in this regard. See "Financial Aid and
Regulation--Federal Oversight of the Title IV Programs--Restrictions on
Acquiring or Opening Additional Schools and Adding Educational Programs."
The Company believes that the Offering will not constitute a change of
ownership resulting in a change in control under the HEA or DOE regulations
because of Dr. Markovitz's continued voting control. However, if the Offering
were determined to constitute a change of ownership resulting in a change in
control under state and/or accrediting agency standards, the Company would be
required to reestablish the state authorization and accreditation of each of
the affected U.S. campuses. Based upon its review of applicable state and
accrediting agency standards, the Company does not believe that the Offering
will constitute a change of ownership resulting in a change of control for
state authorization or accreditation purposes. The Company is in the process
of obtaining agreement from each of the relevant agencies to such effect.
Once the Company is deemed to be publicly traded, the potential adverse
implications of a change of ownership resulting in a change in control could
influence future decisions by the Company and its shareholders regarding the
sale, purchase, transfer, issuance or redemption of the Company's capital
stock. Under certain circumstances, a sale or transfer by Michael C. Markovitz
of a substantial amount of Class B Common Stock (which would convert upon such
sale or transfer to Class A Common Stock) could constitute a change in
ownership resulting in a change of control. Under the Company's Articles of
Incorporation and Bylaws, the Class B Common Stock will automatically convert
into Class A Common Stock upon sale or transfer, except transfers to certain
family members and trusts of Dr. Markovitz. See "--Voting Control by Principal
Shareholder."
14
<PAGE>
DEPENDENCE ON CANADIAN FINANCIAL AID; POTENTIAL ADVERSE EFFECTS OF CANADIAN
REGULATION
Approximately 70% of the students attending PrimeTech receive student
financial assistance from Canadian federal and/or provincial financial aid
programs. Specifically, Canadian students are eligible to receive loans under
the Canada Student Loan ("CSL") program. Students who are residents of the
province of Ontario receive financial assistance under both the CSL program
and the Ontario Student Assistance Plan ("OSAP").
To enable its students to receive such financial aid, a Canadian institution
must meet certain eligibility standards to administer these programs and must
comply with extensive statutes, rules, regulations and requirements. In
particular, to maintain its right to administer Ontario student financial
assistance programs, an institution, such as PrimeTech, must, among other
things, be registered and in good standing under the Private Vocational
Schools Act ("PVSA") and must be approved by the Ontario Ministry of Education
and Training as an eligible institution. Additionally, the Company may not
operate a private vocational school in the province of Ontario unless such
school is registered under the PVSA. Any failure of PrimeTech or the Company
to meet the eligibility standards or comply with the applicable statutes,
rules, regulations and requirements could have a material adverse effect on
the Company's business, results of operations or financial condition.
The legislative, regulatory and other requirements relating to student
financial assistance programs in Ontario are subject to change by applicable
governments due to political and budgetary pressures, and any such change may
affect the eligibility for student financial assistance of the students
attending PrimeTech which, in turn, could materially adversely affect the
Company's business, results of operations or financial condition. See
"Financial Aid and Regulation--Canadian Regulation."
EXPANSION AND ACQUISITION PLANS MAY PRESENT DIFFICULTIES
As part of its business strategy, the Company intends to continue to expand
its operations through the expansion of existing programs, the establishment
of new schools and programs and the acquisition of existing institutions. The
organic development of new schools, locations and programs poses unique
challenges and requires the Company to make investments in management, capital
expenditures, marketing expenses and other resources different, and in some
cases greater, than those required with respect to the operation of acquired
schools. To open a new school, the Company is required to obtain appropriate
state or provincial approvals and accrediting agency authorizations. In
addition, to be eligible for Title IV Program funding, such schools need
federal authorization and approvals. In the case of entirely separate, free
standing U.S. institutions, a minimum of two years' operating history is
required for them to be eligible for Title IV Program funding.
Acquisitions involve a number of special risks and challenges, including the
diversion of management's attention, integration of the operations and
personnel of acquired companies, adverse short-term effects on reported
operating results and the possible loss of key employees. Continued growth
through acquisitions may also subject the Company to unanticipated business or
regulatory uncertainties or liabilities. In addition, when the Company
acquires an existing school, a significant portion of the purchase price for
such school typically will be allocated to goodwill and other intangibles
(e.g., intellectual property and non-competition agreements). The Company
amortizes goodwill over periods of 15 to 40 years and other intangible assets
over periods of two to ten years. In addition, the Company's acquisition of a
school would constitute a change in ownership resulting in a change of control
with respect to such school for purposes of eligibility to participate in the
Title IV Programs and for state licensing and accreditation purposes. See "--
Potential Adverse Effects of Regulation; Loss of Financial Aid Program
Participation in the Event of a Change of Ownership or Control." Generally,
the Company intends to acquire schools subject to the condition that they be
recertified promptly for such eligibility by the DOE. The failure of the
Company to manage its expansion and acquisition program effectively could have
a material adverse effect on the Company's business, results of operations or
financial condition.
There can be no assurance that suitable expansion or acquisition
opportunities will be identified or can be acquired on acceptable terms or
that any new or acquired institutions can be operated profitably or
successfully
15
<PAGE>
integrated into the Company's operations. Growth through expansion or
acquisition also could involve other risks, including the diversion of
management's attention from normal operating activities, the inability to find
appropriate personnel to manage the Company's expanding operations and the
possibility that new or acquired schools will be subject to unanticipated
business or regulatory uncertainties or liabilities.
DIFFICULTIES IN ENTERING NEW BUSINESS AREAS
Historically, the Company's primary business activity has been providing
postgraduate education in the field of clinical psychology. Since 1992, the
Company has also been providing postgraduate degrees in education and
business. Through its acquisitions of Ventura (August 1997), MIM (February
1998) and PrimeTech (November 1998), the Company has recently begun providing
programs at the associate and diploma level and publishing materials and
holding workshops for mental health licensure preparation. The Company may not
be able to perform in these areas at the level it has historically performed
in its traditional business activities.
REVENUE GROWTH OR OPERATING MARGINS MAY DECLINE DUE TO COMPETITION
The postsecondary education market in the United States is highly fragmented
and competitive, with no private or public institution enjoying a significant
market share. The Company competes for students with postgraduate, four-year
and two-year degree granting institutions, which include non-profit public and
private colleges, universities and proprietary institutions. An attractive
employment market also reduces the number of students seeking postgraduate
degrees, thereby increasing competition for potential postgraduate students.
Management believes that competition among educational institutions is based
on the quality of educational programs, location, perceived reputation of the
institution, cost of the programs and employment opportunities for graduates.
Certain public and private colleges and universities may offer programs
similar to those of the Company at a lower tuition cost due in part to
governmental subsidies, government and foundation grants, tax deductible
contributions or other financial resources not available to proprietary
institutions. Other proprietary institutions also offer programs that compete
with those of the Company. Moreover, there is an increase in competition in
the specific educational markets served by the Company. For example, excluding
PsyD programs offered by the Company, in the 1992 academic year there were 29
PsyD programs existing in the United States, while in the 1997 academic year
there were 36 PsyD programs in the United States. Certain of the Company's
competitors in both the public and private sector have greater financial and
other resources than the Company. There can be no assurance that competitive
factors will not have a material adverse effect on the Company's enrollment
rates, pricing or recruitment costs and, as a result, on its revenue growth or
operating margins. See "Business--Competition."
DEPENDENCE ON CERTAIN INDUSTRIES
The Company's schools offer programs in clinical psychology, education,
business, allied health professions and information technology, and the demand
for the Company's educational programs is correlated to employment
opportunities in these particular markets. For example, the Company believes
that managed care and other health care cost containment initiatives can lead
to reduced compensation for health care providers such as clinical
psychologists and reduced demand for psychologists with advanced degrees such
as those offered by the Company, thereby having an adverse impact on the
demand for certain of the programs offered by the Company. These and other
adverse economic and market conditions in the industries that employ graduates
of the Company's schools could have a material adverse effect on the business,
financial condition or results of operations of the Company. See "Business--
Graduate Employment."
RELIANCE ON KEY PERSONNEL
The operation of the Company requires managerial, operational and academic
expertise. In particular, the Company is dependent upon the management and
leadership skills of a number of its senior executives, including its
Chairman, Michael C. Markovitz, its President, Harold J. O'Donnell, and its
Chief Financial Officer, Charles T. Gradowski, as well as on the skills of the
deans of its various institutions and its faculty members. The nature
16
<PAGE>
of the skills required to manage the Company and teach in its schools affords
the Company's key employees substantial opportunities for alternative
employment, and there can be no assurance that the Company will continue to be
successful in attracting and retaining such personnel. The Company does not
maintain "key man" life insurance policies on any of its key employees. The
failure of the Company to attract and retain key personnel could have a
material adverse effect on the Company's business, results of operations or
financial condition. See "Management."
YEAR 2000 PROBLEM
The "Year 2000 Problem" is the potential for computer processing errors
resulting from the use of computer programs that have been written using two
digits, rather than four, to denote a year (e.g., using the digits "98" to
denote 1998). Computer programs using this nomenclature can misidentify
references to dates after 1999 as meaning dates early in the twentieth century
(e.g., "1902" rather than "2002"). The Year 2000 Problem is commonly
considered to be prevalent in computer programs written as recently as the
mid-1990s, and can cause such programs to generate erroneous information, to
otherwise malfunction or to cease operations altogether.
The Company is in the process of installing a new management information
system in its corporate headquarters and expects such installation to be
completed by June 1999 . In addition, the Company's schools each have stand-
alone computer systems and networks for internal use and for communication
with its students and with corporate headquarters. There can be no assurance
that the installation of the Company's new system will proceed smoothly or
that additional management time or expense will not be required to
successfully complete such installation. Although the Company expects that its
new computer system will be free of the Year 2000 Problem and, based upon its
review of its other internal computer systems, all such systems will be free
of the Year 2000 Problem, there can be no assurance that this new computer
system will not be affected by the Year 2000 Problem, that the Company's
existing systems will not be affected by the Year 2000 Problem, or that a
failure of any other parties, such as the DOE or other government agencies on
which the Company depends for student financial assistance or the financial
institutions involved in the processing of student loans, to address the Year
2000 Problem will not have a material adverse effect on the Company's
business, results of operations or financial condition. In particular, there
can be no assurance that malfunctions relating to the Year 2000 Problem will
not result in the misreporting of financial information by the Company. The
Company is currently making inquiries of certain of its vendors regarding the
Year 2000 Problem, and has not detected any significant issues relating to the
Year 2000 Problem. However, the Company has not made a formal assessment of
the computer programs used by government agencies or other third parties with
which the company interacts, or an assessment of its own vulnerability to the
failure of such programs to be free of the Year 2000 Problem. The Company does
not have any formal contingency plans relating to the Year 2000 Problem.
The Company believes that the most reasonably likely worst case scenario for
the Company regarding the Year 2000 Problem is a failure of the DOE to
adequately ensure payment of financial aid amounts. The 1998 Amendments, which
were enacted on October 1, 1998 to reauthorize the student financial
assistance programs, require the DOE to take steps to ensure that the
processing, delivery and administration of grant, loan and work assistance
provided under the Title IV Programs are not interrupted because of the Year
2000 Problem. This legislation also authorizes the DOE to postpone certain HEA
requirements to avoid overburdening institutions and disrupting the delivery
of student financial assistance as a consequence of this problem. There can be
no assurance, however, that assistance will not be interrupted or that
requirements would be postponed so that there would be no material adverse
effect on the Company's schools. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000 Problem."
VOTING CONTROL BY PRINCIPAL SHAREHOLDER
The Company's founder and Chairman, Michael C. Markovitz, beneficially owns
all of the outstanding shares of Class B Common Stock. Each share of Class B
Common Stock has ten votes as compared to one vote for each share of Class A
Common Stock. Following consummation of the Offering, Dr. Markovitz will
control
17
<PAGE>
% ( % if the Underwriters' over-allotment option is exercised in full) of
the voting power of the Common Stock. As a result of such stock ownership, Dr.
Markovitz will be able to control the outcome of all matters submitted to a
vote of the holders of Common Stock, including the election of Directors,
amendments to the Company's Articles of Incorporation (the "Articles") and By-
laws and approval of significant corporate transactions. See "Description of
Capital Stock." Such voting power could also have the effect of delaying,
deterring or preventing a change in control of the Company that might be
otherwise beneficial to shareholders. See "Security Ownership of Certain
Beneficial Owners and Management."
ANTI-TAKEOVER PROVISIONS COULD DETER BENEFICIAL TRANSACTIONS
Certain provisions of the Company's Articles and By-laws may inhibit changes
in control of the Company not approved by the Company's Board of Directors
(the "Board"). These provisions include (i) disparate voting rights per share
between the Class A Common Stock and the Class B Common Stock, (ii) a
prohibition on shareholder action through written consents, (iii) a
requirement that special meetings of shareholders be called only by the Board,
(iv) advance notice requirements for shareholder proposals and nominations,
(v) limitations on the ability of shareholders to amend, alter or repeal the
By-laws and (vi) the authority of the Board to issue without shareholder
approval preferred stock with such terms as the Board may determine. In
addition, under certain conditions, Section 11.75 of the Illinois Business
Corporation Act of 1983, as amended (the "Illinois Act"), would prohibit the
Company from engaging in a "business combination" with an "interested
shareholder" (in general, a shareholder owning 15% or more of the Company's
outstanding voting shares) for a period of three years. See "Description of
Capital Stock."
RESTRICTIONS UNDER THE CREDIT AGREEMENT
The Company intends to enter into a credit agreement (the "Credit
Agreement") with The Bank of America providing for borrowings of up to
approximately $20 million. Following consummation of the Offering, the Company
does not expect to have any borrowings outstanding under the Credit Agreement.
It is anticipated that the Credit Agreement will restrict the Company and its
subsidiaries' ability to take certain actions, including incurring additional
indebtedness and substantially altering the Company's current method of
conducting business. The Credit Agreement is also expected to contain certain
financial covenants and ratios that may have the effect of restricting the
Company's ability to take certain actions in light of their impact on the
Company's financial condition or results of operations. A breach of any
covenants contained in the Credit Agreement could result in an event of
default thereunder and allow the lenders to accelerate the maturity of the
indebtedness outstanding under the Credit Agreement. The Bank of America has
indicated its willingness to enter into the Credit Agreement; however, there
can be no assurance that the Credit Agreement will be executed. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
BROAD DISCRETION AS TO USE OF PROCEEDS
The Company intends to use the net proceeds of the Offering to repay certain
indebtedness and, as determined by management in its sole discretion, for
working capital and general corporate purposes, including new program
development and the possible acquisition of additional businesses that are
complementary to the current or future business of the Company. Aside from the
repayment of indebtedness, the Company has not determined the specific
allocation of the net proceeds among the various uses described above and,
accordingly, investors in the Offering will rely upon the judgment of the
Company's management with respect to the use of proceeds. See "Use of
Proceeds."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE; IMMEDIATE AND
SUBSTANTIAL DILUTION
Prior to the Offering, there has been no public market for the Class A
Common Stock and there can be no assurance that an active trading market will
develop or be sustained after the Offering. The initial public offering price
for the Class A Common Stock will be determined by negotiations between the
Company and the
18
<PAGE>
Underwriters, based upon several factors, and may not be indicative of the
price that will prevail in the public market. There can be no assurance that
the market price of the Class A Common Stock will not decline from the initial
public offering price.
After consummation of the Offering, the market price of the Class A Common
Stock will be subject to fluctuations in response to a variety of factors,
including quarterly variations in the Company's operating results,
announcements of acquisitions by the Company or its competitors, new
regulations or interpretations of regulations applicable to the Company's
schools, changes in accounting treatments or principles and changes in
earnings estimates by securities analysts, as well as general political,
economic and market conditions. The market price for the Class A Common Stock
may also be affected by the Company's ability to meet or exceed analysts' or
"street" expectations, and any failure to meet such expectations, even if
minor, could have a material adverse effect on the market price of the Class A
Common Stock. In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have particularly affected the
market prices of equity securities of certain companies and that have often
been unrelated to the operating performance of such companies. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such a
company. Any such litigation initiated against the Company could result in
substantial costs and a diversion of management's attention and resources,
which could have a material adverse effect on the Company's business, results
of operations or financial condition. See "Underwriting."
The initial public offering price of the Class A Common Stock offered hereby
is substantially higher than the net book value of the currently outstanding
Common Stock. Therefore, purchasers of the Class A Common Stock offered hereby
will experience immediate and substantial dilution of $ per share in the
net tangible book value of the Class A Common Stock. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have shares of
Common Stock outstanding. The shares of Class A Common Stock sold in
the Offering will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), unless held by an "affiliate" of the Company, as that term is defined
in the Securities Act. The Company, and certain persons holding Common Stock
or options to purchase Common Stock, at the time of the Offering, have agreed
not to sell, offer to sell, grant any option for the sale of or otherwise
dispose of any shares of Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock, without the prior written
consent of Salomon Smith Barney Inc. on behalf of the Underwriters, for a
period of 180 days after the date of this Prospectus. Upon the expiration of
these lock-up arrangements with Salomon Smith Barney Inc., all of the
shares of Common Stock issued and outstanding as of the date of this
Prospectus will be eligible for immediate sale in the public market subject in
certain cases to compliance with certain volume and other limitations under
Rule 144 of the Securities Act ("Rule 144"). No prediction can be made as to
the effect, if any, that sales of shares of Common Stock or the availability
of shares of Common Stock for sale will have on the market price of the Class
A Common Stock from time to time. The sale of a substantial number of shares
held by existing shareholders, whether pursuant to subsequent public offerings
or otherwise, or the perception that such sales could occur, could adversely
affect the market price of the Class A Common Stock and could materially
impair the Company's future ability to raise capital through an offering of
equity securities. See "Shares Eligible For Future Sale" and "Underwriting."
19
<PAGE>
THE COMPANY
The Company is an Illinois corporation that currently owns and operates ASPP
directly, and owns and operates U of S, MIM, PrimeTech and Ventura through its
wholly owned subsidiaries. Historically, Dr. Markovitz separately owned and
operated each of the businesses that are now owned by the Company, other than
PrimeTech.
The following chart illustrates the Company's current organizational
structure:
Prior to the Offering, the Company will effect the Stock Conversion,
consisting of a -for-one stock split of all outstanding shares of common
stock and the subsequent conversion of all outstanding shares of common stock
into shares of Class B Common Stock and the authorization of the Class A
Common Stock.
The Company has elected to be treated as an S corporation for federal income
tax purposes. Similar elections were made in states providing for conforming
laws. As a result, the Company currently pays no federal income tax and
virtually no state income tax, and the earnings of the Company are subject to
taxation directly at the shareholder level. Effective with the Offering, the
Company's S corporation status will be terminated, and the Company will become
subject to corporate income taxation as a C corporation.
The Company intends to pay to Dr. Markovitz a distribution equal to all of
the Company's undistributed earnings, certain capital contributions and the
net deferred income tax asset which the Company has as of the consummation of
the Offering (the "Distribution"). It is not possible at this time to
determine the exact amount of the Distribution because it will be based upon
the Company's net income for 1999, which precedes the consummation of the
Offering. The Company currently estimates that such amounts as of the
consummation of the Offering will be approximately $11.7 million. The
Distribution will be paid in the form of a note issued by the Company to Dr.
Markovitz (the "Distribution Loan"), which will be payable immediately after
consummation of the Offering.
The principal executive offices of the Company are located at Two First
National Plaza, 20 South Clark Street, Third Floor, Chicago, Illinois 60603
and its telephone number is (312) 899-9900.
20
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of Class A Common
Stock offered hereby are estimated to be $ , assuming an initial public
offering price of $ per share and after deducting estimated underwriting
discounts and commissions and expenses of the Offering. The Company will not
receive any proceeds from the exercise of the over-allotment option granted to
the Underwriters by the Company's sole shareholder. See "Underwriting."
The Company intends to use approximately $4.8 million of the net proceeds of
the Offering to repay notes payable to the Company's lenders (the "Bank
Notes"), which were issued in connection with the acquisitions of Ventura and
MIM and for general corporate purposes. The Bank Notes bear interest at an
average blended rate of 8.0% per annum, become due at various times through
2004 and may be prepaid at anytime without premium or penalty.
The Company also intends to use approximately $11.7 million of the net
proceeds of the Offering to pay the Distribution Loan, $0.7 million to repay
indebtedness to Dr. Markovitz incurred in connection with the Company's
purchase of the stock of MCM Plaza, a company wholly owned by Dr. Markovitz
and $0.3 million to repay indebtedness to Dr. Markovitz incurred in connection
with the PrimeTech acquisition (such amounts, together with the Distribution
Loan, the "Shareholder Loans"). The Shareholder Loans bear interest at 8.0%
per annum, are payable upon demand and may be prepaid at anytime without
premium or penalty. See "Management--Compensation Committee Interlocks and
Insider Participation."
The Company intends to use the remaining $ million of the net proceeds of
the Offering for working capital and general corporate purposes, including new
program development at existing campuses, the addition of new campuses and the
possible acquisition of additional businesses that are consistent with the
Company's mission of providing academically-oriented, practitioner-focused
education in fields with numerous employment opportunities and strong student
demand. The Company currently has no agreements, understandings or commitments
with respect to any acquisitions. The Company has not determined the specific
allocation of the remainder of the net proceeds among the various uses
described above and, accordingly, investors in the Offering will rely upon the
judgment of the Company's management with respect to the use of such proceeds.
DIVIDEND POLICY
The Company intends to retain future earnings to finance its growth and
development and therefore does not anticipate paying any cash dividends in the
foreseeable future, other than the Distribution. See "The Company." Payment of
future dividends, if any, will be at the discretion of the Company's Board of
Directors after taking into account various factors, including the Company's
financial condition, operating results, current and anticipated cash needs and
plans for expansion. In addition, if the Company fails to meet DOE financial
responsibility standards, the Company may need to restrict or withhold payment
of dividends or refrain from obtaining dividends or other funds from its
subsidiaries in order to meet DOE standards. See "Risk Factors--Potential Loss
of Student Financial Aid in the Event of Failure to Meet Financial
Responsibility Standards." For certain information regarding distributions
made by the Company in fiscal 1996, 1997 and 1998, see "Management--
Compensation Committee Interlocks and Insider Participation." See also
"Management's Discussions and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
21
<PAGE>
CAPITALIZATION
The following table sets forth the cash, cash equivalents and short-term
investments and the consolidated capitalization of the Company (i) at August
31, 1998, (ii) pro forma for (a) the conversion of the Company from an S
corporation to a C corporation and (b) the payment of the estimated
Distribution and (iii) as adjusted to give effect to the sale by the Company
of shares of Class A Common Stock offered hereby (assuming an
initial public offering price of $ per share) and the application of the
estimated net proceeds as described under "Use of Proceeds." This table should
be read in conjunction with the Company's consolidated financial statements
and notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF AUGUST 31, 1998
------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
<S> <C> <C> <C>
Cash, cash equivalents and short-term
investments.................................... $ 3,843 $3,843 $
======= ====== ======
Long-term debt, less current maturities......... $ 5,165 $5,165 $
Shareholders' equity (deficit):
Preferred stock, $.01 par value, 5,000,000
shares authorized, no shares issued and
outstanding on an as adjusted basis..........
Class A Common Stock, $.01 par value,
30,000,000 shares authorized, shares
issued and outstanding (1)...................
Class B Common Stock, $.01 par value,
10,000,000 shares authorized, shares
issued and outstanding.......................
Common stock, no par value, 1,000,000 shares
authorized, 1,666 shares issued and
outstanding on an actual basis, no shares
authorized, issued or outstanding on an as
adjusted basis............................... 6,505 505
Additional paid-in capital (2)................ -- --
Unrealized gain on investments................ 2 2
Purchase price in excess of predecessor
carryover basis (3).......................... (720) (720)
Retained earnings (2)......................... 3,135 --
------- ------ ------
Total shareholders' equity (deficit).......... 8,922 (213)
------- ------ ------
Total capitalization........................ $14,087 $4,952 $
======= ====== ======
</TABLE>
- --------
(1) Excludes an aggregate of shares which, prior to the consummation of
the Offering, will be reserved for issuance under the Company's Stock
Plans. See "Management--Stock Plans."
(2) Additional paid-in capital and retained earnings have been adjusted to
reflect the capitalization of retained earnings to additional paid-in
capital upon conversion of the Company to a C corporation. The amount
capitalized is net of the adjustments necessary to (i) record deferred
income taxes upon conversion of the Company to a C corporation and (ii)
reflect payment of the Distribution, which would have been approximately
$9.7 million as of August 31, 1998.
(3) Reflects the purchase price of MCM Plaza's stock in excess of the
historical book value of the underlying net assets.
22
<PAGE>
DILUTION
The net tangible book value of the Company as of August 31, 1998 was
approximately $2.2 million, or $1,339 per share of Common Stock. Net tangible
book value per share represents the amount of the Company's total tangible
assets less its total liabilities, divided by the number of shares of Common
Stock outstanding. After giving effect to (i) the receipt of $ million of
estimated net proceeds from the sale by the Company of shares of Class A
Common Stock in the Offering (assuming an initial public offering price of $
per share), (ii) the use of such net proceeds to repay indebtedness as
described under "Use of Proceeds," (iii) the recording of deferred income
taxes upon conversion of the Company from an S corporation to a C corporation
and (iv) the payment of the Distribution, the pro forma net tangible book
value of the Company at August 31, 1998 would have been approximately
$ , or $ per share of Common Stock. This represents an immediate
dilution in net tangible book value of $ per share to new investors
purchasing shares in the Offering. The following table illustrates this
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
Net tangible book value per share at August 31, 1998............... $
Decrease per share attributable to the recording
of deferred income taxes and the payment
of the Distribution ..............................................
----
Increase per share attributable to the Offering (1)................
----
Pro forma as adjusted net tangible book value per share
after the Offering................................................
----
Dilution of net tangible book value per share to purchasers
of shares in the Offering......................................... $
====
</TABLE>
- --------
(1) After deduction of underwriting discounts and commissions and estimated
expenses of the Offering.
The following table summarizes, on a pro forma basis as of August 31, 1998,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by the existing
shareholder and by new investors purchasing shares in the Offering:
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION
-------------- ---------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders............ 1,666 $504,666 $302.92
Investor purchasing shares in the
Offering........................
----- --- -------- --- -------
Total........................ 100% $ 100% $
===== === ======== === =======
</TABLE>
23
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
The following selected historical consolidated financial and other data are
qualified by reference to, and should be read in conjunction with, the
Company's consolidated financial statements and the related notes thereto
appearing elsewhere in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The selected
statement of operations data set forth below for the Company for the fiscal
years ended August 31, 1996, 1997 and 1998 and the selected balance sheet data
as of August 31, 1997 and 1998 are derived from the audited consolidated
financial statements of the Company included elsewhere in this Prospectus. The
selected statement of operations data for the Company set forth below for the
eleven months ended August 31, 1995 and the selected balance sheet data as of
August 31, 1995 and 1996 are derived from the audited consolidated financial
statements of the Company not included in this Prospectus. The selected
statement of operations data for the Company set forth below for the fiscal
year ended September 30, 1994 and the balance sheet data as of September 30,
1994 are derived from the unaudited consolidated financial statements of the
Company not included in this Prospectus. The unaudited statements of the
Company include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the Company's financial
condition and results of operations for those periods and, in the opinion of
management have been prepared on the same basis as the audited financial
statements.
<TABLE>
<CAPTION>
ELEVEN
MONTHS
YEAR ENDED ENDED YEAR ENDED AUGUST 31,
SEPTEMBER 30, AUGUST 31, -------------------------
1994 1995 (1) 1996 1997 1998
------------- ---------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............. $11,061 $14,041 $17,840 $20,460 $29,352
Operating expenses:
Cost of education...... 5,496 7,251 9,370 10,661 15,075
Selling expenses....... 317 325 263 516 1,102
General and
administrative
expenses.............. 3,079 3,763 5,174 5,432 9,104
Related party expense
(2)................... 624 1,244 1,710 993 2,271
------- ------- ------- ------- -------
Total operating
expenses............ 9,516 12,583 16,517 17,602 27,552
------- ------- ------- ------- -------
Income from operations.. 1,545 1,458 1,323 2,858 1,800
Interest income......... 12 123 304 497 357
Interest expense........ (40) (1) (55) (107) (601)
Other income (expense),
net.................... 21 -- 21 (48) (12)
------- ------- ------- ------- -------
Income before provision
for income taxes as
reported............... 1,538 1,580 1,593 3,200 1,544
Provision for income
taxes.................. 40 30 30 37 29
------- ------- ------- ------- -------
Net income.............. $ 1,498 $ 1,550 $ 1,563 $ 3,163 $ 1,515
======= ======= ======= ======= =======
OTHER DATA:
EBITDA (3).............. $ 1,741 $ 1,748 $ 1,722 $ 3,296 $ 2,738
EBITDA margin (3)....... 15.7% 12.4% 9.7% 16.1% 9.3%
Cash flows from:
Operating activities... $ 1,097 $ 1,638 $ 2,736 $ 3,908 $ 2,582
Financing activities... (823) 371 (124) 5,193 (3,853)
Investing activities... (401) (2,531) (392) (9,123) (226)
Capital expenditures,
net.................... 224 195 404 341 597
Student population (4).. 2,304 2,644 2,858 3,253 4,514
Number of campuses (5).. 7 7 8 8 10
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF AUGUST 31,
SEPTEMBER 30, --------------------------------
1994 1995 (1) 1996 1997 1998
------------- -------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments..... $ 2,533 $ 3,596 $ 5,384 $ 6,728 $ 3,843
Working capital............. 523 1,848 3,316 4,412 2,459
Total assets................ 4,637 6,452 8,336 17,580 23,475
Long-term debt (excluding
current maturities)........ 62 292 243 6,354 5,165
Shareholder's equity........ 2,280 3,830 5,236 7,448 8,922
</TABLE>
- --------
(1) Prior to fiscal 1995, the Company's fiscal year end was September 30.
During fiscal 1995, the Company changed its year end to August 31. Fiscal
1995 represents the Company's results of operations for the eleven months
ended August 31, 1995. All fiscal years subsequent to 1995 represent the
twelve months ended August 31 of the year indicated.
(2) Represents amounts paid to Management Corp., an affiliate of Dr.
Markovitz, for services rendered by Dr. Markovitz during the period
presented. Dr. Markovitz is the sole shareholder and employee of
Management Corp. Dr. Markovitz did not receive any compensation for
services rendered to the Company, other than through this management fee.
Through Management Corp., Dr. Markovitz provides services characteristic
of a chief executive officer, including strategic direction and oversight
for the Company, daily management oversight, consultation on business
acquisitions and other corporate business matters. Following the Offering,
Dr. Markovitz will serve as the Company's Chairman and perform the
services Management Corp. has performed in the past as an employee of the
Company. Dr. Markovitz will enter into an employment agreement that
provides for an initial annual base salary of $200,000 plus performance-
based compensation, which is currently expected to be paid in the form of
stock options.
(3) "EBITDA" equals income from operations plus depreciation and amortization.
EBITDA margin is EBITDA as a percentage of net revenue. EBITDA and EBITDA
margin are presented because such data is used by certain investors to
assess liquidity and ability to generate cash. The Company considers
EBITDA to be an indicative measure of the Company's operating performance
because EBITDA can be used to measure the Company's ability to service
debt, fund capital expenditures and expand its business; however, such
information should not be considered as an alternative to net income,
operating profit, cash flows from operations, or any other operating or
liquidity performance measure provided by GAAP. Cash expenditures for
various long-term assets, interest expense and income taxes that have been
and will be incurred are not reflected in the EBITDA presentation and
could be material to an investor's understanding of the Company's
liquidity and profitability. The Company's calculation of EBITDA may not
be comparable to that of other companies.
(4) Reflects actual student population as of the end of the period indicated,
not including participants in Ventura test preparation programs.
(5) Reflects the total number of campuses operated by the Company as of the
end of the period indicated.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Selected Historical Consolidated Financial and Other Data and the Company's
consolidated financial statements and notes thereto appearing elsewhere in
this Prospectus.
BACKGROUND AND OVERVIEW
The Company is a leading provider of for-profit postgraduate education with
a primary focus on doctoral level programs. As of August 31, 1998, the
Company's schools had approximately 4,500 students enrolled representing 47
states and 30 foreign countries. The Company's schools offer programs in
clinical psychology, education, business, allied health professions and
information technology and are approved and accredited to offer doctoral,
master's, bachelor's and associate degrees as well as to award diplomas.
Approximately 60% of the Company's students are enrolled in doctoral programs.
The Company operates 14 campuses in eight states and the Province of Ontario,
Canada. Additionally, the Company is preparing to operate two new campuses
pending regulatory approval.
The Company's principal sources of revenue are tuition, workshop fees and
sales of related study materials. Students attending the Company's schools
finance their education through a combination of individual resources
(including earnings from full or part-time employment), government-sponsored
financial aid and other sources, including family contributions and
scholarships provided by the Company. During fiscal 1998, approximately 46% of
the Company's net cash receipts were derived indirectly from the Title IV
Programs.
In fiscal 1998, the Company derived approximately 99% of its net revenue
from tuition. Tuition payments are made at the beginning of each term; the
start date for each term varies by school and program. Payment of each term's
tuition may be made by cash or financial aid. If a student withdraws from
school prior to the completion of the term, the Company refunds a portion of
the tuition already paid, based upon the number of classes the student has
attended. For students receiving financial aid, the timing of the refunds for
withdrawal is based on federal, state and accrediting agency standards. The
scholarships that the Company grants to certain students are recorded as a
reduction of tuition revenue. Tuition revenue is recognized ratably over the
term of each program, while fees for the three to four day workshops held by
Ventura are recognized on the first day of the workshop. Revenue from sales of
related study materials is recognized on the date of shipment.
The Company's schools charge tuition at varying amounts, depending not only
on the particular school, but also upon the type of program and the specific
curriculum. Each of the Company's schools typically implements one or more
tuition increases annually. The size of these increases differ from year to
year and among campuses and programs. Tuition for the Company's schools as of
September 1, 1998 represents an approximate increase of 5% over the same date
in 1997.
The Company also generates revenue from textbook sales and property rental.
In fiscal 1998, less than 1% of the Company's net revenue was derived from
these sources.
The Company categorizes its expenses as cost of education, selling and
general and administrative. Cost of education expenses generally consists of
expenses directly attributable to the educational activity at the schools.
These include salaries and benefits of faculty and student support personnel,
the cost of educational supplies and facilities (including rents on school
leases), and all other school occupancy costs. Selling expenses include direct
and indirect marketing and advertising expenses.
General and administrative expenses include salaries and benefits of
personnel in accounting, human resources, corporate and school administration
functions and all corporate office expenses. Also included in general and
administrative expenses are depreciation expense associated with computer
laboratories, equipment, furniture and fixtures, and amortization expense
associated with intangible assets consisting primarily of goodwill,
intellectual property and non-competition agreements with previous owners of
the schools or campuses.
26
<PAGE>
Prior to fiscal 1995, the Company's fiscal year end was September 30. During
fiscal 1995, the Company changed its year end to August 31. Fiscal 1995
represents the Company's results of operations for the eleven months ended
August 31, 1995. All fiscal years subsequent to 1995 represent the twelve
months ended August 31 of the year indicated.
RECENT ACQUISITIONS
On August 26, 1997, the Company acquired Ventura for an aggregate purchase
price of $4.1 million and, on February 3, 1998, the Company acquired MIM for
an aggregate purchase price of $2.4 million. Both acquisitions were accounted
for as purchases.
On November 30, 1998, the Company completed its acquisition of PrimeTech.
Dr. Markovitz initially acquired on a one-third interest in PrimeTech in
November 1995 and, together with the other owners, sold his interest to the
Company on November 30, 1998. The agreement obligates the Company to pay the
former owners a total of $500,000 (Canadian Dollars) upon closing and to issue
shares of the Company's common stock, the fair value of which is equal to 102%
of PrimeTech's net income, as defined in such agreement, in each of the next
three fiscal years. Dr. Markovitz received a note from the Company for his pro
rata share of the initial payment $166,666 (Canadian Dollars); the other
owners received cash. The acquisition will be accounted for as a purchase. For
the ten months ended September 30, 1997, PrimeTech's net income was
approximately $194,000 (Canadian Dollars). The aggregate purchase price is
currently expected to be approximately $3.7 million (Canadian Dollars). The
purchase price was determined by arms-length negotiations between the other
owners on behalf of themselves and Dr. Markovitz, on the one hand, and
representatives of the Company (other than Dr. Markovitz), on the other hand.
On August 31, 1998, U of S acquired the stock of MCM Plaza. The purchase is
accounted for in a manner similar to a pooling of interests, resulting in the
Company including the results of operations of MCM Plaza for all periods
subsequent to April 30, 1997, the date Dr. Markovitz acquired MCM Plaza. The
purchase price of approximately $3.3 million, based upon an appraisal,
exceeded the historical book value of the underlying net assets by
approximately $0.7 million, resulting in a reduction in the Company's
shareholder's equity by such amount. See "Management--Compensation Committee
Interlocks and Insider Participation."
RESULTS OF OPERATIONS
The following table summarizes the Company's operating results as a
percentage of net revenues for the period indicated:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST
31,
-------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................................................ 100.0% 100.0% 100.0%
Operating expenses:
Cost of education........................................ 52.5 52.1 51.4
Selling expenses......................................... 1.5 2.5 3.8
General and administrative expenses...................... 29.0 26.5 31.0
Related party expense.................................... 9.6 4.9 7.7
----- ----- -----
Total operating expenses............................... 92.6 86.0 93.9
----- ----- -----
Income from operations..................................... 7.4 14.0 6.1
Interest/other income (expense), net....................... 1.5 1.7 (0.8)
----- ----- -----
Income before provision for income taxes................... 8.9 15.7 5.3
Provision for income taxes................................. 0.2 0.2 0.1
----- ----- -----
Net income................................................. 8.7% 15.5% 5.2%
===== ===== =====
</TABLE>
27
<PAGE>
Year Ended August 31, 1998 Compared to Year Ended August 31, 1997
Net Revenue. Net revenue increased 43.5% from $20.5 million for fiscal 1997
to $29.4 million for fiscal 1998, primarily due to additional net revenue of
$6.3 million from the acquisitions of Ventura and MIM. For schools owned by
the Company during fiscal 1997, the total number of students attending the
schools increased 55.1%, and the average tuition increased 5.1% during 1998.
Cost of Education. Cost of education increased 41.4% from $10.7 million for
fiscal 1997 to $15.1 million for fiscal 1998, due to additional teaching costs
to meet the growth in the number of students attending the schools and the
development of new programs. Cost of education as a percentage of net revenue
decreased slightly from 52.1% in 1997 to 51.4% in 1998 due to the acquisition
of Ventura, whose programs have lower cost of education than the Company's
other programs. This benefit was partially offset by the acquisition of MIM,
which has higher costs of education as a percentage of net revenue.
Selling Expenses. Selling expenses increased 113.6% from $0.5 million for
fiscal 1997 to $1.1 million for fiscal 1998 and, as a percentage of net
revenue, increased from 2.5% to 3.8%, primarily due to the acquisitions of
Ventura and MIM, which require the use of more costly advertising media than
ASPP and U of S. Selling expenses of schools acquired during 1998 accounted
for approximately 70.1% of the increase. In addition, the Company marketed new
programs and increased promotion for ASPP'S Arizona, Minnesota and Virginia
campuses in fiscal 1998.
General and Administrative Expenses. General and administrative expenses
increased 67.6% from $5.4 million for fiscal 1997 to $9.1 million for fiscal
1998 and, as a percentage of net revenue, increased from 26.5% to 31.0%,
primarily due to additional costs associated with Ventura and MIM, which
accounted for approximately 51.8% of the increase. The Company also hired
personnel at its corporate office to expand the depth of its management.
Related Party Expense. Related party expense increased 128.7% from $1.0
million for fiscal 1997 to $2.3 million for fiscal 1998 and, as a percentage
of net revenue, increased from 4.9% to 7.7%. The related party expense is a
management fee paid to MCM Management. Dr. Markovitz is the sole shareholder
and employee of MCM Management. He does not receive any compensation for
services rendered to the Company, other than through the management fee the
Company pays MCM Management. Through Management Corp., Dr. Markovitz provides
services characteristic of a chief executive officer, including strategic
direction and oversight for the Company, daily management oversight,
consultation on business acquisitions and other corporate business matters.
Following the Offering, Dr. Markovitz will serve as the Company's Chairman and
perform the services Management Corp. has performed in the past as an employee
of the Company. Dr. Markovitz will enter into an employment agreement with the
Company that provides for an initial annual base salary of $200,000 and
performance-based compensation, which is currently expected to be paid in the
form of stock options.
Interest/Other Income (Expense), Net. Interest/other income (expense), net
decreased 174.9% from $0.3 million for fiscal 1997 to $(0.3) million for
fiscal 1998 and, as a percentage of net revenue, decreased from 1.7% to
(0.8)%. Interest income decreased from $0.5 million for fiscal 1997 to $0.4
million for fiscal 1998. Interest expense of $.6 million as a result of
additional borrowings to finance the acquisitions of Ventura and MIM exceeded
interest income earned on the Company's investments during fiscal 1998.
Provision for Income Taxes. The provision for income taxes was immaterial
for both fiscal 1997 and fiscal 1998.
Net Income. Net income decreased 52.1% from $3.2 million for fiscal 1997 to
$1.5 million for fiscal 1998, due to the increase in related party expense and
additional interest expense in fiscal 1998 related to the Company's
acquisitions.
28
<PAGE>
Year Ended August 31, 1997 Compared to Year Ended August 31, 1996
Net Revenue. Net revenue increased 14.7% from $17.8 million in fiscal 1996
to $20.5 million in fiscal 1997, primarily due to a 13.8% increase in the
average number of students attending the schools and an average tuition
increase of 5.1% effected in fiscal 1997. The increase in student population
is attributed to the development of new programs at the Company's Chicago and
Rolling Meadows campuses and the addition of the Company's Arizona campus.
Cost of Education. Cost of education increased 13.8% from $9.4 million in
fiscal 1996 to $10.7 million in fiscal 1997, due to additional teaching costs
to meet the growth in the number of students attending the schools and the
development of new academic programs. As a percentage of net revenue, cost of
education remained relatively constant.
Selling Expenses. Selling expenses increased 96.2% from $0.3 million in
fiscal 1996 to $0.5 million in fiscal 1997 and, as a percentage of net
revenue, increased from 1.5% to 2.5%, primarily due to the Company's increased
focus on marketing new academic programs.
General and Administrative Expenses. General and administrative expenses
increased 5.0% from $5.2 million in fiscal 1996 to $5.4 million in fiscal
1997; however, as a percentage of net revenue, general and administrative
expenses decreased from 29.0% in fiscal 1996 to 26.5% in fiscal 1997. The
decrease can be attributed primarily to the Company's 1996 investments in new
office space, corporate office personnel and a new computer system.
Related Party Expense. Related party expense decreased 41.9% from $1.7
million in fiscal 1996 to $1.0 million in fiscal 1997 and, as a percentage of
net revenue, decreased from 9.6% to 4.9%.
Interest/Other Income (Expense), Net. Interest/other income (expense), net
remained relatively constant from fiscal 1996 to fiscal 1997. Although more
interest income was generated in fiscal 1997 from the increase in cash flow
from operations, it was offset by additional interest expense associated with
the Company's purchase of MCM Plaza.
Provision for Income Taxes. The provision for income taxes was immaterial in
both fiscal 1996 and fiscal 1997.
Net Income. Net income increased 102.4% from $1.6 million in fiscal 1996 to
$3.2 million in fiscal 1997 due to the growth of existing schools and the
factors discussed above, including the decrease in related party expense.
SEASONALITY; VARIATIONS IN QUARTERLY RESULTS OF OPERATIONS
The Company has experienced seasonality in its results of operations
primarily due to the pattern of student enrollments at most of the Company's
schools. Historically, the Company's lowest quarterly net revenue and income
have been in the fourth fiscal quarter (June through August) due to lower
student enrollment during the summer months at most of the Company's schools,
while the Company's expenses remain relatively constant over the course of a
year. The Company expects that this seasonal trend will continue.
The following table sets forth unaudited quarterly financial data for the
years ended August 31, 1998 and 1997 and such data expressed as a percentage
of the Company's totals with respect to such information for the applicable
quarters. The Company believes that this information includes all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of such quarterly information when read in conjunction with the
consolidated financial statements included elsewhere herein. The operating
results for any quarter are not necessarily indicative of the results for any
future period.
29
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED
AUGUST 31, 1997 AUGUST 31, 1998
------------------------------- --------------------------------
1ST 3RD 4TH 1ST 3RD
QTR 2ND QTR QTR QTR QTR 2ND QTR QTR 4TH QTR
------ ------- ------ ------ ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue............. $5,466 $4,850 $6,198 $3,946 $7,247 $6,724 $8,771 $ 6,610
% of fiscal year total.. 26.7% 23.7% 30.3% 19.3% 24.7% 22.9% 29.9% 22.5%
Income from operations.. $1,624 $ 579 $1,379 $ (724) $1,741 $ 585 $ 936 $(1,462)
% of fiscal year total.. 56.7% 20.3% 48.3% (25.3)% 96.7% 32.5% 52.0% (81.2)%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Since its formation, the Company has financed its operating activities
primarily through cash generated from operations. Acquisitions have been
financed primarily through debt instruments. Net cash provided by operating
activities decreased to $2.6 million in fiscal 1998 from $3.9 million in
fiscal 1997 and $2.7 million in fiscal 1996, due primarily to changes in the
level of net income.
Capital expenditures were $0.4 million, $0.3 million and $0.6 million in
fiscal 1996, 1997 and 1998, respectively. Capital expenditures are expected to
increase in the future as student population increases and the Company
continues to upgrade and expand current facilities and equipment. The Company
plans to invest approximately $0.5 million in upgrading its computer systems
during fiscal 1999. The Company has no other commitment for material capital
expenditures.
Following the consummation of the Offering, the Company expects to enter
into the Credit Agreement with The Bank of America providing for revolving
credit borrowings of up to $20 million. Borrowings under the Credit Agreement
are expected to bear interest at a variable rate equal to (at the Company's
option) the lenders prime rate as in effect from time to time or the London
Inter-Bank Offered Rate plus, in each case, a margin of between 25 and 250
basis points, depending on the type of loan and the Company's ratio of funded
debt to EBITDA. In addition, the Credit Agreement is expected to provide for
an unused commitment fee of 37.5 basis points on commitments available but
unused under the Credit Agreement, as well as certain other customary fees.
The Credit Agreement is expected to provide for a blanket lien on all material
assets of the Company and a pledge of the capital stock of all the Company's
material subsidiaries, as well as upstream guarantees from all such
subsidiaries. It is anticipated that the Credit Agreement will restrict the
Company and its subsidiaries' ability to take certain actions, including
incurring additional indebtedness or altering the Company's current method of
doing business. The Credit Agreement is also expected to contain certain
financial covenants and ratios that may have the effect of restricting the
Company's ability to take certain actions in light of their impact on the
Company's financial condition or results of operations. The Credit Agreement
is expected to terminate approximately three years after the consummation of
the Offering, unless extended.
The Company's cash flow from operations on a long-term basis is dependent on
the receipt of funds from the Title IV Programs. For fiscal 1998, the
Company's U.S. institutions derived approximately 48% to approximately 77% of
their respective net revenue (on a cash basis) from the Title IV Programs. The
HEA and its implementing regulations establish specific standards of financial
responsibility that must be satisfied in order to qualify for participation in
the Title IV Programs.
The DOE requires that Title IV Program funds collected by an institution for
unbilled tuition be kept in separate cash or cash equivalent accounts until
the students are billed for the portion of their program related to these
Title IV Program funds. In addition, all funds transferred to the Company
through electronic funds transfer programs are held in a separate cash account
until certain conditions are satisfied. As of August 31, 1998, the Company
held an immaterial amount of funds in these separate accounts. The
restrictions on any cash held in these accounts have not significantly
affected the Company's ability to fund daily operations.
30
<PAGE>
The Company intends to use approximately $4.8 million of the net proceeds
from the Offering to repay the Bank Notes, which were issued in connection
with the acquisition of Ventura, MIM, and for general corporate purposes, and
to use approximately $12.7 million to repay the Shareholder Loans. The Company
intends to use the remainder of the net proceeds for working capital and
general corporate purposes, including new academic program development at
existing campuses, the addition of new campuses and the possible acquisition
of additional businesses that are complementary to the business of the
Company. The Company has not determined the specific allocation of the
remainder of the net proceeds among the various uses described above and,
accordingly, investors in the Offering will rely upon the judgment of the
Company's management with respect to the use of such proceeds. See "Use of
Proceeds."
Upon consummation of the Offering, the only indebtedness outstanding will be
indebtedness in the aggregate amount of $2.3 million secured by the real
estate that is owned by MCM Plaza and leased by U of S, which bears interest
at a rate of 9.0% and matures in 2007 and 2008, and certain indebtedness of
the Company to the sellers in the acquisitions of MIM and Ventura, which
aggregates $1.4 million, bears interest at rates of 6.25% and 8.0% and matures
in 2001 and 2002. This indebtedness is expected to be permitted under the
Credit Agreement.
YEAR 2000 PROBLEM
The "Year 2000 Problem" is the potential for computer processing errors
resulting from the use of computer programs that have been written using two
digits, rather than four, to denote a year (e.g., using the digits "98" to
denote 1998). Computer programs using this nomenclature can misidentify
references to dates after 1999 as meaning dates early in the twentieth century
(e.g., "1902" rather than "2002"). The Year 2000 Problem is commonly
considered to be prevalent in computer programs written as recently as the
mid-1990s, and can cause such programs to generate erroneous information, to
otherwise malfunction or to cease operations altogether.
The Company is in the process of installing a new management information
system in its corporate headquarters and expects such installation to be
complete by June 1999. In addition, the Company's schools each have stand-
alone computer systems and networks for internal use and for communication
with its students and with corporate headquarters. There can be no assurance
that the installation of the Company's new system will proceed smoothly or
that additional management time or expense will not be required to
successfully complete such installation. Although the Company expects that its
new computer system will be free of the Year 2000 Problem and, based upon its
review of its other internal computer systems, expects such other systems will
be free of the Year 2000 Problem, there can be no assurance that this new
computer system will not be affected by the Year 2000 Problem, that the
Company's existing systems will not be affected by the Year 2000 Problem, or
that a failure of any other parties, such as the DOE or other government
agencies on which the Company depends for student financial assistance or the
financial institutions involved in the processing of student loans, to address
the Year 2000 Problem will not have a material adverse effect on the Company's
business, results of operations or financial condition. In particular, there
can be no assurance that malfunctions relating to the Year 2000 Problem will
not result in the misreporting of financial information by the Company. The
Company is currently making inquiries of certain of its vendors regarding the
Year 2000 Problem, and has not detected any significant issues relating to the
Year 2000 Problem. However, the Company has not made a formal assessment of
the computer programs used by the DOE or other government agencies or other
third parties with which the company interacts, or an assessment of its own
vulnerability to the failure of such programs to be free of the Year 2000
Problem. The Company does not have any formal contingency plans relating to
the Year 2000 Problem.
The Company believes that most reasonably likely worst case scenario for the
Company regarding the Year 2000 Problem is a failure of the DOE to adequately
ensure payment of financial aid amounts. The 1998 Amendments, which were
enacted on October 1, 1998 to reauthorize the student financial assistance
programs, require the DOE to take steps to ensure that the processing,
delivery and administration of grant, loan and work
31
<PAGE>
assistance provided under the Title IV Programs are not interrupted because of
the Year 2000 Problem. This legislation also authorizes the DOE to postpone
certain HEA requirements to avoid overburdening institutions and disrupting
the delivery of student financial assistance as a consequence of this problem.
There can be no assurance, however, that assistance will not be interrupted or
that requirements would be postponed so that there would be no material
adverse effect on the Company's schools. See "Risk Factors--Year 2000 Problem;
New Company Computer System."
INFLATION
The Company has historically implemented tuition increases each year at or
above the rate of inflation. Average tuition increases at the Company's
schools for fiscal 1998, 1997 and 1996 were 5.1%, 5.1% and 5.0%, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
Recent pronouncements of the Financial Accounting Standards Board ("FASB"),
which are not required to be adopted at this date, include Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments of
an Enterprise and Related Information," and SFAS No. 130, "Reporting
Comprehensive Income." Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities," requires that all nongovernmental entities expense the
costs of start-up activities as these costs are incurred. SFAS No. 128,
"Earnings Per Share," is effective for both interim and fiscal years ending
after December 15, 1997. SFAS No. 131 requires that a public business
enterprise report financial and descriptive information about its reporting
segments on the same basis that it uses internally for evaluating segment
performance and deciding how to allocate resources to segments. SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its components in a full set of general-purpose financial statements. SFAS No.
128 specifies guidelines as to the method of computation of, as well as
presentation and disclosure requirements for, earnings per share. SFAS No. 128
and Statement of Position 98-5 did not have any effect on the Company's
Consolidated Financial Statements upon adoption. SFAS Nos. 130 and 131 are
effective for fiscal years beginning after December 15, 1997 and earlier
application is not permitted. The adoption of SFAS No. 130 is not expected to
have a material effect on the Company's consolidated financial statements. The
impact of adopting SFAS No. 131 has not been determined by the Company.
32
<PAGE>
BUSINESS
GENERAL
The Company is a leading provider of for-profit postgraduate education with
a primary focus on doctoral level programs. The Company's mission is to
provide academically-oriented, practitioner-focused education in fields with
numerous employment opportunities and strong student demand. The Company's
schools offer programs in clinical psychology, education, business, allied
health professions and information technology and are approved and accredited
to offer doctoral, master's, bachelor's and associate degrees as well as to
award diplomas. At August 31, 1998, approximately 60% of the Company's
students were enrolled in doctoral programs. In 1997, the Company graduated
approximately 335 clinical psychology doctoral students out of approximately
4,000 clinical psychology doctoral degrees conferred nationwide. The Company
operates 14 campuses in eight states and the Province of Ontario, Canada, with
a total of approximately 4,500 students representing 47 states and 30 foreign
countries, enrolled as of August 31, 1998. The Company's net revenue has grown
from $8.1 million in fiscal 1993 to $29.4 million in fiscal 1998, representing
a compound annual growth rate of approximately 29%.
The Company was founded in 1975, when the Company's Chairman, Michael C.
Markovitz, Ph.D., recognized a demand for a non-research oriented professional
school that would educate and prepare students for careers as clinical
psychology practitioners. To address this demand, the Company started the
Illinois School of Professional Psychology in Chicago, Illinois in 1976 and,
in its first year of operations, received several thousand applications for
admission to a class of 70 students for the PsyD degree. The continuing demand
for high quality, practitioner-focused psychology postgraduate education led
the Company to expand the renamed ASPP to nine campuses located across the
United States. In response to a broader demand for quality career education,
the Company has expanded beyond the psychology curriculum with the
acquisitions of: (i) the University of Sarasota, a degree-granting institution
focusing primarily on postgraduate business and education (March 1992); (ii)
the Medical Institute of Minnesota, a degree-granting institution focusing on
a variety of allied health professions (February 1998); and (iii) PrimeTech
Institute, an institution granting diplomas in computer programming and other
aspects of information technology and in paralegal studies (November 1998). In
addition, the Company became the largest provider of postgraduate psychology
license examination preparation courses and materials in the United States by
its acquisition of Ventura in August 1997. Through Ventura, the Company also
provides professional licensure examination materials and workshops for social
work; marriage, family and child counseling; marriage and family therapy; and
counseling certification examinations nationwide.
The Company operates the following schools:
. American Schools of Professional Psychology grants doctoral and master's
degrees in clinical psychology and related disciplines at nine campuses
located in Illinois (2), Minnesota, Georgia, Virginia, Hawaii, Arizona,
Florida and California pending regulatory approval. ASPP is accredited by
NCA, and four of its campuses are accredited by the APA. ASPP's net
tuition revenue has grown from $7.1 million for fiscal 1993 to $17.6
million for fiscal 1998, representing a compound annual growth rate of
approximately 20%.
. University of Sarasota grants doctoral, master's and bachelor's degrees
at two campuses located in Sarasota and Tampa, Florida, and is preparing
to operate a campus in Southern California. U of S is accredited by SACS.
U of S's net tuition revenue has grown from $1.1 million for fiscal 1993
to $5.5 million for fiscal 1998, representing a compound annual growth
rate of approximately 38%.
. Medical Institute of Minnesota grants associate degrees at one campus in
Minneapolis, Minnesota. MIM is institutionally accredited by ABHES, and
additionally holds individual programmatic accreditation appropriate to
each degree program offered. MIM's net tuition revenue was $2.5 million
for the seven-month period from February 3, 1998 (the date of
acquisition) to August 31, 1998.
33
<PAGE>
. PrimeTech Institute awards diplomas at two campuses in Ontario, Canada,
and is preparing to operate a campus in Scarborough, Ontario pending
regulatory approval. PrimeTech's net tuition revenue was $2.7 million for
the ten-month period ended September 30, 1998.
In addition, Ventura publishes materials and holds workshops in select
cities across the United States to prepare individuals to take various
national and state administered oral and written health care licensure
examinations in psychology and other mental health disciplines. Ventura's net
tuition revenue was $3.8 million for the year ended August 31, 1998.
The following table sets forth certain additional information regarding the
Company's schools and their various campuses:
<TABLE>
<CAPTION>
YEAR
SCHOOL AND CAMPUS LOCATIONS OPENED DATE ACQUIRED ACCREDITATION
- ------------------------------------------------ ------ -------------- -------------
<S> <C> <C> <C> <C>
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY NCA
Illinois School of
Professional
Psychology/Chicago....... Chicago, IL 1976 -- APA
Illinois School of
Professional
Psychology/Meadows....... Rolling Meadows, IL 1979 March 1994
Minnesota School of
Professional Psychology.. Minneapolis, MN 1987 -- APA
Georgia School of
Professional Psychology.. Atlanta, GA 1990 -- APA
American School of
Professional
Psychology/Virginia...... Arlington, VA 1994 --
American School of
Professional
Psychology/Hawaii........ Honolulu, HI 1979 March 1994
Arizona School of
Professional Psychology.. Phoenix, AZ 1997 -- APA
Florida School of
Professional Psychology.. Tampa, FL 1995 September 1998
American School of
Professional
Psychology/Rosebridge.... Corte Madera, CA 1998 September 1998
UNIVERSITY OF SARASOTA SACS
University of
Sarasota/Honore.......... Sarasota, FL 1969 March 1992
University of
Sarasota/Tampa........... Tampa, FL 1997 --
University of
Sarasota/California(1)... Orange CA
MEDICAL INSTITUTE OF
MINNESOTA................ Minneapolis, MN 1961 February 1998 ABHES
PRIMETECH INSTITUTE
PrimeTech Institute/North
York..................... North York, Ontario 1989 November 1998
PrimeTech Institute/City
Campus................... Toronto, Ontario 1995 November 1998
PrimeTech
Institute/Scarborough(1). Scarborough, Ontario
</TABLE>
- --------
(1) These campuses will be established if and when all required regulatory
approvals have been obtained. The Company has applications pending for all
such approvals.
INDUSTRY OVERVIEW
According to the DOE's National Center for Education Statistics (the
"NCES"), education is the second largest sector of the U.S. economy,
accounting for approximately 8% of gross domestic product in 1997, or over
$600 billion. The Company's schools are part of the postsecondary education
market, which accounts for approximately one-third of the total sector. Of the
approximately 6,000 postsecondary schools that are eligible to participate in
the Title IV Programs, approximately 500 are proprietary degree-granting
institutions such as the Company's schools.
34
<PAGE>
The NCES estimates that by the year 2001 the number of students enrolled in
higher education institutions will increase by more than 1.5 million, to over
16 million students. The Company believes that a significant portion of this
growth in the postsecondary education market will result from an increase in
the number of new high school graduates, an increase in the number of college
graduates attending postgraduate institutions and the increased enrollment by
working adults in postsecondary and postgraduate institutions. According to
the NCES, the number of new high school graduates per year is expected to
increase by approximately 24%, from 2.5 million graduates in 1994 to 3.1
million graduates in 2004. Over the same period, the number of college
graduates attending postgraduate institutions is expected to increase by
approximately 100,000 students. The NCES estimates that, over the next several
years, initial enrollments in postsecondary education institutions by working
adults will increase more rapidly than initial enrollments of recent high
school graduates.
The postsecondary education industry generally is expected to benefit from
the public's increased recognition of the value of a postsecondary education.
According to the NCES, the percentage of recent high school graduates who
continued their education after graduation increased from approximately 53% in
1983 to approximately 65% in 1996. The percentage of college graduates
continuing to postgraduate institutions remained relatively constant, at 11%,
over the same period. The Company believes that students pursue higher
education for a variety of reasons, including the increased prestige
associated with academic credentials, career change and development,
intellectual curiosity and the income premium associated with higher
education. According to Census Bureau data, in 1995 the income premiums over
comparable workers with high school diplomas for associate, bachelor's,
master's and doctoral degree holders were 25%, 55%, 91% and 127%,
respectively.
BUSINESS STRATEGY
The Company's mission is to provide academically-oriented, practitioner-
focused education in fields with numerous employment opportunities and strong
student demand. The key elements of the Company's business strategy are as
follows:
Focusing on Advanced Degrees. The Company is a leading for-profit provider
of postgraduate education in the United States. Approximately 60% of the
Company's students are enrolled in doctoral programs, with an additional 18%
pursuing master's degrees and the remainder pursuing bachelor's or associate
degrees or diplomas. Management believes that the Company's emphasis on
advanced degree programs provides greater predictability of tuition revenue
and reduces recruitment cost per enrolled student, as compared to lower level
degree programs, due to a number of factors, including the longer term of most
advanced degree programs, the higher student retention rates experienced in
more advanced degree programs and the narrower target markets for advanced
degree programs. Consistent with this philosophy, the Company plans to expand
some of its associate degree programs, such as those offered by MIM, to
bachelor's degree programs. By offering more advanced degree programs, the
Company can also take advantage of the tendency of many graduates of master's,
bachelor's and associate degree programs to continue their education at the
same institution if appropriate advanced degree programs are offered.
Focusing on Curricula with Practical Professional Applications. The Company
was founded to respond to a demand for postgraduate education which focuses on
practical professional applications instead of research. The Company's
academic programs are designed to prepare students to work in their chosen
professions immediately upon graduation. Psychology graduate students, for
example, gain significant practical professional experience through a required
internship program. Similarly, MIM requires all of its students to participate
in a field-based internship. The Company's programs for professional educators
also focus on practical benefits by offering the academic credentials and
skills in discrete sub-specialties required for promotion and increased
compensation. This practitioner-focused approach provides the additional
benefits of attracting highly motivated students and increasing student
retention and graduate employment. The Company's professional test preparation
business provides it with another means of participating in the practical
education needed for graduates in many fields to become practitioners.
35
<PAGE>
Refining and Adapting Educational Programs. Each of the Company's schools
strives to meet the changing needs of its students and changes in the
employment markets by regularly refining and adapting its existing educational
programs. To do so, the Company has implemented its Program for Institutional
Effectiveness Review. PIER is designed to provide periodic feedback from
senior management, faculty and students with a view toward consistently
improving the quality of each school's academic programs. Through PIER, the
Company solicits the views of each of these participants in the educational
process on quality improvement issues such as curriculum innovations which can
meet existing or expected employment and student demands and class scheduling
and other program administrative improvements which can improve the students'
educational experience.
Emphasizing School Management Autonomy and Accountability. The Company
operates with a decentralized management structure in which local campus
management is empowered to make most of the day-to-day operating decisions at
each campus and is primarily responsible for the profitability and growth of
that campus. Appropriate performance-based incentive compensation arrangements
have been implemented by the Company to reinforce the accountability of local
campus management under this structure. At the same time, the Company provides
each of its schools with certain services that it believes can be performed
most efficiently and cost-effectively by a centralized office. Such services
include marketing, accounting, information systems, financial aid processing
and administration of regulatory compliance. The Company believes this
combination of decentralized management and certain centralized services
significantly increases its operational efficiency.
GROWTH STRATEGY
The Company's objective is to achieve growth in revenue and profits while
consistently maintaining the integrity and quality of its academic programs.
The key elements of the Company's growth strategy are as follows:
Expanding Program Offerings. The Company continually engages in the
development of new and the expansion of existing curricular offerings at the
doctoral, master's, bachelor's, associate and diploma levels. Of the 17
degree-granting programs currently offered by the Company, five have been
introduced since 1995. For example, in 1995 the Company introduced its DBA
program to provide students with advanced level business training and in 1997
the Company initiated its MSHSA program to provide students with training and
problem solving skills from the areas of both business and social sciences.
The Company believes that there are significant opportunities to develop
additional new programs, such as its proposed program in sports psychology at
ASPP, its new program in pastoral counseling at U of S and its proposed
program in dental hygienics at MIM. Once new programs have proven successful
at one school, the Company seeks to expand them to its other schools which
offer related programs. For example, ASPP currently offers a master's of arts
("MA") degree in counseling at four campuses and is in the process of making
this program available at the remaining ASPP campuses.
Adding New Campuses. The Company seeks to expand its presence into new
geographic locations. Six of the Company's 14 campuses were developed by the
Company, either as new campuses or as additional locations of existing
campuses. The Company continually evaluates new locations for developing
additional campuses and believes that significant opportunities exist for
doing so. For example, of the 21 metropolitan areas in the United States with
a population in excess of two million persons, nine do not have a graduate
school of professional psychology that awards the PsyD degree. The Company
also believes there is demand in Southern California for the type of programs
offered by U of S and has received approval from SACS to open a branch campus
of U of S in Southern California. The Company intends to proceed with the
development of this branch campus as soon as it receives approval from the
State of California. The Company has also recently been granted a license to
open a new PrimeTech campus in Scarborough, Ontario.
Emphasizing Student Recruitment and Retention. The Company believes that it
can increase total enrollment at its campuses through the implementation of an
integrated marketing program that utilizes direct response and
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<PAGE>
direct sales to college and high school counselors. The Company has hired a
marketing professional at each of its campuses to focus both the marketing
campaign and overall recruitment effort of each campus within its targeted
market. The Company also believes it can increase its profitability through
improvements in student retention rates, as the cost of efforts to keep
current students in school are less than the expense of attracting new
students.
Expanding into Related Educational Services. The Company believes that
significant opportunities exist in providing educational services that are
related to its current program offerings. Through Ventura, the Company has
become a leading provider of test preparation programs for psychology
licensure examinations. These programs bring the Company in contact with a
significant number of current and future psychology practitioners, which the
Company believes can offer an opportunity to market additional educational
programs in the future. For example, the Company believes that non-degree
continuing education programs will increasingly be mandated by state licensing
authorities; this represents an opportunity for the Company to provide
services not only for the graduates of its schools, but also for the broader
universe of licensed health care providers to which it gains access through
its Ventura test preparation programs.
Acquisitions. The Company believes that, in both the for-profit and not-for-
profit postgraduate education industry, most schools are small, stand-alone
entities without the benefits of centralized professional management, scale
economies in purchasing and advertising or the financial strength of a well-
capitalized parent company. The Company intends to capitalize on this
fragmentation by acquiring and consolidating attractive schools and
educational programs. The Company has acquired eight of its 14 campuses, five
of which were for-profit and three of which were not-for-profit, and the
Ventura test preparation business. The Company believes there are significant
opportunities to acquire schools which can serve as platforms for program and
campus expansion. Prime acquisition candidates are those that have the
potential to be quickly developed into profitable, accredited degree-granting
schools offering programs consistent with the Company's mission.
PROGRAMS OF STUDY
ASPP. ASPP grants postgraduate level degrees in a variety of specialties
within the field of clinical psychology. The Company offers a doctorate in
clinical psychology, master's of arts degrees in clinical psychology and
professional counseling and a master's of science degree in health services
administration. ASPP also offers a postdoctoral program in clinical
psychopharmacology. Approximately 70% of ASPP's students are enrolled in the
PsyD program in various specialties and, of the students enrolled in the
clinical MA program, historically more than 50% continue in the PsyD program.
The Company was among the first academic programs in the United States to
offer the practitioner-focused PsyD degree, as compared to the research-
oriented PhD degree. The PsyD is a four year program consisting of one year of
classroom training, two years divided between classroom training and fieldwork
practicum and a fourth year consisting of a paid internship. The program
focuses on practical issues in clinical psychology as compared to abstract
research topics. For example, fourth year students prepare a case study as
their final project, rather than a doctoral dissertation. Clinical MA students
complete a two year program, all of which can be carried over into the PsyD
program.
In connection with its emphasis on a practitioner-focused education, ASPP
offers a variety of minors to be pursued in connection with the PsyD program.
For example, the Chicago campus offers minors in the areas of Family
Psychology, Ethnic Racial Psychology, Psychoanalytic Psychology, Sexual Abuse
Psychology, Health Psychology and Psychology and Religion. The Minnesota
campus also offers the Health Psychology and Psychology and Religion
subspecialties, as well as a minor in Child and Family Psychology, and the
Hawaii campus offers a minor in Substance Abuse.
The master's of arts program in professional counseling is a two year
program combining classroom training and fieldwork. Typically offered in the
evening and on weekends, this program aims to provide the skills and
37
<PAGE>
training needed by individuals to practice as licensed professional counselors
in a wide variety of governmental, community and private settings.
The MSHSA degree is designed to provide students with training and problem
solving skills from the areas of both business and social sciences. Students
learn about business principles and their application to health care as well
as clinical training methods and behavior theories applicable to the health
care field. The program focuses on innovative solutions to health care
delivery problems by drawing on both business and interpersonal behavior
theory.
ASPP's academic programs are highly respected in the field. Since its
inception in 1976, ASPP has graduated over 2,400 students. While its focus is
on practice rather than research, its graduates also include PsyDs who now
serve as tenured faculty members at Harvard University and Northwestern
University.
U of S. U of S grants postgraduate and bachelor's level degrees in
education, business and behavioral science. In education, U of S offers a
doctorate in education ("EdD"), a master's of arts in education ("MEd") and an
educational specialist degree ("EdS"), each with various majors or
concentrations such as curriculum and instruction, human services
administration, counseling psychology and educational leadership. In business,
U of S offers a doctorate in business administration, a master's of business
administration ("MBA") and a bachelor's of science in business administration
("BSBA"), each with various majors or concentrations such as information
systems, international business, management and marketing. In behavioral
science, U of S offers a master's of arts in counseling.
The EdD, MEd and EdS programs are offered to professional educators from
across the U.S. The programs consist of an innovative combination of distance
learning and personal interaction, allowing students to complete a significant
percentage of the preparatory work for each course at home in advance of an
intensive in-person instructional period, typically scheduled during breaks in
the academic year. The Company believes that an important aspect of the
learning experience is the student's interaction with faculty and other
students. The EdD is a three year program and the MEd and EdS are a two year
programs.
The DBA, MBA and BSBA degrees are offered both part-time and full-time and
consist of classes in disciplines such as statistics, economics, accounting
and finance. The DBA is a three year program; the MBA is a two year program,
which may count towards two of the three years required for the DBA; and the
BSBA is a two year degree completion program.
MIM. MIM offers associate degrees ("AA") in a variety of allied health care
fields. MIM offers programs leading to certification as a veterinary
technician, diagnostic medical sonographer, histotechnician, medical
assistant, medical laboratory technician or radiologic technologist.
Currently, approximately 60% of the students are enrolled in the veterinary
technician program. The programs typically consist of 12-15 months of full-
time classroom training and two to six additional months of internship.
PrimeTech. PrimeTech offers diploma programs in network engineering,
internet engineering, software programming and paralegal studies. The programs
typically consist of 12-18 months of full-time course work, which can be taken
on a part-time basis and which is completed on-site.
Ventura. Ventura publishes materials and holds workshops in select cities
across the United States to prepare individuals to take various national and
state administered oral and written health care licensure examinations in the
fields of psychology, social work, counseling, marriage and family therapy,
and marriage, family and child counseling. The programs typically last three
to four days and are conducted at various locations throughout the United
States.
STUDENT BODY
Recruitment
The Company seeks to attract students with both the motivation and ability
to complete the programs offered by its schools. To generate interest, the
Company engages in a broad range of activities to inform potential students
and their parents about its schools and programs of study.
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The general reputation of the Company's schools and referrals from current
students, alumni and employers are the largest sources of new students. The
Company believes that over 60% of ASPP's students for the 1997 fiscal year
were recruited through referrals from current and former students as well as
employees and others who have worked with ASPP's graduates. The Company also
employs marketing tools such as its web sites and creates publications and
other promotional materials for the Company's schools, participates in school
fairs and uses other traditional recruitment techniques common to
undergraduate and postgraduate institutions. The goal of the Company's
recruitment efforts is to increase awareness of the Company's schools among
potential applicants in a cost-effective and dignified manner.
ASPP and U of S operate in a different marketing environment than MIM and
PrimeTech. ASPP and U of S seek to appeal to academically-oriented students,
students who might otherwise elect to attend a state-sponsored or private
university and who expect to see recruitment efforts and materials consistent
with such universities, such as course catalogs and participation in student
fairs. MIM and PrimeTech seek to appeal to students who are strictly seeking
career-enhancing education, students who may not have college or university
experience and who typically respond to more traditional commercial marketing
efforts. Ventura markets its programs directly to graduates of postgraduate
psychology schools that have registered to take postgraduate licensure exams.
The following table sets forth certain statistics regarding the student body
at each of the Company's schools for the 1997/1998 academic year:
<TABLE>
<CAPTION>
NUMBER OF AVERAGE
SCHOOL STUDENTS AGE % POSTGRADUATE
- ----------------------------------------------- --------- ------- --------------
<S> <C> <C> <C>
American Schools of Professional Psychology.... 1,876 33 100%
University of Sarasota......................... 1,217 41 98%
Medical Institute of Minnesota................. 582 27 0%
PrimeTech Institute............................ 574 30 0%
</TABLE>
Admission
The Company's admissions objective is to achieve controlled student
enrollment growth while consistently maintaining the integrity and quality of
its academic programs. At each of the Company's schools, student admissions
are overseen by a committee, comprised principally of members of the faculty,
that reviews each application and makes admissions decisions. Differing
programs within the Company operate with differing degrees of selectivity.
Some of the Company's programs, particularly its postgraduate psychology
programs, receive many more applications for admission than can be
accommodated. Admissions criteria for such programs include a combination of
prior academic record, performance on an admissions essay and work experience.
The Company believes that other of its programs are beneficial to anyone who
chooses to take them. Such programs tend to be less selective; however, the
Company does screen students both for their commitment to completing a
particular program of study and their aptitude for the academic subject matter
of their chosen program. Upon passing the various screens of the admissions
process, successful applicants are notified of acceptance into the program of
their choice. All of the Company's schools use a rolling admissions format.
Retention
The Company recognizes that the ability to retain students until graduation
is an important indicator of the success of its schools and of its students.
As with other postsecondary institutions, students at the Company's schools
may fail to finish their programs for a variety of personal, financial or
academic reasons. While ASPP doctoral students have seven years to complete
their studies, students generally complete the program in approximately five
and one-half years. Over 62% of the members of ASPP's 1992 entering doctoral
class graduated in 1997, and historically approximately 70% of ASPP's students
ultimately complete their degree. U of S, MIM and PrimeTech have historically
had similar completion rates, although MIM and PrimeTech have substantially
shorter programs. The Company believes MIM's and PrimeTech's completion rates
are higher than those of many other associate degree and diploma programs. To
reduce the risk of student withdrawals, the
39
<PAGE>
Company counsels students early in the application process to gauge their
commitment to completing their chosen course of study.
Student retention is considered an entire school's responsibility, from
admissions to faculty and administration to career counseling services. To
minimize student withdrawals, faculty and staff members at each of the
Company's campuses strive to establish personal relationships with students.
Each campus devotes staff resources to advising students regarding academic
and financial matters, part-time employment and other matters that may affect
their success. However, while there may be many contributors, each campus has
one administrative employee specifically responsible for monitoring and
coordinating the student retention efforts. In addition, the Company's senior
management regularly tracks retention rates at each campus and provides
feedback and support to local campus administrators.
TUITION AND FEES
The Company's schools invoice students for tuition and other institutional
charges by the term of instruction. Each school's refund policies meet the
requirements of the DOE and such school's state and accrediting agencies.
Generally, if a student ceases attendance during the first 60% of his or her
first term, the applicable school will refund institutional charges based on
the number of weeks remaining in that term. After a student has attended 60%
of that term, the school will retain 100% of the institutional charges. After
a student's first term, the school refunds institutional charges based on the
number of weeks attended in the term in which the student withdraws.
Generally, after six weeks of a term, the school will retain 100% of the
institutional charges for that academic period.
The Company has historically implemented tuition increases each year at or
above the rate of inflation. Average tuition increases at the Company's
schools for fiscal 1998, 1997 and 1996 were 5.1%, 5.1% and 5.0%, respectively.
The following table sets forth the average total tuition to complete a
degree at each of the Company's schools, based on tuition rates for the 1998-
99 academic year:
<TABLE>
<CAPTION>
AVERAGE TOTAL LENGTH OF
SCHOOL TUITION PROGRAM
- ------------------------------------------------------- ------------- ---------
<S> <C> <C>
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY
PsyD................................................. $ 52,440 4 years
MA (Clinical)........................................ 24,908 2 years
MA (Counseling)...................................... 19,008 2 years
MSHSA................................................ 22,500 2 years
UNIVERSITY OF SARASOTA
DBA, EdD............................................. $ 21,180 3 years
MEd.................................................. 15,650 2 years
EdS.................................................. 10,590 2 years
MBA.................................................. 9,640 2 years
MA................................................... 16,600 2 years
BSBA................................................. 14,250 2 years
MEDICAL INSTITUTE OF MINNESOTA
Veterinary Technician, Radiologic Technologist,
Medical Lab Technician, Diagnostic Medical
Sonographer......................................... $ 18,900 18 months
Histotechnician, Medical Assistant................... 16,250 18 months
PRIMETECH INSTITUTE
Software Programming Engineer........................ $ 14,500 18 months
Software Programmer.................................. 11,600 13 months
PC/LAN............................................... 7,000 12 months
Internet Service/Support Engineer.................... 6,150 12 months
Legal Secretary...................................... 6,000 12 months
LAN Professional, Paralegal.......................... 5,500 12 months
Microcomputer Business Application Administration.... 4,500 12 months
Desktop Publishing Specialist........................ 4,000 12 months
Accounting Assistant................................. 3,700 12 months
</TABLE>
40
<PAGE>
GRADUATE EMPLOYMENT
The Company believes that employment of its graduates in occupations related
to their fields of study is critical to the ability of its schools to continue
to recruit students successfully. Based on information received from
graduating students and employers, the Company believes that students
graduating from the Company's schools enjoy considerable professional success.
ASPP's graduating class of 1997, for example, reported a 95% employment rate
within six months after graduation. U of S's education students are primarily
working professional educators, and thus by definition, have a significant
graduate employment rate. The success of their educational experience is
measured by continued and accelerated success in their field. MIM and
PrimeTech each provide academic programs specifically tailored to a student's
career goals. MIM's and PrimeTech's graduating classes of 1997 reported
employment rates in their relevant fields of study within six months of
graduation of 85% and 91%, respectively.
FACULTY
The Company seeks to attract and retain faculty with outstanding credentials
in their respective fields for each of its schools. Each of the Company's
schools attempts to employ faculty members who are dedicated to the teaching
profession and to provide such faculty members with a stimulating and
professional academic environment and competitive compensation package. The
Company emphasizes a core staff of full-time faculty members to maintain
continuity and consistency across its academic programs, augmented by part-
time adjunct faculty with significant industry experience. The Company's
schools each employ dedicated faculty with significant experience and
credentials in their respective fields to provide the personal interaction
that is critical to the academic experience. The Company also encourages its
full-time faculty members to engage in meaningful outside professional
activities to retain current practical experience. The Company has implemented
its PIER program providing periodic feedback to faculty from senior
management, faculty peers and students with a view toward consistently
improving the quality of each school's academic programs.
The following table sets forth certain information regarding the faculty at
each of the Company's schools as of August 31, 1998:
<TABLE>
<CAPTION>
FULL-TIME ADJUNCT
SCHOOL FACULTY FACULTY(1) HIGHEST DEGREE OF FULL-TIME FACULTY
- ------------------------ --------- ---------- ------------------------------------------
<S> <C> <C> <C>
American Schools of
Professional
Psychology............. 81 166 100% Doctoral (PhD or PsyD)
University of Sarasota.. 29 11 95% Doctoral, 5% Master's
Medical Institute of 23 26 9% Doctoral, 13% Master's, 43% Bachelor's,
Minnesota.............. 9% Associate, 26% Certificate
PrimeTech Institute..... 15 2 12% Doctoral, 38% Master's, 50% Bachelor's
</TABLE>
- --------
(1) Represents faculty members teaching at least one class during the
1997/1998 academic year.
GOVERNANCE OF THE COMPANY'S SCHOOLS
Each ASPP campus is managed locally by a Dean who reports to the President
of the Company (Harold J. O'Donnell). U of S is headed by a Provost (Ned
Wilson) who reports to the Board of U of S, with a consultative relationship
with the President of the Company. Both PrimeTech and MIM are headed by Unit
Presidents (George Schwartz and Philip Miller, respectively) each of whom
reports to his respective Board, as well as maintains a consultative
relationship with the President of the Company. Scott Abels, President of
Ventura, reports to the President of the Company.
ASPP, U of S, MIM and PrimeTech each has an independent Board of Directors,
separate from the Company's Board but elected by the Company as sole
shareholder. These local Boards independently make and approve policies and
budgets.
41
<PAGE>
COMPETITION
The postsecondary education market in the United States is highly fragmented
and competitive, with no private or public institution enjoying a significant
market share. The Company competes for students with postgraduate, four-year
and two-year degree-granting institutions, which include non-profit public and
private colleges, universities and proprietary institutions. An attractive
employment market also reduces the number of students seeking postgraduate
degrees, thereby increasing competition for potential postgraduate students.
Management believes that competition among educational institutions is based
on the quality of educational programs, location, perceived reputation of the
institution, cost of the programs and employment opportunities for graduates.
Certain public and private colleges and universities may offer programs
similar to those of the Company at a lower tuition cost due in part to
governmental subsidies, government and foundation grants, tax deductible
contributions or other financial resources not available to proprietary
institutions. Other proprietary institutions also offer programs that compete
with those of the Company. Moreover, there is an increase in competition in
the specific educational markets served by the Company. For example, excluding
PsyD programs offered by the Company, in the 1992 academic year there were 29
PsyD programs existing in the United States, while in the 1997 academic year
there were 36 PsyD programs in the United States. Certain of the Company's
competitors in both the public and private sector have greater financial and
other resources than the Company.
EMPLOYEES
As of August 31, 1998, the Company employed 308 persons. Of this number, 23
were employed in the Company's corporate headquarters, 152 were full-time or
permanent part-time faculty members and 133 were working as administrative or
support staff deployed at the various Company locations. None of the Company's
employees are unionized. The Company believes its relations with its employees
are generally good.
FACILITIES
The following table sets forth certain information as of August 31, 1998
with respect to the principal properties leased by the Company and its
subsidiaries. The Company believes that its facilities are in substantial
compliance with applicable environmental laws and with the Americans With
Disabilities Act. All of the Company's facilities are leased except the
University of Sarasota's Honore campus, which is owned by the Company. See
"Management--Compensation Committee Interlocks and Insider Participation."
<TABLE>
<CAPTION>
CAMPUS SQUARE FOOTAGE
- ----------------------------------------------------------------- --------------
<S> <C>
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY
Illinois School of Professional Psychology/Chicago............... 37,831
Illinois School of Professional Psychology/Meadows............... 10,469
Minnesota School of Professional Psychology...................... 9,457
Georgia School of Professional Psychology........................ 9,725
American School of Professional Psychology/Virginia.............. 7,976
American School of Professional Psychology/Hawaii................ 6,596
Arizona School of Professional Psychology........................ 8,673
Florida School of Professional Psychology........................ 5,410
American School of Professional Psychology/Rosebridge............ 4,184
UNIVERSITY OF SARASOTA
University of Sarasota/Honore Campus............................. 18,940
University of Sarasota/Tampa Campus.............................. 5,410
MEDICAL INSTITUTE OF MINNESOTA................................... 62,300
PRIMETECH INSTITUTE
PrimeTech Institute/North York................................... 9,199
PrimeTech Institute/City Campus.................................. 8,681
VENTURA.......................................................... 15,540
</TABLE>
42
<PAGE>
LEGAL PROCEEDINGS
The Company, Dr. Markovitz and certain other companies in which Dr.
Markovitz has an interest have been named as defendants in Charlena Griffith,
et al. v. University Hospital, L.L.C. et al., a class action lawsuit filed in
November 1997 and currently pending in the United States District Court for
the Northern District of Illinois, Eastern Division. No specific amount of
damages is sought by the plaintiffs. This lawsuit arose in connection with the
closing of a for-profit psychiatric hospital located in Chicago, which was
established in 1989 by Dr. Markovitz and operated under the name University
Hospital ("University Hospital"). University Hospital was substantially
dependant on Medicare reimbursement for its revenues. In May 1997, after
continued Medicare reimbursement to University Hospital was effectively
terminated, University Hospital ceased operations and made an assignment for
the benefit of its creditors, which is ongoing. The Company owned a 95% equity
interest in University Hospital at the time of the assignment for the benefit
of its creditors.
The plaintiffs in the lawsuit, former employees of University Hospital,
allege that (i) the hospital was closed without proper notice to employees in
violation of the Worker Adjustment and Retraining Notification Act; (ii) in
violation of the Employee Retirement Income Security Act of 1974, employee
contributions to the hospital's profit sharing plan made prior to the hospital
closing were not delivered to the plan; (iii) in violation of the Illinois
Wage Payment and Collection Act, the hospital failed to pay the final
compensation due its employees prior to the hospital closing; and (iv) the
defendants converted for their own use and benefit the amount of the
plaintiffs' last paycheck, accrued vacation, profit sharing contributions and
credit union contributions. The Company and Dr. Markovitz have been named as
defendants in this lawsuit based upon an allegation that they are alter egos
of University Hospital.
The Company, Dr. Markovitz and the other defendants in this lawsuit deny all
claims asserted and are vigorously defending themselves. The cost of defense
has not been borne by the Company and is not expected to be borne by the
Company in the future. Dr. Markovitz has agreed that no settlement amounts or
damage awards will be paid by the Company. Therefore, the Company does not
expect the ultimate outcome of this matter to have a material adverse effect
on its results of operations or financial condition.
The Company is not party to any other legal proceedings that it believes
would, individually or in the aggregate, have a material adverse effect on its
results of operations or financial condition.
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<PAGE>
FINANCIAL AID AND REGULATION
ACCREDITATION
Accreditation is a non-governmental process through which an institution
voluntarily submits itself to qualitative review by an organization of peer
institutions. The three types of accrediting agencies are (i) national
accrediting agencies, which accredit institutions on the basis of the overall
nature of the institutions without regard to their locations, (ii) regional
accrediting agencies, which accredit institutions located within their
geographic areas, and (iii) programmatic accrediting agencies, which accredit
specific educational programs offered by an institution. Accrediting agencies
primarily examine the academic quality of the instructional programs of an
institution, and a grant of accreditation is generally viewed as certification
that an institution's programs meet generally accepted academic standards.
Accrediting agencies also review the administrative and financial operations
of the institutions they accredit to ensure that each institution has the
resources to perform its educational mission.
Pursuant to provisions of the HEA, the DOE relies on accrediting agencies to
determine whether institutions' educational programs qualify them to
participate in the Title IV Programs. The HEA specifies certain standards that
all recognized accrediting agencies must adopt in connection with their review
of postsecondary institutions. Accrediting agencies that meet the DOE
standards are recognized as reliable arbiters of educational quality. The HEA
requires each recognized accrediting agency to submit to a periodic review of
its procedures and practices by the DOE as a condition of its continued
recognition.
All of the Company's U.S. campuses are accredited by an accrediting agency
recognized by the DOE. These accrediting agencies are the North Central
Association of Colleges and Schools ("NCA"), the Southern Association of
Colleges and Schools ("SACS"), the Accrediting Bureau of Health Education
Schools/Programs ("ABHES") and the American Psychological Association ("APA").
NCA, SACS and ABHES are institutional accrediting bodies which accredit the
entire institution. The APA is a programmatic accrediting body which does not
accredit the entire institution, but only specific programs offered by the
institution. ASPP is institutionally accredited by NCA to offer both doctoral
and master's degrees at its campuses in Illinois, Minnesota, Georgia,
Virginia, Hawaii and Arizona. ASPP's Chicago, Minneapolis and Atlanta campuses
also have programmatic accreditation by the APA. U of S is institutionally
accredited by SACS to award doctoral, master's and bachelor's degrees in
business, doctoral and master's degrees in education and doctoral and master's
degrees in psychology. MIM is approved by the State of Minnesota to award
associate degrees in a variety of allied health fields, is institutionally
accredited by ABHES, a nationally recognized accreditor of allied health care
institutions, and additionally holds individual programmatic accreditation
appropriate to each degree program offered. PrimeTech is approved as a private
vocational school in the Province of Ontario, Canada, to award diplomas upon
successful completion of the following main programs: (1) Network Engineering;
(2) Internet Engineering; (3) Software Programming; and (4) Paralegal Studies.
Each of the institutional accrediting agencies that accredits the Company's
campuses has standards pertaining to areas such as curricula, institutional
objectives, long-range planning, faculty, administration, admissions, record-
keeping, library resources, facilities, finances and student refunds, among
others. Certain institutional substantive changes, including changes of
ownership and the addition of new facilities and programs may require review
and approval from accrediting agencies. Institutions which apply for
accreditation typically receive a visiting team which reviews the
institution's compliance with these standards. Based on the team's report and
the institution's response, the accrediting agency grants or denies
accreditation. The accrediting agencies which accredit the institution's
campuses assess annual fees and require that institutions pay for the costs
associated with team visits and other substantive reviews of the institution
resulting from changes to the institution or its curricula. The Company
believes that it incurred costs of approximately $20,000 in fiscal 1998
directly related to accreditation.
The HEA requires accrediting agencies recognized by the DOE to review many
aspects of an institution's operations to ensure that the education or
training offered by the institution is of sufficient quality to achieve, for
the duration of the accreditation period, the stated objective for which the
education or training is offered. Under the HEA, a recognized accrediting
agency must perform regular inspections and reviews of institutions of higher
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education, including unannounced site visits to institutions that provide
career-oriented education and training. An accredited institution must meet or
exceed an accrediting agency's standards throughout its period of
accreditation. An accrediting agency may place an institution on probation or
similar warning status or direct the institution to show cause why its
accreditation should not be revoked if the accrediting agency believes an
institution may be out of compliance with accrediting standards. It may also
place an institution on "reporting" status in order to monitor one or more
specified areas of the institution's performance. An institution placed on
reporting status is required to report periodically to its accrediting agency
on that institution's performance in the specified areas. While on reporting
status, an institution may be required to seek the permission of its
accrediting agency to open and commence instruction at new locations. None of
the Company's schools are on probation, show cause or reporting status.
STUDENT FINANCIAL ASSISTANCE
Students attending the Company's schools finance their education through a
combination of individual resources (including earnings from full or part-time
employment), government-sponsored financial aid and other sources, including
family contributions and scholarships provided by the Company. The Company
estimates that over 51% of the students at its U.S. schools receive some
government-sponsored (federal or state) financial aid. For fiscal 1998,
approximately 46% of the Company's net tuition revenue (on a cash basis) was
derived from some form of such government-sponsored financial aid received by
the students enrolled in its schools. In addition, approximately 70% of the
students attending PrimeTech receive Canadian government-sponsored financial
aid.
To provide students access to financial assistance available through the
Title IV Programs, an institution, including its additional locations, must be
(i) authorized to offer its programs of instruction by the relevant agencies
of the state in which it and its additional campuses, if any, are located,
(ii) accredited by an accrediting agency recognized by the DOE and (iii)
certified as eligible by the DOE. In addition, the institution must ensure
that Title IV Program funds are properly accounted for and disbursed to
eligible students.
Under the HEA and its implementing regulations, each of the Company's
campuses that participates in the Title IV Programs must comply with certain
standards on an institutional basis, as more specifically identified below.
For purposes of these standards, the regulations define an institution as a
main campus and its additional locations, if any. Under this definition, each
of the Company's U.S. campuses is a separate institution.
NATURE OF FEDERAL SUPPORT FOR POSTSECONDARY EDUCATION IN THE UNITED STATES
While many states support public colleges and universities primarily through
direct state subsidies, the federal government provides a substantial part of
its support for postsecondary education in the form of grants and loans to
students who can use this support at any institution that has been certified
as eligible by the DOE. The Title IV Programs have provided aid to students
for more than 30 years, and, since the mid-1960's, the scope and size of such
programs have steadily increased. Since 1972, Congress has expanded the scope
of the HEA to provide for the needs of the changing national student
population by, among other things, (i) providing that students at proprietary
institutions, such as the Company's institutions, are eligible for assistance
under the Title IV Programs, (ii) establishing a program for loans to parents
of eligible students, (iii) opening the Title IV Programs to part-time
students, and (iv) increasing maximum loan limits and in some cases
eliminating the requirement that students demonstrate financial need to obtain
federally guaranteed student loans. Most recently, the Federal Direct Loan
program was enacted, enabling students to obtain loans from the federal
government rather than from commercial lenders.
On October 1, 1998, legislation was enacted which reauthorized the student
financial assistance programs of the HEA. The Company also believes that its
current refund policy satisfies the new refund requirements. Regulations to
implement the 1998 Amendments are subject to negotiated rulemaking and will
likely not become effective until July 1, 2000. The 1998 Amendments will
continue many of the current requirements for student and institutional
participation in the Title IV Programs. The 1998 Amendments will also change
or modify some requirements. These changes and modifications include
increasing the revenues that an institution may derive from Title IV funds
from 85% to 90% and revising the requirements pertaining to the
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manner in which institutions must calculate refunds to students. The 1998
Amendments also contain a provision that will prohibit institutions that are
ineligible for participation in Title IV loan programs due to student default
rates in excess of applicable thresholds from participating in the Pell Grant
program. Other changes expand participating institutions' ability to appeal
loss of eligibility owing to such default rates. The 1998 Amendments will
further permit an institution to avoid the interruption of eligibility for the
Title IV Programs upon a change of ownership which results in a change of
control by submitting a materially complete application for recertification of
eligibility within 10 business days of such a change of ownership. The Company
does not believe that the 1998 Amendments will adversely or materially affect
its business operations. None of the Company's institutions derives more than
80% of its revenue from Title IV funds and no institution has student loan
default rates in excess of current thresholds. See "Risk Factors--Risk That
Legislative Action Will Reduce Financial Aid Funding or Increase Regulatory
Burden."
Students at the Company's institutions receive grants, loans and work
opportunities to fund their education under several of the Title IV Programs,
of which the two largest are the FFEL program and the Federal Pell Grant
("Pell") program. Some of the Company's institutions participate in the
Perkins program and the Federal Work-Study ("FWS") program. In addition, the
Company's institutions are eligible to participate in the Federal Supplemental
Educational Opportunity Grant ("FSEOG") program.
Most aid under the Title IV Programs is awarded on the basis of financial
need, generally defined under the HEA as the difference between the cost of
attending an educational program and the amount a student can reasonably
contribute to that cost. All recipients of Title IV Program funds must
maintain a satisfactory grade point average and progress in a timely manner
toward completion of their program of study.
Pell. Pell grants are the primary component of the Title IV Programs under
which the DOE makes grants to students who demonstrate financial need. Every
eligible student is entitled to receive a Pell grant; there is no
institutional allocation or limit.
FSEOG. FSEOG awards are designed to supplement Pell grants for the neediest
students. FSEOG grants generally range in amount from $100 to $4,000 per year;
however, the availability of FSEOG awards is limited by the amount of funds
allocated to an institution under a formula that takes into account the size
of the institution, its costs and the income levels of its students. The
Company is required to make a 25% matching contribution for all FSEOG program
funds disbursed. Resources for this institutional contribution may include
institutional grants, scholarships and other eligible funds (i.e., funds from
foundations and other charitable organizations) and, in certain states,
portions of state scholarships and grants. At this time, none of the Company's
institutions participates in FSEOG.
FFEL. The FFEL program consists of two types of loans, Stafford loans, which
are made available to students, and PLUS loans, which are made available to
parents of students classified as dependents. Under the Stafford loan program,
a student may borrow up to $2,625 for the first academic year, $3,500 for the
second academic year and, in some educational programs, $5,500 for each of the
third and fourth academic years. Graduate and professional students may borrow
up to $8,500 per academic year. Students with financial need qualify for
interest subsidies while in school and during grace periods. Students who are
classified as independent can increase their borrowing limits and receive
additional unsubsidized Stafford loans. Such students can obtain an additional
$4,000 for each of the first and second academic years and, depending upon the
educational program, an additional $5,000 for each of the third and fourth
academic years. Graduate and professional students may borrow up to an
additional $10,000 per academic year. The obligation to begin repaying
Stafford loans does not commence until six months after a student ceases
enrollment as at least a half-time student. Amounts received by students in
the Company's institutions under the Stafford program in fiscal 1998 equaled
approximately 46% of the Company's net tuition revenue (on a cash basis). PLUS
loans may be obtained by the parents of a dependent student in an amount not
to exceed the difference between the total cost of that student's education
(including allowable expenses) and other aid to which that student is
entitled. At this time, none of the Company's institutions participates in the
PLUS program.
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The Company's schools and their students use a wide variety of lenders and
guaranty agencies and have not experienced difficulties in identifying lenders
and guaranty agencies willing to make federal student loans. The HEA requires
the establishment of lenders of last resort in every state to ensure that
students at any institution that cannot identify such lenders will have access
to the FFEL program loans.
Perkins. Eligible undergraduate students may borrow up to $3,000 under the
Perkins loan program during each academic year, with an aggregate maximum of
$15,000, at a 5% interest rate and with repayment delayed until nine months
after the borrower ceases to be enrolled on at least a half-time basis.
Perkins loans are made available to those students who demonstrate the
greatest financial need. Perkins loans are made from a revolving account, 75%
of which was initially capitalized by the DOE. Subsequent federal capital
contributions, with an institutional match in the same proportion, may be
received if an institution meets certain requirements. Each institution
collects payments on Perkins loans from its former students and loans those
funds to currently enrolled students. Collection and disbursement of Perkins
loans is the responsibility of each participating institution. During the
1996-97 award year, the Company collected approximately $36,100 from its
former students in repayment of Perkins loans. In the 1996-97 award year, the
Company's required matching contribution was approximately $5,700. The Perkins
loans disbursed to students in the Company's institutions in the 1996-97 award
year represented less than 1% of the Company's net U.S. tuition revenue.
FWS. Under the FWS program, federal funds are made available to pay up to
75% of the cost of part-time employment of eligible students, based on their
financial need, to perform work for the institution or for off-campus public
or non-profit organizations. During the 1996-97 award year, the Company's
institutions and other organizations provided matching contributions totaling
approximately $27,000. At least 5% of an institution's FWS allocation must be
used to fund student employment in community service positions. FWS earnings
are not used for tuition and fees. However, in the 1996-97 award year, the
federal share of FWS earnings represented less than 1% of the Company's net
U.S. tuition revenue.
FEDERAL OVERSIGHT OF THE TITLE IV PROGRAMS
The substantial amount of federal funds disbursed through the Title IV
Programs coupled with the large numbers of students and institutions
participating in those programs have led to instances of fraud, waste and
abuse. As a result, the United States Congress has required the DOE to
increase its level of regulatory oversight of institutions to ensure that
public funds are properly used. Each institution which participates in the
Title IV Programs must annually submit to the DOE an audit by an independent
accounting firm of that institution's compliance with Title IV Program
requirements, as well as audited financial statements. The DOE also conducts
compliance reviews, which include on-site evaluations of several hundred
institutions each year, and directs student loan guaranty agencies to conduct
additional reviews relating to the FFEL programs. In addition, the Office of
the Inspector General of the DOE conducts audits and investigations of
institutions in certain circumstances. Under the HEA, accrediting agencies and
state licensing agencies also have responsibilities for overseeing
institutions' compliance with Title IV Program requirements. As a result, each
participating institution, including each of the Company's institutions, is
subject to frequent and detailed oversight and must comply with a complex
framework of laws and regulations or risk being required to repay funds or
becoming ineligible to participate in the Title IV Programs. In addition,
because the DOE periodically revises its regulations (e.g., in November 1997,
the DOE published new regulations with respect to financial responsibility
standards to take effect July 1, 1998) and changes its interpretation of
existing laws and regulations, there can be no assurance that the DOE will
agree with the Company's understanding of each Title IV Program requirement.
See "--Financial Responsibility Standards."
Largely as a result of this increased oversight, the DOE has reported that
1,500 institutions have either ceased to be eligible for or have voluntarily
relinquished their participation in some or all of the Title IV Programs since
October 1, 1992. This has reduced competition among institutions with respect
to certain markets and educational programs.
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Cohort Default Rates. A significant component of the Congressional
initiative aimed at reducing fraud, waste and abuse was the imposition of
limitations on participation in the Title IV Programs by institutions whose
former students defaulted on the repayment of federally guaranteed or funded
student loans at an "excessive" rate. Since the DOE began to impose sanctions
on institutions with cohort default rates above certain levels, the DOE has
reported that over 1,000 institutions have lost their eligibility to
participate in some or all of the Title IV Programs. However, many
institutions, including all of the Company's institutions, have responded by
implementing aggressive student loan default management programs aimed at
reducing the likelihood of students failing to repay their loans in a timely
manner. An institution's cohort default rates under the FFEL programs are
calculated on an annual basis as the rate at which student borrowers scheduled
to begin repayment on their loans in one federal fiscal year default on those
loans by the end of the next federal fiscal year. Any institution whose cohort
default rate equals or exceeds 25% for any one of the three most recent
federal fiscal years may be found by the DOE to lack administrative capability
and, on that basis, placed on provisional certification status for up to three
years. Provisional certification status does not limit an institution's access
to Title IV Program funds but does subject that institution to closer review
by the DOE and possible summary adverse action if that institution commits
violations of Title IV Program requirements. Any institution whose cohort
default rates equal or exceed 25% for three consecutive years will no longer
be eligible to participate in the FFEL programs for the remainder of the
federal fiscal year in which the DOE determines that such institution has lost
its eligibility and for the two subsequent federal fiscal years. In addition,
an institution whose cohort default rate for any federal fiscal year exceeds
40% may have its eligibility to participate in all of the Title IV Programs
limited, suspended or terminated. Since the calculation of cohort default
rates involves the collection of data from many non-governmental agencies
(i.e., lenders, private guarantors or services), as well as the DOE, the HEA
provides a formal process for the review and appeal of the accuracy of cohort
default rates before the DOE takes any action against an institution based on
such rates. In addition to the foregoing, if an institution's cohort default
rate for loans under the Perkins program exceeds 15% for any federal award
year (i.e., July 1 through June 30), that institution may be placed on
provisional certification status for up to three years. Furthermore, as a
result of the 1998 Amendments to the HEA, institutions that are ineligible to
participate in the Title IV loan program due to student loan default rates
will also become ineligible to participate in the Pell Grant Program.
None of the Company's institutions has had a published FFEL or Perkins
cohort default rate of 15% or greater for any of the past three federal fiscal
years. The Company's overall average cohort default rates for fiscal 1993,
1994 and 1995 were 0.4%, 2.9% and 7.9%, respectively. The average cohort
default rates for proprietary institutions nationally for federal fiscal years
1993, 1994 and 1995 were 23.9%, 21.1% and 19.9%, respectively. The Company's
preliminary overall average cohort default rate for fiscal 1996 was 4.6%.
Increased Regulatory Scrutiny. The HEA provides for a three-part initiative,
referred to as the Program Integrity Triad, intended to increase regulatory
scrutiny of postsecondary education institutions. One part of the Program
Integrity Triad expands the role of accrediting agencies in the oversight of
institutions participating in the Title IV Programs. As a result, the
accrediting agencies which review and accredit the Company's campuses have
increased the breadth of such reviews and have expanded their examinations in
such areas as financial responsibility and timeliness of student refunds. The
Program Integrity Triad provisions also require each accrediting agency
recognized by the DOE to undergo comprehensive periodic reviews by the DOE to
ascertain whether such accrediting agency is adhering to required standards.
Each accrediting agency that reviews any of the Company's campuses has been
reviewed by the DOE under these provisions and has been approved for
recognition by the DOE. These accrediting agencies are NCA, SACS and ABHES.
NCA, SACS and ABHES are institutional accreditors which review the entire
institution. The Company relies upon NCA, SACS and ABHES accreditation to
establish eligibility to participate in the Title IV programs. Three ASPP
campuses have programmatic accreditation from the APA, which also is
recognized by the DOE. The Company, however, does not rely upon APA
accreditation to establish Title IV program eligibility.
A second part of the Program Integrity Triad tightens the standards to be
applied by the DOE in evaluating the financial responsibility and
administrative capability of institutions participating in the Title IV
Programs. In addition, the Program Integrity Triad mandates that the DOE
periodically review the eligibility and certification
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to participate in the Title IV Programs of every such eligible institution. By
law, all institutions were required to undergo such a recertification review
by the DOE by 1997 and are required to undergo such a recertification review
every six years thereafter. Under these standards, each of the Company's
institutions will be evaluated by the DOE more frequently than in the past. A
denial of recertification would preclude an institution from continuing to
participate in the Title IV Programs.
A third part of the Program Integrity Triad required each state to establish
a State Postsecondary Review Entity ("SPRE") to review certain institutions
within that state to determine their eligibility to continue participating in
the Title IV Programs. However, no SPREs are actively functioning. The United
States Congress has declined to provide funding for the SPREs, and Congress
has repealed the SPRE program. Nevertheless, state requirements are important
to an institution's eligibility to participate in the Title IV Programs since
an institution and its programs must be licensed or otherwise authorized to
operate in the state in which it offers education or training in order to be
certified as eligible. See "State Authorization."
Financial Responsibility Standards. All institutions participating in the
Title IV Programs must satisfy a series of specific standards of financial
responsibility. Institutions are evaluated for compliance with those
requirements in several circumstances, including as part of the DOE's
recertification process and also annually as each institution submits its
audited financial statements to the DOE. Under standards in effect prior to
July 1, 1998, one standard requires each institution to demonstrate an acid
test ratio (defined as the ratio of cash, cash equivalents and current
accounts receivable to current liabilities) of at least 1:1 at the end of each
fiscal year. Another standard requires that each institution have a positive
tangible net worth at the end of each fiscal year. A third standard prohibits
any institution from having a cumulative net operating loss during its two
most recent fiscal years that results in a decline of more than 10% of that
institution's tangible net worth as measured at the beginning of that two-year
period. The DOE may measure an institution's financial responsibility on the
basis of the financial statements of the institution itself or the financial
statements of the institution's parent company, and may also consider the
financial condition of any other entity related to the institution.
An institution that is determined by the DOE not to meet any one of the
standards of financial responsibility is nonetheless entitled to participate
in the Title IV Programs if it can demonstrate to the DOE that it is
financially responsible on an alternative basis. An institution may do so by
posting surety either in an amount equal to 50% (or greater, as the DOE may
require) of total Title IV Program funds received by students enrolled at such
institution during the prior year or in an amount equal to 10% (or greater, as
the DOE may require) of such prior year's funds if the institution also agrees
to provisional certification and to transfer to the reimbursement or cash
monitoring system of payment for its Title IV Program funds. The DOE has
interpreted this surety condition to require the posting of an irrevocable
letter of credit in favor of the DOE. Alternatively, an institution may
demonstrate, with the support of a statement from a certified public
accountant and other information specified in the regulations, that it was
previously in compliance with the numeric standards and that its continued
operation is not jeopardized by its financial condition. Under a separate
standard of financial responsibility, if an institution has made late Title IV
Program refunds to students in its prior two years, the institution is
required to post a letter of credit in favor of the DOE in an amount equal to
25% of total Title IV Program refunds paid by the institution in its prior
fiscal year.
In November 1997, the DOE issued new regulations, which took effect July 1,
1998 and revised the DOE's standards of financial responsibility. These new
standards replace the numeric tests described above with three different
ratios: an equity ratio, a primary reserve ratio and a net income ratio, which
are weighted and added together to produce a composite score for the
institution. Institutions such as the Company have the choice of meeting the
new standards or the old standards for fiscal years that began on or after
July 1, 1997, but before June 30, 1998.
The new standards employ a ratio methodology under which an institution need
only satisfy a single standard--the composite score standard. The ratio
methodology takes into account an institution's total financial resources and
provides a combined score of the measures of those resources along a common
scale (from negative 1.0 to positive 3.0). It allows a relative strength in
one measure to mitigate a relative weakness in another measure.
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If an institution achieves a composite score of at least 1.5, it is
financially responsible without further oversight. If an institution achieves
a composite score from 1.0 to 1.4, it is in the "zone," is subject to
additional monitoring, and may continue to participate as a financially
responsible institution for up to three years. Additional monitoring may
require the school to (i) notify the DOE, within 10 days of certain changes,
such as an adverse accrediting action; (ii) file its financial statements
earlier than the six month requirement following the close of the fiscal year;
and (iii) subject the school to a cash monitoring payment method. If an
institution achieves a composite score below 1.0, it fails to meet the
financial responsibility standards unless it qualifies under the provisions of
an alternative standard (i.e., letter of credit equal to 50% of the Title IV
program funds expended from the prior fiscal year or equal to at least 10% of
the Title IV program funds expended from the prior fiscal year and provisional
certification status). The institution may also be placed on the cash
monitoring payment method or the reimbursement payment method.
The Company has applied these new regulations to the Company's financial
statements as of August 31, 1998 and has determined that the Company and each
of its institutions satisfied the new standards as of that date. The composite
score and the individual score for each of the three ratios, for the Company
and each of its institutions is set forth below:
<TABLE>
<CAPTION>
PRIMARY NET
COMPOSITE RESERVE EQUITY INCOME
SCORE RATIO RATIO RATIO
--------- ------- ------ ------
<S> <C> <C> <C> <C>
The Company............................... 1.52 .42 .28 .82
Institutions:
ASPP.................................... 2.13 .75 .75 .63
U of S.................................. 1.50 .31 .29 .90
MIA..................................... 1.97 .90 .92 .15
</TABLE>
Restrictions on Acquiring or Opening Additional Schools and Adding
Educational Programs. An institution which undergoes a change of ownership
resulting in a change in control must be reviewed and recertified for
participation in the Title IV Programs under its new ownership. Pending
recertification, the DOE suspends Title IV Program funding to that
institution's students, except for certain Title IV Program funds that were
committed under the prior owner. If an institution is recertified following a
change of ownership, it will be on a provisional basis. During the time an
institution is provisionally certified, it may be subject to closer review by
the DOE and to summary adverse action for violations of Title IV Program
requirements, but provisional certification does not otherwise limit an
institution's access to Title IV Program funds.
In addition, the HEA generally requires that proprietary institutions be
fully operational for two years before applying to participate in the Title IV
Programs. However, under the HEA and applicable regulations, an institution
that is certified to participate in the Title IV Programs may establish an
additional location and apply to participate in the Title IV Programs at that
location without reference to the two-year requirement, if such additional
location satisfies all other applicable eligibility requirements. The
Company's expansion plans are based, in large part, on its ability to acquire
schools that can be recertified and to open additional locations as part of
its existing institutions. The Company believes that its ability to open
additional locations as part of existing institutions is the most feasible
means of expansion, because its existing institutions are currently certified
as eligible to participate in Title IV Programs and students enrolled at the
new additional locations will have more ready access to Title IV Program
funds.
Generally, if an institution eligible to participate in the Title IV
Programs adds an educational program after it has been designated as an
eligible institution, the institution must apply to the DOE to have the
additional program designated as eligible. However, an institution is not
obligated to obtain DOE approval of an additional program that leads to a
professional, graduate, bachelor's or associate degree or which prepares
students for gainful employment in the same or related recognized occupation
as an educational program that has previously been designated as an eligible
program at that institution and meets certain minimum length requirements.
Furthermore, short-term educational programs, which generally consist of those
programs that provide at least 300 but less than 600 clock hours of
instruction, are eligible only for FFEL funding and only if they have been
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offered for a year and the institution can demonstrate, based on an
attestation by its independent auditor, that 70% of all students who enroll in
such programs complete them within a prescribed time and 70% of those students
who graduate from such programs obtain employment in the recognized occupation
for which they were trained within a prescribed time. In the event that an
institution erroneously determines that an educational program is eligible for
purposes of the Title IV Programs without the DOE's express approval, the
institution would likely be liable for repayment of Title IV Program funds
provided to students in that educational program. The Company does not believe
that the DOE's regulations will create significant obstacles to its plans to
add new programs because any new programs offered by its campuses will lead to
professional, graduate, bachelor's or associate degrees or prepare students
for gainful employment in the same or related recognized occupation as
education programs which were previously offered by the Company's campuses.
Certain of the state authorizing agencies, OSAP, and accrediting agencies
with jurisdiction over the Company's campuses also have requirements that may,
in certain instances, limit the ability of the Company to open a new campus,
acquire an existing campus, establish an additional location of an existing
institution or begin offering a new educational program. The Company does not
believe that such standards will have a material adverse effect on the Company
or its expansion plans, because the standards for approval of new programs or
expanding institutions are generally no more stringent than the standards
applied by the states, OSAP and accrediting agencies in originally granting
accreditation and licensure to the campuses. Compliance with state and OSAP
standards generally requires notification of the proposed change and, in some
states, approval by the accrediting agency. Based on its current practice of
meeting or exceeding both state and accrediting agency standards, the Company
believes that it will be able to obtain any accreditation or state approvals
to initiate new programs or expand its campuses. If the Company were unable to
meet those standards, its ability to add programs or expand its campuses would
be materially adversely affected.
The "85/15 Rule." Under a provision of the HEA commonly referred to as the
"85/15 Rule," a proprietary institution, such as each of the Company's U.S.
institutions, would cease being eligible to participate in the Title IV
Programs if, on a cash accounting basis, more than 85% of its net revenues for
the prior fiscal year was derived from the Title IV Programs. As discussed
above, Congress recently amended the 85/15 Rule to a 90/10 Rule in the 1998
Amendments to the HEA. Any institution that violates this immediately becomes
ineligible to participate in the Title IV Programs and is unable to apply to
regain its eligibility until the following fiscal year. The Company has
calculated that, since this requirement took effect in 1995, none of the
Company's U.S. institutions derived more than 80% of its net revenue (on a
cash basis) from the Title IV Programs for any award year, and that for fiscal
1998 the range for the Company's U.S. institutions was from approximately 48%
to approximately 77%. For 1997, the independent auditors of the Company or the
institution, if applicable, examined management's assertion that each of the
Company's U.S. institutions complied with these requirements and opined that
such assertion was fairly stated in all material respects. The Company
regularly monitors compliance with this requirement in order to minimize the
risk that any of its U.S. institutions would derive more than the maximum
percentage of its revenue from the Title IV Programs for any fiscal year. If
an institution appears likely to approach the maximum percentage threshold,
the Company would evaluate the appropriateness of making changes in student
funding and financing to ensure compliance with the Rule.
Restrictions on Payment of Bonuses, Commissions or Other Incentives. The HEA
prohibits an institution from providing any commission, bonus or other
incentive payment based directly or indirectly on success in securing
enrollments or financial aid to any person or entity engaged in any student
recruitment, admission or financial aid awarding activity for programs
eligible for Title IV Program funds. The Company believes that its current
compensation plans are in compliance with HEA standards.
STATE AUTHORIZATION
Each of the Company's campuses is authorized to offer educational programs
and grant degrees or diplomas by the state in which such campus is located.
The level of regulatory oversight varies substantially from state to state. In
some states, the campuses are subject to licensure by the state education
agency and also by a separate higher education agency. State laws establish
standards for instruction, qualifications of faculty, location and
51
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nature of facilities, financial policies and responsibility and other
operational matters. State laws and regulations may limit the ability of the
Company to obtain authorization to operate in certain states, to award degrees
or diplomas or offer new degree programs. Certain states prescribe standards
of financial responsibility that are different from those prescribed by the
DOE. The Company believes that each of its campuses is in substantial
compliance with state authorizing and licensure laws.
CANADIAN REGULATION
The Ontario Ministry of Education and Training ("OMET") provides financial
assistance to eligible students through OSAP, which includes two main
components, the CSL program and the Ontario Student Loans Program ("OSLP")
program. To maintain its right to administer OSAP, an institution, such as the
PrimeTech campuses in Toronto, must, among other things, be registered and in
good standing under the PVSA and abide by the rules, regulations and
administrative manuals of the CSL, OSLP and other OSAP-related programs. In
order to attain initial eligibility, an institution must establish, among
other things, that it has been in good standing under the PVSA for at least 12
months, that it has offered an eligible program for at least 12 months and
that it has graduated at least one class in an eligible program that satisfies
specific requirements with respect to class size and graduation rate. In
addition, the institution must offer full-time programs at the postsecondary
level, award a diploma or certificate upon successful completion of the
program, have minimum admission requirements for entering students, require
students to participate fully in their studies, monitor students' progress and
maintain academic records, and advise OMET before taking any action that could
result in its failing to meet OMET's requirements. When applying for initial
eligibility an institution must also file with OMET a request for OSAP
designation with a description of the procedures to be implemented to
administer the OSAP financial aid office. During the first two years of
initial eligibility, the institution must have its administration of OSAP
independently audited, and full eligibility will not be granted unless these
audits establish that the institution has properly administered OSAP. The
institution can only administer CSL funds, and cannot administer OSLP funds,
until it has gained full eligibility. Once an institution has gained OSAP
eligibility, the institution must advise OMET before it takes any material
action that may result in its failure or inability to meet any rules,
regulations or requirements related to OSAP. Both of the Company's Canadian
campuses are fully eligible to administer CSL and OSLP Funds.
In order for an OSAP-eligible institution to establish a new branch of an
existing eligible institution, it must obtain an OSAP-designation from OMET,
either as a separate institution if the branch administers OSAP without the
involvement of the main campus, or as part of the same institution, if OSAP is
administered through the main campus of the institution. The Company does not
believe that OSAP's requirements will create significant obstacles to its
plans to acquire additional institutions or open new branches in Ontario.
Institutions participating in OSAP, such as the PrimeTech campuses in
Toronto, cannot submit applications for loans to students enrolled in
educational programs that have not been designated as OSAP-eligible by OMET.
To be eligible, among other things, a program must be registered with the
Private Vocational Schools Unit, must be of a certain minimum length and must
lead to a diploma or certificate. Each of the PrimeTech educational programs
has been designated OSAP eligible by OMET and the Company does not anticipate
that these program approval requirements will create significant problems with
respect to its plans to add new educational programs.
An institution cannot automatically acquire OSAP-designation through
acquisition of other OSAP-eligible institutions. When there is a change of
ownership, including a change in controlling interest, in a non-incorporated
OSAP-eligible institution, OMET will require evidence of the institution's
continued capacity to properly administer the program before extending OSAP
designation to the new owner. The Company does not believe that the Offering
will be considered a change of ownership for purposes of OSAP. Under OSAP
regulations, a change or reorganization which significantly affects the
institution's administration of OSAP funds such that the institution's prior
record of administering such funds is no longer relevant results in the OMET
considering the institution to be a new institution. The Company believes that
the Offering will not result in PrimeTech being considered a new institution
under OSAP regulations because the parent corporation and PrimeTech's
administration of OSAP funds will not change as a result of the Offering.
Given that OMET periodically revises its regulations and other requirements
and changes its interpretations of existing laws and regulations, there can be
no assurance that OMET will agree with the Company's understanding of each
OMET requirement.
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PrimeTech is required to audit its OSAP administration annually and OMET is
authorized to conduct its own audits of the administration of the OSAP
programs by any OSAP-eligible institution. The Company has complied with these
requirements on a timely basis. Based on its most recent annual compliance
audits, PrimeTech has been found to be in substantial compliance with the
requirements of OSAP, and the Company believes that it continues to be in
substantial compliance with these requirements. OMET has the authority to take
any measures it deems necessary to protect the integrity of the administration
of OSAP. If OMET deems a failure to comply to be minor, OMET will advise the
institution of the deficiency and provide the institution with the opportunity
to remedy the asserted deficiency. If OMET deems the failure to comply to be
serious in nature, OMET has the authority to: (i) condition the institution's
continued OSAP designation upon the institution's meeting specific
requirements during a specific time frame; (ii) refuse to extend the
institution's OSAP eligibility to the OSLP program; (iii) suspend the
institution's OSAP designation; or (iv) revoke the institution's OSAP
designation. In addition, when OMET determines that any non-compliance in an
institution's OSAP administration is serious, OMET has the authority to
contract with an independent auditor, at the expense of the institution, to
conduct a full audit in order to quantify the deficiencies and to require
repayment of all loan amounts. In addition, OMET may impose a penalty up to
the amount of the damages assessed in the independent audit.
As noted above, PrimeTech is subject to the PVSA. The Company may not
operate a private vocational school in the province of Ontario unless such
school is registered under the PVSA. Upon payment of the prescribed fee and
satisfaction of the conditions prescribed by the regulations under the PVSA
and by the Private Vocational Schools Unit of the OMET, an applicant or
registrant such as PrimeTech is entitled to registration or renewal of
registration to conduct or operate a private vocational school unless: (1) it
cannot reasonably be expected to be financially responsible in the conduct of
the private vocational school; (2) the past conduct of the officers or
directors provides reasonable grounds for belief that the operations of the
campus will not be carried on in accordance with relevant law and with
integrity and honesty; (3) it can reasonably be expected that the course or
courses of study or the method of training offered by the private vocational
school will not provide the skill and knowledge requisite for employment in
the vocation or vocations for which the applicant or registrant is offering
instruction; or (4) the applicant is carrying on activities that are, or will
be, if the applicant is registered, in contravention of the PVSA or the
regulations under the PVSA. An applicant for registration to conduct or
operate a private vocational school is required to submit with the application
a bond in an amount determined in accordance with the regulations under the
PVSA. PrimeTech is currently registered under the PVSA at both of its
buildings, and the Company does not believe that there will be any impediment
to renewal of such registrations on an annual basis.
The PVSA provides that a "registration" is not transferable. However, the
Private Vocational Schools Unit of OMET takes the position that a purchase of
shares of a private vocational school does not invalidate the school's
registration under the PVSA. The Company does not believe that the Offering
will invalidate the registration of PrimeTech.
If a corporation is convicted of violating the PVSA or the regulations under
the PVSA, the maximum penalty that may be imposed on the corporation is
$25,000.
The legislative, regulatory and other requirements relating to student
financial assistance programs in Ontario are subject to change by applicable
governments due to political and budgetary pressures and any such change may
affect the eligibility for student financial assistance of the students
attending PrimeTech which, in turn, could materially adversely affect the
Company's business, results of operations and financial condition.
53
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Set forth below is the name, age as of August 31, 1998, and a brief account
of the business experience of the Company's executive officers and directors
and certain key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --- -------------------------------------
<S> <C> <C>
Michael C. Markovitz.................. 48 Chairman of the Board of Directors
Harold J. O'Donnell................... 68 President
Charles T. Gradowski.................. 49 Chief Financial Officer
Theodore J. Herst..................... 74 Director
Karen M. Knab......................... 50 Director
Michael W. Mercer..................... 47 Director
Kalman K. Shiner...................... 56 Director
Leslie M. Simmons..................... 69 Director
John E. Sites......................... 60 Director
Scott Ables........................... 37 General Manager, Ventura
Philip Miller......................... 49 Unit President, MIM
George Schwartz....................... 49 Unit President, PrimeTech
Ned Wilson............................ 54 Provost, U of S
Lisa Doyle............................ 31 Controller
Cynthia Hartwell...................... 43 Vice President, Operations
Jean Norris........................... 33 Vice President, Enrollment Management
Jamie Wyse............................ 44 Vice President, Business Development
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
Michael C. Markovitz, Ph.D., has served as Chairman of the Board of the
Company since its inception. In 1976, Dr. Markovitz co-founded the Illinois
School of Professional Psychology and, during the developmental years of the
school, also served as President. After purchasing the interests of the co-
founders of the Illinois School of Professional Psychology, Dr. Markovitz
oversaw the growth of the original single campus school into the multi-campus
American Schools of Professional Psychology. From 1978 to 1986, Dr. Markovitz
was a lecturer in Management at Northwestern University and is the author of
the "BBP Guide to Human Resource Management" (1982), a textbook regarding
personnel management. Dr. Markovitz received his doctoral degree in psychology
from the University of Chicago and has been an active member of the American
Psychological Association and the National Council of Schools of Professional
Psychology.
Harold J. O'Donnell, Ph.D., has served as the President of the Company since
1992. From 1976 to 1991, Dr. O'Donnell served in a series of management
positions with Apollo Group, Inc., a for-profit education company, including
Director of the Southern California Program of Institute for Professional
Development (1976 to 1979), Executive Vice President of Institute for
Professional Development (1979 to 1982), Executive Vice President of
University of Phoenix (1979 to 1987) and Provost of University of Phoenix
(1987 to 1992). From 1974 to 1976, Dr. O'Donnell served as Deputy Manpower
Director for the Long Beach Commission on Economic Opportunity. Dr. O'Donnell
has served as an adviser to colleges and universities in California, Indiana,
Illinois and Florida involving developmental and regional accreditation issues
with accrediting bodies such as NCA, SACS and the Western Association of
Schools and Colleges. Dr. O'Donnell received his doctoral degree in
educational administration from the University of Notre Dame and his master's
degree from Catholic University of America. He continued his postdoctoral
training in programs at Stanford University, the University of California at
Los Angeles and the University of San Francisco.
Charles T. Gradowski, C.P.A., has served as Chief Financial Officer of the
Company since 1995. Mr. Gradowski served as Controller at Clipper Exxpress, a
freight forwarder, from 1988 to 1995. Mr. Gradowski received his bachelor's
degree and a master's in business administration from the University of
Illinois.
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Theodore J. Herst has been a Director of the Company since its inception.
Mr. Herst is a co-founder of the Illinois School of Professional Psychology
and past Chairman of the Board of the Illinois School of Professional
Psychology. Since 1988, Mr. Herst has been retired from the practice of law.
Karen M. Knab has been a Director of the Company since 1986. Ms. Knab has
been a member of the Board of Directors of U of S since 1995. Since January
1996, Ms. Knab has been the Executive Officer of the law firm of Sutherland,
Asbill and Brennan. From 1993 to 1996, she was the Managing Partner of the
Washington, D.C. office of The Peers Group, a consulting firm.
Michael W. Mercer, Ph.D., has been a Director of the Company since 1986. Dr.
Mercer is currently in private practice as a psychologist and is the author of
several books on psychology. He is the past President of the Illinois
Psychological Association.
Kalman M. Shiner, C.P.A., has been a Director of the Company since June
1998. Mr. Shiner is currently the Managing Director of the accounting firm of
Ostra, Reisin, Berk & Abrams, Ltd.
Leslie M. Simmons has been a Director of the Company since 1981. Mr. Simmons
has been a member of the Board of Directors of U of S since 1995. Mr. Simmons
is Chairman of the Board of Directors of Apollo Steel Corporation, a
manufacturing company.
John M. Sites has been a Director of the Company since 1994. Mr. Sites has
been Vice President for Program Development for American InterContinental
University since 1997. Mr. Sites served as President of the American
InterContinental University in Dubai (United Arab Emirates) (1996 to 1997),
Senior Vice President of American InterContinental University in London (1994
to 1996) and Associate Executive Director of the Commission on Colleges, SACS
(1989 to 1993). Mr. Sites served for over twenty years at Brenau College as a
Faculty Member, Department Chair, Academic Dean and Executive Vice President.
OTHER KEY EMPLOYEES
Scott Ables has been the General Manager of Ventura since 1997, where he
oversees the administration, marketing and sales efforts. Mr. Ables has been
affiliated with the Association for Advanced Training in the Behavioral
Sciences since 1991, serving in a number of managerial positions, and has
overseen the development of curricular materials for test preparation in a
variety of professional fields. From 1987 to 1991, Mr. Ables was an executive
of Contractors Career Centers, Inc., where he taught seminars addressing
business and legal issues to professionals. He is a former Director of the
California Contractors Association. Mr. Ables received his bachelor's degree
in political science from California State University.
Philip Miller has served as President of Medical Institutes of America, Inc.
since its founding in 1998. Mr. Miller had been Executive Vice President of
MIM from 1988 to 1992 and President of MIM since 1992. From 1970 to 1985, Mr.
Miller was with the U.S. Department of Education, the Minnesota Department of
Education and the Minnesota Higher Education Board. Mr. Miller received his
J.D. degree from the William Mitchell College of Law.
George Schwartz, C.A., has served as President of PrimeTech Institute since
1995. From 1988 to 1995, Mr. Schwartz was a Chartered Accountant and Partner
with Cole and Partner. Mr. Schwartz is a graduate of the University of
Toronto.
Ned Wilson, Ph.D., has served as the Provost and CEO of the University of
Sarasota since 1994. From 1992 to 1994, Dr. Wilson served as Dean of the
School of Business of the University of Sarasota. From 1990 to 1992, Dr.
Wilson was a faculty member at the University of Sarasota and a software
design consultant for GTE and Arthur Andersen. Dr. Wilson had previously
served as a faculty member in schools of business as well as an educational
consultant in Connecticut. Dr. Wilson received his doctoral degree from Ohio
State University.
Lisa Doyle, C.P.A., has served as the Controller of the Company since 1995.
From 1989 to 1995, Ms. Doyle served as Audit Manager for Goettsche, Tranen,
Winter and Russo. Ms. Doyle is a graduate of the University of Illinois.
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Cynthia Hartwell has served as Vice President of Operations for the Company
since 1997. From 1995 to 1997, Ms. Hartwell served as Director of Operations
for the Sacramento Campus, University of Phoenix. From 1991 to 1995, she was
an employee of the Apollo Group/University of Phoenix, and served as Director
of Learning Resources for the University of Phoenix. Ms. Hartwell has also
served in management and research positions at several companies, with a focus
on programs involving educational development. Ms. Hartwell holds a master's
degree from the University of Missouri.
Jean Norris has served as Vice President for Enrollment Management for the
Company since January 1998. Ms. Norris had previously served as the Dean of
Admissions at Robert Morris College from 1996 to 1998, and a variety of other
administrative positions at Robert Morris from 1989 to 1996. Ms. Norris has a
bachelor's degree in management from National-Louis University and a master's
degree in communications from Governors State University.
Jamie Wyse has served as Vice President of Business Development for the
Company since 1996. From 1994 to 1996, Mr. Wyse served as Director of
Marketing and Sales for Regal Hotels International and, from 1990 to 1994,
served as Director of Marketing and Sales for Regent International Hotels.
During 1988 to 1990, he worked on developing a group of retail gourmet
specialty shops with Neuchatel, Inc. From 1985 to 1988, Mr. Wyse served as
Director of Strategic Planning and New Business Development with World Book,
Inc. At World Book, Mr. Wyse completed twelve acquisitions in the educational
publishing area. Mr. Wyse holds a master's in business administration in
marketing/finance from the University of Chicago's Graduate School of Business
and a bachelor's of science in communication management from the University of
Tennessee.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors currently has three standing committees--a
Compensation Committee, an Audit Committee and an Investment Committee. A
majority of the members of each of these committees are independent directors.
The Compensation Committee recommends action to the Board regarding the
salaries and incentive compensation of elected officers of the Company and
administers the Company's bonus plans and Stock Plans. The Compensation
Committee is currently comprised of Michael C. Markovitz (Chairman), Karen M.
Knab and Leslie M. Simmons. It is anticipated that a majority of the
Compensation Committee members will continue to be persons who are "Non-
Employee Directors" as defined under Rule 16b-3 of the Exchange Act and
"outside directors" (as defined in Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code")).
The Audit Committee makes recommendations to the Board regarding the
selection, retention and termination of the Company's independent auditors and
reviews the annual financial statements of the Company and the Company's
internal controls. The Audit Committee is currently comprised of Michael C.
Markovitz (Chairman), Theodore J. Herst and Kalman M. Shiner.
The Investment Committee makes recommendations to the Board regarding the
acquisition of additional schools. The Investment Committee is currently
comprised of Michael C. Markovitz (Chairman), Michael W. Mercer and Kalman M.
Shiner.
COMPENSATION OF DIRECTORS
Historically, the Company's directors have received $700 for attending each
Board meeting. After the consummation of the Offering, the Company's directors
will also be compensated in the form of stock option grants, initially to be
annual grants of options to purchase shares of Class A Common Stock at
the fair market value thereof on the date of grant. Additionally, directors of
U of S, MIM and PrimeTech will be compensated in the form of annual grants of
options to purchase shares of Class A Common Stock at the fair market
value thereof on the date of grant. All directors are reimbursed for all
travel-related expenses incurred in connection with their activities as
directors.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth in summary form information concerning the
compensation awarded to Michael C. Markovitz, Harold J. O'Donnell and Charles
T. Gradowski (collectively, the "Named Executive Officers") for all services
rendered in all capacities to the Company and its subsidiaries for the fiscal
year ended August 31, 1998. No other executive officer of the Company earned
more than $100,000 in total compensation for fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY(1) BONUS COMPENSATION
- --------------------------- --------- ------- ------------
<S> <C> <C> <C>
Michael C. Markovitz.......................... $ -- $ -- $7,611,089(2)
Chairman
Harold J. O'Donnell........................... 114,700 58,341 10,781(3)
President
Charles T. Gradowski.......................... 86,883 15,000 6,264(3)
Chief Financial Officer
</TABLE>
- --------
(1) Includes amounts earned in fiscal 1998, but deferred at each Named
Executive Officer's election pursuant to the Company's 401(k) Plan.
(2) Dr. Markovitz, as the Company's sole shareholder, received other annual
compensation of $5,339,857 from the Company in 1998 in the form of cash
distributions out of the Company's accumulated earnings and profits. In
addition, Management Corp., an affiliate of Dr. Markovitz, received
payments of $2,271,232 in 1998 for services performed by Dr. Markovitz.
Dr. Markovitz is the sole shareholder and employee of Management Corp. He
did not receive any compensation for services rendered to the Company,
other than through this management fee through Management Corp., Dr.
Markovitz provided strategic direction and oversight for the Company,
daily management oversight, consultation on business acquisitions and
other corporate business matters in addition to services characteristic of
a corporate chief executive officer. Following the Offering, Dr. Markovitz
will serve as the Company's Chairman and perform the services Management
Corp. has performed in the past as an employee of the Company. Dr.
Markovitz will enter into an employment agreement which provides for an
initial annual base salary from the Company of $200,000 plus performance-
based compensation, which is currently intended to be in the form of stock
options.
(3) Represents contributions made by the Company under its 401(k) Plan.
STOCK PLANS
Pre-Existing Stock Option Grants, Exercises and Holdings
No persons held any options to purchase Common Stock or stock appreciation
rights as of the end of fiscal 1997.
1998 Stock Incentive Plan
Prior to the consummation of the Offering, the Board and stockholder of the
Company will approve the Company's 1998 Stock Incentive Plan (the "1998 Stock
Plan"). The 1998 Stock Plan will be administered by the Compensation
Committee. Certain employees, directors, officers, advisors and consultants of
the Company will be eligible to participate in the 1998 Stock Plan
("Participants"). The Compensation Committee will be authorized under the 1998
Stock Plan to select the Participants and determine the terms and conditions
of the awards under the 1998 Stock Plan. The 1998 Stock Plan provides for the
issuance of the following types of incentive awards: stock options, stock
appreciation rights, restricted stock, performance grants and other types of
awards that the Compensation Committee deems consistent with the purposes of
the 1998 Stock Plan. An aggregate of shares of Class A Common Stock of
the Company will be reserved for issuance under the 1998 Stock Plan, subject
to certain adjustments reflecting changes in the Company's capitalization.
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Options granted under the 1998 Stock Plan may be either incentive stock
options ("ISOs") or such other forms of non-qualified stock options ("NQOs")
as the Compensation Committee may determine. ISOs are intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Code. The
exercise price of (i) an ISO granted to an individual who owns shares
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (a "10% Owner") will be at least 110% of the fair market
value of a share of Class A Common Stock on the date of grant and (ii) an ISO
granted to an individual other than a 10% Owner and an NQO will be at least
100% of the fair market value of a share of Class A Common Stock on the date
of grant.
Options granted under the 1998 Stock Plan may be subject to time vesting and
certain other restrictions at the sole discretion of the Compensation
Committee. Subject to certain exceptions, the right to exercise an option
generally will terminate at the earlier of (i) the first date on which the
initial grantee of such option is not employed by the Company for any reason
other than termination without cause, death or permanent disability or (ii)
the expiration date of the option. If the holder of an option dies or suffers
a permanent disability while still employed by the Company, the right to
exercise all unexpired installments of such option shall be accelerated and
shall vest as of the latest of the date of such death, the date of such
permanent disability and the date of the discovery of such permanent
disability, and such option shall be exercisable, subject to certain
exceptions, for 180 days after such date. If the holder of an option is
terminated without cause, to the extent the option has vested, such option
will be exercisable for 30 days after such date.
All outstanding awards under the 1998 Stock Plan will terminate immediately
prior to consummation of a liquidation or dissolution of the Company, unless
otherwise provided by the Board. In the event of the sale of all or
substantially all of the assets of the Company or the merger of the Company
with another corporation, all restrictions on any outstanding awards will
terminate and Participants will be entitled to the full benefit of their
awards immediately prior to the closing date of such sale or merger, unless
otherwise provided by the Board.
The Board generally will have the power and authority to amend the 1998
Stock Plan at any time without approval of the Company's stockholders, subject
to applicable federal securities and tax laws limitations (including
regulations of the Nasdaq National Market).
Stock Purchase Plan
The Company's Employee Stock Discount Purchase Plan (the "Stock Purchase
Plan") will be approved by the Board and stockholder prior to the consummation
of the Offering. The Stock Purchase Plan is intended to give employees a
convenient means of purchasing shares of Class A Common Stock through payroll
deductions. The Stock Purchase Plan is intended to provide an incentive to
participate by permitting purchases at a discounted price. The Company
believes that ownership of stock by employees will foster greater employee
interest in the success, growth and development of the Company.
Subject to certain restrictions, each employee of the Company who is a U.S.
resident or a U.S. citizen temporarily on location at a facility outside of
the United States will be eligible to participate in the Stock Purchase Plan
if he or she has been employed by the Company for more than one year.
Participation will be discretionary for eligible employees. The Company will
reserve shares of Class A Common Stock for issuance in connection with
the Stock Purchase Plan. Elections to participate and purchases of stock will
be made on a quarterly basis. Each participating employee contributes to the
Stock Purchase Plan by choosing a payroll deduction in any specified amount,
with a specified minimum deduction per payroll period. A participating
employee may increase or decrease the amount of such employee's payroll
deduction, including a change to a zero deduction, as of the beginning of any
month. Elected contributions will be credited to participants' accounts at the
end of each calendar quarter.
Each participating employee's contributions will be used to purchase shares
for the employee's share account as promptly as practicable after each
calendar quarter. The cost per share will be 90% of the lower of the closing
price of the Class A Common Stock on the Nasdaq National Market on the first
or the last day of the
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<PAGE>
calendar quarter. The number of shares purchased on each employee's behalf and
deposited in his/her share account will be based on the amount accumulated in
such participant's cash account and the purchase price for shares with respect
to any calendar quarter. Shares purchased under the Stock Purchase Plan will
carry full rights to receive dividends declared from time to time. A
participating employee will have full ownership of all shares in such
employee's share account and may withdraw them for sale or otherwise by
written request to the Compensation Committee following the close of each
calendar quarter. Subject to applicable federal securities and tax laws, the
Board will have the right to amend or to terminate the Stock Purchase Plan.
Amendments to the Stock Purchase Plan will not affect a participating
employee's right to the benefit of the contributions made by such employee
prior to the date of any such amendment. In the event the Stock Purchase Plan
is terminated, the Compensation Committee will be required to distribute all
shares held in each participating employee's share account plus an amount of
cash equal to the balance in each participating employee's cash account.
401(K) PLAN
The Company has a tax-qualified employee savings and retirement plan (the
"401(k) Plan") covering all of the Company's full-time employees. Pursuant to
the 401(k) Plan, employees may elect to reduce their current compensation up
to the statutorily prescribed annual limit ($9,500 in 1998) and have the
amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan
provides for contributions to the 401(k) Plan by the Company on behalf of all
participants. The Company contributes an amount equal to 6% of an eligible
employee's annual earnings on a discretionary basis. The 401(k) Plan is
intended to qualify under Section 401 of the Code so that contributions by
employees or by the Company to the 401(k) Plan, and income earned on plan
contributions, are not taxable to employees until withdrawn, and so that
contributions by the Company will be deductible by the Company when made. The
trustees under the 401(k) Plan, at the direction of each participant, invest
such participant's assets in the 401(k) Plan in selected investment options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 1997, the compensation of the Company's executives was determined
by a majority of the Company's Board, consisting of Dr. Markovitz, Karen M.
Knab, Michael W. Mercer, Kalman M. Shiner, Leslie M. Simmons and John E.
Sites.
The Company has historically paid certain management fees from time to time
to Management Corp., a company wholly owned by Michael C. Markovitz, the
Company's Chairman, for services rendered. Dr. Markovitz is the sole
shareholder and employee of Management Corp. He did not receive any
compensation for services rendered to the Company, other than through the
management fee the Company paid Management Corp. Through Management Corp., Dr.
Markovitz provides services characteristic of a chief executive officer,
including strategic direction and oversight for the Company, daily management
oversight, consultation on business acquisitions and other corporate business
matters. Such amounts totaled $1.0 million and $2.3 million during fiscal 1997
and 1998, respectively. These amounts represent the only business transactions
between the Company and Management Corp. during such time period.
During fiscal 1997, the Company from time to time advanced amounts to Dr.
Markovitz. During fiscal 1997, the Company advanced Dr. Markovitz $0.5 million
in exchange for an unsecured note bearing interest at 5.9% per annum. As of
May 31, 1998, Dr. Markovitz had repaid the note and interest totaling
approximately $0.5 million.
On August 30, 1998, Dr. Markovitz issued a note to the Company in the form
of a capital contribution totaling $6,000,000, secured by his stock in the
Company, which bore interest at a rate of 4.33% and was due upon demand. The
note and accrued interest thereon were repaid in full on December 10, 1998.
As of August 31, 1998, the Company had loaned approximately $165,000 to
Prime Tech, an entity one-third owned by Dr. Markovitz. The note is unsecured
and bears interest at 8.0%. The Company purchased 100% of Prime Tech on
November 30, 1998.
59
<PAGE>
The Company pays certain administrative and other expenses on behalf of an
entity partially owned by Dr. Markovitz. The total amount owed to the Company
from this entity for such advances was approximately $106,000 at August 31,
1998. The affiliated entity paid a management fee to the Company of
approximately $174,000 during the year ended August 31, 1998 related to such
services.
On August 31, 1998, U of S acquired the stock of MCM Plaza, a company wholly
owned by Dr. Markovitz. The purchase price of approximately $3.3 million,
based upon an independent third-party appraisal, exceeded the historical book
value of the underlying net assets by $0.7 million. MCM Plaza acquired the
property on which U of S is located in April 1997 for a purchase price of
approximately $2.2 million.
On November 30, 1998, the Company completed the acquisition of PrimeTech.
Dr. Markovitz initially acquired a one-third interest in PrimeTech in November
1995 and, together with the other owners, sold his interest to the Company.
The aggregate purchase price, estimated to be $3.7 million (Canadian Dollars)
after considering the earn out provision, was determined by arms-length
negotiations between the other owners on behalf of themselves and Dr.
Markovitz, on the one hand, and representatives of the Company (other than Dr.
Markovitz), on the other hand.
The Company made distributions to its shareholder of $0.2 million, $0.9
million and $5.3 million to Dr. Markovitz in fiscal 1996, fiscal 1997 and
fiscal 1998, respectively. In addition, as described in "The Company," the
Company intends to pay to Dr. Markovitz the Distribution. It is not possible
at this time to determine the exact amount of the Distribution because it will
be based upon the Company's income for the portion of fiscal 1999 income which
precedes the consummation of the Offering. The Company currently estimates
that the Distribution as of the consummation of the Offering will be
approximately $11.7 million. The Distribution will be paid in the form of the
Distribution Loan, which will be payable immediately after consummation of the
Offering.
One of the Company's schools has historically leased 18,940 square feet of a
building owned by MCM Plaza, a company wholly owned by Dr. Markovitz, for
lease payments aggregating $189,400 per year. During fiscal 1998, Dr.
Markovitz sold the stock of MCM Plaza to the Company for an aggregate
consideration equal to its appraised value of approximately $3.3 million, less
liabilities assumed of approximately $2.6 million to which the property was
subject.
Dr. Markovitz indirectly owned and operated Illinois Alternatives, Inc.
("Illinois Alternatives One"), a company formed by him in 1994 to provide
social work case management on behalf of the Illinois Department of Children
and Family Services for children in need of psychological treatment. From July
1, 1997 through December 31, 1997, the Company provided accounting services to
Illinois Alternatives One in exchange for payments to the Company of $12,000
per month, for a total of $72,000 for this period. Effective December 31,
1997, the business of Illinois Alternatives One was transferred to IA
Acquisition Corporation, which assumed the name "Illinois Alternatives, Inc."
("Illinois Alternatives Two"), 30% of the stock of which is owned by Dr.
Markovitz. Since January 1, 1998, the Company has continued to provide
accounting services to Illinois Alternatives Two for $12,000 per month and the
Company expects this arrangement to continue.
In 1989, Dr. Markovitz established a small for-profit psychiatric hospital
located in Chicago and operated under the name University Hospital. University
Hospital was substantially dependant on Medicare reimbursement for its
revenues. In May 1997, after continued Medicare reimbursement to this hospital
was effectively terminated, University Hospital ceased operations and made an
assignment for the benefit of its creditors, which is ongoing.
During fiscal years 1996 and 1997, the Company made loans to University
Hospital in the amounts of $600,000 and $1,251,000, and bearing interest at
rates of 5.8% and 5.9%, respectively. The largest amount outstanding under
such loans at any time since January 1, 1997 was $1,093,000 as of August 31,
1997. Of these amounts, $766,000 has been repaid. The remaining balance of
$1,093,000 has not been repaid and the Company does not expect it to be
repaid. The Company has recorded such loans as shareholder distributions to
Dr. Markovitz in its financial statements.
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<PAGE>
A class action lawsuit has been filed on behalf of former employees of
University Hospital against Dr. Markovitz, the Company, University Hospital
and certain other companies in which Dr. Markovitz has an interest. See
"Business--Legal Proceedings."
The Company intends that any future transactions between the Company and its
officers, directors and affiliates will be on terms no less favorable to the
Company than can be obtained on an arm's length basis from unaffiliated third
parties and that any transactions with such persons will be approved by a
majority of the Company's outside directors or will be consistent with
policies approved by such outside directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information regarding the equity
ownership of the Company as of August 31, 1998 by (i) each person or entity
known to the Company who beneficially owns five percent or more of a class of
Common Stock of the Company, (ii) each Director and Named Executive Officer of
the Company and (iii) all Directors and executive officers of the Company as a
group. Unless otherwise stated, each of the persons named in the table has
sole voting and investment power with respect to the securities beneficially
owned by him or her as set forth opposite his or her name. Beneficial
ownership of the Common Stock listed in the table has been determined in
accordance with the applicable rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
<TABLE>
<CAPTION>
PRIOR TO THE OFFERING AFTER THE OFFERING
------------------------------ NUMBER OF ------------------------------
DIRECTORS, NAMED NUMBER OF NUMBER OF PERCENT OF CLASS A NUMBER OF NUMBER OF PERCENT OF
EXECUTIVE OFFICERS CLASS A CLASS B VOTING SHARES CLASS A CLASS B VOTING
AND 5% SHAREHOLDERS SHARES SHARES POWER OFFERED SHARES SHARES POWER
------------------- --------- --------- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael C. Markovitz(1).
Harold J. O'Donnell.....
Charles T. Gradowski....
Theodore J. Herst.......
Karen M. Knab...........
Michael W. Mercer.......
Kalman M. Shiner........
Leslie M. Simmons.......
John E. Sites...........
All Directors and
Officers as a group (9
persons)...............
</TABLE>
- --------
* Less than one percent.
(1) If the Underwriters exercise their over-allotment option in full, Dr.
Markovitz will sell shares of Class B Common Stock, which will
automatically convert into an equal number of shares of Class A Common
Stock immediately prior to the sale. After the Offering, Dr. Markovitz
will beneficially own no shares of Class A Common Stock and shares of
Class B Common Stock, comprising % of the total voting power of the
Common Stock.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The following discussion describes the Company's capital stock, Articles and
By-laws as will be in effect upon consummation of the Offering. The following
summary of certain provisions of the Company's capital stock describes all
material provisions of, but does not purport to be complete and is subject to,
and qualified in its entirety by, the Articles and the By-laws of the Company
that are included as exhibits to the Registration Statement of which this
Prospectus forms a part and by the provisions of applicable law.
Prior to the Offering, the Company had one class of common stock
outstanding. Contingent upon consummation of the Offering, the Company's
existing common stock will be converted into Class B Common Stock, and the
Class A Common Stock will become authorized. At the time of the Offering, the
total amount of authorized capital stock of the Company will consist of
30,000,000 shares of Class A Common Stock, par value $0.01 per share,
10,000,000 shares of Class B Common Stock, par value $0.01 per share and
5,000,000 shares of Preferred Stock, par value $1.00 per share (the "Preferred
Stock"). Upon completion of the Offering, shares of Class A Common
Stock, shares of Class B Common Stock and no shares of Preferred Stock
will be issued and outstanding. Additionally, shares of Class A Common
Stock will be reserved for issuance under the Stock Plans and shares
of Class A Common Stock will be reserved for issuance upon conversion of the
Class B Common Stock.
The Articles and By-laws contain certain provisions that are intended to
enhance the likelihood of continuity and stability in the composition of the
Board and that may have the effect of delaying, deferring or preventing a
future takeover or change in control of the Company unless such takeover or
change in control is approved by the Board.
CLASS A COMMON STOCK
The shares of Class A Common Stock being offered by the Company will be,
upon payment therefor, validly issued, fully paid and nonassessable. Subject
to the prior rights of the holders of any Preferred Stock, the holders of
outstanding shares of Class A Common Stock will be entitled to receive
dividends out of assets legally available therefor at such time and in such
amounts as the Board may from time to time determine. See "Dividend Policy."
The shares of Class A Common Stock will not be convertible and the holders
thereof will have no preemptive or subscription rights to purchase any
securities of the Company. Upon liquidation, dissolution or winding up of the
Company, the holders of Class A Common Stock, along with holders of Class B
Common Stock, will be entitled to receive pro rata the assets of the Company
which are legally available for distribution, after payment of all debts and
other liabilities and subject to the prior rights of any holders of Preferred
Stock then outstanding. Each outstanding share of Class A Common Stock will be
entitled to one vote on all matters submitted to a vote of shareholders.
Except as otherwise required by law or the Articles, the Class A Common Stock
and Class B Common Stock will vote together on all matters submitted to a vote
of the shareholders, including the election of Directors.
Application has been made for inclusion of the Class A Common Stock on the
Nasdaq National Market under the symbol "ARGY."
CLASS B COMMON STOCK
The issued and outstanding shares of Class B Common Stock generally will
have identical rights to those of the Class A Common Stock except with respect
to voting power and conversion rights. Each share of Class B Common Stock will
be entitled to ten votes on all matters submitted to a vote of shareholders,
as compared to one vote for each share of Class A Common Stock. Class B Common
Stock will be convertible at the option of the holder, and mandatorily
convertible upon any transfer thereof (except to Permitted Transferees) and at
any time that the Permitted Transferees, in the aggregate, do not beneficially
own at least 10% of the total outstanding shares of Common Stock, into Class A
Common Stock on a share-for-share basis. "Permitted Transferee" is
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<PAGE>
defined in the Articles of Incorporation to include Dr. Markovitz, certain
members of his family and certain family trusts and corporations. The Class B
Common Stock will not be registered under the Securities Act and will not be
listed for trading on any national securities exchange or on the Nasdaq
National Market.
PREFERRED STOCK
The Board may, without further action by the Company's shareholders, from
time to time, direct the issuance of shares of Preferred Stock in series and
may, at the time of issuance, determine the rights, preferences and
limitations of each series. Holders of shares of Preferred Stock may be
entitled to receive a preference payment in the event of any liquidation,
dissolution or winding-up of the Company before any payment is made to the
holders of shares of Common Stock. Satisfaction of any dividend preferences of
outstanding shares of Preferred Stock would reduce the amount of funds
available for the payment of dividends on shares of Common Stock. Under
certain circumstances, the issuance of shares of Preferred Stock may render
more difficult or tend to discourage a merger, tender offer or proxy contest,
the assumption of control by a holder of a large block of the Company's
securities or the removal of incumbent management. Upon the affirmative vote
of a majority of the total number of Directors then in office, the Board,
without shareholder approval, may issue shares of Preferred Stock with voting
and conversion rights which could adversely affect the holders of shares of
Common Stock. Upon consummation of the Offering, there will be no shares of
Preferred Stock outstanding, and the Company has no present intention to issue
any shares of Preferred Stock.
CERTAIN PROVISIONS OF THE AMENDED AND ARTICLES OF INCORPORATION AND BY-LAWS
The Articles provide that, at any time after the date on which Dr. Markovitz
and his Permitted Transferees cease to own at least 51% of the voting power of
the outstanding Common Stock, shareholder action can be taken only at an
annual or special meeting of shareholders and cannot be taken by written
consent in lieu of a meeting. The Articles and the By-laws provide that,
except as otherwise required by law, special meetings of the shareholders can
only be called by the Chairman of the Board or the President of the Company,
or pursuant to a resolution adopted by a majority of the Board. Shareholders
are not permitted to call a special meeting or to require the Board to call a
special meeting.
The By-laws establish an advance notice procedure for shareholder proposals
to be brought before an annual meeting of shareholders of the Company,
including proposed nominations of persons for election to the Board.
Shareholders at an annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the
direction of the Board or by a shareholder who was a shareholder of record on
the record date for the meeting, who is entitled to vote at the meeting and
who has given to the Company's Secretary timely written notice, in proper
form, of the shareholder's intention to bring that business before the
meeting. Although the By-laws do not give the Board the power to approve or
disapprove shareholder nominations of candidates or proposals regarding other
business to be conducted at a special or annual meeting, the By-laws may have
the effect of precluding the conduct of certain business at a meeting if the
proper procedures are not followed or may discourage or defer a potential
acquiror from conducting a solicitation of proxies to elect its own slate of
Directors or otherwise attempting to obtain control of the Company.
The Articles and By-laws provide that the affirmative vote of holders of at
least 66 2/3% of the total votes eligible to be cast in the election of
Directors will be required to amend, alter, change or repeal certain of their
provisions. This requirement of a super-majority vote to approve amendments to
the Articles and By-laws could enable a minority of the Company's shareholders
to exercise veto power over any such amendments. In addition, the Class B
Common Stock has ten votes, as compared to one vote for each share of Class A
Common Stock, on all matters to come before the shareholders, including the
election of Directors. By virtue of such stock ownership, the holders of the
Class B Common Stock will be able to control the vote on all matters submitted
to a vote of the holders of Common Stock, including the election of Directors,
amendments to the Articles and By-laws and approval of significant corporate
transactions. Such concentration of ownership could also have the effect of
delaying, deterring or preventing a change in control of the Company that
might otherwise be beneficial to shareholders. See "Risk Factors--Control by
Existing Shareholders."
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<PAGE>
CERTAIN PROVISIONS OF ILLINOIS LAW
Section 11.75 of the Illinois Act prevents an "interested shareholder"
(defined in Section 11.75, generally, as a person owning 15% or more of a
corporation's outstanding voting shares) from engaging in a "business
combination" with a publicly-held Illinois corporation for three years
following the date upon which such person became an interested shareholder
unless: (i) before such person became an interested shareholder, the board of
directors of the corporation approved the transaction in which the interested
shareholder became an interested shareholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
shareholder becoming an interested shareholder, the interested shareholder
owned at least 85% of the voting shares of the corporation outstanding at the
same time the transaction commenced (excluding shares held by directors who
are also officers of the corporation and by employee shares plans that do not
provide employee participants with the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer); or (iii) on or subsequent to the date upon which such person
became an interested shareholder, the business combination is approved by the
board of directors of the corporation and authorized at a special meeting of
shareholders (not by written consent) by the affirmative vote of the holders
of at least 66 2/3% of the outstanding voting shares of the corporation not
owned by the interested shareholder. A "business combination" includes
mergers, asset sales and other transactions resulting in financial benefit to
a shareholder. Section 11.75 could prohibit or delay mergers or other takeover
or change in control attempts with respect to the Company and, accordingly,
may discourage attempts to acquire the Company.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Articles limit the liability of Directors to the fullest extent
permitted by the Illinois Act. In addition, the By-laws provide that the
Company shall indemnify Directors and officers of the Company to the fullest
extent permitted by such law. The Company anticipates entering into
indemnification agreements with its current Directors and executive officers
shortly following the completion of the Offering.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Class A Common Stock will be
American Stock Transfer & Trust Company.
64
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Offering, the Company will have outstanding
shares of Common Stock (assuming no exercise of the Underwriters'
over-allotment option). All of the shares of Class A Common Stock sold in the
Offering will be freely tradeable under the Securities Act, unless purchased
by "affiliates" of the Company as that term is defined under the Securities
Act. Upon the expiration of lock-up arrangements between the Company, certain
shareholders and the Underwriters, which will occur 180 days after the date of
this Prospectus (the "Effective Date"), all of the shares of Common
Stock issued and outstanding as of the date of this Prospectus (the
"Restricted Shares") will become immediately eligible for sale, subject to
compliance with Rule 144 of the Securities Act as described below (other than
the holding period required by Rule 144 which has already been satisfied).
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least one year will be entitled to sell in any three-month period a number
of shares that does not exceed the greater of: (i) 1% of the number of shares
of Common Stock then outstanding (approximately shares immediately
after the Offering) or (ii) the average weekly trading volume of the Class A
Common Stock on the Nasdaq National Market during the four calendar weeks
immediately preceding the date on which the notice of sale is filed with the
Securities and Exchange Commission. Sales pursuant to Rule 144 are subject to
certain requirements relating to manner of sale, notice and availability of
current public information about the Company. A person (or persons whose
shares are aggregated) who is not deemed to have been an affiliate of the
Company at any time during the 90 days immediately preceding the sale and who
has beneficially owned Restricted Shares for at least two years is entitled to
sell such shares pursuant to Rule 144(k) without regard to the limitations and
requirements described above.
The Company's officers, directors and sole shareholder have agreed with the
Underwriters that until 180 days after the Effective Date they shall not,
directly or indirectly, sell, offer to sell, solicit any offer to buy,
contract to sell, grant any option to purchase or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or in any manner transfer all or
a portion of the economic consequences associated with the ownership of the
Common Stock, or cause a registration statement covering any shares of Common
Stock to be filed, without the prior written consent of Salomon Smith Barney
Inc. subject to certain limited exceptions. The Company has also agreed not to
directly or indirectly, offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or, in any
manner, transfer all or a portion of the economic consequences associated with
the ownership of the Common Stock or cause a registration statement covering
any shares of Common Stock to be filed, for a period of 180 days after the
Effective Date, without the prior written consent of Salomon Smith Barney Inc.
subject to certain limited exceptions, including grants of options pursuant
to, and issuance of shares of Class A Common Stock upon exercise of options
under, the 1998 Stock Plan. The lock-up agreements may be released at any time
as to all or any portion of the shares subject to such agreements at the sole
discretion of Salomon Smith Barney Inc.
The Company intends to file a registration statement covering the sale of
shares of Class A Common Stock reserved for issuance under the 1998
Stock Plan. See "Management--Stock Option Plan." Such registration statement
is expected to be filed as soon as practicable after the date of this
Prospectus and will automatically become effective upon the filing.
Accordingly, shares registered under such registration statement will be
available for sale in the public market unless such shares are subject to
vesting restrictions and subject to limitations on resale by "affiliates"
pursuant to Rule 144.
65
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company has agreed to sell to such Underwriter,
the number of shares of Class A Common Stock set forth opposite the name of
such Underwriter.
<TABLE>
<CAPTION>
NUMBER OF
NAME OF UNDERWRITER SHARES
------------------- ----------
<S> <C>
Salomon Smith Barney Inc.......................................
ABN AMRO Incorporated..........................................
----------
Total......................................................
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Class A
Common Stock offered hereby (other than those covered by the over-allotment
option described below) if any such shares are taken.
The Underwriters, for whom Salomon Smith Barney Inc. and ABN AMRO
Incorporated are acting as the Representatives, propose to offer part of the
shares directly to the public at the public offering price set forth on the
cover page of this Prospectus and part of the shares to certain dealers at a
price that represents a concession not in excess of $ per share under the
public offering price. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. After the initial offering of the shares to the public, the public
offering price and such concessions may be changed by the Representatives. The
Representatives have advised the Company that the Underwriters do not intend
to confirm sales of any shares to any accounts over which they exercise
discretionary authority.
The Company's sole shareholder has granted to the Underwriters an option,
exercisable for thirty days from the date of this Prospectus, to purchase up
to additional shares of Class A Common Stock at the price to public
set forth on the cover page of this Prospectus minus the underwriting
discounts and commissions. The Underwriters may exercise such option solely
for the purpose of covering over-allotments, if any, in connection with the
Offering of the shares offered hereby. To the extent such option is exercised,
each Underwriter will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite each Underwriter's name in the preceding table bears
to the total number of shares listed in such table.
The Company, its officers and directors and its sole shareholder, who will
hold an aggregate of shares of Common Stock after this Offering, have
agreed that, for a period of 180 days following the date of this Prospectus,
they will not, without the prior written consent of Salomon Smith Barney Inc.,
sell, offer to sell, solicit any offer to buy, contract to sell, grant any
option to purchase (other than under the Stock Option Plan), or otherwise
transfer or dispose of any shares of Common Stock, or any securities
convertible into, or exercisable or exchangeable for, Class A Common Stock,
except that the Company may grant options under the Stock Option Plan and may
issue shares of Class A Common Stock pursuant to the exercise of options
granted under the Stock Option Plan.
Prior to the Offering, there has not been any public market for the Class A
Common Stock of the Company. Consequently, the initial public offering price
for the shares of Class A Common Stock included in the Offering will be
determined by negotiations between the Company and the Representatives. Among
the factors to be considered in determining such price are the history of and
prospects for the Company's business and the industry in which it competes, an
assessment of the Company's management and the present state of the Company's
development, the past and present net revenues and earnings of the Company,
the prospects for growth of the Company's net revenues and earnings, the
current state of the economy in the United States and
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<PAGE>
the current level of economic activity in the industry in which the Company
competes and in related or comparable industries, and currently prevailing
conditions in the securities markets, including current market valuations of
publicly traded companies that are comparable to the Company.
Up to an aggregate of shares of Class A Common Stock, or
approximately % of the shares offered hereby, have been reserved for sale
at the public offering price to certain employees of the Company and other
persons designated by the Company. The maximum investment of any such person
may be limited by the Company in its sole discretion. The number of shares of
Class A Common Stock available for sale to the general public will be reduced
to the extent such persons purchase such reserved shares. Any reserved shares
not so purchased will be offered by the Underwriters to the general public on
the same basis as the other shares offered hereby. This program will be
administered by Salomon Smith Barney Inc.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Exchange Act. Over-allotment involves syndicate sales in excess of
the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids for any purchases of the Class A Common Stock so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Class A Common Stock in the open market
in order to cover syndicate short positions. Syndicate short positions may
also be covered by exercise of the Underwriters' over-allotment option
described above in lieu of or in addition to open market purchases. Penalty
bids permit the Underwriters to reclaim a selling concession from a syndicate
member when the shares of Class A Common Stock originally sold by such
syndicate member are purchased in a stabilizing transaction or syndicate
covering transaction to cover syndicate short positions. Such stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of the Class A Common Stock to be higher than it would otherwise be in
the absence of such transactions. These transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities arising under the Securities Act.
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<PAGE>
LEGAL MATTERS
The validity of the Class A Common Stock being offered hereby and certain
other legal matters relating to the Offering will be passed upon for the
Company by Kirkland & Ellis (a partnership which includes professional
corporations), Chicago, Illinois. Katten Muchin & Zavis (a partnership which
includes professional corporations), Chicago, Illinois, is acting as counsel
for the Underwriters.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries as
of August 31, 1997 and 1998 and for the fiscal years ended August 31, 1996,
1997 and 1998, included in this Prospectus and elsewhere in the Registration
Statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-1 with respect to
the Class A Common Stock being offered hereby with the Securities and Exchange
Commission (the "Commission") under the Securities Act. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain items of which
are omitted in accordance with the rules and regulations of the Commission.
Statements contained in this Prospectus concerning the provisions of documents
filed with the Registration Statement as exhibits are necessarily summaries of
such documents, and each such statement is qualified in its entirety by
reference to the copy of the applicable document filed as an exhibit to the
Registration Statement. The Registration Statement may be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; at its
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and at its New York Regional Office, Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material
can be obtained from the public reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates or accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. For further information pertaining to the Company and the
Class A Common Stock being offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof.
68
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets as of August 31, 1997 and 1998.............. F-3
Consolidated Statements of Operations for the years ended August 31,
1996, 1997 and 1998.................................................... F-4
Consolidated Statements of Shareholder's Equity for the years ended
August 31, 1996, 1997 and 1998......................................... F-5
Consolidated Statements of Cash Flows for the years ended August 31,
1996, 1997 and 1998.................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
Argosy Education Group, Inc.:
We have audited the accompanying consolidated balance sheets of ARGOSY
EDUCATION GROUP, INC. AND SUBSIDIARIES (an Illinois corporation) as of August
31, 1997 and 1998 and the related consolidated statements of operations,
shareholder's equity and cash flows for the years ended August 31, 1996, 1997
and 1998. 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 in accordance with generally accepted auditing
standards. 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 includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Argosy
Education Group, Inc. and Subsidiaries as of August 31, 1997 and 1998, and the
results of their operations and their cash flows for the years ended August
31, 1996, 1997 and 1998, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Chicago, Illinois
December 11, 1998
F-2
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 31,
-----------------------------
PRO FORMA
1998
ASSETS 1997 1998 (NOTE 12)
------ ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents........................... $ 4,209 $ 2,712 $ 2,712
Short-term investments.............................. 2,519 1,131 1,131
Receivables--
Students, net of allowance for doubtful accounts
of $30 and $230 at August 31, 1997 and 1998,
respectively..................................... 221 451 451
Other............................................. 126 222 222
Shareholder note receivable......................... 505 6,000 --
Due from related entities........................... -- 271 271
Inventories......................................... 108 94 94
Prepaid expenses.................................... 117 485 485
Deferred income taxes............................... -- -- 326
------- ------- -------
Total current assets............................ 7,805 11,366 5,692
------- ------- -------
Property and equipment, net of accumulated
depreciation and amortization........................ 3,188 3,870 3,870
Other assets:
Non-current investments............................. 1,451 1,073 1,073
Deposits............................................ 405 475 475
Deferred income taxes............................... -- -- 276
Intangibles, net.................................... 4,731 6,691 6,691
------- ------- -------
Total other assets.............................. 6,587 8,239 8,515
------- ------- -------
Total assets.................................... $17,580 $23,475 $18,077
======= ======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
----------------------------------------------
<S> <C> <C> <C>
Current Liabilities:
Current maturities of long-term debt................ $ 264 $ 3,362 $ 3,362
Accounts payable.................................... 590 1,157 1,157
Accrued payroll and related expenses................ 557 833 833
Accrued expenses.................................... 266 751 751
Deferred revenue.................................... 1,716 2,084 2,084
Shareholder distribution............................ -- 720 4,457
------- ------- -------
Total current liabilities....................... 3,393 8,907 12,644
------- ------- -------
Long-term debt, less current maturities............... 6,354 5,165 5,165
------- ------- -------
Deferred rent......................................... 385 481 481
------- ------- -------
Commitments and contingencies
Shareholder's equity (deficit):
Common stock--1,000,000 shares authorized, no par
value, 1,666 shares issued and outstanding......... 505 6,505 505
Unrealized (loss) gain on investments............... (17) 2 2
Purchase price in excess of predecessor carry over
basis.............................................. -- (720) (720)
Retained earnings................................... 6,960 3,135 --
------- ------- -------
Total shareholder's equity (deficit)............ 7,448 8,922 (213)
------- ------- -------
Total liabilities and shareholder's equity
(deficit)...................................... $17,580 $23,475 $18,077
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
-------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Net revenue......................................... $17,840 $20,460 $29,352
------- ------- -------
Operating expenses:
Cost of education................................. 9,370 10,661 15,075
Selling expenses.................................. 263 516 1,102
General and administrative expenses............... 5,174 5,432 9,104
Related party expense............................. 1,710 993 2,271
------- ------- -------
Total operating expenses........................ 16,517 17,602 27,552
------- ------- -------
Income from operations.......................... 1,323 2,858 1,800
------- ------- -------
Other income (expense):
Interest income................................... 304 497 357
Interest expense.................................. (55) (107) (601)
Other income (expense)............................ 21 (48) (12)
------- ------- -------
Total other income (expense), net............... 270 342 (256)
------- ------- -------
Income before provision for income taxes........ 1,593 3,200 1,544
Provision for income taxes.......................... 30 37 29
------- ------- -------
Net income.......................................... $ 1,563 $ 3,163 $ 1,515
======= ======= =======
Earnings per share:
Basic and diluted................................. $ 938 $ 1,899 $ 909
======= ======= =======
Weighted average shares outstanding--basic and
diluted.......................................... 1,666 1,666 1,666
======= ======= =======
Pro forma data (unaudited):
Income before provision for income taxes, as
reported......................................... $ 1,544
Pro forma related party expense adjustment........ (2,071)
-------
Income before provision for income taxes, as
adjusted......................................... 3,615
Pro forma provision for income taxes.............. 1,446
-------
Pro forma net income.............................. $ 2,169
=======
Pro forma earnings per share--basic and diluted... $ 1,302
=======
Pro forma weighted average shares outstanding--
basic and diluted................................ 1,666
=======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK--
NO PAR VALUE, PURCHASE
1,000,000 SHARES PRICE IN
AUTHORIZED EXCESS OF
------------------ UNREALIZED PREDECESSOR TOTAL
SHARES GAIN (LOSS) CARRYOVER RETAINED SHAREHOLDER'S
OUTSTANDING AMOUNT ON INVESTMENTS BASIS EARNINGS EQUITY
----------- ------ -------------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, August 31,
1995................... 1,666 $ 503 $ -- $ -- $ 3,327 $ 3,830
Net income............ -- -- -- -- 1,563 1,563
Shareholder
distributions........ -- -- -- -- (158) (158)
Shareholder
contribution......... -- 1 -- -- -- 1
----- ------ ----- ----- ------- -------
BALANCE, August 31,
1996................... 1,666 504 -- -- 4,732 5,236
Net income............ -- -- -- -- 3,163 3,163
Unrealized loss on
investments.......... -- -- (17) -- -- (17)
Shareholder
distributions........ -- -- -- -- (935) (935)
Shareholder
contribution......... -- 1 -- -- -- 1
----- ------ ----- ----- ------- -------
BALANCE, August 31,
1997................... 1,666 505 (17) -- 6,960 7,448
Net income............ -- -- -- -- 1,515 1,515
Unrealized gain on
investments.......... -- -- 19 -- -- 19
Shareholder
distributions........ -- -- -- -- (5,340) (5,340)
Shareholder
contribution......... -- 6,000 -- -- -- 6,000
Purchase price in
excess of predecessor
carryover basis...... -- -- -- (720) -- (720)
----- ------ ----- ----- ------- -------
BALANCE, August 31,
1998................... 1,666 $6,505 $ 2 $(720) $ 3,135 $ 8,922
===== ====== ===== ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $1,563 $ 3,163 $ 1,515
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization.................... 399 438 938
Changes in operating assets and liabilities, net
of acquired businesses--
Receivables, net............................... (45) (38) 1
Inventories.................................... (27) 53 67
Prepaid expenses............................... (14) (56) (354)
Deposits....................................... 378 (154) (65)
Accounts payable............................... (35) 251 231
Accrued payroll and related expenses........... 113 70 404
Accrued expenses............................... 67 (26) 136
Deferred revenue............................... 179 102 (384)
Deferred rent.................................. 158 105 93
------ ------- -------
Net cash provided by operating activities.... 2,736 3,908 2,582
------ ------- -------
Cash flows from investing activities:
Purchase of property and equipment, net............ (404) (341) (597)
(Purchase) sale of investments, net................ 12 (1,985) 1,784
Business acquisitions, net of cash acquired........ -- (6,292) (1,918)
Shareholder note receivable........................ -- (505) 505
------ ------- -------
Net cash used in investing activities........ (392) (9,123) (226)
------ ------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt........... 193 6,296 3,029
Payments of long-term debt......................... (160) (169) (1,271)
Borrowings from affiliated entities, net........... -- -- (271)
Shareholder distributions.......................... (158) (935) (5,340)
Shareholder contributions.......................... 1 1 --
------ ------- -------
Net cash (used in) provided by financing
activities.................................... (124) 5,193 (3,853)
------ ------- -------
Net increase (decrease) in cash and cash equivalents. 2,220 (22) (1,497)
Cash and cash equivalents, beginning of year......... 2,011 4,231 4,209
------ ------- -------
Cash and cash equivalents, end of year............... $4,231 $ 4,209 $ 2,712
====== ======= =======
Supplemental disclosures of cash flow information:
Cash paid for--
Interest......................................... $ 48 $ 107 $ 549
Taxes............................................ 30 17 41
====== ======= =======
Supplemental disclosure of non-cash investing and
financing activities:
Acquisitions of various schools and businesses--
Fair value of assets acquired.................... $ -- $ 6,677 $ 3,346
Net cash used in acquisitions.................... -- (6,292) (1,918)
------ ------- -------
Liabilities assumed or incurred................ $ -- $ 385 $ 1,428
====== ======= =======
Supplemental disclosure of non-cash shareholder
activities:
On August 31, 1998, the shareholder of the Company
issued a note to the Company in the form of a
capital contribution totaling $6,000,000
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
The consolidated financial statements of Argosy Education Group, Inc.
(formerly known as American Schools of Professional Psychology, Inc. ("ASPP"))
("AEG" or the "Company") include the accounts of the Company and its wholly
owned subsidiaries, University of Sarasota, Inc. ("U of S"), Argosy
International, Inc. ("Ventura") and the Medical Institutes of America, Inc.
("MIA"). Prior to being subsidiaries of the Company, the companies were
separate entities owned by the same shareholder. Through various transactions,
these companies were contributed by the shareholder to the Company. The
Company continues to conduct business under its historical name, ASPP.
The Company provides programs in clinical psychology, education, business
and allied health professions and offers courses and materials for post-
graduate psychology license examinations in the United States. The Company
operates through four business units and is approved and accredited to offer
doctoral, master's, bachelor's and associate degrees as well as to award
diplomas through ten campuses in seven states.
ASPP was established in 1975 and is accredited by the National Association
of Colleges and Schools to offer both doctoral degrees (PsyD--Doctor of
Psychology) and master's degrees (MA, Clinical Psychology; MA, Counseling
Psychology; MHSA, Master of Health Service Administration) at campuses located
in Illinois (Illinois School of Professional Psychology/Chicago; Chicago, IL
and Illinois School of Professional Psychology/Meadows; Rolling Meadows, IL);
Minnesota (Minnesota School of Professional Psychology; Minneapolis, MN);
Georgia (Georgia School of Professional Psychology; Atlanta, GA); Virginia
(American School of Professional Psychology/Virginia; Arlington, VA); Hawaii
(American School of Professional Psychology/Hawaii; Honolulu, HI); Arizona
(Arizona School of Professional Psychology; Phoenix, AZ); Florida (Florida
School of Professional Psychology; Tampa, FL); and California (American School
of Professional Psychology/Rosebridge; Corte Madera, CA). The four senior
campuses (Illinois School of Professional Psychology/Chicago, Minnesota School
of Professional Psychology, Georgia School of Professional Psychology and
American School of Professional Psychology/Hawaii) are also accredited by the
American Psychological Association.
U of S was established in 1969 and is accredited by the Southern Association
of Colleges and Schools ("SACS") to award bachelor's degrees in business
(BSBA, Bachelor of Science in Business Administration), master's degrees in
business (MBA), doctoral degrees in business (DBA), both master's and doctoral
degrees in education (MEd and EdD) and master's and doctoral degrees in
psychology (MA, Clinical Psychology and PsyD). U of S operates two campuses:
University of Sarasota/Honore, Sarasota, FL; and University of Sarasota/Tampa,
Tampa, FL.
Ventura has two wholly-owned subsidiaries, Academic Review, Inc. ("AR") and
Association for Advanced Training in the Behavioral Sciences, Inc. ("AATBS").
Both AR and AATBS publish materials and hold workshops in select cities across
the United States to prepare individuals to take various national and state
administered oral and written health care licensure examinations in the fields
of psychology; social work; counseling; marriage and family therapy; and
marriage, family and child counseling.
MIA has one wholly-owned subsidiary, the Medical Institute of Minnesota,
Inc. ("MIM"), which is approved by the State of Minnesota to award associate
degrees in a variety of allied health care fields. MIM is institutionally
accredited by the Accrediting Bureau of Health Education Schools ("ABHES"), a
nationally recognized accreditor of allied health care institutions, and
additionally holds individual programmatic accreditation appropriate to each
degree offered.
The contribution by the shareholder of businesses under common control and,
as described in Note 3, the Company's purchase of MCM University Plaza, Inc.'s
stock from its shareholder have been accounted for in a manner similar to a
pooling of interests. In addition, the results of operations of acquired
businesses have been consolidated for all periods subsequent to the date of
acquisition. The consolidated financial statements include
F-7
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the accounts of the Company and its wholly owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.
2. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies of the Company are as follows:
Concentration of Credit Risk
The Company extends unsecured credit for tuition to a significant portion of
the students who are in attendance at its schools. A substantial portion of
credit extended to students is repaid through the students' participation in
various federally funded financial aid programs under Title IV of the Higher
Education Act of 1965, as amended (the "Title IV Programs").
The following table presents the amount and percentage of the Company's cash
receipts collected from the Title IV Programs for the years ended August 31,
1996, 1997 and 1998 (dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
AUGUST 31,
-------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Total Title IV funding........................... $ 9,131 $ 9,035 $13,011
Total cash receipts.............................. $18,883 $20,982 $28,514
Total Title IV funding as a percentage of total
cash receipts................................... 48% 43% 46%
======= ======= =======
</TABLE>
The Company generally completes and approves the financial aid packet of
each student who qualifies for financial aid prior to the student beginning
class in an effort to enhance the collectibility of its unsecured credit.
Transfers of funds from the financial aid programs to the Company are made in
accordance with the United States Department of Education ("DOE")
requirements. Changes in DOE funding of federal student financial aid programs
could impact the Company's ability to attract students.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks, highly liquid money
market accounts and commercial paper with maturities of less than three
months.
Restricted Cash
Cash received from the U.S. Government under various student aid grant and
loan programs is considered to be restricted. Restricted cash is held in
separate bank accounts and does not become available for general use by the
Company until the financial aid is credited to the accounts of students and
the cash is transferred to an operating account. Restricted cash is not
included in the accounts of the Company and was immaterial at August 31, 1997
and 1998.
F-8
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Investments
The Company invests excess cash in investments consisting primarily of
corporate bonds (maturing from 1 to 18 months) and U.S. Government treasury
notes (maturing from 6 to 14 months). The investments are considered available
for sale, stated at their fair market value and classified based upon their
maturity dates.
At August 31, 1997 and 1998, investments consisted of the following (dollars
in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
-------------
1997 1998
------ ------
<S> <C> <C>
Fair value--
Corporate bonds.......................................... $2,272 $1,413
U.S. Government treasury notes........................... 1,698 793
------ ------
Total investments at fair value........................ 3,970 2,206
Valuation allowance/unrealized gain........................ 17 (2)
------ ------
Total investments at cost.............................. $3,987 $2,204
====== ======
</TABLE>
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred and are included in
selling expenses in the accompanying consolidated statements of operations.
Inventories
Inventories, consisting principally of program materials, books and
supplies, are stated at the lower of cost, determined on a first-in, first-out
basis, or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
recognized utilizing both accelerated and straight-line methods. Leasehold
improvements are amortized over their estimated useful lives or lease terms,
whichever is shorter. Maintenance, repairs and minor renewals and betterments
are expensed; major improvements are capitalized. The estimated useful lives
and cost basis of property and equipment at August 31, 1997 and 1998, are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
-------------
1997 1998 LIFE
------ ------ ----------
<S> <C> <C> <C>
Land.................... $ 517 $ 517
Building................ 1,905 2,066 40 years
Office equipment........ 864 851 3-7 years
Furniture and fixtures.. 272 338 3-7 years
Leasehold improvements.. 151 526 7-10 years
Computer equipment...... 365 631 3-5 years
Instructional equipment
and materials.......... 434 722 3-7 years
------ ------
4,508 5,651
Less--Accumulated
depreciation and
amortization........... 1,320 1,781
------ ------
$3,188 $3,870
====== ======
</TABLE>
F-9
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Intangible Assets
Intangible assets include goodwill, intellectual property and covenants not-
to-compete related to business acquisitions and the buyout of a former
shareholder. Intangible assets are being amortized on a straight-line basis
over their estimated useful lives. At August 31, 1997 and 1998, the cost basis
and useful lives of intangible assets consist of the following (dollars in
thousands):
<TABLE>
<CAPTION>
AUGUST 31,
-------------
1997 1998 LIFE
------ ------ -----------
<S> <C> <C> <C>
Goodwill........................................ $4,614 $6,811 15-40 years
Intellectual property........................... 390 600 2-4 years
Covenants not-to-compete........................ 252 252 5-10 years
------ ------
5,256 7,663
Less--Accumulated amortization.................. 525 972
------ ------
$4,731 $6,691
====== ======
</TABLE>
On an ongoing basis, the Company reviews intangible assets and other long-
lived assets for impairment whenever events or circumstances indicate that
carrying amounts may not be recoverable. To date, no such events or changes in
circumstances have occurred. If such events or changes in circumstances occur,
the Company will recognize an impairment loss if the undiscounted future cash
flows expected to be generated by the asset (or acquired business) are less
than the carrying value of the related asset. The impairment loss would adjust
the asset to its fair value.
Revenue Recognition
Revenue consists primarily of tuition revenue from courses taught at the
schools and workshop fees and sales of related materials. Tuition revenue from
courses taught is recognized on a straight-line basis over the length the
applicable course is taught. Revenue from workshops is recognized on the date
of the workshop. If a student withdraws, future revenue is reduced by the
amount of refund due to the student. Refunds are calculated in accordance with
federal, state and accrediting agency standards. Revenue from rental of the
Company's owned facility is recognized on a straight-line basis over the life
of the leases. Textbook sales are recorded upon shipment. Revenue from rent
and textbook sales represent less than 1% of the Company's net revenue for the
year ended August 31, 1998. Revenue is stated net of scholarships and grants
given to the students, which totaled approximately $705,000 for the year ended
August 31, 1998. Deferred revenue represents the portion of payments received
but not earned and is reflected as a current liability in the accompanying
balance sheets as such amount is expected to be earned within the next year.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Financial Instruments
The carrying value of current assets and liabilities reasonably approximate
their fair value due to their short maturity periods. The carrying value of
the Company's debt obligations reasonably approximate their fair value as the
stated interest rate approximates current market interest rates of debt with
similar terms.
F-10
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
New Accounting Pronouncements
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 128, "Earnings Per Share" ("SFAS No. 128"), which is
effective for reporting periods ending after December 15, 1997. SFAS No. 128
changed the methodology of calculating earnings per share and renamed the two
calculations basic earnings per share and diluted earnings per share. The
calculations differ by eliminating any common stock equivalents (such as stock
options, warrants and convertible preferred stock) from the basic earnings per
share and changes certain calculations when computing diluted earnings per
share. The weighted average number of common shares outstanding used in
determining basic earnings per common share calculation includes all common
stock outstanding during each period presented. The Company does not have any
common stock equivalents or convertible securities and therefore the same
number of shares outstanding is used when determining both basic and diluted
earnings per share. The Company has adopted SFAS No. 128 and has retroactively
restated all periods presented.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"), which establishes standards
for reporting of comprehensive income. This pronouncement requires that all
items recognized under accounting standards as components of comprehensive
income, as defined in the pronouncement, be reported in a financial statement
that is displayed with the same prominence as other financial statements.
Comprehensive income includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners. The
financial statement presentation required under SFAS No. 130 is effective for
all fiscal years beginning after December 15, 1997. As of August 31, 1998, the
Company had not adopted this pronouncement; however, the impact is not
expected to be material.
Segment Reporting
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("SFAS
No. 131"), which amends the requirements for a public enterprise to report
financial and descriptive information about its reportable operating segments.
Operating segments, as defined in the pronouncement, are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the Company in deciding how to allocate resources and
in assessing performance. The financial information is required to be reported
on the basis that it is used internally for evaluating segment performance and
deciding how to allocate resources to segments. The disclosure required by
SFAS No. 131 is effective for all fiscal years beginning after December 15,
1997. As of August 31, 1998, the impact of this pronouncement had not been
determined by the Company.
Start-Up Costs
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." This SOP provides guidance on the financial reporting of start-up
costs and organization costs. It requires that all nongovernmental entities
expense the costs of start-up activities as these costs are incurred. The
Company currently expenses all start-up and organization costs as incurred and
is therefore not impacted by this SOP.
F-11
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. BUSINESS ACQUISITIONS
Real Estate Operation
On August 31, 1998, the Company purchased 100% of the stock of MCM
University Plaza, Inc. from the Company's shareholder at its appraised value
of approximately $3.3 million less assumed obligations of approximately $2.6
million. MCM University Plaza, Inc. owns real estate leased by U of S, and was
originally acquired by the Company's shareholder on April 30, 1997 for
approximately $2.2 million with funds obtained from a mortgage (Note 4). The
assets, liabilities and operations of the real estate are included in the
Company's financial statements subsequent to April 30, 1997, the date the
Company's shareholder purchased the real estate, in a manner similar to a
pooling of interests because the August 1998 transaction was between two
parties controlled by the Company's shareholder. The purchase price of MCM
University Plaza, Inc.'s stock in excess of the historical book value of the
underlying net assets acquired, totaling approximately $720,000, is reflected
as a reduction of shareholder's equity as of August 31, 1998.
Ventura
On August 26, 1997, Ventura acquired 100% of the outstanding shares of
capital stock of AATBS. This acquisition was accounted for as a purchase and,
accordingly, the acquired assets and assumed liabilities have been recorded at
their estimated fair market values at the date of the acquisition. The
estimated fair market values of certain assets are based upon appraisal
reports. The purchase price of approximately $1,756,000 exceeded the fair
market value of net assets acquired, resulting in goodwill of approximately
$1,562,000. In connection with the purchase, the former owner of the acquired
business entered into a 10 year covenant not-to-compete agreement with the
Company for a total price of $50,000. The acquisition was financed through the
issuance of a $1,606,000 promissory note payable to the former owner and other
debt financing.
AR
On August 26, 1997, AR acquired certain assets and assumed certain
liabilities of Academic Review, Inc., a California corporation. This
acquisition was accounted for as a purchase and, accordingly, the purchased
assets and assumed liabilities have been recorded at their estimated fair
market values at the date of acquisition. The estimated fair market values of
certain assets are based upon appraisal reports. The purchase price of
approximately $2,324,000 exceeded the estimated fair market value of net
assets acquired, resulting in goodwill of approximately $2,045,000. In
connection with the purchase, the former owner of the acquired business
entered into a 10 year covenant not-to-compete agreement with the Company for
a total price of $50,000. The acquisition was financed with bank debt.
MIA
On February 3, 1998, MIA purchased 100% of the capital stock of MIM for a
purchase price of approximately $2,368,000. The acquisition was accounted for
as a purchase and, accordingly, the acquired assets and assumed liabilities
have been recorded at their estimated fair value at the date of the
acquisition. The purchase price, subject to certain modifications, exceeded
the fair market value of net assets acquired resulting in goodwill of
approximately $1,962,000. The final purchase price adjustment is still being
negotiated, and the negotiations are expected to be completed in early
February 1999. The Company does not expect a material adjustment to the
initial purchase price. The purchase price was financed with approximately
$2,068,000 in short-term borrowings and cash from operations.
The following unaudited pro forma results of operations data (in thousands,
except per share data) for the years ended August 31, 1997 and 1998, assumes
that the business acquisitions described above occurred on
F-12
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
September 1, 1996. The pro forma results below are based on historical results
of operations including adjustments for interest, depreciation and
amortization and do not necessarily reflect actual results that would have
occurred.
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31,
---------------
1997 1998
------- -------
(UNAUDITED)
<S> <C> <C>
Net revenue.............................................. $29,267 $31,357
Net income............................................... $ 2,301 $ 1,549
======= =======
Earnings per share--basic and diluted.................... $ 1,381 $ 930
======= =======
</TABLE>
On November 30, 1998 the Company acquired 100% of the outstanding stock of
Primetech Corporation, Inc. and 1184267 Ontario, Inc. (collectively, "Prime
Tech"), Canadian schools which award non-degree certificates in network
engineering and software programming. The shareholder of the Company owned a
one-third interest in Prime Tech. The agreement obligates the Company to pay
the former owners a total of $500,000 (Canadian Dollars) upon closing and to
issue shares of the Company's common stock, the fair value of which is equal
to 102% of Prime Tech's net income, as defined in such agreement, in each of
the next three fiscal years. For the ten months ended September 30, 1998,
Prime Tech's net income was approximately $194,000 (Canadian Dollars). The
acquisition will be accounted for as a purchase. The Company's shareholder
received a note for $166,666 (Canadian Dollars) from the Company representing
his pro rata share of the initial payment; the other owners received cash. The
purchase price was determined by arms-length negotiations between the other
owners on behalf of themselves and the shareholder, and representatives of the
Company (excluding the shareholder).
F-13
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. DEBT
Debt of the Company at August 31, 1997 and 1998, consists of the following:
<TABLE>
<CAPTION>
AUGUST 31,
-------------
1997 1998
------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Borrowings under line of credit agreements............... $ 56 $ 441
Bank note payable, bearing interest at prime (8.5% at
August 31, 1998), requiring monthly interest payments of
$14,500 and a final principal payment on November 27,
1998, secured by the assets of ASPP..................... -- 2,023
Bank note payable, bearing interest at the one year U.S.
treasury note rate plus 2% (7.512% at August 31, 1998),
requiring monthly principal payments of $27,976 through
September 1, 2004, secured by the assets of AR.......... 2,350 2,042
Promissory note with the former owner of AATBS, bearing
interest at 6.25%, requiring an initial payment of
$400,000 on January 1, 1998, quarterly principal and
interest payments of $75,000 through October 1, 2002 and
a final payment of $375,000 on January 1, 2002, secured
by the assets of AATBS.................................. 1,605 1,131
Mortgage debt, bearing interest at 9%, requiring monthly
principal and interest payments of $18,378 through March
31, 2007 and a final payment of $1,830,368 on April 30,
2007, secured by related real estate.................... 2,182 2,157
Promissory note with the former owner of MIM, bearing
interest at 8%, requiring monthly principal and interest
payments of $9,426 through May 31, 2001, unsecured...... -- 285
Bank note payable, bearing interest at the one year U.S.
treasury rate plus 2% (7.512% at August 31, 1998),
requiring monthly principal payments of $1,786 through
September 1, 2004, secured by the assets of AATBS and
Ventura................................................. 150 130
Bank note payable, bearing interest at the prime rate
plus 1% (9.5% at August 31, 1998), requiring monthly
payments of interest only, principal due on February 12,
1999, unsecured......................................... 80 80
Bank note payable, bearing interest at 9%, requiring
monthly principal and interest payments of $1,462
through May 18, 2008, secured by real estate............ -- 113
Bank note payable, bearing interest at prime (8.5% at
August 31, 1998), requiring monthly principal payments
of $8,333 through July 31, 1999, secured by certain
assets of ASPP.......................................... 192 125
Other.................................................... 3 --
------ ------
6,618 8,527
Less--Current maturities................................. 264 3,362
------ ------
$6,354 $5,165
====== ======
</TABLE>
The Company has three line-of-credit agreements with various banks which
provide for aggregate maximum borrowings of $850,000, expiring at various
times beginning on September 15, 1998. Amounts outstanding under these
agreements bear interest at rates ranging from prime to prime plus 2% (8.5% to
10.5% at August 31, 1998) and are secured by the assets of MIM, AATBS, Ventura
and ASPP. As of August 31, 1998, outstanding borrowings under these agreements
totaled approximately $441,000.
F-14
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is required to maintain certain financial ratios under its
various credit agreements. As of August 31, 1998, the Company was either in
compliance with or has obtained waivers for its covenants.
At August 31, 1998, future annual principal payments of long-term debt are
as follows (in thousands):
<TABLE>
<S> <C>
August 31--
1999............................ $3,362
2000............................ 753
2001............................ 761
2002............................ 799
2003............................ 407
2004 and thereafter............. 2,445
------
$8,527
======
</TABLE>
5. INCOME TAXES
All of the consolidated entities have elected to include their income and
expenses with those of their shareholder for federal income tax purposes (an
"S Corporation election"). Accordingly, the statements of operations for the
fiscal years ended August 31, 1996, 1997 and 1998, do not include a provision
for federal income taxes. The S Corporation election will terminate
immediately prior to the consummation of the proposed initial public offering
("IPO," Note 12). The Company has recorded a provision for state income taxes.
Upon effective termination of the S Corporation election, the Company will
record a deferred income tax asset and a related tax benefit. If the effective
date of the Offering had been August 31, 1998, a deferred income tax asset and
income tax benefit of approximately $602,000 would have been recorded.
Deferred income taxes are recorded under the asset and liability method of
accounting for income taxes, which requires the recognition of deferred income
taxes based upon the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statements carrying amounts and the tax basis of existing assets
and liabilities. As of August 31, 1998, deferred income taxes would have
consisted of the following (dollars in thousands):
<TABLE>
<S> <C>
Deferred income tax assets:
Deferred rent..................................................... $176
Other............................................................. 128
Depreciation and amortization..................................... 100
Payroll and related............................................... 106
Allowance for doubtful accounts................................... 92
----
Total deferred income tax assets................................ $602
====
</TABLE>
The Company intends to enter into a tax indemnification agreement with its
shareholder prior to the IPO which will provide, among other things, that the
Company will indemnify its current shareholder against additional income taxes
resulting from adjustments made (as a result of a final determination made by
a competent tax authority) to the taxable income reported by the Company as an
S Corporation for periods prior to the Offering, but only to the extent those
adjustments provide a tax benefit to the Company.
F-15
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LEASES
Facilities and Equipment Leases
The Company maintains operating leases for its educational and office
facilities and for certain office and computer equipment. The facility leases
generally require the Company to pay for pro rata increases in property taxes,
maintenance and certain operating expenses. Rent expense under operating
leases, recognized on a straight-line basis over the term of the lease
(excluding property taxes, maintenance and operation costs), totaled,
$1,118,777, $1,087,204 and $1,617,784 for the fiscal years ended August 31,
1996, 1997 and 1998, respectively.
Real Estate Rental Income
The Company leases certain space of its building owned by MCM University
Plaza, Inc. in Sarasota, Florida, to outside parties under noncancellable
operating leases.
At August 31, 1998, the approximate future minimum rental income and
commitments under operating leases that have initial or remaining
noncancellable lease terms in excess of one year are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
REAL ESTATE
AND
LEASE SUBLEASE
COMMITMENTS INCOME TOTAL
----------- ----------- ------
<S> <C> <C> <C>
As of August 31,
1999..................................... $ 1,532 $ (424) $1,108
2000..................................... 1,248 (405) 843
2001..................................... 1,320 (201) 1,119
2002..................................... 1,407 (75) 1,332
2003..................................... 1,362 (33) 1,329
2004 and thereafter...................... 3,297 (5) 3,292
------- ------- ------
$10,166 $(1,143) $9,023
======= ======= ======
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Letters of Credit
The Company has outstanding irrevocable letters of credit totaling
approximately $482,000 as of August 31, 1998, which were issued in connection
with leases for office facilities.
Litigation
The Company, the shareholder of the Company and certain other companies in
which the shareholder of the company has an interest have been named as
defendants in a class action lawsuit filed in November 1997. The lawsuit arose
in connection with the closing of a for-profit psychiatric hospital (the
"Hospital"), which was established in 1989 by the shareholder of the Company.
The Hospital was substantially dependent on Medicare reimbursement for its
revenues. In May 1997, after continued Medicare reimbursement to the Hospital
was effectively terminated, the Hospital ceased operations and made an
assignment for the benefit of its creditors, which is ongoing. The Company
owned a 95% equity interest in the Hospital at the time of the assignment for
the benefit of its creditors.
F-16
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The plaintiffs in the lawsuit, former employees of the Hospital, allege that
(i) the Hospital was closed without proper notice to employees in violation of
the Worker Adjustment and Retraining Notification Act; (ii) in violation of
the Employee Retirement Income Security Act of 1974, employee contributions to
the Hospital's profit sharing plan made prior to the Hospital closing were not
delivered to the plan; (iii) in violation of the Illinois Wage Payment and
Collection Act, the Hospital failed to pay the final compensation due its
employees prior to the Hospital closing and (iv) the defendants converted for
their own use and benefit the amount of the plaintiffs' last paycheck, accrued
vacation, profit sharing contributions and credit union contributions. The
Company, the shareholder of the Company and the other defendants in the
lawsuit deny all claims asserted and are vigorously defending themselves. The
cost of the defense has not been borne by the Company and is not expected to
be borne by the Company in the future. The shareholder of the Company has
agreed that no settlement amounts or damage awards will be paid by the
Company. Therefore, the Company does not believe that the results of this
matter will have a material effect on its results of operations or financial
position.
From time to time, the Company is also subject to occasional lawsuits,
investigations and claims arising out of the normal conduct of business.
Management does not believe the outcome of any pending claims will have a
material adverse impact on the Company's financial position or results of
operations.
8. REGULATORY
The Company and its U.S. schools are subject to extensive regulation by
federal and state governmental agencies and accrediting bodies. In particular,
the Higher Education Act of 1965, as amended (the "HEA") and the regulations
promulgated thereunder by the DOE subject the Company's U.S. schools to
significant regulatory scrutiny on the basis of numerous standards that
schools must satisfy in order to participate in the various federal student
financial assistance programs under the Title IV Programs.
The HEA and its implementing regulations establish specific standards of
financial responsibility that must be satisfied in order to qualify for
participation in the Title IV Programs. Under standards effective prior to
July 1, 1998, and which may continue to be applied to demonstrate financial
responsibility for an institution's fiscal year beginning on or after July 1,
1997 and on or before June 30, 1998, an institution must: (i) have an acid
test ratio (defined as the ratio of cash, cash equivalents and current
accounts receivable to current liabilities) of at least 1:1 at the end of each
fiscal year, (ii) have a positive tangible net worth at the end of each fiscal
year and (iii) not have a cumulative net operating loss during its two most
recent fiscal years that results in a decline of more than 10% of the
institution's tangible net worth at the beginning of that two-year period. In
order to make this determination, the DOE requires an institution to submit
annual audited financial statements prepared on an accrual basis. As of August
31, 1998, the Company and each of its institutions were in full compliance
with the HEA financial responsibility standards.
In November 1997, the DOE issued new regulations, which took effect July 1,
1998 and revised the DOE's standards of financial responsibility. These new
standards replace the numeric tests described above with three different
ratios: an equity ratio, a primary reserve ratio and a net income ratio, which
are weighted and added together to produce a composite score for the
institution. The Company and each of its institutions may demonstrate
financial responsibility by meeting the new standards or the old standards for
fiscal years that began on or after July 1, 1997 but on or before June 30,
1998.
The new standards employ a ratio methodology under which an institution need
only satisfy a single standard--the composite score standard. The ratio
methodology takes into account an institution's total financial resources and
provides a combined score of the measures of those resources along a common
scale (from negative 1.0 to positive 3.0). It allows a relative strength in
one measure to mitigate a relative weakness in another measure.
F-17
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
If an institution achieves a composite score of at least 1.5, it is
financially responsible without further oversight. If an institution achieves
a composite score from 1.0 to 1.4, it is in the "zone," is subject to
additional monitoring, and may continue to participate as a financially
responsible institution for up to three years. Additional monitoring may
require the school to (1) notify the DOE, within 10 days of certain changes,
such as an adverse accrediting action; (2) file its financial statements
earlier than the six month requirement following the close of the fiscal year
and (3) subject the school to a cash monitoring payment method. If an
institution achieves a composite score below 1.0, it fails to meet the
financial responsibility standards unless it qualifies under the provisions of
an alternative standard (i.e., letter of credit equal to 50% of the Title IV
program funds expended from the prior fiscal year or equal to at least 10% of
the Title IV program funds expended from the prior fiscal year and provisional
certification status). The institution may also be placed on the cash
monitoring payment method or the reimbursement payment method. The Company
applied these new regulations to its financial statements as of August 31,
1998 and has determined that the Company and each of the its institutions
satisfied the new standards as of that date based upon their composite scores.
On October 1, 1998, legislation was enacted which reauthorized the student
financial assistance programs of the HEA ("1998 Amendments"). Regulations to
implement the 1998 Amendments are subject to negotiated rulemaking and
therefore, the Amendments will likely not become effective until July 1, 2000.
The 1998 Amendments will continue many of the current requirements for student
and institutional participation in the Title IV Programs. The 1998 Amendments
will also change or modify some requirements. These changes and modifications
include increasing the revenues that an institution may derive from Title IV
funds from 85% to 90% and revising the requirements pertaining to the manner
in which institutions must calculate refunds to students. The 1998 Amendments
also contain a provision that will prohibit institutions that are ineligible
for participation in Title IV loan programs due to student default rates in
excess of applicable thresholds from participating in the Pell Grant program.
Other changes expand participating institutions' ability to appeal loss of
eligibility owing to such default rates. The 1998 Amendments will further
permit an institution to avoid the interruption of eligibility for the Title
IV Programs upon a change of ownership which results in a change of control by
submitting a materially complete application for recertification of
eligibility within 10 business days of such a change of ownership. The Company
does not believe that the 1998 Amendments will adversely or materially affect
its business operations. None of the Company's institutions derives more than
80% of its revenue from Title IV funds and no institution has student loan
default rates in excess of current thresholds. The Company also believes based
on its current refund policy that it will satisfy the new refund requirements.
The process of reauthorizing the HEA by the U.S. Congress takes place
approximately every five years. The Title IV Programs are subject to
significant political and budgetary pressures during and between
reauthorization processes. There can be no assurance that government funding
for the Title IV Programs will continue to be available or maintained at
current levels. A reduction in government funding levels could lead to lower
enrollments at the Company's schools and require the Company to seek
alternative sources of financial aid for students enrolled in its schools.
Given the significant percentage of the Company's net revenue that is
indirectly derived from the Title IV Programs, the loss of or a significant
reduction in Title IV Program funds available to students at the Company's
schools would have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, there can be no
assurance that current requirements for student and institutional
participation in the Title IV Programs will not change or that one or more of
the present Title IV Programs will not be replaced by other programs with
materially different student or institutional eligibility requirements.
In order to operate and award degrees, diplomas and certificates and to
participate in the Title IV Programs, a campus must be licensed or authorized
to offer its programs of instruction by the relevant agency of the state in
which such campus is located. Each of the Company's campuses is licensed or
authorized by the relevant
F-18
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
agency of the state in which such campus is located. In addition, in order to
participate in the Title IV Programs, an institution must be accredited by an
accrediting agency recognized by the DOE. Each of the Company's schools is
accredited by an accrediting agency recognized by the DOE.
With each acquisition of an institution that is eligible to participate in
the Title IV Programs, that institution undergoes a change of ownership that
results in a change of control, as defined in the HEA and applicable
regulations. In such event, that institution becomes ineligible to participate
in the Title IV Programs and may receive and disburse only previously
committed Title IV Program funds to its students until it has applied for and
received the DOE recertification under the Company's ownership. A change of
ownership, as defined, occurred in connection with the purchase of MIM. As of
August 31, 1998, the Company had received DOE approval for the change of
ownership.
9. RELATED-PARTY TRANSACTIONS
During fiscal 1997, the Company advanced funds to its shareholder totaling
$500,000. The unsecured note bears interest at 5.9% at August 31, 1997 and is
due on June 26, 1999. The amount of principal and interest outstanding totaled
$527,791 and was repaid on May 31, 1998.
On August 30, 1998, the shareholder of the Company issued a note to the
Company in the form of a capital contribution totaling $6,000,000. The note is
secured by the shareholder's stock in the Company, bears interest at 4.33% and
is due upon demand. The note and accrued interest thereon was repaid in full
on November 30, 1998.
A company owned by the shareholder of the Company provides management
services for the Company and its schools. For the years ended August 31, 1996,
1997 and 1998, the Company incurred and paid expenses totaling $1,709,900,
$993,441 and $2,271,232, respectively, related to such services. Upon
consummation of the IPO, such services will no longer be provided by the
affiliated company.
As of August 31, 1998, the Company had loaned approximately $165,000 to
Prime Tech, an entity one-third owned by the shareholder of the Company. The
note is unsecured and bears interest at 8.0%. The Company purchased 100% of
Prime Tech on November 30, 1998 (Note 3).
The Company pays certain administrative and other expenses on behalf of an
entity partially owned by the shareholder of the Company. The total amount
owed to the Company from this entity for such advances was approximately
$106,000 at August 31, 1998. The affiliated entity paid a management fee to
the Company of approximately $174,000 during the year ended August 31, 1998
related to such services.
10. PROFIT-SHARING PLAN
The Company maintains a 401(k) profit-sharing plan that covers full-time
employees. Employees can contribute up to 15%. Contributions to the plan are
made at the discretion of the Board of Directors as well as by employees in
lieu of current salary. Contributions by the Company totaled $332,689,
$389,632 and $455,778 for the years ended August 31, 1996, 1997 and 1998,
respectively.
F-19
<PAGE>
ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
11. VALUATION AND QUALIFYING ACCOUNTS
The following summarizes the activity of the allowance for doubtful accounts
(dollars in thousands):
<TABLE>
<CAPTION>
BALANCE AT NET CHARGES INCREASE DUE BALANCE AT
BEGINNING TO OPERATING TO END OF
OF PERIOD EXPENSES ACQUISITIONS PERIOD
---------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Student receivable
allowance activity for
the year ended August
31, 1996 $ 5 $ 25 $-- $ 30
Student receivable
allowance activity for
the year ended August
31, 1997 $30 $-- $-- $ 30
Student receivable
allowance activity for
the year ended August
31, 1998 $30 $177 $ 23 $230
</TABLE>
12. SUBSEQUENT EVENTS AND PRO FORMA DATA (UNAUDITED)
On September 10, 1998, the Company filed a registration statement on Form S-
1 under the Securities Act of 1933 to sell shares of its common stock in the
IPO. The Company intends to use the net proceeds from the Offering to repay
certain outstanding debt which totaled $4.8 million at August 31, 1998 and to
pay a distribution to its shareholder.
In connection with the Offering, the Company will convert to a C Corporation
resulting in the recording of deferred income tax assets, as discussed in Note
5. Prior to the consummation of the Offering, the Company intends to declare a
distribution (the "Distribution") equal to the Company's undistributed
earnings, certain capital contributions and the net deferred income tax asset
as of the consummation of the Offering. The Company also intends to enter into
a tax indemnification agreement with its shareholder prior to the consummation
of the Offering. As of August 31, 1998, the Distribution would have equaled
approximately $9.7 million. Retained earnings of the Company, after recording
the Distribution and deferred income taxes, will be reclassified to additional
paid-in-capital in connection with the termination of the Company's S
Corporation election.
The unaudited pro forma balance sheet gives effect to the recording of the
deferred income taxes and the Distribution. No other contemplated transactions
in connection with the Offering are included in the unaudited pro forma
balance sheet information.
The pro forma net income and pro forma net income per share (i) includes a
related party expense adjustment, which eliminates the management fee the
Company paid to a company owned by the shareholder of approximately
$2,271,000, (ii) reflects cash compensation which would have paid to the
shareholder under his employment agreement of approximately $200,000 and (iii)
includes a provision for income taxes assuming a combined effective federal
and state income tax rate of 40%.
Supplemental pro forma earnings per share for the year ended August 31, 1998
of $ , is computed based upon (i) a reduction in interest expense (net of
tax benefit) resulting from the application of net proceeds of the
contemplated offering to reduce indebtedness of the Company and (ii) the pro
forma weighted average number of shares of common stock outstanding adjusted
to reflect the assumed sale by the Company of approximately shares of
common stock in the Offering for the year ended August 31, 1998 resulting in
net proceeds sufficient to pay indebtedness and shareholder distributions in
excess of net income for the year ended August 31, 1998.
See Note 3 for a description of the purchase of Prime Tech which occurred on
November 30, 1998.
F-20
<PAGE>
[INSIDE BACK COVER ART]
[MAP SHOWING THE COMPANY'S LOCATIONS TOGETHER WITH THE FOLLOWING TEXT:]
ARGOSY EDUCATION GROUP
UNIVERSITY OF MEDICAL INSTITUTE AMERICAN SCHOOLS OF PROFESSIONAL
SARASOTA OF MINNESOTA PSYCHOLOGY
WWW.ASPP.EDU
WWW.SARASOTA.EDU
WWW.MIM.TEC.MN.US
5250 17th Street 5503 Green Valley
Sarasota, FL 34235 Drive 2301 W Dunlap Ave 3465 Waialae Ave
800-331-5995 Bloomington, MN Suite 211 Suite 300
55437 Phoenix, AZ 85021 Honolulu, HI 96816
410 Ware Blvd Suite 612-844-0064 602-216-2600 808-735-0109
300
Tampa, FL 33619 PRIMETECH INSTITUTE 50 El Camino Drive 1701 Gold Road,
800-850-6488 Corte Madera, CA Suite 101
94925
WWW.PRIMETECHINSTITUTE.COM
Rolling Meadows, IL
60008
5001 Yonge Street,
VENTURA GROUP Suite 302 415-927-2477
847-290-7400
Willowdale, Ontario
WWW.AARBS.COM M2N 6P6
410 Ware Blvd
5126 Ralston Street 416-225-1862 Suite 300 3103 East 80th
Ventura, CA 93003 Tampa, FL 33619 Street
800-472-1931 94 Cumberland 813-246-4419 Suite 290
Street Suite 700 Minneapolis, MN
55425
Toronto, Ontario 990 Hammond Drive
M5RIA3 Atlanta, GA 30328 612-921-9500
416-929-0121 888-671-4777
1400 Wilson Blvd.
Suite 110
Arlington, VA 22209
703-243-5300
20 S. Clark Street
Suite 300
Chicago, IL. 60603
312-201-0200
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
THE CLASS A COMMON STOCK IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COM-
PANY SINCE THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 9
The Company............................................................... 20
Use of Proceeds........................................................... 21
Dividend Policy........................................................... 21
Capitalization............................................................ 22
Dilution.................................................................. 23
Selected Historical Consolidated Financial and Other Data................. 24
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 26
Business.................................................................. 33
Financial Aid and Regulation.............................................. 44
Management................................................................ 54
Security Ownership of Certain Beneficial Owners and Management............ 61
Description of Capital Stock.............................................. 62
Shares Eligible for Future Sale........................................... 65
Underwriting.............................................................. 66
Legal Matters............................................................. 68
Experts................................................................... 68
Available Information..................................................... 68
Index to Financial Statements............................................. F-1
</TABLE>
------------
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTIC-
IPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES
ARGOSY EDUCATION
GROUP, INC.
CLASS A COMMON STOCK
--------
PROSPECTUS
, 1999
--------
SALOMON SMITH BARNEY
ABN AMRO INCORPORATED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses of the issuance and
distribution of the securities being registered other than underwriting
compensation:
<TABLE>
<S> <C>
SEC registration fee............................................. $10,178
NASD filing fee.................................................. 3,950
Nasdaq National Market fees...................................... *
Blue sky fees and expenses (including attorneys' fees and
expenses)....................................................... *
Printing and engraving expenses.................................. *
Transfer agent's fees and expenses............................... *
Accounting fees and expenses..................................... *
Legal fees and expenses.......................................... *
Miscellaneous expenses........................................... *
-------
Total........................................................ $ *
=======
</TABLE>
- --------
*To be provided by amendment.
All amounts are estimated except for the SEC registration fee and the NASD
filing fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Illinois. Section
8.75 of the Illinois Business Corporation Act provides generally and in
pertinent part that an Illinois corporation may indemnify its directors and
officers against expenses (in the case of actions by or in the right of the
corporation) or against expenses, judgments, fines and settlements (in all
other cases) actually and reasonably incurred by them in connection with any
action, suit or proceeding if, in connection with the matters in issue, they
acted in good faith and in a manner they reasonably believed to be in, or not
opposed to, the best interests of the corporation and, in connection with any
criminal suit or proceeding, if in connection with the matters in issue, they
had no reasonable cause to believe their conduct was unlawful. Section 8.75
further permits an Illinois corporation to grant to its directors and officers
additional rights of indemnification through bylaw provisions, agreements,
votes of shareholders or interested directors or otherwise, to purchase
indemnity insurance on behalf of such indemnifiable persons and to advance to
such indemnifiable persons expenses incurred in defending a suit or proceeding
upon receipt of certain undertakings.
The Company's Articles of Incorporation will provide for the indemnification
of directors and officers of the Company to the fullest extent permitted by
Section 8.75.
In that regard, the Articles of Incorporation will provide that the Company
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was
a director or officer of such corporation, or is or was serving at the request
of such corporation as a director, officer or member of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of such corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Indemnification in connection with an action
or suit by or in the right of such corporation to procure a judgment in its
favor will be limited to payment or settlement of such an action or suit
except that no such indemnification may be made in respect of any claim, issue
or matter as to which such person shall have
II-1
<PAGE>
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the indemnifying corporation unless and only to the extent that
the court in which such action or suit was brought shall determine that,
despite the adjudication of liability but in consideration of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. In addition,
all of the Company's directors and officers are expected to be covered by
insurance policies maintained by the Company against certain liabilities for
actions taken in their capacities as such, including liabilities under the
Securities Act.
Section 8 of the Underwriting Agreement also provides for indemnification by
the Underwriters of the Company's officers and directors for certain
liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement
3.1** Articles of Incorporation of the Company
3.2** By-laws of the Company
4.1** Form of Specimen Stock Certificate
5.1** Opinion of Kirkland & Ellis
10.1* Argosy Education Group, Inc. 1998 Stock Incentive Plan
10.2* Argosy Education Group, Inc. Employees Stock Discount Purchase Plan
Form of Tax Indemnification Agreement between the Company and Dr.
10.3** Markovitz
Term Note of Academic Review, Inc., dated August 27, 1997, in favor of
10.4* Northern Trust Company
10.5* Real Estate Mortgage and Security Agreement, dated April 30, 1997,
among MCM University Plaza, Inc. and Northern Trust Bank of Florida,
N.A.
Lease Agreement, dated July 21, 1995, between Park Central Corp. and U
10.6* of S
10.7* Standard Tenancy Agreement, dated December 10, 1992, between Lakeside
Commons Partners and the Company, as amended by Lease Amendment, dated
March 17, 1994, between Lakeside Commons Partners and the Company
10.8* Tenant Lease, dated June 21, 1995, between CKSS Associates and the
Company
10.9* Lease Agreement, dated January 20, 1997, between Reed Union School
District and California Graduate School of Psychology.
10.10* Lease, dated September 8, 1994, between American National Bank and
Trust Company of Chicago and The Company, as amended by Amendment to
Lease, dated November 28, 1997, between American National Bank and
Trust Company of Chicago and the Company
10.11* Lease Agreement, dated July 3, 1996, between Continental Offices Ltd.
and the Company, as amended by First Amendment, to Lease Agreement,
dated July 3, 1996, between Continental Offices Ltd. and the Company
10.12* Office Lease, dated May 28, 1997, between Presson Advisory, L.L.C. and
the Company
10.13* Lease, dated May 3, 1997, between Control Data Corporation and the
Company, and amended by Letter Agreement, dated December 8, 1994
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.14* Lease, dated August 1, 1997, between Oneida Realty Company and the
Company
10.15* Lease Agreement, dated May 3, 1994, between Arlington Park Realty
Corporation and the Company
10.16* Standard Industrial/Commercial Multi-Tenant Lease--Modified Net, dated
November 3, 1995, between the Gordon Family Trust and AATBS, and
addenda and amendments thereto
10.17* Lease, dated October 11, 1991, between MEPC American Properties
Incorporated and Medical Institute of Minnesota, Inc. and amendments
thereto.
10.18* Indenture of Sublease, dated June 9, 1997, between Royal Bank of
Canada and PrimeTech Corporation
10.19* Lease, dated March 14, 1997, between Cumberland-Bellair Investment,
Inc. and 1184266 Ontario Inc.
10.20* Stock Purchase Agreement, dated April 15, 1998, among PrimeTech Canada
Inc., George Schwartz, P.M.T. Holdings Inc. and Michael Markovitz
10.21* Stock Purchase Agreement, dated February 3, 1998, between Medical
Institutes of America, Inc. and Phillip Miller
10.22* Agreement to Purchase and Redeem Stock, dated August 26, 1997, among
Ventura, Steven H. Santini and Association for Advanced Training in
the Behavioral Sciences
10.23* Agreement to Purchase Assets, dated August 26, 1997, among Academic
Review, Inc., an Illinois corporation, Academic Review, Inc., a
California corporation and Steven H. Santini
10.24** Purchase and Sale Agreement, dated August 31, 1998, between University
of Sarasota, Inc. and Michael C. Markovitz
10.25* Software License and Service Agreement, dated March 31, 1998, between
SCT Software & Resource Management Corporation and the Company
10.26* Purchase of Services Agreement, dated January 1, 1998, between
Illinois Alternatives, Inc. and the Company
10.27** Form of Distribution Loan note.
21.1** Subsidiaries of the Company
23.1** Consent of Kirkland & Ellis (included in Exhibit 5.1)
23.2* Consent of Arthur Andersen LLP
27.1* Financial Data Schedule
</TABLE>
- --------
*Filed herewith.
**To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being
II-3
<PAGE>
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
CHICAGO, STATE OF ILLINOIS ON DECEMBER 14, 1998.
Argosy Education Group, Inc.
/s/ Michael C. Markovitz
By: _________________________________
Name: Michael C. Markovitz
Title: Chairman
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED ON
DECEMBER 14, 1998, BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH
RESPECT TO ARGOSY EDUCATION GROUP, INC.:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
/s/ Michael C. Markovitz Chairman and Director
___________________________________________ (principal executive officer)
Michael C. Markovitz
* Chief Financial Officer
___________________________________________ (principal financial and accounting
Charles T. Gradowski officer)
* Director
___________________________________________
Theodore J. Herst
* Director
___________________________________________
Michael W. Mercer
* Director
___________________________________________
Karen M. Knab
* Director
___________________________________________
Kalman M. Shiner
* Director
___________________________________________
Leslie M. Simmons
* Director
___________________________________________
John E. Sites
</TABLE>
*The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on behalf of the above-named
Directors and officers of the Registrant pursuant to a Power of Attorney
executed by each such Director and officer and filed with the Securities
and Exchange Commission.
/s/ Michael C. Markovitz
By: ____________________________
Michael C. Markovitz
As Attorney-in-Fact
II-5
<PAGE>
EXHIBIT 10.1
ARGOSY EDUCATION GROUP, INC.
1998 STOCK INCENTIVE PLAN
1. Purpose. This plan shall be known as the Argosy Education Group, Inc.
-------
1998 Stock Incentive Plan (the "Plan"). The purpose of the Plan shall be to
promote the long-term growth and profitability of Argosy Education Group, Inc.,
an Illinois corporation (the "Company") and its Subsidiaries by (i) providing
certain directors, officers and key employees of, and certain other key
individuals who perform services for, the Company and its Subsidiaries with
incentives to maximize stockholder value and otherwise contribute to the success
of the Company and (ii) enabling the Company to attract, retain and reward the
best available persons for positions of substantial responsibility. Grants of
incentive or nonqualified stock options, stock appreciation rights ("SARs"),
either alone or in tandem with options, restricted stock, performance awards, or
any combination of the foregoing may be made under the Plan.
2. Definitions. Capitalized terms used in this Plan and not otherwise
-----------
defined have the meanings set forth below.
"Board of Directors" and "Board" mean the board of directors of the
Company.
"Change in Control" means the occurrence of one of the following
events:
(a) if any "person" or "group" as those terms are used in
Sections 13(d) and 14(d) of the Exchange Act, other than an Exempt Person, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding securities;
or
(b) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by the Company's stockholders
was approved by at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority thereof;
or
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation (A) which would result in all or a portion of the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) by which the corporate
existence of the Company is not affected and following which the Company's chief
executive officer and directors retain their positions with the Company (and
constitute at least a majority of the Board); or
<PAGE>
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets, other than a sale to
an Exempt Person.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board. The membership
of the Committee shall be constituted so as to comply at all times with the
applicable requirements of Rule 16b-3 under the Exchange Act and Section 162(m)
of the Code.
"Common Stock" means the Class A Common Stock, par value $.01 per share, of
the Company, and any other shares into which such stock may be changed by reason
of a recapitalization, reorganization, merger, consolidation or any other change
in the corporate structure or capital stock of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exempt Person" means any employee benefit plan of the Company or a trustee
or other administrator or fiduciary holding securities under an employee benefit
plan of the Company.
"Fair Market Value" of a share of Common Stock of the Company means, as of
the date in question, the officially-quoted closing selling price of the stock
(or if no selling price is quoted, the bid price) on the principal securities
exchange on which the Common Stock is then listed for trading (including for
this purpose the Nasdaq National Market) (the "Market") for the date in question
or, if the Common Stock is not then listed or quoted in the Market, the Fair
Market Value shall be the fair value of the Common Stock determined in good
faith by the Board; provided, however, that when shares received upon exercise
of an option are immediately sold in the open market, the net sale price
received may be used to determine the Fair Market Value of any shares used to
pay the exercise price or withholding taxes and to compute the withholding
taxes.
"Incentive Stock Option" means an option conforming to the requirements of
Section 422 of the Code and any successor thereto.
"Non-Employee Director" has the meaning given to such term in Rule 16b-3
under the Exchange Act.
"Nonqualified Stock Option" means any stock option other than an Incentive
Stock Option.
"Other Company Securities" mean securities of the Company other than Common
Stock, which may include, without limitation, unbundled stock units or
components thereof, debentures, preferred stock, warrants and securities
convertible into or exchangeable for Common Stock or other property.
-2-
<PAGE>
"Subsidiary" means a corporation or other entity of which outstanding
shares or ownership interests representing 50% or more of the combined voting
power of such corporation or other entity entitled to elect the management
thereof, or such lesser percentage as may be approved by the Committee, are
owned directly or indirectly by the Company.
3. Administration.
--------------
(a) The Plan shall be administered by the Committee; provided that the
Board may, in its discretion, at any time and from time to time, resolve to
administer the Plan, in which case the term "Committee" shall be deemed to mean
the Board for all purposes herein. The Committee shall consist of at least two
directors. Subject to the provisions of the Plan, the Committee shall be
authorized to (i) select persons to participate in the Plan, (ii) determine the
form and substance of grants made under the Plan to each participant, and the
conditions and restrictions, if any, subject to which such grants will be made,
(iii) modify the terms of grants made under the Plan, (iv) interpret the Plan
and grants made thereunder, (v) make any adjustments necessary or desirable in
connection with grants made under the Plan to eligible participants located
outside the United States and (vi) adopt, amend, or rescind such rules and
regulations, and make such other determinations for carrying out the Plan as it
may deem appropriate. Decisions of the Committee on all matters relating to the
Plan shall be in the Committee's sole discretion and shall be conclusive and
binding on all parties. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with applicable federal and state laws and rules and regulations promulgated
pursuant thereto. No member of the Committee and no officer of the Company
shall be liable for any action taken or omitted to be taken by such member, by
any other member of the Committee or by any officer of the Company in connection
with the performance of duties under the Plan, except for such person's own
willful misconduct or as expressly provided by statute.
(b) The expenses of the Plan shall be borne by the Company. The Plan shall
not be required to establish any special or separate fund or make any other
segregation of assets to assume the payment of any award under the Plan, and
rights to the payment of such awards shall be no greater than the rights of the
Company's general creditors.
4. Shares Available for the Plan. Subject to adjustments as provided in
-----------------------------
Section 15, an aggregate of ______________ shares of Common Stock (the "Shares")
may be issued pursuant to the Plan. Such Shares may be in whole or in part
authorized and unissued, or shares which are held by the Company as treasury
shares. If any grant under the Plan expires or terminates unexercised, becomes
unexercisable or is forfeited as to any Shares, such unpurchased or forfeited
Shares shall thereafter be available for further grants under the Plan unless,
in the case of options granted under the Plan, related SARs are exercised.
-3-
<PAGE>
5. Participation.
-------------
(a) Participation in the Plan shall be limited to those directors
(including Non-Employee Directors), officers (including non-employee officers)
and key employees of, and other key individuals performing services for, the
Company and its Subsidiaries selected by the Committee (including participants
located outside the United States). Nothing in the Plan or in any grant
thereunder shall confer any right on a participant to continue in the employ of
or the performance of services for the Company or shall interfere in any way
with the right of the Company to terminate the employment or performance of
services of a participant at any time. By accepting any award under the Plan,
each participant and each person claiming under or through him or her shall be
conclusively deemed to have indicated his or her acceptance and ratification of,
and consent to, any action taken under the Plan by the Company, the Board or the
Committee.
(b) Incentive Stock Options or Nonqualified Stock Options, SARs, alone or
in tandem with options, restricted stock awards, performance awards, or any
combination thereof, may be granted to such persons and for such number of
Shares as the Committee shall determine (such individuals to whom grants are
made being sometimes herein called "optionees" or "grantees," as the case may
be). Determinations made by the Committee under the Plan need not be uniform
and may be made selectively among eligible individuals under the Plan, whether
or not such individuals are similarly situated. A grant of any type made
hereunder in any one year to an eligible participant shall neither guarantee nor
preclude a further grant of that or any other type to such participant in that
year or subsequent years.
6. Incentive and Nonqualified Options. The Committee may from time to time
----------------------------------
grant to eligible participants Incentive Stock Options, Nonqualified Stock
Options, or any combination thereof; provided that the Committee may grant
Incentive Stock Options only to eligible employees of the Company or its
subsidiaries (as defined for this purpose in Section 424(f) of the Code).
Subject to adjustments as provided for in Section 15, in any one calendar year,
the Committee shall not grant to any one participant options or SARs to purchase
a number of shares of Common Stock in excess of _________________. The options
granted shall take such form as the Committee shall determine, subject to the
following terms and conditions.
It is the Company's intent that Nonqualified Stock Options granted under
the Plan not be classified as Incentive Stock Options, that Incentive Stock
Options be consistent with and contain or be deemed to contain all provisions
required under Section 422 of the Code and any successor thereto, and that any
ambiguities in construction be interpreted in order to effectuate such intent.
If an Incentive Stock Option granted under the Plan does not qualify as such for
any reason, then to the extent of such nonqualification, the stock option
represented thereby shall be regarded as a Nonqualified Stock Option duly
granted under the Plan, provided that such stock option otherwise meets the
Plan's requirements for Nonqualified Stock Options.
(a) Price. The price per Share deliverable upon the exercise of each
-----
option ("exercise price") shall be established by the Committee, except that in
the case of the grant of any Incentive
-4-
<PAGE>
Stock Option, the exercise price may not be less than 100% of the Fair Market
Value of a share of Common Stock as of the date of grant of the option, and in
the case of the grant of any Incentive Stock Option to an employee who, at the
time of the grant, owns more than 10% of the total combined voting power of all
classes of stock of the Company or any of its Subsidiaries, the exercise price
may not be less that 110% of the Fair Market Value of a share of Common Stock as
of the date of grant of the option, in each case unless otherwise permitted by
Section 422 of the Code.
(b) Payment. Options may be exercised, in whole or in part, upon payment
-------
of the exercise price of the Shares to be acquired. Unless otherwise determined
by the Committee, payment shall be made (i) in cash (including check, bank draft
or money order), (ii) by delivery of outstanding shares of Common Stock with a
Fair Market Value on the date of exercise equal to the aggregate exercise price
payable with respect to the options so exercised, (iii) by simultaneous sale
through a broker reasonably acceptable to the Committee of Shares acquired on
exercise, as permitted under Regulation T of the Federal Reserve Board, (iv) by
authorizing the Company to withhold from issuance a number of Shares issuable
upon exercise of the options which, when multiplied by the Fair Market Value of
a share of Common Stock on the date of exercise is equal to the aggregate
exercise price payable with respect to the options so exercised or (v) by any
combination of the foregoing. Options may also be exercised upon payment of the
exercise price of the Shares to be acquired by delivery of the optionee's
promissory note, but only to the extent specifically approved by and in
accordance with the policies of the Committee.
In the event a grantee elects to pay the exercise price payable with
respect to an option pursuant to clause (ii) above, (A) only a whole number of
share(s) of Common Stock (and not fractional shares of Common Stock) may be
tendered in payment, (B) such grantee must present evidence acceptable to the
Company that he or she has owned any such shares of Common Stock tendered in
payment of the exercise price (and that such tendered shares of Common Stock
have not been subject to any substantial risk of forfeiture) for at least six
months prior to the date of exercise, and (C) Common Stock must be delivered to
the Company. Delivery for this purpose may, at the election of the grantee, be
made either by (A) physical delivery of the certificate(s) for all such shares
of Common Stock tendered in payment of the price, accompanied by duly executed
instruments of transfer in a form acceptable to the Company, or (B) direction to
the grantee's broker to transfer, by book entry, such shares of Common Stock
from a brokerage account of the grantee to a brokerage account specified by the
Company. When payment of the exercise price is made by delivery of Common
Stock, the difference, if any, between the aggregate exercise price payable with
respect to the option being exercised and the Fair Market Value of the share(s)
of Common Stock tendered in payment (plus any applicable taxes) shall be paid in
cash. No grantee may tender shares of Common Stock having a Fair Market Value
exceeding the aggregate exercise price payable with respect to the option being
exercised (plus any applicable taxes).
In the event a grantee elects to pay the exercise price payable with
respect to an option pursuant to clause (iv) above, (A) only a whole number of
Share(s) (and not fractional Shares) may be withheld in payment and (B) such
grantee must present evidence acceptable to the Company that
-5-
<PAGE>
he or she has owned a number of shares of Common Stock at least equal to the
number of Shares to be withheld in payment of the exercise price (and that such
owned shares of Common Stock have not been subject to any substantial risk of
forfeiture) for at least six months prior to the date of exercise. When payment
of the exercise price is made by withholding of Shares, the difference, if any,
between the aggregate exercise price payable with respect to the option being
exercised and the Fair Market Value of the Share(s) withheld in payment (plus
any applicable taxes) shall be paid in cash. No grantee may authorize the
withholding of Shares having a Fair Market Value exceeding the aggregate
exercise price payable with respect to the option being exercised (plus any
applicable taxes). Any withheld Shares shall no longer be issuable under such
option.
(c) Terms of Options. The term during which each option may be exercised
----------------
shall be determined by the Committee, but, except as otherwise provided herein,
in no event shall an option be exercisable in whole or in part, in the case of a
Nonqualified Stock Option or an Incentive Stock Option (other than as described
below), more than ten years from the date it is granted or, in the case of an
Incentive Stock Option granted to an employee who at the time of the grant owns
more than 10% of the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries, if required by the Code, more than five
years from the date it is granted. All rights to purchase Shares pursuant to an
option shall, unless sooner terminated, expire at the date designated by the
Committee. The Committee shall determine the date on which each option shall
become exercisable and may provide that an option shall become exercisable in
installments. The Shares constituting each installment may be purchased in whole
or in part at any time after such installment becomes exercisable, subject to
such minimum exercise requirements as may be designated by the Committee. Unless
otherwise provided herein or in the terms of the related grant, an optionee may
exercise an option only if he or she is, and has continuously since the date the
option was granted, been a director, officer or employee of or performed other
services for the Company or a Subsidiary. Prior to the exercise of an option and
delivery of the Shares represented thereby, the optionee shall have no rights as
a stockholder with respect to any Shares covered by such outstanding option
(including any dividend or voting rights).
(d) Limitations on Grants. If required by the Code, the aggregate Fair
---------------------
Market Value (determined as of the grant date) of Shares for which any single
Incentive Stock Option is exercisable for the first time during any calendar
year under all equity incentive plans of the Company and its Subsidiaries (as
defined in Section 422 of the Code) may not exceed $100,000.
(e) Grant of Reload Options. The Committee may provide (either at the
-----------------------
time of grant or exercise of an option), in its discretion, for the grant to
a grantee who exercises all or any portion of an option ("Exercised Options")
and who pays all or part of such exercise price with shares of Common Stock, of
an additional option (a "Reload Option") for a number of shares of Common Stock
equal to the sum (the "Reload Number") of the number of shares of Common Stock
tendered or withheld in payment of such exercise price for the Exercised Options
plus, if so provided by the Committee, the number of shares of Common Stock, if
any, tendered or withheld by the grantee or withheld by the Company in
connection with the exercise of the Exercised Options to satisfy any federal,
state or local tax withholding requirements. The terms of each Reload Option,
including the
-6-
<PAGE>
date of its expiration and the terms and conditions of its exercisability and
transferability, shall be the same as the terms of the Exercised Option to which
it relates, except that (i) the grant date for each Reload Option shall be the
date of exercise of the Exercised Option to which it relates and (ii) the
exercise price for each Reload Option shall be the Fair Market Value of the
Common Stock on the grant date of the Reload Option.
7. Stock Appreciation Rights.
-------------------------
(a) The Committee shall have the authority to grant SARs under this Plan,
either alone or to any optionee in tandem with options (either at the time of
grant of the related option or thereafter by amendment to an outstanding
option). SARs shall be subject to such terms and conditions as the Committee
may specify.
(b) No SAR may be exercised unless the Fair Market Value of a share of
Common Stock of the Company on the date of exercise exceeds the exercise price
of the SAR or, in the case of SARs granted in tandem with options, any options
to which the SARs correspond. Prior to the exercise of the SAR and delivery of
the cash and/or Shares represented thereby, the participant shall have no rights
as a stockholder with respect to Shares covered by such outstanding SAR
(including any dividend or voting rights).
(c) SARs granted in tandem with options shall be exercisable only when, to
the extent and on the condition that any related option is exercisable. The
exercise of an option shall result in an immediate forfeiture of any related SAR
to the extent the option is exercised, and the exercise of an SAR shall cause an
immediate forfeiture of any related option to the extent the SAR is exercised.
(d) Upon the exercise of an SAR, the participant shall be entitled to a
distribution in an amount equal to the difference between the Fair Market Value
of a share of Common Stock on the date of exercise and the exercise price of the
SAR or, in the case of SARs granted in tandem with options, any option to which
the SAR is related, multiplied by the number of Shares as to which the SAR is
exercised. The Committee shall decide whether such distribution shall be in
cash, in Shares having a Fair Market Value equal to such amount, in Other
Company Securities having a Fair Market Value equal to such amount or in a
combination thereof.
(e) All SARs will be exercised automatically on the last day prior to the
expiration date of the SAR or, in the case of SARs granted in tandem with
options, any related option, so long as the Fair Market Value of a share of
Common Stock on that date exceeds the exercise price of the SAR or any related
option, as applicable. An SAR granted in tandem with options shall expire at
the same time as any related option expires and shall be transferable only when,
and under the same conditions as, any related option is transferable.
8. Restricted Stock.
----------------
-7-
<PAGE>
(a) The Committee may at any time and from time to time grant Shares of
restricted stock under the Plan to such participants and in such amounts as it
determines. Each grant of restricted stock shall specify the applicable
restrictions on such Shares, the duration of such restrictions (which shall be
at least six months except as otherwise provided by the Committee), and the time
or times at which such restrictions shall lapse with respect to all or a
specified number of Shares that are part of the grant.
(b) The participant will be required to pay the Company the aggregate par
value of any Shares of restricted stock within ten days of the date of grant,
unless such Shares of restricted stock are treasury shares. Unless otherwise
determined by the Committee, certificates representing Shares of restricted
stock granted under the Plan will be held in escrow by the Company on the
participant's behalf during any period of restriction thereon and will bear an
appropriate legend specifying or referring to the applicable restrictions
thereon, and the participant will be required to execute a blank stock power
therefor. Except as otherwise provided by the Committee, during such period of
restriction the participant shall have all of the rights of a holder of Common
Stock, including but not limited to the rights to receive dividends and to vote,
and any stock or other securities received as a distribution with respect to
such participant's restricted stock shall be subject to the same restrictions as
then in effect for the restricted stock.
9. Performance Awards.
------------------
(a) Performance awards may be granted to participants at any time and from
time to time as determined by the Committee. The Committee shall have complete
discretion in determining the size and composition of performance awards so
granted to a participant and the appropriate period over which performance is to
be measured (a "performance cycle"). Performance awards may include (i)
specific dollar-value target awards (ii) performance units, the value of each
such unit being determined by the Committee at the time of issuance, and/or
(iii) performance Shares, the value of each such Share being equal to the Fair
Market Value of a share of Common Stock. The value of each performance award
may be fixed or it may be permitted to fluctuate based on a performance factor
(e.g., return on equity) selected by the Committee.
(b) The Committee shall establish performance goals and objectives for
each performance cycle on the basis of such criteria and objectives as the
Committee may select from time to time, including, without limitation, the
performance of the participant, the Company, one or more of its Subsidiaries or
divisions or any combination of the foregoing. During any performance cycle, the
Committee shall have the authority to adjust the performance goals and
objectives for such cycle for such reasons as it deems equitable.
(c) The Committee shall determine the portion of each performance award
that is earned by a participant on the basis of the Company's performance over
the performance cycle in relation to the performance goals for such cycle. The
earned portion of a performance award may be paid out in Shares, cash, Other
Company Securities, or any combination thereof, as the Committee may determine.
-8-
<PAGE>
10. Withholding Taxes.
-----------------
(a) Participant Election. Unless otherwise determined by the Committee, a
--------------------
participant may elect to deliver shares of Common Stock (or have the Company
withhold shares acquired upon exercise of an option or SAR or deliverable upon
grant or vesting of restricted stock, as the case may be) to satisfy, in whole
or in part, the amount the Company is required to withhold for taxes in
connection with the exercise of an option or SAR or the delivery of restricted
stock upon grant or vesting, as the case may be. Such election must be made on
or before the date the amount of tax to be withheld is determined. Once made,
the election shall be irrevocable. The fair market value of the shares to be
withheld or delivered will be the Fair Market Value as of the date the amount of
tax to be withheld is determined. In the event a participant elects to deliver
shares of Common Stock pursuant to this Section 10(a), such delivery must be
made subject to the conditions and pursuant to the procedures set forth in
Section 6(b) with respect to the delivery of Common Stock in payment of the
exercise price of options.
(b) Company Requirement. The Company may require, as a condition to
-------------------
any grant or exercise under the Plan or to the delivery of certificates for
Shares issued hereunder, that the grantee make provision for the payment to the
Company, either pursuant to Section 10(a) or this Section 10(b), of any federal,
state or local taxes of any kind required by law to be withheld with respect to
any grant or any delivery of Shares. The Company, to the extent permitted or
required by law, shall have the right to deduct from any payment of any kind
(including salary or bonus) otherwise due to a grantee, an amount equal to any
federal, state or local taxes of any kind required by law to be withheld with
respect to any grant or to the delivery of Shares under the Plan, or to retain
or sell without notice a sufficient number of the Shares to be issued to such
grantee to cover any such taxes, the payment of which has not otherwise been
provided for in accordance with the terms of the Plan, provided that the Company
shall not sell any such Shares if such sale would be considered a sale by such
grantee for purposes of Section 16 of the Exchange Act that is not exempt from
matching thereunder.
11. Written Agreement; Vesting. Each participant to whom a grant is made under
--------------------------
the Plan shall enter into a written agreement with the Company that shall
contain such provisions, including without limitation, vesting requirements,
consistent with the provisions of the Plan, as may be approved by the Committee.
Unless the Committee determines otherwise, no grant under this Plan may be
exercised, and no restrictions relating thereto may lapse, within six months of
the date such grant is made.
12. Transferability. Unless the Committee determines otherwise, no option,
---------------
SAR, performance award, or restricted stock granted under the Plan shall be
transferable by a participant otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code. Unless the Committee determines otherwise, an option, SAR, or
performance award may be exercised only by the optionee or grantee thereof or
his guardian or legal representative; provided that Incentive Stock Options may
be exercised by such guardian or legal representative only if permitted by the
Code and any regulations promulgated thereunder.
-9-
<PAGE>
13. Listing, Registration and Qualification.
---------------------------------------
(a) If the Committee determines that the listing, registration or
qualification upon any securities exchange or under any law of Shares subject to
any option, SAR, performance award or restricted stock grant is necessary or
desirable as a condition of, or in connection with, the granting of same or the
issue or purchase of Shares thereunder, no such option or SAR may be exercised
in whole or in part, no such performance award may be paid out and no Shares may
be issued unless such listing, registration or qualification is effected free of
any conditions not acceptable to the Committee.
(b) It is the intent of the Company that the Plan comply in all respects
with Section 162(m) of the Code, that awards made hereunder comply in all
respects with Rule 16b-3 under the Exchange Act, that any ambiguities or
inconsistencies in construction of the Plan be interpreted to give effect to
such intention and that if any provision of the Plan is found not to be in
compliance with Section 162(m), such provision shall be deemed null and void to
the extent required to permit the Plan to comply with Section 162(m), as the
case may be.
14. Transfer of Employee. The transfer of an employee from the Company to
--------------------
a Subsidiary, from a Subsidiary to the Company, or from one Subsidiary to
another shall not be considered a termination of employment; nor shall it be
considered a termination of employment if an employee is placed on military or
sick leave or such other leave of absence which is considered by the Committee
as continuing intact the employment relationship.
15. Adjustments.
-----------
(a) In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure or shares of the Company, the
Committee shall make such adjustment as it deems appropriate in the number and
kind of Shares or other property reserved for issuance under the Plan, in the
number and kind of Shares or other property covered by grants previously made
under the Plan, in the exercise price of outstanding options and SARs and in any
limitations or other provisions in the Plan expressed in terms of a number of
shares. Any such adjustment shall be final, conclusive and binding for all
purposes of the Plan. In the event of any merger, consolidation or other
reorganization in which the Company is not the surviving or continuing
corporation or in which a Change in Control is to occur, all of the Company's
obligations regarding options, SARs performance awards, and restricted stock
that were granted hereunder and that are outstanding on the date of such event
shall, on such terms as may be approved by the Committee prior to such event, be
assumed by the surviving or continuing corporation or canceled in exchange for
property (including cash).
(b) Without limitation of the foregoing, in connection with any
transaction of the type specified by clause (iii) of the definition of a Change
in Control in Section 2(b), the Committee may, in its discretion, (i) cancel any
or all outstanding options under the Plan in consideration for payment
-10-
<PAGE>
to the holders thereof of an amount equal to the portion of the consideration
that would have been payable to such holders pursuant to such transaction if
their options had been fully exercised immediately prior to such transaction,
less the aggregate exercise price that would have been payable therefor, or (ii)
if the amount that would have been payable to the option holders pursuant to
such transaction if their options had been fully exercised immediately prior
thereto would be less than the aggregate exercise price that would have been
payable therefor, cancel any or all such options for no consideration or payment
of any kind. Payment of any amount payable pursuant to the preceding sentence
may be made in cash or, in the event that the consideration to be received in
such transaction includes securities or other property, in cash and/or
securities or other property in the Committee's discretion.
16. Termination and Modification of the Plan. The Board of Directors or the
----------------------------------------
Committee, without approval of the stockholders, may modify or terminate the
Plan, except that no modification shall become effective without prior approval
of the stockholders of the Company if stockholder approval would be required for
continued compliance with the performance-based compensation exception of
Section 162(m) of the Code or any listing requirement of the principal stock
exchange on which the Common Stock is then listed.
17. Amendment or Substitution of Awards under the Plan. The terms of any
--------------------------------------------------
outstanding award under the Plan may be amended from time to time by the
Committee in its discretion in any manner that it deems appropriate (including,
but not limited to, acceleration of the date of exercise of any award and/or
payments thereunder or of the date of lapse of restrictions on Shares); provided
that, except as otherwise provided in Section 15, no such amendment shall
adversely affect in a material manner any right of a participant under the award
without his or her written consent. The Committee may, in its discretion,
permit holders of awards under the Plan to surrender outstanding awards in order
to exercise or realize rights under other awards, or in exchange for the grant
of new awards, or require holders of awards to surrender outstanding awards as a
condition precedent to the grant of new awards under the Plan.
18. Commencement Date; Termination Date. The date of commencement of the Plan
-----------------------------------
shall be ____________, 1998, subject to approval by the shareholders of the
Company. Unless previously terminated upon the adoption of a resolution of the
Board terminating the Plan, the Plan shall terminate at the close of business on
____________, 2008; provided that the Board may, prior to such termination,
extend the term of the Plan for up to five years for the grant of awards other
than Incentive Stock Options. No termination of the Plan shall materially and
adversely affect any of the rights or obligations of any person, without his or
her consent, under any grant of options or other incentives theretofore granted
under the Plan.
19. Governing Law. The Plan shall be governed by the corporate laws of the
-------------
State of Illinois, without giving effect to any choice of law provisions.
-11-
<PAGE>
EXHIBIT 10.2
ARGOSY EDUCATION GROUP, INC.
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN
The following constitutes the provisions of the Argosy Education Group,
Inc. Employee Stock Discount Purchase Plan (the "Plan").
1. Purpose. The purpose of the Plan is to maintain competitive equity
-------
compensation programs and to provide employees of Argosy Education Group, Inc.
(the"Company") with an opportunity and incentive to acquire a proprietary
interest in the Company through the purchase of the Company's Common Stock,
thereby more closely aligning the interests of the Company's employees and
shareholders. It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of
1986, as amended ("Section 423"). Accordingly, the provisions of the Plan shall
be construed to extend and limit participation consistent with the requirements
of Section 423.
2. Definitions. Capitalized terms used in this Plan and not otherwise
-----------
defined have the meanings set forth below.
"Administrator" means the Compensation Committee, or the Board if the Board
asserts administrative authority over the Plan pursuant to Section 13.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the Class A Common Stock of the Company.
"Compensation" means with respect to each participant for each pay period,
the full base salary or hourly compensation and any commissions and cash bonus
paid to such participant. Except as otherwise determined by the Compensation
Committee for all participants, "Compensation" does not include (i) overtime pay
or shift premiums, (ii) any amount contributed on behalf of a participant to any
pension plan or plan of deferred compensation, (iii) any automobile or
relocation allowances (or reimbursement for any such expenses), (iv) any amounts
realized as compensation from the exercise of qualified or nonqualified stock
options, (v) any amounts paid as a starting bonus or finder's fee, (vi) any
amounts paid to a participant in the form of fringe benefits, such as health and
welfare, hospitalization, and group life insurance benefits, or perquisites, or
paid in lieu of such benefits, such as cash-out credits generated under a plan
qualified under Code Section 125 or (vii) other similar forms of extraordinary
compensation.
"Compensation Committee" means a committee of members of the Board meeting
the qualifications described in Section 12 and appointed by the Board to
administer the Plan.
"Eligible Employee" means an Employee who has been an Employee for at least
one year.
<PAGE>
"Employee" means any individual who is customarily employed for at least
thirty (30) hours per week and more than five (5) months in a calendar year by
the Company or a Subsidiary that is permitted to participate in the Plan under
Section 15(b). For purposes of the Plan, the employment relationship shall be
treated as continuing while the individual is on sick leave or other leave of
absence approved by the Company, except that when the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship will be deemed to have
terminated on the 91st day of such leave.
"Enrollment Date" means the first day of each Offering Period.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Date" means the last day of each Offering Period.
"Fair Market Value" of the Common Stock on any date means the value of
Common Stock determined as follows:
(a) If the Common Stock is listed on any established stock exchange or
a national market system, including, without limitation, the Nasdaq National
Market, its Fair Market Value shall be the closing sales price for such stock
(or the closing bid, if no sales were reported), as quoted on such exchange or
system (or the exchange or system with the greatest volume of trading in the
Common Stock) on the date of such determination (or, if such date is not a
Trading Day, then on the next preceding Trading Day), as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(b) If the Common Stock is quoted on the National Association of
Securities Dealers Automated Quotation System (but not on the Nasdaq National
Market) or is regularly quoted by a recognized securities dealer but selling
prices are not reported, its Fair Market Value shall be the mean between the
high and low asked prices for the Common Stock on the date of such determination
(or, if such date is not a Trading Day, then on the next preceding Trading Day),
as reported in the Wall Street Journal or such other source as the Administrator
deems reliable; or
(c) In the absence of an established market for the Common Stock, the
Fair Market Value of the Common Stock shall be determined in good faith by the
Administrator.
"Offering Period" means each period of three (3) months ending on each
November 30, February 28, May 31 and August 31, provided that the initial
Offering Period shall commence as soon as practicable following consummation of
the Company's initial public offering. The Administrator shall have the power to
change the duration of Offering Periods without shareholder approval as set
forth in Section 11 or if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be affected.
"Option" means the option granted to each participant pursuant to Section 4
upon enrollment in an Offering Period.
"Periodic Exercise Limit" has the meaning set forth in Section 4(a).
2
<PAGE>
"Plan Account" means an account maintained by the Company for each
participant in the Plan to which are credited the payroll deductions made for
such participant pursuant to Section 5 and from which are debited amounts paid
for the purchase of shares upon exercise of such participant's Option pursuant
to Section 6.
"Purchase Price" as of any Exercise Date means an amount equal to 90% of
the Fair Market Value of a share of Common Stock on the Exercise Date or on the
Enrollment Date for the Offering Period in which such Exercise Date occurs,
whichever is lower.
"Reserves" means the number of shares of Common Stock covered by each
Option that have not yet been exercised and the number of shares of Common Stock
that have been authorized for issuance under the Plan, but not yet placed under
Option.
"Rule 16b-3" means Rule 16b-3 under the Exchange Act and any successor
provision.
"Subsidiary" has the meaning as set forth under Section 424(f) of the Code.
"Trading Day" means a day on which national stock exchanges and the
National Association of Securities Dealers Automated Quotation System are open
for trading.
3. Offering Periods and Participation. The Plan shall be implemented
----------------------------------
through a series of consecutive Offering Periods. An Eligible Employee may
enroll in an Offering Period by delivering a subscription agreement in the form
of Exhibit A hereto to the Company's payroll office at least five (5) business
days prior to the Enrollment Date for that Offering Period. A subscription
agreement in effect for a Plan participant for a particular Offering Period
shall continue in effect for subsequent Offering Periods if the participant
remains an Eligible Employee and has not withdrawn pursuant to Section 7.
4. Options.
-------
(a) Grants. On the Enrollment Date for each Offering Period, each Eligible
------
Employee participating in such Offering Period shall be granted an Option to
purchase on the Exercise Date of such Offering Period (at the applicable
Purchase Price) up to that number of shares of Common Stock determined by
dividing $______ by the Fair Market Value of a share of Common Stock on the
Enrollment Date (such number of shares being the "Periodic Exercise Limit"). The
Option shall expire immediately after the Exercise Date of the Offering Period.
(b) Grant Limitations. Any provisions of the Plan to the contrary
-----------------
notwithstanding, no participant shall be granted an Option under the Plan:
(i) if, immediately after the grant, such participant (taking into
account stock held by other persons that is attributed to such Employee pursuant
to Section 424(d) of the Code) would own stock and/or hold outstanding options
to purchase stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any
Subsidiary (as determined under Treasury Regulations Section 1.423-2(d)); or
3
<PAGE>
(ii) which permits such participant's rights to purchase stock under
all employee stock purchase plans of the Company and its Subsidiaries to accrue
at a rate that exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock
(determined at the Fair Market Value of the shares at the time such Option is
granted) in any calendar year.
(c) No Rights in Respect of Underlying Stock. The participant will have no
----------------------------------------
interest or voting right in shares covered by an Option until such Option has
been exercised.
5. Payroll Deductions.
------------------
(a) Participant Designations. The subscription agreement applicable to an
------------------------
Offering Period shall designate payroll deductions to be made on each payday
during the Offering Period as a whole number percentage not exceeding ten
percent (10%) of such Eligible Employee's Compensation for the pay period
preceding such payday, provided that the aggregate of such payroll deductions
during the Offering Period shall not exceed ten percent (10%) of the
participant's Compensation during said Offering Period.
(b) Plan Account Balances. The Company shall make payroll deductions as
---------------------
specified in each participant's subscription agreement on each payday during the
Offering Period and credit such payroll deductions to such participant's Plan
Account. A participant may not make any additional payments into such Plan
Account. No interest will accrue on any payroll deductions. All payroll
deductions received or held by the Company under the Plan may be used by the
Company for any corporate purpose, and the Company shall not be obligated to
segregate such payroll deductions.
(c) Participant Changes. A participant may discontinue his or her
-------------------
participation in the Plan as provided in Section 7, or may increase or decrease
(subject to such limits as the Administrator may impose) the rate of his or her
payroll deductions during any Offering Period by filing with the Company a new
subscription agreement authorizing such a change in the payroll deduction rate.
The change in rate shall be effective with the first full payroll period
following five (5) business days after the Company's receipt of the new
subscription agreement, unless the Company elects to process a given change in
participation more quickly.
(d) Decreases. Notwithstanding the foregoing, to the extent necessary to
---------
comply with Section 423(b)(8) of the Code and Section 4(b) herein, a
participant's payroll deductions may be decreased to 0% at such time during any
Offering Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Offering
Period that is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 7.
(e) Tax Obligations. At the time of each exercise of a participant's
---------------
Option, and at the time any Common Stock issued under the Plan to a participant
is disposed of, the participant must adequately provide for the Company's
federal, state, or other tax withholding obligations, if any, that arise upon
the exercise of the Option or the disposition of the Common Stock. At any time,
the Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding
4
<PAGE>
required to make available to the Company any tax deductions or benefit
attributable to sale or early disposition of Common Stock by the Employee.
(f) Statements of Account. The Company shall maintain each participant's
---------------------
Plan Account and shall give each Plan participant a statement of account at
least annually. Such statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any, for the period covered.
6. Exercise of Options.
-------------------
(a) Automatic Exercise on Exercise Dates. Unless a participant withdraws as
------------------------------------
provided in Section 7, his or her Option for the purchase of shares will be
exercised automatically on the Exercise Date of the Offering Period in which
such participant is enrolled for the maximum number of shares of Common Stock,
including fractional shares, as can then be purchased at the applicable Purchase
Price with the payroll deductions accumulated in such participant's Plan Account
and not yet applied to the purchase of shares under the Plan, subject to the
Periodic Exercise Limit. During a participant's lifetime, a participant's
Options to purchase shares hereunder are exercisable only by the participant.
(b) Delivery of Shares. As promptly as practicable after each Exercise Date
------------------
on which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate or book entry transfer
representing the shares purchased upon exercise of his or her Option, provided
that the Company may in its discretion hold fractional shares for the accounts
of the participants pending aggregation to whole shares.
(c) Compliance with Law. Shares shall not be issued with respect to an
-------------------
Option unless the exercise of such Option and the issuance and delivery of such
shares pursuant thereto comply with all applicable provisions of law, domestic
or foreign, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance. As a condition to the exercise of an Option, the
Company may require the participant for whom an Option is exercised to represent
and warrant at the time of any such exercise that the shares are being purchased
only for investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned applicable provisions of law. Shares
issued upon purchase under the Plan may be subject to such transfer restrictions
and stop-transfer instructions as the Administrator deems appropriate.
(d) Excess Plan Account Balances. If, due to application of the Periodic
----------------------------
Exercise Limit, there remains in a participant's Plan Account immediately
following exercise of such participant's Option on an Exercise Date any cash
accumulated during the Purchase Period immediately preceding such Exercise Date
and not applied to the purchase of shares under the Plan, such cash shall
promptly be returned to the participant.
7. Withdrawal; Termination of Employment.
-------------------------------------
5
<PAGE>
(a) Voluntary Withdrawal. Subject to Section 15(f), a participant may
--------------------
withdraw from an Offering Period by giving written notice to the Company's
payroll office at least five (5) business days prior to the Exercise Date. Such
withdrawal shall be effective beginning five business days after receipt by the
Company's payroll office of notice thereof. On or promptly following the
effective date of any withdrawal, all (but not less than all) of the withdrawing
participant's payroll deductions credited to his or her Plan Account and not yet
applied to the purchase of shares under the Plan will be paid to such
participant, and on the effective date of such withdrawal such participant's
Option for the Offering Period will be automatically terminated, and no further
payroll deductions for the purchase of shares will be made during the Offering
Period. If a participant withdraws from an Offering Period, payroll deductions
will not resume at the beginning of any succeeding Offering Period unless the
participant delivers to the Company a new subscription agreement with respect
thereto.
(b) Termination of Employment. Promptly after a participant's ceasing to be
-------------------------
an Employee for any reason the payroll deductions credited to such participant's
Plan Account and not yet applied to the purchase of shares under the Plan will
be returned to such participant or, in the case of his or her death, to the
person or persons entitled thereto under Section 9, and such participant's
Option will be automatically terminated, provided that, if the Company does not
learn of such death more than five (5) business days prior to an Exercise Date,
payroll deductions credited to such participant's Plan account may be applied to
the purchase of shares under the Plan on such Exercise Date.
8. Transferability. Neither payroll deductions credited to a
---------------
participant's Plan Account nor any rights with regard to the exercise of an
Option or to receive shares under the Plan may be assigned, transferred, pledged
or otherwise disposed of by the participant in any way other than by will, the
laws of descent and distribution or as provided in Section 9 hereof. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Administrator may treat such act as an election to
withdraw from an Offering Period in accordance with Section 7. The Administrator
may, in its discretion and consistent with applicable law, restrict the transfer
of shares purchased under the Plan by imposing a holding period not to exceed
one year from the date of issuance.
9. Designation of Beneficiary. A participant may file a written
--------------------------
designation of a beneficiary who is to receive any cash from the participant's
Plan Account in the event of such participant's death and any shares purchased
for the participant upon exercise of his or her Option but not yet issued. If a
participant is married and the designated beneficiary is not the spouse, spousal
consent may be required for such designation to be effective. A designation of
beneficiary may be changed by a participant at any time by written notice. In
the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
6
<PAGE>
10. Stock. The maximum number of shares of the Company's Common Stock that
-----
shall be made available for sale under the Plan shall be _________ shares,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 11. If on a given Enrollment Date or Exercise Date the number of
shares with respect to which Options are to be granted or exercised exceeds the
number of shares then available under the Plan, the Administrator shall make a
pro rata allocation of the shares remaining available for purchase in as uniform
a manner as shall be practicable and as it shall determine to be equitable.
Shares of Common Stock subject to unexercised Options that expire, terminate or
are cancelled will again become available for the grant of further Options under
the Plan.
11. Adjustments upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
- ----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the Reserves as well as the Purchase Price,
Periodic Exercise Limit, and other characteristics of the Options, shall be
appropriately and proportionately adjusted for any increase or decrease or
exchange in the issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, exchange or any other increase or decrease in the number of shares
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option. The Administrator may, if it so determines
in the exercise of its sole discretion, provide for adjusting the Reserves, as
well as the Purchase Price, Periodic Exercise Limit, and other characteristics
of the Options, in the event the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of shares
of its outstanding Common Stock.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, the pending Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Administrator, and all Plan Account balances will be paid to
participants as appropriate consistent with applicable law.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger or other
combination (the "Transaction") of the Company with or into another entity, each
Option under the Plan shall be assumed or an equivalent option shall be
substituted by such successor entity or a parent or subsidiary of such successor
entity, unless the Administrator determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten the
Offering Period then in progress by setting a new Exercise Date (the "New
Exercise Date"). If the Administrator shortens the Offering Period then in
progress in lieu of assumption or substitution, the Administrator shall notify
each participant in writing, at least ten (10) days prior to the New Exercise
Date, that the Exercise Date for such participant's Option has been changed to
the New Exercise Date and that such participant's Option will be exercised
automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering
7
<PAGE>
Period as provided in Section 8 (provided that, in such case, the participant's
withdrawal shall be effective if notice thereof is delivered to the Company's
payroll office at least two (2) business days prior to the New Exercise Date).
For purposes of this Section, an Option granted under the Plan shall be deemed
to be assumed if, following the Transaction, the Option confers the right to
purchase at the Purchase Price (provided that for such purposes the Fair Market
Value of the Common Stock on the New Exercise Date shall be the value per share
of the consideration paid in the Transaction), for each share of stock subject
to the Option immediately prior to the Transaction, the consideration (whether
stock, cash or other securities or property) received in the Transaction by
holders of Common Stock for each share of Common Stock held on the effective
date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if such
consideration received in the Transaction was not solely common equity of the
successor entity or its parent (as defined in Section 424(e) of the Code), the
Administrator may, with the consent of the successor entity and the participant,
provide for the consideration to be received upon exercise of the Option to be
solely common equity of the successor entity or its parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
Transaction.
12. Administration. The Plan shall be administered by the Compensation
--------------
Committee, which shall have the authority to construe, interpret and apply the
terms of the Plan and any agreements defining the rights and obligations of the
Company and participants under the Plan, to prescribe, amend, and rescind rules
and regulations relating to the Plan, to determine eligibility and to adjudicate
all disputed claims filed under the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan. The Administrator
may, in its discretion, delegate ministerial responsibilities under the Plan to
the Company. Every finding, decision and determination made by the Compensation
Committee shall, to the full extent permitted by law, be final and binding upon
all parties. Any action of the Compensation Committee shall be taken pursuant to
a majority vote or by the unanimous written consent of its members. The
Compensation Committee shall consist of three or more members of the Board, each
of whom shall be disinterested within the meaning of Rule 16b-3, provided,
however, that the number of members of the Compensation Committee may be reduced
or increased from time to time by the Board to the number required or allowed by
Rule 16b-3. The Board may from time to time in its discretion exercise any
responsibilities or authority allocated to the Compensation Committee under the
Plan. No member of the Compensation Committee or any designee thereof will be
liable for any action or determination made in good faith with respect to the
Plan or any transaction arising under the Plan.
13. Amendment or Termination.
------------------------
(a) Administrator's Discretion. The Administrator may, at any time and for
--------------------------
any reason, terminate or amend the Plan. Except as provided in Section 11, no
such termination can affect Options previously granted, provided that an
Offering Period may be terminated by the Administrator on any Exercise Date if
the Administrator determines that such termination is in the best interests of
the Company and its shareholders. Except as provided herein, no amendment may
make any change in any Option theretofore granted that adversely affects the
rights of any participant. To the extent necessary to comply with and qualify
under Rule 16b-3 or under Section 423 (or any successor rule or provision or any
other applicable law or regulation), the Administrator
8
<PAGE>
shall obtain shareholder approval of amendments to the Plan in such a manner and
to such a degree as required.
(b) Administrative Modifications. Without shareholder consent (except as
----------------------------
specifically required by applicable law or regulation) and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Administrator shall be entitled to amend the Plan to the extent
necessary to comply with and qualify under Rule 16b-3 and Section 423, change
the duration of the Offering Period, limit the frequency and/or number of
changes in payroll deductions during an Offering Period, establish the exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a participant
to adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant's Compensation, and
establish such other limitations or procedures as the Administrator determines
in its sole discretion to be advisable and which are consistent with the Plan.
14. Term of Plan. The Plan shall become effective upon the first
------------
Enrollment Date after its approval by the shareholders of the Company and shall
continue in effect for a term of ten (10) years unless sooner terminated
pursuant to Section 13.
15. Miscellaneous.
-------------
(a) Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
(b) Subsidiaries. The Administrator may from time to time in its
------------
discretion permit Employees of any Subsidiary to participate in the Plan on the
same terms as Eligible Employees hereunder.
(c) Expenses. All costs and expenses incurred in administering the Plan
--------
shall be paid by the Company, except that any stamp duties or transfer taxes
applicable to participation in the Plan may be charged to the account of such
participant by the Company. Any brokerage fees for the purchase of shares by a
participant shall be paid by the Company, but any brokerage fees for the sale of
shares by a participant shall be borne by the participant.
(d) Equal Rights and Privileges. All Employees of the Company (or of any
---------------------------
Subsidiary that is permitted to participate in the Plan under Section 15(b))
shall have equal rights and privileges under the Plan so that the Plan qualifies
as an "employee stock purchase" within the meaning of Section 423 (or any
successor provision of the Code) and the Treasury regulations thereunder. Any
provision of the Plan which is inconsistent with Section 423 (or any successor
provision of the Code) or applicable Treasury regulations shall, without further
act or amendment by the Company or the Board, be reformed to comply with the
requirements of Section 423 (or any successor provision of
9
<PAGE>
the Code) or applicable Treasury regulations. This Section 15(d) shall take
precedence over all other provisions of the Plan.
(e) Exclusion From Retirement and Fringe Benefit Computation. To the extent
--------------------------------------------------------
not prohibited by statutory law, no portion of the award of Options under this
Plan shall be taken into account as "wages," "salary," or other "compensation"
for any purpose, whether in determining eligibility, benefits, or otherwise,
under (i) any pension, retirement, profit sharing or other qualified or
nonqualified plan of deferred compensation, (ii) any employee welfare or fringe
benefit plan including, but not limited to, group insurance, hospitalization,
medical, and disability, or (iii) any form of extraordinary pay including but
not limited to, bonuses, sick pay, and vacation pay.
(f) Additional Restrictions of Rule 16b-3. The terms and conditions of
-------------------------------------
Options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such Options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions. Without limitation of the foregoing, the election
by a person subject to Section 16 of the Exchange Act to enroll in an Offering
Period may be made irrevocable for specific Purchase Period within the Offering
Period.
(g) No Employment Rights. The Plan does not, directly or indirectly, create
--------------------
any right for the benefit of an employee or class of employees to purchase any
shares under the Plan, or create in any employee or class of employees any right
with respect to continuation of employment by the Company, and it shall not be
deemed to interfere in any way with the Company's right to terminate, or
otherwise modify, an employee's employment at any time.
(h) Applicable Law. The laws of the State of Illinois shall govern all
--------------
matters relating to the Plan, except to the extent (if any) superseded by the
laws of the United States.
(i) Headings. Headings used herein are for convenience of reference only
--------
and do not affect the meaning or interpretation of the Plan.
10
<PAGE>
EXHIBIT 10.4
$2,350,000.00 Chicago, Illinois
Dated as of August 27, 1997
TERM NOTE
This Note has been executed by ACADEMIC REVIEW, INC., a corporation formed under
the laws of the State of Illinois ("Borrower"); if more than one entity executes
this Note, the term "Borrower" refers to each of them individually and some or
all of them collectively, and their obligations hereunder shall be joint and
several.
FOR VALUE RECEIVED, on or before September 1, 2004, the scheduled maturity date
hereof, Borrower promises to pay to the order of THE NORTHERN TRUST COMPANY, an
Illinois banking corporation (hereafter, together with any subsequent holder
hereof, called "Lender"), at its main banking office at 50 South LaSalle Street,
Chicago, Illinois 60675, or at such other place as Lender may direct the
principal sum of Two Million Three Hundred Fifty Thousand no/100 United States
Dollars ($2,350,000.00) (the "Loan"), payable in 84 consecutive monthly
principal installments consisting of $27,976.19 each plus interest, beginning
October 1, 1997 and a last and final installment of all then remaining
outstanding principal shall be due and payable in full on the 1st day of
September, 2004, the scheduled maturity date of this Note.
1. INTEREST.
Borrower agrees to pay the per annum rate of interest equal to Two percent
(2.0%) in addition to the current average yield on One Year United States
Treasury Notes as determined by Lender as of the date hereof or as of any
anniversary date hereof on the unpaid principal amount from time to time
outstanding hereunder. The initial rate of interest shall be 7.512% which shall
be fixed for the first year of this Note, subject to change annually commencing
on the anniversary date of this loan.
After the maturity of the Loan, whether by acceleration or otherwise, the
Loan shall bear interest until paid at a rate equal to two percent (2%) in
addition to the rate in effect immediately prior to maturity.
Interest shall be computed for the actual number of days elapsed on the
basis of a year consisting of 360 days, including the date the Loan is made and
excluding the date the Loan or any portion thereof is paid or prepaid. Interest
shall be due and payable monthly, on the 1st day of each month, beginning
October 1, 1997, with all accrued but unpaid interest being due and payable in
full with the final principal payment due hereunder. After maturity interest
shall be payable on demand.
2. PREPAYMENTS.
If the Loan bears interest at the Prime-Based Rate, WSJ Prime Rate or a
Treasury Note-Based Rate, Borrower may prepay the Loan without penalty or
premium. If the Loan bears interest at the Fixed Rate, and Borrower prepays the
Loan in whole or in part, or the maturity of the Loan is accelerated, then,
to the fullest extent permitted by law Borrower shall also pay Lender for all
losses (including but not
<PAGE>
limited to interest rate margin and any other losses of anticipated profits) and
expenses incurred by reason of the liquidation or re-employment of deposits
acquired by Lender to make the Loan or maintain principal outstanding at the
Fixed Rate. Upon Lender's demand in writing specifying such losses and expenses,
Borrower shall promptly pay them; Lender's specification shall be deemed correct
in the absence of manifest error. If bearing interest at the Fixed Rate, the
Loan shall be conclusively deemed to have been funded by or on behalf of Lender
by the purchase of a deposit corresponding in amount and in maturity to the
Loan.
3. REFERENCES TO PREVIOUS NOTES, FACILITY TYPE, COLLATERAL,
GUARANTIES, LOAN & OTHER AGREEMENTS.
This Note evidences a transaction or term loan in the amount of this Note.
This Note is secured without limitation as provided in the following and
all related documents, in each case as amended, modified, renewed, restated
or replaced from time to time:
Security Agreement dated as of August 27, 1997 executed by Borrower in
favor of Lender;
Covenant Agreement dated as of August 27, 1997 executed by Borrower in
favor of Lender;
UCC-1 Financing Statement executed by Borrower as Debtor in favor of Lender
to be filed in Illinois and California; and
UCC-2 Financing Statement executed by Borrower as Debtor in favor of Lender
to be filed in Illinois.
Payment of this Note has been unconditionally guaranteed by ARGOSY
INTERNATIONAL, INC., AN ILLINOIS CORPORATION AMERICAN EDUCATION CORPORATION, AN
ILLINOIS CORPORATION AND AMERICAN SCHOOL OF PROFESSIONAL PSYCHOLOGY, AN ILLINOIS
CORPORATION (each individually and all collectively referred to as "guarantor")
as provided in separately executed guaranties.
4. USE OF PROCEEDS.
Borrower represents and warrants that the proceeds of this Note will be
used solely for business purposes, and not for personal, family or household
use, within the meaning of Federal Truth-in-Lending and similar state laws and
regulations.
5. REPRESENTATIONS.
Borrower hereby represents and wan-ants to Lender that:
(i) Borrower and any "Subsidiary" (as defined below) are existing and in
good standing under the laws of their state of formation, are duly
qualified, in good standing and authorized to do business in each
jurisdiction where failure to do so might have a material adverse impact on
the consolidated assets, condition or prospects of Borrower; the execution,
delivery and performance
<PAGE>
of this Note and all related documents and instruments are within
Borrower's powers and have been authorized by all necessary corporate,
partnership or joint venture action;
(ii) the execution, delivery and performance of this Note and all related
documents and instruments have received any and all necessary governmental
approval, and do not and will not contravene or conflict with any provision
of law or of the partnership or joint venture or similar agreement, charter
or by-laws of Borrower or any agreement affecting Borrower or its property;
and
(iii) there has been no material adverse change in the business,
condition, properties, assets, operations or prospects of Borrower or any
guarantor since the date of the latest financial statements provided on
behalf of Borrower or any guarantor to Lender.
"Subsidiary" means any corporation, partnership, joint venture, trust, or
other legal entity of which Borrower owns directly or indirectly fifty percent
(50%) or more of the outstanding voting stock or interest, or of which Borrower
has effective control, by contract or otherwise.
6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default":
(a) failure to pay, within five (5) days of when due, any principal,
interest or other amounts payable hereunder, failure to comply with or perform
any agreement or covenant of Borrower contained herein; or failure to furnish
(or caused to be furnished to) Lender when and as requested by Lender (but not
more often than once every twelve months) fully completed personal financial
statement(s) of any individual guarantor on Lender's then-standard form together
with such supporting information as Lender may reasonably request and such
failure shall continue and remain unremedied for ten (10) days after written
notice there of shall have been made by Lender to Borrower; or
(b) any default, event of default, or similar event shall occur or
continue under any other instrument, document, note, agreement, or guaranty
delivered to Lender in connection with this Note, or any such instrument,
document, note, agreement, or guaranty shall not be, or shall cease to be,
enforceable in accordance with its terms; or
(c) there shall occur any default or event of default, or any event or
condition that might become such with notice or the passage of time or both, or
any similar event, or any event that requires the prepayment of borrowed money
or the acceleration of the maturity thereof, under the terms of any evidence of
indebtedness or other agreement issued or assumed or entered into by Borrower,
any Subsidiary, any general partner or joint venturer of Borrower, or any
guarantor, or under the terms of any indenture, agreement, or instrument under
which any such evidence of indebtedness or other agreement is issued, assumed,
secured, or guaranteed, and such event shall continue beyond any applicable
period of grace; or
(d) any representation, warranty, schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of
Borrower, any Subsidiary, any general partner or joint venturer of
<PAGE>
Borrower, or any guarantor to Lender is false or misleading in any material
respect on the date as of which the facts therein set forth are stated or
certified; or
(e) any guaranty of or pledge of collateral security for this Note shall
be repudiated or become unenforceable or incapable of performance; or
(f) Borrower or any Subsidiary shall fail to maintain their existence in
good standing in their state of formation or shall fail to be duly qualified, in
good standing and authorized to do business in each jurisdiction where failure
to do so might have a material adverse impact on the consolidated assets,
condition or prospects of Borrower; or
(g) Borrower, any Subsidiary, any general partner or joint venturer of
Borrower, or any guarantor shall die, become incompetent, dissolve, liquidate,
merge, consolidate, or cease to be in existence for any reason; or any general
partner or joint venturer of Borrower shall withdraw or notify any partner or
joint venturer of Borrower of its or his/her intention to withdraw as a partner
or joint venturer (or to become a limited partner) of Borrower; or any general
or limited partner or joint venturer of Borrower shall fail to make any
contribution required by the partnership or joint venture agreement of Borrower
as and when due under such agreement; or there shall be any change in the
partnership or joint venture agreement of Borrower from that in force on the
date hereof which may have a material adverse impact on the ability of Borrower
to repay this Note; or
(h) any person or entity presently not in control of a corporate,
partnership or joint venture Borrower, any corporate general partner or joint
venturer of Borrower, or any guarantor, shall obtain control directly or
indirectly of Borrower, such a corporate general partner or joint venturer, or
any guarantor, whether by purchase or gift of stock or assets, by contract, or
otherwise; or
(i) any proceeding (judicial or administrative) shall be commenced against
Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or
any guarantor, or with respect to any assets of Borrower, any Subsidiary, any
general partner or joint venturer of Borrower, or any guarantor which shall
threaten to have a material and adverse effect on the assets, condition or
prospects of Borrower, any Subsidiary, any general partner or joint venturer of
Borrower, or any guarantor; or final judgment(s) and/or settlement(s) in an
aggregate amount in excess of Fifty Thousand and no/100 UNITED STATES DOLLARS
($50,000.00) in excess of insurance for which the insurer has confirmed coverage
in writing, a copy of which writing has been furnished to Lender, shall be
entered in any suit or action commenced against Borrower, any Subsidiary, any
general partner or joint venturer of Borrower, or any guarantor; or
(j) Borrower shall grant or any person (other than Lender) shall obtain a
security interest in any collateral for this Note; Borrower or any other person
shall perfect (or attempt to perfect) such a security interest; a court shall
determine that Lender does not have a first-priority security interest in any of
the collateral for this Note enforceable in accordance with the terms of the
related documents; or any notice of a federal tax lien against Borrower or any
general partner or joint venturer of Borrower shall be filed with any public
recorder; or
<PAGE>
(k) there shall be any material loss or depreciation in the value of any
collateral for this Note for any reason, or Lender shall otherwise reasonably
deem itself insecure; or, unless expressly permitted by the related documents,
all or any part of any collateral for this Note or any direct, indirect, legal,
equitable or beneficial interest therein is assigned, transferred or sold
without Lender's prior written consent; or
(l) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
liquidation, dissolution, or similar proceeding, domestic or foreign, is
instituted by or against Borrower, any Subsidiary, any general partner or joint
venturer of Borrower, or any guarantor; or Borrower, any Subsidiary, any general
partner or joint venturer of Borrower, or any guarantor shall take any steps
toward, or to authorize, such a proceeding; or
(m) Borrower, any Subsidiary, any general partner or joint venturer of
Borrower, or any guarantor shall become insolvent, generally shall fail or be
unable to pay its debts as they mature, shall admit in writing its inability to
pay its debts as they mature, shall make a general assignment for the benefit of
its creditors, shall enter into any composition or similar agreement, or shall
suspend the transaction of all or a substantial portion of its usual business.
7. DEFAULT REMEDIES.
(a) Upon the occurrence and during the continuance of any Event of Default
specified in Section 6(a)-(k), Lender at its option may declare this Note
(principal, interest and other amounts) immediately due and payable without
notice or demand of any kind except as required hereby or by applicable law.
Upon the occurrence of any Event of Default specified in Section 6(l)-(m), this
Note (principal, interest and other amounts) shall be immediately and
automatically due and payable without action of any kind on the part of Lender.
Upon the occurrence and during the continuance of any Event of Default, Lender
may exercise any rights and remedies under this Note, any related document or
instrument (including without limitation any pertaining to collateral), and at
law or in equity.
(b) Lender may, by written notice to Borrower, at any time and from time
to time, waive any Event of Default or "Unmatured Event of Default" (as defined
below), which shall be for such period and subject to such conditions as shall
be specified in any such notice. In the case of any such waiver, Lender and
Borrower shall be restored to their former position and rights hereunder, and
any Event of Default or Unmatured Event of Default so waived shall be deemed to
be cured and not continuing; but no such waiver shall extend to or impair any
subsequent or other Event of Default or Unmatured Event of Default. No failure
to exercise, and no delay in exercising, on the part of Lender of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies of Lender herein provided are cumulative and not exclusive of any
rights or remedies provided by law. "Unmatured Event of Default" means any
event or condition which would become an Event of Default with notice or the
passage of time or both.
8. NO INTEREST OVER LEGAL RATE.
Borrower does not intend or expect to pay, nor does Lender intend or expect
to charge, accept or collect any interest which, when added to any fee or other
charge upon the principal which may legally be treated as interest, shall be in
excess of the highest lawful rate. If acceleration, prepayment or any other
charges upon the principal or any portion thereof, or any other circumstance,
result in the
<PAGE>
computation or earning of interest in excess of the highest lawful rate, then
any and all such excess is hereby waived and shall be applied against the
remaining principal balance. Without limiting the generality of the foregoing,
and notwithstanding anything to the contrary contained herein or otherwise, no
deposit of funds shall be required in connection herewith which will, when
deducted from the principal amount outstanding hereunder, cause the rate of
interest hereunder to exceed the highest lawful rate.
9. PAYMENTS, ETC.
All payments hereunder shall be made in immediately available funds, and
shall be applied first to accrued interest and then to principal; however, if an
Event of Default occurs, Lender may, in its sole discretion, and in such order
as it may choose, apply any payment to interest, principal and/or lawful charges
and expenses then accrued. Borrower shall receive immediate credit on payments
received during Lender's normal banking hours if made in cash, immediately
available funds, or by debit to available balances in an account at Lender;
otherwise payments shall be credited after clearance through normal banking
channels. Borrower authorizes Lender to charge any account of Borrower
maintained with Lender for any amounts of principal, interest, taxes, duties, or
other charges or amounts due or payable hereunder, with the amount of such
payment subject to availability of collected balances in Lender's discretion;
unless Borrower instructs otherwise, the Loan shall be credited to an account(s)
of Borrower with Lender. LENDER AT ITS OPTION MAY MAKE THE LOAN HEREUNDER UPON
TELEPHONIC INSTRUCTIONS AND IN SO DOING SHALL BE FULLY ENTITLED TO RELY SOLELY
UPON INSTRUCTIONS, INCLUDING WITHOUT LIMITATION INSTRUCTIONS TO MAKE TRANSFERS
TO THIRD PARTIES, REASONABLY BELIEVED BY LENDER TO HAVE BEEN GIVEN BY AN
AUTHORIZED PERSON, WITHOUT INDEPENDENT INQUIRY OF ANY TYPE. All payments shall
be made without deduction for or on account of any present or future taxes,
duties or other charges levied or imposed on this Note or the proceeds, Lender
or Borrower by any government or political subdivision thereof. Borrower shall
upon request of Lender pay all such taxes, duties or other charges in addition
to principal and interest, including without limitation all documentary stamp
and intangible taxes, but excluding income taxes based solely on Lender's
income.
10. SETOFF.
At any time and without notice of any kind, except as provided herein, upon
the occurrence and during the continuance of any Event of Default, any account,
deposit or other indebtedness owing by Lender to Borrower, and any securities or
other property of Borrower delivered to or left in the possession of Lender or
its nominee or bailee, may be set off against and applied in payment of any
obligation hereunder, whether due or not.
11. NOTICES.
All notices, requests and demands to or upon the respective parties hereto
shall be deemed to have been given or made when deposited in the mail, postage
prepaid, addressed if to Lender to its main banking office indicated above
(Attention: Division Head, Business Banking Division), and if to Borrower to its
address set forth below, or to such other address as may be hereafter designated
in writing by the respective parties hereto or, as to Borrower, may appear in
Lender's records.
<PAGE>
12. MISCELLANEOUS.
This Note and any document or instrument executed in connection herewith
shall be governed by and construed in accordance with the internal law of the
State of Illinois, and shall be deemed to have been executed in the State of
Illinois. Unless the context requires otherwise, wherever used herein the
singular shall include the plural and vice versa, and the use of one gender
shall also denote the other. Captions herein are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof,
references herein to Sections or provisions without reference to the document in
which they are contained are references to this Note. This Note shall bind
Borrower, its heirs, trustees (including without limitation successor and
replacement trustees), executors, personal representatives, successors and
assigns, and shall inure to the benefit of Lender, its successors and assigns,
except that Borrower may not transfer or assign any of its rights or interest
hereunder without the prior written consent of Lender. Borrower agrees to pay
upon demand all expenses (including without limitation attorneys' fees, legal
costs and expenses, and time charges of attorneys who may be employees of
Lender, in each case whether in or out of court, in original or appellate
proceedings or in bankruptcy) incurred or paid by Lender or any holder hereof in
connection with the enforcement or preservation of its rights hereunder or under
any document or instrument executed in connection herewith. Borrower expressly
and irrevocably waives notice of dishonor or default as well as presentment,
protest, demand and notice of any kind in connection herewith. If there shall be
more than one person or entity constituting Borrower, each of them shall be
primarily, jointly and severally liable for all obligations hereunder.
13. WAIVER OF JURY TRIAL, ETC.
BORROWER HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO LENDERS SOLE AND
ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO,
ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY DOCUMENT OR INSTRUMENT
EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING
SITUS WITHIN OR JURISDICTION OVER COOK COUNTY, ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR
CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY LENDER IN
ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
Lender is hereby authorized by Borrower without notice to Borrower to fill in
any blank spaces and dates and strike inapplicable terms herein or in any
related document to conform to the terms upon which the Loan evidenced hereby is
or may be made, for which purpose Lender shall be deemed to have been granted an
irrevocable power of attorney coupled with an interest.
Address for Notices:
ACADEMIC REVIEW, INC. 20 S. CLARK STREET
CHICAGO, ILLINOIS 60603
ATTENTION: MICHAEL MARKOVITZ
<PAGE>
BY:_____________________
MICHAEL MARKOVITZ
TITLE:__________________
<PAGE>
EXHIBIT 10.5
Prepared By and Return To:
Sam D. Norton, Esquire
NORTON, GURLEY, HAMMERSLEY & LOPEZ,
P.A.
1819 Main Street, Suite 610
Sarasota, Florida 34236
REAL ESTATE MORTGAGE AND SECURITY AGREEMENT
-------------------------------------------
Date: April 30, 1997
Mortgagor: MCM UNIVERSITY PLAZA, INC., AN ILLINOIS CORPORATION
5250 17th Street, Sarasota, Florida 34235
Mortgagee: NORTHERN TRUST BANK OF FLORIDA, N.A.
1515 Ringling Blvd.
Sarasota, Florida 34236
Amount of initial indebtedness secured hereby: TWO MILLION ONE HUNDRED NINETY
THOUSAND AND NO/100 DOLLARS ($2,190,000.00)
Date final payment due: April 30, 2007
Maximum principal indebtedness, including future advances, that may he secured
hereby: $4,400,000.00.
Mortgaged Real Property: see Exhibit "A" attached hereto
1. Mortgage. Mortgagor is indebted to Mortgagee in the principal amount
--------
stated above as evidenced by a Promissory Note of even date herewith made by
Mortgagor and delivered to Mortgagee (the "Note") . In consideration of the loan
to Mortgagor evidenced by the Note, Mortgagor mortgages to Mortgagee the
Mortgaged Real Property, for the purposes identified below.
2. Secured Indebtedness; Future Advances; Maximum Amount and Time. This
--------------------------------------------------------------
Mortgage secures (a) the initial indebtedness of Mortgagor to Mortgagee, as
specified above, (b) any future advances made by Mortgagee to Mortgagor, and (c)
all other indebtedness or payments required, and (d) all other indebtedness of
Mortgagor to Mortgagee, however and wherever incurred or evidenced, whether
primary, secondary, direct, indirect, absolute, contingent, sole, joint or
several, due or to become due, whether contracted for or acquired now or in the
future, whether arising in the ordinary course of business or otherwise. The
total amount of indebtedness secured by this Mortgage may decrease or increase
from time to time, but the total unpaid balance so secured at any
one time may not exceed the maximum principal amount specified above, plus
accrued interest and any
<PAGE>
disbursements made for the payment of taxes, levies, or insurance on the
Mortgaged Property, and for maintenance, repair, protection, and preservation of
the Mortgaged Property, with interest on such disbursements, all as provided in
this Mortgage. This Mortgage does not secure any future advances made more than
twenty years from the date hereof.
3. Payment of Secured Indebtedness. Mortgagor shall pay all indebtedness
-------------------------------
and perform all obligations secured by this Mortgage promptly when due.
4. Additional Collateral. In addition to the Mortgaged Real Property,
---------------------
this Mortgage encumbers the Additional Collateral listed below (collectively,
the "Mortgaged Property").
(a) Improvements, Fixtures, Personal Property. All building, structures,
-----------------------------------------
and improvements situated on the Mortgaged Property and all Mortgagor's right,
title and interest in and to all fixtures or appurtenances erected now or at any
time in the future on the Mortgaged Property, and all machinery, equipment and
personal property (including any construction and building materials) of every
nature whatsoever including all furniture, furnishings, goods, equipment and
inventory, together with any proceeds thereof and any replacements thereof,
which are now or may be located in the future on the Mortgaged Property,
together with all and singular the tenements, hereditaments, easements and
appurtenances thereunder belonging or in any way appertaining, and the rents,
issues and profits thereof, and also all the estate, title, interest and all
claims and demands whatsoever, in law and in equity, of the Mortgagor in and to
the same, and every part and parcel thereof, and also all gas and electric
---
fixtures, cabinets, ovens, hoods, vent fans, radiators, heaters, air
conditioning equipment, machinery boilers, ranges, elevators and motors, bath
tubs, sinks, water closets, water basins, pipes, faucets, washing machines,
dryers, stoves, disposals, refrigerators, dishwashers, carpeting, drapes, all
electrical conduit, light fixtures, plumbing lines and fixtures, mantels, window
screens, screen doors, Venetian blinds, storm shutters and awnings, pool
equipment and other recreational equipment; all furniture, furnishings and
equipment necessary to the operation of the Mortgaged Property, owned by
Mortgagor now or at any time in the future and located in, on, or under, or used
or intended to be used in connection with the operation of the Mortgaged
Property, buildings, structures or other improvements, including all extensions,
additions, improvements, betterments, renewals and replacements to any of the
foregoing.
(b) Easements. All easements, rights of way, streets, ways, alleys,
---------
passages, sewer rights, waters, water courses, water rights and powers, and all
estates, rights, titles, interest, privileges, liberties, tenements,
hereditaments and appurtenances whatsoever, now or in the future in any way
belonging, relating or appertaining to any of the Mortgaged Property, and the
reversions, remainders, rents, issues, and profits thereof, and all the estate,
right, title, interest, property, possession, claim and demand whatsoever at
law, as well as in equity, of the Mortgagor of, in and to the same.
(c) Eminent Domain. All judgments, awards, damages, and settlements
--------------
rendered or paid after the date hereof, resulting from condemnation proceedings
concerning the Mortgaged Property or the taking of the Mortgaged Property or any
------
part of the Mortgaged Property under the power of eminent domain, and Mortgagee
may require that any sums payable to Mortgagor as a result of a condemnation
proceeding or the exercise of the power of eminent domain concerning the
Mortgaged Property be applied to the indebtedness secured by this Mortgage.
<PAGE>
(d) Insurance Proceeds. All Mortgagor's right, title and interest in all
------------------
unearned premiums accrued, accruing, or to accrue under any and all insurance
policies provided now or in the future pursuant to the terms of this Mortgage
and all proceeds or sums payable for the loss of or damage to (a) the Mortgaged
Property, or (b) rents, revenues, income, profits, or proceeds from leases,
concessions, or licenses, of or on any part of the Mortgaged Property.
(e) Licenses, Permits, Etc. All Mortgagor's interest in any licenses,
----------------------
permits, deposits, tap fees, utility agreements, or similar items, existing now
or at any time in the future, which in any way, relate to or are useful in
connection with the operation of the Mortgaged Property or the improvements
thereon.
(f) Rents and Profits.. All rents, issues, profits, proceeds, and revenues
------------------
derived from room rentals, or from the operation of any business or service
located on the Mortgaged Property, but Mortgagor may receive same while this
Mortgage is not in default.
(g) Trade Names. All Mortgagor's right, title, and interest in the name
-----
Presidential Square.
5. Title Covenants. Mortgagor covenants that the Mortgaged Property is
---------------
free from all encumbrances (other than this Mortgage), that lawful seisen of and
good right to encumber the Mortgaged Property are vested in Mortgagor, and that
Mortgagor fully warrants the title to the Mortgaged Property and will defend the
same against the lawful claims of all persons.
6. Security Property. To the extent any of the property encumbered by
-----------------
this Mortgage from time to time constitutes personal property subject to the
provision of the Uniform Com mercial Code, this Mortgage constitutes a
"Security Agreement" for all purposes under the Code; and the recording or
filing of this Mortgage with any public officer or agency will have the same
effect as recording or filing a "Financing Statement" under the Code. Without
limitation, Mortgagee, at its election upon any default under this Mortgage,
will have all rights and remedies from time to time available to a secured party
under the Code with respect to such property. Notwithstanding the foregoing,
Mortgagor and Mortgagee intend and agree that, unless and until Mortgagee elects
otherwise, all right, title, and interest of Mortgagor in and to the Mortgaged
Property and rents constitutes an interest in real property. Without
limitation, the parties intend and agree that the inclusion of the Mortgaged
---------
Property, rents, or any rights therein or proceeds thereof, in any such
financing statement will not operate to alter Mortgagee's rights under this
Mortgage, or otherwise available at law or in equity, or to impair the priority
of the lien or security interest granted by this Mortgage.
7. Maintenance and Repair. Mortgagor shall permit, commit, or suffer no
----------------------
waste, impairment, or deterioration of the Mortgaged Property reasonable wear
and tear and casualty excepted. Mortgagor shall maintain the Mortgaged Property
in good condition and repair in accordance with prudent commercial practices.
If Mortgagor fails to do so, then Mortgagee, without waiving the option to
foreclose, may take some or all measures that Mortgagee reasonably considers
necessary or desirable for the maintenance, repair, preservation, or protection
of the Mortgaged Property, and any expenses reasonably incurred by Mortgagee in
so doing: (1) are part of the
<PAGE>
indebtedness secured by this Mortgage; (2) are, at Mortgagee's option,
immediately due and payable; and (3) bear interest at the highest lawful rate
specified in any note evidencing any indebtedness secured by this Mortgage.
Mortgagee has no obligation to care for and maintain the Mortgaged Property, but
if Mortgagee takes some measures to care for and maintain the Mortgaged
Property, Mortgagee has no obligation to continue those measures or to take
other measures.
8. Hazard and Flood Insurance. Mortgagor shall keep all buildings
--------------------------
constituting a part of the Mortgage Property now or in the future, insured
against loss or damage by fire, flood, and other hazards included within the
term "extended coverage," and against such other hazards as Mortgagee may
require, in the full insurable value (or such lesser amount as Mortgagee may
authorize in writing), with an insurer of high financial reputation acceptable
to Mortgagee. The policy or policies of insurance must contain a standard
mortgagee clause in favor of Mortgagee and must be delivered to Mortgagee.
Mortgagor shall pay all premiums and charges for the maintenance and renewal of
the insurance, and shall furnish Mortgagee with receipts and proofs of payment
not less than ten days before the expiration of each policy without notice or
demand from Mortgagee. If Mortgagor fails to do so, then Mortgagee, without
waiving the option to foreclose, may obtain such insurance for the protection of
Mortgagee, and any expenses rea sonably incurred by Mortgagee in so doing: (1)
is a part of the indebtedness secured hereby; (2) is, at Mortgagee's option,
immediately due and payable; and (3) bears interest at the highest lawful rate
specified in any note evidencing any indebtedness secured by this Mortgage. In
the event of loss, Mortgagee must apply the insurance proceeds either to the
reduction of the indebtedness secured by this Mortgage, or to the restoration
and repair of the Mortgaged Property, at the option of Mortgagee. Mortgagee
shall have the full power to settle or compromise claims under all policies and
to demand, receive, and receipt for all sums payable thereunder. In the event
of foreclosure of this Mortgage or transfer of the Mortgaged Property in full or
partial satisfaction of the indebtedness secured by this Mortgage, all interest
of Mortgagor in the policy or policies of insurance (including any claim to
proceeds attributable to losses already incurred-but not yet paid to Mortgagor)
passes to the purchaser, grantee, or. transferee. Upon the occurrence of an
Event of Default hereunder (as hereinafter defined) Mortgagee may at its option
require Mortgagor to deposit with Mortgagee on the first day of each month, in
addition to making payments of principal and interest, until the Note is full
paid, an amount equal to one-twelfth (1/12) of the yearly premiums for all
insurance. Such deposits shall not be, nor be deemed to be, trust funds, but
may be commingled with the general funds of Mortgagee, and no interest shall be
payable in respect thereof. Upon demand by Mortgagee, Mortgagor shall deliver
to Mortgagee such additional monies as are necessary to make up any deficiencies
in the amount necessary to enable Mortgagee to pay such premiums when due. Upon
the occurrence of an uncured Event of default under any of the terms, covenants
and conditions in the Note, this Mortgage or any other instrument securing the
Note to be performed or observed by Mortgagor, Mortgagee may apply to the
reduction of the sums secured hereby, in such manner as Mortgagee shall
determine, any amount under this paragraph remaining to Mortgagor's any return
premium received from cancellation of any insurance policy by Mortgagee upon
foreclosure of this Mortgage.
9. Receiver. Upon the occurrence of an Event of Default , Mortgagee is
--------
entitled to the appointment of a receiver to take charge of the Mortgaged
Property, and the rents, issues, profits, proceeds, and revenues arising from
the Mortgaged Property, and hold the same subject to the
<PAGE>
direction of a court of competent jurisdiction, regardless of the solvency of
Mortgagor or the adequacy of the security.
10. Taxes, Assessments and Liens. Mortgagor shall pay all taxes,
----------------------------
assessments, liens, and other charges upon or with respect to the Mortgaged
Property before they are delinquent, and shall furnish Mortgagee with receipts
and proofs of payment at least ten days before the last day allowed for payment
free from penalty, without notice or demand from Mortgagee. If Mortgagor fails
`to do so, then Mortgagee, without waiving the option to foreclose, may pay the
same, together with any penalty that may have accrued and any related expenses,
including reasonable attorneys' fees or the fees of any person employed to aid
or give advice in the discharge or adjustment of the matter. Mortgagee may at
its option require Mortgagor to deposit with Mortgagee on the first day of each
month, in addition to making payments of principal and interest, until the Note
is full paid, an amount equal to one-twelfth (1/12) of the yearly taxes and
assessments which may be levied against the Mortgaged Property. Such deposits
shall not be, nor be deemed to be, trust funds, but may be commingled with the
general funds of Mortgagee, and no interest shall be payable in respect thereof.
--
Upon demand by Mortgagee, Mortgagor shall deliver to Mortgagee such additional
monies as are necessary to enable Mortgagee to pay such yearly taxes and
assessments which may be levied against the Mortgaged Property when due. In the
event of default under any of the terms, covenants and conditions in the Note,
this Mortgage or any other instrument securing the Note to be performed or
observed by Mortgagor, Mortgagee may apply to the reduction of the sums secured
hereby, in such manner as Mortgagee shall determine, any amount under this
paragraph remaining to Mortgagor's credit upon foreclosure of this Mortgage.
11. Inspection. Mortgagee and Mortgagee's representatives may enter upon
----------
the Mortgaged Property for inspection at all reasonable times and in a
reasonable manner, both before and after default.
12. Enforcement and Collection Expenses. Mortgagor shall pay all
-----------------------------------
expenses, including attorneys, fees, reasonably incurred by Mortgagee with
respect to the collection of the indebtedness secured by this Mortgage or the
enforcement of Mortgagee's rights under this Mortgage (including foreclosure or
other litigation expenses and such costs and attorneys' fees as may be incurred
on appeal), resulting from any default by Mortgagor, and all such sums: (1) are
a part of the indebtedness secured by this Mortgage; (2) are, at Mortgagee's
option, immediately due and payable; and (3) bear interest at the highest lawful
rate specified in any note evidencing any indebtedness secured by this Mortgage.
13. Acceleration Upon Default. If Mortgager fails to pay any indebtedness
------------------------- ---------
secured hereby or otherwise due hereunder within fifteen (15) days of the date
same is due (or within the grace period provided in the note or notes evidencing
the indebtedness) , or if Mortgagor breaches any other covenant of this Mortgage
or of any other instrument or document executed or delivered to Mortgagee in
connection with this Loan, all of the terms of which are incorporated by
reference herein, extending beyond any applicable grace, notice and/or curative
period provided thereunder (collectively an "Event of Default") then Mortgagee
may declare all indebtedness secured hereby accelerated and immediately due and
payable. Mortgagee's failure to declare an acceleration does not impair
Mortgagee's right to do so in the event of a continuing or subsequent breach or
default.
<PAGE>
14. Acceleration Upon Transfer of Mortgaged Property. If all or any part
------------------------------------------------
of the Mortgaged Property or any interest therein is sold or transferred by
Mortgagor in any manner whatsoever without Mortgagee's prior written consent,
Mortgagee may, at Mortgagee's option, declare all of the sums secured by or
otherwise due under this Mortgage accelerated and immediately due and payable.
Mortgagee waives its option to accelerate if, and only prior to the sale or
transfer, Mortgagee and the person or persons to whom the property is to be sold
or transferred reach an agreement in writing that (i) the credit and such other
matters as may be required by Mortgagee (including, without limitation,
Mortgagee's approval of the skill, knowledge, ability, business performance, and
experience) of such person or persons is satisfactory to Mortgagee; (ii) the
interest payable on the sums secured by or otherwise due under this Mortgage
will be at such rate as Mortgagee in its sole discretion shall determine; and
(iii) Mortgagee receives payment of an assumption fee in an amount equal to one
---------
percent (1%) of the then outstanding principal balance of the Note. In
determining such rate or payment, or both, Mortgagee may, but is not required
to, consider the Mortgagee's costs actually incurred, the creditworthiness of
the transferee, the protection of Mortgagee's security, the profitability of
Mortgagee's loan portfolio, or any one or more of the foregoing. Mortgagee's
right to accelerate the Note and foreclose the Mortgage under the conditions
specified in this paragraph is included in this Mortgage as a material
----
inducement to Mortgagee's making the loan or loans secured hereby and has been
relied upon by Mortgagee in establishing the terms and conditions of the Note
and this Mortgage; accordingly, the limitations contained in this paragraph will
be strictly construed against Mortgagor and Mortgagor's successor(s) in interest
and in favor of Mortgagee. If Mortgagee waives the option to accelerate provided
in this paragraph, and if Mortgagor's successor(s) in interest executes a
written assumption agreement, in form and substance satisfactory to Mortgagee,
undertaking to pay all indebtedness secured hereby and to perform all
obligations set forth herein, and if Mortgagor's successor(s) in interest
executes such other agreements as Mortgagee may reasonably require, Mortgagee
shall release Mortgagor from all obligations under this Mortgage and any note
evidencing any indebtedness secured by this Mortgage. If Mortgagee does not
waive its option to accelerate as provided in this paragraph, Mortgagee may deal
with the successor or successors in interest without in any way discharging or
reducing Mortgagor's liability for Mortgagor's obligations secured hereby.
15. No Waiver. No delay by Mortgagee in exercising any option, right, or
---------
remedy provided by this Mortgage or otherwise afforded by law shall waive or
preclude the exercise of such option during the continuance of any breach or
default of this Mortgage. No waiver by Mortgagee of any provision, breach, or
default shall be a waiver of any other provision or a consent to any subsequent
breach or default.
16. Default Under other Mortgages. If all or any part of the Mortgaged
-----------------------------
Property is encumbered now or in the future by any other mortgage held by
Mortgagee, then, at the option of Mortgagee, any default of this Mortgage is
also a default under all such mortgages, and a default under any such other
mortgages is also, at Mortgagee's option, a default of this Mortgage. A default
by Mortgagor in any term, covenant, or provision of any other mortgage held by
any other party that may encumber all or part of the Mortgaged Property, now or
in the future, at Mortgagee's option constitutes a default of this Mortgage.
<PAGE>
17. Bankruptcy. It is a default under this Mortgage if: (1) Mortgagor
---------- ---------
files a petition in bankruptcy, or for reorganization, or for an arrangement
pursuant to the National Bankruptcy Code (or any similar law federal or state,
in effect now or in the future); (2) Mortgagor files any other pleading seeking
the benefit of any such law, or makes an assignment for the benefit of
creditors, or admits in writing its inability to pay its debts as they become
due, or suspends payment of its obligations, or takes any action in furtherance
of the foregoing; (3) Mortgagor consents to the appointment of a receiver,
trustee, liquidator, or other similar official for Mortgagor for the Mortgaged
Property; or (4) a petition, answer or other pleading proposing an adjudication
of Mortgagor as a bankrupt or Mortgagor's reorganization pursuant to the
aforementioned laws, is filed in, and approved by, any court of competent
jurisdiction, and the order approving the same is not vacated or stayed within
sixty (60) days from entry, or if Mortgagor consents to the filing of any such
pleading or fails to timely deny the material allegations therein.
18. Extensions, Leniencies, and Releases. Mortgagee may grant extensions
------------------------------------
of time for payment and other leniencies with respect to any indebtedness
secured by this Mortgage, and may waive or fail to enforce any of Mortgagee's
rights hereunder, and may release a portion or portions of the Mortgaged
Property from the lien of this Mortgage, without releasing or diminishing the
obligation or liability of any person constituting Mortgagor or any guarantor or
endorser.
19. Subrogation. Mortgagee shall be subrogated to the lien
-----------
(notwithstanding its release of record) of any vendor, mortgagee, or other
lienholder paid or discharged by the proceeds of any loan or advance made by
Mortgagee to Mortgagor and secured by this Mortgage.
20. Release or Satisfaction. Whenever there is no outstanding obligation
-----------------------
secured by or otherwise due under this Mortgage and no commitment to make
advances, Mortgagee shall, on written demand by Mortgagor, give a release of
this Mortgage in recordable form.
21. Prohibition Against Other Liens. Mortgagor agrees not to create or
-------------------------------
permit the creation of any other mortgage, charge, lien, or encumbrance against
the Mortgaged Property (or any portion of the Mortgaged Property) without
obtaining the prior written consent of Mortgagee. Mortgagor agrees that a
default by Mortgagor in any term, covenant, or provision of any other mortgage
that may encumber the Mortgaged Property now or in the future also constitutes a
default hereunder.
22. General Provisions. The singular shall include the plural and any
------------------
gender shall be applicable to all genders when the context permits or implies.
If more than one person constitutes Mortgagor, their covenants and obligations
hereunder shall be joint. and several. Mortgagee's rights expressed in this
Mortgage are in addition to and cumulative of any other rights and remedies
provided by law. When the context permits, the terms "Mortgagor" and
"Mortgagee" shall extend to and include their respective heirs, legal
representatives, successors, and assigns. Any agreement made in the future by
Mortgagor and Mortgagee pursuant to this Mortgage shall be superior to the
rights of the holder of any intervening lien or encumbrance. Time is of the
essence.
23. Hazardous Substances. Mortgagor warrants and represents to Mortgagee
--------------------
that to the best of Mortgagor's knowledge, the Mortgaged Property has not been,
and is not now being used in
<PAGE>
violation of any applicable federal, state or local environmental law, ordinance
regulation, (an "Environmental Law"), and that no proceedings have been
commenced, or notice received, concerning any alleged violation of any such
environmental law, ordinance or regulation, and that the Mortgaged Property is
free of hazardous or toxic waste, contaminants, oil, radio active or other
materials, the removal of which is required or the maintenance of which is
restricted, prohibited or penalized by any federal, state or local agency,
authority or governmental unit ("Hazardous Substances"). However, "Hazardous
Substances" Include neither (a) immaterial quantities of automotive motor oil
leaked inadvertently from vehicles in the ordinary course of the operation of
the Mortgaged Property and cleaned up in accordance with reasonable property
management procedures and any applicable law nor (b) immaterial quantities of
substances customarily and prudently used in the cleaning and maintenance of the
Mortgage Property in accordance with any applicable law. Mortgagor covenants
that it shall not permit any such Hazardous Substances to be brought on to the
Mortgaged Property, or if so brought or found located thereon, shall be
immediately removed, with proper disposal, and all required environmental clean
up procedures shall be diligently undertaken pursuant to all such laws,
ordinances and regulations. Mortgagor, jointly and severally, hereby agrees to
indemnify and hold Mortgagee harmless from and against any and all liability,
damages, expenses and causes of action arising out of or resulting from a breach
of the warranties and representations set forth above. Mortgagor's obligations
hereunder shall survive any foreclosure of this mortgage or other collateral
securing the note, or a deed given in lieu of foreclosure (provided, however,
the foregoing indemnification shall not extend to any such presence or release
of a Hazardous Substance that arises or occurs solely and in its entirety after
a transfer of both title and possession of the Mortgaged Property to Mortgagee,
its successors or assigns (regardless of whether Mortgagor is divested of title
by foreclosure, deed in lieu of foreclosure, or otherwise), which is not caused,
in whole or in part, directly or indirectly, by any act or omission of Mortgagor
or any of its partners, agents or employees or Tenants.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage the date stated
above.
Signed, sealed and delivered
in the presence of: MCM UNIVERSITY PLAZA, INC.,
AN ILLINOIS CORPORATION
/s/ Charles T. Gradowski By: /s/ Michael C. Markovitz
- -------------------------------- --------------------------------
TYPE NAME: Charles T. Gradowski Name: MICHAEL C. MARKOVITZ
As Its: President
/s/ Lisa R. Doyle
- --------------------------------
TYPE NAME: Lisa R. Doyle
STATE OF ILLINOIS
COUNTY OF COOK
The foregoing instrument was acknowledged before me this 28th day of April,
1997, by MICHAEL C. MARKOVITZ as President of MCM UNIVERSITY PLAZA, INC., AN
ILLINOIS
<PAGE>
CORPORATION, on behalf of the corporation. He/she is personally known to me or
has produced as identification.
/s/ Linda M. Skrabutenas
-----------------------------------
Name: Linda M. Skrabutenas
Notary Public
My Commission Expires:
OFFICIAL SEAL
LINDA M. SKRABUTENAS
Notary Public, State of Illinois
My Commission Expires: 06/23/99
<PAGE>
EXHIBIT A
DESCRIPTION OF THE PROPERTY
That certain parcel of land lying and being in the County of Sarasota and State
of Florida, more particularly described as follows:
Commence at the Northeast corner of the Southeast 1/4 of Section 14, Township 36
South, Range 18 East, Sarasota County, Florida; thence S 00(degrees)00'04" E,
along the
East line of said Section 14, a distance of 50.03 feet; thence N
88(degrees)02'50" W, a distance of 60.03 feet, for a Point of Beginning; thence
S 00(degrees)00'04" E, along the West right-of-way line of Newburn Road, a
distance of 325.00 feet; thence N 88(degrees)02'50" W, a distance of 541.47
feet; thence N 01(degrees)57'10" E, a distance of 324.81 feet to the
Intersection of said line and the South right-of-way line of 17th Street; thence
S 88(degrees)02'50" E, along said Right-of-Way line, a distance of 530.39 feet
to the Point of Beginning. Being and lying in Section 14, Township 36 South,
Range 18 East, Sarasota County, Florida.
<PAGE>
EXHIBIT 10.6
LEASE AMENDMENT
This Amendment made and entered into this 1st day of April, 1996 by and between
Park Central Corp., hereinafter known as "Lessor," and University of Sarasota,
INC., hereinafter known as "Lessee."
W I T N E S S E T H:
WHEREAS, Lessor and Lessee herein have heretofore entered into a Lease
Agreement, hereinafter known as the "Agreement," dated the 21st day of July,
1995 for the Premises located at 410 Ware Boulevard, Suite 300, Tampa, Florida.
AND WHEREAS, paragraph 25 of said Agreement provides Lessee, under certain
conditions, a one time First Right of Refusal on all contiguous space subject to
the rights of existing tenants.
Lessor and Lessee hereby agree that Lessee has been offered said First
Right of Refusal on the space located at Suite 310, 410 Ware Boulevard, Tampa,
Florida, as outlined in Exhibit A attached hereto, and Lessee hereby forever
waives said right to Suite 310 pursuant to paragraph 25 in the Agreement.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands the
day and year set forth below.
LESSOR: PARK CENTRAL CORP.
This 1/st/ day of April, 1996 By: /s/ Robert J. Frederikson
--------------------------------------
Robert J. Fredrikson, Attorney-in-Fact
/s/ Meghan J. Munay
- -------------------------------
Witness
Date: 4-1-96
------------------------------------
/s/ Lynne Ascego
- -------------------------------
Witness
LESSEE: UNIVERSITY OF SARASOTA, INC.
This 26th day of March, 1996 By: /s/
--------------------------------------
/s/ Date: 3/26/96
- ------------------------------- ------------------------------------
Witness
1
<PAGE>
Title: 9:50 a.m.
-----------------------------------
/s/ Michelle L. Krueger
- -------------------------------
Witness
2
<PAGE>
Exhibit A
3RD FLOOR
NORTH
Park Central
410 Ware Blvd.
Tampa, FL 336
(813) 621-0659
3
<PAGE>
LEASE AMENDMENT
This Amendment made and entered into this 1st day of April 1996, by and between
Park Central Corp., hereinafter known as "Lessor," and University of Sarasota,
INC., hereinafter known as "Lessee."
W I T N E S S E T H:
WHEREAS, Lessor and Lessee herein have heretofore entered into a Lease
Agreement, hereinafter known as the "Agreement," dated the 21st day of July,
1995 for the Premises located at 410 Ware Boulevard, Suite 300, Tampa, Florida.
AND WHEREAS, paragraph 25 of said Agreement provides Lessee, under certain
conditions, a one time First Right of Refusal on all contiguous space subject to
the rights of existing tenants.
Lessor and Lessee hereby agree that Lessee has been offered said First
Right of Refusal on the space located at Suite 310, 410 Ware Boulevard, Tampa,
Florida, as outlined in Exhibit A attached hereto, and Lessee hereby forever
waives said right to Suite 310 pursuant to paragraph 25 in the Agreement.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands the
day and year set forth below.
LESSOR: PARK CENTRAL CORP.
This 1/st/ day of April, 1996 By: /s/ Robert J. Frederikson
------------------------------------------
Robert J. Fredrikson, Attorney-in-Fact
/s/ Meghan J. Munay
- -------------------------------
Witness
Date: 4-1-96
----------------------------------------
/s/ Lynne Ascego
- -------------------------------
Witness
LESSEE: UNIVERSITY OF SARASOTA, INC.
This 26th day of March, 1996 By: /s/
------------------------------------------
/s/ Date: 3/26/96
- ------------------------------- ----------------------------------------
Witness Title: 9:50 a.m.
---------------------------------------
/s/ Michelle L. Krueger
- -------------------------------
Witness
4
<PAGE>
Exhibit A
3RD FLOOR
NORTH
Park Central
410 Ware Blvd.
Tampa, FL 336
(813) 621-0659
5
<PAGE>
SECOND LEASE AMENDMENT
THIS AGREEMENT made and entered into this ___ day of __________, 1997 by
and, between PARK CENTRAL CORP. hereinafter known as Lessor, and UNIVERSITY OF
SARASOTA, INC., hereinafter known a Lessee.
W I T N E S S E T H:
WHEREAS, Lessor and Lessee herein have heretofore entered into an Office
Lease Agreement ("Lease") dated July 21, 1995 for the Premises commonly known as
410 Ware Boulevard, Suite 300, Tampa, Florida consisting of approximately 9,107
rentable square feet.
AND WHEREAS, Lessor and Lessee did subsequently amend said Lease via a
Lease Amendment dated April 1, 1996.
AND WHEREAS, the Lessee is desirous of expanding the Premises by
approximately 1,213 rentable square feet as indicated on Exhibit A ("Expansion
Space"), attached, and extending the term of said Lease for a further period
amending said Lease as hereinafter set forth:
1. The Expansion Space shall be made available for Lessee's Possession,
upon Lessee's receipt and acceptance of a fully executed original copy of this
Second Lease Amendment.
2. The Effective Date shall be defined to be the earlier of August 1,
1997 or the date Tenant Improvements (as defined in paragraph 6 below) are
substantially complete.
3. The Lease Term is hereby extended for a period of fourteen (14) months
ending December 31, 2002, upon the same terms and conditions of the Lease and at
a monthly rental* as follows:
<TABLE>
<S> <C>
Effective Date to May 31, 1998 $122,601.60 P.A. ($10,216.80 per month)
June 1, 1998 - May 31, 1999 $129,000.00 P.A. ($10,656.25 per month)
June 1, 19 - June 30, 2000 $134,160.00 P.A.. ($11,180.00 per month)
July 1, 2000 - October 31, 2001 $136,740.00 P.A. ($11,395.00 per month)
November 1, 2001 - October 31, 2002 $141,900.00 P.A.. ($11,825.00 per month)
November 1, 2002 - December 31, 2002 $147,060.00 P.A. ($12,255.00 per month)
*plus all applicable taxes
</TABLE>
4. Lessee agrees to take Possession of the Expansion Space on an "as-is"
basis, with all Tenant Improvement work, as outlined in paragraph 5 below, to be
completed in a timely manner thereafter.
5. Lessor, at its sole cost and expense, agrees to complete the following
Tenant Improvements to the Expansion Space, at a cost not to exceed $7,278.00.
To the extent that the work
6
<PAGE>
outlined below amounts to a Total which is less than $7,278.00, Lessor agrees to
provide Lessee an amount equal to the difference between the Total and $7,273.00
upon receipt of an invoice for additional construction work to the Premises,
performed with written approval of Lessor, at Lessee's expense.
Lessor will complete the following Tenant Improvements:
a. Provide access, via a cased opening with door, to the Expansion
Space from Suite 300;
b. Provide a paint grade drywall surface throughout the Expansion
Space;
c. Paint Expansion Space with building grade paint, Lessee to select
color;
d. Re-carpet the Expansion Space with carpet of like kind to that in
Suite 300, Lessee to select color, provide new vinyl base cove
throughout the Expansion Space.
6. It is agreed that, except as hereby expressly extended and amended,
all of the terms, covenants and conditions of said Lease are hereby ratified,
approved and confirmed, and which provisions are hereby incorporated by
reference as thoughtfully set forth herein.
7. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives, successors and/or
assigns.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands the
day and year set forth below.
LESSOR: PARK CENTRAL CORP.
This 24th day of June, 1997 By: /s/ Robert J. Frederikson
------------------------------------------
Robert J. Fredrikson, Attorney-in-Fact
/s/
- -----------------------------
Witness
Date: 6/24/97
----------------------------------------
/s/
- -----------------------------
Witness
LESSEE: UNIVERSITY OF SARASOTA, INC.
This 18th day of June, 1997 By: /s/
------------------------------------------
/s/ Title: CEO
- ----------------------------- ---------------------------------------
Witness
Date: 6/18/97
----------------------------------------
/s/
- -----------------------------
Witness
7
<PAGE>
PARK CENTRAL OFFICE LEASE AGREEMENT
THIS LEASE AGREEMENT, hereinafter referred to as "Lease", made and entered
into this 21/st/ day of July, 1995 and between PARK CENTRAL CORP. or its
Assigns, hereinafter referred to as "Lessor", and UNIVERSITY OF SARASOTA INC.,
hereinafter referred to as "Lessee";
W I T N E S S E T H:
1. PREMISES: Lessor, in consideration of the covenants to be
performed by Lessee, and upon the terms and conditions hereinafter stated, does
hereby rent and lease to Lessee, and Lessee does hereby rent and lease from
Lessor the following described area, hereinafter referred to as "Premises",
located within the property known as Park Central Corp., hereinafter referred to
as the "Building" more particularly described in Exhibit "B":
Address: 410 Ware Boulevard
Tampa, FL 33619
Floor: 3/rd/
Suite Number: 300
Rentable Square Feet: 9,107
2. TERM: To have and to occupy the Premises for a sixty five (65)
month term (or until sooner terminated as hereinafter provided) (the "Lease
Term"), beginning on September 1, 1995 or the "Commencement Date (as hereinafter
defined), whichever date shall last occur, except that if the Commencement Date
is other than the first day of a calendar month, the term hereof shall be
extended for the remainder of that calendar month. In the event Lessor is
unable to provide premises on or before September 1, 1995, Lessor will provide
Lessee temporary space to Lessee until the premises are available such temporary
space may be on multiple floors and occupancy of such space will serve as the
Commencement Date. The Base Annual Rent for such temporary space will be $5.00
per rentable square foot and shall be due in accordance with Paragraph 5
contained herein. Lessor and Lessee agree and understand that Lessor requires
approximately eight (8) weeks to deliver the Premises after Lessor and Lessee
fully execute this lease.
3. COMMENCEMENT DATE: The Commencement Date shall be earlier of (i)
the date upon which the Building, other improvements on the Property and the
leased premises have been substantially completed in accordance with the plans
and specifications of Lessor (other than any work which cannot be completed on
such data provided such in completion will not substantially interfere with
Lessee use of the leased premises), or (ii) the date on which Lessee takes
possession of a portion of or all of the leased premises; provided, however,
that if Lessor shall be delayed in such substantial completion as a result of:
(1) Lessee's failure to agree to plans, specifications, or cost estimates before
the date referred to in the separate Office Lease Improvement Agreement attached
hereto as Exhibit "D" and made a part hereof; (2) Lessee's request for
materials, finishes or installations other than Lessor's standard; (3) Lessee's
changes in plans; or (4) the performance or
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<PAGE>
completion by a party employed by Lessee, the Commencement Date and the payment
of rent hereunder shall be accelerated by the number of days of such delay.
If substantial completion of the leased premises or possession thereof
by Lessee is delayed because any Lessee or other occupant thereof hold over, and
Lessor is delayed, using good faith efforts in Lessor's discretion, in acquiring
possession of the leased premises, Lessor shall not be deemed in default, nor in
any way liable to Lessee because of such delay, and Lessee agrees to accept
possession of the leased premises at such time as Lessor is able to tender the
same, which date shall thenceforth be deemed the Commencement Date
notwithstanding any other provision hereof to the contrary.
The taking of possession by Lessee, and completion of any construction
punch list items, shall be deemed conclusively to establish that the Building,
other improvements, and the Premises have been completed in accordance with the
plans and specifications and are in good and satisfactory condition as of when
possession was so taken.
4. NOTICES: Any notices required to be given hereunder shall be in
writing and shall be mailed to the parties by registered or certified mail,
return receipt requested, at the following address;
Lessor: Lessee:
PARK CENTRAL CORP. UNIVERSITY OF SARASOTA
410 Ware Boulevard 5250 17th Street
Suite 500 Sarasota, Florida 34235
Tampa, FL 33619 Attn: Dr. Wilson
cc:
President
American Schools of Professional Psychology
20 South Clark Street, 3rd floor
Chicago, IL 60603
5. RENTAL: Lessee agrees to pay to Lessor at its offices set forth
above, or at such other place as Lessor may designate from time to time in
writing, a "Base Annual Rent" of (see Exhibit "C") dollars for each calendar
year of the Lease term, payable in equal installments of (see Exhibit "C")
dollars per month. One such monthly installment shall be due and payable on the
date hereof, and a like monthly installment shall be due and payable without
demand in advance on or before the first of each calendar month succeeding the
Commencement Date during the term of this Lease. If the Commencement Date shall
be a day other than the first day of a calendar month, rental for the portion of
that month shall be prorated, and paid on or before the date on which Lessee
takes possession of the Premises. Rental shall be deemed paid only when
received by Lessor at its offices as above set forth.
9
<PAGE>
In the event Lessee cannot demonstrate that it is a sales tax exempt
business, the Lessor will receive monthly from Lessee the equivalent of 6.5% of
the monthly rental rate which is paid to the State of Florida by the Lessor.
This 6.5% rate is accountable by the Lessor to the State of Florida under the
Florida Sales Tax Statute. The Lessor receives no monetary benefit from the
collection and disbursement of this charge. Therefore, to satisfy this
obligation, Lessee shall forward to Lessor 6.5% of the base rental rate, as set
forth under the term and conditions of this Lease Agreement or any subsequent
Lease Renewal Option, in addition to the base rental rate agreed to by the
parties. Should such tax rate change under the Florida Sales Tax Statute the
Lessee will pay accordingly.
In the event Lessee fails to pay before the tenth (10/th/ business day
of the month in which the payment is due any installment of rent or other
payment due hereunder as and when such installment is due to help defray
additional cost to Lessor for processing such late payments. Lessee shall pay to
Lessor on demand a late charge in an amount equal to ten percent (10%) of such
installment; and the failure to pay such amount within ten (10) days after
demand therefore shall be an event of default hereunder. The provision for such
late charge shall be in addition to all of Lessor's other right and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Lessors remedies in any manner.
6. ADDITIONAL RENTAL: Commencing on the first day of January
following the execution of this lease, and each January 1st thereafter, the Base
Annual Rent provided hereinabove in Paragraph five, shall be adjusted in
accordance with the provisions of the addendum attached hereto as Exhibit "A"
and by reference made a part hereof, and the additional sums thereby payable
shall constitute "Additional Rental" payable to Lessee to Lessor according to
the provisions of Exhibit "A". Lessee has the option to review Lessor's
accounting of said Additional Rental.
7. USE OF PREMISES:
(a) The Premises shall be used for general office and educational
purposes, and shall not be used for any retail business inviting the
general public, nor for any illegal purposes, nor in violation of any
regulation of any governmental body having jurisdiction thereof, nor
in any manner to create a nuisance to other tenants, nor trespass;
however, Lessee may sell educational material to its students. The
foregoing shall limit Lessee's rights to sell at retail, consumer type
goods to its own employees. Lessee shall not sell at retail, consumer
type goods to its own employees. Lessee agrees to obtain at Lessee's
expense any and all licenses and permits necessary for its use and
occupancy of the Premises. Lessee agrees not to receive, store or
otherwise handle any product, material or merchandise which is
explosive or highly inflammable, nor in any manner to vitiate the
insurance on the Premises. In no event shall any activity be carried
out on the Premises which shall emit smoke, noxious odors, dust, or
loud noises, unless the Premises are properly designed and approved by
Lessor in writing to provide adequate protection for same. Lessee
agrees that at the expiration of the term hereof Lessee will return
the keys and deliver possession of the Premises to Lessor in the same
condition as on the commencement of the term
10
<PAGE>
hereof, reasonable wear and tear excepted. Lessee will enforce a
business-like and professional dress code for all students, faculty,
staff and personnel while on the Premises.
(b) Provided Lessee is not in default under this Lease at the
expiration of the Lease term, Lessee shall have the right to remove
any of Lessee's fixtures, machines, or equipment from the Premises,
provided, however, that Lessee agrees to repair and restore any damage
caused to the Premises by the installation, removal and/or use of said
fixtures, machines or equipment. Lessor may at any time upon
reasonable notice inspect the Premises during normal business hours to
determine compliance with the terms and provisions of this lease, or
to show the Premises to prospective purchasers or mortgagees of the
Premises, or to prospective lessees during the last six (6) months of
the terms of this Lease or any renewals thereof.
(c) Lessee will be responsible for the cost and expense of allocating
security cards to all students, faculty, staff and personnel; the
estimated cost is expected to be $5.00 (Five dollars) per card.
(d) If in the sole opinion of the Lessor it become necessary, due to
Lessee's actions, to employ a security guard at the building during
the evening hours, the cost and expense of the security guard will be
the Lessee's obligation. Lessee will have a five (5) day period to
cure the need for Lessor to hire a security guard.
8. ALTERATIONS: Any alterations, additions or improvements in or to
the Premises shall not be made without the prior written consent of Lessor,
which consent shall not be unreasonably withheld. Upon the expiration of this
Lease, Lessee may, if Lessor so elects in writing, remove any or all additions
or improvements erected by Lessee and Lessee shall restore Premises to their
original condition. Any such removal shall be accomplished in a good and
workmanlike manner. Lessee shall keep the Premises free of liens and
encumbrances due to Lessee's alterations, additions, improvements, or the
removal thereof. Unless Lessor elects in writing to the contrary, all
alterations, additions or improvements made in or upon the Premises by the
Lessee, shall become the sole property of Lessor, and shall remain in or upon
the Premises at the expiration of the Lease term.
9. REPAIRS: Lessor agrees, at it sole expense, to maintain the
roof, structural and mechanical parts, the exterior walls of the Building which
includes the Premises in a similar condition to like buildings in the area.
After possession has been delivered to the Lessee, Lessor shall not be required
to make any improvements or repairs of the Premises except for normal
maintenance and repairs necessary for the safety and tenant ability of the
Premises and grounds maintenance. Lessee shall notify Lessor in writing of any
defective condition which Lessor is required to repair, after which Lessor shall
have a reasonable time to repair said defective condition. Should Lessee fail
to provide Lessor with such written notice, Lessor shall be relieved of all
liability for any injury or damage resulting from said defective condition.
Lessor shall have the right to enter
11
<PAGE>
the Premises at reasonable times to examine the defective condition and to made
such repairs as required herein which Lessor deems necessary, for the safety of,
comfortable habitation in or preservation of the Premises using reasonable
diligence not to disturb the normal business operations of Lessee. Lessor shall
not be required to make any repairs caused by acts of Lessee. Lessee shall keep
the Premises in good order and shall promptly make all repairs required to be
made by Lessee at its expense. Lessor will repair the exterior glass in the
event of a windstorm.
10. DAMAGE OR DESTRUCTION:
(a) If the Premises or the Building are totally destroyed or so
substantially damaged as to be untenantable by fire, lightning,
earthquake, windstorm, or other casualty, to the degree whereby Lessor
determines that it cannot be repaired to substantially the same
condition as before such damage or destruction within a reasonable
time, this Lease may be terminated by either party upon thirty (30)
days written notice and rent shall be accounted for between Lessor and
Lessee as of the casualty date.
(b) If the Premises, or any part thereof, are damaged but not rendered
untenantable by any above mentioned casualty, Lessor shall repair the
Premises within a reasonable time after receipt of written notice
thereof to the extent and availability of insurance proceeds;
provided, however, that Lessor shall not be required to rebuild,
repair or replace any part of the alterations, additions,
improvements, equipments or machinery which may have been placed on
the Premises by Lessee. Until such repairs are made, the rent shall be
reduced in proportion to the area of the Premises which cannot be used
or occupied the Lessee as a result of such casualty, In no event shall
rent abate nor shall any termination occur if damage to or destruction
of the Premises is the result of negligence of Lessee, or its
representatives, agents, employees or invitees.
(c) Any insurance which may be carried by Lessor or Lessee against
loss or damage to the Building and/or the Premises, or contents within
the Premises, shall be for the sole benefit of the party carrying such
insurance.
(d) Lessee shall not make any use of the Premises which would make
void or voidable any policy of fire or extended coverage insurance
insuring the Premises, and if by reason of any use by Lessee of the
Premises the premiums on the insurance policies maintained by Lessor
shall be increased over normal rates for this type of building, the
amount of the increase in the premium shall be paid by Lessee to
Lessor upon receipt of a statement from Lessor and verification of the
increased premium.
11. EMINENT DOMAIN: If all or substantially all of the Premises is
taken by any legally constituted authority for public or quasi-public use
eminent domain then in either of said events, this Lease shall terminate at
Lessor's option on the date that actual possession thereof is taken by public
authorities, and rental shall be accounted for between Lessor and Lessee as of
that date. If the portion of the Premises remaining after such condemnation
proceedings shall be suitable for
12
<PAGE>
Lessee's use, the rent payable by Lessee after the taking shall be reduced by
the same percentage as the rentable area of the space taken bears to the total
rentable area originally in the Premises. It is agreed that Lessee shall not
have any right or claim to any part of any award or compensation make to or
received by Lessor for such taking. Nothing herein shall be construed to
preclude Lessee from prosecuting any claim directly against the condemning
authority for loss of business, damage to, and cost of removal of property
belonging to Lessee; provided, however, that no such claim shall diminish or
adversely affect Lessor's award.
12. INSURANCE AND LIABILITY:
(a) Lessee does hereby agree to indemnify and save Lessor harmless
from and against liability for injury to any person or persons, or
damage to property, in any way arising out of, or connected with the
use or occupancy of the Premises, or in any way arising out of the
activities of Lessee, its agents employees, licensees, or invitees on
the Premises, and/or the Building and from all costs, expenses and
liabilities, including but not limited to, reasonable attorney's fees
incurred by Lessor in connection therewith.
(b) Unless Lessor has been declared by a court of competent
jurisdiction to have been in gross negligence, Lessor shall not be
liable to Lessee for injury to any person or persons or for damage to
any property of Lessee, or any person claiming through Lessee, arising
out of any accident or occurrence in the Building or within the
Premises for injury or damage caused by any defective condition, or
failure of equipment, pipes, or wiring, or caused by broken glass,
stoppage of drains, or caused by gas, water, stream, or oil leaking,
escaping, or flowing into the Premises, or caused by fire or smoke or
by the acts or omissions of other tenants located in or about the
Premises.
(c) During the term of this Lease, Lessee shall keep in effect with
insurance companies satisfactory to Lessor, legally authorized to
transact business in the State of Florida, public liability insurance,
including persona injury coverage, for the benefit of Lessor and
Lessee, with limits for personal injury or death or not less than
$300,000, and with limits for property damage of not less than
$100,000 for each occurrence. A certificate of insurance shall be
furnished to Lessor and shall provide that all Lessor's losses
resulting from Lessee's negligence, to the limit of the policy will be
reimbursed by any insurance proceeds, and all liability claims against
Lessor resulting from Lessee's business will be defended by Lessee or
his insurance carrier at no cost to Lessor. Lessee agrees that it will
not cancel any of the above-mentioned policies, or allow any policy to
lapse without delivering to Lessor a certificate indicating equal or
greater coverage written by an insurance company acceptable to Lessor.
Lessee, prior to occupancy of the Premises, shall cause to be
delivered to Lessor such certificates of insurance as above set forth
to be held by Lessor.
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<PAGE>
13. WAIVER OF SUBROGATION: In the event either Lessor or Lessee
sustains a loss by reason of fire or other casualty which is or could have been
covered by a fire and extended coverage or insurance policy, and such fire or
other casualty is caused in whole or in part by acts or omissions of the other
party, its agents, employees, licensees, or invitees, then the party incurring
such loss agrees to look solely to its fire and extended coverage insurance
proceeds (if any), and such party shall have no right of action against the
other party to this Lease, its agents, employees, licensees, or invitees of such
other party, and no third party shall have any right way of assignment,
subrogation or otherwise. If the inclusion in this Lease of this "Waiver of
Subrogation" results in an increase in the fire insurance premiums of either
party, then the other party, within ten (10) days after written request, will
either pay the amount of such increase or be deemed to have waived the benefits
of this provision.
14. SUBORDINATION:
(a) This Lease and all the rights of Lessee hereunder are and shall be
subject and subordinate to the lien of any mortgage, deed to secure
debt, deed of trust or other security instrument which may now or
hereafter affect Lessor's or its successor's interest in the fee title
or leasehold estate to the Premises. In confirmation of such
subordination, Lessee shall upon request execute, acknowledge and
deliver to Lessor, without expense to Lessor, all instruments that may
be requested by Lessor to evidence the subordination of this Lease and
all rights hereunder to the lien of any such mortgage, deed to secure
debt, deed of trust or other security instrument.
(b) If the holder of any mortgage, deed to secure debt, deed or trust,
or other security instrument, or any other purchaser at a sale,
whether such sale shall be pursuant to the exercise of any power of
sale contained in any security instrument, or through judicial
proceedings, or otherwise, shall hereafter succeed to the rights of
Lessor under this Lease, at the option of such purchaser, purchaser
may deliver a new lease containing the same terms and conditions as
this Lease except that the Commencement Date of such new lease shall
be the date of execution of such new lease by all parties. In the
event any such purchaser does not request execution of a new lease,
then and in that event Lessee shall attorn to and recognize such
successor as Lessee's lessor under this Lease, and shall promptly
execute and deliver any instrument that may be necessary to evidence
such adornment. Upon adornment provided herein, this Lease shall
continue in full force and effect as a direct lease between such
successor lessor and Lessee, subject to all of the terms, covenants,
and conditions of this Lease, and Lessee's terms and conditions shall
not be changed, modified, or amended due to subordination or adamant.
15. SUBLETTING OR ASSIGNMENT: Lessee may not, without the prior
written consent of Lessor, assign this Lease or any interest hereunder, or
sublet the Premises, which consent shall not be unreasonably withheld.
Notwithstanding any permitted assignment or subletting, Lessee shall at all
times remain fully responsible and liable for the payment of the rent and other
herein specified
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<PAGE>
charges, and for compliance with all of Lessee's obligations under the terms and
conditions of this Lease.
16. SUBSTITUTED SPACE: Notwithstanding any other provisions of this
Lease to the contrary, Lessor, at its option and at any time during the term of
this Lease, may require that Lessee move to another location within the Building
upon giving Lessee ninety (90) days written notice of such relocation, which
notice shall be accompanied by a space plan that Lessor will offer to jointly
develop with Lessee showing the relocated premises. This substituted space
shall contain not less than the number of square feet contained in the Premises
under this Lease, the substituted space will be substantially similar to the
premises, and Lessee may continue to occupy and lease such substituted space for
the rentals and under the same terms and conditions as herein provided.
Lessor shall reimburse Lessee for the cost of relocation to said
substituted space and will also reimburse Lessee for the value, as of the date
of written notice, for Lessee's printed materials by reason of this relocation.
17. SECURITY DEPOSIT: Lessee has, simultaneously with the execution
of this Lease, deposited with Lessor the sum of EIGHT THOUSAND ONE HUNDRED
EIGHTY-FOUR DOLLARS AND NO/100S ($ 8,184.00 ) as a security for the performance
of Lessee's obligations hereunder. Said sum shall be returned to Lessee at the
expiration of the lease term here, provided Lessee has fully performed all of
its obligations hereunder. Lessor retains the right to apply all or any part of
said deposit to cure any default of Lessee hereunder.
18. HOLDING OVER: If Lessee remains in possession of the Premises at
the expiration of the term of this Lease, without a written extension or a
renewal lease agreement between the parties, Lessee shall be deemed to be a
tenant at will from month to month. Rental during the holdover period shall be
at a rental rate equal of 200% of the effective rental rate at the end of the
term hereof, and there shall be no renewal of this Lease by operation of law.
19. DEFAULTS AND REMEDIES:
(a) The following events shall be deemed to be events of default by
Lessee under this Lease: (i) Lessee shall fail to pay any installment
of Base Annual Rent, Additional Rental or any other charge or
assessment against Lessee pursuant to the terms hereof within ten (10)
days after the due date thereof; (ii) Lessee shall fail to comply with
any term, provision, covenant or warranty made under this Lease by
Lessee, other than the payment of Base Annual Rent or additional
rental or any other charge or assessment payable by Lessee, and shall
not cure such failure within fifteen (15) days after notice thereof to
Lessee; (iii) Lessee or any guarantor of this Lease shall become
insolvent, or shall make a transfer in fraud of creditors or shall
make an assignment for the benefit of creditors; (iv) Lessee or any
guarantor of this Lease shall file a petition under any Section or
Chapter of the National Bankruptcy Act, as amended, or under any
similar law or statute of the United States or any State thereof, or
there
15
<PAGE>
shall be filed against the Lessee or any guarantor of the Lease a
petition in bankruptcy or insolvency or a similar proceeding, or
Lessee or any guarantor shall be judged bankrupt or insolvent in
proceedings filed against Lessee or any guarantor hereunder; (v) a
receiver or trustee shall be appointed for the Premises or for all or
substantially all of the assets of Lessee or of any guarantor of this
Lease; (vi) Lessee shall abandon or vacate all or any portion of the
Premises or fail to take possession thereof as provided in this Lease;
or (vii) Lessee shall not do or permit to be done anything which
creates a lien upon the Premises.
(b) Upon the occurrence of any of the aforesaid events of default,
Lessor shall have the option to pursue any one or more of the
following remedies in accordance with the laws of the state of Florida
without any notice or demand whatsoever: (i) terminate this Lease, in
which event Lessee shall immediately surrender the Premises to Lessor
and, If Lessee fails to do so, Lessor may, without prejudice to any
other remedy which it may have for possession or arrearages in rent,
enter upon and take possession of the Premises and expel or remove
Lessee and any other person who may be occupying said Premises or any
part thereof, by force if necessary, without being liable for
prosecution or any claim of damages therefor, Lessee hereby agreeing
to pay to Lessor on demand the amount of all loss and damage which
Lessor may suffer by reason of such termination, whether through
inability to relet the Premises on satisfactory terms or otherwise;
(ii) enter upon and take possession of the Premises and expel or
remove Lessee and any other person who may be occupying said Premises
or any part thereof, by force, if necessary, without being liable for
prosecution of any claim for damages thereof and, if Lessor so elects,
relet the Premises on such terms as Lessor may deem advisable and
receive the rent therefor, Lessee hereby agreeing to pay to Lessor on
Demand any deficiency that may arise by reason of such reletting,
(iii) enter upon the Premises, by force if necessary, without being
liable for prosecution or any claim of damages therefor, and do
whatever Lessee is obligated to do under the terms of this Lease and
Lessee agrees to reimburse Lessor on demand for any expenses, which
Lessor may incur in thus effecting compliance with Lessee's
obligations under this Lease, and Lessee further agrees that Lessor
shall not be liable for any damages resulting to Lessee for such
action, whether caused by negligence of Lessor or otherwise; or (iv)
declare immediately due and payable all Base Annual Rental, additional
rental and other charges and assessments against Lessee due or to
become due under the Lease. In the event of litigation between Lessor
and Lessee, arising from any reason whatsoever, the legal fees of the
prevailing party shall be paid by the non-prevailing party. Each party
shall bear its own legal fees in the event of a settlement.
(c) Pursuit of Lessor or any of the foregoing remedies shall not
preclude pursuit if any other remedy herein provided or any other
remedy provided by law or at equity, nor shall pursuit by Lessor Of
any remedy herein provided constitute: (i) election of remedies
thereby excluding the later election of an alternate remedy or (ii)
forfeiture
16
<PAGE>
or waiver of any Base Annual Rent, additional rental or other charges
and assessments payable by Lessee and due to Lessor hereunder or of
any damages accruing to Lessor by reason of the violation of any of
the terms, covenants, warranties and provisions herein contained. No
action taken by or on behalf of Lessor shall be construed to be an
acceptance or a surrender of this Lease. Forbearance by Lessor to
enforce one or more of the remedies herein provided upon an event of
default shall not be deemed or construed to constitute a waiver of
such default. In determining the amount of loss or damage which Lessor
may suffer by reason of termination of this Lease or the deficiency
arising by reason of any relenting of the Premises by Lessor as above
provided, allowance shall be made for expense of repossession and any
repairs or remodeling undertaken by Lessor following repossession and
there shall be added to the minimum Base Annual Rent herein provided,
for the period from the time of any event of default until the end of
the Lease term, a sum equal to the highest Base Annual Rent required
to be paid hereunder by Lessee during any preceding lease year
multiplied by the number of lease years remaining in the lease term.
Lessee agrees to pay Lessor all costs and expenses incurred by Lessor
in the enforcement of this Lease, including, without limitation, the
reasonable fees of Lessor's attorneys where such attorneys are
employed by Lessor's to effect collection of any sums due hereunder or
to enforce any right or remedy of Lessor.
(d) Lessee hereby appoints as its agent to receive service of all
dispossessory or distress proceedings and notices hereunder, the
person in charge of the Premises at that time. If no person is then in
charge of the Premises, then such service or notice may be made by
attaching same to the entrance of the Premises, provided that copy of
such service, proceedings, or notices, shall be mailed to Lessee at
the address of the home office as indicated herein.
20. LESSOR SERVICES: Lessor hereby agrees that it will, during normal
business hours, furnish heating and air conditioning sufficient to reasonably
heat or cool the Premises, automatic elevator service (where applicable), and
will cause the Premises to be cleaned daily, after normal business operation
hours, Monday through Friday, and the exterior grounds area cared for
periodically by its service personnel. In a similar condition to like buildings
in the area. Lessor will furnish water and electric power for reasonable use on
the Premises for normal office equipment. Electric power will be furnished for
normal business machines only. Lessor shall not be liable for damages arising
for the failure to furnish any of the above services or utilities, and cessation
caused by strike, accident, or reasonable necessity, beyond the control of
Lessor, shall not be considered a default by Lessor. For the purposes of this
lease agreement, normal business operation hours shall be from 8:00 AM to 6:00
PM Monday through Friday inclusive; and Saturday from 8:00 AM to 12:00 Noon.
Lessee will be responsible for all maintenance and electrical charges on the
supplemental heat, ventilation and air conditioning units serving Lessee space.
17
<PAGE>
21. MISCELLANEOUS PROVISIONS:
(a) Lessee agrees that all personal property brought into the
Premises shall be at the risk of the Lessee only and that the Lessor
shall not be liable for theft thereof or any damage thereto occasioned
from any acts of co-tenants, or other occupants of said building or
any other person.
(b) If the Lessee fails to remove all goods, wares, equipment,
fixtures, furniture, inventory, records, files or other personal
property situated on the Premises at the termination of this Lease,
Lessor may, at its option, remove all or part of said property in any
manner that Lessor shall choose and store or dispose of same without
liability for loss thereof. Lessee shall be liable to Lessor for all
expenses incurred in such removal and/or storage of said property.
(c) Upon termination of this Lease wherein Lessee shall be liable in
any amount to Lessor, in addition to the statutory lien for rent in
Lessor's favor, Lessor shall have and Lessee hereby grants to Lessor a
continuing security interest in all rentals and any other sums
becoming due hereunder from Lessee upon all property described in
subparagraph 21 (b) above, Such property shall not be removed from the
Premises without the prior written consent of Lessor until all
arrearages in rent, as well as any and all other sums of money then
due to Lessor hereunder, shall first have been paid and discharged.
(d) Upon Lessor's or any mortgagee's request, Lessee agrees to
furnish to Lessor its most current available annual report or
financial statement. Lessor will disclose to Lessee, prior to Lessee
making available the annual report or financial statement, the name of
the company reviewing said financial information. Lessee shall not be
required to furnish more than one such statement in any calendar year.
Upon request, Lessee, within fifteen (15) days from date of request by
Lessor, agrees to execute, acknowledge, and deliver at no cost to
Lessor an estoppel certificate evidencing the following:
(1) That this Lease is in full force and effect;
(2) That this Lease has not been amended in any way (and if so,
stipulate the amendments)
(3) That to the best knowledge of Lessee, there are not any
existing defaults by the Lessor (or if there are defaults, the
nature of such defaults);
(4) The date to which rent has been paid; and that there has not
been any prepaid rental other than the security deposit set forth
herein;
Each estoppel certificate delivered pursuant to this paragraph may be
relied on by certified public accountants, mortgagees, fee owners, prospective
purchasers, or transferees of Lessor's interest hereunder.
18
<PAGE>
(e) The words "terminate" or "termination" as used herein shall refer
to the end of this Lease whether due to the expiration of the term
hereof or the earlier ending of this Lease in accordance with the
terms and provisions hereof.
(f) All rights, powers and privileges conferred upon the parties
hereto shall be cumulative but not restricted of those given by law.
(g) The captions used in this Lease are for convenience only and do
not in any way limit or amplify the terms and provisions hereof.
(h) One or more waiver of any covenant, term, or condition of this
Lease by either party shall not be construed as waiver of subsequent
breach of the same covenant, term, or condition. The consent or
approval by either party to or of any act by the other party requiring
such consent or approval shall not be deemed to waive or render
unnecessary consent to or approval of any subsequent similar act.
(i) The rules and regulations attached to this Lease and any
amendments and additions hereto as may be reasonably made by Lessor
from time to time shall be and are hereby made a part of this Lease.
Lessee, its employees and agents agree to perform and abide by said
rules and regulations, and any amendments or additions to said rules
and regulations.
(j) This Lease contains the entire agreement of the parties and no
representation or agreements, oral or otherwise, between the parties
not embodied herein shall be of any force or effect.
(k) Time is of the essence of this agreement.
(l) This agreement shall create the relationship of Landlord and
Tenant between Lessor and Lessee: no estate shall pass out of Lessor:
Lessee has only an usufruct, not subject to levy and sale.
(m) The term "Lessor" as used in this lease refers solely to the
owner of the Premises so that in the event of any sale or sales or
foreclosure thereof, Lessor, who is grantor in any such sale of
foreclosure shall be and is hereby entirely relieved of all of the
obligations of Lessor hereunder. Any such sale of the Premises or any
interest therein shall be subject to this Lease, and it shall be
deemed and construed without further agreement that the purchaser at
any such sale has assumed and agreed to carry out any and all
obligations of Lessor in this Lease so long as such purchaser shall be
the owner of the Premises. Any and all references to Lessor shall
equally apply to its successors in interest. The term "Lessee" shall
include the second party, its heirs, representatives, successors and
assigns and if this Lease shall be validly assigned or sublet, shall
include also Lessee's assignees or sub-lessees as to the Premises
covered
19
<PAGE>
by such assignment or sublease. "Lessor" and "Lessee" shall include
male and female, singular and plural, corporation, partnership or
individual, as may fit the particular parties.
(n) No termination of this Lease prior to the normal ending thereof,
by lapse of time or otherwise, shall effect Lessor's right to collect
rent for the period prior to the termination thereof.
(o) Lessee agrees, at its own expense, to promptly comply with all
requirements of any legally constituted public authority made
necessary by reason of Lessee's occupancy of said Premises.
(p) Lessor, upon notice, may enter the premises at reasonable hours
to exhibit the same to prospective purchasers, to inspect the premises
to see that the Lessee is complying with all his obligations
hereunder, and to make repairs required to Lessor under the terms
hereof or repairs to Lessor's adjoining property.
(q) Lessee hereby waives the benefits of all existing and future Rent
Control Legislation and similar government regulations (which may be
applicable with respect to this Lease, or Lessee's rights hereunder),
whether in time of war or not, to the extent permitted by law.
(r) Lessee represents and warrants to Lessor that no broker, agent,
commission salesman or other person has represented Lessee in the
negotiations for the procurement of this Lease and of the Premises and
Lessee does and shall agree to indemnify and hold Lessor harmless from
and against any and all loss, cost, damage, claim and demand,
meritorious or otherwise, for or from any fees, commissions, payments
or expenses due or alleged to be due to any broker, agent, commission
salesman or other person purporting to represent Lessee in connection
with this Lease, the Premises, or the negotiations therefore.
(s) The submission of this Lease for examination does not constitute
an offer to lease, and this Lease shall be effective only upon
execution hereof by Lessor and Lessee.
(t) This Lease is made and intended as a contract under and pursuant
to the laws of the State of Florida and shall be construed and
enforced in accordance therewith.
(u) If any clause or provision of this Lease is or becomes illegal,
invalid or unenforceable because of present or future laws, rules
regulations of any governmental body, or becomes unenforceable for any
reasons, the intention of the parties hereto is that the remaining
parts of this Lease shall not be thereby affected.
20
<PAGE>
22. RADON GAS: Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
county public health units.
23. QUIET ENJOYMENT: Lessor agrees that so long as Lessee pays the
rent hereunder and performs the covenants herein on its part to be performed,
Lessee shall and may peaceably have, hold and enjoy the Premises for the term of
this Lease and all renewal terms thereof.
24. Provided that Lessee is not in default of any of the terms and
conditions contained herein, Lessee will have the right to review this Lease for
an additional five (5) years at then market rates.
25. Provided that the Lessee is not in default of any of the terms
and conditions herein, Lessee will have a one time First Right of Refusal at the
greater of then current market rents or at the then current Lease rental rate on
all contiguous space subject to the rights of the existing tenants. Lessee will
have Ten (10) business days to accept the First Right of Refusal space from
Lessor's notice to Lessee.
26. Lessee shall provide Lessor a binding irrevocable letter of
credit in the sum of One Hundred Thirty Thousand and no/100ths ($130,000.00)
Dollars which as defined on Exhibit E which must be presented to Lessor within
five (5) days upon execution of this Lease by Lessor or this Lease shall
automatically become void. The purpose of said letter of credit shall be for
the guarantee of the rental payments set forth in this Lease.
If at any time the Lessee has defaulted under the rental payments as
provided herein then the Lessor has elected to accelerate all rents due, then at
such time the lessor shall be entitled to present such letter of credit to the
institution issuing same for payment in full for all present and future rents as
provided in this Lease Agreement.
The Lessee may provide that the letter of credit may be reduced
monthly by the amount of Three Thousand Six Hundred and 11/100 Dollars
($3,611.11), when such monthly payment, as defined on Exhibit C attached hereto,
has been made to Lessor in accordance herewith.
21
<PAGE>
IN WITNESS WHEREOF, the parties herein have hereunto set their hands
the day and year set forth below.
As to Lessor: LESSOR: PARK CENTRAL CORP.
This 31st day of July, 1995
By: /s/ Robert J. Frederikson
-----------------------------------------
Robert J. Fredrikson, Attorney-in-Fact
/s/ Meghan J. Munay
- ------------------------------
Witness
/s/ Lynne Ascego
- ------------------------------
Witness
As to Lessee: LESSEE: UNIVERSITY OF SARASOTA, INC.
This 21st day of July, 1995 By: /s/
-----------------------------------------
Title: CEO
--------------------------------------
/s/ Michelle L. Krueger
- ------------------------------
Witness
/s/
- ------------------------------
Witness
22
<PAGE>
RULES AND REGULATIONS
Attached To and Made a part of the Lease Agreement made and entered
into by and between PARK CENTRAL CORP. and UNIVERSITY OF SARASOTA, INC.
1. Lessor will furnish keys for each office suite (approximately one
per 1,000 square feet) to Lessee without charge. No additional locks or latches
shall be installed upon any door without the written consent of Lessor. At the
termination of this Lease, Lessee shall return to Lessor all keys to doors of
the office suite, whether furnished by Lessor, or others.
2. During the hours from 6:00 P.M. to 8:00 A.M., Monday through
Friday and from 12:00 noon Saturday to 8:00 A.M. Monday, the building is the
responsibility of the Lessor's on-site representative and every person entering
or leaving the building is expected to be registered as to his business in the
building if unknown to the representative.
3. All parking spaces, drives, approaches, ingress and egress are
for joint use of all tenants. No tenant shall permit its employees, visitors,
customers, owners, or principals to store any vehicles or other items on the
Premises, or allow any vehicles to remain in the parking area of approach area
for a period exceeding one (1) normal working day without the written permission
of the Lessor. No parking will be permitted on public streets near the
Premises, in driveways, or parallel to curbs, or within grass areas on the
property. All vehicles shall be parked within the confines -of the painted
parking spaces, and Lessee shall be required to instruct their employees,
customers and visitors to obey the ordinances, and rules and regulations of
local governmental authorities having proper jurisdiction regarding public
street right-of-way parking and driveway areas. Lessee will be allowed a total
of thirty six (36) parking spaces for all students, faculty, staff and personnel
during building hours as stated in Paragraph 2 above.
4. Lessee shall not place or permit to be placed any outdoor storage
facility or trash containers outside the building, or on the property. Lessor
will furnish trash containers which shall be effectively screened and shall be
kept in a neat and clean condition. There shall be no obstruction of sidewalks,
entrance passages, corridors, hallways, elevators (if any), or stairways, nor
shall they be used for any purpose other than ingress or egress. Exterior
doors, skylights, and windows that reflect or admit light into the building,
shall not be covered or obstructed by anyone, other than by draperies, blinds,
or other normal window treatments approved by Lessor. If the drapes are to be
installed within the Premises, Lessee will be responsible for the cost and
installation thereof, including a standard white drapery liner on all exterior
windows.
5. The restroom facilities and fixtures, including water closets and
other water apparatus, shall not be used for any purpose other than those for
which they were intended, and no sweepings, rubbish, or other obstructing
substances shall be thrown therein. Damage resulting from any misuse shall be
at the expense of the tenant whose employees, agents, or invitees shall have
caused same.
23
<PAGE>
6. No tenant shall do or permit to be done anything within the
Premises or on the property which would in any way conflict with the regulations
of the Fire Department, Board of Health, or any governmental agency having
proper jurisdiction. In this respect, Lessee agrees not to cause any additional
wiring to be installed within the building, or the Premises, or any type
intercom system, music system, bell or buzzer system, communications systems, or
electrical systems, unless and until a diagram of same is submitted to and
approved in writing by Lessor or its authorized agents. Diagrams submitted
should indicate any borings or cuttings that may be required in conjunction with
requested installation. The use of any inflammable material or product shall
not be used in, or stored in, the building or the Premises without prior written
approval by Lessor. No area of the Premises shall be occupied or used as
sleeping or lodging quarters at any time and shall not be used or in any way
appropriated for gambling, immoral and other unlawful practices, and no
intoxicating liquors shall be sold on the Premises.
7. There shall not be any boring, or fastening devices, used or done
to any doors within the, Premises, and the doors and windows of the Premises and
building shall be kept whole. If any part thereof shall become broken, the same
shall be immediately replaced or repaired to the satisfaction of Lessor by the
party responsible. Tenants shall not injure, overload or deface the Premises,
or the building, the woodwork, or the walls. Lessee shall obtain Lessor's
permission before placing safes, or other heavy articles or equipment,
indicating the prescribed weight of same, and Lessor or Lessor's structural
engineer shall retain the sole and final decision as to the placement thereof.
8. Lessee shall not erect, paint, or place signs, advertising media,
company names, or any type numerals or letters upon the window or exterior walls
of the Premises, including, but not limited to, all trees, shrubbery, bushes,
sign posts, fixtures or lighting fixtures, except with the prior written consent
of the Lessor. Building exterior tenant identification signs shall be of such
order, size and style, and at locations, as shall be designated by Lessor.
Exterior signs will be furnished by Lessor for Lessee, and the cost of
furnishings and installing same be charged to and paid for by Lessee.
9. Tenants shall not employ any persons other than the janitors of
lessor (who will be provided with passkeys to the offices) for the purpose of
cleaning or taking charge of the Premises without the express written permission
of Lessor.
10. Lessee, at its expense, agrees to supply floor mats in all
offices and areas where chairs with castors are placed or being used on carpeted
areas.
11. Lessee shall not permit anyone to house temporarily or
permanently, any animals, pets, birds, insects, or pests within the Premises,
nor shall Lessee allow anyone to store permanently or temporarily, any bicycles
or other vehicles within the offices, halls, corridors, or storage area of the
building or anywhere outside the building on the property.
24
<PAGE>
EXHIBIT "A"
In accordance with the provisions of Paragraph 5 of the Lease to which this
Exhibit is attached, the rental payable by Lessee to Lessor pursuant to this
Lease shall be subject to adjustment as follows, to wit:
The Base Annual Rent as described in Paragraph 5 of this Lease, as the same
may have been previously escalated or increased as herein provided, shall be
escalated or increased on January 1 of each year during the Lease Term by an
amount equal to Tenant's Proportionate Share of the increase in Operating
Expenses for the immediately preceding calendar year over either (y) Base
Operating Expenses (in the case of the first adjustment to the Base Rental) or
(z) the Operating Expenses for next preceding calendar year (in the case of all
adjustments to the Base Annual Rent subsequent to the first such adjustment
thereto). As used in the immediately preceding sentence the following terms
shall have the following meanings or definitions, to wit:
(i) The term "Base Annual Rent" shall mean and be defined as the Base
Rental specified in Paragraph 5 of this Lease.
(ii) The term "Proportionate Share" shall mean and be defined, for any
period, as that fraction determined by multiplying the total
Operating Expenses for the Building and Property by a fraction, the
numerator of which shall be the total number of rentable square feet
of space included within the Leased Premises and the denominator of
which shall be 132,753 square feet (the total amount of square feet
in the Building).
(iii) The term "Operating Expenses" shall mean and be defined, for any
period, as all costs, charges and expenses of any respect and which
are directly attributable to the operation, management, maintenance
and normal repair of the Building and Property in accordance with
generally accepted accounting principles and sound property
management practices applicable to similar office facilities and
complexes, including, without limitation, real estate taxes and
special assessment, hazard and liability insurance, janitorial
service, landscaping and grounds maintenance, window washing
services, etc. The term "Operating Expenses" shall specifically
exclude additions to the Building or its equipment, interest on and
retirement of capital debt, rental commissions and decoration of any
Lessee's space.
(iv) The term "Base Operating Expense" shall mean and be defined as the
greater of the actual Operating Expenses for the calendar year 1995
or the currently budgeted amount of $4.85 per square foot of rentable
area within the Building. Lessor will cap all expenses other than
utilities, real estate taxes and building insurance at 5% per year
non-compounded.
25
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EXHIBIT B
Rentable Square Feet: 9,107
Address:
The University of Sarasota
3rd Floor, Suite #300
410 Ware Boulevard
Tampa, FL 33619
26
<PAGE>
EXHIBIT C
..withstanding any of the provisions contained herein, the Base Annual Rental
payments are:
27
<PAGE>
EXHIBIT E
July ,1995 D R A F T
---------
TO: (Beneficiary)
Park Central Corp.
410 Ware Blvd., Suite 500
Tampa, Florida 33619
Gentlemen,
We hereby establish our Irrevocable Letter of Credit No. ____________ in your,
the beneficiary's, favor for the account of The University of Sarasota, Inc.,
5250 17th Street, Sarasota, Florida 34235, in the aggregate amount of United
States Dollars One Hundred Thirty Thousand ($130,000.00) and is available by
your draft(s) drawn at sight on us, Northern Trust Bank of Florida N.A., bearing
the number and the date of this Letter of Credit.
Your draft(s) must be accompanied by the following documents:
1. The original of this Letter of Credit and all amendments, if any, for
proper endorsement.
2. A sworn affidavit executed on personal knowledge by an authorized
representative of Park Central Corp., attesting the following: "That The
University of Sarasota, Inc. is in default of its rental payment
obligations for Suite 300, 410 Ware Blvd., Tampa, Florida 33619, under a
lease with Park Central Corp. by failing to pay a rental installment
required by said lease and that the default has continued for at least 30
days."
3. A copy of notice(s) sent to The University of Sarasota, Inc. declaring the
amount(s) in default and any written response from The University of
Sarasota-
Partial drawing(s) are permitted.
The purpose of this Letter of Credit is to guarantee transaction costs under a
certain lease agreement between Park Central Corp., and The University of
Sarasota, Inc. After the first five months of the lease, the Total Amount to be
paid under this Letter of Credit shall decrease each month as of the day the
monthly rental installment is received by Park Central Corp. Beginning an the
date the monthly rental installment is received for the sixth month of the lease
term, the Total Amount to be paid under this Letter of Credit shall
automatically decrease by the amount of $3,611.11 and shall continue to decrease
$3,611.11 each month thereafter as the rental installment is received.
Page 1/2
28
<PAGE>
Irrevocable Letter of Credit
No___________________
Page 2/2
This Letter of Credit sets forth in full the terms of our undertaking and such
undertaking shall not in any way be modified, amended, or amplified by reference
to any document, instrument or agreement referenced to herein or in which this
Letter of Credit relates, and any such reference shall not be deemed to
incorporate herein by reference any document, instrument or agreement.
We hereby agree with all drawers, endorsers and good faith holders that all
draft(s) drawn and negotiated in compliance with the terms of this Letter of
Credit will be duly honored if presented at Northern Trust Bank of Florida N.A.,
700 Brickell Avenue, Miami, Florida 33131, on or before March 1, 1999, the
expiration date.
This Letter of Credit is subject to the Uniforms Customs and Practice for
Documentary Credits (1993 Revision) , International Chamber of Commerce
Publication No.500.
Yours very truly,
Rogerio Mendes
Second Vice President
29
<PAGE>
EXHIBIT 10.7
LAKESIDE COMMONS
STANDARD TENANCY AGREEMENT
LAKESIDE COMMONS PARTNERS
AND
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
-------------------------------------------------
as Tenant
DECEMBER 4, 1992
----------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1.00 BASIC AGREEMENT TERMS .......................................................................... 1
1.01 Parties ..................................................................................... 1
1.02 Leased Premises.............................................................................. 1
1.03 Term......................................................................................... 1
1.04 Base Rent and Security Deposit............................................................... 1
1.05 Addresses.................................................................................... 2
1.06 Permitted Use................................................................................ 2
ARTICLE 2.0 RENT ............................................................................................ 2
2.01 Base Rent.................................................................................... 2
2.02 Operating Expenses........................................................................... 2
2.03 Definition of Operating Expenses............................................................. 3
2.04 Late Payment Charge.......................................................................... 4
2.05 Increase In Insurance Premiums............................................................... 4
2.06 Security Deposit............................................................................. 4
2.07 Holding Over................................................................................. 4
2.08 Rent Control................................................................................. 5
2.09 Default...................................................................................... 5
ARTICLE 3.00 OCCUPANCY AND USE............................................................................... 5
3.01 Use.......................................................................................... 5
3.02 Signs........................................................................................ 5
3.03 Compliance with Laws, Rules and Regulations.................................................... 5
3.04 Warranty of Possession....................................................................... 5
3.05 Inspection................................................................................... 5
ARTICLE 4.00 UTILITIES AND SERVICE............................................................................ 6
4.01 Building Services............................................................................ 6
4.02 Providing of Utilities and Services Upon Default............................................. 7
4.03 Janitorial Service........................................................................... 7
4.04 Excessive Utility Consumption................................................................ 7
4.05 Window Coverings............................................................................. 7
4.06 Charge for Service........................................................................... 7
ARTICLE 5.00 REPAIRS AND MAINTENANCE......................................................................... 7
5.01 Landlord Repairs............................................................................. 7
5.02 Tenant Repairs............................................................................... 7
5.03 Request for Repairs.......................................................................... 7
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
5.04 Tenant Damages............................................................................... 8
ARTICLE 6.00 ALTERATIONS AND IMPROVEMENTS.................................................................... 8
6.01 Landlord Improvements........................................................................ 8
6.02 Tenant Improvements.......................................................................... 8
ARTICLE 7.00 CASUALTY AND INSURANCE.......................................................................... 8
7.01 Substantial Destruction...................................................................... 8
7.02 Partial Destruction.......................................................................... 8
7.03 Landlord's Insurance......................................................................... 9
7.04 Waiver of Subrogation........................................................................ 9
7.05 Hold Harmless................................................................................ 9
7.06 Tenant's Insurance........................................................................... 10
ARTICLE 8.00 CONDEMNATION.................................................................................... 10
8.01 Substantial Taking........................................................................... 10
8.02 Partial Taking............................................................................... 10
8.03 Tenant's Claim............................................................................... 10
ARTICLE 9.00 ASSIGNMENT OR SUBLEASE.......................................................................... 10
9.01 Landlord Assignment.......................................................................... 10
9.02 Tenant Assignment............................................................................ 11
9.03 Conditions of Assignment..................................................................... 11
9.04 Rights of Mortgagee and Others............................................................... 12
9.05 Estoppel Certificates........................................................................ 12
ARTICLE 10.00 DEFAULT AND REMEDIES............................................................................. 12
10.01 Default by Tenant............................................................................ 12
10.02 Remedies for Tenant's Default................................................................ 12
ARTICLE 11.00 LIENS.......................................................................................... 14
11.01 Landlord's Lien.............................................................................. 14
11.02 Uniform Commercial Code ..................................................................... 15
ARTICLE 12.00 RELOCATION..................................................................................... 15
12.01 Relocation Option ........................................................................... 15
12.02 Expenses..................................................................................... 15
ARTICLE 13.00 DEFINITIONS.................................................................................... 15
</TABLE>
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<TABLE>
<S> <C>
13.01 Abandon...................................................................................... 15
13.02 Act of God or Force Majeure.................................................................. 15
13.03 Additional Rent.............................................................................. 15
13.04 Base Rent.................................................................................... 16
13.05 Building .................................................................................... 16
13.06 Commencement Date............................................................................ 16
13.07 Events of Default............................................................................ 16
13.08 Landlord..................................................................................... 16
13.09 Operating Expenses........................................................................... 16
13.10 Premises..................................................................................... 16
13.11 Project...................................................................................... 16
13.12 Rent......................................................................................... 16
13.13 Square Feet.................................................................................. 16
13.14 Tenant....................................................................................... 16
13.15 Term......................................................................................... 16
ARTICLE 14.00 MISCELLANEOUS.................................................................................. 16
14.01 Waiver....................................................................................... 16
14.02 Act of God................................................................................... 16
14.03 Attorney's Fees.............................................................................. 17
14.04 Successors................................................................................... 17
14.05 Rent Tax..................................................................................... 17
14.06 Captions..................................................................................... 17
14.07 Notice....................................................................................... 17
14.08 Submission of Agreement...................................................................... 17
14.09 Corporate Authority.......................................................................... 17
14.10 Severability................................................................................. 17
14.11 Landlord's Liability......................................................................... 18
14.12 No Broker Claims............................................................................. 18
14.13 No Estate in Land............................................................................ 18
14.14 No Joint Venture............................................................................. 18
14.15 Ownership and Management..................................................................... 18
14.16 Time of Essence.............................................................................. 19
14.17 Parking...................................................................................... 19
14.18 Bankruptcy................................................................................... 19
14.19 Joint and Several Liability.................................................................. 20
14.20 Covenants as to Hazardous Materials.......................................................... 20
14.21 Theft or Burglary............................................................................ 20
ARTICLE 15.00 AMENDMENT AND LIMITATION OF WARRANTIES......................................................... 20
15.01 Entire Agreement............................................................................. 20
15.02 Amendment.................................................................................... 20
15.03 Limitation of Warranties..................................................................... 20
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 16.00 OTHER PROVISIONS............................................................................... 20
16.01 SPECIAL STIPULATIONS........................................................................... 21
ARTICLE 17.00 SIGNATURES..................................................................................... 22
</TABLE>
EXHIBITS DESCRIPTION
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Exhibit "A" Plan of Premises
Exhibit "B" Preparation of Premises
Exhibit "C" Letter Agreement as to Term and Premises
Exhibit "D" Rent Schedule
Exhibit "E" Rules and Regulations
Exhibit "F" Building Moving Policy
Exhibit "G" Special Stipulations
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STANDARD TENANCY AGREEMENT
ARTICLE 1.00 BASIC AGREEMENT TERMS
1.01 PARTIES. This Agreement ("Agreement") is entered into by and
-------
between the following Landlord and Tenant:
LAKESIDE COMMONS PARTNERS, ("Landlord")
--------------------------------------
A GEORGIA GENERAL PARTNERSHIP
--------------------------------------
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY. INC. ("Tenant")
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AN ILLINOIS CORPORATION
------------------------------------------------------
1.02 LEASED PREMISES. In consideration of the rents, terms,
---------------
provisions and covenants of this Agreement, Landlord hereby leases, lets and
demises to Tenant the following described premises ("Premises"):
APPROXIMATELY 9,020 rentable square feet on the Penthouse Level
- -------------------
LAKESIDE COMMONS (Name of Building or Project)
- -------------------------------------
990 HAMMOND DRIVE. SUITE 1100 (Street address/suite number)
- -------------------------------------
ATLANTA. FULTON COUNTY, GEORGIA 30329 (City, State, and Zip Code)
- -------------------------------------
all as shown on the plans attached hereto as EXHIBIT "A" and hereby made a part
-----------
hereof. Landlord and Tenant agree that the number of square feet stated above
shall be used in the computation of Base Rent, Additional Rent and all other
changes due hereunder. The Premises shall be prepared for Tenant's occupancy in
the manner and subject to the provisions of EXHIBIT "B" attached hereto and made
-----------
a part hereof.
1.03 TERM. Subject to and upon the conditions set forth herein, the
----
term of this Agreement shall commence on the date (the "Commencement Date")
which is the earlier of (a) the day preparation of the Premises is deemed
substantially complete as provided IN EXHIBIT "B" attached hereto, or (b) the
--------------
day Tenant first occupies the Premises for business, and shall terminate at
11:59 p.m. on the last day (the "Expiration Date") of August 31, 2003, unless
sooner terminated, renewed or extended as may be hereinafter provided (such
term, taking into account any such sooner termination or renewal or extension,
is hereinafter referred to as the "Term"). Promptly following the Commencement
Date, Landlord and Tenant shall enter into a letter agreement in the form
attached hereto as EXHIBIT "C" confirming the Commencement Date and the
-----------
Expiration Date and any punch list items uncompleted, which acknowledges the
acceptance and delivery of the Premises, which shall be returned to Landlord
promptly within five (5) days following the date on which Tenant first occupies
the Premises.
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1.04 BASE RENT AND SECURITY DEPOSIT. Base Rent shall be as provided in
------------------------------
the schedule attached hereto as EXHIBIT "D". Security Deposit is $10.485,75.
----------- ----------
1.05 ADDRESSES.
---------
LANDLORD: TENANT:
PRIOR TO THE COMMENCEMENT DATE:
Lakeside Commons Partners
One Lakeside Commons 220 SOUTH STATE STREET
------------------------------------------
990 Hammond Drive
Suite 520 SUITE 609
------------------------------------------
Atlanta, GA 30328
CHICAGO, IL 60604, ATTN: ROBERT J. LULLO
------------------------------------------
Effective as of the Commencement Date, Tenant's address shall be the Premises.
1.06 PERMITTED USE. General office use and as a professional school
-------------
of higher education.
ARTICLE 2.00 RENT
2.01 BASE RENT. Tenant agrees to pay monthly as Base Rent during the
---------
term of this Agreement, without set-off or deduction, the sums of money set
forth in EXHIBIT "D", attached hereto, which amount shall be payable to Landlord
-----------
at 990 Hammond Drive, Suite 640, Atlanta, GA 30328. Such monthly Base Rent
installment amount is subject to increase from time to time as hereinafter
provided in EXHIBIT "D" attached hereto. One monthly installment of Base Rent in
-----------
the amount of $10,410.58 shall be due and payable on the date of execution of
----------
this Agreement by Tenant for Base Rent for the FIRST month of the Term, the
-----
first month for which Base Rent is due and payable, and an installment shall be
due and payable on or before the first day of each calendar month following said
FIRST month of the Term; provided, however, if the day on which Base Rent is
first due and payable is a day other than the first day of a calendar month, the
monthly Base Rent installment paid on the date of execution of this Agreement
shall apply to the thirty (30) day period beginning on the day Base Rent is
first due and payable, Base Rent for the calendar month in which said thirty
(30) day period expires shall be prorated based on a thirty (30) day month and
shall be due and payable on the first day of such calendar month, and all
succeeding installments of Base Rent shall be payable on or before the first day
of each succeeding calendar month during the Term of this Agreement. Tenant
shall pay without set-off or deduction, as Additional Rent, all other sums due
under this Agreement.
2.02 OPERATING EXPENSES. In the event Landlord's Operating Expenses
------------------
shall, in any calendar year during the Term, exceed the sum of the actual
operating costs for the base year 1992 (the "Expense Stop"), Tenant agrees to
pay as Additional Rent Tenant's pro rata share of such excess Operating
Expenses. Tenant's pro rata share of excess Operating Expenses shall be 4.061%,
said percentage determined by dividing the total square footage of the Premises
by the total square footage of the Building. Landlord may invoice Tenant monthly
for Tenant's pro rata share of the estimated excess Operating Expenses for each
calendar year, which amount shall be adjusted each
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year based upon anticipated excess Operating Expenses. Landlord shall use
reasonable efforts to provide Tenant an accounting showing in reasonable detail
all computations of Additional Rent due under this section within one hundred
twenty (120) days of the close of each calendar year; provided, however,
Landlord's failure to so provide an accounting within one hundred twenty (120)
days shall in no way bar Landlord from providing Tenant any such accounting at a
later date, nor limit Tenant's liability for its pro rata share of excess
Operating Expenses. In the event the accounting shows that the total of the
monthly payments made by Tenant exceeds the amount of Additional Rent due by
Tenant under this section, Landlord shall credit any such amount against the
Base Rent payment next coming due. In the event the accounting shows that the
total of the monthly payments made by Tenant is less than the amount of
Additional Rent due by Tenant under this section, the accounting shall be
accompanied by an invoice for the Additional Rent. Notwithstanding any other
provision in this Agreement, during the year in which the Agreement terminates,
Landlord, prior to the Expiration Date, shall have the option to invoice Tenant
for Tenant's pro rata share of the excess Operating Expenses based upon the
previous year's Operating Expenses. If this Agreement commences on a day other
than the first day of a calendar year, the amount of any such excess Operating
Expenses payable by Tenant applicable to the year in which the Terms commences
shall be prorated on the ratio that the number of days from the Commencement
Date to the end of the calendar year bears to 365. If this Agreement shall
terminate on a day other than the last day of a calendar year, the amount of any
such excess Operating Expenses payable by Tenant applicable to the year in which
such termination shall occur shall be prorated on the ratio that the number of
days from the commencement of the calendar year to and including the Expiration
Date bears to 365. Tenant agrees to pay an Additional Rent due under this
section within ten days following receipt of the invoice or accounting showing
Additional Rent due. The provisions of this Agreement concerning the payment of
Additional Rent shall survive the expiration of earlier termination of the Term.
Notwithstanding anything to the contrary contained herein, in the event the
Building is not at least ninety-five percent (95%) occupied at all times during
any calendar year, appropriate adjustments shall be made by Landlord so as to
determine excess Operating Expenses as though the Building had been ninety-five
percent (95%) occupied at all times in such calendar year.
2.03 DEFINITION OF OPERATING EXPENSES. The term "Operating Expenses"
--------------------------------
includes all expenses incurred by, Landlord with respect to the maintenance and
operation of the Building and all Landlord's personal property used in
connection therewith, including, but not limited to, the following: (1)
maintenance, repair and replacement costs; (2) electricity, fuel, water, sewer,
gas and other utility charges; (3) security, window washing, janitorial
services, trash and snow removal; (4) landscaping and pest control; (5)
management fees, wages and fringe benefits payable to employees of Landlord, or
of any management agent of Landlord whose duties are directly connected with the
operation and maintenance of the Building; (6) all services, supplies, repairs,
replacements or other expenses for maintaining and operating the Building or
Project including parking or common areas; (7) the cost, including interest,
amortized over its useful life, of any capital improvement made to the Building
by Landlord after the date of this Agreement which is required under any
governmental law or regulation that was not applicable to the Building at the
time it was constructed; (8) the cost, including interest, amortized over its
useful life, of installation of any device or other equipment designed to
improve the operating efficiency of any system within the Building, but limited
to the amount of any actual operating efficiencies; (9) all other expenses which
would generally be regarded as operating and maintenance expenses which would
reasonably be amortized over a period not to exceed five years; (10) all real
property and personal property taxes and installments of special
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assessments, including dues and assessments by means of deed restrictions and/or
owners' associations which accrue against the Building during the Term of this
Agreement and federal, state and local taxes or charges assessed against the
Building, whether special, general or extraordinary (except for Income or
franchise taxes applicable against Landlord); (11) all insurance premiums
Landlord is required to pay or deems necessary to pay, including, without
limitation, public liability insurance, with respect to the Building; (12) all
Building services costs, and (13) Landlord's reasonable allocation of a portion
of such costs, expenses, taxes, assessments and premiums which relate to the
Project as a whole and are not specifically allocated to any building within the
Project. The term Operating Expenses does not include the following: (1)
repairs, restoration or other work occasioned by fire, wind, the elements or
other casualty; (2) income and franchise taxes of Landlord; (3) expenses
incurred in leasing to or procuring of tenants, leasing commissions, advertising
expenses and expenses for the renovating of space for new tenants; (4) interest
or principal payments on any mortgage or other indebtedness of Landlord; (5)
compensation paid to any employee of Landlord above the grade of property
manager; (6) any depreciation allowance or expenses; or (7) operating expenses
which are the responsibility of Tenant or any other Tenant in the building.
2.04 LATE PAYMENT CHARGE. Other remedies for nonpayment of rent
-------------------
notwithstanding, if the monthly rental payment (including Base Rent and
Additional Rent) is not received by Landlord on or before the tenth day of the
month for which the rent is due, or if any other payment due Landlord by Tenant
is not received by Landlord on or before the tenth day of the month next
following the month in which Tenant was invoiced, a late payment charge of
$100.00 of such past due amount shail become due and payable in addition to any
other amounts owed under this Agreement, which late payment charge is not
intended as a penalty, but instead is intended to compensate Landlord for the
additional administrative expenses resulting from any such late payment and
which shall be paid on demand.
2.05 INCREASE IN INSURANCE PREMIUMS. If any increase in the insurance
------------------------------
premiums paid by Landlord for the Building is caused by Tenant's use of the
Premises in a manner other than as set forth in section 1.06, then Tenant shall
pay as Additional Rent the amount of such increase to Landlord.
2.06 SECURITY DEPOSIT. The security deposit set forth above shall be
----------------
paid by Tenant to Landlord on the date of execution of this Agreement and shall
be held by Landlord for the performance of Tenant's covenants and obligation
under this Agreement. It is expressly understood that the deposit shall not be
considered an advance payment of rental or a measure of Landlord's damage in
case of default by Tenant. Landlord shall not be obligated to place the security
deposit in an interest bearing account, but instead may commingle the security
deposit with other funds of Landlord. Landlord shall not be liable in any way to
Tenant for interest with respect to said security deposit. Upon the occurrence
of any Event of Default by Tenant or breach by Tenant of Tenant's covenants
under this Agreement, Landlord may, from time to time, without prejudice to any
other remedy, use the security deposit to the extent necessary to make good any
arrears of rent, or to repair any damage or injury, and pay any expense or
liability incurred by Landlord as a result of the Event of Default or breach of
covenant, and any remaining balance of the security deposit shall be returned by
Landlord to Tenant upon termination of this Agreement. If any portion of the
security deposit is so used or applied, Tenant shall upon ten days written
notice from Landlord, deposit with Landlord by cash or cashier's check an amount
sufficient to restore the security deposit to its original amount.
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In the event that Landlord shall transfer all or any part of its interest in the
Building or the Project, including Tenant's security deposit, Landlord's
transfer of the security deposit to such transferee, shall release Landlord from
any and all liability for the return of the security deposit and Tenant agrees
thereafter to look only to such transferee for the return of the security
deposit. Tenant shall not assign or encumber its interest in the security
deposit, and Landlord shall not be bound by any attempted assignment or
encumbrance of Tenant's interest therein.
2.07 HOLDING OVER. In the event of holding over by Tenant after the end
------------
of the Term, the hold over shall be as a tenant at sufferance and not as a
tenant at will, and Tenant shall otherwise be subject to all the covenants and
provisions of this Agreement insofar as the same are applicable to a tenant at
sufferance, including, without limitation, the payment of Additional Rent.
Tenant shall pay Landlord, on demand, as rent for the period of such hold over
an amount equal to 150% of the Base Rent which would have been payable by Tenant
had the hc!d over period been a part of the Term, together with the amount of
any actual, direct or consequential damages suffered or incurred by Landlord on
account of such hold over by Tenant or any violation by Tenant of any other term
or condition of this Agreement during such hold over period. In no event shal',
the collection or payment of rent during such hold over period cause Tenant to
be or be deemed a Tenant at will. Tenant shall have no right to notice under
O.C.G.A. 5 44-7-7 of the termination of its tenancy; Tenant agrees to vacate and
deliver the Premises to Landlord immediately upon Tenant's receipt of notice
from Landlord to vacate. Should Tenant fail so to vacate the Premises, Tenant
shall be subject to dispossession without further notice, by summary
dispossessory proceedings, in addition to any and all other remedies to which
Landlord may be entitled by law or under this Agreement. No holding over by
Tenant, whether with or without consent of Landlord, shall operate to extend the
Term except as otherwise expressly provided in a written agreement executed by
both Landlord and Tenant.
2.08 RENT CONTROL. It is understood and agreed that Tenant's payments
------------
of Operating Expenses shall not be deemed payments of rental as that term is
construed in relation to governmental wage and price controls or analogous
governmental actions affecting the amount of rental which Landlord may charge
Tenant. Notwithstanding the foregoing, in the event that such governmental
actions or controls prevent the application of all or any part of this Article
2.00 regarding the payment of Operating Expenses, Tenant hereby agrees to pay as
monthly rent hereunder the monthly Base Rent plus one-twelfth (1/12) of the
Operating Expenses for the calendar year immediately preceding the year of the
institution of such actions or controls, but in no event to exceed the maximum
rent permitted by law.
2.09 DEFAULT. Base Rent, Additional Rent and each and every other
-------
charge, fee, cost, or expense which Tenant is obligated to pay or reimburse
Landlord hereunder shall, for the purposes of the default provisions of this
Agreement, be deemed Additional Rent due from Tenant, and Tenant's failure to so
pay, refund or reimburse when due shall entitle Landlord to all the remedies
provided for herein and at law or in equity or account of failure to pay rent.
ARTICLE 3.00 OCCUPANCY AND USE
3.01 USE. Tenant warrants and represents to Landlord that the Premises
---
shall be used and occupied only for the purpose as set forth in Section 1.06.
Tenant shall occupy the Premises, conduct
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its business and control its agents, Students, employees, invitee and visitors
in such a manner as is lawful, reputable and will not create any nuisance.
Tenant shall not permit any operation which emits any odor or matter which
intrudes into other portions of the Building, use any apparatus or machine which
makes undue noise or causes vibration in any portion of the Building or
otherwise interfere with, annoy or disturb any other Tenant in its normal
business operations or Landlord in its management of the Building. Tenant shall
not commit or permit any waste on the Premises, permit the Premises to be used
in any way which would, in the opinion of Landlord, be extra hazardous on
account of fire or which would in any way increase or render void the insurance
on the Building. Tenant shall not deface or injure, or permit the defacement of
or injury to, the Premises, Project or Building.
3.02 SIGNS. No sign of any type or description shall be erected, placed
-----
or painted in or about the Premises or Project except those signs submitted to
Landlord in writing and approved by Landlord in writing, and which signs are in
conformance with Landlord's sign criteria established for the Project.
3.03 COMPLIANCE WITH LAWS, RULES AND REGULATIONS. Tenant, at Tenant's
-------------------------------------------
sole cost and expense, shall comply with all laws, ordinances, orders, rules and
regulations of state, federal, municipal or other agencies or bodies having
jurisdiction relating to the use, condition and occupancy of the Premises.
Tenant will also comply with the Rules and Regulations of the Building adopted
by Landlord which are set forth on EXHIBIT "E" attached to this Agreement.
Landlord shall have the right at all times to change and amend the Rules and
Regulations in any reasonable manner as may be deemed advisable by Landlord for
the safety, care, cleanliness, preservation of good order and operation or use
of the Building, the Premises or the Project which do not materially interfere
with the normal conduct of Tenant's business operation. All changes and
amendments to the Rules and Regulations will be sent by Landlord to Tenant in
writing and shall thereafter be carried out and observed by Tenant. Landlord
shall not be responsible for other tenants failure to observe the rules &
regulations but agrees to use reasonable efforts to enforce the rules and
regulations equally among all Tenants of the Building or Project.
3.04 WARRANTY OF POSSESSION. Landlord warrants that it has the right
----------------------
and authority to execute this Agreement, and Tenant, upon payment of the
required rents and subject to the terms, conditions, covenants and agreements
contained in this Agreement, shall have possession of the Premises during the
full Term as well as any extension or renewal thereof. Landlord shall not be
responsible for the acts or omissions of any other tenant or third party that
may interfere with Tenant's use and enjoyment of the Premises, nor shall any
such acts or omissions affect Tenant's obligations hereunder.
3.05 INSPECTION. Landlord or its authorized agents shall at any and all
----------
reasonable times, upon reasonable advance notice to Tenant except in case of
emergency, have the right to enter the Premises to inspect the same, to supply
janitorial service or any other service to be provided by Landlord, to show the
Premises to prospective purchasers or tenants, and to alter, improve or repair
the Premises or any other portion of the Building, as provided in Article 5.00
below. Tenant hereby waives any claim for damages for injury or inconvenience to
or interference with Tenant's business, any loss of occupancy or use of the
Premises, and any other loss occasioned thereby. Landlord shall at all times
have and retain a key with which to unlock all of the doors in, upon and about
the
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Premises. Tenant shall not change Landlord's lock system or in any other manner
prohibit Landlord from entering the Premises. Landlord shall have the right to
use any and all means which Landlord may deem proper to open any door in an
emergency without liability therefor.
ARTICLE 4.00 UTILITIES AND SERVICE
4.01 BUILDING SERVICES. Landlord shall furnish water and electricity
-----------------
for Tenant during the Term. Tenant shall pay all telephone charges. Landlord
shall furnish Tenant water at those points of supply provided for general use of
other tenants in the Building, central heating and air-conditioning in season
(at times Landlord normally furnishes these services to other tenants in the
Building, and at temperatures and in amounts as are considered by Landlord to be
standard or in compliance with any governmental regulations, such service on
Saturday afternoons, evenings and holidays to be furnished only upon the request
of Tenant, who shall bear the entire cost). Landlord shall also furnish routine
maintenance, painting and electric lighting service for all public areas and
special service areas of the Building in the manner and to the extent deemed by
Landlord to be standard. Upon Tenant's request, Landlord shall replace
building-standard fluorescent bulbs in the building standard light fixtures
originally provided by Landlord in the Premises. Upon Tenant's request, and at
Tenant's sole cost and expense, Landlord'shall replace bulbs in non-building
standard light fixtures (E.G., incandescent down lights and incandescent wall
washers) located in the Premises; provided, however, that Landlord shall not be
liable for any damage resulting from said replacement of bulbs in non-building
standard light fixtures unless such damage is caused solely by Landlord's
willful misconduct or gross negligence. Landlord may, in its sole discretion,
provide additional services not enumerated herein. Failure by Landlord to any
extent to furnish these defined services or any other services not enumerated,
or any cessation thereof, shall not render Landlord liable in any respect to
Tenant, or Tenant's agents, licensees, invitee or other visitors to the
Premises, Building or Project for damages to either person or property or for
consequential damages of any nature, be construed as a constructive or actual
eviction of Tenant, work an abatement of rent or relieve Tenant from fulfillment
of any covenant in this Agreement. Should any of the equipment or machinery
break down, or for any cause cease to function properly, Landlord shall use
reasonable diligence to repair the same within thirty (30) working days, but
Tenant shall have no claim for abatement or rebate of rent on account of any
interruption in service occasioned from the repairs. Landlord reserves the right
from time to time to make changes in the delivery of utilities and services to
the Building. Tenant hereby acknowledges and agrees that the heating and
air-conditioning standards and the electrical service allowances for the
Premises are as provided in EXHIBIT "B" hereof. Any and all additional heating
-----------
or air-conditioning cost or expense caused by any addition or modification to
any such system, any reconfiguration or alteration of the Premises or any
relocation or addition of personnel, furniture, furnishing or equipment therein
requested or made by Tenant shall be borne solely by Tenant. Notwithstanding any
other provision hereof, Landlord may, in its sole discretion, install separate
electricity metering devices in the Premises to separately meter the electrical
consumption of any machinery or device located in the Premises and operating on
a twenty-four (24) hour a day basis, or to meter the electrical consumption of
any device located in the Premises that consumes electricity in inordinate or
excessive amounts, as determined by Landlord in its sole discretion, said
devices to include, but not be limited to, supplemental HVAC systems for
computer rooms and telephone rooms. Tenant shall be responsible for the payment
of electrical bills and other charges relating to said independent metering.
Landlord may enter the Premises at any time to determine whether the Premises
contains any such device.
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4.02 PROVIDING OF UTILITIES AND SERVICES UPON DEFAULT. Notwithstanding
------------------------------------------------
any provision herein to the contrary, Landlord shall not be obligated to provide
any of the utilities and building services described in this Section 4.02 in the
event that Tenant is in default under this Agreement.
4.03 JANITORIAL SERVICE. Landlord shall furnish janitorial services to
------------------
the Premises and public areas of the Building five times per week during the
Term, excluding holidays, at hours that do not materially interfere with
Tenant's business operation.
4.04 EXCESSIVE UTILITY CONSUMPTION. Tenant shall pay all utility costs
-----------------------------
occasioned by electrodata processing machines, telephone equipment, computers
and other equipment of high electrical consumption, including without
limitation, the cost of installing, servicing and maintaining any special or
additional inside or outside wiring or lines, meters or submeters, transformers,
poles, air-conditioning costs, or the cost of any other equipment necessary to
increase the amount or type of electricity or power available to the Premises.
4.05 WINDOW COVERINGS. Landlord shall furnish and install window
----------------
coverings on all exterior windows to maintain a uniform exterior appearance.
Pursuant to the terms of EXHIBIT "B" attached hereto, the cost of such window
coverings and the installation thereof shall not be a part of Base Building
Work, as defined therein. Tenant shall not remove or replace these window
coverings or install any other window covering which would affect the exterior
appearance of the Building. Tenant may install lined or unlined over draperies
on the interior sides of the window coverings furnished by Landlord, for
interior appearance or to reduce light transmission, provided such over
draperies do not affect the exterior appearance of the Building, or affect the
operation of the Building's beating, ventilating and air-conditioning systems.
4.06 CHARGE FOR SERVICE. All costs of Landlord for providing the
------------------
services set forth in article 4.00 (except those charges to be paid by Tenant
pursuant to Article 4.00) shall be subject to the Additional Rent provisions in
section 2.02.
ARTICLE 5.00 REPAIRS AND MAINTENANCE
5.01 LANDLORD REPAIRS. Landlord shall not be required to make any
----------------
improvements, replacements or repairs of any kind or character to the Premises,
the Building or the Project during the Term, except such repairs as are set
forth in this section. Landlord shall maintain only the roof, foundation,
parking and common areas, the structural soundness of the exterior walls, doors,
corridors, windows of the Building and equipment serving the Premises.
Landlord's cost of maintaining and repairing the items set forth in this section
are subject to the Additional Rent provisions in section 2.02. Landlord shall
not be liable to Tenant, or Tenant's agents, licensees, invitee or other
visitors to the Building, Premises or Project, except as expressly provided in
this Agreement, for any damage to person or property or inconvenience, or for
consequential damages of any nature, and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any repairs, alterations or
additions made by Landlord under this Agreement.
5.02 TENANT REPAIRS. Tenant shall, at its own cost and expense,
--------------
maintain the Premises in a first-class condition, including all necessary
repairs and replacements, but excluding normal wear and tear. Tenant shall
further, at its own cost and expense, repair or replace any damage or
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injury to all or any part of the Premises, Building or Project caused by the
negligence or willful misconduct of Tenant or Tenant's agents, employees,
invitee, licensees or other visitors to the Premises, Project or Building;
provided, however, if Tenant fails to make the repairs or replacements promptly,
Landlord may, at its option, make the repairs or replacements and the costs of
such repairs or replacements shall be charged to Tenant as Additional Rent and
shall become payable by Tenant with the payment of the rent next due hereunder.
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5.03 REQUEST FOR REPAIRS. All requests for repairs or maintenance that
-------------------
are the responsibility of Landlord pursuant to any provision of this Agreement
must be made in writing to Landlord at the address in section 1.05. Tenant shall
notify Landlord promptly of any defect in or damage to the Premises of which
tenant may be or become aware, whether caused by the negligence of Tenant or any
other person, by any casualty or hazard, or by any other cause whatsoever.
5.04 TENANT DAMAGES. Tenant shall not allow any damage to be committed
--------------
on any portion of the Premises, the Building, the Project, and at the
termination of this Agreement, by lapse of time or otherwise, Tenant shall
deliver the Premises to Landlord in as good condition as existed at the
Commencement Date of this Agreement, ordinary wear and tear excepted. The cost
and expense of any repairs necessary to restore the condition of the Premises
shall be borne by Tenant.
ARTICLE 6.00 ALTERATIONS AND IMPROVEMENTS
6.01 LANDLORD IMPROVEMENTS. If construction to the Premises is to be
---------------------
performed by Landlord prior to or during Tenant's occupancy, the provisions of
EXHIBIT "B" shall govern said construction.
6.02 TENANT IMPROVEMENTS. Tenant shall not make or allow to be made any
-------------------
alterations or physical additions in or to the Premises without first obtaining
the written consent of Landlord, which consent may in the sole and absolute
discretion of Landlord be denied. Any alterations, physical additions or
improvements to the Premises made by Tenant shall at once become the property of
Landlord and shall be surrendered to Landlord upon the termination of this
Agreement; provided, however, Landlord, at its option, may require Tenant to
remove any physical additions and/or repair any alterations in order to restore
the Premises to the condition existing at the time Tenant took possession, all
costs of removal and/or alterations to be home by Tenant. This clause shall not
apply to moveable equipment or furniture owned by Tenant, which may be removed
by Tenant at the end of the Term if Tenant is not then in default and if such
equipment and furniture are not then subject to any other rights, liens, or
interests of Landlord.
ARTICLE 7.00 CASUALTY AND INSURANCE
7.01 SUBSTANTIAL DESTRUCTION. If the Premises should be totally
-----------------------
destroyed by fire or other casualty, or if the Premises should be damaged so
that rebuilding cannot be reasonably completed within one hundred twenty (120)
working days after the date of such casualty loss, this Agreement shall
terminate and the rent shall be abated for the unexpired portion of the
Agreement, effective as of the date of such destruction, and Tenant's security
deposit shall be refunded. The determination of whether such rebuilding can
reasonably be completed within such period shall be made by Landlord for the
purposes of sections 7.01 and 7.02 of this Agreement.
7.02 PARTIAL DESTRUCTION. If the Premises should be partially damaged
-------------------
by fire or other casualty, and rebuilding or repairs can reasonable be completed
within one hundred twenty (120) working days from the date of such casualty
loss, this Agreement shall not terminate, and to the extent sufficient insurance
proceeds to enable Landlord to restore and reconstruct the Premises are made
available to Landlord by the holder of any mortgage or deed to secure debt
encumbering the Building, Landlord shall at its sole risk and expense proceed
with reasonable diligence to rebuild or
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<PAGE>
repair the Building or other improvements to substantially the same condition
in which they existed prior to the damage. If the Premises are to be rebuilt or
repaired and are untenantable in whole or in part following the damage, and the
damage or destruction was not caused or contributed to by act or negligence of
Tenant, its agents, Students, employees, invitee or those for whom Tenant is
responsible, the rent payable under this Agreement during the period for which
the Premises are untenantable shall be adjusted to the extent that Tenant
occupies the premises during repairs and as may be fair and reasonable under the
circumstances. In the event that Landlord fails to substantially complete the
necessary repairs or rebuilding within one hundred twenty (120) working days
from the date of such casualty loss, with due allowance for FORCE MAJEURE,
-------------
Tenant may provide Landlord written notice of Tenant's intent to terminate this
Agreement on account of such delay and if Landlord fails to substantially
complete the necessary repairs or rebuilding within an additional thirty (30)
working days, Tenant's sole remedy shall be to terminate this Agreement by
delivering written notice of termination to Landlord, whereupon all rights and
obligations under this Agreement shall cease to exist and Tenant's security
deposit shall be refunded; provided, however, Tenant shall have no such right of
termination in the event any such damage or destruction was caused, in whole or
in part, by the willful or negligent act or omission of Tenant, its employees,
Students, agents, contractors, invitee or others for whom Tenant is responsible.
7.03 LANDLORD'S INSURANCE. Landlord shall at all times during the term
--------------------
of this Agreement maintain a policy or policies of insurance with the premiums
paid in advance, issued by and binding upon some solvent insurance company,
insuring the Building against all risks of direct physical loss, subject to
standard limitations and exclusions, in an amount equal to at least eighty
percent (80%) of the full replacement cost of the Building structure and its
improvements as of the date of the loss; provided, that Landlord shall not be
obligated in any way or manner to insure any personal property (including, but
not limited to, any furniture, machinery, goods or supplies) of Tenant upon or
within the Premises, any fixtures installed by or paid for by Tenant upon or
within the Premises, or any improvements which Tenant may construct on the
Premises. Tenant shall have no right in or claim to the proceeds of any policy
of insurance maintained by Landlord even if the cost of such insurance is borne
by Tenant as set forth in article 2.00.
7.04 WAIVER OF SUBROGATION. Anything in this Agreement to the contrary
---------------------
notwithstanding, Landlord and Tenant hereby waive and release each other of and
from any and all rights of recovery, claim, action or cause of action, against
each other, their partners, agents, officers and employees, for any loss or
damage that may occur to the Premises, the Building, or personal property within
the Building, which is covered by valid and collectible insurance in effect at
the time of such loss or damage regardless of cause or origin, including
negligence of Landlord or Tenant and their partners, agents, officers and
employees, but only to the extent of any recovery made by the parties hereto for
such loss or damage under any insurance policy now or hereafter issued covering
the Premises, Building or Project. Landlord and Tenant agree immediately to give
their respective insurance companies which have issued policies of insurance
covering any risk of direct physical loss, written notice of the terms of the
mutual waivers contained in this section, and to have the insurance policies
properly endorsed, if necessary, to prevent the invalidation of the insurance
coverages by reason of the mutual waivers. In the event either of Landlord's or
Tenant's insurance companies is unwilling or unable to provide the necessary
endorsement(s), the foregoing waiver by the party whose insurance company is
unwilling or unable to provide the necessary endorsement(s) shall be invalid.
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<PAGE>
7.05 HOLD HARMLESS. Landlord shall not be liable to Tenant, or to
-------------
Tenant's employees, agents, Students, invitee, licensees, contractors or
visitors, or to any other person, for any injury to person or damage to property
or for consequential damages of any nature on or about the Premises, Building or
Project, caused by any act or omission of Tenant, its agents, servants or
employees, or of any other persons entering upon the Premises, Building or
Project under express or implied invitation by Tenant, or caused by the
Premises, the Building, the Project or the improvements located thereon becoming
out of repair, the failure or cessation of any service provided by Landlord
(including security service and devices), or caused by leakage of gas, oil,
water or steam or by electricity emanating from the Premises, the Building or
the Project, unless such injury or consequential damages were caused solely by
the gross negligence or willful misconduct of Landlord, its agents or its
employees. Tenant agrees to indemnify and hold harmless Landlord of and from any
loss, attorney's fees, expenses or claims (i) arising out of any such damage or
injury or arising out of any and all defaults by Tenant under this Agreement, or
(ii) resulting from the use or occupancy of the Premises, or any balcony
adjacent to or connected to the Premises, or (iii) resulting from failure of
Tenant to comply with any rules or regulations set forth in EXHIBIT "E" attached
hereto, except when such event is caused solely by the gross negligence or
willful misconduct of the Landlord, its agents or employees.
7.06 TENANT'S INSURANCE. Tenant shall, at its sole expense, maintain at
------------------
all times during the Term (i) fire and extended coverage insurance with respect
to Tenant's improvements to the Premises and any and all furniture, equipment,
supplies and other property owned, leased, held or possessed by Tenant in an
amount equal to the full replacement value of such improvements and property, as
such may increase from time to time, and naming Landlord as an additional
insured, and (ii) public liability insurance with respect to the Premises and
the conduct or operation of Tenant's business therein, naming Landlord as an
additional insured, with limits of not less than $1,000,000.00 for death or
bodily injury to any one or more persons in a single occurrence and
$1,000,000.00 for property damage. Tenant shall deliver a certificate of such
insurance to Landlord on or before the Commencement Date, and thereafter from
time to time upon request. All insurance which Tenant is required to carry
hereunder shall be carried with companies satisfactory to Landlord licensed to
do business in Georgia and shall be noncancelable except after thirty (30) days
written notice to Landlord.
ARTICLE 8.00 CONDEMNATION
8.01 SUBSTANTIAL TAKING. If all or a substantial part of the Premises
------------------
are taken for any public or quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain or by purchase in lieu
thereof, and the taking would prevent or materially interfere with the use of
the Premises for the purpose for which they are then being used, this Agreement
shall terminate and the rent shall be abated during the unexpired portion of
this Agreement effective on the date physical possession is taken by the
condemning authority.
8.02 PARTIAL TAKING. In the event a portion of the Premises shall be
--------------
taken for any public or quasi-public use under any governmental law, ordinance
or regulation, or by right of eminent domain or by purchase in lieu thereof, and
this Agreement is not terminated as provided in section 8.01 above, to the
extent sufficient condemnation awards or sale proceeds in lieu thereof to enable
Landlord to restore and reconstruct the Premises are made available to Landlord
by the holder of any
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<PAGE>
mortgage or deed to secure a debt encumbering the Building, Landlord shall, at
Landlord's sole risk and expense, restore and reconstruct the Building and other
improvements on the Premises to the extent necessary to make it reasonably
tenantable. The rent payable under this Agreement during the unexpired portion
of the Term shall be adjusted to such an extent as may be fair and reasonable
under the circumstances; however, if such taking materially impairs the
operation of Tenant's business, and Landlord is unable to offer Tenant
substitute space, the Lease may be cancelled at Tenant's option with sixty (60)
days prior written notice to Landlord.
8.03 TENANT'S CLAIM. In the event of any total, substantial or partial
--------------
takings described in Sections 8.01 and 8.02, Landlord shall be entitled to
receive the entire condemnation award without deduction therefrom for any
interest of Tenant in the Premises, but Tenant shall have the right to make a
separate claim with the condemning authority for, and to receive therefor, (i)
any moving expenses incurred by Tenant as a result of such condemnation; (ii)
any costs incurred or paid by Tenant in connection with any alteration or
improvement made by Tenant to the Premises, (iii) the value of any of Tenant's
personal property taken; (iv) Tenant's loss of business income; and (v) any
other separate claim which Tenant may hereafter be permitted to make under
applicable law; provided, however, that such other separate claims shall not
reduce or adversely affect the amount of Landlord's award.
ARTICLE 9.00 ASSIGNMENT OR SUBLEASE
9.01 LANDLORD ASSIGNMENT. Landlord shall have the right to sell,
-------------------
transfer or assign, in whole or in part, its rights and obligations in this
Agreement and in the Building. Any such sale, transfer or assignment shall
operate to release Landlord from any and all liabilities under this Agreement
arising after the date of such sale, assignment or transfer.
9.02 TENANT ASSIGNMENT. Tenant shall not assign, in whole or in part,
-----------------
this Agreement, or allow it to be assigned, in whole or in part, by operation of
law or otherwise or mortgage or pledge the same, or sublet the Premises, in
whole or in part, without the prior written consent of Landlord (which consent
shall not be unreasonably withheld), and in no event shall any such assignment
or sublease ever release Tenant or any guarantor from any obligation or
liability hereunder. In determining the reasonableness of Landlord's decision to
grant or withhold its consent to a proposed assignment or sublease, Landlord may
take into consideration all relevant factors surrounding the proposed assignment
or sublease, including, without limitation, the following: (a) the business
reputation of the proposed assignee or subtenant and its officers, directors and
stockholders; (b) the nature of the business and the proposed use of the
Premises by the proposed assignee or subtenant in relation to the other tenants
or occupants of the Project; (c) the financial condition of the proposed
assignee or subtenant; (d) restrictions, if any, contained in other leases or
agreement affecting Project; (e) the effect that the proposed assignee's or
subtenant's occupancy or use of a portion of the premises would have upon the
operation and maintenance of the Project and Landlord's investment therein; (f)
the extent to which the proposed assignee or subtenant and Tenant provide
Landlord with assurances reasonably satisfactory to Landlord as to the
satisfaction of Tenant's obligations hereunder, including the payment of rent;
(g) restrictions, if any, imposed by the holder of any deed to secure debt or
mortgage encumbering the Project or any portion thereof. Without limiting the
generality of the foregoing, (h) no sublease of less than the entire Premises
shall be permitted hereunder if Landlord disapproves of the size and
configuration of the space which is proposed to
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<PAGE>
be subleased; (ii) no sublease or assignment shall be permitted hereunder unless
such sublease or assignment expressly requires the subtenant or assignee to
strictly comply with the requirements of sections 1.06 and 3.01 of this
Agreement. No assignee or subtenant of the Premises or any portion thereof may
assign or sublet the Premises or any portion thereof.
9.03 CONDITIONS OF ASSIGNMENT. If Tenant desires, to assign or sublet
------------------------
all or any part of the Premises, it shall so notify Landlord at least thirty
(30) days in advance of the date on which Tenant desires to make such assignment
or sublease. At the time Tenant submits such a request, Tenant shall pay to
Landlord, Landlord's then standard processing fee and shall reimburse Landlord
for all legal fees incurred in connection with Tenant's request. Tenant shall
provide Landlord with a copy of the proposed assignment or sublease and such
information as Landlord might request concerning the proposed sublessee or
assignee to allow Landlord to make informed judgments as to the financial
condition, reputation, operations and general desirability of the proposed
subtenant or assignee. Within fifteen days after Landlord's receipt of Tenant's
proposed assignment or sublease and all required information concerning the
proposed subtenant or assignee, Landlord shall have the following options: (1)
cancel this Agreement as to the Premises or portion thereof proposed to be
assigned or sublet; (2) consent to the proposed assignment or sublease, and, if
the rent due and payable by any assignee or sublessee under any such permitted
assignment or sublease (or a combination of the rent payable under such
assignment or sublease plus any bonus or any other consideration or any payment
incident thereto) exceeds the rent payable under this Agreement for such space,
Tenant shall pay to Landlord all such excess rent and other excess consideration
within ten (10) days following receipt thereof by Tenant; or (3) subject to the
provisions of Section 9.02, refuse to consent to the proposed assignment or
sublease, which refusal shall be deemed to have been exercised unless Landlord
gives Tenant written notice providing otherwise. In the event all or any part of
the Premises are assigned or sublet, Landlord may, at its option, collect
directly from the assignee or subtenant all rents becoming due to Tenant by
reason of the assignment or sublease, and Landlord shall have a security
interest in all properties on the Premises to secure payment of such sums. Any
collection directly by Landlord from the assignee or subtenant shall not be
construed to constitute a novation or a release of Tenant or any guarantor from
the further performance of its obligations under this Agreement. No assignment
of this Agreement consented to by Landlord shall be effective until Landlord
shall receive an original assumption agreement, in form and substance
satisfactory to Landlord, signed by Tenant and Tenant's assignee.
9.04 RIGHTS OF MORTGAGEE AND OTHERS. Tenant accepts this Agreement
------------------------------
subject and subordinate to the lien or security title of any mortgage or deed to
secure debt presently existing or hereafter created upon the Building and to all
existing restrictions, covenants, easements and agreements with respect to the
Project or any part thereof, and all amendments, modifications and restatements
thereof and all replacements and substitutions therefor. Landlord is hereby
irrevocably vested with full power and authority to subordinate Tenant's
interest under this Agreement to the lien or security title of any mortgage or
deed to secure debt hereafter placed on the Building, and to any future
instrument amending, modifying, restating, replacing or substituting for any
such existing recorded restrictions, covenants, easements and agreements; Tenant
agrees upon demand to execute additional instruments subordinating this
Agreement as Landlord may require. If the interests of Landlord under this
Agreement shall be transferred by reason of exercise of a power of sale,
foreclosure or other proceedings for enforcement of any mortgage or deed to
secure debt on the Building, Tenant shall be bound to the transferee (sometimes
called the "Purchaser"), at the option
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<PAGE>
of the Purchaser, under the terms, covenants and conditions of this Agreement
for the balance of the Term remaining, and any extensions or renewals, with the
same force and effect as if the Purchaser was Landlord hereunder, and, if
requested by the Purchaser, Tenant agrees to be bound and obligated hereunder to
the Purchaser (including the mortgagee or grantee under any such mortgage or
deed to secure debt) as its Landlord.
9.05 ESTOPPEL CERTIFICATES. Tenant agrees to furnish, from time to
---------------------
time, within ten (10) days after receipt of a request from Landlord or
Landlord's mortgagee, a statement certifying, if applicable, the following: that
Tenant is in possession of the Premises; the Premises are acceptable; the
Agreement is in full force and effect; the Agreement is unmodified; Tenant
claims no present charge, lien, or claim of offset against rent; the rent is
paid for the current month, but is not prepaid for more than one month and will
not be prepaid for more than one month in advance; there is no existing default
by reason of some act or omission by Landlord; and such other matters as may be
reasonably required by Landlord or Landlord's mortgagee. Tenant's failure to
deliver such statement within ten (10) days after written request from Landlord,
in addition to being a default under this Agreement, shall be deemed
conclusively that this Agreement is in full force and effect except as declared
by Landlord, that Landlord is not in default of any of its obligations under
this Agreement, and that Landlord has not received more than one month's rent in
advance.
ARTICLE 10.00 DEFAULT AND REMEDIES
10.01 DEFAULT BY TENANT. The following shall be deemed to be Events of
-----------------
Default by Tenant under this Agreement: (1) Tenant shall fail to pay when due
any installment of Rent or any other payment required pursuant to this Agreement
whether Tenant occupies or has vacated; (2) Tenant shall abandon any substantial
portion of the Premises without a thirty (30) day written notice to Landlord;
(3) Tenant shall fail to comply with any term, provision or covenant of this
Agreement, other than the payment of Rent, and the failure is not cured within
thirty days after notice to Tenant; (4) Tenant shall file a petition or be
adjudged bankrupt or insolvent under any applicable federal or state bankruptcy
or insolvency law or admit that it cannot meet its financial obligations as they
become due; or a receiver or trustee shall be appointed for all or substantially
all of the assets of Tenant; or Tenant shall make a transfer in fraud of
creditors or shall make an assignment for the benefit of creditors; or (5)
Tenant shall do or permit to be done any act which results in a lien being filed
against the Premises, the Building or the Project.
10.02 REMEDIES FOR TENANT'S DEFAULT. Upon the occurrence of any Event
-----------------------------
of Default, Landlord may at its option pursue any one or more of the following
remedies, and any and all other rights or remedies accruing to Landlord by law
or otherwise, without any notice or demand to the extent permitted by applicable
law:
(a) Commence dispossessory proceedings with or without the
termination of this Agreement.
(b) Upon any termination of Tenant's right to possession only without
termination of the Agreement, Landlord may, at Landlord's option,
enter into the Premises, remove Tenant's signs and other
evidences of tenancy, and take and hold possession thereof as
provided below, without such entry and possession terminating the
Agreement or
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<PAGE>
releasing Tenant, in whole or in part, from any obligation,
including Tenant's obligation to pay Rent including any
amounts treated as Additional Rent, hereunder for the full
Term. In any such case, Tenant shall pay forthwith to
Landlord, if and when Landlord so elects, a sum equal to the
discounted then present value of the Rent, including any
amounts treated as Additional Rent hereunder, and other sums
provided herein to be paid by Tenant for the remainder of the
stated Term hereof, computed at a rate of eight percent (8%)
per annum. The payment of the foregoing amounts shall not
constitute payment of Rent in advance for the remainder of the
Term. Instead, such sum shall be paid as agreed liquidated
damages and not as a penalty; the parties agree that is
difficult or impossible to calculate the damages which
Landlord will suffer as a result of Tenant's default, and this
provision is intended to provide a reasonable estimate of such
damages. Tenant waives any right to assert that Landlord's
actual damages are less than the amount calculated hereunder;
Landlord waives any right to assert that its damages are
greater than the amount calculated hereunder. Upon the receipt
from Tenant of the sum required to be paid pursuant to this
subsection, Landlord shall use reasonable efforts to relet the
Premises. Upon making such payment and after Landlord has
received in full the balance of the Rent and other sums it
would have received over the remainder of the Term (I.E., the
difference between face amount of Rent and Additional Rent due
hereunder for the entire Term and the amount paid to Landlord
by Tenant), together with the reimbursement or payment of any
sums expended by Landlord on account of the cost of repairs,
alterations, additions, redecorating, and Landlord's expenses
of reletting and collection of the rental accruing therefrom
(including attorney's fees and broker's commissions), Tenant
shall receive from Landlord all Base Rent received by Landlord
from other tenants on account of the Premises during the Term
hereof, provided that the amounts to which Tenant shall become
so entitled shall in no event exceed the entire amount
actually paid by Tenant to Landlord pursuant to this
subsection 10.02(b).
(c) Commence proceedings against Tenant for all amounts owed by
Tenant to Landlord, whether as Base Rent, Additional Rent,
damages or otherwise.
(d) Terminate the Term, in which event Tenant shall immediately
surrender the Premises to Landlord. Tenant agrees to pay on
demand the amount of all loss and damage which Landlord may
suffer by reason of the termination of the Term under this
section or otherwise, which loss and damage shall include,
without limitation, (i) an amount which, at the date of the
Event of Default, represents the present value, as computed
using an eight percent (8%) discount rate, of the excess, if
any, of (A) the Base Rent, Additional Rent and all other
amounts which would have otherwise been payable hereunder
during the remainder of the Term over (B) the aggregate
reasonable rental value of the Premises for the same period;
and (ii) an amount equal to the balance that would still be
owing to Landlord after such termination date if the sum of
concessions and other inducements made available to Tenant
(including without limitation, the value of any abated or
"free rent", "free parking" or other rent concessions, moving
expenses paid by Landlord, payments made by Landlord with
respect to Tenant's former leased premises, the cost of
improvements constructed by
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<PAGE>
Landlord, tenant improvement allowances made available by
Landlord and brokerage commissions paid by Landlord) had been
treated as a loan from Landlord to Tenant accruing interest at
the rate of eight percent (8%) per annum, repayable over the
original term of this Agreement in equal monthly installments
of principal and interest such that the unpaid balance of such
hypothetical loan upon the expiration of the original Term of
this Agreement shall be $0.
(e) Upon any termination of Tenant's right to possession only,
without termination of the Agreement, Landlord may, at
Landlord's option, enter into the Premises, remove Tenant's
signs and other evidences of tenancy, and take and hold
possession thereof as provided below, without such entry and
possession terminating the Agreement or releasing Tenant, in
whole or in part, from any obligation, including Tenant's
obligation to pay Rent, including any amounts treated as
Additional Rent, hereunder for the full Term. In any such
case, Landlord may relet the Premises on behalf of Tenant and
receive directly the Rent by reason of the reletting. Tenant
agrees to pay Landlord on demand any deficiency that may arise
by reason of any reletting of the Premises; further, Tenant
agrees to reimburse Landlord upon demand for any expenditures
made by it for remodeling or repairing in order to relet the
Premises and for all other expenses incurred in connection
with such reletting (including without limitation attorney's
fees and brokerage commissions).
(f) Enter upon and take possession of the Premises, without being
liable for prosecution of any claim for damages or for
trespass or other tort.
(g) Do or cause to be done whatever Tenant is obligated to do
under the terms of this Agreement, in which case Tenant agrees
to reimburse Landlord on demand for any and all costs or
expenses which Landlord may thereby incur. Tenant agrees that
Landlord shall not be liable for any damages resulting to
Tenant from effecting compliance with Tenant's obligations
under this section, whether caused by the negligence of
Landlord or otherwise.
(h) Enforce the performance of Tenant's obligations hereunder by
injunction or other equitable relief (which remedy may be
exercised upon any breach or default or any threatened breach
or default of Tenant's obligations hereunder).
(i) Declare immediately due and payable in an amount equal to the
balance that would still be owing to Landlord after the date
said amounts are declared due and payable if the sum of
concessions and other inducements made available to Tenant
(including without limitation, the value of any abated or
"free rent", "free parking" or other rent concessions, moving
expenses paid by Landlord, payments made by Landlord with
respect to Tenant's former leased premises, the cost of
improvements constructed by Landlord, tenant improvement
allowances made available by Landlord and brokerage
commissions paid by Landlord) had been treated as a loan from
Landlord to Tenant accruing interest at the rate of eight
percent (8%) per annum, repayable over the original Term of
this Agreement in equal monthly installments of principal and
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interest such that the unpaid balance of such hypothetical
loan upon the expiration of the original Term of this
Agreement shall be $0.
ARTICLE 11.00 LIENS
11.01 LANDLORD'S LIEN. If Tenant abandons or vacates any substantial
---------------
portion of the Premises or is in default in the payment of any Rent, damages or
other payments required to be made by this Agreement or is in default of any
other provision of this Agreement, Landlord may, in accordance with applicable
law, enter upon the Premises and take possession of all or any part of the
personal property, (but not Tenant's files, data base, whether written or
electronic, computer equipment or any of Tenant's intangible personal property),
and may sell all or any part of the personal property at a public or private
sale, in one or successive sales, with or without notice to the extent permitted
by applicable law, to the highest bidder for cash, and, on behalf of Tenant,
sell and convey all or part of the personal property to the highest bidder,
delivering to the highest bidder all of Tenant's title and interest in the
personal property sold. The proceeds of the sale of the personal property shall
be applied by Landlord toward the reasonable costs and expenses of the sale,
mcluding attorney's fees, and then toward the payment of all sums then due by
Tenant to Landlord under the terms of this Agreement. Any excess remaining shall
be paid to Tenant or any other person entitled thereto by law.
ARTICLE 12.00 RELOCATION
12.01 RELOCATION OPTION. This paragraph intentionally deleted.
-----------------
12.02 EXTREMES. This paragraph intentionally deleted.
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ARTICLE 13.00 DEFINITIONS
13.01 ABANDON "Abandon" means the vacating of all or a substantial
-------
portion of the Premises by Tenant, or the failure by Tenant to use the Premises
as regularly as would be expected by a similar tenant, whether or not Tenant is
in default of the Rent payments due under this Agreement.
13.02 ACT OF GOD OR FORCE MAJEURE. An "Act of God" or "force majeure"
---------------------------
is defined for purposes of this Agreement as strikes, lockouts, sitdowns,
material or labor restrictions by any governmental authority, unusual
transportation delays, riots, floods, washouts, explosions, earthquakes, fire,
storms, weather (including wet grounds or inclement weather which prevents
construction), acts of the public enemy, wars, insurrections and any other cause
not reasonably within the control of Landlord and which by the exercise of due
diligence Landlord is unable, wholly or in part, to prevent or overcome.
13.03 ADDITIONAL RENT. "Additional Rent" as used in this Agreement
---------------
shall mean all sums due Landlord from Tenant under this Agreement, other than
Base Rent, including, without limitation, amounts specified in sections 2.02,
2.04, 2.05, 2.07, 4.04, 4.06, 5.01 and 5.02.
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13.04 BASE RENT. "Base Rent" as used in this Agreement means the amount
---------
specified in section 1.04 and EXHIBIT "D" as Base Rent.
13.05 BUILDING. "Building" means the building known as Lakeside
--------
Commons.
13.06 COMMENCEMENT DATE. "Commencement Date" shall be the date set
-----------------
forth in section 1.03. The Commencement Date shall constitute the commencement
of the term of this Agreement for all purposes, whether or not Tenant has
actually taken possession.
13.07 EVENTS OF DEFAULT. "Events of Default" as used in this Agreement
-----------------
means those events specified in section 10.01 as Events of Default.
13.08 LANDLORD. "Landlord" as used in this Agreement means the entity
--------
or person identified as Landlord in section 1.01.
13.09 OPERATING EXPENSES. "Operating Expenses" as used in this
------------------
Agreement is defined in section 2.03.
13.10 PREMISES. "Premises" as used in this Agreement means the Premises
--------
described in section 1.02.
13.11 PROJECT. "Project" means the project commonly known as Lakeside
-------
Commons.
13.12 RENT. "Rent", "rent", or "rental" means, collectively, Base Rent
----
and Additional Rent.
13.13 SQUARE FEET. "Square feet" or "square foot" as in this Agreement
-----------
includes the area contained within the Premises increased by the application of
a common area percentage factor based on the relative area of the Premises to
the total Building area.
13.14 TENANT. "Tenant" as used in this Agreement means the entity or
------
person identified as Tenant in section 1.01.
13.15 TERM. "Term" as used in this Agreement means the period of time
----
specified in section 1.03 commencing on the Commencement Date and terminating at
the time specified in section 1.03.
13.16 STUDENT. "Student" as used in this Agreement means those persons
-------
registered with Tenant as a matriculating participant in the educational
programs offered by Tenant under Article 1.06. Student shall not be Tenant as
described in Article 13.14 or Section 1.01, but shall be Tenant's guest or
invitee only, not subject to the privileges, rights or benefits granted Tenant
under this Lease.
13.17 TENANTS. "Tenants" as used in this Agreement means those leasing
-------
and occupying space in the project during the term of Tenant's Lease.
ARTICLE 14.00 MISCELLANEOUS
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<PAGE>
14.01 WAIVER. Failure of Landlord to declare an Event of Default
------
immediately upon its occurrence, or delay in taking any action in connection
with an Event of Default, shall not constitute a waiver of default, but Landlord
shall have the right to declare the default at any time and take such action as
is lawful or authorized under this Agreement. Pursuit of any one or more of the
remedies set forth in article 10.00 above shall not preclude pursuit of any one
or more of the other remedies provided elsewhere in this Agreement or provided
by law, nor shall pursuit of any remedy constitute forfeiture or waiver of any
rent or damages accruing to Landlord by reason of the violation of any of the
terms, provisions or covenants of this Agreement. Failure by Landlord to enforce
one or more of the remedies provided upon an Event of Default shall not be
deemed or construed to constitute a waiver of the default or of any other
violation or breach of any of the terms, provisions and covenants contained in
this Agreement.
14.02 ACT OF GOD. Landlord shall not be required to perform any
----------
covenant or obligation in this Agreement, or be liable in damages to Tenant,
Tenant's invitee, licensees or other visitors to the Premises, Project or
Building, so long as the performance or nonperformance of the covenant or
obligation is delayed, caused or prevented by an Act of God or force majeure, or
by Tenant.
14.03 ATTORNEY'S FEES. In the event Tenant or Landlord defaults in the
---------------
performance of any of the terms, covenants, agreements or conditions contained
in this Agreement and Landlord or Tenant places in the hands of an attorney the
enforcement of all or any part of this Agreement, the collection of any rent due
or to become due or recovery of the possession of the Premises, both Landlord
and Tenant agree to pay costs of collection, or enforcement, including
reasonable attorney's fees for the services of the attorney, whether suit is
actually filed or not, if such party:
(a) initiated the litigation and substantially obtained the relief it
sought, either through a judgment or the losing party's voluntary
action before trial or judgment; or
(b) did not initiate the litigation and judgment is entered for
either party, but without substantially granting the relief
sought.
14.04 SUCCESSORS. This Agreement shall be binding upon and inure to the
----------
benefit of Landlord and Tenant and their respective heirs, personal
representatives, successors and assigns. It is hereby covenanted and agreed that
should Landlord's interest in the Premises cease to exist for any reason during
the term of this Agreement, then notwithstanding the happening of such event,
this Agreement aevertheless shall remain unimpaired and in full force and effect
and Tenant hereunder agrees to attorn to the then owner of the Premises.
14.05 RENT TAX. If applicable in the jurisdiction where the Premises
--------
are situated, Tenant shall pay and be liable for all rental, sales and use taxes
or other similar taxes, if any, levied or imposed by any city, state or county
or other governmental body having authority, such payments to be in addition to
all other payments required to be paid to Landlord by Tenant under the terms of
this Agreement. Any such payment shall be paid concurrently with the payment of
the Rent, Additional Rent, Operating Expenses or other charge upon which the tax
is based as set forth above.
14.06 CAPTIONS. The captions appearing in this Agreement are inserted
--------
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of any section.
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<PAGE>
14.07 NOTICE. All rent and other payments required to be made by Tenant
------
shall be payable to Landlord at the address set forth in section 2.01. All
payments required to be made by Landlord to Tenant shall be payable to Tenant at
the address set forth in section 2.01. Any notice or document required or
permitted to be delivered by the terms of this Agreement shall be deemed to be
delivered (whether or not actually received) when personally delivered
(including without limitation delivery by any commercial courier service) or
when deposited in the United States mail, postage prepaid, certified mail,
return receipt requested, addressed to Landlord and Tenant at the addresses set
forth in section 1.05. Either party may by notice to the other specify a
different address for payments or for delivery of notices.
14.08 SUBMISSION OF AGREEMENT. Submission of this Agreement to Tenant
-----------------------
for signature does not constitute a reservation of space or an option to lease.
This Agreement is not effective until execution by and delivery to both Landlord
and Tenant.
14.09 CORPORATE AUTHORITY. If Tenant executes this Agreement as a
-------------------
corporation, each of the persons executing this Agreement on behalf of Tenant
does hereby personally represent and warrant that Tenant is a fully authorized
and existing corporation, that Tenant is qualified to do business in the state
in which the Premises are located, that the corporation has full right and
authority to enter into this Agreement, and that each person signing on behalf
of the corporation is authorized to do so.
14.10 SEVERABILITY. If any provision of this Agreement or the
------------
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the,
application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
14.11 LANDLORD'S LIABILITY. If Landlord shall be in default under this
--------------------
Agreement and, if as a consequence of such default, Tenant shall recover a money
judgment against Landlord, such judgment shall be satisfied only out of the
right, title and interest of Landlord in the Building as the same may then be
encumbered and neither Landlord nor any person or entity comprising Landlord
shall be liable for any deficiency. In no event shall Tenant have the right to
levy execution against any property of Landlord nor any person or entity
comprising Landlord other than its interest in the Building as herein expressly
provided. In no event shall any partner of Landlord nor any joint venturer in
Landlord, nor any officer, director or shareholder of Landlord or any such
partner or joint venturer of Landlord be personally liable hereunder.
14.12 NO BROKER CLAIMS. Landlord and Tenant acknowledge that Landlord
----------------
has agreed to pay brokerage commissions to Richard Bowers & Co., representing
----------------------------------
the Tenant, and Jamestown Realty Company, L.P., representing the Landlord
- -------------------------------------------------------------------------
(referred to collectively for purposes of this section as "Brokers") with
respect to the Premises pursuant to the terms of separate agreement. Landlord
and Tenant hereby warrant and represent to the other that the party making said
warranty and representation has not dealt with any broker, agent or finder,
other than Brokers. In connection with this Agreement, and, subject to the
default and remedies provisions of Article 10 hereof, Landlord and Tenant
covenant and agree to indemnify and hold the other harmless from and against any
and all loss, liability, damage, claim, judgment, cost or expense (including but
not limited to attorney's fees and expenses and court costs) that may be
incurred or suffered by the other because of any claim
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<PAGE>
for any fee, commission or similar compensation with respect to this Agreement,
made by any broker, agent or finder, other than Brokers, claiming to have dealt
with the indemnifying party, whether or not such claim is meritorious.
14.13 NO ESTATE IN LAND. It is expressly agreed that under this
-----------------
Agreement Tenant shall be granted a usufruct only in the Premises, and not a
leasehold or other estate in land, and that Tenant's interest hereunder is not
subject to levy, execution and sale and is not assignable except with Landlord's
prior written consent.
14.14 NO JOINT VENTURE. Nothing contained in this Agreement or any
----------------
exhibits hereto shall be deemed or construed to create a partnership or joint
venture between Landlord and Tenant or to create any relationship between them
except the relationship of Landlord and Tenant.
14.15 OWNERSHIP AND MANAGEMENT. The name and address of the person
------------------------
authorized to act for and on behalf of the owner of the Building for the purpose
of receiving and receipting for demands and notices is:
Lakeside Commons Partners
On behalf of Jamestown Management Company
One Lakeside Commons
990 Hammond Drive
Suite 520
Atlanta, Georgia 30328
Attn: Messrs. John W. Houser and Steve Zoukis
The name and address of the person authorized to manage the Building
is:
Jamestown Management Company
One Lakeside Commons
990 Hammond Drive
Suite 520
Atlanta, Georgia 30328
Attn: Mr. John Houser
Landlord shall advise Tenant of any change in the foregoing names and
addresses either by notice hereunder or by posting a notice of such change in a
conspicuous place.
14.16 TIME OF ESSENCE. Time is of the essence of this Agreement.
---------------
14.17 PARKING. Landlord shall make available in the parking areas of
-------
the Project to Tenant's officers and staff only, throughout the initial term of
the Lease, a number of parking spaces (on an unassigned, nonexclusive basis)
determined by multiplying 3.3 by the number of square feet of area contained in
the Premises, dividing said product by 1,000, and then rounding such resulting
number to the nearest whole number of spaces, in areas to be determined from
time to time by Landlord.
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<PAGE>
Tenant's Student parking shall be limited to available spaces on the upper level
of the existing parking deck only on an "as available", unassigned, non
exclusive basis. Vehicles of Students parked otherwise will be towed at
Students' sole risk and expense. The availability of Student parking shall at
all times be subordinate to the rights of all other Tenants of the project
(collectively and singularly) as set forth in each Lease Agreement. The parking
requirements of the existing Tenants shall always take precedent over Student's
and, when Student and Tenants parking exceeds the total number of spaces
allocated by lease assignment to all the Tenants of the building, Student
parking will be limited to open and available spaces only. As a part of Student
registration, Tenant shall require each Student to post a parking decal to each
Student's auto and execute a parking agreement which will hold Landlord harmless
for action taken as a result of Student autos parked other than as permitted
herein.
14.18 BANKRUPTCY.
----------
(a) Rent. All amounts payable by Tenant to Landlord hereunder,
whether called Rent, Base Rent, Additional Rent or otherwise,
shall be deemed rent for purposes of Section 502(b)(6) of the
Federal Bankruptcy Code, 11 U. S. C. section 101 ET SEQ. (the
"Bankruptcy Code").
(b) ASSIGNMENT. If Tenant or any trustee of Tenant assumes
----------
this Agreement and Tenant or any trustee of Tenant proposes to
assign the same pursuant to the provisions of the Bankruptcy
Code to any person or entity who shall have made a bona fide
offer to accept an assignment of this Agreement on terms
acceptable to Tenant, then notice of such proposed assignment,
setting forth (i) the name and address of such person or
entity, (ii) all of the terms and conditions of such offer,
and (iii) the adequate assurance to be provided Landlord to
assure such person's or entity's future performance under this
Agreement, including, without limitation, the assurance
referred to in subsections 365(b)(1) and (3) of the Bankruptcy
Code, shall be given to Landlord by Tenant no later than
twenty (20) days after receipt by Tenant, but in any event no
later than ten (10) days prior to the date that Tenant shall
make application to a court of competent jurisdiction for
authority and approval to enter into such assignment and
assumption, and Landlord shall thereupon have the prior right
and option, to be exercised by notice to Tenant given at any
time prior to the effective date of such proposed assignment,
to accept an assignment of this Agreement upon the same terms
and conditions and for the same consideration, if any, as the
bona fide offer made by such person, less any brokerage
commissions which may be payable out of the consideration to
be paid by such person for the assignment of this Agreement.
(c) PAYMENT ON ASSIGNMENT. If this Agreement is assigned to
---------------------
any person or entity pursuant to the provisions of the
Bankruptcy Code any and all moneys or other considerations
payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be
and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant
within the meaning of the Bankruptcy Code. Any and all moneys
or other considerations constituting Landlord's property under
the preceding sentence not paid
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<PAGE>
or delivered to Landlord shall be held in trust for the benefit
of Landlord and be promptly paid to or turned over to Landlord.
(d) DEEMED ASSUMPTION. Any person or entity to which this
-----------------
Agreement is assigned pursuant to the provisions of the
Bankruptcy Code shall be deemed without further act or deed to
have assumed all of the obligations of Tenant arising under this
Agreement on and after the date of such assignment. Any such
assignee shall upon demand execute and deliver to Landlord an
instrument confirming such assumption.
14.19 JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one
---------------------------
person, corporation, partnership or other entity, the liability hereunder of all
such persons, corporations, partnerships or other entities shall be joint and
several.
14.20 COVENANTS AS TO HAZARDOUS MATERIALS. Tenant covenants and agrees
-----------------------------------
not to suffer, permit, introduce or maintain in, on or about any portion of the
Premises, Building or Project, any asbestos, polychlorinated biphenyl, petroleum
products or any other hazardous or toxic materials, wastes and substances which
are defined, determined or identified as such in any federal, state or local
laws, rules or regulations (whether now existing or hereafter enacted or
promulgated) or any judicial or administrative interpretation of any thereof,
including an judicial or administrative orders or judgments. Any such asbestos,
polychlorinated biphenyl, petroleum products and any such other materials,
wastes and substances are herein collectively called "Hazardous Materials".
Tenant further covenants and agrees to indemnify, protect and save Landlord
harmless against and from any and all damages, losses, liabilities, obligations,
penalties, claims, litigation, demands, defenses, judgments, suits, proceedings,
costs, disbursements or expenses of any kind or of any nature whatsoever
(including, without limitation, attorneys' and experts' fees and disbursements)
which may at any time be imposed upon, incurred by or asserted or awarded
against Landlord and arising from or out of any Hazardous Materials on, in,
under or affecting all or any portion of the Building, Project or the Premises,
introduced by, or on behalf of, Tenant including, without limitation, (i) the
costs of removal of any and all Hazardous Materials from all or any portion of
the Building, Premises, or Project, (ii) additional costs required to take
necessary precautions to protect against the release of Hazardous Materials on,
in, under or affecting the Building, Premises, or Project, into the air, any
body of water, any other public domain or any surrounding areas, and (iii) any
costs incurred to comply, in connection with all or any portion of the Building,
Premises, or Project, with all applicable laws, orders, judgments and
regulations with respect to Hazardous Materials.
14.21 THEFT OR BURGLARY. Landlord shall not be liable to Tenant for
-----------------
losses due to theft or burglary, or for damages done by unauthorized persons to
the Premises or the Building, unless such theft, burglary or damage is caused
solely by Landlord's negligence or willful misconduct.
ARTICLE 15.00 AMENDMENT AND LIMITATION OF WARRANTIES
15.01 ENTIRE AGREEMENT. IT IS EXPRESSLY AGREED BY TENANT, AS A MATERIAL
----------------
CONSIDERATION FOR THE EXECUTION OF THIS AGREEMENT, THAT THIS AGREEMENT, WITH THE
SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT OF
THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS, WARRANTIES,
UNDERSTANDINGS,
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<PAGE>
STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS AGREEMENT OR THE
EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN WRITING IN
THIS AGREEMENT.
15.02 AMENDMENT. THIS AGREEMENT MAY NOT BE ALTERED, WAIVED, AMENDED OR
---------
EXTENDED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LANDLORD AND TENANT.
15.03 LIMITATION OF WARRANTIES. LANDLORD AND TENANT EXPRESSLY AGREE
------------------------
THAT THERE ARE AND SHALL BE NO IMPLIED WARRANTIES OR MERCHANTABILITY,
HABITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT
OF THIS AGREEMENT AND THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE
EXPRESSLY SET FORTH IN THIS AGREEMENT.
ARTICLE 16.00 OTHER PROVISIONS
16.01 SPECIAL STIPULATIONS: The special stipulations, if any, set forth
--------------------
in Exhibit "G" attached hereto are hereby made a part hereof by reference. To
----------
the extent that such special stipulations conflict or are inconsistent with any
of the foregoing provisions of this Agreement, the stipulations shall control.
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<PAGE>
ARTICLE 17.00 SIGNATURES
SIGNED at Fulton County, Georgia this 10th day of December, 1992.
LANDLORD TENANT
LAKESIDE COMMONS PARTNERS, a AMERICAN SCHOOLS OF
Georgia general partnership PROFESSIONAL PSYCHOLOGY, INC.
BY: Jamestown Management Company, a BY: /S/ Horold J. O'DonnelL
------------------------
Georgia general partnership, as managing ITS: President
------------------------
partner
BY: Houser Enterprises. Inc. a WITNESS: /s/ Robert J. Lullo
----------------------- ---------------------
Georgia corporation, as DATE: 12/8/92
---------------------
general partner
BY: /s/ John W. Houser
-------------------------
John W. Houser,
-------------------------
ITS: President
-------------------------
WITNESS: Nancy M. Miles
-------------------------
DATE: 12/10/92
-------------------------
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<PAGE>
EXHIBIT "B"
-----------
PREPARATION OF PREMISES
I. TENANT'S PLANS AND SPECIFICATIONS
A. Landlord shall cause to be prepared complete, finished,
detailed architectural and engineering drawings and mechanical
plans including all dimensions and specifications for all work
to be performed by Landlord hereunder ("Tenant's Plans"). The
cost of Tenant's Plans shall be charged against the Tenant
Improvement Allowance provided below.
B. Tenant's Plans shall be delivered to Tenant for approval on or
before December 16, 1992. Such approval shall not be
unreasonably withheld. If Tenant shall have reasonable grounds
for withholding its approval of Tenant's Plans, Tenant, within
three (3) business days of receipt of Tenant's Plans, shall
provide Landlord with written notice of its disapproval
detailing with specificity those aspects of Tenant's Plans
which Tenant disapproves. In the event Tenant fails to provide
Landlord with written notice within such three (3) business
day period, Tenant shall conclusively be deemed to have
approved Tenant's Plans. In the event Tenant provides timely
written notice of its disapproval of Tenant's Plans, within
such three (3) business day period, Landlord shall amend
Tenant's Plans accordingly and deliver the amended plans to
Tenant for approval. The same procedures as for the original
Tenant's Plans shall be applicable to any amendments of
Tenant's Plans under the preceding sentences. If Tenant shall
fail to approve Tenant's Plans within the times provided in
this paragraph, then and in addition to any other rights or
remedies of Landlord (including but not limited to the
provisions of Article VI below) at Landlord's option, Landlord
may terminate this Tenancy Agreement. Such option shall not be
exercised until at least thirty (30) days after the default in
question.
C. Without the prior written consent of Landlord, Tenant shall
make no changes in Tenant's Plans after approval thereof.
D. After approval of Tenant's Plans, Landlord shall obtain from
its general contractor and submit to Tenant a quotation of the
cost of improvement of the Premises in accordance with
Tenant's Plans. Upon written approval of such quotation by
Tenant, Landlord and Tenant shall be deemed to have given
final approval to Tenant's Plans, including but not limited to
a date for completion of the work required thereunder, and
Landlord shall be authorized to proceed with the improvement
of the Premises in accordance with Tenant's Plans. Tenant
shall have the right to obtain and approve an alternate
quotation from another contractor, subject to Landlord's
approval of such contractor in Landlord's sole discretion.
Failure of Tenant to approve any such quotation shall abate
Landlord's obligation to proceed with any improvement of the
Premises, but shall not postpone the Commencement Date by more
than seven (7) days.
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<PAGE>
E. Tenant's Plans of Tenant's Work shall be finally approved by
Tenant and Landlord as provided herein no later than December
17, 1992. A copy of Tenant's Plans as so finally approved
shall be signed and dated by both Tenant and Landlord and
delivered to Landlord for its records.
II. LANDLORD'S WORK; TENANT'S WORK
A. Landlord shall perform the following work (herein called "Base
Building Work"), at Landlord's sole cost and expense, except
as otherwise specifically provided to the contrary below,
substantially in accordance with Tenant's Plans as approved by
Landlord:
1. Ventilating and Air-Conditioning - Duct work, supply
and return grilles and thermostats served by a
central outside air system to provide air-
conditioning to suit normal general office space
occupancy. Air supply in tenant spaces is provided by
linear diffusers at the Building perimeter, and lay-
in diffusers in the interior. All perimeter diffusers
are installed by Landlord. Interior lay-in diffusers
are provided by Landlord, with 7 feet of flexible
duct and spin-ins at the maximum rate of 6.5 per
1,000 usable square feet, but the cost and
installation of such diffusers, duct and spin-ins is
not a part of Base Building Work. All relocation or
addition of ducts, diffusers, or grilles is not part
of Base Building Work.
2. Ceiling - Suspending grid acoustical ceiling is
standard in all tenant space. The grid has a white
baked enamel finish, with white 2'x 2' Frost tile.
Landlord installs the grid in 4'x 4' modules, and
provides 2' and 4' tees and all ceiling tile. IMe
installation of all ceiling tile is not part of Base
Building Work.
3. Lighting - Light fixtures in tenant spaces are 2'x
4'x 6" lay-in, deep cell parabolic with 3 tubes.
Landlord will provide these fixtures to a maximum of
10 per 1,000 usable square feet. The installation of
such fixtures is not part of Base Building Work.
4. Electrical Allowance - The average electrical
connected load of the Premises shall be no more than
five watts per square foot of the Premises, allocated
as follows: (i) no more than three (3) watts per
square foot of high voltage electricity, and (ii) no
more than two (2) watts per square foot of low
voltage electricity, with a maximum of one (1)
circuit per 400 square feet relating to standard
tenant loads. For the purposes hereof, the
consumption of electricity by any equipment requiring
dedicated circuits (e.g., copiers, computer circuits,
---
water heaters) does not constitute standard tenant
loads. If the Premises consist of more than one
floor, then the foregoing defined limits apply to
each floor of the Premises. If electrical loads of
the Premises exceed the foregoing defined limits,
either in terms of watts per square foot or circuits
per square foot, then Tenant shall bear all costs
associated with
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<PAGE>
installation of additional electrical panels required
to support such loads and such installation shall not
be a part of Base Building Work.
5. Air-conditioning Specifications - Building standard
air-conditioning system based on an average
electrical connected load of five watts per square
foot and one person per 150 square feet of the
Premises (or on each floor of the Premises if the
Premises consist of more than one floor) in
accordance with the following specifications:
Summer Conditions:
INSIDE TEMPERATURE OUTSIDE TEMPERATURE
------------------ -------------------
78d. F dry bulb 96d. F dry bulb
50% relative humidity 78d. F wet bulb
Winter Conditions:
INSIDE TEMPERATURE OUTSIDE TEMPERATURE
------------------ -------------------
68d. F dry bulb 15d. dry bulb
30% relative humidity 13d. wet bulb
6. Fire Protection - All tenant space will have
sprinklers installed by Landlord in a regular grid
pattern at the rate of 1 head per 225 square feet of
space. Sprinkler heads are ceramic and semi-recessed.
All relocation or addition of heads is not part of
Base Building Work.
7. Blinds - Landlord will furnish and install blinds
with 1" aluminum slats on all exterior windows;
provided, however, the cost and installation of such
blinds is not a part of Base Building Work but is
instead to be paid from the improvement allowance
provided Tenant hereunder. All blinds are installed
with tilt control and top lock mechanisms.
Landlord shall, using the existing improvements now in place
(including existing Base Building Work) and additional labor
and materials as are necessary to complete the work detailed
in Exhibit "A" (not including Alternates) prepared by Hendrick
Associates, dated November 25, 1992; and mutually executed by
Tenant and Landlord, ("Landlord's Work") complete the
improvements, turnkey, at Landlord's sole cost and expense.
B. Any remaining costs and additional expenses of preparation of
Tenant's Plans and of improving the Premises are herein
referred to as "Tenant's Work."
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<PAGE>
III. EXTRA WORK
A. Tenant may request substitutions, additional or extra work
and/or materials over and above that required under Tenant's
Plans approved under Section E of Article I above (herein
called "Extra Work") to be performed by Landlord, provided
that the Extra Work, at Landlord's option, (i) shall not
require the use of contractors or types of contractors other
than those normally engaged by Landlord in the Building: (ii)
shall not delay completion of Landlord's Work or the
Commencement Date; (iii) shall be practicable and consistent
with existing physical conditions in the Building and with the
plans for the Building which have been filed with the
applicable governmental authorities having jurisdiction
thereover; (iv) shall not impair Landlord's ability to perform
any of Landlord's obligations hereunder or under this
Agreement or any other Agreement with respect to space in the
Building; and (v) shall not affect any portion of the Building
other than the Premises. All Extra Work shall require the
installation of new materials and shall be otherwise subject
to Landlord's reasonable approval.
B. Subject to Landlord's written consent, Tenant may request the
omission of an item of work required under the approved
Tenant's Plans, provided that such omission shall not delay
the completion of the Premises, and Landlord thereafter shall
not be obligated to install same. No credit shall be granted
to Tenant for such omitted items.
IV. PAYMENTS
A. The costs of Tenant's Work shall be paid by Tenant to Landlord
as follows:
1. Upon the approval by Tenant and Landlord of Tenant's
Plans and of the quotation estimating the cost of
Tenant's Work, in the manner described in Article I,
Section E of this Exhibit B, Tenant shall pay
forthwith to Landlord fifty percent (50%) of the cost
of Tenant's Work as estimated in the referenced
quotation (the "Initial Payment").
2. Upon substantial completion of the Premises, Tenant
shall pay to Landlord 85 % of the cost of Tenant's
Work, less the amount of the Initial Payment
previously paid to Landlord.
3. Upon the rendering of a reconciliation by Landlord to
Tenant showing the aggregate cost of Tenant's Work
and payments previously made to Landlord, Tenant
shall pay to Landlord the remainder of the cost of
Tenant's Work.
B. As costs are incurred and bills are received by Landlord in
the performance of Extra Work, Tenant shall make periodic
payments to Landlord within ten (10) days after receipt by
Tenant of a statement therefor from Landlord.
C. Upon substantial completion of the Premises in accordance with
Tenant's Plans, Tenant shall pay Landlord for coordination and
supervision of such work an amount
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<PAGE>
equal to 5% of the total cost of such work, which coordination
and supervision fee shall be paid out of the improvement
allowance provided Tenant hereunder.
V. COOPERATION
All work not within the scope of the normal construction trades
employed for the Building, such as the furnishing and installing of
draperies, furniture, telephone equipment and wiring, and office
equipment, shall be furnished and installed by Tenant at Tenant's
expense. Tenant shall adopt a schedule in conformance with the schedule
of Landlord's contractors and shall conduct its work in such a manner
as to maintain harmonious relations and as not to interfere
unreasonably with or delay the work of Landlord's contractors. Tenant
shall cause its telephone contractor to contact Landlord with regard to
installation of a telephone system in the Premises within three (3)
business days of the date Landlord commences construction of the
Premises.
VI. COMMENCEMENT DATE
Subject to the following provisions, the Commencement Date shall be the
earlier of the date on which Tenant occupies the Premises for business,
or the date on which preparation of the Premises in accordance with
Tenant's Plans is substantially complete. For the purposes of this
Agreement, the Premises shall be deemed "substantially complete" upon
the issuance of a certificate of occupancy or temporary certificate of
occupancy with respect to the Premises. The Premises shall be
conclusively presumed to be delivered and accepted in full compliance
with this Agreement on the Commencement date, except for defects of
which Tenant gives Landlord written notice with reasonable specificity
within ten (10) business days after the Commencement Date. If Landlord
shall be delayed in substantially completing the Premises as a result
of:
A. Tenant's failure to furnish when due Tenant's Plans, approvals
of quotations or revisions of Tenant's Plans; or
B. Tenant's failure to file promptly the approved Tenant's Plans
and the mechanical plans and specifications provided for in
Article II hereof; or
C. Extra Work; or
D. Tenant's changes in Tenant's Plans subsequent to approval; or
E. The performance or completion of work in the Premises by
Tenant or by a person, firm or corporation employed by Tenant;
or
F. Any other act or omission caused by or on behalf of Tenant,
including, without limitation, the breach by Tenant of its
obligations under this Agreement; then Landlord shall not be
responsible for any such delays and the Commencement Date
shall be accelerated by the number of days of such delay. In
addition, Tenant shall
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<PAGE>
reimburse Landlord for any and all expenses, losses, costs and
damages suffered by Landlord and caused by such delay.
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<PAGE>
EXHIBIT "C"
-----------
LETTER AGREEMENT AS TO TERM AND PREMISES
Lakeside Commons Partners ("Landlord") and American Schools of Professional
Psychology, Inc., an Illinois corporation ("Tenant"), do each hereby agree and
certify to the other that the Term of that certain Tenancy Agreement between
Landlord and Tenant dated December 4, 1992, commenced February 1, 1993 and will
expire on the 31st day of August, 2003, unless extended or sooner terminated as
may be provided in the Agreement. Tenant hereby acknowledges that it has
accepted delivery of the Premises in "substantially complete" condition as
defined in the Agreement, and that said Premises are in full compliance with all
requirements of the Agreement, except for defects of which Tenant gives Landlord
written notice with reasonable specificity within ten (10) business days from
the commencement date referenced above.
IN WITNESS WHEREOF Landlord and Tenant have executed this instrument
this the 10th day of December, 1992.
LANDLORD TENANTS
LAKESIDE COMMONS PARTNERS, a AMERICAN SCHOOLS OF
Georgia general partnership PROFESSIONAL PSYCHOLOGY, INC.
BY: Jamestown Management Company, a BY: /s/ Harold J. O'Donnell
------------------------
Georgia general partnership, as managing ITS: President
------------------------
partner
BY: Houser Enterprises. Inc. a WITNESS: /s/ Robert J. Lullo
----------------------- ---------------------
Georgia corporation, as DATE: 12/8/92
---------------------
general partner
BY: /s/ John W. Houser
-------------------------
John W. Houser,
-------------------------
ITS: President
-------------------------
WITNESS: /s/ Nancy M. Miles
-------------------------
DATE: 12/10/92
-------------------------
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<PAGE>
EXHIBIT "D"
-----------
BASE RENT
- ---------
The base rent schedule for AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
-------------------------------------------------
will be as follows:
YEAR(S) AMOUNT/SF/ANNUM
----------------------------------
1 $ 13.95 2/93 - 1/94
2 14.55 2/94 - 1/95
3 15.25 2/95 - 1/96
4 16.00 2/96 - 1/97
5 16.75 2/97 - 1/98
6 - Balance 17.50 2/98 - 8/31/03
of Term
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<PAGE>
EXHIBIT "E"
-----------
RULES AND REGULATIONS
1. No sign, picture, advertisement, or notice shall be displayed by Tenant on
any part of the Premises or the Building unless the same is first approved
by Landlord. Any such sign, picture, advertisement, or notice approved by
Landlord shall be painted or installed for Tenant by Landlord at Tenant's
expense. No awnings, curtains, blinds, shades, or screens shall be attached
to or hung in, or used in connection with any window or door of the
Premises without the prior written consent of the Landlord, including
approval by the Landlord of the quality, design, color, and manner
attached.
2. Tenant shall not do or permit to be done in or about the Premises or the
Building any act which obstructs or interferes with the rights of other
tenants of Landlord, or annoy them in any way, including, but not limited
to, making loud or unseemly noises. Tenant shall not use the Premises for
manufacturing, storage, or sale of merchandise or property of any kind,
sleeping, lodging, or cooking at any time except with Landlord's written
permission. Tenant may use for its own employees within its Premises a
conventional coffee-maker, a standard microwave and refrigerator, but
Tenant shall be responsible for shutting off all such appliances at the
close of each business day.
3. No vending machines of any kind will be installed, permitted or used by
Tenant on any part of the Premises without Landlord's written permission.
No part of the Building shall be used for gambling, immoral, or unlawful
purposes. No intoxicating beverage shall be sold or consumed in the
Building without the prior written consent of Landlord. No area outside of
the Premises shall be used by Tenant for storage purposes at any time. No
bicycles, vehicles, or animals of any kind shall be brought into the
Building by Tenant or kept in or about the Premises.
4. The sidewalks, entrances, passages, corridors, halls, elevators, and
stairways shall not be obstructed by Tenant or used for any purpose other
than those for which same were intended as ingress and egress. No window
shall be covered or obstructed by Tenant. Toilets, wash basins, and sinks
shall not be used for any purposes other than those for which they were
constructed, and no sweeping, rubbish, coffee grounds, or other obstructing
substances shall be thrown therein.
5. No additional lock, latch or bolt of any kind shall be placed upon any door
or any changes be made in existing locks or mechanism thereof by Tenant
without the consent of Landlord, and such consent of Landlord shall be
requested by Tenant in writing.
6. Tenant shall not cause or permit any unusual or objectionable odors to be
produced upon or issue from the Premises, and no flammable, combustible or
explosive fluid, chemical or substance shall be brought into the Building
by Tenant.
7. Tenant shall be responsible for locking all entrance doors to the Premises
upon the conclusion of the business day. Tenant assumes full responsibility
for protecting the Premises
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<PAGE>
from theft, robbery and pilferage. Except during Tenant's normal business
hours, Tenant shall keep all doors to the Premises locked and other means
of entry of the Premises closed and secured. Landlord shall not be
responsible for any lost or stolen property, equipment, money or jewelry
from the Premises regardless of whether such loss occurs when the Premises
are locked or not.
8. No safes, furniture, boxes, large parcels, or other kind of freight shall
be taken to or from the Premises by Tenant or allowed in any elevator,
hall, or corridor at any time except by permission of, and at all times
allowed by, Landlord. The persons employed to move Tenant's articles must
be approved by Landlord.
9. The Building shall be open to Tenant, its employees, and business visitors
during such business hours as are deemed standard by Landlord from time to
time on all days except Saturdays after 1:00 p.m., Sundays and holidays. At
all other times every person, including Tenant, its employees and visitors
entering and leaving the Building may be questioned by a watchman as to
that person's business therein, and may be required to sign such persons
name on a form provided by Landlord for registering such person.
10. Tenant shall not employ any person other than Landlord's contractor or
employees for the purpose of cleaning and taking care of the Premises.
11. All decoration of the Premises, including design, color selection, and
finish work of the Premises which is visible from any corridor, elevator or
other such common area, shall be made only with specific written approval
from Landlord, and in the absence of such approval Landlord may require
Tenant to remove undesirable decoration and restore the premises to its
former condition. Landlord shall provide Tenant with a list of approved
subcontractors from which Tenant must choose to do finish work.
12. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability for offices, and upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising.
13. Tenant shall not overload any floor and shall not install any heavy
objects, safes, business machines, files or other equipment without having
received Landlord's prior written consent as to size, maximum weight,
routing and location thereof.
14. No tenant shall mark, paint, drill into, or in any way deface any part of
the Premises or the Building. No boring, cutting or stringing of wires
shall be permitted, except with the prior written consent of the Landlord,
and as the Landlord may direct.
15. Canvassing, soliciting, and peddling in the Building is prohibited and each
tenant shall cooperate to prevent the same.
16. Effective April 1, 1991, the common areas at Lakeside Commons will be Non
Smoking. Commons Areas include all hallways, stairwells, restrooms,
lobbies, elevators, elevator
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<PAGE>
lobbies and any public areas. Smoking policies inside individual suites
should be determined by the Tenant.
17. This edition of Rules and Regulations shall be effective on and after
August 1, 1985 as from time to time later supplemented and amended by
--------------
Landlord. Landlord shall not be responsible to Tenant for the non-
observance, or violation, of any of these Rules and Regulations by other
tenants of the Building.
-37-
<PAGE>
EXHIBIT "F"
-----------
BUILDING MOVING POLICY
The following rules pertain to (i) moving Tenant's furniture, equipment and
supplies into or out of the building, and (ii) the delivery of substantial
amounts of equipment, furniture or supplies to existing tenants in the Building.
Any movers that do not adhere to the following rules will not be allowed to
enter the Building or will be required to discontinue the move.
1. No move into or out of building shall take place during normal business
hours of the Building. Moves must be scheduled after 5:30 p.m. on weekdays
or during weekends and holidays. There will be a $15.00 per hour charge for
an overtime Security Guard to monitor the loading dock during your move.
2. Building management must be notified at least ten (10) days prior to your
proposed moving date in order to coordinate dates and the details of the
move. A representative of the moving company must contact the management
office at least five (5) days prior to the proposed moving date. The
service elevator, which must be used for your move, will be available only
if the management office has been timely notified. For insurance purposes,
the moving company representative must meet in person with the management
office for a tour of the building route to be taken during the move.
3. All moving company employees should be in uniform or wear some form of
identification. All moving company employees must be bonded.
4. There will be no smoking inside of the building by any employee of the
moving company (in order to prevent carpet burns).
5. Prior to the move, the moving company must submit a Certificate of
Insurance naming Landlord as an additional insured. The moving company must
carry insurance with at least the following coverage:
a. Worker's compensation insurance in the amount of $100,000.
b. Comprehensive General Liability insurance shall include coverage
for hazards on premises-operation, elevators, products and
completed operations and also personal injury coverage and
contractual liability coverage designating the assumption of
liability under performance of the act of moving. Such insurance
shall be in limits no less than $500,000 per person bodily; and
$500,000 per occurrence for property damage. Property damage
insurance shall be in broad form, including completed operations.
c. An umbrella policy with a limit of $1,000,000 per occurrence.
Each moving company transporting supplies, furniture, and/or equipment
through the Building shall secure and present to the building manager
a certificate reflecting these
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<PAGE>
coverages at least twenty-four (24) hours before the move takes place.
Please make sure your moving company meets the above requirements so
they will be permitted to move your company to the building.
6. The route to be followed in the Building during the move must be approved
by Landlord. The moving company must provide and install adequate
protective coverings on all vulnerable corners, walls, door facings,
elevator cabs and other areas along the route to be followed during the
move. These areas will be inspected for damage after the move.
7. Clean masonite sections must be used as runners on all finished floor areas
here heavy furniture or equipment is being moved with wheel or skid type
dollies. The masonite must be at least one fourth inch thick. All sections
of masonite should be taped to prevent sliding.
8. Do not stick duct tape onto the floors, walls, door jambs, or doors.
9. All vendor and moving company boxes and cartons are to be removed from the
premises by the vendor or moving company. They are not to be disposed of in
the dumpster on the loading dock.
10. It is the Tenant's responsibility to notify Landlord of items to be moved
which are unusually large or heavy (in excess of 3,500 pounds) or which may
require review by Landlord. Dimensions and weight may prohibit the safe
transport and placement within acceptable structural guidelines. Any large
items that cannot be placed in the service elevator will require special
hoisting arrangements which will be made through the Landlord. Tenant's
moving company should include in the bid price to the Tenant any additional
charges required for extra services which may need to be provided by the
moving company to hoist large items.
11. Access control personnel will be notified as to the move-in schedule and
will monitor the progress of the move. Any changes in the move-in schedule
must be reported to Landlord or Landlord's representative immediately. An
emergency phone number will be required by the access control personnel for
the moving company's supervisor and for the Tenant's representative
responsible for coordinating the move.
12. When ordering equipment, furniture, supplies, etc. at any time before or
after your move, please specify "Inside Delivery" to your suite, because
Landlord is not responsible for deliveries from the loading dock to your
suite.
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<PAGE>
EXHIBIT "G"
-----------
SPECIAL STIPULATIONS
- -------------------------------------------------
TO STANDARD TENANCY AGREEMENT (THE "LEASE")
- -------------------------------------------------------------
BETWEEN
- -------------------------------------------
LAKESIDE COMMONS PARTNERS
- ----------------------------------------------------
AND
- -----------------------------------------
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
- ----------------------------------------------------------------
1. RENTAL ADJUSTMENT
(a) Tenant shall pay to Landlord as additional rental, a rental
adjustment (the "Rental Adjustment") which shall be determined as of the first
anniversary of the Commencement Date thereafter and as of each anniversary of
the Commencement Date thereafter in the manner hereinafter provided (each such
date being hereinafter in this Special Stipulation No. I called an "Adjustment
Date", and each one (1) year period from any given Adjustment Date through the
day before the next succeeding Adjustment Date being herein called the
"Adjustment Period"). Each such Rental Adjustment shall be payable in monthly
installments in advance on the first day of every such calendar month during the
Adjustment Period for which such Rental Adjustment was determined. A prorated
monthly installment, based on a thirty (30) day month, shall be paid for any
fraction of a month in the Commencement Date that falls on any day other than
the first day of a calendar month, or if the Lease Term is terminated or the
Expiration Date falls on any other day other than the last day of a calendar
month. Landlord shall use its best efforts to notify Tenant in writing of the
monthly amount of the Rental Adjustment for each Adjustment period at least ten
(10) days prior to the date on which the first installment of such Rental
Adjustment is due and payable, or as soon thereafter as is practicable. Failure
by Landlord to notify Tenant of the monthly amount of such Rental Adjustment
shall not prejudice Landlord's right to collect the full amount of such Rental
Adjustment, nor shall Landlord be deemed to have forfeited or surrendered its
rights to collect such Rental Adjustment which may have become due pursuant to
this Section, and Tenant agrees to pay upon demand all accrued but unpaid Rental
Adjustment.
(b) For each Adjustment Period, each monthly installment of the Rental
Adjustment shall be an amount equal to one-twelfth (1/12) of the product of. (i)
the Base Rental of the Lease Agreement, as contained in Schedule "D", multiplied
----------
by (ii) .50, multiplied by, (iii) the "percentage increase" (as hereinafter
- -- -------------
defined, if any, in the "Consumer Price Index" as hereinafter defined, and being
herein called "CPI", as such percentage increase is determined with respect to
the Adjustment Date beginning such Adjustment Period. Landlord and Tenant agree
that in no event the CPI increase will be less than four percent (4%) or greater
than eight percent (8%) throughout the term of the Lease.
(c) For purposes of subsection (b) above, the "percentage increase," if
any, in the CPI for each Adjustment Date shall mean and equal the quotient
(expressed as a decimal) determined by dividing (i) the difference obtained by
subtracting the CPI most recently published prior to the calendar month in which
the Commencement Date falls from the CPI most recently published prior to the
Adjustment Date in question (if the difference so obtained is negative, then
this factor (1) shall
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<PAGE>
be deemed to be zero), by (ii) the CPI most recently published prior to the
calendar month in which the Commencement Date occurs.
(d) The term "Consumer Price Index" or "CPI" as used in subsections (b)
and (c) above shall mean the Index now known as the United States Bureau of
Labor Statistics, Consumer Price Index for Urban Consumers (1982-84-100)
specified for All Items relating to the U.S. City Average. In the event the CPI
shall hereafter be converted to a different standard reference base or otherwise
revised, the termination of the amount of the Rental Adjustment under
subsections (a), (b) and (c) above, for each Adjustment Date after such
conversion factor, formula or table for converting the CPI as may be published
by a department or agency of the United States Government, or failing such
publication, then with the use of such conversion factor, formula, or table as
may be published by any nationally recognized publisher of similar statistical
information. Should the parties not be able to secure such appropriate
conversion or adjustment, they shall agree on some other index serving the same
purpose so as to adjust the rental as provided for herein, or if they are unable
to agree the Landlord shall designate a comparable index.
(e) Nothing contained in this Special Stipulation shall be construed at
any time so to reduce the monthly installments of Base Rental payable hereunder
below the amount set forth in Exhibit "D" of this Lease.
-----------
2. FREE RENT
As long as Tenant has not defaulted in its obligations herein, Landlord
grants Tenant the use and occupancy of the Premises, free of base rental, during
the first six and one-half (6.5) months following the commencement of the Lease.
3. TENANT'S EXISTING LEASE
In lieu of assuming Tenant's existing lease obligation, as long as
Tenant has not defaulted, nor is in default under this Lease, commencing with
and conditioned upon Tenant's monthly payment of rent to Landlord under the
Lease, Landlord shall credit Tenant's account in the amount of $4,827.00 per
month to fully amortize Tenant's obligation of $115,000 under Tenant's existing
lease.
4. RIGHT OF FIRST REFUSAL
As long as Tenant has not defaulted in its obligations set forth in the
Lease, subject and subordinate to rights previously granted existing tenants,
Landlord grants a continuing right of first refusal on contiguous units of space
on the Penthouse Level that become available during the initial term of the
lease only under the following terms and conditions: (i) expansions during the
first sixty (60) months of Tenant's term, at a base rental rate of $16.75/RSF
plus all accrued increases (whether a result of CP1 increases or D.O.E. pass
through); such base rental increasing throughout the remaining unexpired term as
set forth in the Lease, with an improvement allowance equal to $.12 per rentable
square foot of the expansion area times the number of months remaining in the
unexpired term. (ii) thereafter, through expiration, at rental rates equal to
the then "market rate".
5. RENEWAL OPTION
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<PAGE>
As long as Tenant has not defaulted in its obligations set forth in the
Lease, Landlord grants Tenant, and Tenant only, the one time option to renew its
Lease of the Premises for one (1) additional five (5) year term by giving
Landlord two hundred eighty (280) days prior notice as to Tenant's desire to
renew, and the execution of a Lease agreement by Landlord and Tenant within
sixty (60) days of such notice at the then "market rate."
6. MOVING ALLOWANCE
As long as Tenant has not defaulted in its obligations herein, Landlord
shall pay to Tenant an amount equal to $3.85/rentable square foot demised,
within thirty (30) days of Tenant's occupancy and the mutual execution of
Exhibit "C" of this agreement.
- -----------
7. HEALTH CLUB MEMBERSHIP
As an inducement to enter into this agreement, Landlord will fund the
cost of two (2) memberships (initiation fees only) to the Concourse Athletic
Club.
8. SECURITY SYSTEM
Tenant, throughout the term of the Lease, at Tenant's sole cost and
expense and subject to adequate existing capacity/capability of Landlord's
system, may establish an electronic security system for the demised premises
utilizing Landlord's system and contractors.
9. SIGNAGE
Subject to zoning, municipal codes and the mutual approval of Landlord,
Tenant and Landlord's architect, as an inducement to Tenant to locate on the
Penthouse Level of Lakeside Commons, Landlord, at its sole cost and expense,
shall provide Tenant with the following identification signage:
A) Monument: Landlord shall design, manufacture and install an
--------
exterior granite tombstone style sign etched with the school's
initials, just west of the Hammond Drive entry/exit to the project.
B) Lobby: Landlord shall design and install directional signage,
-----
(bearing the school's initials only), in the main lobby of the building
which will direct Tenant's Students and guests to the Penthouse Level.
C) Elevator: Landlord shall design and install a small plaque in
--------
each elevator cab over the floor buttons which instruct Tenant's
Students and guests to take the elevator to the 10th Floor to access
the Penthouse Level elevator.
Further, Tenant may, at its option, sole cost and expense, erect
signage in the Penthouse elevator lobby, utilizing the full school name, subject
to the mutual approval of Landlord, Tenant and Landlord's architect.
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<PAGE>
10. SQUARE FOOTAGE ADJUSTMENT
Notwithstanding anything to the contrary contained throughout the
Lease, Tenant's rentable square footage, base rent, operating expense and any
other elements of the Lease based on the square footage demised, shall be
adjusted to reflect the actual and final square footage of the Premises
determined by the space plan, mutually executed by Tenant and Landlord.
11. ELEVATOR LOBBY IMPROVEMENTS
As an inducement to American Schools of Professional Psychology, Inc.
to lease the Penthouse Level, simultaneously with the construction of Tenant's
space, Landlord will commence improvements to the Penthouse elevator entry (on
the 10th Floor) and to the elevator lobby of the Penthouse Level including
recessed/indirect lighting, new wallpaper, floor covering and wood veneer casing
and install new wallpaper and floor covering in the common corridor areas of the
Penthouse Level, all at Landlord's sole discretion and complete the same within
the first ninety (90) days of Tenant's lease term.
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<PAGE>
LAKESIDE COMMONS
- --------------------------------------------------------------------------------
January 25, 1993
Mr. Robert J. Lullo
Controller/CFO
American Schools of Professional Psychology, Inc.
220 South State Street
Suite 609
Chicago, Illinois 60604
Dear Bob:
I hope that by now you have noticed the changes taking place at Lakeside Commons
and that you have taken advantage of your newly remodeled and restaffed Cafe,
----
the new Shared Conference Facility on the 5th floor, and the renovated Health
-------------------------- ------
Club with additions of treadmill and stairmaster equipment. We will continue
- ----
refurbishing the common areas of the building throughout '93 as well as
expanding the closed circuit surveillance of the building entries to include the
parking deck, monitored 24 hours a day by on-site security.
----------------------------------
As a part of our obligation to the lender who in concert with the owners have
made these improvements to the building possible, we are required to prepare the
attached estoppel for your review and signature. The required information has
been drawn from your lease document. For your convenience, we have included
those pages from your lease which support this data. Please review it carefully
and, if you are in agreement, sign, date, have the estoppel witnessed and call
Ms. Nancy Miles @ (404) 399-9344 for pick-up this week.
On behalf of all of us at Jamestown Management & Realty, thank you for your
patience during the construction, and your contribution in establishing Lakeside
Commons as a preferred business location. If I can answer any questions you may
have regarding this document or be of service to you in any way, don't hesitate
to call on me.
Sincerely yours,
J. Richard Speer
Jamestown Realty Company, L.P.
as Agent for Lakeside Commons
JRS:nmm
Enclosures
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<PAGE>
- --------------------------------------------------------------------------------
AMERICAN SCHOOLS 220 South State Street
OF PROFESSIONAL PSYCHOLOGY, INC. Suite 609
Chicago, IL 60604
312-922-1025
Fax 312-922-1730
March 22, 1993
Mr. Richard Spear
Lakeside Commons Partners
990 Hammond Drive
Suite 520
Atlanta, GA 30328
Dear Richard,
Regarding the signage for the Georgia School of Professional Psychology it is my
understanding that the following signs have been ordered and have either been or
are about to be installed.
- Lobby directory identification on both floor
- Lobby individuals signs on both lobby floors and 10th floor lobby
- Elevator signs in all main floor cabs
- Elevator buttons reading "GSPP" instead of "PH" on private cab
In addition, we will need to have your sign company begin design and
construction of the following signs.
- Monument sign by street
- Identity signage in 11th floor elevator lobby opposite elevator door
- School initials "GSPP" on header over tenth floor private elevator
lobby
I have enclosed rough drawings for each type of sign and would like to have your
designer submit sketches to me for approval based on these designs.
Your help in this matter is greatly appreciated.
Sincerely,
Robert J. Lullo
Controller/CFO
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<PAGE>
GSPP SIGNAGE
1. Monument Sign to be placed approximately where the current "Space for
Lease" sign is for Jamestown Properties.
G S P P
2. Style of initials to be placed over tenth floor lobby entrance to private
elevator.
G S P P
3. Sign to be erected in 11th floor elevator lobby opposite elevator doors.
GEORGIA SCHOOL OF
PROFESSIONAL PSYCHOLOGY
ADMINISTRATION/FACULTY *
* CLASSROOMS/LIBRARY
-46-
<PAGE>
LAKESIDE COMMONS
- --------------------------------------------------------------------------------
April 27, 1995
VIA FAX 312-201-1907
Mr. Keith Zekind
American Schools of Professional Psychology, Inc.
220 South State Street, Suite 509
Chicago, IL 60604
RE: LAKESIDE COMMONS OFFICE BUILDING
TENANT ESTOPPEL CERTIFICATE DATED APRIL 21, 1995
Dear Mr. Zekind:
Dr. O'Donnell signed a tenant estoppel certificate related to the space leased
to the American Schools of Professional Psychology in the Lakeside Commons
Office Building in Atlanta, GA. Schedule A to the tenant estoppel certificate
inadvertently omitted the information about the CPI provision contained in your
lease agreement dated December 4, 1992.
I have attached a revised Schedule A to the tenant estoppel certificate which
contains the correct information about the CPI provision. If possible, I need
Dr. O'Donnell to initial the revised Schedule A. The revised schedule should be
telefaxed to me at 404-395-3602 as soon as possible.
To assist in your review of this matter, I have enclosed a copy of the original
estoppel agreement and page one of Exhibit G of the original lease agreement
which contains the information about the CPI provision.
Thank you very much for your assistance in this matter. I apologize for any
inconvenience this request has created for Dr. O'Donnell or you. Please call me
at 404-395-3630 if you have any questions.
Very truly yours,
________________________________________
Lakeside Commons Partners
By: Jamestown, managing general partner
By: William D. Newcomb, general partner
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<PAGE>
ORIGINAL
--------
SCHEDULE A
TENANT: Georgia Schools of Professional Psych.
PREMISES: Suite 1100
PROPERTY: Lakeside Commons
LEASE: 12/4/94
AMENDMENTS
RELATED DOCUMENTS: First Amendment Expansion 7/6/94
TERM COMMENCEMENT: 2/01/93
TERM EXPIRATION 8/31/2003
LAST MONTHLY RENTAL
PAYMENT DATE: See attached aging
SECURITY DEPOSIT: $10,485.75
PREPAID RENTAL: None
MONTHLY BASE RENTAL
CURRENTLY IN EFFECT: $12,611.73 minus $4,827.00 rent credit
BASE YEAR: 1992
EXPENSE STOP: $5.98
CPI PROVISION:
-48-
<PAGE>
REVISED
-------
SCHEDULE A
TENANT: American Schools of Professional Psych.
PREMISES: Suite 1100
PROPERTY: Lakeside Commons
LEASE: 12/4/92
AMENDMENTS
RELATED DOCUMENTS: First Amendment Expansion 7/6/94
TERM COMMENCEMENT: 2/01/93
TERM EXPIRATION: 8/31/2003
LAST MONTHLY RENTAL
PAYMENT DATE: See attached aging
SECURITY DEPOSIT: $10,485.75
PREPAID RENTAL: None
MONTHLY BASE RENTAL
CURRENTLY IN EFFECT: $12,611.73 minus $4,837.00 rent credit
BASE YEAR: 1992
EXPENSE STOP: $5.98
50% CPI PROVISION: Min. 4%, Max. 8%
-49-
<PAGE>
EXHIBIT D
---------
TENANT ESTOPPEL CERTIFICATE
---------------------------
BACKGROUND
- ----------
1. The tenant ("Tenant") identified on Schedule A attached hereto and
----------
by this reference made a part hereof, leases space (the "Premises") identified
on Schedule A hereto, in the improved real property (the "Property") identified
----------
on Schedule A hereto, pursuant to a Lease identified on Schedule A hereto (the
---------- ----------
lease, any amendments and related documents listed an Schedule A, collectively,
----------
the "Lease").
2. Tenant has been advised that the Property, together with the Lease,
will be conveyed pursuant to that certain Purchase and Sale Agreement for
Lakeside Commons, Atlanta, Georgia, (the "Purchase Agreement") by and among
Yarmouth Capital Partners, L.P.I. ("Purchaser"), Lakeside Commons Partners
("Seller") and Piedmont Title Insurance Agency, Inc., ("Escrow Agent") (the
purchase and sale contemplated in the Purchase Agreement, the "Transaction"). As
used herein, the term "Landlord" shall mean Seller, as the current "landlord" or
"lessor" under the Lease.
CERTIFICATE:
- -----------
Tenant certifies and agrees that:
(a) The Lease represents the entire agreement between Landlord and
Tenant and there are no supplements, amendments or modifications of the Lease,
except as specifically set forth on Schedule A hereto. The Lease is in full
----------
force and effect, and all conditions to the effectiveness or continuing
effectiveness of the Lease have been satisfied. Tenant has unconditionally
accepted possession of the Premises pursuant to the Lease, is presently in
occupancy at the Premises and paying rent on the Premises.
(b) The term of the Lease commenced on, and will expire on, the dates
set forth on Schedule A hereto, subject to the extension and/or renewal options
----------
(if any) set forth in the Lease.
(c) The last payment of monthly rental was made on the date stipulated
on Schedule A. There is no credit, deduction, abatement, claim, offset or
----------
defense with respect to the Tenant's obligation to pay rent or additional rent
under the Lease, nor is Tenant entitled to an), concession, rebate, allowance or
other consideration for work or for free or reduced rent in the future.
(d) Any security deposit paid by Tenant is shown on Schedule A.
----------
(e) Tenant has not paid any installment of rent or other payment
payable under the Lease, for more than thirty (30) days in advance of the due
date hereof, except as set forth on Schedule A.
----------
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<PAGE>
(f) That neither Landlord nor Tenant is in default of its respective
obligations under the Lease and that no condition exists which with the giving
of notice or the passage of time or both would constitute a default under the
Lease by either Landlord or Tenant.
(g) Tenant has not assigned or sublet, pledged, hypothecated or
encumbered its interest in the Lease without the prior written consent of the
Landlord.
(h) The monthly base rental in effect as of the date of this
Certificate is set forth on Schedule A. The Base Year and Expense Stop is set
----------
forth on Schedule A. If applicable, the CPI Provision is set forth on Schedule
---------- --------
A.
- -
(i) The Tenant is not involved in any bankruptcy, reorganization or
insolvency proceedings.
(j) Tenant has not, and will not, generate, store, handle or otherwise
deal with any hazardous or toxic waste, substance or material, or contaminants,
oil, pesticides, radioactive or other materials on the Premises, the removal of
which is required or the maintenance of which is prohibited, regulated or
penalized by any local, state or federal agency, authority or governmental unit.
(k) In connection with the consummation of the Transaction, Tenant
agrees that Seller, Purchaser and Escrow Agent may rely upon the truth and
accuracy of the certifications and the agreements made in this Certificate in
connection with the consummation of the Transaction. This Certificate shall
inure to the benefit of Purchaser, and its successors and assigns, and shall be
binding upon Tenant, and it successors and assigns.
IN WITNESS WHEREOF, Tenant has executed this Certificate as of the day
stated below.
/s/ HAROLD J. O'DONNELL
-----------------------------------------
(Name of Tenant)
By: HAROLD J. O'DONNELL
--------------------------------------
Name: PRESIDENT
------------------------------------
Title: AMERICAN SCHOOLS OF PROF. PSYCH.
-----------------------------------
Date of Execution:___________________
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<PAGE>
LAKESIDE
COMMONS
- --------------------------------------------------------------------------------
June 30, 1994
Via Federal Express: Airbill #6260083281
- -----------------------------------------
Dr. Harold O'Donnell
American Schools of Professional Psychology, Inc.
220 South State Street, Suite 509
Chicago, Illinois 60604
RE: Lease Amendment Dated March 17, 1994 by and between Lakeside Commons
Partners and American Schools of Professional Psychology, Inc.
Dear Dr. O'Donnell:
With regard to the above-referenced Lease Amendment, I enclose four executable
copies of the Letter Agreement as to Term and Premises. This exhibit identifies
the lease term for your expansion premises to be July 1, 1994 through August 31,
2003.
Please review the documents and, if you are in agreement with the statements
made, sign all copies on behalf of the American Schools of Professional
Psychology, Inc. and return to me. I will then obtain signatures on behalf of
Lakeside Commons Partners and return a fully-executed, original Lease Amendment
to you for your permanent files.
Should you have questions or if I may be of any assistance to you, please don't
hesitate to contact me directly at (404) 395-3613.
Sincerely,
/s/ Nancy M. Miles
Nancy M. Miles
Leasing Coordinator
:nmm
- ----
Enclosures
cc: J. Richard Speer
Dr. Joseph Bascuas
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<PAGE>
LAKESIDE
COMMONS
- --------------------------------------------------------------------------------
DISCLAIMER
----------
LAKESIDE COMMONS PARTNERS
AND
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
The attached Lease Draft is not intended to be contractual in nature. It is only
an expression of the basis on which Lakeside Commons Partners would consider
entering into a lease for the subject space, and Lakeside Commons Partners shall
have no obligation to lease the subject space to American Schools of
Professional Psychology, Inc. unless and until a final lease, in form and
substance satisfactory to Lakeside Commons Partners has been prepared and
executed by American Schools of Professional Psychology, Inc. and Lakeside
Commons Partners. Any reliance by American Schools of Professional Psychology,
Inc. on the possibility that Lakeside Commons Partners might enter into a lease
with American Schools of Professional Psychology, Inc. shall be at American
Schools of Professional Psychology's risk and expense. This lease is also
subject to credit references satisfactory to Lakeside Commons Partners and the
availability of the premises delineated in the Lease or substitute space at the
time Lakeside Commons Partners is prepared to sign a lease.
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<PAGE>
LAKESIDE
COMMONS
- --------------------------------------------------------------------------------
July 6, 1994
Dr. Harold O'Donnell
American Schools of Professional Psychology, Inc.
220 South State Street, Suite 509
Chicago, Illinois 60604
RE: Lease Amendment Dated March 17, 1994 by and between Lakeside Commons
Partners and American Schools of Professional Psychology, Inc.; Expansion
Dear Dr. O'Donnell:
Concerning the above-referenced expansion, I enclose your fully-executed
original Lease Amendment and construction drawing.
I hope that your expansion premises are as you and Dr. Bascuas had envisioned.
If I may be of assistance to you in the future, please don't hesitate to contact
me directly at 404/395-3613.
Sincerely,
/s/ Nancy M. Miles
Nancy M. Miles
Leasing Coordinator
:nmm
- ----
Enclosure
cc: Dr. Joseph Bascuas (w/enclosure)
Mr. J. Richard Speer
Mr. David Morgan (w/enclosure)
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<PAGE>
LEASE AMENDMENT
EXPANSION
This Memorandum of Lease is made as of March 17, 1994 between Lakeside Commons
Partners ("Landlord') and American Schools of Professional Psychology, Inc.
("Tenant").
WHEREAS, Lakeside Commons Partners and Tenant have entered into a lease
agreement dated December 4, 1992 ("Lease"), by which Lakeside Commons Partners
demised unto Tenant approximately 7,702 Rentable Square Feet on the 11th Floor
(Suite 1100) of the building located at 990 Hammond Drive, Atlanta, Georgia
30328, all as more particularly described in the Lease;
WHEREAS, Landlord and Tenant desire to expand the Demised Premises, modify
and confirm certain other matters relating thereto as set forth herein below;
NOW, THEREFORE, for and in consideration of the promises hereto, the
keeping and performance of the covenants and agreements hereinafter contained,
and for Ten and No/100 Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant, intending to be legally bound, agree and amend the Lease as
follows:
1. TENANT AREA. The square footage of the Tenant's Existing Demised Premises
(7,702 Rentable Square Feet) on the 11th Floor (Suite 1100) is increased by
2,023 Rentable Square Feet of Floor Space ("Expansion Premises"), as shown on
Exhibit "A" attached hereto, for a total of 9,725 Rentable Square Feet. The
additional 2,023 Rentable Square Feet of Floor Space is hereby incorporated into
the Premises, or Leased Premises wherever such terms are used in the Lease.
2. TERM. The term of this Agreement shall commence on the date (the
"Commencement Date") which is the earlier of (a) the day preparation of the
Premises is deemed substantially complete, or (b) the day Tenant first occupies
the Premises for business, and shall terminate at 11:59 p.m. on the last day of
August 31, 2003, (the "Expiration Date").
3. TERMS. The Expansion Premises shall be upon the same terms and conditions
of the Lease, except (a) the leasehold improvements shall be provided in their
then existing condition, on an "as is" basis in the broadest sense of the term
at the time construction of the Expansion Premises commences, improved only as
provided in P. 5 herein; (b) Tenant shall not be entitled to any rent abatement,
moving allowance or other concessions of any kind or nature whatsoever; and (c)
Tenant's base rent on the Expansion Premises shall be the rate scheduled in P. 4
herein, subject to the adjustments specified in the Lease including, direct
operating expense pass throughs as set forth in P. 2.02 of the Lease for any
annual increases in operating expenses and taxes over a base amount equal to
Landlord's actual Direct Operating Expenses for 1992, all accrued C.P.I.
increases and those
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<PAGE>
future increases as set forth in the Lease; and (d) Tenant's prorata share of
excess operating expenses as set forth in P. 2.02 of the Lease, is increased to
4.378%, representing Tenant's percentage of the total rentable area of the
building, including the Expansion Premises.
4. RENT. In addition to the rent set forth in Exhibit "D" of the Lease and any
and all other escalations and charges for Additional Rent as set forth in the
Lease, Tenant shall pay base rent on the Expansion Premises as follows:
<TABLE>
<CAPTION>
===========================================================================================================================
PSF/ Mo. Annual Rental
Term RSF Annum Mos Rntl Rntl over Term
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
May 15, 1994 - Jan 31, 1998 2,023 $16.75 44.5 $2,823.77 $33,885.24 $125,657.77
- ---------------------------------------------------------------------------------------------------------------------------
Feb 1, 1998 - Aug 31, 2003 2,023 $17.50 67.0 2,950.21 35,402.52 $197,664.07
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SCHEDULED RENTAL FOR EXPANSION PREMISES: $323,321.84
===========================================================================================================================
</TABLE>
5. IMPROVEMENTS. Landlord shall provide an allowance of $27,067.74 for space
planning and Tenant's Improvements to the Expansion Premises in accordance with
the terms of the Exhibit "B" of the Lease and the plans (Exhibit "A") prepared
by Hendrick Associates, Inc. dated August 2, 1993, last revised March 23, 1994
(TP-1). All costs, regardless of their cause or nature, in excess of this
allowance shall be deemed Tenant's "Extra Work" and such shall be paid by Tenant
to Landlord as additional rent as provided in the Lease under the terms of the
Lease and Exhibit "B".
6. CAPTIONS. All capitalized terms contained in this Amendment shall bear the
same meanings as ascribed to them in the Lease.
7. BINDING EFFECT. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia, and shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors, representatives and assigns, but always subject, in the case of
Tenant, to the terms of the Lease. In the event of any inconsistency or conflict
between the terms of this Amendment and of the Lease, the terms hereof shall
control. Time is of the essence of all of the terms of this Amendment.
8. CONTINUED VALIDITY. Except as hereinabove provided, all other terms and
conditions of the Lease shall remain unchanged and in full force and effect, and
are hereby ratified and confirmed by Landlord and Tenant.
9. MODIFICATIONS. This Amendment may not be changed, modified, discharged or
terminated orally in any manner other than by an agreement in writing signed by
Landlord and Tenant or their respective heirs, representatives, successors and
permitted assigns.
Date:__________________________________ Date:__________________________________
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<PAGE>
IN WITNESS WHEREOF, Tenant and Landlord have executed this Agreement
this 25th day of May, 1994.
LANDLORD TENANT
LAKESIDE COMMONS PARTNERS, AMERICAN SCHOOLS OF PROFESSIONAL
a Georgia general partnership PSYCHOLOGY, INC.
an Illinois corporation
By: Jamestown
a Georgia general partnership
as Managing General Partner By: /s/ HAROLD J. O'DONNELL
------------------------------
Its:______________________________
By: /s/ WILLIAM D. NEWCOMB
--------------------------------------
William D. Newcomb, General Partner
Witness: /s/ NANCY M. MILES Witness:__________________________
---------------------------------
Date:____________________________________ Date:_____________________________
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<PAGE>
LETTER AGREEMENT AS TO TERM AND PREMISES
EXPANSION
Lakeside Commons Partners ("Landlord") and American Schools of Professional
Psychology, Inc. ("Tenant"), do each hereby agree and certify to the other that
the Term of that certain First Amendment between Landlord and Tenant commenced
July 1, 1994 and will expire on the 31st day of August, 2003, unless extended or
sooner terminated as may be provided in the Lease. Tenant hereby acknowledges
that it has accepted delivery of the Premises in "substantially complete"
condition as defined in the Agreement, and that said Premises are in full
compliance with all requirements of the Agreement, except for defects of which
Tenant gives Landlord written notice with reasonable specificity within ten (10)
business days from the commencement date referenced above.
IN WITNESS WHEREOF, Landlord and Tenant have executed this instrument
this the 6th day of July, 1994.
LANDLORD TENANT
LAKESIDE COMMONS PARTNERS, AMERICAN SCHOOLS OF PROFESSIONAL
a Georgia general partnership PSYCHOLOGY, INC.
an Illinois corporation
By: Jamestown
a Georgia general partnership
as Managing General Partner By: /s/ HAROLD J. O'DONNELL
-------------------------------
Its: PRESIDENT
------------------------------
By: /s/ WILLIAM D. NEWCOMB
--------------------------------------
William D. Newcomb, General Partner
Witness: /s/ NANCY M. MILES Witness: /s/ BETH J. DOREY
--------------------------------- --------------------------
Date: 7-6-94 Date:_____________________________
--------------
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<PAGE>
LAKESIDE COMMONS
ONE LAKESIDE COMMONS
990 HAMMOND DRIVE
SUITE 320
ATLANTA, GA 30328
PHONE: 404/395-3601
FAX: 404/395-3964
- --------------------------------------------------------------------------------
TO: Dr. Joseph Bascuas
TELEFAX: 671-0476 NUMBER OF PAGES:
cc: J. Richard Speer
FROM: Nancy M. Miles
SUBJECT: Amendment to Lease; Expansion
DATE: May 2, 1994
- --------------------------------------------------------------------------------
Pursuant to our telephone conversation today, I am transmitting a revised second
page of the above-referenced document which shows the corrected total scheduled
rental for the period May 15, 1994 through January 31, 1998. When we amended the
improvement allowance and number of months In the term, we failed to correct the
total. It is now correct at $125,657.77, not the $122,834.00 originally stated.
Please forward the corrected page to Dr. O'Donnell and ask that he initial as an
indication of his acceptance of the change and fax back to me at (404) 395-3964.
Upon receipt, I will insert corrected pages in the amendments, have signed on
behalf of Lakeside Commons, and distribute fully- executed originals to the
appropriate parties.
Once again, thanks for your assistance.
:nmm
Attachments
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<PAGE>
equal to Landlord's actual Direct Operating Expenses for 1992, all accrued
C.P.I. increases and those future increases as set forth in the Lease; and (d)
Tenant's prorata share of excess operating expenses as set forth in P. 2.02 of
the Lease, is increased to 4.378%, representing Tenant's percentage of the total
rentable area of the building, including the Expansion Premises.
4. RENT. In addition to the rent set forth in Exhibit "D" of the Lease and any
and all other escalations and charges for Additional Rent as set forth in the
Lease, Tenant shall pay base rent on the Expansion Premises as follows:
[INITIALS]
<TABLE>
<CAPTION>
===========================================================================================================================
PSF/ Mo. Annual Rental
Term RSF Annum Mos Rntl Rntl over Term
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
May 15, 1994 - Jan 31, 1998 2,023 $16.75 44.5 $2,823.77 $33,885.24 $125,657.77
- ---------------------------------------------------------------------------------------------------------------------------
Feb 1, 1998 - Aug 31, 2003 2,023 $17.50 67.0 2,950.21 35,402.52 $197,664.07
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SCHEDULED RENTAL FOR EXPANSION PREMISES: $323,321.84
===========================================================================================================================
</TABLE>
5. IMPROVEMENTS. Landlord shall provide an allowance of $27,067.74 for space
planning and Tenant's Improvements to the Expansion Premises in accordance with
the terms of the Exhibit "B" of the Lease and the plans (Exhibit "A") prepared
by Hendrick Associates, Inc. dated August 2, 1993, last revised March 23, 1994
(TP-1). All costs, regardless of their cause or nature, in excess of this
allowance shall be deemed Tenant's "Extra Work" and such shall be paid by Tenant
to Landlord as additional rent as provided in the Lease under the terms of the
Lease and Exhibit "B".
6. CAPTIONS. All capitalized terms contained in this Amendment shall bear the
same meanings as ascribed to them in the Lease.
7. BINDING EFFECT. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia, and shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors, representatives and assigns, but always subject, in the case of
Tenant, to the terms of the Lease. In the event of any inconsistency or conflict
between the terms of this Amendment and of the Lease, the terms hereof shall
control. Time is of the essence of all of the terms of this Amendment.
8. CONTINUED VALIDITY. Except as hereinabove provided, all other terms and
conditions of the Lease shall remain unchanged and in full force and effect, and
are hereby ratified and confirmed by Landlord and Tenant.
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<PAGE>
LAKESIDE
COMMONS
- --------------------------------------------------------------------------------
Dr. Joseph Bascuas Via Telefax: 671-0476
ONE LAKESIDE COMMONS
REVISED EXPANSION PROPOSAL
FOR
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
AUGUST 27, 1993
On behalf of Lakeside Commons Partners, I am pleased to submit the following
expansion proposal for your consideration for office space, at Lakeside Commons:
NAME & LOCATION One Lakeside Commons; located north of I-285 at the
THE BUILDING: intersection of GA 400 and Hammond Drive.
BUILDING SIZE: Phase I: 222,118 Rentable Square Feet, Eleven (11) Floors.
PROPOSED LEASE
TERM: October 1, 1993 - August 31, 2003
TERM The proposed lease term shall begin on October 1, 1993 or
COMMENCEMENT within thirty (30) days from the date of a fully executed
DATE: expansion agreement and mutually approved construction
drawings.
PROPOSED LOCATION: Eleventh (11th) Floor
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PROPOSED TENANT Approximately 1,054 Rentable Square Feet.
AREA: Approximately 917 Usable Square Feet
FLOOR EFFICIENCY: The efficiency factor of the floor is 14.9 percent measured
to BOMA standards.
BUILDING FACE A full-service face rental rate of $21.50 per rentable
RENTAL RATE: square foot/annum.
PROPOSED BASE
RENTAL SCHEDULE: Expansion rental as provided in Exhibit "G", P. 4, of the
Lease:
============================================================
. . . base rental rate of $16.75/RSF plus all accrued
increases (whether a result of CPI increases or D.O.E. pass
through); such base rental increasing throughout the
remaining unexpired term as set forth in the Lease, . . .
============================================================
IMPROVEMENTS: Landlord will demo any existing improvements and construct
Tenant's improvements in substantial accordance per the plan
prepared by Hendrick Associates, dated 8/2/93 (TP-1), not
including auxiliary HVAC, which, if provided, shall be
engineered and installed at Tenant's sole cost and expense.
ESCALATION: In concert with Tenant' s existing Lease, Tenant's base
rental rate will be escalated annually by an amount equal to
50% of the Consumer Price Index (CPI) and a pass through of
annual increases in operating expenses and taxes over the
base amount set forth in the Primary Lease.
HVAC: HVAC operating hours are from 7:00 a.m. to 6:00 p.m. Monday
through Friday, and from 7:00 a.m. to 1:00 p.m. on Saturdays
(except holidays). Tenant's auxiliary HVAC, if provided,
shall be metered separately and usage will be billed to
Tenant as Additional Rent.
BUILDING SERVICES: Landlord will provide electrical service as required for
"normal and customary" use as defined in the lease up to in
average electrical connected load of no more than 5
watts/SF. Any usage over this amount shall be billed to
Tenant as additional rent.
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ACCESS: Tenant's have acres to the building twenty-four (24) hours a
day, seven (7) days at week, subject only to security
restrictions.
LIFE & SAFETY Lakeside Commons has been equipped with state-of-the-art
SYSTEMS: life support safety support systems. An emergency control
center, located on the Terrace Level, includes fire alarm
panels, strategic building equipment controls, elevator
controls and a central Fire Department Communications
Center. In addition to the building's sprinkler system,
smoke detection, smoke evaluation and pressurized stairwells
provide an extra element of early notification and allow
time to exit the premises in the event of emergency.
PARKING: Parking is provided in an adjacent four-level parking garage
providing COVERED access to the building at no charge to
Tenants. The First Phase parking garage contains
approximately 800 parking spaces.
HEALTH CLUB: Landlord has provided at no cost and for the common use by
all Tenant's employees a health facility within the building
containing men's and women's locker rooms, showers and
saunas, a fully equipped exercise room containing
Stairmaster, treadmill, Universal weight machines, free
weights, two (2) "Life Cycle" stationery bikes and exercise
mats. Access to this facility is by card access during the
building operation hours.
MAIL & PARCEL A separate mail room for use by the Tenant's is located on
SERVICE: the Terrace Level (First Floor) of the building convenient
to passenger and/or freight elevators. Any large deliveries
or quick messenger services can enter through the service
areas to the freight elevator.
FINISHED CEILING Each floor contains a floor to finished ceiling height of
HEIGHT: 9'0" and contains exterior windows of 8'6". All door frames
and doors are full height throughout Tenants space.
JANITORIAL Five (5) days per week.
SERVICE:
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SECURITY: Lakeside Commons has been designed with a "card key"
controlled access security system. The system allows access
to only those who have been issued a card and will log the
date and time each person enters the building. Additionally,
Tenants are able to lock their individual suites.
ELEVATOR SERVICES: Vertical transportation is comprised of four (4) elevators
servicing the Terrace Level through the Tenth Floor,
traveling at a speed of 450 feet per minute, each with a
loading capacity of 3,500 pounds. Each elevator cab contains
polished stainless steel closures inside and out (on every
floor), and is finished in horizontal bands of Honduras
mahogany with stainless steel reveals, stainless steel
handrails and marble borders with carpet inserted floors.
FREIGHT CAPACITY: In addition to four (4) passenger elevators, the building
contains a separate freight elevator servicing each floor
from the designated loading area. This elevator will travel
350 feet per minute, with a loading capacity of 4,500
--------------------------------
pounds, and has a platform size of 5'4" width by _______
------
depth and a ceiling height of 10 feet.
AMENITIES: . Large 2-acre lake with outdoor plaza and water feature.
. Two-story atrium lobby.
. Remodeled full service cafe with catering capabilities,
located on the Terrace Level of the building
overlooking: the lake.
. Health facility (free of charge to tenants and their
employees).
. On-site ownership and management.
. Secluded loading dock capable of serving two (2) full-
size tractor trailers.
. Excellent access to I-295, GA 400 and all major surface
roads.
. MARTA (mass transit) bus service at the entrance to the
project.
. Shared tenant telecommunications.
Close proximity to Perimeter Mall, Park
Place Shopping Center, Marriott Hotel,
Holiday Inn Crowns Plaza, Doubletree
Hotel, as well as numerous other hotels
and restaurants.
. Four-level covered parking garage providing covered
access into the building.
. On-site travel agent.
. Shared conference/training facility.
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<PAGE>
DISCLOSURE: Richard Bowers & Company, Inc. is acting as broker for the
American Schools of Professional Psychology, Inc. in this
transaction and is to be compensated by Landlord as
contained under separate agreement.
Jamestown Realty Company, L.P. is acting as the broker in
this transaction representing Lakeside Commons Partners as,
Landlord and is to be compensated by Landlord as contained
under separate agreement.
Other than as set forth herein, the proposed expansion will be subject to all
other terms and conditions of the Primary Lease.
The proposal represents a conditional offer to expand Tenant's Premises and is
open for acceptance for fifteen (15) days only, subject to space availability,
review of Tenant's financials, final approval by Jamestown Management, Inc.,
Lakeside Commons Partners and/or assigns and the mutual execution of a lease
amendment reflective of the terms contained herein.
Thank you for giving Lakeside Commons the opportunity to meet your expansion
needs. We look forward to our continuing dialogue and a positive outcome in this
regard.
Sincerely yours,
/s/ J. Richard Speer
J. Richard Speer, Managing Partner
Jamestown Realty Company, L.P.
as Agent for Lakeside Commons Partners, L.P.
JRS:nmm
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<PAGE>
===================================================
KAIMUKI PLAZA
TENANT LEASE
CKSS ASSOCIATES
LANDLORD
AMERICAN SCHOOL OF PROFESSIONAL PSYCHOLOGY, INC.
Tenant
===================================================
<PAGE>
EXHIBIT 10.8
KAIMUKI PLAZA
HONOLULU, HAWAII
OFFICE LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SPECIFIC PROVISIONS
SECTION 1. SPECIFIC PROVISIONS..................................... 1
SECTION 2. EXHIBITS................................................ 2
SECTION 3. SPECIAL TERMS AND CONDITIONS............................ 2
GENERAL PROVISIONS
SECTION 4. PREMISES................................................ 1
SECTION 5. RENT.................................................... 1
SECTION 6. QUIET ENJOYMENT......................................... 2
SECTION 7. USE..................................................... 3
SECTION 8. POSSESSION.............................................. 3
SECTION 9. SERVICES PROVIDED BY LANDLORD........................... 3
SECTION 10. ELECTRICITY............................................. 4
SECTION 11. DAMAGE TO PREMISES...................................... 4
SECTION 12. CONDEMNATION............................................ 4
SECTION 13. HOLDING OVER............................................ 5
SECTION 14. LIENS................................................... 6
SECTION 15. DEFAULT AND RE-ENTRY.................................... 6
SECTION 16. REPAIRS AND ALTERATIONS................................. 9
SECTION 17. INSPECTION OF PREMISES.................................. 12
SECTION 18. SURRENDER OF PREMISES................................... 12
SECTION 19. ACTION OR SUIT.......................................... 12
SECTION 20. ASSIGNMENT, SUBLETTING AND MORTGAGING................... 12
SECTION 21. CHANGE OF CONTROL....................................... 14
SECTION 22. BANKRUPTCY OF TENANT.................................... 14
SECTION 23. NON-LIABILITY OF LANDLORD............................... 14
SECTION 24. INDEMNITY AND RISK OF INJURY............................ 15
SECTION 25. ADVERTISING............................................. 15
SECTION 26. RULES AND REGULATIONS................................... 15
SECTION 27. SUBORDINATION........................................... 15
SECTION 28. ESTOPPEL CERTIFICATE.................................... 16
SECTION 29. INSURANCE............................................... 16
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 30. OPERATING EXPENSES...................................... 17
SECTION 31. PARKING AND TRAFFIC..................................... 20
SECTION 32. CURE AND SECURITY DEPOSIT............................... 20
SECTION 33. ABANDONMENT............................................. 20
SECTION 34. AUTHORITY............................................... 20
SECTION 35. ATTACHMENTS............................................. 20
SECTION 36. COVENANTS AND CONDITIONS................................ 20
SECTION 37. NOTICE.................................................. 20
SECTION 38. SEVERABILITY............................................ 21
SECTION 39. DISCLAIMER OF WARRANTIES................................ 21
SECTION 40. DIMINUTION OF LIGHT, VIEW OR AIR BY ADJACENT
STRUCTURE............................................... 21
SECTION 41. SUBSTITUTION OF LEASED PREMISES......................... 21
SECTION 42. SERVICE CONTRACTS....................................... 21
SECTION 43 NO RENT REDUCTION....................................... 21
SECTION 44. CANCELLATION NOT MERGER................................. 21
SECTION 45. SUBMISSION FOR REVIEW................................... 21
SECTION 46. RESERVATION OF LANDLORD................................. 21
SECTION 47. SUCCESSORS.............................................. 22
SECTION 48. SHORT-FORM COUNTERPART.................................. 22
SECTION 49. CONVEYANCE TAX.......................................... 22
SECTION 50. GENERAL................................................. 22
SECTION 51. WAIVER OF JURY TRIAL.................................... 22
SECTION 52. WAIVER OF RIGHTS OF REDEMPTION.......................... 22
SECTION 53. ENTIRE AGREEMENT........................................ 22
SECTION 54. APPLICABLE LAWS......................................... 22
SECTION 55. MISCELLANEOUS........................................... 22
</TABLE>
<PAGE>
KAIMUKI PLAZA
HONOLULU, HAWAII
SPECIFIC PROVISIONS
THIS LEASE, made and entered into this ____ day of _____________ 1995,
by and between CKSS ASSOCIATES, a Hawaii registered limited partnership, whose
principal place of business and post office address is 220 South King Street,
Honolulu, Hawaii 96813, hereinafter called "Landlord" and AMERICAN SCHOOL OR
PROFESSIONAL PSYCHOLOGY, INC. whose principal place of business and post office
address in 3465 Waialas Avenue, Suite 300, Honolulu, HI 96816.
hereinafter called "Tenant",
W I T N E S S E T H:
1. SPECIFIC PROVISIONS The following entries constitute certain specific
provisions of this lease and are referred to elsewhere herein:
1.1. Floor(s) on which Premises are located: Third (3rd)
1.2. Suite number: 300
1.3. Area of Premises:
1.3.1. Approximate usable area of Tenant's Premises 6,029 sf
1.3.2. Approximate proportionate share of common
area on 1st Floor + 567 sf
--------
1.3.3. Approximate "rentable area" of Tenant's Premises
on 1st Floor (for determination of base rent and
operating expenses): 6,596 sf
1.4. Tenant's present share of rentable area of the entire KAIMUKI PLAZA:
10.70%
1.5. The term of this lease shall be ten (10) years and shall commence
on the 1st day of August, 1995 (the "Commencement Date"), and end on the 31st
day of July, 2005, inclusive, subject to the provisions of Sections 4 and 8
hereof.
1.6. Monthly Rent: Subject to confirmation by the parties in a written
memorandum, the form of which is attached hereto as Exhibit "D", monthly rent
shall be the sum of
Specific Provisions Page 1 of 6
<PAGE>
1.6.1. Base rent for in the amount of:
Year 1: $0.00 per month for the period commencing
August 1, 1995 to October
Year 2 to 5: $9,613.35 per month for the period commencing
November 1, 1995 to July 31, 1996.
Years 2 to 5: $9,613.35 per month for the period commencing
August 1, 1996 to July 31, 2000.
Years 6 to 10: $11,536.02 per month for the period
commencing August 1, 2000 to July 31, 2005.
1.6.2. Additional rent, beginning on the commencement date of the
lease, of $5,554.38 per month representing Tenant's share of estimated operating
expenses, as provided for in Section 5.7 of this lease, subject to adjustment as
set forth in Section 30 hereinbelow;
1.6.3. RESERVED
1.6.4. Hawaii State General Excise Tax (as provided for and subject
to adjustment under Section 5.6 of this lease).
1.7. Security Deposit: The first applicable monthly Base Rent (Section
1.6.1.) and Additional rent (Section 1.6.2.) above with the exact amount to be
determined and confirmed by the parties in a written memorandum, the form of
which is attached hereto as Exhibit "D"). $15,799.77 to be arranged as the
parties may agree.
1.8. Tenant's use of Premises shall be for the following purpose(s) only:
General office use and as classrooms.
2. EXHIBITS. The following drawings and special provisions are attached hereto
as exhibits and made a part of this lease:
Exhibit "A": Floor plan outlining the Premises.
Exhibit "B": Rules and Regulations pertaining to KAIMUKI PLAZA.
Exhibit "C": Work Letter.
Exhibit "D": Confirmation of Commencement Date and Lease Terms.
3. SPECIAL TERMS AND CONDITIONS. The following special terms and conditions
are applicable:
3.1. Tenant's Representative: _____________________ (for purposes of
Section 1(a) of the Work Letter attached hereto as Exhibit "C").
Specific Provisions Page 2 of 6
<PAGE>
3.2. Tenant Improvement Allowance: $43.00 (for purposes of Section 1(c) of
the work Letter).
3.3. Programming Information Submission Date: Completed for purposes of
Section 1(e) of the Work Letter).
3.4. For purposes of Section 15.2.8 herein, the rate of interest shall be
twelve percent (12%) per year.
3.5. Parking - Tenant shall be entitled to rent fifteen (15) unassigned
-------
parking stalls for the term of the lease, at the then prevailing rates,
currently $50.00 per stall per month. Tenant's visitors are permitted to park in
the building at the following rates:
Weekdays:
--------
Prior to 3:00 p.m.: Prevailing rates.
3:00 p.m. to 10:00 p.m.: $1.00 flat rate. (During the hours
of 3:00 p.m. to 5:00 p.m., students
will be permitted to park only on
parking levels P3, P4 and P5.)
$1.00 flat rate.
Weekends:
--------
3.6. Option To Renew - Tenant is given one (1) five (5) year option to
---------------
renew the lease, with one hundred eighty (180) days prior written notice, at the
then fair market value for rent. If the parties are unable to agree on the
rental rate, then it shall be determined in accordance with Section 5.5 herein.
3.7. Option to Lease Additional Space. Landlord agrees to notify Tenant
--------------------------------
at least four (4) months in advance of the availability for rent of any
contiguous space on the same floor as the demised premises (after the expiration
of the initial lease(s) for said space). Upon receiving such notice, Tenant
shall have ten (10) days within which to notify Landlord of Tenant's desire to
lease such space under the same terms and conditions of this lease, except for
the term.
3.8. Tenant Improvements - Landlord will provide Tenant with a
-------------------
preliminary space plan and one (1) major revision to that space plan. Unused
Tenant Improvement Allowance, if any, will be credited to Tenant as additional
free base rent.
3.9. HVAC - The HVAC system is described as fan coil units connected to
----
existing chilled water stub-outs. Currently, the operational hours of the units
will be those of the building, Monday through Friday 7:00 a.m. to 9:00 p.m.,
Saturday 8:00 a.m. to 5:00 p.m. Air conditioning beyond the building standard
operating hours shall be charged to Tenant at the then building rate, currently
$15.00 per hour.
Specific Provisions Page 3 of 6
<PAGE>
3.10. With respect to Section 5.3 herein, Tenant shall have twenty (20)
days within which to make its rental payments, not ten (10) days. In addition,
Landlord hereby waives the right to charge Tenant the five cents ($.05) per
dollar administrative fee.
3.11. With respect to Section 9 herein, Landlord agrees to provide
services and to maintain and operate the building consistent with other first
class office buildings in Honolulu.
3.12. With respect to Section 11.3 herein, the second line of that
section should begin with the phrase "Premises or the Building ...."
3.13. With respect to Section 14.1 herein, it is understood and agreed
that Tenant's obligations to keep the Premises and Building free from
encumbrances shall commence upon Tenant's occupancy of the demised premises.
3.14. With respect to Section 15.2.1(B) herein, the term "twenty-four
(24) hours" shall be deleted and replaced by "five (5) business days".
3.15. With respect to Section 16.2 herein, the following sentence is
hereby deleted: "Tenant hereby waives any right to make repairs at Landlord's
expense."
3.16. With respect to Section 16.8 herein, it is understood and agreed
by the parties that Tenant shall not be legally responsible for any ACM's
existing within the demised premises prior to Tenant's occupancy.
3.17. With respect to Section 19 herein, the following language is
hereby added:
Landlord also agrees to pay all costs, including, but not
limited to, reasonable attorney's fees, which may be
incurred or paid by Tenant in enforcing without litigation
any of the covenants, conditions or agreements contained in
this lease.
3.18. With respect to Section 23 herein, the parties understand and agree
that notwithstanding anything contained therein, Landlord shall be liable and
responsible for damage caused by its willful acts or gross neglect.
3.19. Notwithstanding anything to contrary contained in Section 24 herein,
with respect to that section, Landlord acknowledges and agrees that Land shall
be responsible_____________ ____________________acts of gross neglect.
3.20. With respect to Section 26 herein, Landlord agrees to make reasonable
efforts to enforce said rules and regulations.
Specific Provisions Page 4 of 6
<PAGE>
3.21. With respect to Section 28.1 herein, Tenant shall have twenty (20)
days, instead of ten (10) days, within which to execute, acknowledge and deliver
to Landlord the estoppel certificates referred to therein.
3.22. Section 28.3 of the lease is hereby deleted and of no force or
effect.
3.23. Sections 29.3 and 29.4 of the lease are hereby deleted and of no
force or effect.
3.24. With respect to Section 30.1 herein, it is understood and agreed
by the parties that Tenant's share of operating expenses for calendar year 1995
only, shall be fixed at $.78 per square foot and not subject to year-end
adjustment. In addition, the parties understand and agree that increases in
operating expenses which are within the control of Landlord shall be capped at
an average of five percent (5%) per year.
3.25. With respect to Section 30.3, the following phrase (which begins
in the tenth line thereof), shall be deleted: "(or the cost of equivalent
management services computed at the prevailing rate charged from time to time by
companies generally in the management business, whichever is higher)".
Maintenance of common areas shall specifically include, without limitation,
keeping washrooms clean and stocked with paper supplies as necessary, keeping
common areas free of litter and debris, cleaning common area walls, floors and
window surfaces on a regular basis, and maintaining the passenger and freight
elevators, HVAC system, boilers, electricity, water and other utility services
as they may enter the building to a point of distribution to tenants, spaces
within the Landlord's property, the roof, stairwells, outside walls, parking
areas, loading docks, and arterial plumbing and electrical systems.
3.26. With respect to Sections 1.7 and 32, Landlord agrees that in lieu of
said security deposit, Tenant may .
3.27. Notwithstanding anything to the contrary contained in Section 37
herein, notices shall be deed conclusively to have been given or served, to both
Landlord and Tenant, on the date of receipt thereof.
3.28. With respect to Section 41 herein, Landlord shall have no such right
to relocate Tenant, except upon giving Tenant reasonable notice thereof and
obtaining Tenant's consent thereto, which consent shall not be unreasonably
withheld.
3.29. With respect to Section 42 herein, Tenant may reasonably refuse to
execute such contracts.
3.30. With respect to Section 55.3 herein, the parties understand I'd agree
that Landlord is responsible for maintaining the mechanical elements such as air
conditioning and lighting located
Specific Provisions Page 5 of 6
<PAGE>
above the ceiling of Tenant's premises and such expenses related thereto shall
constitute part of common area maintenance expenses.
3.31. With respect to the Work Letter attached hereto as Exhibit, "C",
Landlord hereby waives the administrative fee referred to in paragraphs (o) (4)
and 4(b)(4). The parties further understand and agree that the schedule referred
to in paragraph (o) (5) is Schedule 2, not Schedule 1.
The parties further agree that notwithstanding the last sentence of
paragraph 4 (b) of the Work Letter, Tenant shall be entitled to a credit for any
unused portion of the Tenant Improvement Allowance.
Landlord shall provide Tenant with a final detailed listing of the costs
incurred for the improvement of Tenant's demised premises.
3.32. Notwithstanding the existing prohibitions contained in Section 16.8
of the lease, Tenant understands, acknowledges and expressly agrees that smoking
of any kind, including but not limited to the smoking of cigarettes, cigars,
pipes or any other tobacco, tobacco-containing or tobacco-related products, is
prohibited within the Premises and the common areas of the building, except in
such areas as may be designated by Landlord.
Specific Provisions Page 6 of 6
<PAGE>
GENERAL PROVISIONS
- ------------------
THE PARTIES COVENANT AND AGREE AS FOLLOWS:
- ------------------------------------------
4. PREMISES
4.1. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, upon the terms and conditions herein set forth, those certain Premises
described in Sections 1.1, 1.2, and 1.3, and shown outlined in red on Exhibit A,
situated in the KAIMUKI PLAZA situated at 3465 Waialae Avenue, Honolulu, Hawaii,
hereinafter referred to as the "Building. " The area so leased is herein called
"Premises". In addition to the Premises, Tenant shall, as an appurtenance
thereto, have full right of access to the Premises over and across such
entrances, lobbies, halls, corridors, stairways and elevators as Landlord may
from time to time designate and provide for common use by tenants in the
Building.
4.2. Tenant accepts the Premises in its condition existing as of the
Commencement Date set forth in Section 1.5, and as confirmed by the parties in a
written memorandum, the form of which is attached hereto as Exhibit "D", in an
"as is" condition. The Commencement Date shall be the date upon which there is
substantial completion of the improvements, as determined by Landlord. When
such memorandum is executed, it shall thereupon be deemed attached hereto and
incorporated herein. Failure of Tenant to execute and deliver such a memorandum
when requested to by Landlord shall constitute an acceptance of the demised
premises and an acknowledgment that the statements contained in said Exhibit "D"
are true and correct, without exception. In addition, if Tenant fails to
execute and deliver such a memorandum to Landlord within ten (10) days after
Landlord demands it, Landlord may, as attorney-in-fact for Tenant (coupled with
an interest) , execute such a memorandum for, on behalf of and in the name of
Tenant. Tenant acknowledges that neither Landlord nor Landlord's agent has made
any representation or warranty as to the present or future suitability of the
Premises for the conduct of Tenant's business. Tenant further acknowledges that
neither Landlord nor Landlord's agent has made any representation or warranty,
and Landlord hereby disclaims any representation or warranty, as to the physical
condition of the Premises or anything installed or contained therein, including,
but not limited to, any express or implied warranty of habitability,
merchantability or fitness for a particular purpose.
4.3. Unless otherwise expressly agreed upon by the Landlord and Tenant,
Landlord shall deliver to Tenant and Tenant shall have the right to possess and
occupy the Premises on the Commencement Date, and the right to such possession
and occupancy shall continue to the expiration date unless and until Tenant
shall be in default of any of the terms, covenants and/or conditions contained
in this lease and on the part of Tenant to be observed and performed.
General Provisions Page 1 of 35
<PAGE>
5. RENT
5.1. Tenant shall pay to Landlord monthly in advance throughout the term of
this lease or any extensions thereof the monthly rent for the Premises set forth
in Section 1.6, in United States currency, over and above all other charges
herein set forth and without any set-off or counterclaim whatsoever. It is the
intent of the parties hereto that Tenant shall pay and Landlord shall have and
enjoy the rent set forth in Section 1.6 without any deduction therefrom on any
account whatsoever. The installment of rent payable for any portion less than
all of a calendar month shall be a pro rata portion of the rent payable for a
full calendar month.
5.2. All payments of rent after the first payment shall be paid without
notice on or before the first day of each and every calendar month during the
term hereof or _______ _____ _______________________________________________.
5.3. Every installment of rent and every other payment due hereunder from
Tenant to Landlord which shall not be paid within ten (10) days after the same
shall have become due shall bear interest at the rate of one per cent (1%) per
month from the date that the same became due and payable until paid, whether or
not demand be made therefor. It is also agreed by Tenant that since collection
of any amount past due imposes an administrative cost on Landlord, in addition
to any fees of collection agents or attorneys or other out-of-pocket costs,
Tenant will pay to Landlord a sum to reimburse Landlord for such administrative
costs equal to five cents ($.05) for every dollar past due as set forth in each
billing or other written demand rendered or made by Landlord, computed on the
total amount of each such billing or demand but not to exceed one such billing
or demand per month.
5.4. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenants default with respect to such overdue, amount, nor
prevent Landlord from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of rent, then at Landlord's
option, rent shall automatically become due and payable quarterly in advance,
rather than monthly notwithstanding any provision in this lease to the contrary.
5.5. If the rent for the entire lease term has not been fixed and agreed to
at the time of execution of this lease, then the basic monthly rent for each
successive rental period following the last period for which rent was fixed,
shall be determined by mutual agreement. In the event Landlord and Tenant are
unable to agree on the basic rental for each period at least three (3) months
prior to the date of the commencement of such period, then the basic rental
shall be the monthly fair market rental value of the Premises (at least
commensurate with rents typical of similar space in other first class office
buildings in comparable locations), including amenities offered, but exclusive
of any fixtures, equipment, alterations, additions or improvements installed or
made by the Tenant, as determined by a real estate appraiser agreed upon by the
Landlord and the Tenant, but such rent shall not be less than the basic monthly
rent for the prior period. In the event that the Landlord and Tenant are unable
to agree upon a real estate appraiser at least sixty (60) days prior to the
commencement of such period, then the determination of the aforesaid monthly
rent shall be made by three impartial appraisers, one of whom shall be appointed
by each of the parties hereto. Either party may give to
General Provisions Page 2 of 35
<PAGE>
the other written notice of a desire to have a determination of such fair market
rental value and name therein one of the appraisers whereupon the other party
shall, within ten (10) days after receipt of such notice, name another appraiser
and give notice thereof to the party desiring such determination. In case of
failure of the second party to do so, the party who has named an appraiser shall
have the right to apply to any judge of the First Circuit Court of the State of
Hawaii to appoint an appraiser, and the two appraisers thus appointed (in either
manner) shall select and appoint a third appraiser, and give notice thereof to
the Landlord, and the Tenant. In the event the two appraisers so appointed shall
within ten (10) days after the naming of the second appraiser fail to appoint
the third appraiser, either party may apply to and have such appraiser selected
and appointed by the First Circuit Court, and the three appraisers so appointed
shall thereupon proceed to determine said fair rental value and the decision of
any two of them shall be final, conclusive and binding upon both parties for the
particular rental period then under consideration, unless the same shall be
vacated, modified or corrected, all as provided in Chapter 658, Hawaii Revised
Statutes, as the same is now or from time to time hereafter may be amended,
provided, however, that such basic monthly rent for such period shall not be
less than the basic monthly rent payable for the preceding period. The parties
hereto shall each pay for the services of their own appointee, and shall pay
one-half of all other legitimate costs of such determination, other than
attorneys' fees and witnesses, fees. If and whenever the fixing of such basic
rent is under arbitration, Tenant, pending the determination thereof, shall pay
one and one-half (1-1/2) times the same rent which the Tenant had been paying
during the last preceding rent period and shall promptly pay the deficiency, if
any, when the rent is determined.
5.6. Tenant shall pay to Landlord as additional rent, together with each
payment of rent or any other payment required hereunder which is subject to any
State of Hawaii general excise tax on gross income, as it may be amended, and
all other similar taxes imposedon Landlord on said rent or other payments in the
in the nature of a gross receipts tax, sales tax, privilege tax or the like
(excluding federal or state net income taxes) whether imposed by the United
States of America ______________________ the city and County of Honolulu, or any
other duly authorized taxing body, an amount which, when added to such rental or
other payment, shall yield to Landlord, after deduction of all such tax payable
by Landlord with respect to all such payments, a net amount equal to that which
Landlord would have realized from such payments had no such tax been imposed,
said additional amount presently being equal to 4.167% of the said rental and
other amounts. It is the intent of this provision and of the other provisions of
this lease to insure that the rent herein provided to be paid to Landlord by
Tenant will be received by Landlord without diminution by any tax, assessment,
charge or levy of any nature whatever, except federal and state net income
taxes, and the terms and conditions of this lease shall be liberally construed
to effect such purpose.
5.7. Tenant shall also pay as additional rent those payments required by
the provisions of Section 30, Operating Expenses.
------------------
5.8. RESERVED.
6. QUIET ENJOYMENT. Landlord agrees that upon payment of the rent herein
provided for, and upon the observance and performance by Tenant of the covenants
hereinafter contained and on
General Provisions Page 3 of 35
<PAGE>
the part of Tenant to be observed and performed, subject to the provisions of
this lease, and any underlying lease and any mortgage on Landlord's estate,
Tenant shall peaceably hold and enjoy the Premises for the term hereby demised.
7. USE
7.1. The Premises may be used and occupied only for the purpose(s) set
forth in Section 1.8 above and for no other purpose or purposes, except as
permitted in writing by Landlord. Tenant shall not permit any business to be
operated in or from the Premises by any concessionaire, licensee or subtenant.
No use shall be made of the Premises, nor act done in or about the Premises
which is illegal, unlawful, improper or offensive, or which will overload the
floors or any parts of the Building or increase the existing rate of insurance
upon the Building, nor shall any use be made of the Premises which would cause
Landlord to be in default under any underlying lease on all or any part of the
Building or any mortgage on Landlord's estate. Tenant shall not commit or allow
to be committed any strip or waste upon the Premises, or any public or private
nuisance or other act or thing which may interfere with or disturb the quiet
enjoyment of any other tenant in the Building, nor shall Tenant overload the
floor of said Premises. Tenant shall not use any apparatus, machinery or device
in or about the Premises which shall cause any substantial noise or vibration.
If any of Tenant's office machines and equipment should disturb the quiet
enjoyment of any other tenant in the Building, then Tenant shall provide
adequate insulation, or take such other action as may be necessary to eliminate
the disturbance. Tenant will comply, at its own expense, with all laws,
statutes, ordinances, and governmental rules and regulations applicable to the
Premises.
7.2. Tenant shall not install or use any machine, apparatus or equipment
which may cause heat to be emitted into the surrounding air, other than those in
normal office use within the Building, without first obtaining written consent
from the Landlord, which consent may be arbitrarily withheld by Landlord
respecting any machine, apparatus or equipment emitting material heat.
8. POSSESSION
8.1. In the event of Landlord's inability to deliver possession of the
Premises at the Commencement Date set forth in Section 1.5 and Exhibit "D",
Landlord shall not be liable for any damage caused thereby nor shall this lease
became void or voidable. In such event, no rent shall be payable by Tenant to
Landlord for any portion of the lease term prior to delivery of possession of
the Premises, and the date of termination of this lease shall be extended by a
period of time equal to the nearest number of full calendar months during which
Landlord was unable to deliver possession of the Premises to Tenant. If the
termination date is extended as herein provided, the parties agree to enter into
a supplemental agreement amending and fixing the term of the lease as herein
agreed. Unless otherwise provided for herein, in the event Tenant, with
Landlord's permission, enters into possession of the Premises or commences
improvements upon the Premises, prior to commencement of the lease term, all of
the terms and conditions of this lease, including the payment of rent, shall
apply during such prior period.
8.2. Unless otherwise expressly agreed upon by the Landlord and Tenant,
Landlord shall _________ ____________________ have the right to possess and
occupy the Premises on the
General Provisions Page 4 of 35
<PAGE>
Commencement Date, and the right to such possession and occupancy shall continue
to the expiration date unless and until Tenant shall be in default of any of the
terms, covenants and/or conditions contained in this lease and on the part of
Tenant to be observed and performed. For the purposes of this Section,
possession shall be deemed to be delivered on the date specified by the Landlord
that the Premises are ready for occupancy. Such specification shall be by
written notice to Tenant from Landlord.
8.3. Except as may be otherwise herein provided, Tenant, by entering into
and occupying the Premises, shall be deemed to have accepted the Premises and to
have acknowledged that the same are then in the condition called for by this
lease, and are in good order, condition and repair.
9. SERVICES PROVIDED BY LANDLORD. Provided Tenant shall not be in default
hereunder, Landlord agrees to furnish to Tenant electricity for lighting and
normal office use (subject to Section 10 hereof) , automatic elevator service,
washroom facilities and supplies, and water. Landlord shall also furnish
customary and reasonable janitorial and cleaning services on the basis of five
(5) days per week (exclusive of holidays) within the Premises, and provide
standard fluorescent lighting replacement at reasonable intervals. Landlord
shall provide window cleaning services for both sides of the exterior windows of
the Building, except for ground floor windows, upon determination by Landlord,
at its sole discretion, that such services are required. Air conditioning as
may be reasonably required for the comfortable occupation of the Premises will
be furnished by Landlord during normal operating hours as specified in the Rules
and Regulations attached hereto as Exhibit B; provided that Tenant agrees that
if the air-conditioning equipment shall fail or break down, Landlord's
obligation to so furnish shall be limited to taking reasonable steps to repair
or replace the same so as to restore such service. All such services will be
provided in accordance with the Rules and Regulations (Exhibit B). Except as
otherwise herein provided, Landlord will use reasonable efforts to maintain the
public and common areas of the Building, such as stairs, lobbies, corridors and
restrooms, in good order and condition except for any damage occasioned by act
of Tenant, which damage shall be repaired by Landlord at Tenant's expense.
Landlord shall not be liable for any damages or for stoppage or interruption of
any of said services mentioned in this Section caused by maintenance, labor
disturbances or labor disputes (whether caused by Landlord or otherwise) ,
accidents, repairs, wars, riots or other cause beyond the reasonable control of
Landlord, nor shall Landlord be liable under any circumstances, for loss of or
injury to persons or property, however occurring, through or in connection with
or incidental to the furnishing of any of the foregoing, nor shall any such
failure relieve Tenant from the duty to pay the full amount of rent herein
reserved or constitute or be construed as a constructive or other eviction of
Tenant. Landlord reserves the right to change the name of the Building at
Landlord's sole discretion.
10. ELECTRICITY. Tenant's use of electrical power shall not exceed the "normal
power consumption" of other first-class office buildings of similar size and
characteristics. The "normal power consumption" is set forth in the Building
Rules and Regulations and may be adjusted from time to time. Tenant shall not
install any electrical equipment requiring power in excess of that required for
normal office use without first obtaining written consent from Landlord.
Landlord
General Provisions Page 5 of 35
<PAGE>
reserves the right to install a meter in the Premises at the sole expense of
Tenant and to be kept in repair at the sole expense of Tenant (including
Landlord's reasonable administrative expenses in conjunction therewith) to
measure the amount of electricity consumed by Tenant. If it is determined that
Tenant's consumption of electrical power exceeds the "normal power consumption"
as set forth in the Building Rules and Regulations, Landlord reserves the right
to increase Tenant's rent by the cost of such excess power.
11. DAMAGE TO PREMISES
11.1. In the event the Premises or the Building shall be destroyed or
damaged by fire or other casualty, rendering the Premises or the Building
untenantable, Landlord may at Landlord's option, exercised by written notice to
Tenant within ninety (90) days from the happening of the casualty, elect that
said damage be repaired. If Landlord does not so elect to repair said damage,
this lease may be terminated by either party as of the date of such damage by
written notice to the other. If Landlord elects that said damage be repaired,
Landlord shall at its own expense promptly repair said damage to the Building,
and Tenant shall be entitled to an abatement of the rent, or a fair and just
proportion thereof, according to the nature of the damage sustained until the
Premises _________________ occupancy and use, unless such damage or destruction
was caused by the act or negligence of Tenant, its employees, agents or
invitees.
11.2. If Landlord becomes obligated to repair or reconstruct the Premises
or the Building, Landlord shall be responsible to repair only such portions of
the Building that affect access or services essential to the Premises, and in
such case, Tenant shall be solely responsible to repair all damage to the
interior of the Premises and any improvements, alterations and additions therein
as may have been caused by such casualty. To the extent that the Premises are
not fit for occupancy or use by reason of damage that Tenant is obligation to
repair hereunder, any abatement of rent to which Tenant would otherwise be
entitled hereunder shall not extend later than the time by which Tenant ought to
have completed such repairs with reasonable diligence.
11.3. If Landlord becomes obligated to repair or reconstruct the Premises
of the Building, Landlord shall be relieved of such obligation and Landlord may
terminate this lease if Landlord is unable to obtain the necessary labor or
materials, or if Landlord is unable to perform such obligation due to any cause
beyond its control, including, but not limited to strikes, lockouts, labor
disturbances, acts of civil or military authorities, restrictions by municipal
authorities, restrictions by municipal ordinances or federal or state statutes
and military activity, riots or civil commotions.
12. CONDEMNATION
12.1. TERMINATION OF LEASE AS TO PORTION TAKEN. Unless otherwise
----------------------------------------
terminated hereunder, if the Premises or any part thereof or interest therein be
taken by condemnation (other then a temporary taking which is provided for in
Section 12.6) this lease shall terminate as to the part so taken as of the time
possession thereof shall vest in the condemnor, whichever shall first occur.
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12.2. LANDLORD'S OPTION TO TERMINATE. If (i) the Premises or any part
------------------------------
thereof or interest therein is taken by condemnation or (ii) a substantial
portion of the Building is taken by condemnation and Landlord shall decide to
discontinue the use or operation of the Building, or to demolish, alter or
rebuild the same, as a result of such taking, then in any such event stated in
(i) or (ii), Landlord shall have the right to terminate this lease by giving
Tenant written notice of termination within sixty (60) days after such taking.
Any such termination shall be effective as of the last day of the calendar month
next following the month in which such notice is given.
12.3. TENANT'S OPTION TO TERMINATE. If more than twenty-five percent (25%)
----------------------------
of the Premises is taken by condemnation and if the remaining part is thereby
rendered unfit for Tenant's use, Tenant shall have the right to terminate this
lease by giving Landlord written notice of termination within fifteen (15) days
after possession is lost or title passes, whichever shall first occur. Any such
termination shall be effective as of the last day of the calendar month next
following the month in which such notice is given.
12.4. REDUCTION OF RENTAL. If part of the Premises is taken by
-------------------
condemnation (other than a temporary taking which is provided for in Section
12.6) and neither Landlord nor Tenant shall terminate this lease as provided
herein, then this lease shall continue in full force and effect as to the part
of the Premises not taken and the rent herein shall be reduced, as of the date
of such taking, in the same proportion as the useable floor area of the Premises
shall have been reduced as a result of such taking.
12.5. RIGHT TO COMPENSATION. In the event of any taking specified in
---------------------
Sections 12.1, 12.2 and 12.3 above, all compensation and damages payable or to
be paid for or by reason of such taking shall be payable to and be the sole
property of Landlord without any apportionment to Tenant, and Tenant hereby
assigns to Landlord any right to compensation or damages for its leasehold
interest in the Premises condemned. Termination of this lease by Landlord
pursuant to Section 12.2 or by Tenant pursuant to Section 12.3 shall not affect
the respective rights of Landlord and Tenant to compensation and damages and
Tenant shall not hereby be prevented from filing any claim for the taking of any
fixtures owned by Tenant and for moving expenses.
12.6. TAKING FOR A LIMITED PERIOD. If the Premises or any part thereof
---------------------------
shall be taken by condemnation for a limited period, this lease shall not
terminate and Tenant shall continue to pay in full the rent provided for
herein, in the manner __________. Except to the extent that Tenant is prevented
from so doing by reason of any order of the condemning authority, Tenant shall
continue to perform and observe all of the other covenants, agreements, terms
and provisions of this lease as though such taking had not occurred. In the
event of any such taking, Tenant shall be entitled to the entire amount paid by
the governmental authority with respect to governmental occupancy of the
Premises during the term of this lease (whether paid by the authority as
damages, rent or otherwise), and in the event any such governmental occupancy
extends beyond the date of termination of this lease, all such amounts paid by
the governmental authority shall be prorated as of the date of termination of
this lease. Tenant covenants that at the termination of any such limited or
specified period prior to the expiration or earlier termination of this lease,
Tenant
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will, at its sole cost and expense, restore the Premises and improvements
therein as may be reasonably possible to the condition which the same were prior
to such taking.
Tenant hereby assigns any condemnation proceeds to Landlord and irrevocably
appoints Landlord its attorney-in-fact to collect the same from the condemning
governmental authority. In the event of a lump sum award, Landlord shall retain
for itself an amount sufficient to equal those amounts payable by Tenant in
accordance with the terms hereof. This amount shall be calculated in terms of
the present dollar value of the anticipated rental income stream in accordance
with recognized standard accounting procedures. In the event the award is made
on a monthly basis, Landlord shall retain that amount due it in accordance with
the terms hereof. In both cases, any excess shall be paid to Tenant.
13. HOLDING OVER
13.1. WITH LANDLORD'S CONSENT. Any holding over after the expiration of
-----------------------
the said term, with the consent of Landlord, shall be construed to be a tenancy
from month-to-month, terminable by either party by not less than twenty-eight
(28) days' written notice. The monthly rent during such holdover period shall
be equal to the higher of (i) the monthly rent and monthly operating and
janitorial expenses applicable at the end of the stated term, and (ii) the then
prevailing rate for comparable space in the Building as determined by Landlord.
All of the other terms, covenants and agreements hereof shall continue to apply
and bind Tenant so long as Tenant shall remain in possession, insofar as the
same are applicable.
13.2. WITHOUT LANDLORD'S CONSENT. If Tenant, at the expiration or other
--------------------------
termination of this lease, without the consent of the Landlord, continues in
possession of the Premises, either actually or constructively, then the monthly
rent shall be two (2) times the monthly rent payable for the last month prior to
such expiration or other termination, prorated on a daily basis for each day
that Tenant remains in possession. Tenant shall also be liable to Landlord for
any and all consequential damages sustained by Landlord as a result of such
failure to surrender possession.
14. LIENS
14.1. Tenant shall at all times indemnify, defend, save and hold Landlord
or any other lessor of any underlying lease, and any mortgagee under any
mortgage on Landlord's estate, and the Premises, Landlord's reversionary estate
therein, and the Building free, clear and harmless from and against any and all
claims, liens, demands, charges, encumbrances or litigation arising directly or
indirectly out of any use, occupancy or activity of Tenant, its agents or
employees, or out of any work performed, material furnished, or obligations
incurred by Tenant, its agents or employees, in, upon, about or otherwise in
connection with the Premises. Tenant, except as hereinafter permitted herein,
shall pay or cause to be paid for all work performed and material furnished to
the Premises or Landlord's reversionary estate therein, and will keep the
Premises, Landlord's reversionary estate therein and the Building free and clear
of all mechanics' and materialmen's liens.
14.2. Immediately upon any attachment of any lien or entry of final
judgment which establishes the validity of the lien and in which Tenant
contested the claim of lien, and within fifteen
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<PAGE>
(15) days after the attachment or filing of any lien for record which Tenant
does not contest, and in any event, prior to any execution sale, Tenant shall
fully pay and discharge such judgment or lien, as the case may be. Further,
Tenant shall reimburse Landlord upon demand for any and all loss, damage and
expense, including reasonable attorney's fees, which Landlord may suffer or be
put to by reason thereof. Nothing contained herein shall prevent Landlord, at
the cost and for the account of Tenant, from satisfying any such judgment or
lien, as the case may be, in the event ______________________________ the same
as herein provided.
14.3. Should any claim or lien be filed against the Premises, or any action
or proceeding be instituted affecting the title to the Premises, Tenant shall
give Landlord written notice thereof as soon as Tenant obtains knowledge
thereof.
15. DEFAULT AND RE-ENTRY
15.1. BY LANDLORD. Notwithstanding any other provision hereof, in the
-----------
event Landlord fails or refuses to perform any of the provisions, covenants or
conditions of this lease on Landlord's part to be kept or performed, Tenant
shall, prior to exercising any right or remedy Tenant may have against Landlord
on account of such default, give a thirty (30) day written notice to Landlord of
such default, specifying in said notice the default with which Landlord is
charged. Tenant agrees that if the default complained of in such notice is of
such a nature that the same can be rectified or cured by Landlord, but cannot
with reasonable diligence be rectified or cured within said 30-day period, then
such default shall be deemed to be rectified or cured if within said 30-day
period Landlord shall have commenced and thereafter shall prosecute diligently
to completion the rectification and curing thereof. This Section does not modify
in any way the provisions of Sections 22 and 23 herein.
15.2. BY TENANT.
---------
15.2.1. Notice and Termination: Landlord's Options. In the event
------------------------------------------
that:
(A) Tenant shall fail to pay said rent or any part
thereof within thirty (30) days after the same becomes due, whether the same
shall or shall not have been legally demanded, or
(B) Any event shall occur which shall be a breach of
the section regulating the conduct of the business and use of the Premises and
such breach continues beyond twenty-four (24) hours after notice thereof from
Landlord to Tenant; or
(C) Tenant shall fail to observe or perform any of the
other covenants herein contained and on Tenant's part to be observed and
performed, and such default shall continue for five (5) calendar days after
written notice thereof is given to Tenant, or if such default in observance or
performance of such other covenant cannot reasonably be cured within said 5-day
period, then such longer time as may be required, provided that Tenant shall
within said period commence such cure and thereafter diligently prosecute the
same to completion, or
(D) Tenant then owning this lease shall become
bankrupt, or file any debtor proceedings, or any case or proceeding, voluntary
or involuntary, be filed by or against
General Provisions Page 9 of 35
<PAGE>
Tenant as debtor under any provision of the Federal Bankruptcy Code or any State
statute governing any debtor-creditor rights, seeking or have any order or
decree rendered against Tenant directing any readjustment, arrangement,
composition or reduction of Tenant's debts, liabilities or obligations, or make
any assignment for the benefit of creditors or abandon the Premises, or
(E) Any mechanics, or materialmen's liens shall attach
to the Premises or Tenant's estate or interest therein and shall not be
discharged or released within five (5) business days after such attachment, or
(F) There is any attachment, execution, or other
judicial seizure of this lease or any estate or interest of Tenant hereunder, or
(G) Tenant shall vacate or abandon the Premises for a
period of fifteen (15) days during the term of this lease, excluding a temporary
vacating of the Premises by Tenant that is approved in writing by Landlord, then
and in any such event (and in addition to all other rights and remedies Landlord
may have according to this lease or by law provided) , Landlord, at its option,
shall have the following rights:
(a) The right to declare the term of this lease ended
and to re-enter the Premises, or any part thereof in the name of the whole, and
take possession thereof, and to terminate all of the rights of Tenant in and to
the Premises, or
(b) The ________________________ the term of this
leaseended, to re-enter the Premises and to occupy the same, or any portion
thereof, or to lease the whole or any portion thereof, for and on account of
Tenant as hereinafter provided, or
(c) The right, even though it may have re-let all or
any portion of the Premises, at any time thereafter to elect to terminate this
lease for such previous defaults on the part of Tenant, and to terminate all of
the rights of Tenant in and to the Premises.
Pursuant to said rights of re-entry, Landlord may remove all persons from
the Premises using such force as may be necessary therefor and may remove all
property therefrom without being deemed guilty of any trespass or becoming
liable for any loss or damage occasioned thereby. Said rights of re-entry shall
be without prejudice to any other right or remedy of action, including summary
possession, which Landlord may have for rent or any other indebtedness owing by
Tenant hereunder. Whether or not Landlord shall have taken any action above
permitted, Landlord may bring an action for summary possession in case of such
default, and in any such action, service or prior notice or demand is hereby
expressly waived.
In the event of such resumption of possession under this lease, whether by
summary proceedings or by any other means, Landlord or any receiver appointed by
a court having jurisdiction, may dispossess and remove all persons and property
from the Premises, and any property so removed may be stored in any public or
private warehouse or elsewhere at the cost and
General Provisions Page 10 of 35
<PAGE>
for the account of Tenant, and Landlord shall not be responsible for the care or
safekeeping thereof, and Tenant hereby waives any claim or cause of action, any
and all loss, destruction, and/or damages or injury which may be occasioned in
the exercise of any of the aforesaid acts. After thirty (30) days, property so
stored shall be considered abandoned.
Anything contained herein to the contrary notwithstanding, Landlord shall
not be deemed to have terminated this lease or the liability of Tenant to pay
any rent or other sum of money thereafter to accrue hereunder, or Tenant's
liability for damages under any of the provisions hereof, by any such re-entry,
or by any action in unlawful detainer or otherwise to obtain possession of the
Premises, unless Landlord shall have notified Tenant in writing that is has so
elected to terminate this lease. The effective date of termination of this
lease shall be as of the date set forth or provided in the notice or order
aforementioned, as the case may be.
15.2.2. Repeated Defaults. In the event Tenant establishes a pattern
-----------------
of repeated defaults in that Tenant fails to make any payment of money under
this lease when due or defaults in the performance of any covenant, undertaking,
or obligation, other than for the payment of money, required by this lease to be
performed by Tenant, in three consecutive calendar months or in any four months
during the same calendar year (whether the same or different failures or
defaults are involved), then notwithstanding that Tenant has cured within the
times prescribed any such failures and defaults occurring in the first two
consecutive calendar months or in any three months in the same calendar year, it
is nevertheless agreed that the occurrence of such failure or default for the
third consecutive calendar month or for the fourth month in the same calendar
year shall be conclusively deemed to be an immediate material breach of this
lease.
15.2.3. Right to Re-let Premises.
------------------------
15.2.3.1 In the event Landlord elects to re-enter the
Premises as hereinabove provided, or should Landlord take possession thereof
pursuant to legal proceedings or pursuant to any notice provided for by law,
Landlord, at its option, may either terminate this lease or without terminating
this lease re-let the Premises or any portion thereof for such term or terms and
at such rent or rents and upon such other terms and conditions as Landlord in
its sole discretion may deem advisable. In addition to the foregoing, Landlord
shall have the right at Tenant's cost to make such alterations and repairs to
the Premises, or to divide or subdivide the Premises, as may be required or
occasioned by any such re-letting. In the event Landlord re-lets the Premises or
any portion thereof, Landlord may execute any such lease either in its own name
or in the name of the Tenant, but Tenant shall not have any right or authority
whatsoever to collect any rent from such tenant thereunder.
15.2.3.2 Upon each such re-letting, Landlord shall apply
the rents and sums _______________________________________ in the following
order: (a) first, to the payment of costs of recovering the Premises, including,
without limitation, court costs and reasonable attorney's fees; (b) second, to
the payment of any costs and expenses of said re-letting, including, without
limitation, the costs of alterations and repairs, dividing and subdividing of
the
General Provisions Page 11 of 35
<PAGE>
Premises in connection therewith, and the payment of any brokerage commissions
or other similar expenses of Landlord in connection with such reletting; (c)
third, the balance, if any, shall then be applied by Landlord, from time to
time, but in any event no less often than once each month, on account of the
payments of rent and other payments on the part of Tenant due and payable
hereunder; and (d) fourth, the residue, if any, shall be paid to Tenant.
15.2.3.3 Landlord reserves the right to bring such actions
for the recovery of any deficit remaining unpaid by Tenant to Landlord hereunder
as Landlord may deem advisable from time to time without being obligated to
await the end of the term hereof for a final determination of Tenant's account.
The commencement or maintenance of one or more actions by Landlord in this
connection shall not bar Landlord from bringing other or subsequent actions for
further accruals pursuant to the provisions of this Section.
15.2.4. Damages on Termination. Should Landlord at any time
----------------------
terminate this lease for any default, breach or failure of Tenant hereunder,
then, in addition to any other rights or remedies available to Landlord
hereunder or by law provided, Landlord may have and recover from Tenant at the
option of Landlord: (a) all damages Landlord may incur by reason of such
default, breach or failure, including, without limitation, damages for loss of
rent determined, all costs of recovering the Premises, including, without
limitation, court costs and reasonable attorney's fees, all unamortized
brokerage commissions, all unamortized Tenant improvement costs incurred by
Landlord and all costs and expenses of any re-letting, including, without
limitation, all costs of alterations and repairs, dividing and subdividing of
the Premises in connection therewith, all brokerage commissions or other similar
expenses of Landlord in connection with such re-letting; or (b) the worth at the
time of termination of this lease of the excess, if any, of the rent and other
charges reserved in this lease for the remainder of the term hereof over the
then reasonable rental value of the Premises for the same period. All such
amounts under either of the foregoing options, including attorney's fees of
Landlord, shall be immediately due and payable by Tenant to Landlord.
15.2.5. Waiver of Default. The waiver by Landlord of any default or
-----------------
breach of any of the provisions covenants or conditions hereof on the part of
Tenant to be kept and performed shall not be a waiver of any preceding or
subsequent default or breach of the same or any other provision, covenant or
condition contained herein. The subsequent acceptance of rent or any other
payment hereunder by Tenant to Landlord shall not be construed to be a waiver of
any preceding breach by Tenant of any provision, covenant or condition of this
lease other than the failure of Tenant to pay the particular rent or other
payment or portion thereof so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such rent or other payment.
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance of such rent or pursue any other remedy in this lease
provided. Landlord's failure to take advantage of any default or breach of
covenant on the part of Tenant shall not be construed as a waiver thereof, nor
shall any custom or practice which may grow up between the parties in the course
of administering this instrument be construed to waive or to lessen the right of
Landlord to insist upon the performance by Tenant of any term, covenant or
condition hereof, or to exercise any rights given Landlord on account of any
such default.
General Provisions Page 12 of 35
<PAGE>
15.2.6. Appointment of Landlord as Attorney-in-fact. In the event
-------------------------------------------
the Premises or any part thereof are sublet or Tenant is entitled to receive
payments of any kind whatsoever by reason of its being the Tenant in the
Premises, then, in the event of default, Landlord shall have the immediate right
to receive and collect all rents, income and profits from the Premises hereby
leased, due or accrued or to become due, and said rents and profits are hereby
assigned to Landlord. Landlord is hereby irrevocably appointed the attorney-in-
fact of Tenant in Tenant's name or in Landlord's own name to demand, sue for,
collect, recover and receive all such rents and profits, and to compromise and
settle claims for rents or profits upon such terms and conditions as to Landlord
may seem proper, and to enter into, renew or terminate leases or tenancies.
15.2.7. Cumulative Remedies. The rights and remedies under this
-------------------
lease are cumulative and the use of one remedy shall not be taken to exclude or
waive the right to the use of another.
15.2.8. Advances by Landlord Rentals. If Tenant fails to make any
----------------------------
of the payments such as for real property taxes, assessments and the like,
required to be made under this lease, or by any act or neglect of Tenant causes
Landlord's interest in the Premises or any portion thereof to be jeopardized in
any manner, Landlord may make any or all such payments for Tenant's account and
Tenant shall forthwith repay to Landlord such advances, together with any costs
and attorney's fees which may thereby be incurred.
All delinquent rentals and all such advances made by Landlord shall bear
interest from the due date at the rate of interest set forth in Section 3.
16. REPAIRS AND ALTERATIONS
-----------------------
16.1. Landlord shall be under no obligation to maintain or to make any
repairs, alterations or improvements to or upon the Premises or any part thereof
at any time, except as otherwise expressly provided in this lease.
16.2. Tenant, at its sole cost and expense, at all times during the term
hereof, shall keep and maintain the Premises, the improvements thereof, and
every part thereof in good and sanitary order, condition and repair and in
compliance with all applicable laws and regulations, whenever enacted. Tenant
shall paint the interior surfaces of the Premises and shall perform such
maintenance, replacement or repair of wall paper, if any, of the interior of the
Premises as may be reasonably required and approved by Landlord. Tenant, at its
sole cost and expense, shall repair any and all damage to the roof or exterior
walls of the Premises and the Building and pay for the replacement of doors or
windows of the Premises and the Building resulting from the acts or omissions of
Tenant, Tenant's agents, employees or invitees. Tenant hereby waives any right
to make repairs at Landlord's expense. Tenant shall not make changes to locks
on doors or add, disturb or in any way change any plumbing, air-conditioning
system or wiring without first obtaining written consent of Landlord. Tenant
shall not put any curtains, draperies or other hangings on or beside the windows
in the
General Provisions Page 13 of 35
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Premises without first obtaining Landlord's consent. All required repairs shall
be made with the least inconvenience reasonably possible under the circumstances
to Landlord.
16.3. If Tenant refuses or neglects to repair the Premises as required
hereunder and to the reasonable satisfaction of Landlord as soon as reasonably
possible after written demand, Landlord may make such repairs without liability
to Tenant for any loss or damage that may accrue to Tenant's stock or other
property or to Tenant's business by reason thereof. Upon completion thereof and
upon presentation of a bill thereof, Tenant shall pay Landlord's cost for making
such repairs as additional rent.
16.4. In the event any repairs become necessary to the structural portions
of the Premises, then upon written notice from Tenant to Landlord stating the
necessity therefor and the nature thereof, Landlord, with reasonable promptness
after receipt of such written notice, shall make any such necessary repairs
specified in such notice. Landlord shall not be required to make repairs to the
interior surfaces of the Premises, even where damage to such interior surface
has resulted from Landlord's acts, omissions or defects or which were otherwise
required to be kept in repair by Landlord, but any such damage shall be insured
against by Tenant with Landlord as an additional insured. Landlord may make any
alterations, additions or capital improvements which Landlord may deem necessary
for the preservation, safety or improvement of the Premises or the Building, or
to comply with any laws, codes, regulations or ordinances now or hereafter in
effect, or for the purpose of reducing energy requirements; and if such is done
to comply with any such law, code, regulation or ordinance or for the purpose of
reducing energy requirements, the cost thereof shall be deemed to be a part of
the operating expenses for the KAIMUKI PLAZA as provided in Section 30
hereinbelow.
16.5. Except as may be specially provided herein to the contrary, Landlord
has rented and Tenant hereby accepts the Premises, the common areas, and the
utility services available to and designated for the Premises in "as is"
condition (including any latent conditions) ; and Tenant agrees by taking
possession of the Premises that the Premises are then in a tenantable and good
condition. Except as may otherwise be provided herein, Tenant, at Tenant's own
expense, shall perform ____________________________ necessary to prepare the
Premises for occupancy by Tenant, in accordance with plans and specifications
therefor prepared by and at the expense of Tenant. No work shall be commenced
by Tenant until Tenant's final plans and specifications for the Premises and for
connections to utility systems existing in the Building have been submitted to
Landlord for review and have been approved in writing by Landlord. All work
shall comply with all applicable building codes, ordinances and regulations.
Before commencing any work, the Tenant shall provide Landlord with a copy of
Tenant's contract with the contractor and shall furnish evidence satisfactory to
Landlord that Tenant is financially able to pay the said contractor. Unless the
cost thereof shall be less than ONE THOUSAND AND N0/100 DOLLARS ($1,000.00),
before commencing construction of any improvements in the Premises, Tenant shall
furnish to Landlord a copy of a bond in an amount, in form, and with a surety
acceptable to Landlord naming Landlord and Tenant as obligees and insuring
completion of the proposed work free and clear of all mechanics, and
materialmen's liens. Tenant will pay to Landlord a reasonable fee for review
and approval of said
General Provisions Page 14 of 35
<PAGE>
plans and specifications, including any fees charged by an architect or engineer
employed by Landlord for such review. Upon completion of construction, Tenant
shall provide Landlord with a set of final plans and specifications of the
improvements as constructed. Unless otherwise agreed, Tenant shall maintain the
Premises and utility systems available to and designated for the Premises in the
condition they existed upon the date of Tenant's inspection thereof, reasonable
wear and tear excepted.
16.6. All alterations or improvements to the Premises shall remain for the
benefit of Landlord and shall not be removed unless otherwise expressly agreed
in writing, and shall be presumed to become an integral part of the Premises.
All fixtures installed by Tenant shall be new or completely reconditioned.
16.7. The design and all work and installations undertaken by Tenant shall
be subject to the prior written approval thereof by Landlord and if a value in
excess of $10,000.00, a licensed architect must be employed by Tenant. Landlord
shall have the right to order any contractor of the Tenant who violates any of
Landlord's requirements or standards of work to cease work and to remove itself,
its equipment and its employees from the Building. Tenant's contractor shall
conduct its work in such a manner so as not to interfere with or cause any
interruption of either (1) Landlord's construction, (2) another tenant's
occupancy or construction, or (3) other phases of Landlord's option of the
Building. Landlord may without further reason withhold approval of any
alterations, additions and improvements if the plans or specifications therefor
are not acceptable to the architect or engineer (if any) retained by Landlord to
review the same. In connection with any request for approval as required by the
terms of this paragraph, Landlord may charge a reasonable review fee and may
retain the services of an architect, consultant or engineer, and the reasonable
fees of such architect, consultant and/or engineer shall be reimbursed to
Landlord by Tenant. Landlord's approval of any plans and suggestions for the
revision thereof shall not be construed to be an agreement or representation on
Landlord's part of the adequacy or suitability of the alterations, additions or
improvements shown for the intended purposes.
16.8. ASBESTOS AND HAZARDOUS MATERIALS. Landlord hereby warrants that, to
--------------------------------
the best of its knowledge, no asbestos containing materials ("ACM") were used in
the original construction of the ceiling, walls and insulation of the Premises.
Tenant shall indemnify, defend and hold harmless Landlord and its employees,
agents, engineers, successors and assigns against any and all damages, injuries,
claims arising out of any repairs, modifications, alterations or construction
within the Premises, including but not limited to, damages, injuries and claims
due to exposure to ACM or any other Hazardous Material (as hereinafter defined).
Landlord, at its sole discretion, may withhold consent to any such work which in
Landlord's opinion may result in the introduction of ACM or other Hazardous
Material. In the event ACM or other Hazardous Material is discovered in or
about the Premises, or in the event ACM or other Hazardous material must be
removed and Tenant's use of the Premises is affected thereby, this lease shall
not be void or voidable, nor shall such discovery or work be construed as a
constructive eviction. Tenant shall continue to observe all terms and
conditions of this lease, except that the rent herein shall be reduced, as of
the date of the interference with Tenant's use of the Premises until the date
full use of the Premises is restored to
General Provisions Page 15 of 35
<PAGE>
Tenant, in the same proportion as the rentable area of the Premises shall have
been reduced. All costs of any inspection, testing, removal, abatement,
restoration, compliance with laws and regulation and monitoring due to ACM or
_________________ other by Landlord with respect to the Building shall be
included as an operating expense as defined in Section 30. Anything herein to
the contrary notwithstanding, Landlord shall not be liable for any damages due
to ACM or other Hazardous Materials within the Premises or the Building, and
Landlord shall not be responsible or liable for interruption of services, loss
profits or any other damages due to ACM or any other Hazardous Materials.
Tenant covenants and agrees to clean-up, remove, mitigate and take any
other action respecting Hazardous Materials to the extent such clean-up,
removal, mitigation, or other action is required by the Hazardous Materials
Laws. In the event Tenant fails to comply with the requirements of the
Hazardous Materials Laws, and as a result of such failure to comply, Landlord,
or any mortgagee of Landlord's interest are joined or named in any action,
hearing, proceeding or investigation by or before any federal, Hawaii State or
municipal authorities or regulatory bodies, Tenant will defend, indemnify and
hold harmless each and all of the aforesaid parties against any loss, fines,
penalties, damages or costs (including, without limiting the generality of the
foregoing, attorneys' fees and court costs) .
Tenant shall not cause or permit any Hazardous Material to be used, stored,
generated or disposed of on or in the Premises or the Building by Tenant,
Tenant's agents, employees, contractors or invitees without first obtaining
Landlord's written consent, which consent may be arbitrarily withheld by
Landlord. Tenant shall not discharge, leak or emit, or permit to be discharged,
leaked or emitted, any material into the atmosphere, ground, sewer system, or
any body of water, if that material (as is reasonably determined by the
Landlord, or any governmental authority) does or may pollute or contaminate the
same, or may adversely affect (a) the health, welfare, or safety of persons,
whether located on the Premises or elsewhere, (b) the condition, use or
enjoyment of the Building or any other real or personal property.
Any Hazardous Material permitted on the Premises and all containers
therefor, shall be used, kept, stored and disposed of any a manner that complies
with all federal, state and local laws or regulations applicable to such
Hazardous Material. If Hazardous Materials are used, stored, generated or
disposed of on or in the premises except as permitted above, or if the Premises
become contaminated in any manner for which Tenant is legally liable, Tenant
shall indemnify and hold harmless the Landlord from any and all claims, damages,
fines, judgments, penalties, costs, liabilities or losses (including, without
limitation, a decrease in value of the Premises, damages caused by loss or
restriction of rentable area, or any damages caused by adverse impact on
marketing of the space, and any and all sums paid for settlement of claims,
attorney's fees, consultant and expert fees) arising during or after the Lease
Term and arising as a result of that contamination by Tenant. This
indemnification includes, without limitation, any and all costs incurred because
of any investigation of the site or any clean-up, removal or restoration
mandated by a federal, state or local agency or political subdivision. Without
limitation of the foregoing, if Tenant causes or permits the presence of any
Hazardous Material on the Premises and that results in contamination, Tenant, at
its sole
General Provisions Page 16 of 35
<PAGE>
expense, promptly shall take any and all necessary actions to return the
Premises to the condition existing prior to the presence of any such Hazardous
Material on the Premises. Tenant shall first obtain Landlord's approval for any
such remedial action. As used herein, the term "Hazardous Materials" means and
includes, without limitation, inflammable explosives, radioactive materials,
asbestos, organic compounds (including polychlorinated biphenyls), pollutants,
contaminates, hazardous wastes, toxic substances or related materials and any
substances defined as or included in the definitions for "hazardous substances",
"hazardous wastes", "extremely hazardous wastes", "hazardous materials" or
"toxic substances" under the following laws, ordinances and regulations
("Hazardous Materials Laws"): Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, the Resource Conservation and Recovery
Act, the Hazardous Materials Transportation Act, the Clean water Act, the Clean
Air Act, the Toxic Substances Control Act, the Safe Drinking Water Act, as the
same may be amended from time to time, any similar Hawaii State and local laws
and ordinances, and regulations now or hereafter adopted, accomplished and
promulgated pursuant thereto applying to the Premises or the Building.
16.9. Compliance With Disability Access Laws. Tenant hereby covenants and
--------------------------------------
agrees with Landlord that Tenant shall at all times during the Term comply with
any and all governmental regulation of the Premises regarding access of disabled
persons, including without limitation, Title III of the Americans with
Disabilities Act of 1990 ___________________ and Hawaii Revised Statutes Chapter
489, or any other similar federal, state or local laws or ordinances and the
regulations promulgated thereunder, as the same may be amended from time to time
(collectively "Disability Access Laws") . Landlord shall not be liable for any
failure by Tenant to comply with the requirements of the Disability Access Laws
with respect to the Premises during the Term hereof and Tenant expressly
releases Landlord from any and all liability for any failure by Tenant to so
comply. Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all claims and demands for loss or damage, including claims for
discrimination, personal injury, monetary damage or injunctive relief arising
out of or in connection with any failure or alleged failure of the Premises to
comply with the Disability Access Laws, and Tenant shall reimburse Landlord for
all costs and expenses, including reasonable attorneys' and other professional
or consultants' fees, paid or incurred by Landlord in connection with the
defense of any such claims including, but not limited to, all costs for research
regarding settlement or other preventive measures which Landlord may take prior
to the filing of such action or to attempt to prevent the filing of such an
action.
17. INSPECTION OF PREMISES
----------------------
17.1. Tenant shall permit Landlord, Landlord's employees, agents, janitors
and engineers to enter into and upon the Premises at all reasonable times to
inspect and examine the same and to determine the state of repair and condition
thereof and to maintain the Building, with the right to erect and maintain such
scaffolding, canopies, fences and props as may be required, and all without any
rebate of rent or liability to Tenant for any loss of occupation or quiet
enjoyment of the Premises thereby occasioned.
General Provisions Page 17 of 35
<PAGE>
17.2. Tenant agrees that Landlord and Landlord's employees, janitors and
engineers may retain a passkey to the Premises and may enter the same during
normal business hours or at any time during emergencies by the use of such
passkey for any of the foregoing purposes. Tenant shall not change any lock on
the doors of the Premises. In the event Tenant changes locks, Landlord shall
have the right to use any means to gain access in an emergency, and any entry
made by Landlord under any circumstances shall not be construed or deemed to be
an unlawful entry, nor shall Landlord be liable to Tenant for any damage
whatsoever resulting from the use of force in effecting entry.
17.3. Tenant also will permit Landlord to bring prospective tenants upon
the Premises to view the same from time to time during business hours within the
six (6) month period prior to the expiration of the term of this lease.
18. SURRENDER OF PREMISES. At the expiration or sooner termination of this
---------------------
lease, Tenant will surrender and deliver up to Landlord, possession of the
Premises, including all improvements whenever and by whomsoever made or place
therein, in good condition and repair, ordinary use and wear excepted, PROVIDED,
HOWEVER, that if there be no default on the part of Tenant at the termination of
this lease, Tenant may, or if Landlord shall so require, by notice thereof to be
given not less than sixty (60) days prior to the end of the term hereof Tenant
shall, at its cost and expense, remove prior to the termination of this lease
all signs and trade fixtures erected or placed upon the Premises, and on such
notice, shall also remove any improvements made or placed by Tenant in the
Premises, as specified in such notice by Landlord, and Tenant shall replace and
repair all damage to the Premises, caused by or resulting from such removal and
leave the Premises in a clean and orderly condition. In the event Tenant shall
fail to perform such removal and/or restoration in accordance with the
requirements hereof, Landlord may do so and Tenant, upon demand, will pay to
Landlord the cost thereof, plus interest at the rate of one percent (1%) per
month from the date the same be demanded by Landlord until paid. This
obligation shall survive the termination of this lease. Any property left upon
the Premises by Tenant at the termination of this lease will be deemed by
Landlord to have been abandoned by Tenant, and Landlord may appropriate, destroy
or dispose of the same without liability or accountability to Tenant.
19. ACTION OR SUIT. In the event of any action or proceeding brought by either
--------------
party hereto against the other party based upon or arising out of any breach of
the terms and conditions hereof, the prevailing party shall be entitled to
recover all costs, including, but not limited to, reasonable attorney's fees,
from the other party. Tenant also agrees to pay all costs, including, but not
limited to, reasonable attorney's fees, which may be incurred or paid by
Landlord in enforcing without litigation any of the covenants, conditions or
agreements contained in this lease, and all such amounts shall be deemed
additional ______________________________ in the event of any litigation or
legal expense incurred by Landlord in connection with any litigation commenced
by or against Tenant (other than condemnation proceedings) in which Landlord
shall without fault be made party, then Landlord will be entitled to recover
from Tenant all of its costs and expenses so incurred, including reasonable
attorney's fees.
General Provisions Page 18 of 35
<PAGE>
20. ASSIGNMENT, SUBLETTING AND MORTGAGING. Tenant, without the prior written
-------------------------------------
consent of Landlord, shall not assign, transfer, mortgage, pledge, hypothecate
or encumber this lease or any interest herein, or sublet the Premises or any
part thereof. The term "sublet" shall include, without limitation, permitted
use or occupancy of the Premises by any person or party other than Tenant. Any
of the foregoing acts without such consent shall be void and constitute a
default under this lease. Tenant recognizes and agrees that Landlord may demand
and collect from Tenant a reasonable service charge, as set by Landlord, for the
processing of the application for the consent and for the preparation of the
consent. Landlord may condition the granting of consent upon the proposed
assignee or sublessee depositing or increasing the security deposit for the
Premises and/or executing a guaranty and/or providing current financial
statements that provide Landlord with adequate assurances that the proposed
assignee or sublessee is financially responsible. Any such consent by Landlord
shall not release Tenant from any of Tenant's obligations hereunder, or be
deemed to be a consent to any subsequent assignment, transfer, mortgage, pledge,
hypothecation, encumbrance or subletting.
If at any time or from time to time during the term of this lease Tenant
intends to so assign, sublet or mortgage, the following provisions shall govern:
20.1. With respect to a proposed assignment, Tenant shall submit to
Landlord for Landlord's review an agreement to assign, executed by both Tenant
and the proposed assignee, together with current financial statements of the
assignee. Landlord shall have the option to terminate this lease by written
notice given to Tenant within twenty (20) days after the agreement to assign is
given by Landlord. If Landlord does not so terminate, Landlord's written consent
to assignment shall nevertheless be required but shall not be unreasonably
withheld. If consent is given, Tenant shall pay to Landlord as consideration
therefor one-half (1/2) of any sums or other economic consideration payable to
Tenant as a result of such assignment, whether or not received by Tenant, except
payments received which are to reimburse Tenant for the then unamortized cost of
leasehold improvements made to the Premises by Tenant. An executed copy of the
assignment with the undertaking of the assignee to observe and perform all
obligations of the Tenant hereunder shall be furnished to Landlord for review
and written consent prior to entry by assignee into possession. This lease shall
not, nor shall any interest herein be assignable as to the interest of Tenant by
operation of law without the written consent of Landlord.
20.2. With respect to a proposed sublease, Tenant shall submit to Landlord
for Landlord's review, an agreement to sublease, executed by Tenant and the
proposed sublessee, together with current financial statements of the sublessee.
If the proposed subletting is for all or any portion of the Premises, Landlord
shall have the following options, exercisable by written notice given to Tenant
within twenty (20) days after the proposed agreement to sublease is given to
Landlord for its review: (i) Landlord may either sublet from Tenant such space
at the lower of (a) the rent set forth in this lease or (b) the rent set forth
in the proposed sublease agreement, and upon such other terms set forth in the
proposed sublease agreement, or (ii) if the proposed subletting is for the
entire Premises for the balance of the term of this lease, Landlord may
terminate this lease. If Landlord does not so exercise its option to either
sublet the Premises or terminate this lease in accordance with
General Provisions Page 19 of 35
<PAGE>
above, Landlord's written consent to sublet the Premises or any portion thereof
shall nevertheless be required but shall not be unreasonably withheld subject to
the following conditions:
20.2.1. The sublease shall be on the same terms set forth in the
agreement to sublease given to Landlord;
20.2.2. No sublease shall be valid and no sublessee shall take
possession of the Premises subleased until an executed counterpart of such
sublease, together with a current certificate of insurance attached thereto as
evidence that a comprehensive general liability insurance policy is in effect,
naming Landlord, Tenant and the sublessee as insured, have been delivered to
Landlord for review and written consent. Such certificate of insurance shall
conform to the provisions of _____________________.
20.2.3. No sublessee shall have a right to sublet further or to
assign its interest without Landlord's written consent;
20.2.4. One-half (1/2) of any sums or other economic consideration
payable from time to time to Tenant as a result of such subletting, whether or
not received by Tenant and whether denominated rent under the sublease or
otherwise, which exceed in the aggregate the total sums which Tenant is
obligated to pay to Landlord under this lease, prorated to reflect obligations
allocable to that portion of the Premises subject to such sublease (except rent
or other payments received which are attributable to the amortization of the
cost of leasehold improvements made to the sublet portion of the Premises by
Tenant) shall be payable to Landlord as additional rental under this lease
without affecting or reducing any other obligation of Tenant hereunder;
20.2.5. The sublease and all rights of the sublesee thereunder shall
be subject to this lease; and
20.2.6. Tenant shall pay to Landlord a reasonable fee for any
sublease submitted to Landlord for review and consent.
20.3. With respect to Tenant's intention to mortgage, Tenant shall submit
to Landlord a copy of the proposed mortgage and the note to be secured thereby
for Landlord's review. Tenant shall not mortgage this lease or any interest
herein without the prior written consent of Landlord, provided that such consent
shall not be unreasonably withheld if the proposed mortgagee is a recognized
lending institution and the mortgage is for the purpose of making improvements
on the subject Premises. Upon recordation of all documents relating to the
mortgaging of this lease or any interest herein, Tenant shall deliver to
Landlord certified copies of same as soon as possible thereafter.
General Provisions Page 20 of 35
<PAGE>
21. CHANGE OF CONTROL. If at any time during the term hereof, the ownership of
-----------------
Tenant's business shall be changed as a result of any sale of assets, sale of
stock, merger, consolidation or otherwise so as to result in a change in the
controlling interest in said business, Tenant shall give immediate notice
thereof to Landlord and Landlord may terminate this lease at any time after
receipt of such notice or if such notice shall not be given, after discovery by
Landlord of such change in controlling interest by giving Tenant sixty (60)
days' written notice of such termination unless Tenant shall furnish reasonably
adequate assurance that there has been no reduction in the financial
responsibility of Tenant as a result of the change.
22. BANKRUPTCY OF TENANT
--------------------
22.1. The filing of any petition in bankruptcy, or the adjudication of
Tenant as a bankrupt or insolvent, or the appointment of a receiver or trustee
to take possession of all or substantially all of the assets of Tenant, or a
general assignment by Tenant for the benefit of creditors, or any action taken
or suffered by Tenant under any state or federal insolvency or bankruptcy act,
or any similar law now or hereafter in effect, including, without limitation,
the filing of any petition for or in reorganization, or the taking or seizure of
the premises or any portion thereof under levy of execution or attachment
against Tenant and the continuance of the sale in effect for a period of thirty
(30) days, shall constitute a breach of this lease by Tenant and in any such
event Landlord at its option may terminate this lease upon written notice to
Tenant.
22.2. It is understood and agreed that neither this lease, nor any
interest herein or hereunder or any estate hereby created in favor of Tenant,
shall pass by operation of law under any state or federal insolvency or
bankruptcy act, or any similar law now or hereafter in effect, to any trustee,
receiver, assignee for the benefit of creditors, or any other person whomsoever
without the express written consent of Landlord first had and obtained therefor.
Any purported transfer in violation of the provisions herein shall constitute a
breach of this lease by Tenant.
23. NON-LIABILITY OF LANDLORD. Tenant shall and hereby does assume all risk of
-------------------------
loss or damage to furniture, fixtures, supplies, merchandise, and other
property, by whomsoever owned, stored or placed in upon or about the Premises
and does hereby agree that Landlord will not be responsible for loss or damage
to any such property, unless caused by the willful act or gross neglect of
Landlord, and Tenant hereby agrees to indemnify and save harmless Landlord from
and against any and all claims for such loss or damage, other than damage
caused solely by the willful act or gross neglect of Landlord or arising solely
out of a defect which Landlord is required hereunder to repair and has failed to
remedy within a reasonable time after having been given notice in writing
thereof. Without prejudice to the generality of the foregoing, Landlord shall
not be liable for any damage to any property at any time stored or kept in the
Premises or in any other part of the Building, either from rain or from any
other water which may leak, issue or flow from any part of the Building, or from
the pipes or plumbing of the same or from any other place or quarter, nor shall
Landlord be liable for any damage to property in the Building caused by accident
involving the elevators, or for damage of any character arising out of defects
of construction either of the Building, or the Premises or any machinery,
equipment, electrical wiring or facility therein or failure or breakdown thereof
or from lack of repair or proper operation of the same or from any other cause,
General Provisions Page 21 of 35
<PAGE>
unless the sole cause is a defect which Landlord is required hereunder to repair
and Landlord shall have failed to remedy such defect within a reasonable time
after written notice thereof. In any event, Landlord shall not be liable for
any damage to Tenant's leasehold improvements, fixtures, personal property, or
merchandise resulting from fire or other insurable hazards, regardless of the
cause thereof, and Tenant hereby expressly releases Landlord from all liability
for such damage. Landlord shall in no way be responsible to Tenant for any loss
of property on the Premises, however occurring, or for any damage done to
Tenant's effects by Landlord's janitorial personnel or any other employee or any
other person. Tenant shall give to Landlord prompt written notice of any
accident to, or defect in, any water or other pipes or plumbing, electric lights
or fixtures or other fixtures or other equipment or appurtenances of the
Premises. Landlord shall not be liable or responsible for any loss or damage
sustained by Tenant, Tenant's agents, employees, business guests, invitees,
licensees, or subtenants, by reason of the negligence, willfulness or malice of
any other tenant, occupant, invitees, licensee or trespasser of the Property, or
of any other person.
24. INDEMNITY AND RISK OF INJURY. Tenant will and does hereby assume all risk
----------------------------
of bodily injury, wrongful death and/or property damage from any cause
whatsoever, by reason of the use, occupancy and enjoyment of the Premises
occasioned by any nuisance made or suffered in the Premises, or resulting from
any failure on the part of Tenant to maintain the Premises in a safe condition,
and Tenant hereby agrees to indemnify and save harmless Landlord from and
against any and all claims, actions, proceedings, expenses, damages, and other
liabilities, including attorneys' fees and other legal expenses, arising from or
in connection with this lease or the Premises, and Tenant shall pay any such
indemnification amounts immediately upon demand as additional rent. Without
limitation, Tenant will indemnify and save harmless Landlord against and from
any and all claims by or on behalf of any person or persons, firm or firms,
corporation or corporations, arising from the conduct or management of any work
or thing whatsoever done by Tenant or Tenant's agents, employees, invitees,
licensees, or trespassers in or about, or from transactions of Tenant concerning
the Premises, and will further indemnify and save Landlord harmless against and
from any and all claims arising from any breach or default on the part of Tenant
in the performance of any covenant or agreement on the part of Tenant to be
performed pursuant to the terms of this lease, or arising from any act or
negligence of Tenant, or any of its agents, contractors, servants, employees,
invitees or licensees and from and against the costs, attorney's fees, expenses
and liabilities incurred in or about any such claim of any action or proceeding
brought thereon.
25. ADVERTISING. Tenant shall not inscribe any inscription or post, place or
-----------
in any manner display any sign, notice, picture, placard or poster, or any
advertising matter whatsoever, anywhere in or about the Premises or the Building
at places visible (either directly or indirectly as an outline or shadow on a
glass pane) from anywhere outside the Premises, except as permitted under the
Rules and Regulations of the Building (Exhibit B).
General Provisions Page 22 of 35
<PAGE>
26. RULES AND REGULATIONS. Landlord, for the proper maintenance, safety, order
---------------------
and cleanliness of the Building, and for the rendering of good services, the
protection and the quiet enjoyment of tenants, may from time to time make, amend
and enforce rules and regulations appropriate for such purposes applicable to
all tenants of the Building. The rules and regulations in force at the date
hereof are those set forth in Exhibit B. Tenant shall observe and comply with
all such rules and regulations, including those set forth in Exhibit B, and all
amendments thereto and all additional rules and regulations of which Tenant
receives notice which are not inconsistent with the terms of this lease.
Landlord shall not be liable or responsible to Tenant for the violation by any
other tenant or occupant of the Building of any such rules or regulations.
27. SUBORDINATION. This lease shall be subject to and subordinate at all times
-------------
to:
That certain Lease dated October 23, 1992, as amended by Amendment of
Lease dated October 27, 1992, a memorandum of which is dated October
27, 1992, and recorded in the Bureau of Conveyances of the State of
Hawaii as Document No. 93-073668, and
any other underlying leases which may hereafter be executed affecting the
Building, to such liens and encumbrances, including mortgages, as are now on or
as Landlord may hereafter impose on the Building or the Premises, and on
Landlord's interest or estate herein without the necessity of any further
instrument or act on the part of Tenant to effectuate such subordination, and
such subordination of Tenant's interest shall be self-operating and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant agrees to promptly execute and deliver any instrument that
the holder of any such underlying lease or lien holder may require to evidence
such subordination, and Tenant hereby irrevocably appoints Landlord its
attorney-in-fact to execute and deliver such instruments on behalf of Tenant
should Tenant refuse or fail to do so within ten (10) days after request is
made. If there shall be any conflict between the terms and conditions of this
lease and the terms and conditions of any underlying lease, the terms and
conditions of the underlying lease shall control. If any Landlord under such
underlying lease or such holder of a lien or purchaser on foreclosure of such
lien shall require, Tenant shall attorn to it and this lease shall then continue
in effect in the event of termination of such underlying lease or acquisition of
the interest of Landlord by such lien holder or purchaser on foreclosure of such
lien. Said power of attorney is coupled with an interest and shall be
irrevocable. Said liens shall include, without limitation, the lien of a
mortgage executed in part to secure a loan to pay for the construction of
improvements in or to the Building.
28. ESTOPPEL CERTIFICATE
--------------------
28.1. Tenant shall at any time upon not less than ten (10) days, prior
written notice from Landlord, execute, acknowledge and deliver to Landlord a
statement in writing (i) certifying that this lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such
General Provisions Page 23 of 35
<PAGE>
defaults if any are claimed and (iii) acknowledging or certifying such other
matters as may be reasonably requested. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises.
28.2. At Landlord's option, Tenant's failure to deliver such statement
within such time shall be a material breach of this lease or shall be conclusive
upon Tenant (i) that this lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) that there are no
uncured defaults in Landlord's performance, and (iii) that not more than one
month's rent has been paid in advance. Tenant hereby constitutes and appoints
Landlord as Tenant's attorney-in-fact to execute any such statement or
statements on behalf of Tenant in the event Tenant does not do the same within
the time period provided herein.
28.3. If Landlord desires to finance, refinance, or sell the Premises, or
any part thereof, Tenant hereby agrees to deliver to any lender or purchaser
designated by Landlord such financial statements of Tenant as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three years, financial statements of Tenant. All such financial statements
shall be received by Landlord and such lender or purchaser in confidence and
shall be used only for the purposes herein set forth.
29. INSURANCE
---------
29.1. Tenant shall procure at Tenant's expense and keep in force during
the term of this lease and any extension thereof commercial general liability
insurance covering bodily injury and property damage with respect to the
Premises and the business operated therein by Tenant, such insurance to have
reasonable minimum limits set by Landlord from time to time, based on acceptable
minimum limits used for similar properties at the time of such setting, but
initially not less than a combined single limit of $1,000,000 per occurrence and
$2,000,000 in the aggregate _______________________ insurance shall be primary
and noncontributing with any insurance which may be carried by Landlord. The
adequacy of the coverage afforded by said liability and property damage
insurance shall be subject to review by Landlord from time to time, and if it
appears in such a review that a prudent business person in Honolulu, Hawaii,
operating a similar business to that operated by Tenant on the Premises would
increase the limits of its liability and property damage insurance, Tenant shall
to that extent forthwith increase such limits.
29.2. Tenant shall procure at its own expense and will keep in force
during the term of this lease and any extension thereof insurance on all
improvements (as defined in Section 55 hereinbelow) whenever and by whomsoever
made in the Premises. Such insurance shall be written on an Insurance Services
office, Inc. ("ISO") Commercial Property Policy Special Causes of Loss form or
its equivalent and shall insure against destruction, damage or debris removal by
fire and other perils covered under such an ISO policy and in time of war,
against war damage to the extent such governmental insurance is obtainable, and
shall be in an amount equal to the full replacement cost thereof, without
deduction for depreciation. Tenant shall pay all premiums on such insurance when
due. In every case of loss or damage to such improvements, Tenant with all
reasonable speed will use all proceeds of such insurance for rebuilding,
repairing or otherwise reinstating the
General Provisions Page 24 of 35
<PAGE>
improvements in a good and substantial manner, and Tenant will make up from its
own funds any deficiency in the insurance proceeds, unless this lease is
terminated as provided in Section 11 above, in which case Tenant shall be
entitled to payment from the proceeds of an amount equal to Tenant's unamortized
cost of improvements made by Tenant at Tenant's cost, and the balance of the
proceeds shall be kept by Landlord.
29.3. Tenant shall procure at Tenant's own cost and expense and keep in
force during the entire term of this lease, insurance on Tenant's furniture,
equipment, fixtures, merchandise and inventory and all other property located in
the Premises, in an amount equal to the full replacement cost thereof, without
deduction for depreciation. Such insurance shall be written on an ISO Special
Causes of Loss form or its equivalent and shall insure against destruction,
damage or debris removal by fire and other perils covered under such an ISO
policy and in time of war, against war damage to the extent such governmental
insurance is obtainable.
29.4. Tenant shall procure and maintain in force and effect, at all times,
a policy of insurance for actual rent loss sustained from necessary
untenantability caused by damage to or destruction of the Premises, or any
portion thereof. Such policy shall insure against destruction, damage or debris
removal by fire and other perils covered under policies written on ISO Special
Causes of Loss forms and be in an amount at least equivalent to the annual
rental value of the Premises and payable in case of loss to Landlord and Tenant
as their respective interests may appear.
29.5. All policies mentioned in this Section 29 shall be subject to the
approval of Landlord and issued by an insurance company authorized to do
business in Hawaii. All such policies shall be for the mutual and joint benefit
and protection of Landlord, Tenant, any mortgagee, if any, of Landlord's and/or
Tenant's interest hereunder, and others hereinabove mentioned, and executed
copies of such policies of insurance or certificates thereof shall be delivered
to Landlord within ten (10) days after delivery of possession of the Premises to
Tenant and thereafter within thirty (30) days prior to the expiration of the
term of each such policy. As often as any such policy shall expire or
terminate, renewal or additional policies shall be procured and maintained by
Tenant in like manner and to like extent. All policies of insurance delivered
to Landlord must contain a provision that they shall remain in full force and
effect until the company writing said policy gives to Landlord, and Landlord's
mortgagees, if any, thirty (30) days' notice in writing in advance of any
cancellation or lapse or the effective date of any reduction in the amounts of
insurance. All general liability and property damage policies shall contain a
provision that Landlord, although named as an insured, shall nevertheless be
entitled to recovery under said policies for any loss occasioned to it, its
servants, agents and employees by reason of the negligence of Tenant. All
general liability, property damage and other casualty policies shall be written
as primary policies, not contributing with and not in excess of coverage which
Landlord may carry.
29.6. Tenant's obligations to carry the insurance provided for herein may
be brought within the coverage of a so-called blanket policy of insurance
carried and maintained by Tenant; provided, however, that the requirements set
forth herein are otherwise satisfied _______________________.
General Provisions Page 25 of 35
<PAGE>
29.7. If and to the extent of those risks as to which waiver of rights of
subrogation is permitted by their respective insurers, Landlord and Tenant
hereby waive the rights each may have against the other on account of any loss
or damage occasioned to Landlord or Tenant, as the case may be, their respective
property, the Premises, or its contents, or to other portions of the Building,
arising from any risk generally covered by insurance written on ISO Special
Causes of Loss forms. Tenant agrees to use its best efforts to have its
insurance company insuring its property against any such loss, waive any right
of subrogation against Landlord.
29.8. Tenant agrees to pay to Landlord forthwith upon demand the amount of
any increase in premiums for insurance that may be charged during the term of
this lease on the amount of insurance maintained in force by Landlord on the
Property, which results from Tenant doing any act in or about the Premises that
increases the insurance rates, whether or not Landlord shall have consented to
such act on the part of Tenant. If Tenant installs upon the Premises any
electrical equipment that constitutes an overload on the electrical lines of the
Premises, Tenant at its own expense shall make whatever changes are necessary to
comply with the requirements of the insurance underwriters and any governmental
authority having jurisdiction thereover, but nothing herein contained shall be
deemed to constitute Landlord's consent to such overloading.
30. OPERATING EXPENSES
30.1. PAYMENT OF ADDITIONAL RENT. The monthly rent provided in Section 1.6
--------------------------
above is the sum of (A) a base rent as set forth in Section 1.6.1 plus (B)
Tenant's share of the average monthly estimated operating expenses (computed on
the basis of known or estimated operating expenses for each calendar year) as
set forth in Section 1.6.2, plus (C) the Hawaii State General Excise Tax as set
forth in Section 5.6 above. The intent of this Section 30 is to obligate the
tenants in the Building to fully reimburse Landlord for all operating expenses
(as hereinafter defined) such that this lease shall be fully "net-net-net" to
Landlord. The amount of Tenant's initial share of said estimated operating
expenses for the calendar year in which the term hereof commences is as stated
in Section 1.6.2 above. The monthly rental payable to Landlord shall be adjusted
annually as of the commencement of each calendar year by increasing the
additional rent for such year over the additional rent payable during the
preceding year by the amount of Tenant's share of any increase in the estimated
operating expenses for such year over the estimated operating expenses for the
preceding year or by reducing the additional rent for such year by the amount of
Tenant's share of any reduction in the estimated operating expenses as compared
with the estimated expenses for the preceding year. Landlord shall notify Tenant
of Tenant's share of the estimated operating expenses for such year and the
additional rent during such year shall be adjusted as aforesaid, effective as of
the commencement of such year, and payable in equal monthly installments.
Tenants' share of the operating expenses shall be in the same percentage as the
demised area is of the rentable area of the Building.
Tenant's "fair share" of the building operating expenses of the Building
shall be calculated on the basis of the "rentable area" serviced, which means
that Tenant's share of an increase in building operating expenses over basic
cost shall be: the proportionate part of those costs as shown in Section 1.4,
determined as of the date of this lease. Tenant's "rentable area" shall be
computed
General Provisions Page 26 of 35
<PAGE>
by measuring the usable area outlined in red on Exhibit A as referenced in
Section 30.6 and adding thereto Tenant's pro rata share of common corridors and
toilets, air conditioning rooms, fan rooms, janitors, closets, electrical and
telephone closets and any other areas within and servicing exclusively only
Tenant's floor. However, Landlord and Tenant hereby recognize that Landlord may,
from time to time, reconstruct and/or reconfigure portions of the Building
(without any obligation of Landlord to so act being inferred from this
provision). If undertaken by Landlord such programs may increase or decrease the
square footage of the total rentable area of the Building. Aside from temporary
conditions, that is, periods of not longer than four months duration to allow
for construction, any material change in the total rentable area of the Building
shall be taken into account and Tenant's proportionate share of Building area
shall be recomputed and determined. Tenant's redetermined proportionate share of
the Building shall be fixed for all purposes of this lease at the higher or
lower percentage, subject to further revision if there should again be a
material change in the total rentable area of the Building. The time for
recomputation of Tenant's fair share shall be the date on which a reconstructed
area in the Building is first occupied in whole or in part ____________________
that if space should be modified and abandoned as tenant area by Landlord, the
effective date thereof shall be deemed the date on which such area of the
Building is placed in substantially completed condition in accordance with
Landlord's construction plan for such space. Tenant's "fair share" of those
costs for such services rendered to Tenant, but not rendered to all tenants,
shall be in the same proportion as the rentable area bears to the total rentable
area to which such services are rendered. The proportionate amount shall be
divided by 12 to give Tenant's monthly "fair share."
30.2. ANNUALIZATION. After the end of each calendar year (including the
-------------
years in which the term hereof commences and terminates) Landlord shall compute
the actual operating expenses for such calendar year, to the extent not already
computed, and notify Tenant of any correction from the estimated operating
expenses as soon as reasonably possible after the end of each such year. Within
thirty (30) days after the giving of notice that the actual expenses were
greater than the estimated expenses, Tenant shall pay to Landlord an amount
equal to Tenant's share of the excess of the actual operating expenses over the
estimated operating expenses upon which Tenant's rent had been based during the
preceding year. Should it be determined that the actual operating expenses for
any year were less than the estimated operating expenses, Tenant shall be
entitled to a credit against future rent payments, or a refund in the case of
the last year of the term hereof, in an amount equal to Tenant's share of the
difference between the actual operating expenses and the estimated operating
expenses.
30.3. DEFINITION OF OPERATING EXPENSES. Operating expenses shall be
--------------------------------
determined in accordance with generally accepted accounting principles as
applied to the operation and maintenance of first class office buildings in
Honolulu, and the term "operating expenses" shall mean all of the expenses which
shall be incurred or paid on account of such operation and maintenance of the
Building, including without limitation, all parking facilities. Said operating
expenses shall include, without limitation to the generality of the foregoing,
the costs of utilities, automated control systems, heating, elevators, air
conditioning, trash disposal, repair and maintenance, security control, the cost
of janitorial services, the cost of management contracts (or the cost of
equivalent management services computed at the prevailing rate charged from time
to
General Provisions Page 27 of 35
<PAGE>
time by companies generally in the management business, whichever is higher),
supplies, wages and salaries of employees used in maintenance and general
operations (as distinguished from the cost of management contracts or equivalent
management services aforesaid), and payroll taxes (and similar governmental
charges) with respect thereto, depreciation or rental of equipment used in
operation and maintenance, bookkeeping expenses, fees of operator of parking
facilities and other expenses of operation thereof (or the cost of equivalent
parking management services computed at the prevailing rate charged from time to
time by companies generally in the parking management business), legal fees and
expenses, financing expenses relating to operation and management, landscaping
expenses including the replacement of plants and sprinkler systems, insurance
(including fire and extended coverage, vandalism and malicious mischief, plate
glass, difference in conditions coverage, public liability and property damage
and workmen's compensation insurance customarily carried by owners of first
class office buildings), taxes upon or measured by Landlord's gross income to
the extent that such taxes have not already been recovered under Section 5.6 of
this or similar leases (but excluding taxes upon or measured by Landlord's net
income), all federal, state and local government taxes, assessments and charges
of every kind or nature, whether general, special, ordinary or extraordinary,
including but not limited to real property taxes, which Landlord shall pay or
become obligated to pay because of or in connection with the ownership, leasing,
management, control or operation of the Building (including the land on which it
is situated), or of the personal property, fixtures, machinery, equipment,
systems and apparatus located or used in connection with the Building, all fees,
costs and expenses (including attorneys' fees) paid by Landlord during such year
in seeking or obtaining any refund or reduction of such taxes, the cost and
expenses of any audit of the books and records of management and its
determination and allocation of operating expenses for the Building, the cost
and expenses of any contest by appropriate legal proceedings of the amount or
validity of any such taxes, charges or other assessments, any increases in
ground rent as may occur at any time during the term of this Lease and
subsequent to the date upon which this Lease is executed, and the cost of
alterations, additions and capital improvements required by any laws, codes,
regulations or ordinances now or hereafter in effect or made by Landlord to
reduce energy requirements (amortized over their reasonable life with interest
at the rate usually charged for borrowing on _______________ or if the Landlord
is prohibited by law from charging interest at such rate, at the maximum rate
then allowed by law). The operating expenses shall not include capital
expenditures, as aforementioned, or depreciation on real property.
30.4. NORMALIZATION AND PRORATION. For the purpose of determining increase
in rental payable by Tenant under this Section 30, the calculation shall be
based on a full calendar year and additional rent computed as herein set forth
shall be deemed to have accrued uniformly during the calendar year. The final
payment under the provisions of this Section for the year in which this lease
terminates shall be prorated, based on the actual expenses for such year,
through the termination of this lease and any additional rent shall be due or a
refund of overpayment made thirty (30) days after notification to Tenant of any
adjustment as provided in Section 30.2. If any part of the Building is not fully
occupied and used during any year, for the purpose of calculations under this
Section 30, the operating expenses, both estimated and actual for such year,
shall be adjusted by adding amounts and items of operating expenses which would
normally have been incurred if the property had been fully occupied and used
during the entire year and deducting any abnormal start-up
General Provisions Page 28 of 35
<PAGE>
costs incurred, all as estimated by Landlord, and the percentages set forth in
Section 1.4 hereinabove are and shall be based on an assumed full occupancy.
30.5. SPECIAL TENANT'S EXPENSES. Where (1) any expense over and above
-------------------------
normal operating expenses is incurred or paid by Landlord specifically for the
benefit of and at the request of a particular tenant, or (2) any expense which
is part of normal operating expenses undergoes an increase from the previous
billing period of over fifty percent (50%), Landlord, in its sole discretion,
may charge such expense immediately & directly against the tenant to which the
expense applies rather than including such expense in operating expenses for the
purpose of this Section 30.
30.6. DEFINITION OF AREA. The term "usable area" shall consist of the
------------------
area outlined in red on Exhibit A. For full floor tenants, the usable area of a
floor shall be computed by measuring the area bounded by the interior surface of
the permanent outer building walls excluding however, any major vertical
penetrations of the floor. No deduction shall be made for columns or other
projections necessary to the building. For multiple tenants occupying a single
floor, usable area shall be computed by measuring the area bounded by the
interior surface of corridor walls or other permanent walls, the center of
partitions separating the demised premises from adjoining usable areas and the
inside finished surfaces of the glass walls. No deduction shall be made for
columns or other projections necessary to the building. The usable and rentable
areas are subject to adjustment from time to time to correct any error in
measurement or if changes are made to the Premises and the percentages
applicable shall be adjusted accordingly.
30.6. AUDIT OF OPERATING EXPENSES. Operating expenses for the Building
---------------------------
shall be audited annually by a firm of certified public accountants selected by
Landlord. Such audited statement shall be available for inspection by Tenant
during normal business hours upon 72 hours' prior notice. If operating expenses
according to such audit shall differ from the operating expenses estimated by
Landlord pursuant to Section 30, the expenses according to such audit shall be
deemed correct, and an appropriate adjustment shall be made in the rent as
herein provided in Section 30.
31. PARKING AND TRAFFIC. The right of Tenant, its customers, invitees and
-------------------
employees to use the common areas in the KAIMUKI PLAZA for ingress, egress and
parking shall be subject to Landlord's right to impose reasonable traffic rules,
regulations and routing and to prohibit parking by employees of the tenants in
order to provide adequate parking for customers and invitees of the tenants.
Landlord further reserves the right to assess Tenant for any extra parking
charges upon written notice to Tenant.
32. CURE AND SECURITY DEPOSIT
-------------------------
32.1. Concurrently with the execution of this lease, Tenant shall deliver
to Landlord a sum equal to the amount which is set forth in Section 1.7 as
security for the performance by Tenant of every covenant and condition of this
lease. Said deposit may be commingled with other funds of Landlord and shall
bear no interest. In the event that the monthly rent shall increase from time to
time during the term of this lease, Tenant shall deposit with Landlord within
five (5) days after the effective date _of such increase, additional security
deposit so that the amount of the security deposit
General Provisions Page 29 of 35
<PAGE>
held by Landlord shall bear the same or __________________________________ as
the original security deposit bears to the original monthly rent. Landlord may
transfer and/or deliver the security deposit to any purchaser to Landlord's
interest in the event that the Landlord's interest shall be sold, and thereupon
Landlord shall be discharged from any further liability in reference thereto.
32.2. If Tenant shall default with respect to any covenant or condition of
this lease, Landlord may, without prejudice to any other right or remedy
provided for Landlord in this lease, cure the same and Tenant shall reimburse
Landlord for the cost thereof on demand. Landlord may apply the whole or any
part of such security deposit to the payment of any sum in default or any other
sum which Landlord may be required to spend by reason of Tenant's default. In
the event Landlord should so apply all or any part of said deposit, Tenant
shall, within fifteen (15) days after receipt of notice from Landlord, pay the
sum expended in order to replenish such deposit. Failure to do so shall be a
default under this lease. Should Tenant comply with all of the covenants and
conditions of this lease, the security deposit or any balance thereof shall be
returned to Tenant at the expiration of the term hereof.
33. ABANDONMENT. If Landlord has reason to believe that Tenant has abandoned
-----------
the Premises, Landlord shall give Tenant written notice of its intention to
exercise its default remedies as provided for in Section 37. If Tenant fails to
respond to such notice within fifteen (15) calendar days after the date such
notice is sent to Tenant, Landlord may at once, without any further notice to or
consent of Tenant, change the locks to the Premises and lock Tenant out of the
Premises until such time as Tenant's default under this lease is cured, without
any liability for damages to Tenant or for trespass or for any damage, loss or
theft to the Premises or any contents or personal property, stored within the
Premises. This right shall be in addition to Landlord's default remedies
provided for in Section 15.
34. AUTHORITY. If Tenant is a corporation, trust, or general or limited
---------
partnership, each individual executing this lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this lease on behalf of said entity. If Tenant is a corporation, trust or
partnership, Tenant shall, within thirty (30) days after execution of this
lease, deliver to Landlord evidence of such authority satisfactory to Landlord.
35. ATTACHMENTS. All attachments and exhibits to this lease hereto shall
-----------
constitute a part of this lease and a breach of any provision therein contained
shall constitute a default under this lease.
36. COVENANTS AND CONDITIONS. Each provision of this lease performable by
------------------------
Lessee shall be deemed both a covenant and a condition.
General Provisions Page 30 of 35
<PAGE>
37. NOTICE. All notices hereunder shall be given in writing and may be given
------
or served for all purposes by being sent as registered or certified mail,
postage prepaid, addressed to Tenant at its post office address hereinbefore
specified or at such other post office address as Tenant may from time to time
designate in writing by notice to Landlord or to Landlord at its office
hereinabove set forth or at such other post office address as Landlord may from
time to time designate to Tenant, and any such notice shall be deemed
conclusively to have been given or served, if on Tenant, on the date of such
mailing, and if on Landlord, on the date of receipt thereof by Landlord. If
such notice or demand is served personally, service shall be conclusively deemed
made at the time of such personal service. If there is more than one Tenant,
mailing to one of the Tenants shall be construed as notice to all of the
Tenants.
38. SEVERABILITY. If for any reason whatever any of the provisions hereof
------------
shall be unenforceable or ineffective, all of the other provisions shall be and
remain in full force and effect.
39. DISCLAIMER OF WARRANTIES. The provisions of this lease constitute, and are
------------------------
intended to constitute, the entire agreement of the parties to this lease. No
terms, conditions, warranties, promises or undertakings of any nature whatever,
express or implied, exist between the parties except as herein expressly set
forth.
40. DIMINUTION OF LIGHT, VIEW OR AIR BY ADJACENT STRUCTURE. It is expressly
------------------------------------------------------
understood and agreed that any diminution or shutting off of light, view or air
by any structure which may be erected adjacent to the Building, whether by
Landlord or by others shall in no way affect this lease or impose any liability
on Landlord or be construed as a constructive eviction or grounds for reduction
or abatement of rent.
41. SUBSTITUTION OF LEASED PREMISES. At any time or times during the term
-------------------------------
hereof, Landlord shall have the right, at its option, to substitute as the
Premises to be leased hereunder, a substantially equivalent area in a different
portion of the Building in lieu of the Premises described and referred to in
Sections 1.1, 1.2 and 1.3 and outlined in red on Exhibit A. In such cases,
Tenant shall relocate to such substitute Premises and all of the terms,
covenants and conditions herein set forth shall then apply to such substitute
Premises to the same effect as if originally described hereinabove; provided,
however, that Landlord shall have given Tenant written notice of its exercise of
such option at least sixty (60) days prior to the date upon which relocation to
such substitute Premises is to be accomplished, and all reasonable cost of such
relocation shall be borne by Landlord, including the cost of relocating or
replacing any fixtures or other improvements installed within the original
Premises by Tenant; and provided further, however, that no more than one such
relocation shall be made without the prior written consent of Tenant. It is
further understood that the term "equivalent area" shall mean an area of
substantially the same useable floor area and having substantially the same
number of exterior windows, and if not on the same floor level, then on either a
floor on a level above or on a floor which is not more than two (2) levels below
the level of the original Premises. Tenant shall be entitled to a ratable
reduction in the rent for any period in excess of one (1) day during which
Tenant is reasonably prevented from operating its business on account
General Provisions Page 31 of 35
<PAGE>
of such relocation. The parties shall immediately execute an appropriate
amendment to this lease reflecting the substitution aforesaid.
42. SERVICE CONTRACTS. Any services which Landlord is required to furnish
-----------------
pursuant to the provisions of this lease may, at Landlord's option, be furnished
from time to time in whole or in part by employees of the managing agent of the
property or by one or more third persons. Landlord further reserves the right
to require Tenant to enter into agreements with such third persons, in form and
content approved by Landlord for the furnishing of such services.
43. NO RENT REDUCTION. Except as provided elsewhere under those provisions of
-----------------
this lease which specifically refer to rent reduction, Tenant shall not be
entitled to any suspension, abatement or reduction of rent, nor to the recovery
of any sums for any loss or damage on account of the interruption of the use of
the Premises or of any of the services required to be furnished by Landlord
hereunder by reason of delays beyond the reasonable control of Landlord.
44. CANCELLATION NOT MERGER. The voluntary or other surrender of this lease by
-----------------------
Tenant, or a mutual cancellation thereof, or the termination thereof by Landlord
pursuant to any provision contained herein, shall not work a merger, but at the
option of Landlord shall either terminate any or all existing subleases or
subtenancies hereunder, or operate as an assignment to Landlord of any or all of
such subleases or subtenancies.
45. SUBMISSION FOR REVIEW. The submission of this lease for examination does
---------------------
not constitute a reservation of or option for the Premises and this lease
becomes effective as a lease only upon execution in full by all parties and
delivery thereof by Landlord to Tenant.
46. RESERVATION OF LANDLORD. Landlord reserves the right to place, maintain,
-----------------------
repair, replace, renovate, remodel, make additions to, or demolish such utility
lines, pipes, tunneling walls, ceilings, floors, public areas, restrooms,
elevators, stairs, common areas and the like, in, under, over and upon the
Premises as may be reasonably necessary or advisable for the servicing,
remodeling, or repairing of the Premises or of other portions of the Building of
which the Premises are a part. Landlord reserves the right to enter the Premises
at any time for the purpose of performing such work. Landlord further reserves
the right to change the name of the Building at Landlord's sole discretion.
47. SUCCESSORS. All of the covenants, agreements, terms and conditions
----------
contained in this lease shall apply to, accrue to and be binding upon Landlord
and Tenant and their respective heirs, personal representatives, successors and
assigns. On any sale or conveyance by Landlord of the Building, the buyer or
grantee shall become responsible for all of the covenants and conditions herein
contained and on the part of Landlord to be observed or performed after the time
of such sale or conveyance and the seller or grantor shall be released therefrom
except as to obligations already _________________.
General Provisions Page 32 of 35
<PAGE>
48. SHORT-FORM COUNTERPART. This lease shall not be recorded, but upon the
----------------------
request of either party, the other party shall execute and deliver to any party
requesting the same, a recordable short-form of this lease sufficient to give
constructive notice of the leasehold estate hereby created, and said short-form
counterpart may be filed in the office of the Assistant Registrar of the Land
Court of the State of Hawaii, and/or recorded in the Bureau of Conveyances of
the State of Hawaii. If a short-form counterpart of this lease is recorded,
Tenant agrees, at Tenant's expense, once the lease is terminated, to execute a
recordable instrument evidencing such termination. Tenant hereby appoints
Landlord as Tenant's attorney-in-fact for the purpose of executing any
memorandum of lease as evidence of the termination of this lease, such
appointment being coupled with an interest to be irrevocable and not affected by
specific revocation, death, incompetence or other cause.
49. CONVEYANCE TAX. Tenant shall be solely responsible for any conveyance tax
--------------
payable to the State of Hawaii pursuant to Section 247, Hawaii Revised Statutes,
as amended, which may be incurred by Landlord under this lease.
50. GENERAL. The necessary grammatical changes required to make the provisions
-------
of this lease apply in the plural sense where there is more than one tenant and
to either corporations, associations, partnerships, or individuals, males or
females, shall in all instances be assumed as though in each case fully
expressed. The term "Premises" shall mean the area specifically described in
the demise from Landlord to Tenant, except where such meaning would be clearly
repugnant to the content. Any conflict between the printed provisions of this
lease and properly initialed typewritten or handwritten provisions shall be
controlled by the initialed typewritten or handwritten provisions.
51. WAIVER OF JURY TRIAL. The parties each hereby waives trial by jury in any
--------------------
action, proceeding or counterclaim brought by either against the other on any
matter whatsoever arising out of or in any way connected with this lease, the
relationship of Landlord with Tenant, Tenant's use or occupancy of the Premises,
including any claim of injury or damage, and any emergency and other statutory
remedy with respect thereto.
52. WAIVER OF RIGHTS OF REDEMPTION. Tenant 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 for any cause, or in the event of Landlord
obtaining possession of the Premises by reason of the violation by Tenant of any
of the covenants or conditions of this lease, or otherwise.
53. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
----------------
Landlord and Tenant and supersedes all oral and written agreements and
understandings made and entered into by the parties hereto prior to the date
hereof. Except as herein otherwise provided, no subsequent alteration,
amendment, change or addition to this lease shall be binding upon Landlord or
Tenant unless reduced to writing and signed by each of them.
General Provisions Page 33 of 35
<PAGE>
54. APPLICABLE LAWS. This lease shall be governed by and construed in
---------------
accordance with the laws of the State of Hawaii. The venue for any action with
respect to this lease shall be Honolulu, Hawaii.
55. MISCELLANEOUS
-------------
55.1. Time is of the essence of this lease.
55.2. The term "Premises" wherever it appears herein includes and shall be
deemed to include (except where such meaning would be clearly repugnant to the
context) the space demised and all improvements therein.
55.3. The space demised shall consist of the area shown outlined in red on
Exhibit A and be bounded by the unfinished interior surfaces of the perimeter
walls and windows, the unfinished surfaces of interior load bearing walls, the
unfinished top of the floor slab and the unfinished bottom of the floor slab of
the floor above, excluding, however, any stairs and other items within said
boundaries which are not included in rentable area as defined in Section 30.6
above.
55.4. The term "improvements" wherever it appears herein shall include all
improvements existing at the commencement of the term hereof or at any time
thereafter built by anyone in the space hereby demised, including, without
limitation all walls and partitions which are not load-bearing, the interior
decorated or finished surfaces of all perimeter and load-bearing walls and floor
slabs, all non-standard ceilings and ceiling light fixtures, all interior
windows, all entrance doors, all mechanical and electrical conduits, wiring,
fixtures and equipment, all floor tile, carpeting and wall covering and all
other fixtures of all kinds, excluding, however, water, electric, telephone and
other utility lines, ducts, conduits and other facilities serving other portions
of the Building which may pass through the demised area, and excluding also the
air-conditioning ducts and equipment, ceiling and ceiling light fixtures if of
the standard type furnished by Landlord, and sprinkler systems, all of which
excluded items shall be the responsibility of Landlord, and with respect to
which Landlord reserves the right to install, repair, replace, maintain and
remove the same in its discretion.
55.5. The section headings herein are for convenience of reference, and
shall in no way define, limit or describe the scope or intent of any provisions
of this lease.
55.6. The term "Landlord" in these presents shall include the above-named
Landlord and its successors and assigns. In any case where this lease is signed
by more than one person, the obligations hereunder shall be joint and several.
55.7. The term "Tenant" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their and each of their respective
successors, personal representatives and permitted assigns, according to the
context hereof.
General Provisions Page 34 of 35
<PAGE>
55.8. No payments by Tenant or receipt by Landlord of a lesser amount than
the rent stipulated in this lease shall be deemed to be other than on account of
the earliest stipulated rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such rent or pursue any
other remedy in this lease provided.
55.9. Landlord does not, in any way or for any purpose, become a partner
of Tenant in the conduct of its business, or otherwise, or joint venturer or a
member of a joint enterprise with Tenant.
General Provisions Page 35 of 35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this indenture
the day and year first above written.
CKSS ASSOCIATES, a Hawaii
Registered Limited Partnership
BY: CPB PROPERTIES, INC.
GENERAL PARTNER
By ______________________________________
Its
Landlord
AMERICAN SCHOOL OF PROFESSIONAL
PSYCHOLOGY, INC.
BY: /s/ Harold J. O'Donnell
----------------------------------------
ITS: President
---------------------------------------
DATE: June 21, 1995
--------------------------------------
Federal Identification No. 36-2855674
----------------
Social Security No. _______________________
Tenant
General Provisions Page 36 of 35
<PAGE>
EXHIBIT B
---------
RULES AND REGULATIONS
---------------------
KAIMUKI PLAZA
-------------
These rules and regulations have been adopted for the purpose of insuring order
and safety in the Building and to maintain the rights of Tenants and Landlord.
Landlord reserves the right to modify, supplement or rescind any of these rules
for the safety, care and cleanliness of KAIMUKI PLAZA and for the preservation
of good order therein. Landlord may waive any one of more of these rules and
regulations for the benefit of any particular Tenant or Tenants, but no such
waiver by Landlord shall be construed as a waiver of such rules and regulations
in favor of any other Tenant or Tenants, nor prevent Landlord from thereafter
enforcing any such rules and regulations, against any or all of the Tenants of
the Building. Each Tenant shall be liable for injury or damage caused by the
infraction of any of these rules by it, its employees, agents or invitees, and
Landlord may repair such damage, charging the cost of the same to such Tenant,
which amount shall be added to rent due for the ensuing month. These rules and
regulations are in addition to, and shall not be construed to in any way modify
or amend, in whole or in part, the terms, covenants, agreements and condition of
any lease of premises in the Building.
ACCESS: Office areas will be open from 7:00 a.m. to 6:00 p.m. Mondays through
- ------
Thursdays, 7:00 a.m. to 7:00 p.m. Fridays and 8:00 a.m. to 2:00 p.m. Saturdays.
On Sundays, holidays and after regular open hours, only authorized personnel
will be permitted on the demised premises.
ACCESS CARDS: Security Access Control Cards are assigned as authorized by an
- ------------
authorized Tenant representative only, and are operable seven (7) days a week,
twenty-four (24) hours per day. A written request for cards is required from an
authorized Tenant representative to Landlord along with a deposit of $25.00 per
card. Tenant shall provide Landlord with a current Security Access List for all
persons authorized access to demises premises after normal business hours.
After issuance of a card, if a change is made in the status of the card, an
additional $5.00 may be charged for each status change. All changes, deletions,
and additions to said Security Access List shall be the sole responsibility of
Tenant and shall be made in writing to Landlord. Any lost or stolen cards shall
be promptly reported in writing by Tenant to Landlord. Tenant shall be charged
a fee of $25.00 per card for lost, stolen or unaccounted Security Access Control
Cards, and $5.00 per card if damaged and a replacement is necessary. For
security reasons, instructions on how to activate card readers are not covered
in the rules and regulations.
AFTER-HOURS SERVICES: Requests for after-hours services of air conditioning
- --------------------
shall be honored by the Landlord provided the same are requested in writing by
the Tenant prior to 3:00 p.m. for the day requested or prior to 3:00 p.m. on the
business day preceding, if requested for a weekend or holiday. Landlord shall
determine an extra-ordinary charge for after-hours services which shall be based
on the actual premium cost of providing such services, including
EXHIBIT "B" Page 1 0f 9
<PAGE>
the cost of labor and fringe benefits for required operating personnel,
electricity at the per kilowatt hour rate applicable to KAIMUKI PLAZA, water and
sewerage at the posted rate, consumable supplies and materials, if any, a
mechanical equipment depreciation charge based on additional usage, and any
other direct premium costs associated with providing such services. In the event
more than one tenant shall request after-hours services as aforesaid for
coincidental periods, the Landlord will attempt, where practical, to prorate the
cost of same among such Tenants on an equitable basis.
CLOSING PREMISES: Each Tenant shall see that his demised Premises are securely
- ----------------
locked and will exercise caution to insure that all water faucets, lights and
powered equipment are shut off before Tenant or Tenant's employees __________
the building, so as to prevent waste or damage.
BUILDING HOLIDAYS: The following holidays shall be observed by the Building.
- -----------------
The Building will be secured, and air conditioning and other Building services
will not be provided on such days.
New Year's Day
President's Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Christmas Day
BUILDING ADDRESS AND TRADE NAME: Landlord will have the right, exercisable upon
- -------------------------------
notice and without liability to any Tenant, to change the name and street
address of the Building.
BUILDING SECURITY: Landlord may from time to time adopt appropriate systems and
- -----------------
procedures for the security or safety of the Building, any persons co-occupying,
using or entering the Building, and Tenant will comply with Landlord's
reasonable requirements relative to such systems and procedures.
VANDALISM: Defacing any part of the Premises or the Building is prohibited.
- ---------
SOLICITING PROHIBITED: Landlord reserves the right to eject from the Building
- ---------------------
any solicitors, canvassers or peddlers and any other class of persons who, in
the judgment of the Landlord, are annoying or interfering with any of Tenants,
or Landlord's operations or who are otherwise undesirable. Canvassing,
peddling, soliciting and distribution of any written materials in the Building
are prohibited and each Tenant shall cooperate to prevent such activity from
occurring on the Premises.
<PAGE>
VIOLATIONS: Landlord shall not be responsible to any Tenant for the
- ----------
nonobservance or violation of any KAIMUKI PLAZA rules and regulations by any
other Tenant or other person. Tenant shall be deemed to have read these rules
and regulations and to have agreed to abide by them as a condition to its
occupancy of the space leased.
PROHIBITED USES: Except with the prior written consent of Landlord, Tenant shall
conduct only the business that is specifically provided for in its lease.
Tenant shall utilize its demised premises in a non-offensive or unobjectionable
manner to the other Tenants or Landlord. Cooking may be permitted in the
Premises with Landlord's written consent first having been obtained so as not
cause or permit any unusual or objectionable odors to be produced upon or
permeate from its Premises. Flammable, combustible or explosive fluid, chemical
or substance in such quantities as may endanger or imperil the demised premises
or any other premises or the property or lives of other persons are prohibited.
Tenant shall not make or permit to be made any unreasonable vibration, unseemly
noise or disturb or interfere with occupants of this or adjoining buildings or
premises or those having business with them whether by the use of any business
machines and other equipment, musical instruments, radio or television sets,
phonographs, signing or the making of any disturbing sounds. The Premises shall
not be used for lodging or sleeping.
TENANT'S CONDUCT: Tenants will conduct themselves in any manner which is
- ----------------
consistent with the character of the Building as a first class office building
or which adds to the comfort and convenience of other Tenants in the Building.
Landlord shall have the right to exclude or expel from the Building any person
who, in the judgment of Landlord, is intoxicated or under the influence of
liquor or drugs, or who shall in any manner do any act in violation of any of
the Rules and Regulations of the Building.
SPECIAL TENANT REQUIREMENTS: The requirements of the Tenants will be attended
- ---------------------------
to, as deemed appropriate by Landlord, only upon application by written,
personal or telephone notice at the management's office for the Building.
Employees of Landlord or its managing agent will not perform any work or do
anything outside of their regular duties unless under special
instruction/direction from the Landlord or its managing agent.
PREVENTION OF DEDICATION: Landlord reserves the right to close off any and all
- ------------------------
of the plaza's sidewalks and promenades of the Building for twenty-four hours
once every five years to prevent dedication.
___________________ Only locks provided by Landlord shall be placed on any door
unless approved in writing by the Landlord. Two (2) keys per lock will be
furnished to Tenant by Landlord. Orders for additional keys should be placed two
(2) days prior to need with Property Manager by the authorized Tenant
representative only. Tenants will be required to sign a work order for this
request and will be billed $5.00 for each additional key. Lock cylinders and
keys shall be changed by Landlord at Tenant's expense upon receipt of written
request from Tenant. All keys will be surrendered upon termination of lease.
Building janitors and contract cleaners
EXHIBIT "B" Page 3 of 9
<PAGE>
will be provided with a passkey to offices in the Building. These procedures are
established in order to provide a uniform key/lock system for the building. This
system is necessary in order that the janitorial staff has access to areas to be
cleaned, and to ensure that the fire department has access to all areas in an
emergency situation.
COMMON ROOMS: Rooms used in common by Tenants shall be subject to regulations
- ------------
adopted by Landlord.
OBSTRUCTION OF COMMON-AREAS: All common areas will be used only for ingress and
- ---------------------------
egress to the demised premises. The sidewalks, mall entrances, passages,
elevators, vestibules, stairways, corridors or halls shall not be obstructed or
used for any purpose other than ingress or egress. The halls, passages,
entrances, elevator, stairways, balconies and roof are not for the use of the
general public and Landlord shall in all cases retain the right to control or
prevent access thereto by all persons whose presence in the judgment of Landlord
shall be prejudicial to the safety, character, reputation or interest of the
Building and its tenants, provided that nothing herein contained shall be
construed to prevent such access by persons with whom Tenant normally deals in
the ordinary course of business unless such persons are engaged in illegal
activities. Landlord retains the right to control and prevent access onto the
property, including the entire KAIMUKI PLAZA, by any and all persons other than
those persons having a legal right to ingress to and egress from the demised
premises. Only persons authorized by Landlord will be permitted in the areas
housing mechanical, electrical or equipment of any kind.
CORRIDOR DOORS: On multiple tenancy floors, all Tenants will keep the doors to
- --------------
the Building corridors closed at all times except for ingress and egress.
ACCESS TO ROOF: Only those authorized by the Landlord may have access to the
- --------------
roof of the Building.
ELECTRICAL AND AIR-CONDITIONING SYSTEMS: Alterations of the standard building
- ---------------------------------------
lighting or air-conditioning system or installation of any special wiring or
abnormal power consuming equipment must have written approval of Landlord. If
air conditioning and/or power is used out of normal Building operations hours or
there is abnormal consumption thereof, the Tenant involved shall pay on demand a
reasonable charge. The air-conditioning system will operate between the hours
of 7:00 a.m. to 6:00 p.m. Mondays through Thursdays, 7:00 a.m. to 7:00 p.m.
Fridays and 8:00 a.m. to 12:30 p.m. on Saturdays.
CLOSETS AND TOILETS: The water closets, toilet rooms, toilets, urinals, wash
- -------------------
bowls and other plumbing fixtures will not be used for any purpose other than
those for which they were constructed, and no sweepings, rubbish, rags, or other
foreign substances will be thrown in such plumbing fixtures. All damages
resulting from any misuse of the fixtures will be borne by the Tenant who, or
whose servants, employees, agents, visitors or licensees, caused the same.
EXHIBIT "B" Page 4 of 9
<PAGE>
WATER: Water will be supplied by Landlord for drinking and toilet purposes
- -----
only.
DIRECTORIES: A directory of the Building will be provided for the display of
- -----------
the name and location of each Tenant, and such reasonable number of the
principal officers and employees of Tenant as Landlord in its sole discretion
approves, and Landlord reserves the right to exclude any other names therefrom.
Landlord will not in any event be obligated to furnish more than one (1)
directory strip per Tenant. Any additional name(s) which any Tenant desires to
place in the directory must first be approved by Landlord, and if so approved,
such Tenant will pay to Landlord a charge, set by Landlord, for each such
additional name(s). All entries on the Building directory display will conform
to standards and style set by Landlord in its sole discretion. Landlord will
have exclusive right to use any exterior signage. Landlord may reasonably limit
the amount of space utilized by any one Tenant at Landlord's sole discretion.
SIGNS: Signs, placard, picture, name, advertisement or notice ___________
- -----
painted, affixed or otherwise displayed by any Tenant on any part of the
Building of the Premises without the prior written consent of Landlord. Landlord
will adopt and furnish to each Tenant general guidelines relating to signs
inside the Building on the office floors. All Tenants shall conform to such
guidelines. All approved signs or lettering on doors will be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved by Landlord.
In the event of the violation of this Rule by any Tenant, Landlord may remove
the violating items without any liability, and may charge the expense incurred
by such removal to such Tenant.
WINDOW DISPLAYS: Tenant will not use any method or type of display or window
- ---------------
advertising without Landlord's prior written approval which shall only be given
if the proposals are considered by Landlord to be consistent with the Building
character.
SIGNS, SCREENS AND AWNINGS: All notices or advertisements visible from the
- ---------------------------
exterior of the Building or the Premises will require written approval from the
Landlord. All graphics, curtains, blinds, shades or screens visible from the
exterior of the Building or any Premises demised, where permitted, shall conform
to Building standards as specified by Landlord from time to time. In the event
of the violation of this rule by any Tenant, Landlord may remove same without
any liability, and may charge the expense incurred thereby to the Tenant
involved.
ADVERTISING: Landlord shall have the right to prohibit any advertising by any
- -----------
Tenants, mentioning the Building, which, in the Landlord's sole opinion, tends
to impair the reputation of the Building, or its desirability as a building for
offices, and upon written notice from the Landlord, Tenants shall refrain from
or discontinue any such advertising.
DELIVERIES AND SERVICE AREA: Only hand trucks equipped with rubber tires and
- ---------------------------
slide guards will be permitted in the Building. All deliveries requiring
exclusive use of an elevator shall be scheduled through the Property Manager and
such use will be permitted between the hours of 8:00 - 11:30 a.m. and 1:30 -
3:30 p.m. and only with the use of protective elevator padding.
EXHIBIT "B" Page 5 of 9
<PAGE>
HEAVY ITEMS AND MOVING OPERATIONS: All carrying in or out of freight, packages
- ---------------------------------
or bulky matter of any description must take place only during hours selected by
Landlord and then only with prior notice to and approval by Landlord. Only
objects which meet the rated capacity of the elevator shall be brought into the
Building. Landlord shall have the right to prescribe the location of heavy
objects and if considered necessary, the means to distribute the weight thereof
(to no more than 50 pounds per square foot unless written approval is granted by
Landlord). Landlord reserves the right to inspect all property to be brought
into the Building and to exclude from the Building all property which would
violate any of the Rules and Regulations or the Lease of which these Rules and
Regulations are a part. Supplies, goods, materials, packages, furniture, etc.
delivered to or taken from the Premises will be delivered or removed through the
entrance and route designated by Landlord, and Landlord will not be responsible
for the loss or damage of any such property. All costs incurred, including any
architectural and consulting expenses, will be charged to Tenant. Any damage to
the Building caused by any such Tenant or its contractor, delivery or moving
service will be repaired at such Tenant's expense.
APPROVAL OF MOVING: The persons employed to move any Tenant's equipment,
- ------------------
material, furniture or other property in or out of the Building must be a
locally recognized professional mover, whose primary business is the performing
of relocation services, must be bonded, fully insured, and reasonably acceptable
to Landlord. A certificate or other verification of such insurance must be
received and approved by Landlord prior to the start of any moving operations.
Insurance must be sufficient in Landlord's sole opinion, to cover all personal
liability, theft or damage to the Project, including, but not limited to, floor
covering, doors, walls, elevators, stairs, foliage and landscaping during
adverse weather. All moving operations will be conducted at such times and in
such a manner as Landlord will direct, and all moving will take place during
non-business hours unless Landlord agrees in writing otherwise. Tenants will be
responsible for the provisions of Building security during their respective
moving operations, and will be liable for all losses and damages sustained by
any party as a result of the failure to supply adequate security.
JANITORIAL SERVICE: Only a Landlord authorized janitorial service shall be
- ------------------
permitted to perform any janitorial service in the Building. Janitorial
service, if supplied by the Landlord, shall not include shampooing or spot-
cleaning of carpets nor dry cleaning of draperies. Landlord shall not be
responsible for any loss of or damage to any Tenant's property by the janitor,
its employees or any other person performing janitorial services.
Cleaning is accomplished by a contract janitorial service after hours Monday
through Friday. Normal cleaning of Tenant suites includes dusting, vacuuming,
emptying waste baskets, and cleaning counters and sinks in kitchens. Any trash
to be removed by cleaning personnel, but not in the usual waste receptacles,
must be clearly marked "trash".
Packing cases, shipping boxes, etc., should be broken down by the Tenant and
discarded in the dumpster provided on site. Removal of any furniture or
furnishings, large equipment, packing crates, packing materials and boxes will
be the responsibility of each Tenant.
EXHIBIT "B" Page 6 of 9
<PAGE>
Materials of such nature that they may not be disposed of in the ordinary and
customary manner of removal and disposition of trash and garbage without being
in violation of any law, ordinance, rule or regulation governing such disposal
shall be restricted from being placed or disposed of in Building trash boxes or
receptacles. They will not be removed by the Building's janitorial service,
except at Landlord's sole option and at the Tenant's expense.
Furniture, appliances, equipment or flammable products of any type may not be
disposed of in the Building's trash receptacle.
Special cleaning or other services of this nature should be directed to building
management at least one (1) day in advance. Tenants will be required to sign a
work order, and charges relating to services performed will be billed to the
Tenant.
Tenants will refrain from any activity which would cause the Property Manager to
incur unnecessary labor charges by reason of such Tenant's carelessness or
indifference in the preservation of good order and cleanliness. Should any
Tenant's actions result in any increased expense for any required cleaning,
Landlord reserves the right to assess such Tenant for such expenses. Janitorial
service will not be furnished to Premises which are occupied after Business
Hours, unless Landlord has given its prior approval for the provision of service
at a later hour for such Premises.
The janitorial staff is instructed to turn off the lights each evening in all
offices. During weekends and holidays, we request that Tenants turn off all
lighting in their Premise to conserve energy and dollars.
Requests for restroom supplies or any complaints or problems should be directed
to the Property Manager.
PARKING: Parking for visitors is available and is permitted in designated
- -------
areas. Violators parking in unauthorized areas may be subject to having their
vehicles towed. All such towing charges shall be at the expense of the owner of
the vehicle. Tenants requesting parking in the garage must complete the
"Parking Agreement Form". Assignment of a Security Access Control Card to the
garage will be based on the specific lease agreement between the Landlord and
the Tenant. Security Access Control Cards will be programmed when the "Parking
Agreement" is submitted by the Tenant's authorized representative to the
Property Manager. The Security Access Control Cards are provided upon payment
of parking fee and $25.00 deposit. Any lost or stolen cards shall be promptly
reported in writing by Tenant to Landlord. Tenant shall be charged a fee of
$25.00 per card for lost, stolen or unaccounted Security Access Control Cards,
and $5.00 per card if damaged and a replacement is necessary. For security
reasons, instructions on how to activate card readers are not covered in the
rules and regulations.
EXHIBIT "B" Page 7 of 9
<PAGE>
PARKING - LIMITATIONS OF LIABILITY: Neither Landlord nor any operator of the
- ----------------------------------
parking areas within Building, as the same are designated and modified by
Landlord, in its sole discretion, from time to time (the "Parking Areas") will
be liable for loss of or damage to any vehicle or any contents of such vehicle
or accessories to any such vehicle, or any property left in any other Parking
Areas, resulting from fire, theft, vandalism, accident, conduct of other users
of the Parking Areas and other persons, or any other casualty or cause.
Landlord will not be obligated to provide any traffic control, security
protection or operator for the Parking Areas and stalls, All Tenants use the
Parking Areas at their own risk, and Landlord will not be liable for personal
injury or death, or theft, loss or damage to property arising out of or in
connection with the use of the Parking Areas. By using the Parking Areas, all
Tenants agree to indemnify and hold harmless Landlord, any operator of the
Parking Areas and their respective employees and agents from and against any
____________ demands and actions arising out of the use of the Parking Areas by
Tenants, their employees, agents, invitees, and visitors, whether brought by any
of such person or any other person.
PARKING - USE OF PARKING STALLS: Tenants (including all of Tenants' employees,
- --------------------------------
agents, invitees, and visitors) will use the parking stalls solely for the
purpose of parking passenger-model cars, small vans and small trucks and will
comply in all respects with any rules and regulations that may be promulgated by
landlord from time to time with respect to the Parking Areas. The Parking Areas
may be used by Tenants, their agents or employees, with prior notice to
Landlord, for occasional overnight parking of vehicles. Tenants must ensure
that any vehicle parked in any of the parking stalls will be kept in proper
repair and will not leak excessive amounts of oil or grease or any amount of
gasoline. If any of the parking stalls are at any time used
(a) for any purpose other than parking as provided above; (b) in any way or
manner reasonably objectionable to Landlord; or (c) by any Tenant after
default by such Tenant under its Lease, Landlord, in addition to any other
right otherwise available to landlord may consider such default an Event of
Default under such Tenant's Lease.
PARKING - NON-EXCLUSIVE USE: All Tenants, right to use the Parking Areas will
- ---------------------------
be in common with other Tenants of the Building and with all other parties
permitted by Landlord to use the Parking Areas. Landlord reserves the right to
assign and re-assign, from time to time, particular parking spaces for use by
persons selected by Landlord provided that each Tenant's rights under its Lease
are preserved. Landlord will not be liable to any Tenants for any
unavailability of such Tenants, designated spaces, if any, nor will any
unavailability entitle any Tenant to any refund, deduction, or allowance.
Tenants will not park in any numbered space or any space designated as:
ASSIGNED, HANDICAPPED, BANK CUSTOMERS ONLY, LIMITED TIME PARKING (or similar
designation).
PARKING - DAMAGE: If the Parking Areas are damaged or destroyed, or if the use
- ----------------
of the Parking Areas is limited or prohibited by any governmental authority, or
the use or operation of the Parking Areas is limited or prevented by strikes,
Landlord or any operator of the Parking
EXHIBIT "B" Page 8 of 9
<PAGE>
Areas will not be subject to any liability to Tenants and Tenants will not be
relieved of any of their obligations under their Leases and the Leases will
remain in full force and effect. Each Tenant will pay to Landlord upon demand,
and each Tenant will indemnify Landlord against, any and all loss or damage to
the Parking Areas, or any equipment, fixtures, or signs used in connection with
the Parking Areas and any adjoining buildings or structures caused by such
Tenant or any of its employees, agents, invitees, or visitors.
PARKING - SUBLEASE OF PARKING STALLS: Tenants have no right to assign or sub
- ------------------------------------
license any of their rights to use the Parking Stalls in the Parking Areas,
except as part of a permitted assignment or sublease of their respective Leases.
Tenants may allocate the Parking Stalls among their employees.
PETS, BICYCLES: Tenants shall not bring or keep, or permit any person to
- --------------
bring in or keep, animals (except for use by handicapped persons) or birds of
any kind in or about any Premises or the Building. Bicycles and other similar
vehicles, are to be parked only in those areas so designated within the parking
garage structure, as so designated at the sole discretion of the Landlord.
VENDING MACHINES: Prior written consent of the Landlord is required before any
- ----------------
vending machine or machines of any description shall be installed, maintained or
operated upon any Premises or within the Building.
EXHIBIT "B" Page 9 of 9
<PAGE>
EXHIBIT "C"
Work Letter
AMERICAN SCHOOL OF PROFESSIONAL PSYCHOLOGY, INC.
3465 Waialae Avenue,
Suite 300
Honolulu HI 96813
Gentlemen:
You (hereinafter called "Tenant") and we (hereinafter called "Landlord")
are executing simultaneously with this Work Letter, the written lease of that
certain premises in the building known as KAIMUKI PLAZA, to which this Work
Letter is attached. Said premises are described in said lease and are
hereinafter called the "premises".
RECITAL:
Landlord desires to make certain improvements to the Premises, and Tenant
desires to have Landlord make such initial improvements, prior to occupancy,
upon the terms and conditions contained in this Work Letter.
Landlord and Tenant mutually agree as follows:
1. Definitions. In this Work Letter, some defined terms are used.
-----------
They are:
(a) Tenant's Representative: Tenant's Representative is as set forth
-----------------------
in Section 3.1 of the Lease.
(b) Landlord's Representative: Landlord's Representative is:
-------------------------
(c) Tenant Improvement Allowance: The Tenant Improvement Allowance is
----------------------------
set forth in Section 3.2 of the Lease.
(d) Programming Information: Information provided by Tenant which is
-----------------------
necessary for the preparation of the Space Plan, including the nature of
Tenant's business, manner of operation, number and types of rooms, special
equipment and functional requirements, anticipated growth, interactions among
groups, and any other programming requirements Tenant may have.
EXHIBIT "C" Page 1 of 9
<PAGE>
(e) Programming Information Submission Date: The date, set forth in
---------------------------------------
Section 3.3 of the Lease, by which Tenant shall submit to Landlord the
Programming Information.
(f) Preliminary Space Plan: A drawing of the Premises clearly showing
----------------------
the layout and relationship of all departments and offices, depicting
partitions, door locations and swings, special equipment locations and
requirements, rentable and usable area calculations and limited furniture
layouts to demonstrate the size of the area.
(g) Final Space Plan: A drawing of the Premises showing, in addition
----------------
to the items on the Preliminary Space Plan, locations of
electrical/data/telephone outlets, plumbing, millwork, furniture and equipment
and indicating any areas that will be evaluated for structural enhancements as
the result of Tenant's requirements.
(h) Estimated Construction Costs: A preliminary estimate of the costs
----------------------------
of the Improvements that are depicted on the Final Space Plan, including all
architectural, engineering, contractor, and any other costs as can be determined
from the Final Space Plan.
(i) Working Drawings: Construction documents detailing the
----------------
Improvements and conforming to codes, complete in form and content and
containing sufficient information and detail to allow for competitive bidding or
negotiated pricing by contractors) selected and engaged by Landlord.
(j) Construction Schedule: A schedule depicting the relative time
---------------------
frames for various activities related to the construction of the Improvements in
the Premises.
(k) Tenant Cost Proposal: A final estimate of costs of the
--------------------
Improvements that are depicted on the Working Drawings, including all
architectural, engineering, contractor, and any other costs, and clearly
indicating the dollar amount, if any, that is to be paid by Tenant pursuant to
paragraph 7 herein.
(1) Preliminary Maximum Approved Cost: The sum of the Tenant
---------------------------------
Improvement Allowance and any additional amount that Tenant has agreed to pay
for the Improvements to the Premises, based on the Final Space Plan.
(m) Final Maximum Approved Cost: The sum of the Tenant Improvement
---------------------------
Allowance and any additional amount that Tenant has agreed to pay for the
Improvements to the Premises, based on the Work Drawings.
(n) Improvements: The work is inclusive of the following:
------------
(1) The development of Space Plans and Working Drawings, including
supporting engineering studies (i.e., structural design or analysis, lighting or
acoustical evaluations, or others as determined by Landlord's architect).
EXHIBIT "C" Page 2 of 9
<PAGE>
(2) All construction work necessary to augment the Base Building,
creating the details and partitioning shown on the Space Plan. The work will
create finished ceilings, walls and floor surfaces, as well as complete HVAC,
lighting, electrical, and fire protection systems.
The Improvements will NOT include personal property items, such as decorator
---
items or services, art work, plants, furniture, equipment, or other fixtures not
permanently affixed to the Premises.
(o) Cost of the improvements: In addition to the actual costs of
------------------------
construction, the Cost of the Improvements includes, but is not limited to, the
following:
(1) All architectural and engineering fees and expenses.
(2) All contractor and construction manager costs and fees.
(3) All permits and taxes.
(4) A coordination and administration fee to Landlord, pursuant
to paragraph 4 (b) (4) herein.
(5) The elements of the Base Building systems, pursuant to
Schedule 1. "Base Building Definition", attached hereto and made a part hereof.
- ----------
(p) Change Order: Any change, modification, or addition to the Final
------------
Space Plan or Working Drawings after Tenant has approved the same.
(q) Base Building: Those elements of the core and shell construction
-------------
that are completed in preparation for the Improvements to the Premises. This
includes Building structure, envelope, and the systems as generally indicated on
Schedule 1, attached hereto. This defines the existing conditions to which
- ----------
Improvements are added.
(r) Building Standard. Component elements utilized in the design and
-----------------
construction of the Improvements that have been pre-selected by Landlord to
ensure uniformity of quality, function, and appearance throughout the Building.
These elements include, but are not limited to, ceiling systems, doors,
hardware, walls, floor coverings, finishes, window coverings, light fixtures,
and HVAC components. A list of Building Standard specifications is attached
hereto as Schedule 2, and made a part hereof.
----------
2. Representatives. Landlord appoints Landlord's
----------------
Representative to act for Landlord in all matters associated with this Work
Letter. Tenant appoints Tenant's Representative to act for Tenant in all
matters associated with this Work Letter. All inquiries, requests,
instructions, authorizations and other communications with respect to the
matters covered by this Work Letter will be made to Landlord's Representative or
Tenant's Representative, as the case may be. Tenant will not make any inquiries
of or requests to, and will not give any instructions or
EXHIBIT "C" Page 3 of 9
<PAGE>
authorizations to, any employee or agent of Landlord, including, without
limitation, Landlord's architect, engineers and contractors or any of their
agents or employees, with regard to matters associated with this Work Letter.
Either party may change its Representative under this Work Letter at any time by
three (3) business days, prior written notice to the other party.
3. Project Design and Construction. All work will be performed by
-------------------------------
designers and contractors selected and engaged by Landlord.
4. Cost Responsibilities.
---------------------
(a) Landlord: Landlord will pay up to the amount of the Tenant
--------
Improvement Allowance for the Cost of the Improvements.
(b) Tenant: Tenant will pay for:
------
(1) Tenant-initiated changes to the Final Space Plan or Working
Drawings after Tenant's approval.
(2) Tenant-initiated Change orders, modifications, or additions to
the Improvements after Tenant's approval of the Working Drawings.
(3) All costs in excess of the Tenant Improvement Allowance that
are not included in (1) or (2) immediately above.
(4) The cost of the Landlord's overhead for coordination and
administration at a rate of 15% of the total cost to Landlord of clauses (1),
(2), and (3) above.
Tenant will not be entitled to any credit for any portion of the
Tenant Improvement Allowance which is not used.
5. Landlord's Approval. Landlord, in its sole discretion, may
-------------------
withhold its approval of any Space Plan, working Drawings, Change Orders that:
(a) Exceeds or adversely affects the structural integrity of the
Building, or any part of the ventilating, air conditioning, plumbing,
mechanical, electrical, communication or other systems of the Building;
(b) Is not approved by the holder of any mortgage or deed of trust
encumbering the Building at the time the work is proposed;
(c) Would not be approved by a prudent owner of property similar
to the Building;
EXHIBIT "C" Page 4 of 9
<PAGE>
(d) Violates any agreement which affects the Building or binds
Landlord;
(e) Landlord reasonably believes will increase the cost of
operation or maintenance of any of the systems of the Building;
(f) Landlord reasonably believes will reduce the market value of
the Premises or the Building at the end of the Term;
(g) Does not conform to applicable building code or is not
approved by all governmental, quasi-governmental, or utility authority with
jurisdiction over the Premises; or
(h) Does not conform to the Building Standard.
6. Schedule of Improvement Activities.
----------------------------------
(a) On or before the ___________ Submission Date, Tenant will
cooperate with and submit to Landlord the Programming Information necessary for
Landlord's architect to prepare the "Preliminary Space Plan".
(b) Landlord's architect will expeditiously prepare a Preliminary
Space Plan and present it to Tenant. Tenant will provide comment on the plan so
as to refine and adjust the design to meet Tenant's need.
(c) Upon written approval of the Preliminary Space Plan, Landlord's
architect will expeditiously prepare the Final Space Plan and forward it to
Tenant. Tenant will give Landlord written notice whether or not it approves the
Final Space Plan, within three (3) business days after its receipt.
If Tenant's notice objects to the Final Space Plan, the notice will set
forth how the plan is inconsistent with the Programming Information and how the
Final Space Plan must be changed in order to overcome Tenant's objections.
Landlord will resubmit a revised plan to Tenant and it will be treated as though
it was the first proposed plan prepared pursuant to this paragraph.
(d) After Tenant's written approval of the Final Space Plan, Landlord
will promptly cause to be prepared, a preliminary estimate of the cost of the
Improvements as set forth in the Final Space Plan (the "Estimated Construction
Costs). If the Estimated Construction Cost is less than the Tenant Improvement
Allowance, the Estimated Construction Cost will be deemed approved without a
required response from Tenant. If the Estimated Construction Cost is more than
the Tenant Improvement Allowance, Landlord will so notify Tenant in writing and
Tenant will establish the Preliminary Maximum Approved Cost by either:
(1) Agreeing in writing to pay the amount by which the Estimated
Construction Cost exceeds the Tenant Improvement Allowance; or
EXHIBIT "C" Page 5 of 9
<PAGE>
(2) Agreeing to have the Final Space Plan revised by Landlord's
architect in order to assure that the Estimated Construction Cost is either:
(A) No more than the Tenant Improvement Allowance;
or
(B) Exceeds the Tenant Improvement Allowance by an amount
which Tenant agrees to pay pursuant to clause (1)
immediately above.
Tenant shall give immediate attention to establishing the
Preliminary Maximum Approved Cost and shall respond to Landlord within two (2)
business days. Upon Tenant's timely fulfillment of its obligations in either
clause (1) or clause (2) immediately above, the Preliminary Maximum Approved
Cost will be established.
(e) Upon establishment of the Preliminary maximum Approved Cost,
Landlord will cause to be prepared and delivered to Tenant the working Drawings,
the Construction Schedule, and the Tenant Cost Proposal for the Improvements in
accordance with the Final Space Plan. If the Tenant Cost Proposal is less than
the Preliminary Maximum Approved Cost, Landlord will take steps necessary to
commence construction of the Improvements to the Premises.
If the Tenant Cost Proposal is more than the Preliminary Maximum
Approved Cost, Landlord will so notify Tenant in writing and Tenant will either
(1) agree in writing to pay the amount by which the Tenant Cost Proposal exceeds
the Preliminary Maximum Approved Cost or (2) request Landlord to revise the
Working Drawings in order to assure that the Tenant Cost Proposal is no more
than the Preliminary Maximum Approved Cost.
Tenant shall give its immediate attention to the cost proposal
approval process and shall respond to Landlord within three (3) business days.
Upon Tenant's timely fulfillment of its obligations in either clause (1) or
clause (2) immediately above, the Final Maximum Approved Cost will be
established.
(f) Following approval of the Working Drawings and establishment of
the Final Maximum Approved Cost, Landlord will cause application to be made to
the appropriate governmental authorities for necessary approvals and building
permits. Upon receipt of the _________ approvals and permits, Landlord will
begin construction of the Improvements.
7. Payment by Tenant. The amount payable by Tenant will be billed
-----------------
periodically, as the work proceeds, and Tenant agrees to pay the same within
fifteen (15) business days following delivery of each such invoice.
EXHIBIT "C" Page 6 of 9
<PAGE>
8. Change Orders. Tenant may authorize changes to the Improvements
-------------
during construction only by written instructions to Landlord's Representative on
a form approved by Landlord. All such changes will be subject to Landlord's
prior written approval in accordance with paragraph 5 herein. Prior to
commencing any change, Landlord will prepare and deliver to Tenant, for Tenant's
approval, a Change order setting forth the total cost of such change, which will
include associated architectural, engineering, construction contractor's costs
and fees, completion schedule changes, and the cost of Landlord's overhead. If
Tenant fails to approve such Change Order within five (5) business days after
delivery by Landlord, Tenant will be deemed to have withdrawn the proposed
change and Landlord will not proceed to perform the change. Upon Landlord's
receipt of Tenant's approval, Landlord will proceed to perform the change.
9. Completion and Commencement Date. Tenant's obligation for the payment
--------------------------------
of Rent pursuant to the Lease will commence on the Commencement Date; however,
the Commencement Date and the date for the payment of Rent may be delayed on a
day-by-day basis for each day the substantial completion of the Improvements are
delayed by Landlord or its contractors or agents. The payment of Rent will not
be delayed by a delay of substantial completion due to Tenant. The following
are some examples of delays which will not affect the Commencement Date and the
date Rent is to commence under the Lease:
(a) Late submissions of Programming Information;
(b) Change orders requested by Tenant;
(c) Delays in obtaining non-Building Standard construction materials
requested by Tenant;
(d) Tenant's failure to approve timely any item requiring Tenant's
approval; and
(e) Delays by Tenant according to paragraph 6.
In the event that substantial completion of the Improvements is
delayed by Landlord, its contractors or agents, the Commencement Date will be
the date of substantial completion of the Improvements, subject only to the
completion of Landlord's punch-list items (that is, those items which do not
materially interfere with Tenant's use and enjoyment of the Premises). Landlord
and Tenant will confirm the Commencement Date in accordance with Section 4.2 of
the Lease.
10. Condition of the Premises.
-------------------------
(a) Prior to the Commencement Date, Tenant will conduct a walk-through
inspection of the Premises with Landlord and prepare a punch-list of items
needing additional work by Landlord. Other than the items specified in the
punch-list and "latent defects" (as defined below), by taking possession of the
Premises, Tenant will be deemed to have accepted the Premises in their condition
on the date of delivery of possession and to have acknowledged that Landlord has
installed
EXHIBIT "C" Page 7 of 9
<PAGE>
the Improvements as required by this Work Letter and that there are no items
needing additional work or repair. The punch-list will not include any damage to
the Premises caused by Tenant's move-in or early access, if permitted. Damage
caused by Tenant will be repaired or corrected by Landlord at Tenant's expense.
Tenant acknowledges that neither Landlord nor its agents or employees have made
any representations or warranties as to the suitability or fitness of the
Premises for the conduct of Tenant's business or for any other purpose, nor has
Landlord or its agents or employees agreed to undertake any alterations or
construct any tenant improvements to the Premises except as expressly provided
in this Lease and this Work Letter. If Tenant fails to submit a punch-list to
Landlord prior to the Commencement Date, it will be deemed that there are no
items needing additional work or repair. Landlord's contractor will complete all
reasonable punch-list items within thirty (30) calendar days after the walk-
through inspection or as soon as practicable after such walk-through.
(b) A "latent defect" is a defect in the condition of the Premises
caused by Landlord's failure to construct the Improvements in a good and
workmanlike manner and in accordance with the Working Drawings, which defect
would not ordinarily be observed during a walk-through inspection. If Tenant
notifies Landlord of a latent defect within one year following the Commencement
Date, then Landlord, at its expense, will repair such latent defect as soon as
practicable. Except as set forth in this paragraph 10, Landlord will have no
obligation or liability to Tenant for latent defects.
11. Adjustments Upon Completion. As soon as practicable, upon completion
---------------------------
of the Improvements in accordance with this Work Letter, Landlord will notify
Tenant of the Rentable Area of the Premises, the Rentable Area of the Building,
Monthly Rent, and Tenant's Share, if such information was not previously
determinable by Landlord. Tenant, within ten (10) calendar days of Landlord's
written request, will execute a certificate, in substantially the form attached
hereto as Attachment "1" and made a part hereof, confirming such information.
EXHIBIT "C" Page 8 of 9
<PAGE>
If the foregoing correctly sets forth our understanding, kindly sign all copies
of this Work Letter where indicated below.
CKSS ASSOCIATES, a Hawaii
Registered Limited Partnership
BY: CPB PROPERTIES, INC.
GENERAL PARTNER
By ________________________
Its
Landlord
ACCEPTED:
--------
AMERICAN SCHOOL OF PROFESSIONAL
PSYCHOLOGY, INC.
/s/ Harold J. O'Donnell
--------------------------
__________________________
__________________________
Tenant
EXHIBIT "C" Page 9 of 9
<PAGE>
SCHEDULE 1
----------
(TO EXHIBIT "C")
KAIMUKI PLAZA
3465 WAIALAE AVENUE, HONOLULU, HI
BASE BUILDING CORE AND SHELL DEFINITION
---------------------------------------
Base Building Specifications:
Landlord will construct the Base Building in accordance with the specifications
described below:
A. CORE AND SHELL
--------------
1. The building shell, including finished ground floor public lobbies.
2. The core area on tenant occupied floors, including mechanical,
electrical, fire and life safety systems, complete elevator cab
interior finish, and build-out of required fire exit stairs.
3. Core area toilet rooms, including necessary plumbing fixtures,
accessories, ceilings, lighting and finishes.
4. Exposed ceiling and exposed concrete floor in all core areas (except
toilet rooms and multi-tenant elevator lobbies and corridors).
5. Telephone/electrical closets, janitorial closets and drinking
fountains (as required by Code) in core area.
6. Finished parking garage, elevators and lobby.
7. Landscaped areas on the ground floor.
B. INTERIOR FINISHES
-----------------
1. Core (corridor) demising walls facing Tenant Space will be exposed
metal stud or as specified in the base building drawings.
2. One door per 3,000 s.f. of office space (or as building code
requires).
Schedule 1 Page 1 of 2
<PAGE>
C. FLOOR COVERING
--------------
1. Tenant lease areas will have a float finish on the concrete floors
ready for the installation of Tenant floor covering.
D. FLOOR LOADING
-------------
1. Tenant space (except within the core area) shall have a load bearing
capacity of 95 pounds per square foot. ("95 P.S.F." total design
loading: 75 PSF live load and 20 PSF partition load).
E. MECHANICAL
----------
1. Base Building chilled water supply system will be installed, in ______
---for Tenant's connection for its installation of building standard
fan coil unit.
2. Outside air supply ducts mounted in ceiling of the core area, ready
for connection by Tenant for ducted outside air supply.
3. Base Building plumbing connection at each floor which include waste,
vent, and cold water piping stubbed out and capped at at least 2
locations.
4. Smoke detector and automatic fire protection for general office uses
installed in the ceiling per open floor plan design and in conformance
with applicable codes.
F. ELECTRICAL/DATA/TELEPHONE
-------------------------
1. 2.0 watts per usable square foot (for receptacle/general
office use) capacity of that portion of the electrical power
distribution system on each floor associated with 120/208V
power equipment.
2. 3.0 watts per usable square feet at 277V for electrical for
Building Standard tenant lighting at secondary panels in
electrical closets on each floor.
3. Telephone cabling, of capacity recommended by local telephone
service supplier, from main service to terminal boards at
building electrical closets on each floor.
4. Television cable facilities to each floor from main service to
terminal boards at building electrical closets.
Schedule 1 Page 2 of 2
<PAGE>
SCHEDULE 2
(TO EXHIBIT "C")
KAIMUKI PLAZA
3465 WAIALAE AVENUE, HONOLULU, HI
OUTLINE OF BUILDING STANDARD SPECIFICATIONS
-------------------------------------------
Building Standard Specifications:
1. FLOOR COVERING
A. Carpet
Monterey Carpet, Inc.
"Sea Cliff" Series, #8006
Choice of 4 colors: Gray, Taupe, Blue or Green
Carpet Pad
Prince Street Technologies
"Enviro Pad" Series, #EP 5201
B. Vinyl Composition Tile
Armstrong Vinyl Composition Tile
"Imperial Texture", 12" x 12" x 1/8"
Choice of 4 colors: Cool White #51899, Classic White
#51911, Shelter White #51836, or Sterling #51904
C. Quantity
Tenant to select and install sufficient quantities of Building
Standard floor covering to cover the Premises as deemed
appropriate on space plan.
2. RUBBER BASE
Burke Base
2 1/2" carpet and cove base
Color: per selected scheme
3. PARTITION TYPE
A. Partition A - Interior Partitions
B. Partition B - Insulated Partitions
Schedule 2 Page 1 of 4
<PAGE>
C. Partition C - Demising Partitions
4. DOOR ASSEMBLY
A. Doors
solid core doors with hardwood face, 3'-0" x 8'-9-3/4" x 1-3/4",
rift cut, white oak veneer finish, with clear varnish finish.
B. Door Frames
ACI Architectural component
Anodized aluminum frames.
C. Finish Hardware
Schlage 03A Series
Lockset or latchset lever handle hardware with dome stop.
Door closures at entry doors only. Dull Chrome Plated _______
finish.
5. WINDOW COVERING
Levelor
1-3/8" horizontal louver blinds.
Color: White
6. CEILING
A. Acoustical Ceiling Tile
Armstrong
"Minaboard/Fireguard - Cortega"
#77 Tegular Edged Lay-in Tile
Color: White
B. Grid
Armstrong
15/16 metal grid system with hanger wires
Color: White
Schedule 2 Page 2 of 4
<PAGE>
7. PAINT
(2) prime coats latex-based interior white primer, Devoe &
Reynolds
(2) finish coats latex-based interior satin, Sinclair Paints
Standard Wall Color: Sinclair #CM8594
8. ELECTRICAL
A. Duplex Power Receptacles (12OV, wall-mounted type), as required but
not to exceed the landlord specified 2.0 watt per square foot
limitation.
B. Telephone/Data junction boxes and conduit; building standard 2" x 4"
recessed receptacle with 1/2' conduit stubbed to ceiling space,
quantities and locations as approved by landlord.
C. Fluorescent Luminaires -- as required but not to exceed the landlord's
specified 2.0 watt per square foot limitation
2' x 4' fluorescent parabolic specular silver louver, 3" deep
2' x 2' fluorescent parabolic specular silver louver, 3" deep
9. AIR CONDITIONING BUILDING STANDARD
A. Building Standard duct and insulation
B. Building Standard Fan Coil Unit
C. Building Standard Ceiling Supply and Return Diffuser
D. Building Standard Thermostatic controls
(Manufacturer, model, quantities and locations to be determined and
specified by landlord's mechanical engineer and approved by landlord)
10. LIFE SAFETY SYSTEMS
A. Fire Suppression System
B. Emergency Exit and Egress Lighting
C. Smoke Detectors
D. Fire Alarm System
Landlord, as part of the Base Building improvements, shall furnish and
install sufficient quantities of the above to the common areas, as required
by local codes.
11. SUBSTITUTIONS -- Tenant may substitute, at Tenant's sole cost and expense,
alternative materials for the materials prescribed in the Building Standard
Specifications with respect to items other than window coverings, ceiling
system areas visible from outside of the Premises, doors, frames and finish
hardware for all entry and exit doors opening to the
Schedule 2 Page 3 of 4
<PAGE>
common areas of the floor, sprinkler heads, life safety devices light
fixtures, and demising and corridor partitions, provided that, (A) the
quality of such alternative materials is equal to or better than that
prescribed in the Building Standard ___________ for the item in question,
(B) the substitution would be in conformance with all applicable codes, (C)
the substitution is not in lieu of any pre-stocked items that Landlord or
Landlord's Tenant Improvement Contractor have previously purchased for the
Premises, and (D) Tenant has obtained Landlord's prior written approval of
such substitutions, which approval shall not be unreasonably withheld.
Schedule 2 Page 4 of 4
<PAGE>
EXHIBIT "D"
CONFIRMATION OF COMMENCEMENT DATE
---------------------------------
THIS CONFIRMATION, made this _ day of ______ by and between CKSS
ASSOCIATES, a Hawaii registered limited partnership, whose principal place of
business and post office address is 220 South King Street, Honolulu, Hawaii
96813, hereinafter called "Landlord" and AMERICAN SCHOOL OF PROFESSIONAL
PSYCHOLOGY, INC., whose principal place of business and post office address is:
3465 Waialae Avenue, Suite 300, Honolulu HI 96813, hereinafter called "Tenant".
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Landlord and Tenant have made an unrecorded lease dated _____ ____
_____, covering that certain space in Kaimuki Plaza, 3465 Waialae Avenue,
Honolulu, Hawaii 96815, known as Suite 300, which is more particularly described
in said lease; and
WHEREAS, under Section ____ of said lease, Landlord and Tenant agreed that,
when the commencement date of the term of said lease shall have been determined,
they would execute a written memorandum expressly confirming said commencement
date; and
WHEREAS, said commencement date has now been determined;
NOW, THEREFORE, in consideration of the premises, Landlord and Tenant
hereby agree and confirm that the commencement date of the term of said lease
was. __________, and _______ and that the expiration date of said lease is
____________, ____________.
EXHIBIT "B" Page 1 of 2
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this instrument as of
the day and year first above written.
CKSS ASSOCIATES, a Hawaii
Registered Limited Partnership
BY: CPB PROPERTIES, INC.
GENERAL PARTNER
By _________________________
Its
Landlord
AMERICAN SCHOOL OF PROFESSIONAL
PSYCHOLOGY, INC.
----------------------------------
Federal Identification No. _______
Social Security No. ______________
Tenant
EXHIBIT "D" Page 2 of 2
<PAGE>
EXHIBIT E
---------
GUARANTY
--------
_________________________________, _________________________________,
(NAME OF GUARANTOR) (marital status of Guarantor)
whose address is _____________________________________________________________,
("Guarantor") hereby absolutely and unconditionally guarantees to and for the
benefit of CKSS ASSOCIATES, a Hawaii registered limited partnership, Landlord
under that certain office Lease hereinbelow described ("Landlord"), all payment
and performance obligations to be performed by
________________________________________, _____________________________________,
(NAME OF TENANT) (marital status of Tenant)
("Tenant") tenant under that certain Office Lease dated ___________________
("Lease").
1. Guaranty. Guarantor unconditionally and irrevocably guarantees to
--------
Landlord, Landlord's heirs, personal representatives, trustees, successors and
assigns or others, as provided in the Lease:
(i) Full and prompt payment of all rents, including all sums
considered to be additional rent; taxes; assessments; common area maintenance
charges; collection costs; attorneys' fees; and all other charges payable by
Tenant under the Lease, as the same becomes due and payable;
(ii) Full observance and performance of all other terms, covenants,
conditions and provisions of the Lease on the part of Tenant to be observed and
performed;
(iii) Full and prompt payment of all Landlord's costs and expenses,
including reasonable attorneys' fees, incurred in connection with any
negotiations or workout involving Tenant's obligations under the Lease or
Guarantor's obligations hereunder or in any collection efforts affecting
Guarantor or in the enforcement of the Guaranty.
2. Direct and Primary Liability of Guarantor. The liability of Guarantor
-----------------------------------------
to Landlord under this Guaranty is direct and primary, and is independent of any
secondary liability Guarantor may have by virtue of its status as a general
partner, officer or stockholder of Tenant (to the extent applicable).
Accordingly, this Guaranty may be enforced by Landlord regardless of any defense
or set off or counterclaim which Tenant may have or assert against Landlord, and
regardless of whether or not Landlord has instituted any suit, action or
proceeding, or exhausted its remedies against Tenant, or exhausted the assets of
Tenant, or taken any steps to enforce any rights against any other person to
compel any such performance or to collect all or part of such amount, and
regardless of whether Landlord has obtained any judgment against Tenant for the
amounts owed by Tenant to Landlord under the Lease. This Guaranty is a guaranty
of payment and performance and not of collectibility or enforceability and is in
no way conditional or contingent.
EXHIBIT "E" Page 1 of 6
<PAGE>
3. Waiver of Defenses. Guarantor hereby unconditionally:
------------------
(i) waives any requirement that Landlord, in the event of any
default by Tenant, first make demand upon, or seek to enforce remedies against,
Tenant or any security before demanding payment under or seeking to enforce this
Guaranty;
(ii) _____________________________ this Guaranty will not be
discharged except by complete performance of Tenant of the obligations contained
in the Lease;
(iii) Agrees that this Guaranty shall remain in full force and
effect without regard to, and shall not be affected or impaired by, without
limitation, any invalidity, irregularity or unenforceability in whole or in part
of any of the provisions of the Lease or any limitation on the liability of
Tenant thereunder;
(iv) Forever waives any rights of appraisement with regard to the
value of any collateral which Landlord may apply as a credit to the obligations
of Tenant, through foreclosure or otherwise, and agrees that the determination
by an independent appraiser appointed by Landlord of the value of such
collateral shall be binding upon the Guarantor for all purposes;
(v) Waives all statutes of limitation as a defense to any action
brought against Guarantor by Landlord to the fullest extent permitted by law;
(vi) Waives any defense based upon any legal disability of
Guarantor or any discharge or limitation of liability of Tenant to Landlord,
whether consensual or arising by operation of law or any bankruptcy, insolvency
or debtor-relief proceeding, or from any other cause;
(vii) Waives presentment, demand, protest and notice of any kind;
(viii) Waives any defense based upon or arising out of any defense
which Tenant may have to the payment or performance of any obligation under the
Lease;
(ix) Waives any defense with respect to this Guaranty, which
defense is not also available to Tenant;
(x) Waives any and all statutory or common law suretyship and
other defenses to enforcement of this Guaranty at any time arising, granted or
made, now or hereafter otherwise applicable.
4. No Release. The obligations of Guarantor under this Guaranty shall
----------
not be released, affected, stayed or impaired, without the written consent of
Landlord, by:
(i) Any assignment of the Lease although made without notice to,
or without the consent of, any guarantor of the Lease;
EXHIBIT "E" Page 2 of 6
<PAGE>
(ii) Any waiver by Landlord of the performance or observance by
Tenant of any of the agreements, covenants, terms or conditions contained in the
Lease;
(iii) Any extension of time for payment of any amounts payable
under or in connection with the Lease or the time of performance by Tenant or
any guarantor of the Lease, of any obligations under or arising out of the
Lease, or any extension or renewal thereof;
(iv) The modification or amendment (whether material or otherwise)
of any duty, agreement or obligation of Tenant set forth in the Lease, including
any agreements involving the workout of Tenant's financial obligations to
Landlord under the Lease;
(v) The voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of Tenant or any other
guarantor of the Lease;
(vi) Any receivership, insolvency, bankruptcy, reorganization,
dissolution or other similar proceeding affecting Tenant or any guarantor of the
Lease or any of their assets;
(vii) The release of any property from any lien or security
interest created by the Lease or the acceptance of additional or substitute
property as security under the Lease;
(viii) The release or discharge of Tenant from the observance or
performance of any agreement, covenant, term or condition contained in the
Lease:
(ix) Any action which Landlord may take or omit to take by virtue
of the Lease or through any course of dealing with Tenant;
(x) The addition of a new guarantor or the release of any
guarantor of the Lease; or
(xi) The operation of law or any other cause, whether similar or
dissimilar to the foregoing.
5. Subrogation. If Guarantor shall be required to make any payments on
-----------
account of the Lease, then, from and after the payment in full of the total
Lease rent and other sums to be paid under the Lease and the discharge of all
obligations to be performed under the Lease, Guarantor shall be subrogated to
the rights of Landlord against Tenant. Until such payment in full and such
other performance and discharge, Guarantor waives any rights it may have to
insist that Landlord enforce any of its remedies under the Lease and any rights
Guarantor may have to participate in any security for the repayment of Tenant's
obligations under the Lease.
6. Guarantor's Financial Condition. Guarantor will, immediately and from
-------------------------------
time to time on Landlord's request, provide to Landlord true and correct
financial information regarding the
EXHIBIT "E" Page 3 of 6
<PAGE>
current status of Guarantor's financial condition and Landlord acknowledges and
agrees that it will keep such information confidential.
7. Tenant's Financial Condition. Guarantor assumes full responsibility
----------------------------
for keeping fully informed of the financial condition of Tenant and all other
circumstances affecting Tenant's ability to perform its obligations to Landlord,
and agrees that Landlord will have no duty to report to Guarantor any
information which Landlord receives about Tenant's financial condition or any
circumstances bearing on its ability to perform.
8. Default. Landlord may declare Guarantor in default under this
-------
Guaranty if Guarantor fails to perform any of its obligations under this
Guaranty or becomes the subject of any bankruptcy, insolvency, arrangement,
reorganization, or other debtor-relief proceeding under any federal or state
law, whether now existing or hereafter enacted.
9. Amendment. The terms of this Guaranty may not be modified of amended,
---------
except by a written agreement executed by Guarantor with the written consent of
Landlord.
10. Notice. Landlord may proceed directly against the Guarantors, or any
------
one of them, after first giving to such Guarantor or Guarantors fifteen (15)
days written notice of default by Tenant provided that such default is not
corrected within the said period. Any notice or demand to be given or served on
the Guarantor shall be in writing and personally delivered, or sent by
telecopier, facsimile transmission (fax) or by first class, registered or
certified mail with postage prepaid addressed as follows:
To Guarantor at:
_______________________________________
_______________________________________
Guarantor may change his address from time to time by delivering to
Landlord written notice of any change of address. Service of any notice or
demand shall be deemed complete on the date of actual delivery or the expiration
of the second day after the date of mailing, whichever is earlier. Failure to
give notice to any one or more of the Guarantors shall not affect the obligation
of a Guarantor to which such notice shall have been given.
11. Agent to Receive Service of Process for Out of State Persons. if
------------------------------------------------------------
Guarantor is an out of state or foreign corporation, Guarantor irrevocably
appoints the person identified herein as its Authorized Agent to receive service
of process for any legal action brought by Landlord in the State of Hawaii:
To Guarantor's Authorized Agent:
_______________________________________
EXHIBIT "E" Page 4 of 6
<PAGE>
______________________________________
______________________________________
12. Submission to Jurisdiction. Guarantor irrevocably agrees that any
--------------------------
legal action or proceeding with respect to this Guaranty against Guarantor may
be brought in any of the courts of the State of Hawaii or in the United States
District Court of the District of Hawaii as Landlord may elect, and by execution
and delivery of this Guaranty, Guarantor hereby irrevocably submits and attorns
to such jurisdiction. This provision shall not, however, preclude Landlord from
commencing any action against Guarantor in any other jurisdiction
_______________________ irrevocably consents to the service of process out of
any such courts by trailing copies thereof by registered United States mail,
postage prepaid (or by the most merely equivalent mail service available to a
foreign nation) or by delivering copies thereof to Guarantor at the address of
Guarantor shown above, or to the Premises demised under the Lease, with the same
force and effect as if personally served upon Guarantor. Guarantor further
agrees that final judgment against Guarantor in any such action or proceeding
shall be conclusive and may be enforced in any jurisdiction within or without
the United States, by suit on the judgment, a certified or exemplified copy of
which shall be conclusive of liability therefore.
13. Prohibited Transactions. The rights of Landlord hereunder shall
-----------------------
extend to all property of Guarantor, whether held as tenants by the entirety,
tenants in severalty, community property or in any other manner of holding
title. If at any time the spouse of Guarantor is not also a guarantor under
this Guaranty, then it shall constitute a default of this Guaranty and of the
Lease if Guarantor transfers any property to Guarantor and spouse as tenants by
the entirety or to Guarantor's spouse of her separate property or acquires any
property in tenants by the entirety or in the name of Guarantor's spouse as her
separate property.
14. Delay: Cumulative Remedies. No delay or failure by Landlord to
--------------------------
exercise any right or remedy against Tenant or Guarantor will be construed as a
waiver of that right or remedy. All remedies of Landlord against Tenant and
Guarantor are cumulative.
15. Binding Force. This Guaranty shall be binding upon Guarantor and his
-------------
heirs, personal representatives, trustees, successors and permitted assigns, and
it shall inure to the benefit of and shall be enforceable by Landlord and their
heirs, personal representatives, trustees, successors and assigns from time to
time. Landlord may assign this Guaranty, in whole or in part, without notice,
in connection with any transfer by Landlord of its interest in the Lease.
16. Miscellaneous. The invalidity or unenforceability of any one or more
-------------
provisions of this Guaranty will not affect any other provision. In the event
this Guaranty is signed by more than one person or entity, any and all liability
thereunder shall be joint and several. This Guaranty shall inure to the benefit
of Landlord, and their heirs, trustees, personal representatives, successors and
assigns, and shall be binding upon the estates, personal representatives,
trustees, administrators and assigns of Guarantor. Whenever the context
requires, all terms used in the singular will be construed in the plural and
vice versa, and each gender will include the other gender.
EXHIBIT "E" Page 5 of 6
<PAGE>
17. Governing Law. This Guaranty shall for all purposes by construed in
-------------
accordance with the laws of the State of Hawaii.
IN WITNESS WHEREOF, Guarantor executed these presents this ______ day of
___________________, _________.
______________________________________
Signature
Printed Name ___________________________
Social Security No. ______________________
_______________________________________
Signature
Printed Name ___________________________
Social Security No. ___________________
" Guarantor"
EXHIBIT "E" Page 6 of 6
<PAGE>
EXHIBIT 10.9
December 19, 1997
Neil S. Kobrin, Ph.D., President
California Graduate School of Psychology
50 El Camino Drive
Corte Madera, California 94925
Re: Annual CPI Adjustment - Granada School
Dear Dr. Kobrin:
February 1, 1998 marks the anniversary of your lease. Pursuant to Paragraph
2.1, the annual CPI adjustment is calculated as follows:
Rent = A x B/C
Rent = $3,202.00 x 162.5/156.9
Rent = $3,316.28 per month effective February 1, 1998
-------- ----------------
A = Base Rent
B = C.P.I. (4 months preceding)
C = C.P.I. (same month as B, 1 year earlier).
A copy of the applicable Consumer Price Indexes is attached for your
information. If you have any questions, please do not hesitate to call.
Sincerely,
Ralph N. Cole
Property Manager
(415) 924-3316
cc: Mrs. Jeri Johnson
<PAGE>
REED UNION SCHOOL DISTRICT
GRANADA SCHOOL LEASE AGREEMENT
This Lease Agreement is entered into as of this 20th day of January, 1997
---- ------- --
by and between the REED UNION SCHOOL DISTRICT, Lessor, hereinafter referred to
as "District," and CALIFORNIA GRADUATE SCHOOL OF PSYCHOLOGY, a non-profit
------------------------------------------------------
corporation registered and existing in the State of California hereinafter
- --------------------------------------------------------------
referred to as "Lessee."
District hereby leases to Lessee those certain premises with the appurtenances,
herein referred to as "Premises" described as Qmega #1 in Omega building, at
-------- -----
Granada School, 50 El Camino Drive, Corte Madera, County of Marin, State of
California, and more particularly depicted on Appendix A attached hereto and by
this reference made a part hereof upon the following TERMS AND CONDITIONS:
1. TERM
----
1.1 The term hereof shall be two years commencing on February 1, 1997, and
--- ----------------
expiring on January 31, 1999.
----------------
1.2 Upon the mutual agreement of the parties, Lessee shall have the option
to renew the Lease for an additional term of two twenty-four month
---------------------
periods commencing at the expiration of the initial Lease term at the
same terms and conditions of this Lease except for rent which shall be
mutually agreed upon by the parties. If Lessee wishes to renew, he
shall give written notice to District on or before August 1, 1998.
--------------
1.3 Whereas District's primary purpose is the provision of quality
education to the youth residing in the district, and not the rental of
real property, District reserves the right to terminate this Lease in
the following circumstances: (1) District's currently usable
facilities have become inadequate for its educational purposes, either
because of a natural calamity or because of an increase in the number
of eligible students who wish to attend District's schools and (a)
District has announced, in the local newspaper or by other appropriate
means at least two (2) weeks before the scheduled hearing date, its
intention to hold a public hearing for the purpose of determining
whether it must terminate this Lease, (b) District holds such hearing
and thereat publicly considers the available alternatives (including
but not limited to using temporary (portable) units on one of the
sites where it presently operates a school, adopting a "split
1 January 20, 1997
<PAGE>
session" at one or more schools, and using available facilities at an
adjacent district), (c) at such hearing District determines that it
has no feasible alternative to using the real property on which the
Premises are located to fulfill its educational purposes and (d)
following such hearing District gives Lessee at least six (6) months
written notice of its intent to terminate this Lease on the following
June 30; or (2) District determines that in order for it to fulfill
its primary educational purposes it is necessary for it to sell the
real property on which the Premises are located to a third party and
(a) District has announced, in the local newspaper or by other
appropriate means at least two (2) weeks before the scheduled hearing
date, its intention to hold a public hearing for the purpose of
determining whether it must terminate this Lease, (b) District holds
such hearing and thereat publicly considers its available
alternatives, (c) at such hearing District determines that it has no
reasonable alternative to selling the real property on which the
Premises are located to fulfill its educational purposes, and (d)
following such hearing District gives Lessee at least six (6) months
written notice of its intent to terminate this Lease on the following
June 30.
2. RENT
----
2.1 a. Monthly rent shall be $3,202.00 for the first twelve (12) months;
---------
for a total of:
$3,202.00 per month from 2/1/97 to 1/31/98 totaling $38,424.00.
--------- ----------
For the succeeding one-year period, the monthly rent shall be adjusted
to reflect increases in cost of living as defined in Paragraph 2.1
(b).
b. The rent provided for in Paragraph 2.1 (a) shall be adjusted
effective February 1, 1998, in accordance with changes in the San
----------------
Francisco/Oakland/San Jose Consumer Price Index for All Urban
Consumers (1982-1984 = 100) as published by the U.S. Government,
Department of Labor, hereinafter called the "CPI " by the following
formula:
R = A x B/C
2 January 20, 1997
<PAGE>
R = the adjusted monthly rent for each month of the particular one
year period;
A = the rent described in Paragraph 2.1 (a).
B = the CPI for October immediately preceding the commencement of the
one-year period for which the adjusted monthly rent is being computed;
and
C = the CPI for October 1996.
------------
In no event shall the monthly rent be less than the amount set forth
in Paragraph 2.1 (a).
2.2 For lease purposes square footage of the Premises is 4184 square feet.
----
2.3 Rent shall be due and payable on the first (1st) day of each and every
month of the term of the Lease.
2.4 All rents shall be paid to REED UNION SCHOOL DISTRICT or its
authorized agent at Reed Union School District office, 105-A Avenida
Miraflores, Tiburon, California, 94920, or at such other place as may
be designated from time to time,
2.5 The original lease deposit accompanying Lessee's offer to rent shall
be applied towards the first month's rent. The second month's rent
shall be prorated according to date of occupancy.
2.6 The Lessee shall pay the first month's rent $3,202.00, and a security
---------
deposit equal to two month's rent $6,404.00 at the time of execution
--------
of the Lease. As $6,000.00 of this security deposit has already been
paid, the Lessee shall pay only the additional amount of $404.00.
-------
2.7 If Lessee fails to pay rent on or before the sixth (6th) day of the
month, such unpaid amounts will be subject to a late payment equal to
five percent (5%) of such unpaid amounts. This late payment charge is
intended to compensate District for District's additional
administrative costs resulting from Lessee's failure, and has been
agreed upon by District and Lessee as a reasonable estimate of the
additional administrative costs which will be incurred by District as
a result of Lessee's failure. The actual cost in each instance is
extremely difficult, if not impossible, to determine. This late
payment charge will constitute liquidated damages and will be paid to
3 January 20, 1997
<PAGE>
District together with such unpaid amounts. The receipt of payment of
this late payment charge will not constitute a waiver by District of
any default by Lessee under this Lease.
2.8 Amounts payable by Lessee according to the Lease will be payable as
rent without deduction or offset. If Lessee fails to pay any amounts
due according to the Lease, District will have all the rights and
remedies available to it on account of Lessee's failure to pay rent.
2.9 n/a
2.10 District has installed to be paid at Lessee's expense, carpeting in
spaces known as 001, 002, 006, and 014 (See Appendix A). District has
paid the initial costs of carpeting (labor and materials) and Lessee
shall repay District over a period of 72 months, ending with payment
due January 1, 2000. (Monthly installment payment = Total cost of
carpeting divided by 72 months.) Payment to District shall be in
addition to rent named in Paragraph 2.1. If lease is terminated prior
to December 31, 1999, for any reason, District shall have the right to
demand the unpaid balance from the security deposit. The improvements
shall be the property of the District.
3. EARLY ACCESS
------------
n/a
4 January 20, 1997
<PAGE>
4. USE AND USES PROHIBITED
-----------------------
4.1 The Premises are to be used for the operation of classrooms and
--------------
administrative offices of a graduate school and for no other purpose,
-------------------------------------------
without prior written consent of District.
4.2 Lessee shall not use any portion of the Premises for purposes other
than those specified hereinabove, and no use shall be made or
permitted to be made upon the Premises, nor acts done, which will
increase the existing rate of insurance upon the property, or cause
cancellation of insurance policies covering said property. Lessee
shall not conduct or permit any sale by auction on the Premises.
4.3 Lessee shall not use, generate, handle, possess or store, or permit or
suffer others to use, generate, handle, possess or store, Hazardous
Substances (as defined below) on the Premises or within the common
area, except for commonly available dispersants intended for use in
photocopy machines. In the storage and use of copier dispersants,
Lessee shall comply in every respect with all applicable laws,
statutes, ordinances, rules, regulations, requirements or orders and
Lessee shall use all due care in such activities. Lessee shall not,
under any circumstances, cause or permit any Hazardous Substance to
come into contact with, in a manner which permits such substance to
adhere to or penetrate, the Premises, the building in which the
Premises are located, or the real property on which the Premises are
situated, nor shall Lessee permit any Hazardous Substance to be placed
in the drains or sewer system. Lessee shall indemnify, defend and hold
District and District's board members, agents, employees, successors
and assigns free and harmless from any claims, damages, losses,
liabilities, or injuries arising from or in connection with any breach
of the covenants set forth in this Paragraph 4.3, whether such claims,
damages, losses, liabilities, or injuries arise during or after the
term of this Lease. The foregoing provisions of this Paragraph are
intended to constitute an indemnity agreement with the meaning of
section 9607(e) (1) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 USC 9607(e) (1)), but
nothing in such Section or Act shall be deemed to invalidate or limit,
either directly or indirectly, the obligations of
5 January 20, 1997
<PAGE>
Lessee hereunder. As used herein, the term "Hazardous Substances"
shall mean and refer to flammable or explosive materials, asbestos,
polychlorinated biphenyls, petroleum, radioactive materials, hazardous
wastes, toxic substances or related injurious materials, whether
injurious by themselves or in combination with other materials, which
are now or hereafter defined or referred to as (i) a "hazardous
substance", "hazardous material", or "toxic substance", (ii) a
substance causing "pollution" or "contamination", or a "chemical known
to the State of California to cause cancer or reproductive toxicity"
in or pursuant to any federal, state or local statute, law, ordinance,
regulation or judicial or administrative order, decision or decree.
5. USE OF COMMON AREAS
-------------------
5.1 The term "common areas" means all areas and facilities on the Granada
School (See Appendix A) site which are provided and designated from
time to time by District for the general nonexclusive use and
convenience of Lessee with other lessees on the site and their
respective employees, students, invitees, licensees, or other
visitors. Common areas include, but are not limited to, the turfed
playing field, play areas, and parking lot. District grants Lessee a
nonexclusi ve license for the term of the Lease from week-days, Monday
-----------------
through Friday, 8:00 a.m. to 7:00 p.m.; two week-day evenings 7:00
------------------------------------------------------------------
p.m.- to 8:00 p.m.: and for occasional week-end and evening use
---------------------------------------------------------------
Lessee's operation is in session, for use of the common areas in
common with others entitled to use the common areas including without
limitation, District, and other lessees on the site, and their
respective employees, students, and invitees and other persons
authorized by District, subject to the terms and conditions of this
Lease, Without advance notice to Lessee (except with respect to
matters covered by subsection (a) of this paragraph) and without any
liability to Lessee in any respect, District may:
a. Establish and enforce reasonable rules and regulations concerning
the maintenance, management, use, and operation of the common areas;
b. Temporarily close any of the common areas for maintenance,
alteration, or improvement purposes;
c. Change the size, use, shape, nature, arrangement, and/or location
of any such common areas, so long as
6 January 20, 1997
<PAGE>
such change does not deprive Lessee of the substantial benefit and
enjoyment of the Premises;
d. Convert common areas to exclusive use areas, or convert exclusive
use areas to common areas, so long as such change does not deprive
Lessee of the substantial benefit and enjoyment of the Promises, if
any such conversions are made, District may at its discretion make an
appropriate adjustment in rentable area and in Lessee's pro@rata share
of rent,
5.2 Lessee shall, with thirty (30) days advance written permission from
District, be entitled to use of common areas on weekends and evenings
for functions consistent with use by other District lessees or
permittees, subject to approval by the Town of Corte Madera,
5.3 Existing playground equipment is the property of the District and may
be removed from the common area by District. Lessee may add new
playground equipment or modify existing playground equipment subject
to written approval by District.
5.4 n/a
5.5 The Lessee shares the use of existing parking facilities with other
District Lessees or Permittees. All parking shall be held in common
and no spaces shall be assigned for the exclusive use of any one
tenant.
5.6 Whenever special activities are held in the evenings or on weekends,
the lower parking lot shall be completely filled before the upper
parking lots behind the school are utilized. Lessee is obligated to
take such action to ensure compliance by Lessee's agents, employees,
students, or others participating in Lessee's operation.
5.7 No cars may park outside the designated parking areas, and all
employees, visitors, and other users of the site shall park in the
parking lots,
5.8 It is understood by all parties to this Lease that the Lessee has been
allocated up to thirteen (13) non-specified spaces for Lessee's use by
the Town of Corte Madera Planning Commission,
5.9 It is the sole responsibility of the Lessee to limit Lessee's parking
use to those allocated number of
9 January 20, 1997
<PAGE>
spaces and to comply with the traffic and safety requirements outlined
in the Town of Corte Madera Use Permit.
5.10 District shall maintain the parking areas, playing field, landscaping,
asphalt, irrigation system, and other school grounds in at least as
good condition, subject to change in seasonal condition, as at the
beginning of the term of the Lease.
5.11 Carpooling shall be encouraged whenever possible.
6. BATHROOMS
---------
6.1 Lessee shall have the use of bathrooms in Omega #1 Of Omega building,
-----------------
7. PERMITS AND APPROVALS
---------------------
7.1 Lessee shall obtain all necessary permits and approvals from
appropriate governmental agencies prior to occupancy. Lessee is solely
responsible for complying with and maintaining all permits and
approvals such as the conditional use permit from the Town of Corte
Madera. Failure to maintain such permits and approvals is not grounds
for termination of the Lease by Lessee and shall constitute a material
default by Lessee of Lessee's obligations hereunder.
7.2 The conditional use permit from the Town of Corte Madera is attached
hereto as Appendix B and by this reference made a part hereof.
8. ORDINANCES AND STATUTES
-----------------------
Lessee, at Lessee's expense, shall comply with all statutes, ordinances and
requirements of all Local, State and Federal authorities now in force, or
which may hereafter be in force, pertaining to the Premises or the common
area, whether necessitated or occasioned by compliance or results, of
Lessee's use. The commencement or pendency of any Local, State or Federal
court abatement proceeding affecting the use of the Premises shall, at the
option of District, be deemed a breach hereof. Should any such event occur,
District at its sole discretion may terminate this Lease.
8 January 20, 1997
<PAGE>
9. ASSIGNMENT AND SUBLETTING
-------------------------
Lessee will neither assign this Lease in whole or in part nor sublease all
or part of the Premises. to any party without first having obtained the
written consent of District, which shall not be unreasonably denied. Any
such assignment or sublet without consent shall be void and may, at the
option of District, terminate this Lease.
10. UTILITIES
---------
10.1 Lessee shall pay for all utilities served to the leased Premises.
10.2 The electric utility cost shall be pro-rated among the users of the
buildings known as omega based on the percentage of square footage of
building space in use by Lessee, from time to time, regardless of
other factors which might otherwise alter the amount of utility
charge.
10.3 The water cost shall be pro-rated among all the users at Granada
School based on the percentage of square footage of the building
space in use by Lessee, from time to time, regardless of other
factors which might otherwise alter the amount of utility charge.
10.4 The gas utility cost shall be pro-rated among the users of the
buildings known as Omega based on the percentage of square footage of
-----
the building space in use by Lessee, from time to time, regardless of
other factors which might otherwise alter the amount of utility
charge.
10.5 District shall make appropriate arrangements for the continuation of
the security alarm system for the Premises and shall bill the lessee
for the cost thereof, from time to time, including any additional
charges for false security alarm calls and Lessee alarm permit.
Lessee shall be responsible for the cost of any District approved
structural changes to the security alarm system required by the
Lessee.
10.6 Lessee shall arrange and be responsible for Lessee's own refuse
service.
9 January 20, 1997
<PAGE>
10.7 District shall bill Lessee monthly for utility and security alarm
system costs. Payment is due upon receipt of the invoice.
10.8 A late charge of five percent (5%) of any delinquent payment shall be
charged for any utility, security alarm, or other charges not
received by the District within twenty-five (25) days after Lessee's
receipt of the invoice. The late charge shall be payable with the
following month's rent.
10.9 Dist rict reserves the right to convert utility billing to a direct
Lessee billing with thirty (30) days written notice.
10.10 District reserves the right to transfer responsibility for the
security alarm system from the District to the Lessee with thirty
(30) days written notice.
10.11 District is not responsible for the loss of security services if
coverage of the Premises is rescinded due to Lessee abuse of the
system.
11. MAINTENANCE AND REPAIRS OF THE PREMISES
---------------------------------------
11.1 At the commencement of the term, Lessee shall accept the building,
Premises, improvements, and any equipment in their existing condition
and state of repair. Lessee agrees that no statements,
representations, or warranties, express or implied, have been made by
or on behalf of District in respect thereto except as contained in
the provisions of this Lease, District shall in no event be liable
for any latent defects.
11.2 Lessee, or Lessee's designated representative, shall at Lessee's own
expense and at all times, preserve and keep the Premises in good
working order and in clean and safe condition, including but not
limited to, custodial services, exterior window glass, bathrooms,
electrical wirings plumbing, sewer lines, carpets, walls, woodwork,
replacement of light bulbs and any other system or equipment upon the
Premises and shall surrender the same, at termination hereof, in as
good condition as received, normal wear and tear excepted, Lessee
shall preserve and keep in good condition such portions adjacent to
the Premises such as sidewalks, shrubbery, and planter boxes. Neither
Lessee, nor Lessee's agents, employees, students or invitees shall
10 January 20, 1997
<PAGE>
misuse the common areas or cause any damage to or destruction of the
common areas,
11.3 District shall be responsible for maintenance of and repairs to the
following structural elements of and systems serving the leased
Premises: roof, walls, foundation, doors, skylights, currently
installed plumbing system, currently installed sewer system,
currently installed electrical system, boiler rooms, currently
installed hot water heaters, currently installed sprinkler systems,
heating and ventilating system, and exterior of the Premises;
provided, however, Lessee shall be responsible for maintenance and
repairs necessitated by damage caused by agents, employees, students,
or others participating in the Lessee's operation, or by the failure
of Lessee to perform or comply with any terms or conditions in this
Lease, which damage will be repaired by District at Lessee's expense.
11.4 Lessee shall report actual and potential maintenance problems to
District.
11.5 Lessee shall provide 2A10BC fire extinguishers for the promises in a
number equal to or greater than the number recommended by the Town of
Corte Madera fire marshal. Lessee shall repair, service and maintain
these fire extinguishers at Lessee's expense.
12. ALTERATIONS AND IMPROVEMENTS
----------------------------
12.1 Lessee shall not make, or cause to be made, any improvement,
alteration, addition or physical change of whatever nature, to the
leased Premises, the building or the grounds without first submitting
a written request to so act, and receiving written approval thereof
from District. District will not unreasonably deny permission for
these improvements, alterations, additions, or physical changes. The
cost of any such improvements, alterations, additions, or physical
changes shall be borne by Lessee, and except as otherwise agreed by
District, the same will become the property of District. Such plans
shall be subject to review by District's consulting architect at
Lessee's expense. Requests for minor changes such as installing
picture hangers need not be submitted for approval. Requests for
interior or exterior painting, including
11 January 20, 1997
<PAGE>
color schemes must be submitted for District review and approval.
12.2 If Town, County, State or Federal requirements necessitate Lessee's
improvements or alterations as a result of Lessee's use, the cost
thereof shall be paid by Lessee.
12.3 Prior to the commencement of any substantial repair, improvement,
alteration, addition, or physical change by Lessee, District may post
appropriate notices to avid any liability for liens.
12.4 Subject to Lessee's rights in paragraph 22, all improvements,
alterations, additions, and physical changes, whether temporary or
permanent in character, made in or upon the Promises by Lessee,
except as otherwise agreed by District, will immediately become
District's property and at the end of the Lease will remain on the
Promises without compensation to Lessee. By notice given to Lessee no
less than sixty (60) days prior to the end of this Lease, District
may require that any improvements, alterations, additions or physical
changes made in or upon the Premises be removed by Lessee. In that
event Lessee will remove such improvements, alterations, additions,
or physical changes at Lessee's sole expense and will restore the
Premises to the condition in which they were before such
improvements, alterations, additions and physical changes were made,
reasonable wear and tear excepted.
13. ENTRY AND INSPECTION
--------------------
13.1 District, or District's duly authorized representative or agents, may
enter upon said Premises at any and all reasonable times during the
term of this Lease for the purpose of determining whether Lessee is
complying with the terms and conditions hereof, or for any other
purpose incidental to the rights of District. Lessee shall cooperate
with District and shall permit reasonable entry on the Premises for
showing the property to prospective purchasers or lessees.
13.2 Lessee agrees that at any time after ninety (90) days prior to the
expiration of the term of this Lease, District may place on Premises
any usual or ordinary "To Let" or "To Lease" or "For Sale" sign.
12 January 20, 1997
<PAGE>
14. INSURANCE
---------
14.1 a. Lessee agrees to maintain during the period of this Lessee's at
Lessees sole cost and expense, a public liability and property damage
insurance policy on Lessee's operations in a sun of not less than one
million dollars ($1,000,000.00) per occurrence or any aggregate; and
to maintain fire legal liability insurance in the amount of full
replacement cost of the leased Promises. Fire legal liability shall
be not less than two hundred nine-three, thousand dollars
----------------------------------------
($293,000,000). Lessee's policy shall name "Reed Union School
--------------
District of Marin County, State of California", as "Additional
Insured", it is further agreed that Lessee's liability policy shall
be endorsed to be primary insurance as respects to Lessee's operation
and any coverage maintained by District shall be excess to the
coverage required to be provided by the Lessee and not contributive
to Lessee's insurance.
b. Prior to occupancy Lessee shall provide District with a
Certificate of Insurance or copies of insurance showing compliance
with the above terms. Lessee may satisfy such insurance requirements
by endorsement to existing policies.
c. Lessee shall obtain the written agreement of the insurers to
notify the District in writing thirty (30) days prior to any
cancellations or termination of insurance or material change of
coverage.
d. The failure of Lessee to maintain insurance coverage in the amount
specified and/or cancellation or termination of the Lessee's
insurance shall constitute breach of this Lease by Lessee.
14.2 Lessee shall not sell, or permit to be kept, used or sold, in or
about the leased Premises, any article which may be prohibited by the
standard form of fire insurance policies. In the event that Lessee's
operations cause an increase in District*s fire insurance, Lessee
shall pay the increased cost thereof or remove the prohibited
article(s).
14.3 To the maximum extent permitted by insurance policies which may be
owned by District or Lessee, Lessee and District, may, for the
benefit of each other, waive any and all rights of subrogation which
might otherwise exist.
13 January 20, 1997
<PAGE>
14.4 Lessee shall be responsible for insuring Lessees personal belongings,
inventory, leasehold improvements and trade fixtures. District shall
not be responsible for damage to or loss of Lessee's personal
property, inventory, leasehold improvements or trade fixtures stored
or used on the Premises.
14.5 Lessee, in compliance with the workers' compensation law of the state
of California, shall carry a policy of workers, compensation
insurance. Such insurance shall be maintained in full force at all
times during the Lease term and proof of said insurance shall be
available to District upon request.
15. HOLD HARMLESS
-------------
Lessee agrees to indemnify, defend, and hold harmless District, District's
board members, officers, agents, directors, and employees from any loss,
damage, liability, injury, cause of action, claims, or suits for damages
caused by, arising out of, or in any way connected with Lessee's operations
on the leased Premises.
16. COOPERATION
-----------
16.1 It is understood and recognized by Lessee that the property is being
used by District and another lessee(s) and that it will be necessary
to cooperate with said users on such matters as use of the parking
areas, play areas, policing of common areas, custodial services,
security measures, cleaning of bathrooms, etc. Lessee shall cooperate
with the other users in reaching amicable arrangements concerning
such matters. District agrees to serve as facilitator in discussions
of such matters with the other users where District's assistance is
reasonably requested by Lessee.
16.2 Lessee shall not permit or suffer anything to be done which will
interfere with the rights of another user or annoy another user by
unreasonable noise, nuisance, smell, or otherwise which will be
noxious or offensive to another user.
14 January 20, 1997
<PAGE>
17. TAX AND FEES
------------
Lessee shall pay any and all personal property taxes including any nonuse
fees that may be assessed against District by the State of California,
possessory interest fees or other assessments and charges required as a
result of Lessee's operation or use of the Premises.
18. DISTRICT'S RIGHTS
-----------------
18.1 If Lessee fails to pay when due amounts payable under this Lease or
to perform any of Lessee's other obligations under this Lease within
the time permitted for performance, then District, after ten (10)
days' prior written notice to Lessee (or, in case of any emergency,
upon such notice or without notice, as may be reasonable under the
circumstances) and without waiving any of District's rights under
this Lease, may (but will not be required to) pay such amount or
perform such obligation.
18.2 All amounts so paid by District and all costs and expenses incurred
by District in connection with the performance of any such
obligations (together with interest at the discount rate of the
Federal Reserve Bank of San Francisco plus 1% per annum from the date
of District's payment of such amount or incurring of each such cost
or expense until the date of full repayment by Lessee) will be
payable by Lessee to District on demand, In the proof of any damages
which District may claim against Lessee arising out of Lessee's
failure to maintain insurance, District will not be limited to the
amount of the unpaid insurance premium but rather District will also
be entitled to recover as damages for such breach, the amount of any
uninsured loss (to the extent of any deficiency in the insurance
required by the provisions of this Lease), damages, costs and
expenses of suit, including attorney's fees, arising out of damage
to, or destruction of, the Premises occurring during any period for
which Lessee has failed to provide such insurance.
19. DEFAULT
-------
19.1 The following occurrences are "events of default":
a. Lessee fails to pay rent, and such default continues for three (3)
days after notice from District;
15 January 20, 1997
<PAGE>
b. Lessee vacates or abandons the Premises;
c. This Lease or the Premises or any part of the Premises are taken upon
execution or by other process of law directed against Lessee, or are taken
upon or subjected to any attachment by any creditor of Lessee or claimant
against Lessee, and such attachment is not discharged within fifteen (15)
days after its levy;
d. Lessee files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United
States or under any insolvency act of any state, or is dissolved, or makes
an assignment for the benefit of creditors;
e. Involuntary proceedings under any such bankruptcy laws or insolvency
act for the dissolution of Lessee are instituted against Lessee, or a
receiver or trustee is appointed for all or substantially all of Lessee's
property, and such proceeding is not dismissed or such receivership or
trusteeship is not vacated within sixty (60) days after institution or
appointment;
f. Lessee fails to take possession of the Premises on the commencement
date of the term; or
g. Lessee breaches any of the other agreements, terms, covenants, or
conditions which this Lease requires Lessee to perform, and such breach
continues for a period of thirty (30) days after notice by District to
Lessee, unless Lessee's breach endangers the safety or welfare of others as
determined by District, in which case Lessee must cure the breach
immediately after notice by District.
19.2 If any one or more events of default set forth in Paragraph 19,1
occurs, then District nay, at District's election, either:
a. Continue this Lease in full force and effect and not terminate
Lessee's right to possession of the Premises, in which event, District
shall have the right to enforce any rights and remedies granted by the
Lease or by law against Lessee, including, without limitation, the right to
collect when due rent and other sums payable hereunder, provided that after
the occurrence of the act of default and for so long as District does not
terminate Lessee's right to possession of the Premises, Lessee shall have
the right to assign or sublet this Lease upon the written consent of
District. in no event shall District's acts of maintenance or preservation
of the Premises, efforts to relet, or obtaining the appointment of a
receiver to protect the interest of District under the Lease be deemed to
constitute termination; or
b. Give Lessee written notice of District's intention to terminate this
Lease on the date of such notice or on any
16 January 20, 1997
<PAGE>
later date specified in such notice, and, on the date specified in such
notice, Lessee's right to possession of the Premises will cease and the
Lease will he terminated. If this Lease is terminated by written notice, or
by operation of law, District may recover from Lessee, the following: (b1)
The worth at the time of award of the unpaid rent and other sums due
hereunder which had been earned at the time of termination of this Lease;
plus, (b2) The worth at the time of the award of the amount of the rent and
other sums which would have been due hereunder had the Lease not been
terminated, from the date of termination to the date of the award, less the
sum of such rent and other sums which Lessee proves reasonably could have
been avoided; plus, (b3) The worth at the time of award of the amount by
which the unpaid rent and other sums due hereunder for the balance of the
term of this Lease after the time of award exceeds the amount of the rent
loss that Lessee proves could be reasonably avoided; plus, (b4) Any other
amount, including attorney's fees and court costs, necessary to compensate
District for all the detriment proximately caused by Lessees failure to
perform Lessee"s obligations under this Lease or which in the ordinary
course of things would be likely to result from such failure. The "worth at
the time of award" of the amount referred to in subparagraphs 19.2 (b1) and
19.2 (b2) above is computed by allowing interest at the rate of ten percent
(10%) per annum from the date such unpaid rent becomes due. The "worth at
the time of award" of the amount referred to in subparagraph 19.2 (b3)
above is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%) per annum, if this Lease is terminated, District may re-enter the
Premises, remove Lessee's property therefrom to any place of storage or any
dumping ground at Lessee's risk and expense, eject all persons from the
Premises, and recover damages from Lessee as hereinafter provided, Any such
re-entry shall be permitted by Lessee without hindrance, and District shall
not be liable thereby in damages for such re-entry or be guilty of trespass
or forcible entry. Such termination shall cancel all Lessee's options, if
any.
20. DAMAGE AND DESTRUCTION OF PREMISES
----------------------------------
20.1 a. If the Premises or the building are damaged by fire or other
insured casualty, District will give Lessee notice of the time which
will be needed to repair such damage as determined by District in its
sole discretion, and the election (if any) which District has made
according to this paragraph. Such notice will
17 January 20, 1997
<PAGE>
be given before the thirtieth (30th) day (the "notice date") after
the fire or other insured casualty.
b. If the Premises or the building is damaged by fire or other
insured casualty to an extent which can be repaired within sixty (60)
days after the commencement of repair, as determined by District,
District will repair the damage within sixty (60) days after the
notice date. In that event this Lease will continue in full force and
effect except that rent will be abated on a pro-rated basis from the
date of the fire or other insured casualty until the date of the
completion of such repairs (the "repair period") based on the
rentable area of the Premises of whose use Lessee is deprived during
the repair period.
c. If the Premises or the building are damaged by fire or other
insured casualty to an extent which cannot be repaired within sixty
(60) days after the commencement of repair but can be repaired within
one hundred twenty (120) days after the commencement of repair, then,
at District's option, District will repair such damage within one
hundred twenty (120) days after the notice date. In that event rent
will be abated on a pro-rated basis during the repair period based on
the rentable area of the Premises of whose use Lessee is deprived
during the repair period. If District does not elect to repair such
damage, this Lease will terminate on the notice date.
d. If the Premises or the building are damaged by fire or other
insured casualty to an extent which cannot be repaired within one
hundred twenty (120) days after the commencement of repair, as
determined by District, then (a) District may cancel this Lease as of
the date of such damage by written notice given to Lessee on or
before the notice date, or (b) Lessee may cancel this Lease as of the
date of such damage by written notice given to District within ten
(10) days after District's delivery of a notice that the repairs
cannot be made within such one hundred twenty (120) day period.
e. If neither District nor Lessee so elects to cancel this Lease,
District will repair the building and Premises and the rent will be
abated on a pro-rated basis during the repair period based on the
rentable area of the Premises of whose use Lessee is deprived during
the repair period.
f. The repair will be deemed complete upon notice from District.
g. District will not be obligated to repair any leasehold
improvements made by Lessees
18 January 20, 1997
<PAGE>
20.2 If the Premises or the building are damaged by any uninsured
casualty, District will have the option to repair such damage or
cancel this Lease as of the date of such casualty by written notice
to Lessee on or before the notice date.
20.3 If any such damage by fire or other casualty is the result of the
willful conduct or negligence or failure to act of Lessee, Lessee's
agents, contractors, employees, or invitees, there will be no
abatement of rent as otherwise provided for in this paragraph 20.
21. HOLDING OVER
------------
Any holdover after the expiration of this Lease, with the written consent
of District, shall be construed as a month-to-month tenancy at a rental of
$3,400.00. per month, otherwise in accordance with the terms hereof, as
--------
applicable. Any holdover after the expiration of this Lease, without the
written consent of District, shall be construed as a month-to-month tenancy
at a rental of $4,500.00 per month, otherwise in accordance with the terms
--------
hereof, as applicable.
22. SURRENDER OF PREMISES
---------------------
At the end of this Lease, Lessee agrees to surrender the Premises to
District in good order and condition, reasonable wear and tear excepted. If
Lessee is not then in default, Lessee may remove from the Premises any
trade fixtures, equipment, and movable furniture placed in the Premises by
Lessee, whether or not such trade fixtures or equipment are fastened to the
Premises or the building, Lessee will not remove any trade fixtures or
equipment without District's prior written consent it such trade fixtures
or equipment are used in the operation of the building or if the removal of
such fixtures or equipment will impair the structure of the Premises or the
building. Whether or not Lessee is then in default, Lessee will remove such
improvements, alterations, additions, trade fixtures, equipment, and
furniture as District has requested in accordance with Paragraph 12.4.
Lessee will fully repair any damage occasioned by the removal of any
improvements, alterations, additions, trade fixtures, equipment, and
furniture. All improvements, alterations, additions, trade fixtures,
equipment, and furniture not so removed will conclusively be deemed to have
been abandoned by Lessee and may be appropriated, sold, stored, destroyed,
or otherwise disposed of by District without notice to Lessee or to any
other person and without obligation to account for
19 January 20, 1997
<PAGE>
theme Lessee will pay District all expenses incurred in connection with
District's disposition of such property, including without limitation the
cost of repairing any damage to the building or Premises caused by removal
of such property. Lessee's obligation to observe and perform this covenant
will survive the end of this Lease.
23. SECURITY DEPOSIT
----------------
The security deposit shall secure the performance of the Lessee's
obligations hereunder. If the security deposit is not sufficient to take
care of necessary repair, Lessee shall be responsible for additional costs
required, payable within thirty (30) days of notification by District, or
within ninety (90) days of termination, whichever is later. In the event of
default in payment of rent, District may use the security deposit and last
month's rent to cover all monies owed it, including but not limited to, the
non-payment of rents, late payments, fees, utilities, and attorney's fees,
Use of such deposits shall not prevent District from instituting legal
proceedings for unlawful detainer.
24. DEPOSIT REFUND
--------------
Any balance remaining upon termination shall be returned to Lessee. Lessee
shall not have the right to apply the security deposit in payment of rent,
The balance of all deposits shall be refunded within thirty (30) days from
date possession is delivered to District together with a statement showing
any charges made against such deposits by District,
25. ATTORNEY'S FEES
---------------
in case suit should be brought for recovery of the Premises, or for any sun
due hereunder, or because of any act or omission which may arise out of the
possession of the Promises, by either party, the prevailing party shall be
entitled to all costs incurred in connection with such action, including a
reasonable attorney's fee.
26. SIGNS
-----
District consents to the erection of a sign designating California Graduate
-------------------
School of Psychology which shall be in accordance with the approved Master
--------------------
Sign Program, It is understood and acknowledged by both parties that the
Town of Corte Madera is the ultimate authority in the approval or
20 January 20, 1997
<PAGE>
disapproval of signs. At Lessee's expense, Lessee will purchase, install
and maintain the permitted sign and will, at the end of the Lease, remove
the sign and repair any damage caused by removal, District may remove all
unpermitted signs without notice to Lessee at Lessee's expense.
27. LOCKS
-----
In the event Lessee changes locks used in the Premises, replacement locks
shall be of equal or better quality than the looks replaced. Lessee shall
provide District copies of all new keys and codes of digital locks and will
turn over all existing keys to District at the termination of the Lease.
28. MAILBOX
-------
In the event that Lessee desires a mailbox on the site, Lessee shall be
responsible for making all the necessary arrangements with the United
States Postal Service.
29. TOBACCO-FREE
------------
Ample research has demonstrated the health hazards associated with the use
of tobacco products, including smoking and the breathing of second-hand
smoke. In the best interests of students, staff, and the general public,
District prohibits the use of tobacco products at all times on District
property and in District vehicles. This prohibition applies to all staff,
students, tenants, visitors, and other persons at any school, school
grounds, or school-sponsored activity or athletic event. It applies to any
activity on any property owned, leased, or rented by or from the District.
30. SUPERVISION OF STUDENTS
-----------------------
30.1 Lessee shall be responsible for supervising and controlling Lessee"s
students" behavior in the play area, on the turfed playing field, in
crossing the driveway and parking lots. and on the site at all times.
Each of Lessee's students shall be under the direct supervision of
Lessee at all times student is present on District property.
30.2 n/a
30.3 Lessee shall be responsible for the health, safety, and welfare of
Lessee's students on the site.
21 January 20, 1997
<PAGE>
31. SURPLUS SCHOOL EQUIPMENT
------------------------
Lessee shall have the permission of District to use District's surplus
school equipment (a current inventory to be kept in the Lessee's file) with
the understanding that the surplus equipment is the property of District,
and that in the event a piece of equipment is damaged or destroyed by
Lessee or Lessee's agents, employees, students, or others participating in
Lessee's operation, normal wear and tear excepted, Lessee will pay the
repair or replacement cost. District may reclaim its surplus school
equipment for its own use with 30 days advance written notice, Lessee shall
accept the surplus equipment in its existing condition and state of repair.
District shall in no event be liable for any defects in the surplus
equipment or for any injuries or damages to Lessee or Lessee's agents,
employees, students or other participants in Lessee"s operation that result
from use of the surplus equipment.
32. NOTICES
-------
Any notice which either party may or is required to give, shall be in
writing and shall be delivered personally or by mailing by registered or
certified mail to Lessee at the Premises or District at the address shown
in Paragraph 2.4, or at such other place as may be designated by the
parties from time to time. Notice sent by registered or certified mail in
accordance with this paragraph shall be deemed delivered seventy-two (72)
hours from the time of mailing.
33. HEIRS, ASSIGNS, SUCCESSORS
--------------------------
This Lease is binding upon and inures to the benefit of heirs, assigns, and
successors in interest to the parties,
34. TIME
----
Time is of the essence of this Lease.
35. WAIVER
------
No failure of District to enforce any term hereof shall be deemed to be a
waiver.
22 January 20, 1997
<PAGE>
36. HEADINGS
--------
The headings or titles to the paragraphs of this Lease are not part of this
Lease and shall have no effect upon its construction or interpretation.
37. PROVISIONS
----------
The provisions of this Lease Agreement are declared to be severable, and if
any provision herein is invalidated by any court, the remaining provisions
shall not be affected thereby and shall be fully enforceable, unless such
enforcement would be unreasonable or inequitable under all the
circumstances or would frustrate the purposes of the Agreement.
38. AUTHORITY
---------
If Lessee signs this Lease as a corporation, each of the persons executing
this Lease on behalf of Lessee warrants to District that Lessee is a duly
authorized and existing corporation. that Lessee is qualified to do
business in the state of California, that Lessee has full right and
authority to enter into this Lease, and that each and every person signing
on behalf of Lessee is authorized to do so. Upon District's request, Lessee
will provide evidence satisfactory to District confirming these
representations.
39. GOVERNING LAW
-------------
This Lease Agreement shall be governed by and construed under the laws of
the State of California as applied to agreements among California
residents, made and to be performed entirely within the State of
California.
40. COUNTERPARTS
------------
This Lease Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one instrument.
ENTIRE AGREEMENT
- ----------------
This Lease Agreement constitutes the entire agreement of the parties in
respect to the subject matter hereof, and there are no oral agreements
between the parties. No changes in this Lease Agreement shall be made
except in writing and signed by both the District and the Lessee.
23 January 20, 1997
<PAGE>
APPROVED AND ADOPTED this 23rd day of January, 1997, by the Reed Union School
District Board of Trustees by following vote:
Ayes:
Nays:
Absent:
REED UNION SCHOOL DISTRICT:
/s/ Sheila Puckett
- ----------------------------------------------
By: Sheila Puckett
Secretary Board of Trustees
DATE: 1/23/97
-----------------------------------------
LESSEE:
/s/ Neil S. Kobrin
- ----------------------------------------------
By: Neil S. Kobrin, Ph.D., President
For: California Graduate School of Psychology
50 El Camino Drive
Corte Madera, CA 94925-2057
DATE: 1/21/97
-----------------------------------------
24 January 20, 1997
<PAGE>
EXHIBIT 10.10
TWO FIRST NATIONAL PLAZA
LEASE
LANDLORD:
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
AS TRUSTEE UNDER TRUST AGREEMENT DATED
OCTOBER 1, 1988 AND KNOWN AS TRUST NO. 106528-08
TENANT:
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
<PAGE>
LEASE
TWO FIRST NATIONAL PLAZA
<TABLE>
<CAPTION>
PAGE
<S> <C>
SCHEDULE............................................................. 1
1. LEASING AGREEMENT............................................ 3
2. RENT......................................................... 3
3. PREPARATION AND CONDITION OF PREMISES, POSSESSION
AND RETURN................................................... 10
4. BUILDING SERVICES............................................ 10
5. ALTERATIONS AND REPAIRS...................................... 13
6. USES OF DEMISED PREMISES..................................... 14
7. BUILDING RULES AND GOVERNMENTAL REGULATIONS.................. 15
8. CLAIMS; INSURANCE; LIABILITY................................. 15
9. FIRE AND OTHER CASUALTY...................................... 17
10. RIGHTS RESERVED TO THE LANDLORD.............................. 18
11. DEFAULT AND LANDLORD'S REMEDIES.............................. 21
12. HOLDOVER..................................................... 24
13. SUBORDINATION TO MORTGAGES, TRUST DEEDS AND
GROUND LEASES................................................ 25
14. ASSIGNMENT AND SUBLETTING BY TENANT.......................... 26
15. SALE BY LANDLORD............................................. 28
16. ESTOPPEL CERTIFICATE......................................... 28
17. SECURITY DEPOSIT............................................. 29
18. EXCUSE OF LANDLORD'S INABILITY TO PERFORM.................... 29
19 PERSONAL PROPERTY............................................ 29
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
20. NOTICES..................................................... 30
21. QUIET POSSESSION............................................ 30
22. REAL ESTATE BROKER.......................................... 30
23. CONDEMNATION................................................ 31
24. NAME OF BUILDING............................................ 31
25. AGENT FOR SERVICE OF PROCESS................................ 31
26. TELEPHONE RISER CABLES...................................... 32
27. HAZARDOUS SUBSTANCES........................................ 33
28. MISCELLANEOUS............................................... 5
</TABLE>
APPENDIX A - PLAN OF THE PREMISES
APPENDIX B - CLEANING SCHEDULE
APPENDIX C - RULES AND REGULATIONS
APPENDIX D - WORK LETTER AGREEMENT
APPENDIX E - FORM OF LETTER OF CREDIT
APPENDIX F - LANDLORD'S ASBESTOS ABATEMENT WORK
APPENDIX G - TENANT'S SIGN
APPENDIX H - EXAMPLE OF AMORTIZATION SCHEDULE FOR CONSTRUCTION LOAN
APPENDIX I - TENANT'S SPACE PLAN
RIDER
ii
<PAGE>
TWO FIRST NATIONAL PLAZA
------------------------
LEASE
-----
THIS LEASE (this "Lease") is made this 8th day of September, 1994
between AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, not personally but
as Trustee under a Trust Agreement, dated October 1, 1988, and known as Trust
No. 106528-08 (hereinafter referred to as "Landlord"), and the tenant named in
Item 1 of the Schedule (hereinafter referred to as "Tenant"). The term
"Building" when used herein refers to the land and building complex currently
known as "Two First National Plaza" situated at 20 South Clark Street in
Chicago, Cook County, Illinois. The term "Premises" or "demised premises" when
used herein refers to that part of the Building leased to Tenant pursuant to
this Lease.
The following Schedule (the "Schedule") is an integral part of this
Lease.
SCHEDULE
--------
<TABLE>
<S> <C>
1. Name of Tenant: American Schools of Professional Psychology, Inc., an
Illinois corporation
2. Floor(s) or room(s) of Premises:....................................................See Section 1 of Rider
3. Rentable square feet of Premises:...................................................................31,726
4. Tenant's use of Premises:...........................................................See Section 6 of Rider
5. Annual Base Rent: ..................................................................See Section 2 of Rider
6 Annual Base Rent per rentable square foot of Premises:..............................See Section 2 of Rider
7. Monthly Installments of Base Rent: .................................................See Section 2 of Rider
8. Tenant's Operating Proportionate Share: ............................................................9.0507%
9. Tenant's Tax Proportionate Share: ..................................................................9.0507%
10. Index Rent Percentage: .....................................................................Not Applicable
11. Security Deposit: $675,000.00, subject to adjustment pursuant to Section 17 hereof
12. Tenant's address for notice before
possession date: 220 South State Street, Chicago, Illinois 60604, Attention: Mr.
Robert Lullo
13. Tenant's Real Estate Broker used for
this Lease:........................................................................Julien J. Studley, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
14. Commencement Date:............................................................ March 26, 1995
15. Termination Date:............................................................. April 30, 2005
</TABLE>
2
<PAGE>
1. LEASING AGREEMENT. Landlord leases to Tenant, and Tenant leases from
-----------------
Landlord, the Premises outlined on the plan attached hereto and made a part
hereof as Appendix A and described on the Schedule, for the term set forth on
the Schedule unless sooner terminated or extended. In consideration whereof,
Landlord and Tenant covenant and agree as follows:
2. RENT.
----
A. Kinds. Tenant agrees to pay rent to Landlord at the office of the
-----
Building or at such other place as Landlord designates as hereinafter provided:
(1) Base Rent to be paid in monthly installments in advance on or
---------
before the first day of each month of the term of this Lease in the amount
set forth on the Schedule.
(2) Operating Adjustment Rent to cover the Tenant's Operating
-------------------------
Proportionate Share of Operating Costs for each Fiscal Year falling within
the term of this Lease. Tenant's Operating Adjustment Rent shall be equal
to the product of Tenant's Operating Proportionate Share multiplied by the
Operating Costs for such Fiscal Year. Operating Adjustment Rent shall be
paid monthly in advance in an estimated amount, as adjusted by Landlord
from time to time. Definitions of Fiscal Year, Operating Costs, Tenant's
Operating Proportionate Share and the method for billing and payment of
Operating Adjustment Rent are set forth in Paragraphs 2B and 2D.
(3) Tax Adjustment Rent to cover the Tenant's Tax Proportionate Share
-------------------
of Taxes for each Fiscal Year falling within the term of this Lease.
Tenant's Tax Adjustment Rent shall be equal to the product of Tenant's Tax
Proportionate Share multiplied by the Taxes for such Fiscal Year. Tax
Adjustment Rent shall be paid monthly in advance in an estimated amount, as
adjusted by Landlord from time to time. Definitions of Fiscal Year, Taxes,
Tenant's Tax Proportionate Share and the method for billing and payment of
Tax Adjustment Rent are set forth in Paragraphs 2B and 2D.
(4) Additional Rent consisting of all of the sums, liabilities,
---------------
obligations and other amounts (excepting Base Rent, Operating Adjustment
Rent, and Tax Adjustment Rent) which Tenant is required to pay or discharge
pursuant to this Lease, together with interest for late payment thereon,
all as hereinafter provided.
B. Payment of Adjustment Rent.
--------------------------
(1) Payment of Estimated Operating Adjustment Rent and Tax Adjustment
-----------------------------------------------------------------
Rent. Landlord shall estimate the Operating Costs and Taxes of the Building
----
from time to time each Fiscal Year. Such estimates may be revised by
Landlord whenever it obtains information relevant to making such estimates
more accurate. Such estimates will generally (but need not) be issued
after the beginning of a Fiscal Year and revised upon the determination of
the final real estate tax assessment or final real estate tax rate for the
Building.
If Landlord's estimate of Operating Costs in any Fiscal Year reflects
an increase in the Operating Costs for such Fiscal Year, upon notice from
Landlord and within ten days (10)
3
<PAGE>
after such notice, Tenant shall pay Landlord one-twelfth (1/12th) of
Tenant's Operating Proportionate Share of such estimated increase in such
costs for each month in such Fiscal Year to date of such payment minus
payments of estimated Operating Adjustment Rent previously paid for said
period. Thereafter on the first day of each month, Tenant shall pay
monthly until a new estimate of rent is applicable, one-twelfth (1/12th) of
Tenant's Operating Proportionate Share of the estimated increase in such
costs.
If Landlord's estimate of Taxes in any Fiscal Year reflects an
increase in the Taxes for such Fiscal Year, upon notice from Landlord and
within ten (10) days after such notice, Tenant shall pay Landlord one-
twelfth (1/12th) of Tenant's Tax Proportionate Share of such estimated
increase in such costs for each month in such Fiscal Year to date of such
payment minus payments of estimated Tax Adjustment Rent previously paid for
said period. Thereafter on the first day of each month, Tenant shall pay
monthly until a new estimate of rent is applicable, one-twelfth (1/12th) of
Tenant's Tax Proportionate Share of the estimated increase in such costs.
(2) Correction of Operating Adjustment Rent. Following the end of
---------------------------------------
each Fiscal Year, Landlord shall deliver to Tenant a report setting forth
the actual Operating Costs for such Fiscal Year and a statement of the
amount of Operating Adjustment Rent that Tenant has paid and is payable for
such Fiscal Year. On or before thirty (30) days after receipt of such
report, Tenant shall pay to Landlord the amount of Operating Adjustment
Rent due for such Fiscal Year (or a portion thereof if this Lease was not
in effect for the entire Fiscal Year) minus any payments made by Tenant for
such Fiscal Year. If Tenant's estimated payments of Operating Adjustment
Rent exceed the amount due Landlord for such Fiscal Year, Landlord shall
either refund any such amount to Tenant or apply any such amount as a
credit against Tenant's other obligations under this Lease.
(3) Correction of Tax Adjustment Rent. Following the end of each
---------------------------------
Fiscal Year, Landlord shall deliver to Tenant a report setting forth the
actual Taxes for such Fiscal Year and a statement of the amount of Tax
Adjustment Rent that Tenant has paid is payable for such Fiscal Year. On
or before thirty (30) days after receipt of such report, Tenant shall pay
to Landlord the amount of Tax Adjustment Rent due for such Fiscal Year (or
a portion thereof if this Lease was not in effect for the entire Fiscal
Year) minus any payments made for such Fiscal Year. If Tenant's estimated
payments of Tax Adjustment Rent exceed the amount due Landlord for such
Fiscal Year, Landlord shall either refund any such amount to Tenant or
apply any such amount as a credit against Tenant's other obligations under
this Lease.
D. Definitions.
-----------
(1) Taxes. "Taxes" shall mean any taxes levied upon the Building
-----
based upon the ownership, leasing, renting or operation of the Building.
Taxes include, without limitation, real estate taxes, personal property
taxes, sewer rents, water rents, assessments (special or otherwise),
transit taxes, any tax or excise on rent or any other tax (however
described) on account of rental received for use and occupancy of any or
all of the Building, whether any such taxes are imposed by the United
States, the State of Illinois, the county in which the
4
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Building is located or any local governmental municipality, authority or
agency, or any other political subdivision of any thereof. Taxes shall also
include all reasonable costs and expenses (including, without limitation,
legal fees and court costs) charged for the protest or the reduction of any
of the aforesaid taxes, whether such protest or reduction is ultimately
successful or not. If at any time during the term hereof, a tax or excise
on rents or income or other tax however described (herein called "Rent
Tax") is levied or assessed by the State of Illinois, or any political
subdivision thereof, on account of the rents hereunder or the interest of
Landlord (or Landlord's beneficiaries) under this Lease, and if such Rent
Tax is in lieu of or as substitute for, in whole or in part, real estate
taxes or other ad valorem taxes, such Rent Tax shall constitute and be
----------
included in Taxes, provided further, in no event shall Tenant be obligated
(a) to pay for any year any greater amount by way of such Rent Tax than
would have been payable by Tenant had the rentals paid to Landlord under
all Building leases (being the rentals upon which such taxes are imposed)
been the sole taxable income of Landlord (or Landlord's beneficiaries) for
the year in question or (b) to pay or to reimburse Landlord for any tax of
any kind assessed against Landlord (or Landlord's beneficiaries) on account
of any such Rent Tax having been reimbursed.
For the purpose of determining Taxes for any given Fiscal Year the
amount to be included for such Fiscal Year (a) from special assessments
payable in installments shall be the amount of the installments (and any
interest) due and payable during such Fiscal Year, (b) from all other Taxes
shall be the amount accrued, assessed or otherwise imposed for such Fiscal
Year without regard to when any such Taxes are payable, and (c) from any
adjustment to any Taxes by the taxing authority, when such adjustment has
resulted in a corresponding adjustment payment by or to Landlord, shall
constitute an adjustment to Taxes for the Fiscal Year during which such
adjustment is made or received by Landlord, as the case may be.
Taxes shall not include any net income, capital, stock, succession,
transfer, franchise, gift, estate or inheritance taxes.
(2) Operating Costs. "Operating Costs" shall mean any expenses, costs
---------------
and disbursements (other than Taxes) incurred by Landlord in connection
with the management, maintenance, operation and repair of all or any part
of the Building adjusted for vacancy as hereinafter provided. Operating
Costs shall not include (a) costs of alterations of tenant premises; (b)
costs of capital improvements (except as provided below); (c) depreciation
(except as provided below); (d) interest and principal payments on
mortgages (except interest on the cost of any capital improvements which
may be included in the definition of Operating Costs as hereinafter
provided) or any rental payments on any ground or other underlying leases
subject to which Landlord holds its interest in the Building (hereinafter,
referred to individually as a "ground lease" and collectively as "ground
leases"), and other debt costs, if any; (e) real estate brokers' leasing
commissions or compensations; (f) any cost or expenditure (or portion
thereof) for which Landlord is reimbursed, whether by insurance proceeds or
otherwise (Operating Adjustment Rent, and Tax Adjustment Rent, provided for
in any tenant leases are not reimbursements); (g) the cost of any kind of
service furnished to any other occupant of the Building which Landlord does
not make available to Tenant hereunder; (h) salaries and fringe benefits of
personnel above the level of Building Manager; (i) costs for after hours
HVAC service billed to other tenants of the Building; and (j) costs related
to the
5
<PAGE>
parking garage located adjacent to the Building. "Operating Costs" shall
include the amortization, at a market rate of interest as determined by
Landlord, of the costs of capital improvements (i) made for the purpose of
saving labor or otherwise reducing applicable Operating Costs or (ii) made
or installed pursuant to governmental requirement or insurance
requirements. The costs of capital improvements described in clause (i)
above shall be amortized over a period, as determined by Landlord in
accordance with generally accepted accounting principles equal to the
quotient obtained by dividing the costs of such capital improvements
divided by the annual costs savings generated by such capital improvements.
The costs of capital improvements described in clause (ii) above shall be
amortized over the reasonable useful life of such capital improvements.
"Operating Costs" shall also include, without limitation, any costs and
expenses incurred by Landlord in connection with the operation, maintenance
or repair of the pedestrian tunnels lying between the Building and the
property commonly known as "ONE FIRST NATIONAL PLAZA" including, without
limitation, any license or permit fee required by the City of Chicago or
any other governmental authority with respect to such tunnels.
If during all or any portion of any Fiscal Year the Building is not
fully rented and occupied, Landlord may elect to make an appropriate
adjustment of Operating Costs for such Fiscal Year, employing sound
accounting and management principles, to determine the Operating Costs that
would have been paid or incurred by Landlord had the Building been fully
rented and occupied for the entire Fiscal Year and the amount so determined
shall be deemed to have been the Operating Costs for such Fiscal Year.
Notwithstanding anything contained herein to the contrary, (a) the
provisions of this paragraph with respect to adjustment of Operating Costs
for vacancy shall apply only to Operating Costs which are variable and
which increase as occupancy in the Building increases and shall not apply
to any Operating Costs which do not vary with the amount of occupancy in
the Building and (b) no adjustment to Operating Costs pursuant to this
paragraph shall result in profit for Landlord.
Landlord maintains its records on an accrual accounting basis rather
than a cash accounting basis for Operating Cost purposes, and therefore
Operating Costs shall be deemed to have been paid when such expenses have
accrued. Any adjustment of an item of Operating Costs included in a
particular Fiscal Year which results in a corresponding adjustment payment
by or to Landlord shall constitute an adjustment to Operating Costs during
the Fiscal Year when such adjustment is made.
(4) Fiscal Year. "Fiscal Year" means each twelve (12) month period
-----------
(or portion thereof) which Landlord may from time to time select as the
fiscal year of the Building.
(5) Tenant's Operating Proportionate Share. "Tenant's Operating
--------------------------------------
Proportionate Share" shall mean the percentage set forth as Item 8 on the
Schedule.
(6) Tenant's Tax Proportionate Share. "Tenant's Tax Proportionate
--------------------------------
Share" shall mean the percentage set forth as Item 9 on the Schedule.
E. Rules of Interpretation and Computation
of Base Rent and Rent Adjustments.
---------------------------------
6
<PAGE>
(1) If this Lease commences or ends on other than the first day or
last day of a month, respectively, the rent for the month in which this
Lease so begins or ends shall be prorated. The rent due for any such month
shall be a sum equal to the total of the Base Rent, Operating Adjustment
Rent and Tax Adjustment Rent payable for a full month multiplied by a
fraction, the numerator of which is the number of days in the month in
which the Lease was in effect and the denominator of which is the total
number of days in the month. With respect to any Fiscal Year which does
not fall entirely within the term of this Lease, Tenant shall only be
obligated to pay a prorata share of Operating Adjustment Rent and Tax
Adjustment Rent based upon the number of days of the term of this Lease
falling within such Fiscal Year.
(2) All rent shall be paid to Landlord without abatement, deduction or
offset of any kind at the office of Landlord in the Building or to such
other person or place as Landlord may from time to time designate in
writing. The covenants to pay rent shall be independent of any other
covenant.
(3) Any sum due from Tenant to Landlord not paid when due shall bear
interest from the date due until the date paid at the annual rate of two
(2) percentage points above the rate then most recently announced by
Citibank, N.A., New York, New York, or its successor, as its corporate base
lending rate, as such corporate base lending rate may change from time to
time during this Lease. The payment of such interest shall not excuse or
cure any default of Tenant under this Lease.
(4) If Tenant is in Default of any of its non-monetary obligations
under this Lease or in default of any of its monetary obligations under
this Lease, Tenant shall not be entitled to any refund of any sum which may
otherwise be due it by application of any provision of this Lease until any
and all Tenant's defaults of this Lease are cured by Tenant.
(5) If changes are made to this Lease or the Building changing the
number of rentable square feet contained in the Premises or in the
Building, Tenant's Operating Proportionate Share and Tenant's Tax
Proportionate Share shall be appropriately adjusted and the computations of
rent shall be appropriately adjusted so as to take into account the
different Tenant's Operating Proportionate Share figures and different
Tenant's Tax Proportionate Share figures applicable during each portion of
such Fiscal Year.
(6) The annual statement of actual Operating Costs and Taxes to be
furnished by Landlord under this Section 2 shall be prepared in accordance
with generally accepted accounting principles consistently applied.
Failure by Landlord to submit such a statement shall not prejudice
Landlord's right to collect any Rent that is due. In the event of any
dispute as to any Operating Adjustment Rent or Tax Adjustment Rent, Tenant
shall have the right to inspect Landlord's accounting records relative to
Operating Costs and Taxes at Landlord's accounting office during normal
business hours at any time within sixty (60) days following the furnishing
by Landlord to Tenant of such statement. Unless Tenant shall take written
exception of any item in any such statement within such sixty (60) day
period, such statement shall be considered as final and accepted by Tenant.
7
<PAGE>
(7) In the event of the termination of this Lease by expiration of
the stated term or for any other cause or reason whatsoever prior to the
determination of Operating Adjustment Rent, Tax Adjustment Rent and
Additional Rent, Tenant's agreement to pay any such sums shall survive
termination of the Lease and Tenant shall pay any amount due to Landlord
within fifteen (15) days after being billed therefor. In the event of the
termination of this Lease by expiration of the stated term or for any other
cause or reason whatsoever, except default by Tenant of any of the terms or
provisions of this Lease, prior to the determination of Operating
Adjustment Rent, or Tax Adjustment Rent, as hereinabove set forth,
Landlord's agreement to refund any excess Tenant's estimates paid by Tenant
over the Operating Adjustment Rent, or Tax Adjustment Rent, up to the time
of termination shall survive termination of the Lease and Landlord shall
pay the amount due to Tenant within fifteen (15) days of Landlord's
determination of such amount.
(8) No adjustment to Operating Adjustment Rent or Tax Adjustment Rent
by virtue of the operation of the rent adjustment provisions under this
Section 2, shall result in the payment by Tenant in any Fiscal Year of less
than the Base Rent shown on the Schedule.
3. PREPARATION AND CONDITION OF PREMISES, POSSESSION AND RETURN. Except
------------------------------------------------------------
to the extent set forth in the Work Letter, if any, attached hereto and made a
part hereof as Appendix D (the "Work Letter"), Landlord is leasing the Premises
"as is" without any representations or warranties, and Tenant hereby
acknowledges that except to the extent set forth in the Work Letter, it is
leasing the Premises "as is" without representation or warranty. If so
indicated in the Work Letter, Landlord shall cause the premises to be completed
in accordance with the plans, specifications, and agreements and on the terms,
conditions and provisions as provided. However, the failure of Landlord to
deliver possession of the Premises on the date set forth in Item 14 of the
Schedule as the Commencement Date shall not subject Landlord to any liability or
otherwise affect the validity of this Lease or the obligations of Tenant
hereunder. Possession by Tenant before completion of said work by Landlord
shall not relieve Landlord from completing or causing the completion of said
work in accordance with the requirements of this Lease.
During the term of this Lease, Tenant shall maintain the Premises in as
good condition as when Tenant took possession, or as when completed after
possession (loss or damage caused by action of the elements, Acts of God and the
public enemy, ordinary wear and fire and other casualty insured against by
Landlord excepted), failing which Landlord may but need not restore the Premises
to such good condition and Tenant shall pay the cost thereof. At the
termination of this Lease or at the termination of Tenant's right to possession
without termination of this Lease, Tenant shall return the Premises to Landlord
in good condition as described in the sentence next above and subject to
provisions of Section 5D of this Lease.
4. BUILDING SERVICES.
-----------------
A. Landlord agrees to furnish to the Tenant without charge except for
electricity for lights and outlets and as otherwise specifically provided
herein, as follows:
(1) Heat. During reasonable hours (8:00 a.m. to 6:00 p.m. Monday
----
through Friday and 8:00 a.m. to 1:00 p.m. on Saturdays) of generally
recognized business days, as
8
<PAGE>
reasonably determined by Landlord, for comfortable occupancy of the demised
premises by Tenant; Tenant agrees to keep and cause to be kept closed all
windows in the demised premises and at all times to cooperate fully with
the Landlord in the operation of the heating system and to abide by all
reasonable regulations and requirements which Landlord may prescribe to
permit the proper functioning and protection of the heating system.
Landlord reserves the right to stop the heating system when necessary by
reason of accident or emergency or for repairs, alterations, replacements
or improvements, which in the judgment of the Landlord are desirable or
necessary, until said repairs, alterations, replacements or improvements
shall have been completed. Landlord shall have no responsibility or
liability for failure to supply heating when prevented from so doing by any
cause beyond Landlord's reasonable control or by laws, orders or
regulations of any Federal, State, County or Municipal authorities and
Tenant shall be entitled to no diminution or abatement of rent by reason of
the stoppage of such heating for any of the aforesaid reasons whatsoever
nor shall the same in any way affect the obligation of Tenant to perform
and fulfill its covenants under this Lease. Landlord agrees to make any
repairs to the heating system promptly and with due diligence.
(2) Air Conditioning. Landlord shall operate an air conditioning
----------------
system in the Premises on generally recognized business days during
generally recognized business hours (8:00 a.m. to 6:00 p.m. on Monday
through Friday and 8:00 a.m. to 1:00 p.m. on Saturdays) in accordance with
rules and regulations promulgated by Landlord, as may, in Landlord's
judgment, be reasonably required for comfortable occupancy of the demised
premises by Tenant. Tenant agrees to keep and cause to be kept closed all
windows in the demised premises and at all times to cooperate fully with
the Landlord in the operation of said system and to abide by all reasonable
regulations and requirements which Landlord may prescribe to permit the
proper functioning and protection of the air conditioning systems.
Landlord reserves the right to stop the air conditioning systems when
necessary by reason of accident or emergency or for repairs, alterations,
replacements or improvements, which in the judgment of the Landlord are
desirable or necessary, until said repairs, alterations, replacements or
improvements shall have been completed. Landlord shall have no
responsibility or liability for failure to supply air conditioning during
said period mentioned just above or when prevented from so doing by any
cause beyond Landlord's reasonable control or by laws, orders or
regulations of any Federal, State, County or Municipal authorities and
Tenant shall be entitled to no diminution or abatement of rent by reason of
the stoppage of such air cooling or conditioning for any of the aforesaid
reasons whatsoever nor shall the same in any way affect the obligation of
Tenant to perform and fulfill its covenants under this Lease. Landlord
agrees to make any repairs to the air conditioning system promptly and with
due diligence.
Tenant acknowledges that the air conditioning system for the Building
was designed to heat, ventilate and cool space used for office purposes.
As a consequence of Tenant's use of the Premises for a school, Tenant
acknowledges that Tenant shall be required, at its sole cost and expense,
to install a supplemental heating, ventilating and air conditioning unit in
the Building to service the Premises (the "Supplemental HVAC System"),
------------------------
which Supplemental HVAC System shall be approved by Landlord. The
Supplemental HVAC System shall be installed by Tenant concurrently with the
tenant improvement work described in the Work
9
<PAGE>
Letter Agreement attached hereto as Appendix D. Tenant shall be responsible
for the cost of installation, maintenance, repair and replacement of the
Supplemental HVAC System and all utilities used in connection therewith.
Tenant acknowledges that as a consequence of Tenant's use of the
Premises for purposes other than office uses, the Building's HVAC system
may not be adequate to supply the heating, ventilating and air conditioning
necessary for comfortable occupancy of the Premises during the hours and on
the days specified in Sections 4(A)(1) and (2). Therefore, Tenant agrees
to operate the Supplemental HVAC System whenever necessary for the
comfortable occupancy of the Premises or whenever such supplemental
heating, ventilating and air conditioning is necessary in order for the
Premises to be occupied in compliance with applicable laws.
(4) Elevators. Landlord shall furnish passenger elevator service and,
---------
subject to scheduling by the Landlord, freight elevator service both in
common with other tenants. Elevator service may be by nonattended
automatic elevators or elevators with attendants at the option of Landlord.
(5) Water. Landlord shall furnish water from the City of Chicago
-----
mains for drinking, lavatory and toilet purposes as customary for office
use.
(6) Janitorial Service. Landlord shall furnish janitorial and
------------------
cleaning services as set forth in Appendix B.
B. Electricity. Tenant acknowledges that electricity for the Premises is
-----------
separately metered and will be provided directly by the applicable utility
company. Tenant shall pay for all electricity costs directly to the applicable
utility company, including, without limitation, any electricity required (1)
during janitorial service to the Premises, (2) during alterations or repairs to
the Premises, (3) for the operation of its office machinery and equipment or (4)
for any special air conditioning or ventilating system.
C. Interruptions of Services. Interruptions of any service to be
-------------------------
provided by Landlord hereunder or of any utility or other service to the
Building or the Premises, in whole or in part caused by repairs, renewals,
improvements, changes of service, alterations, accidents, acts of God or any
enemy, strikes, lockouts, labor controversies, insurrections, picketing (whether
legal or illegal), laws, orders or regulations of any federal, state, county or
municipal authorities, accidents or casualties whatsoever, inability of Landlord
to obtain electricity, fuel, water, supplies, or by the act or default of Tenant
or any person other than Landlord, or by any other cause or causes beyond the
reasonable control of Landlord, shall not be deemed an eviction or disturbance
of Tenant's use and possession of the Premises or any part thereof, or render
Landlord liable for damages by abatement or reduction of rent or otherwise
relieve Tenant from performance of Tenant's obligations under this Lease.
Notwithstanding the foregoing, in the event (a) any interruption of a service to
be provided by Landlord hereunder occurs (other than pursuant to a casualty to
the Building or the Premises, as to which Section 9 of this Lease shall apply)
which renders the Premises untenantable, and (b) such interruption of service is
caused by the gross negligence or wilful misconduct of Landlord, and (c)
10
<PAGE>
such interruption of service continues for a period of five (5) consecutive days
after Landlord receives actual notice thereof from Tenant or from any other
party, then Tenant's obligation to pay Rent shall be abated for the period
commencing on the expiration of said five (5) day period and ending on the date
the Premises are rendered tenantable.
5. ALTERATIONS AND REPAIRS.
-----------------------
A. Tenant shall not, without Landlord's prior written consent, which
consent shall not be unreasonably withheld, permit any alteration, improvement,
addition or installation in or to the Premises (all of which is collectively
referred to as "Work"), including installation of telephone, computer or
internal sound or paging systems or other similar systems, or the performance of
any decorating, painting and other similar work in the Premises.
Notwithstanding the foregoing, Landlord's consent shall not be required in the
event Tenant desires to perform work in any portion of the Premises located on
the Floor 2 or Floor 3 of the Building which Work is decorative, non-structural,
does not affect the Building's systems, does not require a building permit and
does not exceed Ten Thousand and No/100 Dollars ($10,000.00) in costs, subject
to the following conditions: (i) Tenant shall notify Landlord in writing of the
location and the nature of such Work at least five (5) business days prior to
the start of such Work; (ii) Landlord shall have right, within such five (5)
business day period, to require Tenant to modify the proposed Work so as to not
cause a building code violation or interfere with the structure or mechanical
systems of the Building; and (iii) Landlord shall have the right to approve the
proposed contractors and subcontractors, if any. Tenant agrees that any Work of
any nature affecting Floor 1 or the Mezzanine of the Building shall require the
approval of Landlord. In no event shall Tenant or any of its contractors or
employees perform any work which would penetrate, damage or alter any of the
granite surfaces located in the Premises without Landlord's prior written
consent. In the event Landlord consents to any Work, Landlord reserves the
right cause such Work to be performed by contractors and subcontractors approved
by Landlord and Tenant, in which event Tenant shall pay the cost of preparation
of the plans, permits, the fees of said contractors and subcontractors. Before
commencement of any Work or delivery of any materials into the Premises or the
Building, Tenant shall furnish to Landlord, for its prior written approval,
architectural plans and specifications certified by a licensed architect or
engineer reasonably acceptable to Landlord, and such other documentation as
Landlord shall reasonably request. Tenant agrees to hold Landlord, its
beneficiaries and their respective agents, partners, officers, servants and
employees forever harmless against all claims and liabilities of every kind,
nature and description which may arise out of or in any way be connected with
any such Work. Tenant shall pay Landlord's reasonable out-of-pocket expenses
(including, without limitation, expenses related to Landlord's hiring of
engineers, architects and other professionals) for reviewing plans and materials
submitted to Landlord for approval. Tenant shall pay the cost of all such Work
and the cost of decorating and altering the Premises and the Building occasioned
by any such Work. Landlord shall have the right to require Tenant to deliver to
Landlord cash or other security in an amount and form acceptable to Landlord to
be held in escrow by Landlord to assure prompt payment for the cost of any such
Work.
B. In the event that Landlord permits Tenant to hire its own contractors
for the performance of any Work, then in addition to the provisions of Section
5A, the following shall apply: (i) prior to the commencement of the Work or the
delivery of any materials to the Building, Tenant shall submit to Landlord, for
Landlord's approval, copies of the contracts, names, and addresses of all
contractors, necessary permits and licenses, certificates of insurance
(including, without limitation,
11
<PAGE>
Workmen's Compensation, comprehensive general liability and adequacy of design
insurance) and instruments of indemnification and waivers of lien against any
and all claims, costs, expenses, damages and liabilities which may arise in
connection with the Work, all in such form and amount as shall be satisfactory
to Landlord; (ii) all such Work shall be done only by union contractors or
mechanics approved by Landlord and Tenant (which approval shall not be
unreasonably withheld) and at such time and in such manner as Landlord may from
time to time designate; (iii) upon completion of any Work, Tenant shall furnish
Landlord with as-built plans, contractors' affidavits, full and final waivers of
lien, receipted bills covering all labor and materials expended and used in
connection with such Work; and (iv) all such Work shall comply with all
insurance requirements, all laws, ordinances, rules and regulations of all
governmental authorities, and all collective bargaining agreements applicable to
the Building, and shall be done in a good and workmanlike manner and with the
use of good grades of materials.
C. Tenant agrees to protect, defend and indemnify Landlord, its agents
and employees, the Premises and the Building from and against any and all
liabilities of every kind and description which may arise out of or be connected
in any way with said alterations, improvements or repairs or the like whether
performed by or under the direction of Landlord and at the cost of Tenant or
performed by Tenant unless caused by the gross negligence or wilful misconduct
of Landlord, its agents or employees. Any mechanic's lien filed against the
Premises or the Building or any notice which is received by either Landlord or
Tenant for work or materials furnished or claimed to be furnished to Tenant or
the Premises shall be released and discharged by Tenant; and, if such lien or
notice is filed it shall be released and discharged of record by Tenant, in
either case, within ten (10) days after such filing or receipt, whichever is
applicable, at Tenant's expense. If Tenant chooses to contest such claim,
notice or lien, Tenant may do so in place of causing the release and discharge
thereof provided Tenant, within said ten (10) day period, delivers to Landlord
security reasonably required by Landlord to guarantee over such claim or lien.
D. Unless otherwise provided by written agreement, all alterations,
improvements and fixtures (except trade fixtures) installed by Tenant shall be
surrendered with the Premises and shall become Landlord's property without
compensation to Tenant, except that, at Landlord's option, Tenant shall, at its
expense when surrendering the Premises or on the termination of the term of this
Lease or the termination of Tenant's right of possession, remove from the
Premises and the Building all or any of such alterations, improvements and
fixtures installed in the Premises by Tenant. Notwithstanding the foregoing
provisions of this Section 5D, Tenant may, prior to installing any alterations,
improvements or fixtures, request in writing that Landlord agree and consent
that such alterations, improvements and fixtures need not be removed by Tenant
when Tenant surrenders possession of the Premises, and, if Landlord does so
agree and consent, then Tenant shall not be required to remove the same as
provided in this Section 5D. In addition, Tenant may, prior to installing any
alterations, improvements or fixtures, request in writing that Landlord agree
and consent that such alterations, improvements and fixtures be permitted to be
removed by Tenant when Tenant surrenders possession of the Premises. Landlord
shall not unreasonably withhold its consent to such removal provided (i) such
alterations, improvements and fixtures were paid for with funds supplied by
Tenant and not by Landlord, (ii) such removal shall not permanently damage the
Premises or the Building, and (iii) Tenant promptly repairs any damage caused by
such removal, at Tenant's sole cost and expense. Furthermore, Landlord agrees
that Tenant shall not be obligated to remove
12
<PAGE>
any of the alterations, improvements or fixtures identified on Tenant's Space
Plan attached to this Lease as Exhibit I, provided (a) Landlord reserves the
right to require Tenant to remove any toilets Tenant installs in the Premises,
and (b) Landlord reserves the right to require Tenant to remove any alterations,
improvements or fixtures made to or installed in the Premises which are beyond
the scope of the work identified in Tenant's Space Plan. Each and every removal
shall be done in a good and workmanlike manner, and upon such removal Tenant
shall restore the Premises to its condition prior to the installation of such
alterations, improvements and fixtures. If Tenant does not remove such
alterations, improvements and fixtures after request to do so by Landlord,
Landlord may remove the same and restore the Premises, and Tenant shall pay the
cost of such removal and restoration to Landlord upon demand. Tenant shall also
remove its furniture, equipment, trade fixtures and all other items of personal
property from the Premises prior to the end of the term or any extension
thereof, or of the termination of right of possession, however ended; and if
Tenant does not remove such items, Tenant shall be conclusively presumed to have
conveyed the same to Landlord under this Lease as a bill of sale without further
payment or credit by Landlord to Tenant, or at Landlord's sole option Landlord
may cause the items covered in this sentence to be removed and stored at the
risk and cost of Tenant. Tenant shall pay to Landlord, upon demand, any and all
reasonable expenses incurred in such removal and all reasonable storage charges
against such property so long as the same shall be in Landlord's possession or
under Landlord's control. Any such property of Tenant not removed from the
Premises or retaken from storage by Tenant within thirty (30) days after the end
of the term, however terminated or any extension thereof, at Landlord's sole
option, shall be conclusively deemed to have been forever abandoned by Tenant.
6. USES OF DEMISED PREMISES. The Premises shall be occupied and used by
------------------------
Tenant only for executive and general administrative offices directly pertaining
to the operation of Tenant's business as set forth on Item 4 of the Schedule,
and for no other purpose.
7. BUILDING RULES AND GOVERNMENTAL REGULATIONS. Tenant shall abide by
-------------------------------------------
all applicable laws or governmental regulations concerning its use of the
Premises. Tenant shall at its sole cost promptly comply with the requirements
of any board of fire underwriters or similar body relating to the condition, use
or occupancy of the Premises excluding structural changes not related to or
affected by Tenant's improvements or acts. Tenant shall also abide by all
uniform reasonable rules and regulations adopted or to be adopted by Landlord
pertaining to the operation and management of the Building. If any rules and
regulations are contrary to the terms of the Lease, the terms of this Lease
shall prevail. Present rules are contained in Appendix C. The violation of the
Building rules or the laws or regulations governing Tenant's use of the Premises
shall be a default under this Lease allowing Landlord all remedies for default
under Section 11 of this Lease. Landlord shall not be responsible to Tenant for
violation of rules or regulations or terms of this Lease by another tenant nor
shall failure to obey the same by others or lack of enforcement relieve Tenant
from its obligations to comply therewith. Landlord agrees that it will not
enforce the rules and regulations in a discriminatory manner against Tenant.
8. CLAIM; INSURANCE; LIABILITY.
---------------------------
A. To the extent not expressly prohibited by law, Tenant releases
Landlord, its beneficiaries, all mortgagees and their respective agents,
partners, officers, servants and employees, from and waives all claims for
damages to person or property sustained by Tenant or by any occupant
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of the Premises or the Building, or by any other person, resulting directly or
indirectly from fire or other casualty, cause or any existing or future
condition, defect, matter or thing in the Premises, the Building or any part
thereof, or from any equipment or appurtenance therein, or from any accident in
or about the Building, or from any act or neglect of any tenant or other
occupant of the Building or of any other person, including agents, partners,
officers, servants and employees of Landlord and its beneficiaries. This Section
shall apply especially, but not exclusively, to damage caused by water, snow,
frost, steam, excessive heat or cold, sewerage, gas, odors or noise, or the
bursting or leaking of pipes or plumbing fixtures, falling plaster, broken
glass, sprinkling or air conditioning devices or equipment, or flooding of
basements, and shall apply without distinction as to the person whose act or
neglect was responsible for the damage and whether the damage was due to any of
the acts specifically enumerated above, or from any other thing or circumstance,
whether of a like nature or of a wholly different nature. If any damage to the
Premises or the Building or any equipment or appurtenance therein, whether
belonging to Landlord or to other tenants in the Building, results from any act
or neglect of Tenant, its employees, agents, guests or invitees, Tenant shall be
liable therefor and Landlord may, at its option, repair such damage, and Tenant
shall upon demand by Landlord reimburse Landlord for all costs of such repairs
and damages in excess of amounts, if any, paid to Landlord under insurance
covering such damages. All personal properly belonging to Tenant or any occupant
of the Premises that is in the Premises or the Building shall be there at the
risk of Tenant or other person only and Landlord and its beneficiaries shall not
be liable for damage thereto or theft or misappropriation thereof.
B. To the extent not expressly prohibited by law, Landlord and Tenant
each (either case, the "Indemnitor") agree to hold harmless and indemnify, the
other and the other's agents, partners, shareholders, officers, directors,
beneficiaries and employees (collectively, the "Indemnitees") from any losses,
damages, judgments, claims, expenses, costs and liabilities imposed upon or
incurred by or asserted against the Indemnitees, including reasonable attorney's
fees and expenses, for death or injury to third parties other than Indemnitees
that may arise from or be caused directly or indirectly by any negligent act of
omission or commission, or any willful misconduct of Indemnitor or any of
Indemnitor's agents, partners, or employees. Such third parties shall not be
deemed third party beneficiaries of this agreement. In case any action, suit or
proceeding is brought against any of the Indemnitees by reason of any such act
of Indemnitor or any of Indemnitor's agents or employees, then Indemnitor will,
at Indemnitor's expense and at the option of said Indemnitees, by counsel
reasonably approved by said Indemnitees, resist and defend such action, suit or
proceeding.
C. If any damage to the Building or any equipment or appurtenance
therein, whether belonging to Landlord or to other tenants in the Building,
results from any act or neglect of Tenant, its agents, employees, guests or
invitees, Tenant shall be liable therefor and Landlord may, at Landlord's option
repair such damage, and Tenant shall upon demand by Landlord, reimburse Landlord
the total cost of such repairs and damages to the Building. If Landlord elects
not to repair such damage, Tenant shall promptly repair such damages at its own
cost and in accordance with the provisions of Section 5 as if such repair
constituted Work under such Section.
D. Tenant shall procure and maintain at its own cost policies of
comprehensive general public liability and property damage insurance with
contractual liability coverage for the agreements of indemnity provided for
under this Lease and a broad form general liability endorsement to afford
protection with such limits as may be reasonably requested by Landlord from time
to time (which as
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of the date hereof shall be not less than $2,000,000 under a combined single
limit of coverage) insuring Landlord, its beneficiaries and their respective
agents, partners, officers, servants and employees and Tenant from all claims,
demands or actions for injury to or death of any person or persons and for
damage to property made by, or on behalf of, any person or persons, firm or
corporation, arising from, related to or connected with the Premises. The
insurance shall be issued by companies and be in form and substance satisfactory
to Landlord and any mortgagee of the Building and shall, if requested by
Landlord, include any mortgagee and their respective agents and employees as
additional insureds. The aforesaid insurance policies shall provide that they
shall not be subject to cancellation except after at least thirty (30) days'
prior written notice to Landlord and all such mortgagees (unless n such
cancellation is due to non-payment of premiums, in which event ten (10) days'
prior written notice shall be required). The original insurance policies (or
certificates thereof satisfactory to Landlord), together with satisfactory
evidence of payment of the premium thereon, shall be deposited with Landlord
prior to the commencement of the term and renewals thereof not less than thirty
(30) days prior to the end of the term of each such coverage.
E. Tenant shall carry insurance of the type typically referred to as "all
risk" insurance, including water damage, insuring its interest in the tenant
improvements in the Premises and its interest in all its personal property and
trade fixtures located on or within the Building, including without limitation
its office furniture, equipment and supplies.
F. Notwithstanding any other provision of this Lease to the contrary,
Landlord and Tenant each hereby waive all rights of action against the other for
loss or damage to the Premises, or the Building and property of Landlord and
Tenant in the Building, which loss or damage is insured or is required pursuant
to this Lease to be insured by valid and collectible insurance policies to the
extent of the proceeds collected or collectible under such insurance policies,
subject to the condition that this waiver shall be effective only when the
waiver is permitted by such insurance policies or when, by the use of good faith
effort, such waiver could have been permitted in the applicable insurance
policies. The policies of insurance required to be maintained by Tenant under
the terms of this Lease shall contain waiver of subrogation clauses and form and
content satisfactory to Landlord.
G. Tenant shall not conduct or permit to be conducted by its employees,
agents, guests, invitees any activity, or place any equipment in or about the
Premises or the Building that will in any way increase the cost of fur,
insurance or other insurance on the Building. If any increase in the cost of
fire insurance or other insurance is stated by any insurance company or by the
applicable Insurance Rating Bureau, if any, to be due to any activity or
equipment of Tenant in or about the Premises or the Building, such statement
shall be conclusive evidence that the increase in such cost is due to such
activity or equipment and, as a result thereof, Tenant shall be liable for the
amount of such increase. Tenant shall reimburse Landlord for such amount upon
written demand from Landlord and any such sum shall be considered Additional
Rent payable hereunder. Tenant, at its sole expense, shall comply with any and
all requirements of any insurance organization or company necessary for the
maintenance of reasonable fire and public liability insurance covering the
Premises and the Building.
9. FIRE AND OTHER CASUALTY. If the Premises or the Building are made
-----------------------
untenantable by fire or other casualty, including damage or casualties of war,
Landlord shall, to the extent permitted by all mortgages and ground leases on
the Building, immediately take such action as is necessary to make applicable
insurance proceeds available and to use the same to reconstruct,
15
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repair and restore the Building and the Premises, including the tenant
improvements, if any, paid for by Landlord pursuant to the Work Letter or, to
similar improvements located in the Premises on the date of this Lease, and, at
Landlord's option, Tenant may be permitted or required to devote the proceeds of
its insurance covering tenant improvements to cause restoration of tenant
improvements over and above those performed or paid for by Landlord pursuant to
the Work Letter or "as is," as the case may be, and pay for same to Landlord or
through Landlord as if newly done pursuant to Section 5 of this Lease. In the
event fire or other casualty occurs and both Landlord and Tenant are insured, it
is agreed that the coverage of the Landlord shall be primary and that Landlord's
recovery in no event shall be reduced by any insurance recovery to Tenant.
Notwithstanding anything in this Section 9 to the contrary, if a registered
architect selected by Landlord licensed to do business in Illinois should
certify that such work to the Premises cannot be accomplished by using standard
working methods and procedures so as to make the Premises tenantable within
twelve (12) months from the date Landlord settles in full its claim with its
insurance carrier for the Building or within two (2) months from such date if
the Lease term has less than eighteen (18) months remaining, either party shall
have the right to terminate this Lease by giving to the other notice of such
election within ten (10) days after its receipt of the architect's certificate.
Landlord shall select such registered architect within thirty (30) days after
receipt of a written request by Tenant; provided that Landlord may make such
selection without a request by Tenant if Landlord elects to do so. Landlord
shall inform Tenant of the conclusion reached by the architect promptly after
receiving a written request from Tenant. If said fire or other casualty results
in total destruction of the Building, this Lease shall automatically terminate
as of the date of said or other casualty. In case of fire or other casualty not
resulting in termination of this Lease, rent shall be abated on a per them basis
while the Premises are untenantable. If Tenant continues to conduct its business
or profession in whole or in part from a portion of the Premises after such
casualty, rent for space shall be abated pro rata with rent being charged only
for the tenantable area. In case of termination of this Lease, rent shall be
apportioned on a per diem basis and be paid to the date of the fire or other
casualty. Any provision hereof notwithstanding, Tenant's rent shall not abate if
its negligence was the cause of the casualty.
10. RIGHTS RESERVED TO THE LANDLORD. Landlord reserves the following
-------------------------------
rights and Tenant accedes thereto. Specification of the rights reserved to
Landlord herein shall not exclude any right accruing to Landlord by operation of
law or reserved specifically or by inference from any provision contained in
this Lease:
(a) Name: To change the Building's name or street address.
----
(b) Signs: To install, affix and maintain any and all signs on the
-----
exterior and interior of the Building.
(c) Windows: To designate and approve, prior to installation, all
-------
types of window shades, blinds, drapes, awnings, window ventilators and
other similar equipment and to control all the internal lighting that may
be visible from the exterior of any Building.
(d) Service Contracts: To approve all sources furnishing sign
-----------------
painting and lettering, ice and drinking water, and to designate all
sources furnishing towels, toilet supplies, food service, shoe shining or
other services on the Premises, provided such services as are designated by
Landlord are reasonably competitive with rates charged therefor in the
Chicago
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metropolitan area. No vending or dispensing machines of any kind shall be
placed in or about the Premises without prior written consent of Landlord.
Notwithstanding the foregoing, Tenant shall be permitted to install vending
machines in the Premises solely for the use of Tenant's employees and
students.
(e) Keys: To retain at all times and to use passkeys to the Premises
----
and keys to all locks within and into the Premises. No locks or bolts
shall be altered, changed or added without the prior written consent of
Landlord.
(f) Access for Repairs, etc.: To have access to the Premises without
------------------------
liability for damages to the Tenant to make repairs, alterations, additions
or improvements, whether structural or otherwise, in and about the
Premises, the Building or any part thereof as set forth in various parts of
this Lease including Section 5.
(g) Occupancy: During the last one hundred twenty (120) days of the
---------
term of this Lease, if during or prior to that time Tenant vacates the
Premises, to decorate, remodel, repair alter or otherwise prepare the
Premises for reoccupancy. Such acts of Landlord shall not relieve Tenant
of its obligations to pay rent to the termination date.
(h) Rights to Conduct Businesses: To grant to anyone the exclusive
----------------------------
right to conduct any business or render any service in the Building
provided such exclusive right shall not operate to exclude Tenant from the
use permitted by this Lease.
(i) Heavy Equipment: To approve or disapprove the weight, size or
---------------
location of safes and other heavy equipment and articles in and about the
Premises and the Building and to require all such items and furniture to be
moved into and out of the Building and the Premises only at such times and
in such manner as Landlord shall direct in writing. Movement of Tenant's
property into or out of the Building and within the Building is entirely at
the risk and responsibility of Tenant and Landlord reserves the right to
require permits before allowing any such property to be moved into or out
of the Building.
(j) Show Premises: To show the Premises to prospective tenants or
-------------
brokers during the last year of the term of this Lease or the last year of
any extension thereof to show how the Premises to representatives, agents,
officers, shareholders, directors and employees of Landlord and its
beneficiary, prospective purchasers or mortgagees at all reasonable times
provided prior notice is given to Tenant in each case and Tenant's use and
occupancy of the Premises shall not be materially inconvenienced by any
such action of Landlord.
(k) Close Building: To close the Building after regular working hours
--------------
and on legal holidays subject, however, to Tenant's right to admittance
under such regulations as Landlord may prescribe from time to time which
may include, by way of example but not of limitation, that persons entering
or leaving the Building identify themselves to a security guard by
registration or otherwise and that said persons establish their right to
enter or leave the Building.
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(1) Substitution of Space: At any time hereafter, Landlord may change
---------------------
the part of the demised premises located on Floor 3 of the Building (the
"Floor 3 Space") to another area in the Building (herein referred to as the
"new premises") provided that:
(i) The new premises shall be similar to the Floor 3 Space in
area and use for Tenant's purposes and shall be located entirely on
one full floor with a buildout similar in configuration to the Floor 3
Space; and
(ii) Such change shall be made in order to put into the demised
premises a major tenant in the Building who then occupies or will, as
a result of such move, occupy all of at least one floor in the
Building.
if Tenant is already in occupancy of the demised premises, then in
addition:
(iii) Landlord shall pay the expenses of the Tenant for moving
from the Floor 3 Space to the new premises and for improving the new
premises so that they are substantially similar to the Floor 3 Space.
(iv) Such move shall be made during evenings, weekends, or
otherwise so as to incur the least inconvenience to Tenant;
(v) Landlord shall first give Tenant at sixty (60) days' notice
before making such change; and
(vi) Landlord will furnish a new Appendix A.
Tenant shall cooperate with Landlord in all reasonable ways to permit
the necessary action to make the changes including, by way of example only,
designating locations to move furniture and equipment, supervising moving,
of flies or fragile equipment, designating location of telephone outlets,
and listing color of paint and of flooring desired in the new premises.
(m) Use of Lock Box by Landlord: Landlord may from time to time elect
---------------------------
to designate a lock box collection agent (independent agent, bank or other
financial institution) to act as Landlord's agent for the collection of
mounts due Landlord. In such event the date of payment of rent or other
sums paid Landlord through such agent shall be the date of agent's receipt
of such payment (or the date of collection of any such sum if payment is
made in the form of a negotiable instrument thereafter dishonored upon
presentment); however, for purposes of this Lease, no such payment or
collection shall be deemed "accepted" by Landlord if Landlord issues a
check payable to the order of the Tenant in the amount sent to the lock box
and if Landlord mails the check to the Tenant addressed to the place
designated in this lease for notice to Tenant within twenty-one (21) days
after the amount sent by the Tenant is received by the lock box collection
agent or if the Landlord returns a dishonored instrument within twenty-one
(21) days of its dishonor. Return of any such sum to Tenant by so sending
such a check of the Landlord or by so sending a dishonored instrument to
the Tenant within the appropriate twenty-one (21) day period shall be
deemed to be rejection of
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Tenant's tender of such payment for all purposes as of the date of
Landlord's lock box collection agent's receipt of such payment (or
collection). The return of Tenant's payment in the manner described in this
paragraph shall be deemed not to be a waiver of any breach by Tenant of any
term, covenant or condition of this Lease nor a waiver of any of Landlord's
rights or remedies granted in this Lease. The possession of Tenant's funds
or negotiation of Tenant's negotiable instrument by Landlord's agent or
Landlord during the applicable twenty-one (21) day period shall be deemed
not to be a waiver of any defaults of Tenant or any rights of Landlord
theretofore accrued nor shall any such possession or negotiation be
considered an acceptance of Tenant's tender.
(n) Repairs and Alterations: At any time Landlord either voluntarily
-----------------------
or pursuant to governmental requirement may, at Landlord's own expense,
make repairs, alterations or improvements in or to the Building or any part
thereof, including the Premises, and during operations may close entrances,
doors, corridors, elevators and other facilities and may have access to and
open all ceilings, without liability to Tenant by reason of interference,
inconvenience, annoyance or loss of business. Landlord shall not be liable
to Tenant for any expense, injury, loss or damage resulting to Tenant from
work done in the Building, and substantial construction activities on the
Building or upon, along, or the use of any adjacent or nearby building,
land, street, alley or way.
11. DEFAULT AND LANDLORD'S REMEDIES.
-------------------------------
A. Defaults. The occurrence of any of the following shall constitute a
--------
"Default" hereunder:
(1) If Tenant defaults in the payment of rent (whether Base Rent,
Operating Adjustment Rent, Tax Adjustment Rent or Additional Rent), or any
other sum required to be paid by this Lease (including but not limited to
repayment of the Construction Loan together with all interest thereon as
and when due as described in Appendix D attached hereto) and if the default
is not remedied within five (5) days after written notice thereof by
Landlord to Tenant;
(2) If Tenant defaults in the prompt and full performance of any term,
covenant, or provision of this Lease (except those specified in
Subparagraphs (1), (3), (4), (5), (6), (7) and (8) of this Subparagraph A
of Section 11) and if such default is not remedied within thirty (30) days
after notice thereof by the Landlord;
(3) If Tenant abandons or vacates any portion of the Premises located
on Floor 1 of the Building or the Mezzanine of the Building;
(4) If the leasehold interest of Tenant is levied upon under execution
or is attached under process of law, which levy or attachment continues for
a period of thirty (30) days;
(5) If Tenant shall generally not pay its debts as they become due or
shall admit in writing its inability to pay its debts or shall make a
general assignment for the benefit of creditors;
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(6) If Tenant shall commence any case, proceeding or other action
seeking organization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking appointment of
a receiver, trustee, custodian or other similar official for it or for all
or any substantial part of its property;
(7) If Tenant shall take any corporate or other action to authorize
any of the actions set forth above in Subparagraphs A(5) and A(6) of this
Section 11; or
(8) If any case, proceeding or other action against Tenant shall be
commenced seeking to have an order for relief entered against it as debtor,
or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for
it or for all or any substantial part of its property, and such case,
proceeding or other action (i) results in the entry of an order for relief
against it which is not fully stayed within seven (7) business days after
the entry thereof or (ii) remains undismissed for a period of thirty (30)
days.
B. Landlord's Remedies.
-------------------
(1) Upon the occurrence of any one or more Defaults by Tenant,
Landlord elect may elect to terminate this Lease and Tenant's right to the
Premises or, without terminating this Lease, forthwith terminate Tenant's
right to possession of the Premises. Upon any termination of this Lease,
whether by lapse of time or otherwise, or upon any termination of Tenant's
right to possession without termination of the Lease, Tenant shall
surrender possession and vacate the Premises and deliver possession thereof
the Landlord, and Tenant hereby grants to Landlord full and free license to
enter into and upon the Premises with or without process of law in the
event of any such termination of this Lease or right to possession, and to
repossess Landlord of the Premises as of Landlord's former estate and to
expel or remove Tenant and any others who may be occupying or be within the
Premises and to remove any and all property therefrom using such force as
may be necessary without being deemed in any manner guilty of trespass,
eviction or forcible entry or detainer, and without relinquishing
Landlord's rights to rent or any other right given to Landlord hereunder or
by operation of law.
(2) If Tenant voluntarily abandons any portion of the Premises located
on Floor 1 of the Building or the Mezzanine of the Building or otherwise
entitles Landlord to elect to terminate Tenant's right to possession only
without terminating the Lease, and Landlord does so elect, Landlord may at
Landlord's option enter into the Premises, remove Tenant's signs and other
evidences of tenancy, and take and hold possession thereof as in
subparagraph B(l) of this Section 11, without such entry and possession
terminating the Lease or releasing Tenant, in whole or in part, from
Tenant's obligation to pay the rent hereunder for the full term. Upon and
after entry into possession without termination of this Lease, subject to
Landlord's right to first rent other vacant areas in the Building, Landlord
may relet the Premises or any part thereof to any person, firm or
corporation other than Tenant for such rent, for such time and upon such
terms as Landlord in Landlord's sole discretion shall
20
<PAGE>
determine. Any proceeds from the relet of the Premises by Landlord shall
first be applied against the cost and expenses of reletting the Premises
including, but not limited to, all brokerage, advertising, legal,
alteration, and other reasonably necessary expenses incurred to secure a
new tenant for the Premises. If the consideration collected by Landlord
upon any such reletting after payment of the expenses of reletting the
Premises is not sufficient to pay monthly the full amount of the rent
reserved in this Lease, Tenant shall pay to Landlord the amount of each
monthly deficiency as it becomes due upon demand. If the consideration
collected by Landlord upon any such reletting after payment of the expenses
of reletting the Premises is greater than the amount necessary to pay the
full amount of the rent reserved in this Lease, the full amount of such
excess shall be retained by Landlord and shall in no event be payable to
Tenant.
(3) If the Landlord shall decide to terminate this Lease, Landlord, at
its sole option, shall be entitled to recover from Tenant, in lieu of any
amounts due under Section 11B(2) hereof, and Tenant shall pay to Landlord,
on demand, as and for liquidated and agreed final damages, a sum equal to
the amount by which Landlord's reasonable estimate of die aggregate amount
of Base Rent, Operating Adjustment Rent, Tax Adjustment Rent, and
Additional Rent for a period from the date of such termination through the
Termination Date set forth on the Schedule, exceeds the then reasonable
rental value of the Premises for the same period, both discounted to
present worth at the rate of ten percent (10%) per annum. If, before
presentation of such liquidated damages to any court, commission or
tribunal, the Premises, or any part thereof, shall have been relet by
Landlord for such period, or any part thereof, the amount of rent reserved
upon such reletting shall be deemed, prima facie, to be the reasonable
rental value for the part or the whole of the Premises so relet during the
term of the reletting.
(4) Landlord may but shall not be obligated to cure any default by
Tenant hereunder, but, if Landlord so elects, all costs and expenses paid
by Landlord in curing such default and legal fees in connection therewith
shall be Additional Rent payable by Tenant on demand.
(5) Notwithstanding anything in this Lease to the contrary, any and
all remedies set forth in this Lease (i) shall be in addition to any and
all other remedies Landlord may have at law or in equity, (ii) shall be
cumulative and (iii) may be pursued successively or concurrently as the
Landlord may elect. The waiver by Landlord of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver
of such term, covenant or condition or any subsequent breach of the same,
or any other term, covenant or condition herein contained. The acceptance
of rent hereunder shall not be construed to be a waiver of any breach by
Tenant of any term, covenant or condition of this Lease.
(6) Notwithstanding any provision in this Lease permitting Tenant to
cure any default within a specified period of time, if Tenant shall default
(i) in the timely payment of rent (whether any or all of Base Rent,
Operating Adjustment Rent, Tax Adjustment Rent, or Additional Rent) three
or more times in any period of 12 consecutive months, or (ii) in the
performance of any particular term, condition or covenant of this Lease
three or more times in any period of six consecutive months, then,
notwithstanding that such defaults shall have
21
<PAGE>
each been cured within any applicable cure period after notice, if any, as
provided in this Lease, any further similar default (including, without
limitation, with respect to non-payment of rent, the further non-payment of
any kind of rent payable under this Lease) shall not be curable by Tenant
and Landlord shall have all of the remedies provided in this Lease
(including, without limitation, any and all remedies at law and in equity)
for a Default hereunder.
12. HOLDOVER. If Tenant retains possession of the Premises or any part
--------
thereof after the termination of the term or any extension thereof, Tenant shall
become a tenant from month-to-month only upon each and all of the terms herein
provided as may be applicable to such month-to-month tenancy and any such
holdover shall not constitute an extension of this Lease; provided, however,
during such holding over, Tenant shall pay Base Rent, Operating Rent Adjustment
Rent and Tax Adjustment Rent, at double the rate payable for the year
immediately preceding said holding over computed on a monthly basis for the time
Tenant thus remains in possession and, in addition, Tenant shall pay Landlord
all damages, consequential as well as direct, sustained by reason of Tenant's
holding over. The provisions of this paragraph do not waive Landlord's right of
re-entry or right to regain possession by actions at law or in equity or by any
other rights hereunder.
13. SUBORDINATION TO MORTGAGES, TRUST DEEDS AND GROUND LEASES
---------------------------------------------------------
A. Subordination. This Lease shall be subordinated to any and all ground
-------------
leases now or hereafter in force with respect to the Building at the election of
each such ground lessor. This Lease shall be subordinated to the lien of any
and all mortgages now or hereafter in force against (a) the Building or (b) any
and all ground leases with respect to the Building, at the election of each such
mortgagee. Landlord hereby represents to Tenant that, as of the date hereof,
there are no mortgages or ground leases currently existing with respect to the
Building.
The respective rights to so subordinate this Lease at the election of any
such ground lessor or mortgagee shall continue during any renewal, modification,
consolidation, replacement or extension of each such lease or mortgage, and
shall apply to any and all advances made or hereafter made on the security of
each such mortgage.
Subordination shall be effective at election of any such ground lessor or
mortgagee. Election shall not be dependent on receipt of notice by Tenant of
the election to subordinate. Without limitation of the foregoing, notice
thereof may be given as provided for notices pursuant to this Lease.
Such subordination shall be self operating. Nevertheless, Tenant or its
successors in interest upon request of Landlord shall promptly sign and deliver
to Landlord such instruments reasonably needed in Landlord's judgment to
evidence such subordination. Upon request of Landlord, Tenant shall also agree
to attorn to any ground lessor or mortgagee of the Building pursuant to an
agreement satisfactory to such mortgagee or ground lessor provided such
mortgagee or ground lessor agrees not to disturb Tenant in its possession of the
Premises.
B. Termination of Ground Lease or Foreclosure of Mortgage. Should any
------------------------------------------------------
mortgage on the Building or on any ground lease be foreclosed or if any ground
lease be terminated and this Lease be continued:
22
<PAGE>
(1) The liability of the mortgagee, ground lessor or purchaser at such
foreclosure sale shall exist only during the time such mortgagee, ground
lessor or purchase is the owner of the Building.
(2) Tenant shall attorn, as Tenant under this Lease without any
deductions or setoffs whatsoever, to the purchaser at the foreclosure sale
(or the mortgagee if the mortgagee becomes owner of the fee estate or
lessor under any ground lease) or, if any ground lease be terminated for
any reasons, Tenant shall be deemed to have attorned as Tenant under this
Lease to the ground lessor under the ground lease, and this Lease shall
continue in force and effect as a direct lease between and binding upon
Tenant and such mortgagee or ground lessor, as the case may be. Tenant
agrees to promptly execute and promptly deliver at any time and from time
to time upon the request of Landlord, or of any ground lessor of any such
ground lease or of any holder of such mortgage or of such purchaser, any
instrument which, in the sole judgment of such requesting party, may be
necessary or appropriate in any such foreclosure or termination proceeding
or otherwise to evidence such attornment.
(3) Tenant shall attorn, as Tenant under this Lease, without any
deductions or setoffs whatsoever, to a leasehold mortgagee (or any
purchaser of the leasehold estate at the foreclosure sale) in the event
such leasehold mortgagee (or such purchaser) should ever become the owner
of the leasehold estate covered by its mortgage or should become the owner
of any new lease in replacement or substitution of such leasehold estate.
(4) As used in this Section 13, "mortgage" shall include trust deed
and "mortgagee" shall include "trustee" and successors and assigns of such
party whether immediate or remote, the purchaser of any mortgage, whether
at foreclosure or otherwise and the successors, assigns and mortgagees of
such purchaser whether immediate or remote.
C. Security Deposit. The mortgagee under a mortgage and the lessor under
----------------
any ground lease shall have no responsibility for the return of the security
deposit, if any, except to the extent the security deposit is held by such
mortgagee or ground lessor.
D. Notice and Right to Cure. Tenant agrees in the event of any act or
------------------------
omission by Landlord which would give Tenant the right to terminate this Lease
or to claim a partial or total eviction, Tenant shall not exercise any such
right (i) until it has notified in writing the holder of any mortgage or lessor
of any ground lease which at the time shall be a lien on the demised premises,
if the name and address of such holder shall previously have been furnished
(either by written notice or hereunder) to Tenant by Landlord, of such act or
omission, (ii) until a reasonable period, not exceeding thirty (30) days, for
commencing the remedy of such act or omission shall have elapsed following the
giving of such notice and (iii) unless such holder or lessor with reasonable
diligence shall not have so commenced and continued to remedy such act or
omission or to cause the same to be remedied. During the period between the
giving of such notice and the remedying of such act or omission, the rent herein
recited shall be abated and apportioned to the extent that any part of the
demised premises shall be untenantable.
23
<PAGE>
14. ASSIGNMENT AND SUBLETTING BY TENANT. Tenant shall not assign this
-----------------------------------
Lease, or any interest therein, and shall not sublet the Premises, or any part
thereof, or any right or privilege appurtenant thereto, or suffer any other
person to occupy or use the Premises, or any portion thereof, without first
obtaining the written consent of Landlord, which consent may be arbitrarily
withheld except as hereinafter expressly otherwise provided. If Tenant desires
to assign this Lease or sublet the Premises or any portion thereof, Tenant shall
deliver a written notice (a "Transfer Notice") to Landlord, which Transfer
Notice shall set forth the name of the proposed assignee or sublessee, the terms
and conditions of such assignment or sublease, and the current financial
statements of such assignee and sublessee and, if Tenant proposes to sublease
only a portion of the Premises, the portion of the Premises to be sublet.
Landlord agrees not to unreasonably withhold consent to any such assignment of
this Lease or subletting of the entire Premises, provided Tenant delivers a
Transfer Notice to Landlord as aforesaid and provided (i) at the time thereof
Tenant is not in default under this Lease, (ii) Landlord, in its sole discretion
reasonably exercised, determines that the reputation, business, proposed use of
the Premises and financial responsibility of the proposed assignee or sublessee,
are satisfactory to Landlord, (iii) the proposed assignee or sublessee shall
expressly assume all the obligations of this Lease on Tenant's part to be
performed, (iv) such consent, if given, shall not release Tenant of any of its
obligations under this Lease, including without limitation, its obligation to
pay rent, (v) Tenant agrees specifically to pay over to Landlord, as Additional
Rent, 50% of all sums provided to be paid under the terms and conditions of such
assignment or sublease net of reasonable commissions and reasonable costs of
reletting including, but not limited to, tenant improvement costs paid to
accommodate the proposed assignee or sublessee which are in excess of the
amounts otherwise required to be paid pursuant to this Lease, (vi) a consent to
one assignment or subletting shall not be deemed to be a consent to any
subsequent assignment or subletting and (vii) Tenant shall indemnify and hold
Landlord harmless from any brokerage commissions due in connection with such
assignment or subletting. Whether or not such conditions to assignment or
subletting are met, Landlord, at its sole option, may elect to recapture the
space covered by the Transfer Notice and terminate this Lease on the first day
of the second calendar month next succeeding receipt of Tenant's Transfer
Notice, to be effective unless Tenant elects to withdraw its request to sublease
or assign, which election, if exercised by Landlord, shall be by written notice
to Tenant within twenty (20) days of receipt by Landlord of a Transfer Notice.
If Landlord elects to terminate this Lease in accordance with the foregoing
sentence, Landlord may lease the Premises to the sublessee or assignee proposed
by Tenant. If this Lease shall be terminated with respect to less than the
entire Premises, Base Rent, Operating Adjustment Rent, Tax Adjustment Rent, and
Additional Rent shall be adjusted on the basis of the square feet retained by
Tenant in proportion to the square feet of the Premises prior to such
termination and this Lease as so amended shall continue thereafter in full force
and effect. In such event, Tenant shall pay the cost of erecting demising walls
and public corridors and making other modifications to physically separate the
portion of the Premises remaining subject to the Lease from the rest of the
Premises. Any assignment or subletting or occupancy without Landlord's prior
written consent shall be void and shall, at the option of the Landlord,
constitute a default under this Lease. Neither this Lease nor any interest
therein shall be assignable as to the interest of Tenant by operation of law
without consent of Landlord, which consent may be arbitrarily withheld. Tenant
acknowledges that Landlord may arbitrarily withhold its consent to any
assignment of this Lease or subletting of all or a portion of the Premises to a
proposed assignee or sublessee whose use of the Premises, or a portion thereof,
will be for any non-office use.
24
<PAGE>
Tenant agrees that in the event Landlord withholds its consent to any
assignment, subletting, or occupancy contrary to the provisions of the paragraph
next above, Tenant's sole remedy shall be to seek an injunction in equity or
compel performance by Landlord to give its consent and Tenant expressly waives
any right to damages in the event of such withholding by Landlord of its
consent.
Tenant agrees that if it requests Landlord's consent to an assignment or a
subletting that it shall reimburse Landlord for its reasonable costs and
expenses in considering whether to grant its consent (including, but not limited
to, reasonable attorneys' fees). Tenant further agrees that Landlord may, as a
condition to granting its approval to an assignment or a subletting, require the
assignee or sublessee to post a security deposit with Landlord in an amount
determined by Landlord.
15. SALE BY LANDLORD. In the event of sale or conveyance or transfer by
----------------
Landlord of its interest in the Building or in this Lease, the same shall
operate to release Landlord (subject to the second paragraph of Section 17
hereof entitled "Security Deposit") from any future liability upon any of the
covenants or conditions, express or implied, herein contained in favor of
Tenant, and in such event Tenant agrees to look solely to the responsibility of
the interest of the successor in interest of the Landlord in and to this Lease.
This Lease shall not be affected by any such sale, conveyance or transfer. The
term "Landlord," as used in this Lease, means only the Landlord from time to
time, and upon conveying or transferring its interest, such conveying or
transferring landlord shall be relieved from any further obligation or liability
pursuant to this Lease.
16. ESTOPPEL CERTIFICATE. Tenant shall at the request of Landlord at any
--------------------
time and from time to time upon not less than ten (10) days' prior written
notice, execute, acknowledge in recordable form, and deliver to Landlord or
Landlord's mortgagee, ground lessors, auditors or a prospective purchaser of the
Building or any part thereof, a certificate stating that this Lease is
unmodified and in full force and effect, (or, if modified, stating the nature of
such modification and certifying that this Lease, as so modified, is in full
force and effect), and the dates to which the rental and other charges are paid,
that Tenant is in possession and paying rent on a current basis with no offsets,
defenses or claims, that there are not, to Tenant's knowledge, any uncured
defaults on the part of Landlord or of Tenant as is pertinent to the request (or
specifying such offsets, claims or defaults, if any are claimed) and such
matters as Landlord may reasonably require or that any mortgagee or ground
lessor may require. Such certificate may require the date of commencement of
rent, the date of commencement of term, expiration date, Base Annual Rent,
current Operating Adjustment Rent, and Tax Adjustment Rent, estimates, date to
which rent has been paid, whether or not Landlord has completed any improvements
required to be made to the Premises and such other matters as may be required.
It is expressly understood and agreed that any such statement may be relied upon
by any prospective purchaser or encumbrancer of all or any portion of the real
property of which the Premises are a part or purchaser or assignee or lender to
Tenant or to auditors of either party hereto or by any other person to whom it
is delivered. The failure to deliver such statement within such time shall be
conclusive upon Tenant that this Lease is in full force and effect, without
modification except as may be represented by Landlord, there are no uncured
defaults by or defenses or claims against Landlord and that not more than one
(1) month's rental has been paid in advance and Tenant shall be estopped from
asserting any defaults, defenses or claims known to it at that time.
17. SECURITY DEPOSIT. Tenant deposited with Landlord security for the
----------------
full and faithful performance of every provision of this Lease to be performed
by Tenant in the amount set
25
<PAGE>
forth as Item 11 in the Schedule. If Tenant defaults with respect to any
provision of this Lease, Landlord may use all or any part of this security
deposit for the payment of any rent and other sum due or in default, or for the
payment of any other amount which Landlord may spend or become obligated to
spend by reason of Tenant's default, or to compensate Landlord for any loss or
damage which Landlord may suffer by reason of Tenant's default. If any portion
of such deposit is to be used, Tenant shall, within five (5) days after written
demand therefor deposit cash with Landlord in an amount sufficient to restore
the security deposit to its original amount and Tenant's failure to do so shall
be a material breach of this Lease. Landlord shall not re required to keep this
security deposit separate from its general funds and Tenant shall not be
entitled to interest on such deposit. If Tenant shall fully and faithfully
perform every of provision of this Lease to be performed by it, the security
deposit or any balance thereof shall be returned to Tenant (or, at Landlord's
option, to the last assignee of Tenant's interest hereunder) at the expiration
of this Lease and upon vacation of the Premises.
Tenant acknowledges that Landlord has the right to transfer all or any part
of its interest in the Building or this Lease, and Tenant agrees that in the
event of any such transfer, Landlord shall have the right to transfer such
security deposit to the transferee. Upon such transfer, Landlord shall thereby
be released by Tenant from all liability or obligation for the return of such
deposit and Tenant agrees to look solely to such transferee for the return of
the security deposit.
Anything in Section 17 to the contrary notwithstanding, Tenant may, at its
option and expense, satisfy the requirement of delivery of the security deposit
by the delivery to Landlord of an unconditional and irrevocable letter of credit
("Letter of Credit") in the amount of $675,000.00 and in the form attached
hereto as Appendix E and issued by any bank reasonably satisfactory to Landlord
and located in Chicago, Illinois. Tenant shall ensure that at all times during
the term of this Lease and for thirty (30) days after expiration of the Term, an
unexpired Letter of Credit in the amount of $675,000.00 or cash in the amount of
$675,000.00 shall be in the possession of Landlord or Landlord's beneficiaries.
The Letter of Credit shall contain a so-called "evergreen" clause providing that
the Letter of Credit shall not be canceled unless the issuing bank delivers
thirty (30) days' prior written notice to Landlord. During the Term, Tenant
shall deliver to Landlord, no later than thirty (30) days prior to the expiry
date of the then outstanding and expiring Letter of Credit (a) a replacement
Letter of Credit or (b) cash in the amount then required as the security
deposit. Failure by Tenant to deliver any replacement Letter of Credit or pay
the amount of the security deposit in cash as required above shall entitle
Landlord or Landlord's beneficiaries to draw under the outstanding Letter of
Credit and to retain the entire proceeds thereof for application as the security
deposit under this Lease. Landlord or Landlord's beneficiaries may also draw
under the Letter of Credit and use and apply the proceeds as a security deposit
at any time that Tenant is in default under this Lease. Landlord or Landlord's
beneficiaries may also draw on the Letter of Credit and use and apply the
proceeds as a security deposit if the credit rating of the long-term debt of the
issuer of the Letter of Credit (according to Moody's or similar national rating
agency) is downgraded to a grade below investment grade, the issuer of the
Letter of Credit shall enter into any supervisory agreement with any
governmental authority, or the issuer of the Letter of Credit shall fail to meet
any capital requirements imposed by applicable law, and Tenant fails to deliver
to Landlord a replacement Letter of Credit complying with the terms of this
Lease within thirty (30) days of request therefor from Landlord. Failure by the
issuer to honor a draw request on the Letter of Credit shall be a Default under
the terms of this Lease. Each Letter of Credit shall be for the benefit of
Landlord or Landlord's
26
<PAGE>
beneficiaries and their successors and assigns and shall entitle Landlord or
Landlord's beneficiaries or their successors or assigns to draw from time to
time under the Letter of Credit in portions or in whole upon presentation of a
sight draft and statement by Landlord or Landlord's beneficiaries that Landlord
or Landlord's beneficiaries is entitled to draw thereunder pursuant to the terms
and provisions of this Lease.
Notwithstanding the foregoing, so long as Tenant is not then in default
under this Lease, the amount of the security deposit shall be reduced as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------
TIME PERIOD AMOUNT OF SECURITY DEPOSIT
-------------------------------------------------------------
<S> <C>
01/01/96 to 12/31/96 $550,000.00
-------------------------------------------------------------
01/01/97 to 12/31/97 $450,000.00
-------------------------------------------------------------
01/01/98 to 12/31/98 $350,000.00
-------------------------------------------------------------
01/01/99 to 12/31/99 $250,000.00
-------------------------------------------------------------
01/01/00 to 05/30/2005 $100,000.00
-------------------------------------------------------------
</TABLE>
Furthermore, if Landlord issues any portion of the Construction Loan to or on
behalf of Tenant, then during the first five (5) full years of the term of the
Lease the amount of the security deposit shall be increased by the amount of the
Construction Loan, and, commencing on the fifth (5th) anniversary of the
Commencement Date, the required security deposit shall be $100,000.00. Landlord
and Tenant each agree that they shall, within twenty (20) days after a written
requested. by the ether party, enter into a reasonable amendment of this Lease
(i) confirming, if applicable, the amount of the security deposit as so
increased, and (ii) substituting a corrected amortization schedule based on the
actual amount of the Construction Loan for the sample authorization schedule
attached to this Lease as Appendix H.
18. EXCUSE OF LANDLORD'S INABILITY TO PERFORM. This Lease and the
-----------------------------------------
obligation of Tenant to pay rent hereunder and perform all of Tenant's covenants
and agreements hereunder shall not be impaired nor shall Landlord be in default
hereunder because Landlord is unable to fulfill any of its obligations under
this Lease, if Landlord is prevented or delayed from so doing by any accident,
breakage, repairs, alterations, improvements, strike or labor troubles, or any
outside cause whatsoever beyond the reasonable control of Landlord, including
but not limited to, energy shortages or governmental preemption in connection
with a national emergency, or by reason of government laws or any rule, order or
regulation of any department or subdivision thereof of any governmental agency,
or by reason of the conditions of supply demand which have been or are affected
by war or other emergency.
20. NOTICES. All notices and approvals to be given by one party to the
-------
other party under this Lease shall be given in writing, mailed or delivered as
follows:
27
<PAGE>
(a) To Landlord
as follows: The John Buck Company
20 South Clark Street
Chicago, Illinois 60603
Attention: General Manager
With a copy to: The Yarmouth Group
1 Atlanta Plaza, Suite 3210
950 East Paces Ferry Road
Atlanta, Georgia 30326
Attention: W. Jerry Sauls
The Yarmouth Group
Two Prudential Plaza, Suite 1300
Chicago, Illinois 60601
Attention: Doris Parker
or such other person at such other address designated by notice sent to
Tenant, and after commencement of the term at the address to which rent is
payable.
(b) To Tenant at the place set forth as Item 12 on the Schedule until
Tenant takes possession of the Premises, and thereafter at the Premises or
at such other address designated by notice to Landlord.
Mailed notices shall be sent by United States Certified or Registered
Mail, postage prepaid. Such notice shall be deemed to have been given upon
posting in the United States mails.
21. QUIET POSSESSION. So long as Tenant shall observe and perform the
----------------
covenants and agreements binding on it hereunder, Tenant shall at all times
during the term herein granted, and subject to the provisions of this Lease,
peacefully and quietly have and enjoy the possession of the Premises without any
encumbrance or hindrance by, from or through Landlord, its successors or
assigns.
22. REAL ESTATE BROKER. Tenant states that it has not dealt with any real
------------------
estate broker except for The John Buck Company and that broker listed, if any,
in Item 13 in the Schedule with respect to this Lease and, to its knowledge no
other broker initiated or participated in the negotiation of this Lease,
submitted or showed the Premises to Tenant or is entitled to any commission in
connection with this Lease. Tenant agrees to indemnify and hold Landlord
harmless from all claims from any other real estate broker for commission or
fees in connection with this space and based on dealings with Tenant.
23. CONDEMNATION. If the Building or Premises are taken by eminent domain
------------
so that the Premises cannot be reasonably used by Tenant for the purposes for
which they are demised, then at the option of either party the Lease may be
terminated effective as of the date of the taking. The entire award for any
total or partial taking shall be paid to and retained by Landlord.
28
<PAGE>
24. NAME OF BUILDING. Tenant agrees that in advertising, publicity, or on
----------------
signs, it will not, without Landlord's prior written consent, use the name TWO
FIRST NATIONAL PLAZA or any similar name or designation or any other name
associated with the Building, except as its postal address and in identifying
its location, and Tenant shall not use pictures or other representations of the
Building in advertising or publicity or on signs. Tenant further agrees that it
shall not use the designations FIRST NATIONAL, FIRST NATIONAL PLAZA, TWO FIRST
NATIONAL PLAZA, or any confusingly similar designation, as a trade name,
trademark or service mark, or component thereof. In addition to all other
rules, promulgated by Lessor from time to time in connection with its management
of the Building, Tenant agrees that Landlord may promulgate or accept such rules
and regulations binding on Tenant as are necessary in connection with Landlord's
use of the name TWO FIRST NATIONAL PLAZA. In the event the name of the Building
is changed, Tenant shall within one (1) year from such change cease using the
name TWO FIRST NATIONAL PLAZA, including, without limitation, any use on its
stationery, business cards and other materials which identify Tenant's location.
25. AGENT FOR SERVICE OF PROCESS. Tenant hereby submits to personal
----------------------------
jurisdiction in the State of Illinois for the enforcement of this Lease and
waives any and all personal rights to object to such jurisdiction for the
purposes of litigation to enforce this Lease. In the event such litigation is
commenced at any time when Tenant is not permanently domiciled in the State of
Illinois, Tenant agrees that service of process may be made and personal
jurisdiction over Tenant obtained, by service of a copy of the summons,
complaint and other pleadings required to commence such litigation upon Tenant's
appointed agent for service of process in the State of Illinois, which agent
Tenant hereby designates to be:
Harold O'Donnell, Ph.D.
American Schools of Professional Psychology, Inc.
220 South State Street
Chicago, Illinois 60604
Tenant agrees that this appointment of an agent for service of process is made
for the mutual benefit of Tenant and Landlord and may not be revoked without
Landlord's consent. Tenant hereby agrees and consents that any such service of
process upon such agent shall be taken and held to be valid personal service
upon Tenant whether or not Tenant shall be then physically present, residing
within, or doing business within the State of Illinois, and that any such
service hall be of the same force and validity as if service were made upon
Tenant when physically present, residing within, or doing business in the State
of Illinois. Tenant waives all claim of error by reason of any such service.
26. TELEPHONE RISER CABLES.
----------------------
A. Landlord has installed telephone riser cables (collectively the "riser
cables") from the outside of the Building to the terminal block on each floor in
the Building. Subject to Landlord's supervision and approval, Tenant shall have
the right to use the riser cables by installing phone lines (the "telephone
lines") from the Premises to the terminal block on the floor or floors on which
the Premises are located. Landlord, however, makes no representations or
warranties with respect to the capacity, suitability or design of the riser
cables or terminal blocks, except that Landlord represents that the riser cables
and terminal blocks have the capacity to allow tenant to hook-up up to twenty
29
<PAGE>
(20) telephone lines to each floor of the Building. If there is more than one
tenant on a floor, Landlord shall allocate hook-ups to the terminal block based
on the proportion of rentable square feet that each tenant occupies on the
floor. The installation and hook-up of telephone lines by Tenant shall be
subject to all of the terms and conditions of this Lease, including, without
limitation, Section 5 of this Lease. At the termination of this Lease, Landlord
shall have the option of requiring Tenant to remove all of its telephone lines
or leave its telephone lines in place.
B. All of the riser cables and terminal blocks in the Building are and
shall be the property of Landlord, and Tenant shall have no rights or interest
therein except as set forth herein. Landlord shall be responsible for
maintaining the riser cables and terminal blocks, and the cost thereof shall be
included in Operating Costs for purposes of this Lease. Under no circumstances,
however, shall Landlord or its agents or employees be liable for, and Tenant
waives all claims with respect to, any damages or losses sustained by Tenant or
any occupant of the Premises, including any property or consequential damages,
resulting from operation or maintenance of the riser cables and terminal blocks.
Without limiting the generality of the foregoing, in no event shall Landlord be
liable for: (a) any damage to Tenant's telephone lines, telephones or other
equipment connected to the telephone lines, (b) interruption or failure of, or
interference with, telephone or other service coming through the telephone lines
to the Premises, or (c) unauthorized eavesdropping or wiretapping.
27. HAZARDOUS SUBSTANCES.
--------------------
A. Defined Terms.
-------------
(1) "Claim" shall mean and include any demand, cause of action,
proceeding, or suit (a) for damages (actual or punitive), losses, injuries
to person or property, damages to natural resources, fines, penalties,
interest, contribution or settlement, or (b) for the costs of site
investigations, feasibility studies, information requests, health or risk
assessments, or Response actions, and (c) for enforcing insurance,
contribution, or indemnification agreements.
(2) "Environmental Law" shall mean and include all federal, state and
local statutes, ordinances, regulations, and rules relating to
environmental quality, health, safety, contamination and clean-up,
including, without limitation, the Clean Air Act, 42 U.S.C. Section 7401 et
--
seq.; the Clean Water Act, 33 U.S.C. Section 1251 et seq., and the Water
--- -- ---
Quality Act of 1987; the Federal Insecticide, Fungicide, and Rodenticide
Act ("FIFRA"), 7 U.S.C. Section 136 et seq.; the Marine Protection,
-- ---
Research, and Sanctuaries Act, 33 U.S.C. Section 1401 et seq.; the National
-- ---
Environmental Policy Act, 42 U.S.C. Section 4321 et seq.; the Noise Control
-- ---
Act, 42 U.S.C. Section 4901 et seq.; the Occupational Safety and Health
-- ---
Act, 29 U.S.C. Section 651 et seq.; the Resource Conservation and Recovery
-- ---
Act ("RCRA"), 42 U.S.C. Section 6901 et seq.; as amended by the Hazardous
-- ---
and Solid Waste Amendments of 1984; the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq.; the Comprehensive Environmental Response,
-- ---
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.,
-- ---
as amended by the Superfund Amendments and Reauthorization Act, the
Emergency Planning and Community Right-to-Know Act, and Radon Gas and
Indoor Air Quality Research Act; the Toxic Substances Control Act ("TSCA"),
15 U.S.C. Section 2601 et seq.; the Atomic Energy Act, 42 U.S.C. Section
-- ---
2011 et seq., and the Nuclear Waste
-- ---
30
<PAGE>
Policy Act of 1982, 42 U.S.C. Section 10101 et seq.; and the Environmental
-- ---
Protection Act of Illinois ("IEPA"), Ill. Rev. Stat. ch. 111 1/2, par. 1001
et seq., and state superlien and environmental clean-up statutes, with
-- ---
implementing regulations and guidelines. Environmental Laws shall also
include all state, regional, county, municipal, and other local laws,
regulations, and ordinances insofar as they are equivalent or similar to
the federal laws recited above or purport to regulate Hazardous Materials.
(3) "Hazardous Materials" shall mean and include the following,
including mixtures thereof: any hazardous substance, pollutant,
contaminant, waste, by-product, or constituent regulated under CERCLA; oil
and petroleum products and natural gas, natural gas liquids, liquefied
natural gas, and synthetic gas usable for fuel; pesticides regulated under
the FIFRA; asbestos and asbestos-containing materials, PCBs, and other
substances regulated under the TSCA; source material, special nuclear
material, byproduct material, and any other radioactive materials or
radioactive wastes, however produced, regulated under the Atomic Energy Act
or the Nuclear Waste Policy Act; chemicals subject to the OSHA Hazard
Communication Standard, 29 C.F.R. (S) 1910.1200 et seq.; and industrial
-- ---
process and pollution control wastes whether or not hazardous within the
meaning of RCRA.
(4) "Manage" means to generate, manufacture, process, treat, store,
use, re-use, refine, recycle, reclaim, blend or bum for energy recovery,
incinerate, accumulate speculatively, transport, transfer, dispose of, or
abandon Hazardous Materials.
(5) "Release" or "Released" shall mean any actual or threatened
spilling, leading, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, or disposing of Hazardous Materials
into the environment, as "environment" is defined in CERCLA.
(6) "Response" or Respond" shall mean action taken in compliance with
Environmental Laws to correct, remove, remediate, cleanup, prevent,
mitigate, monitor, evaluate, investigate, assess, or abate the Release of a
Hazardous Material.
B. Tenant's Obligations with Respect to Environmental Matters. During
----------------------------------------------------------
the term of this Lease, Tenant warrants that (1) Tenant shall at its own cost
comply with all Environmental Laws; (2) Tenant shall not conduct or authorize
the Management of any Hazardous Materials on the Premises, without prior written
disclosure to and approval by the Landlord; (3) Tenant shall not take any action
that would subject the Premises to permit requirements under RCRA for storage,
treatment, or disposal of Hazardous Materials; (4) Tenant shall not dispose of
Hazardous Materials in dumpsters provided by Landlord for Tenant use; (5) Tenant
shall not discharge Hazardous Materials into Building drains or sewers; (6)
Tenant shall not cause or allow the Release of any Hazardous Materials on, to,
or from the Property; and (7) Tenant shall at its own cost arrange for the
lawful transportation and off-site disposal of all Hazardous Materials that it
generates. During the term of this Lease, Tenant shall promptly provide
Landlord with copies of all summons, citations, directives, information
inquiries or requests, notices of potential responsibility, notices of violation
or deficiency, orders or decrees, Claims, complaints, investigations, judgments,
letters, notices of environmental liens or response actions in progress, and
other communications, written or oral, actual or threatened, from the United
States Environmental Protection Agency, Occupational Safety and Health
Administration,
31
<PAGE>
Illinois Environmental Protection Agency, or other federal, state, or local
agency or authority, or any other entity or individual, concerning (i) any
Release of a Hazardous Material on, to, or from the Premises; (ii) the
imposition of any lien on the Premises; or (iii) any alleged violation of or
responsibility under Environmental Laws. Landlord and Landlord's and employees
shall have the right to enter the Premises and/or conduct appropriate
inspections or tests in order to determine Tenant's compliance with
Environmental Laws. Upon written request by Landlord, Tenant shall provide
Landlord with the results of appropriate reports and tests, with transportation
and disposal contracts for Hazardous Materials, with any permits issued under
Environmental Laws, and with any other applicable documents to demonstrate that
Tenant complies with all Environmental Laws relating to the Premises. If
Tenant's Management of Hazardous Materials at the Premises (i) gives rise to
liability or to a Claim under any Environmental Law, (ii) causes a significant
public health effect, or (iii) creates a nuisance, Tenant shall promptly take
all applicable action in Response.
C. Indemnification. Tenant shall indemnify, defend, and hold harmless
---------------
Landlord, its beneficiaries, its lenders, any managing agents and leasing agents
of the Premises, and their respective agents, partners, officers, directors, and
employees from all claims arising from or attributable to any breach by Tenant
of any of its warranties, representations, or covenants in this Section.
Tenant's obligations hereunder shall survive the termination or expiration of
this Lease.
Failure by Tenant to comply with the warranties, representations, and
covenants in this Article constitute a default under this Lease.
28. MISCELLANEOUS.
-------------
A. Covenants Binding on Successors. Subject to the terms and provisions
-------------------------------
of Section 14 of this Lease, each provision of this Lease shall extend to and
shall, as the case may require, bind and inure to the benefit of Landlord and
Tenant and their respective heirs, legal representatives and successors and
assigns.
B. Date Payments Are Due. All amounts owed to Landlord hereunder, for
---------------------
which the date of payment is not expressly fixed herein, shall be paid within
thirty (30) days from the date Landlord renders statements of account therefor
and shall bear interest at the rate provided in Section 2E(3) from the date due
until paid.
C. Meaning of "Re-entry". The words "re-enter" and "re-entry" as used in
---------------------
this Lease are not restricted to their technical legal meaning.
D. Time Is of the Essence. Time is of the essence of this Lease and each
----------------------
and all of its provisions.
E. No Option. Submission of this instrument for examination or signature
---------
by Tenant does not constitute a reservation of or option for lease, and it is
not effective as a lease or otherwise until execution and delivery by both
Landlord and Tenant.
F. Severability. The invalidity or unenforceability of any provision
------------
hereof shall not affect or impair any other provisions.
32
<PAGE>
G. Governing Laws. The Lease shall be governed by and construed pursuant
--------------
to the laws of the State of Illinois.
H. Lease Modification. Should any mortgagee require a modification of
------------------
this Lease, which modification will not bring about any increased cost or
expense to Tenant or in any other way substantially change the rights and
obligations of Tenant hereunder, Tenant agrees that this Lease may be so
modified.
I. Litigation and Arbitration Costs. In the event of any litigation or
--------------------------------
arbitration between Tenant and Landlord to enforce any provision of this Lease
or any right of either party hereto, the unsuccessful party to such litigation
or arbitration shall pay to the successful party all costs and expenses,
including reasonable attorney's fees, incurred therein. Furthermore, if
Landlord, without fault, is made a party to any litigation instituted by or
against Tenant, Tenant shall indemnify Landlord against, and protect, defend,
and save it harmless from, all costs and expenses, including reasonable
attorney's fees, incurred by it in connection therewith. If Tenant, without
fault, is made party to any litigation instituted by or against Landlord,
Landlord shall indemnify Tenant against, and protect, defend, and save it
harmless from, all costs and expenses including reasonable attorney's fees,
incurred by it in connection therewith.
J. Captions. The marginal headings and tides to the paragraphs of this
--------
Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.
K. Remedies and Rights May Be Exercised by Landlord In Its Own Name;
-----------------------------------------------------------------
Authority to Execute This Lease. All rights and remedies of Landlord under this
- -------------------------------
Lease, or that may be provided by law, may be exercised by Landlord in its own
name individually, or in its name by any agent thereof, and all legal
proceedings for the enforcement of any such rights or remedies, may be commenced
and prosecuted to final judgment and executed by Landlord its own name
individually or in its name by any agent thereof. Landlord and Tenant each
represents to the other that it has full power and authority to execute this
Lease and to make and perform the agreements herein contained.
L. Payments to Affiliates. Nothing in this Lease shall be construed to
----------------------
prevent Landlord from paying for services rendered or materials delivered with
respect to the Building or to the demised premises (including, without
limitation, management services and contracting out capital improvements or
other capital repairs or construction items) by affiliates of Landlord or its
beneficiary provided that the fees or costs of such services and materials are
at market rates in the Chicago metropolitan area. All such fees or costs paid
by Landlord to such affiliates shall be deemed to constitute Operating Costs on
the same terms and conditions as if such fees and costs were paid to non-
affiliates of Landlord or its beneficiaries.
M. Limitation of Landlord's Liability. The obligations of Landlord under
----------------------------------
this Lease do not constitute personal obligations of the individual partners,
directors, officers, shareholders, trustees or beneficiaries of Landlord, and
Tenant shall not seek recourse against the partners, directors, officers,
shareholders, trustees or beneficiaries of Landlord, or any of their personal
assets for satisfaction of any liability with respect to this Lease. In the
event of any default by Landlord under this Lease, Tenant's sole and exclusive
remedy shall be against the Landlord's interest in the Building and the real
property on which it is located. The provision of this Section are not designed
to relieve
33
<PAGE>
Landlord from the performance of any of any of its obligations hereunder, but
rather to limit Landlord's liability in the case of the recovery of a judgment
against it, as aforesaid, nor shall any of the provisions of this Section be
deemed to limit or otherwise affect Tenant's right to obtain injunctive relief
or specific performance or availability of any other right or remedy which may
be accorded Tenant by law or the Lease. In the event of sale or other transfer
of Landlord's right, title and interest in the Building and an assumption of
this Lease by the purchaser or transferee, Landlord shall thereafter be released
from all liability and obligations hereunder; provided, that this Section shall
inure to the benefit of any such purchaser or transferee.
N. No Personal Liability of Trustee. This Lease is executed by American
--------------------------------
National Bank and Trust Company of Chicago, not personally but solely as Trustee
as aforesaid. All covenants and conditions to be performed hereunder by
American National Bank and Trust Company of Chicago are undertaken by it solely
as Trustee, as aforesaid, and not individually, and no personal liability shall
be asserted or be enforced against American National Bank and Trust Company of
Chicago, the beneficiaries thereof or their agents or representatives by reason
of any of the covenants, statements, representations or warranties contained in
this Lease.
O. Appendices and Rider. The following appendices and Rider are attached
--------------------
to and incorporated in this Lease: Appendix A (Plan of the Premises), Appendix B
(Cleaning Schedule), Appendix C (Rules and Regulations), Appendix D (Work Letter
Agreement), Appendix E (Form of Letter of Credit), Appendix F (Landlord's
Asbestos and Abatement Work), Appendix G (Tenant's Sign), Appendix H (Example of
Amortization Schedule for Construction Loan), Appendix I (Tenant's Space Plan),
and the Rider.
IN WITNESS WHEREOF, the parties hereto have executed this Lease on the date
first above written.
LANDLORD: TENANT:
AMERICAN NATIONAL BANK AND AMERICAN SCHOOLS OF
TRUST COMPANY OF CHICAGO, not PROFESSIONAL PSYCHOLOGY, INC.,
personally but as Trustee as aforesaid an Illinois corporation
By: /s/ J.M. Whelan By: /s/ Michael Markovitz
------------------------------- -----------------------------
Name: J.M. Whelan Name: Michael Markovitz
---------------------------- --------------------------
Title: VP Title: Chairman
---------------------------- --------------------------
34
<PAGE>
RIDER
-----
ADDITIONAL LEASE PROVISIONS
---------------------------
THIS RIDER (the "Rider") is attached to and made a part of that certain
-----
lease dated September 8, 1994 (the "Lease"), between American National Bank and
-----
Trust Company of Chicago, not personally but as trustee under a Trust Agreement
dated October 1, 1988, and known as Trust No. 106528-08 (the "Landlord") and
--------
American Schools of Professional Psychology, Inc., an Illinois corporation (the
"Tenant"), for certain premises located on Floors 1, Mezzanine, 2 and 3 of the
------
property commonly known as Two First National Plaza, 20 South Clark Street,
Chicago, Cook County, Illinois. All capitalized terms not defined herein shall
have their respective meanings set forth in the Lease. To the extent of any
conflict between the terms and provisions of the Lease and the terms and
provisions of this Rider, the terms and provisions of this Rider shall prevail.
1. Premises. The Premises shall consist of approximately 31, 726 square
--------
feet of rentable area consisting of the following space: (i) a portion of Floor
1 of the Building (containing approximately 4,205 square feet of rentable area),
(ii) the Mezzanine of the Building (containing approximately 2,473 square feet
of rentable area), and (iii) Floors 2 and 3 (each such floor containing
approximately 12,524 square feet of rentable area). The Premises are depicted
on Appendix A attached to and by this reference made a part of the Lease.
2. Base Rent. Tenant shall pay Annual Base Rent throughout the term of
---------
the Lease pursuant to the following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
MONTHLY
BASE RENT PER INSTALLMENTS OF BASE
PERIOD RENTABLE SQUARE FOOT ANNUAL BASE RENT RENT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3/26/95-4/30/96 $3.72 $118,020.72 $ 9,835.06
- --------------------------------------------------------------------------------------------------
5/1/96-4/30/97 $4.22 $133,883.72 $11,156.98
- --------------------------------------------------------------------------------------------------
5/1/97-4/30/98 $4.22 $133,883.72 $11,156.98
- --------------------------------------------------------------------------------------------------
5/1/98-4/30/99 $5.22 $165,609.72 $13,800.81
- --------------------------------------------------------------------------------------------------
5/1/99-4/30/00 $5.72 $181,472.72 $15,122.73
- --------------------------------------------------------------------------------------------------
5/1/00-4/30/01 $7.72 $244,924.72 $20,410.39
- --------------------------------------------------------------------------------------------------
5/1/01-4/30/02 $7.72 $244,924.72 $20,410.39
- --------------------------------------------------------------------------------------------------
5/1/02-4/30/03 $8.22 $260,787.72 $21,732.31
- --------------------------------------------------------------------------------------------------
5/1/03-4/30/04 $8.22 $260,787.72 $21,732.31
- --------------------------------------------------------------------------------------------------
5/1/04-4/30/05 $8.72 $276,650.72 $23,054.23
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The amounts set forth above as "Base Rent per rentable square foot",
"Annual Base Rent", and "Monthly Installments of Base Rent" are "net" amounts
and are to be paid by Tenant in addition to and no in lieu of Operating
Adjustment Rent, Tax Adjustment Rent and Additional Rent, as such terms are
defined in the Lease.
3. Delivery of Premises. Landlord shall, subject to the provisions of
--------------------
this Section, deliver possession of the Premises to Tenant twelve (12) weeks
after the date the Lease is fully executed and delivered by Landlord and Tenant.
If Landlord is not able to deliver to Tenant possession of all or a portion of
the Premises on or before the date on which delivery is so required, Landlord
shall not be subject to any liability for such failure to deliver possession.
Such failure to deliver possession shall not affect either the validity of the
Lease or the obligations either landlord or Tenant thereunder, or be construed
to extend the expiration of the term of the Lease. Notwithstanding the
foregoing, if Landlord is not able to deliver to Tenant possession of all of the
Premises within twenty (20) weeks after the date the Lease is fully executed and
delivered by Landlord and Tenant, Tenant may, at its option, and as its sole
remedy, terminate the Lease by delivering written notice of termination to
Landlord before the earlier to occur of (i) ten (10) days after the end of such
twenty (20) week period, and (ii) the date on which Landlord delivers possession
of all of the Premises to Tenant. Landlord shall deliver possession of the
Premises to Tenant in their as-is condition without representation or warranty
of any kind provided that Landlord shall complete (a) the work identified on
Appendix F attached to and made part of the Lease ("Landlord's Asbestos
-------------------
Abatement Work"), (b) the base building work identified on Schedule 1 to the
- --------------
Work Letter Agreement attached to the Lease as Appendix D prior to such delivery
of possession, and (c) removal of the teller stations located on the Mezzanine
level of the Building. Notwithstanding the foregoing, Landlord agrees to use
reasonable efforts to (i) complete Landlord's Asbestos Abatement Work on Floor
3, (ii) complete the base building work on Floor 3, and (iii) deliver possession
of Floor 3 to Tenant within eight (8) weeks after the date the Lease is fully
executed and delivered by Landlord and Tenant.
4. Early Occupancy. Provided that (a) Landlord's Asbestos Abatement Work
---------------
has been completed, (b) the tenant improvement work described in the Work Letter
Agreement attached to the Lease as Appendix D has been completed, and (c) Tenant
is not then in default under the terms of the Lease, Tenant may occupy the
Premises as of December 1, 1994 under all of the terms and conditions of the
Lease, except that Tenant shall not be obligated to commence paying Annual Base
Rent until March 26, 1995.
5. Landlord's Option to Terminate. Landlord shall have the option to
------------------------------
terminate this Lease effective as of December 31, 1999 (the "Early Termination
-----------------
Date") by delivering written notice (the "Termination Notice") of such election
- ---- ------------------
to Tenant on or before January 1, 1999. If Landlord delivers the Termination
Notice to tenant the Lease shall be deemed to have expired by lapse of time on
the Early Termination Date and Tenant shall return the Premises to Landlord on
the Early Termination Date in accordance with the terms of the Lease. Tenant
shall not be released from the payment of rent or any other obligations accruing
prior to the Early Termination Date. If Landlord so exercises its option to
terminate the Lease and if Tenant vacates the Premises on or before the Early
Termination Date and is not in default of any of its monetary obligations under
the terms of the Lease or in Default of any of its non-monetary obligations
under the terms of the Lease, Landlord shall, within thirty (30) days after the
Early Termination Date, pay to Tenant a termination fee (the "Termination Fee")
---------------
in an amount equal to the sum of the Annual Base Rent, Operating Adjustment
Rider-Page 2
<PAGE>
Rent and Tax Adjustment Rent accruing under the Lease during the preceding
twelve (12) months. Tenant acknowledges that the Termination Fee shall not
include any amounts paid orpayable by Tenant in connection with the Construction
Loan (as defined in Appendix D to the Lease).
6. Use. Tenant shall use the Premises solely for the purpose of
---
operating a graduate school of psychology including classrooms, a bookstore and
related office purposes, and for no other uses. Tenant acknowledges that the
primary use of the Building is as a first-class office building and that
Landlord has a legitimate interest in preserving the character of the Building
as a first-class office building for the benefit of the other tenants of the
Building. Tenant agrees that it shall comply with, and cause its employees,
students, invitees and guests to comply with, all reasonable rules and
regulations established by Landlord from time to time concerning use of the
Premises, the common areas of the Building and the sidewalks adjacent to the
Building, including, but not limited to, rules and regulations regarding
security, loitering and noise. If Tenant or its employees, students, invitees
or guests fail to comply with such rules and regulations, and if, as a
consequence, Landlord incurs costs to remedy any damage to the Building or
disruption of the character of the Building as a first-class building (such as
janitorial services, extra security guards or other costs), Tenant shall, on
demand, reimburse Landlord for all such costs (not limited to Tenant's
proportionate share thereof) plus fifteen percent (15%) of such costs toward
Landlord's overhead.
7. Principal Entrance to Premises. Except as hereinafter provided in
------------------------------
this Section 7, Tenant shall not be permitted to have access to the Premises
through the Building lobby on the first floor of the Building. The principal
entrance to the Premises shall be located on the second floor of the Building,
subject to the terms of this Section 7. If Landlord determines that use of the
principal entrance to the Premises on the second floor of the Building results
in an excessive amount of pedestrian traffic or places an inordinate burden on
the Building's elevators, Landlord shall have the right, at Landlord's expense,
to relocate such principal entrance to the first floor of the Building at a
location to be determined by Landlord in its reasonable discretion. Tenant
acknowledges that such relocated principal entrance may, at landlord's option,
consist of a storefront entrance to the Premises directly from Clark Street.
Tenant agrees to fully cooperate with any such relocation, including, but not
limited to, granting Landlord entry to the Premises as may be necessary to
effectuate such relocation, provided that Landlord agrees to use reasonable
efforts to avoid unduly disrupting Tenant's business in relocating such
entrance. Tenant acknowledges and agrees that any such entry by Landlord into
the Premises for the purpose of so relocating the principal entrance to the
Premises shall not be deemed to be a constructive or actual eviction of Tenant
and shall not entitle Tenant to any rental reduction, rental abatement or other
remedy or damages.
8. Miscellaneous Alterations to the Premises. Prior to the commencement
-----------------------------------------
of the term of the Lease, Landlord may, at Landlord's option and expense, (a)
remove the entrance doors of the Premises currently located adjacent to the
first floor lobby (the "Existing First Floor Doors") and construct a fire exit
--------------------------
door on the first floor of the Premises in a location determined by Landlord, or
(b) cover the Existing First Floor Doors with opaque glass or other materials
chosen by Landlord and convert such Existing First Floor Doors to a fire exit.
Tenant acknowledges that Landlord shall have the option, exercisable at any time
during the term of the Lease and at Landlord's expense, to render opaque or
cover over the windows of the Premises located on the first floor of the
Building. Tenant shall fully cooperate with Landlord in accomplishing the
foregoing including, but not limited to, granting Landlord entry to the Premises
to effectuate the same. Tenant acknowledges and agrees that
Rider-Page 3
<PAGE>
any such entry shall not be deemed to be a constructive or actual eviction of
Tenant and shall not entitle Tenant to any rental reduction, rental abatement or
other remedy or damages.
9. Signage. Landlord shall cooperate with Tenant in permitting Tenant,
-------
at Tenant's expense, to display a sign ("Tenant's Sign") identifying tenant as
-------------
"ISPP", which sign shall be adjacent to the Premises and located on the ground
floor of the Building. Tenant's Sign shall be in the form of the drawing
attached to the Lease as Appendix G. Tenant acknowledges and agrees that the
location, size, character and method of affixing such sign shall be subject to
Landlord's approval. Such sign shall include only the letters "ISPP" (which
letters shall be no more than ten (10) inches high) and no other letters, words,
signs or symbols, provided that in the event Tenant elects to change the name
under which it does business at the Premises, Tenant may substitute a different
acronym for "ISPP" which different acronym shall contain up to four letters, and
provided further that such change in acronym shall be subject to the reasonable
approval of Landlord.
10. Trustee Exculpation. This Rider is executed by American National Bank
-------------------
and Trust Company of Chicago, not personally but solely as Trustee as aforesaid.
All covenants and conditions to be performed hereunder by American National Bank
and Trust Company of Chicago are undertaken by it solely as Trustee, as
aforesaid, and not individually, and no personal liability shall be asserted or
enforced against American National Bank and Trust Company of Chicago, the
beneficiaries thereof, or their agents or representatives by reason of any of
the covenants, statements, representations or warranties contained in this Rider
or the Lease.
IN WITNESS WHEREOF, the undersigned have executed this Rider to Lease as of
the day and year first above written.
LANDLORD: TENANT:
AMERICAN NATIONAL BANK AND AMERICAN SCHOOLS OF
TRUST COMPANY OF CHICAGO, not PROFESSIONAL PSYCHOLOGY, INC.,
personally but as Trustee as aforesaid an Illinois corporation
By: /s/ J.M. Whelan By: /s/ Michael Markovitz
------------------- -------------------------
Its: VP Its: Chairman
--------------- --------------------
Rider-Page 4
<PAGE>
APPENDIX B
----------
CLEANING SCHEDULE
-----------------
Landlord shall furnish janitorial service as described below:
MONDAY THROUGH FRIDAY, INCLUSIVE
1. Sweep, dry mop or vacuum all floors complete.
2. Empty and damp wipe all ashtrays.
3. Dust all horizontal surfaces that can be reached without a ladder with a
treated cloth, mitt or duster.
4. Clean, polish and sanitize all drinking fountains.
5. Sweep all steps, sidewalks, and plazas.
6. Clean passenger elevator cab and landing doors, including floors.
7. Empty all waste containers.
8. Clean all public wash and restrooms.
(a) All cleaning will be performed with approved germicidal detergents at
disinfectant strengths.
(b) All toilets and urinals will be cleaned on all surfaces nightly; acid
bowl cleaner to be used in the interior.
(c) All wash basins, shelves, dispensers and all other washroom fixtures
will be cleaned nightly.
(d) All mirrors will be cleaned and polished nightly.
(e) All chrome and other bright work, including exposed plumbing, toilet
seat hinges, etc., will be cleaned and polished nightly.
(f) All waste receptacles will be emptied and cleaned nightly.
(g) All lavatory floors will be swept and mopped with a germicidal
detergent solution nightly.
(h) Washroom supplies will be replenished as needed.
Page 1 of 2
<PAGE>
(i) Once each month, hard water stains will be removed from toilet
fixtures by using bowl cleaner after normal cleaning in accordance
with manufacturer's recommendations.
9. All normal rubbish and office waste paper shall be removed from Tenant
floors and carried to a designated location. Tenant shall pay Landlord's
charges for excess trash removal upon billing as Additional Rent.
WEEKLY
1. Dust and wipe clean with dust cloth all desk tops.
2. Spot clean all doors, switch plates, walls and glass areas adjacent to
doors.
3. Dust and wipe all tops of all file cabinets and counters.
4. Sweep building stairwells.
5. Damp mop floors and/or spray buff for heavy scuffs, if necessary.
6. Clean glass in building directory.
7. Wipe all waste containers.
8. Wash all glass entrance doors and side panels inside and out.
MONTHLY
1. When possible, sweep and hose down exterior walks, trucking areas and
shipping platforms.
2. Dust all windowsills.
3. Shampoo common area carpeting.
EVERY THREE MONTHS
1. Dust vertical surfaces of all furniture.
2. Scrub all resilient floor areas so as to maintain a highly polished
surface.
WINDOW CLEANING
Wash all windows, both interior and exterior, at reasonable intervals to be
determined by Landlord.
Page 2 of 2
<PAGE>
APPENDIX C
----------
RULES AND REGULATIONS
---------------------
1. Tenant shall not place anything, or allow anything to be placed near
the glass of any window, door, partition or wall which may, in Landlord's
judgment, appear unsightly from outside the Building.
2. The Building directory shall be available to Tenant solely to display
Tenant's names and their location in the Building, which display shall be as
directed by Landlord. Tenant shall be permitted to use up to 25 slots in the
Building directory to identify its divisions, departments, officers and faculty.
3. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenant or used by Tenant for any purposes
other than for ingress to and egress from the Premises. The halls, passages,
exits, entrances, elevators, stairways, balconies and roof are not for the use
of the general public and Landlord shall, in all cases, retain the right to
control and prevent access thereto by all persons whose presence in the judgment
of Landlord, reasonably exercised, shall be prejudicial to the safety,
character, reputation and interests of the Building. Neither Tenant nor any
employee or invitee of any tenant shall go upon the roof of the Building.
4. The toilet rooms, urinals, wash bowls and other apparatuses shall not
be used for any purposes other than that for which they were constructed, and no
foreign substance of any kind whatsoever shall be thrown therein, and to the
extent caused by Tenant or its employees or invitees, the expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by Tenant.
5. Tenant shall not cause any unnecessary janitorial labor or services by
reason of Tenant's carelessness or indifference in the preservation of good
order and cleanliness.
6. No cooking shall be done or permitted by Tenant on the Premises, nor
shall the Premises be used for lodging. Notwithstanding the foregoing, Tenant
may install microwave ovens in the Premises for the exclusive use of Tenant's
employees and students.
7. Tenant shall not bring upon, use or keep in the Premises or the
Building any kerosene, gasoline or inflammable or combustible fluid or material,
or use any method of hearing or air conditioning other than that supplied by
Landlord.
8. Landlord shall have sole power to direct electricians to where and how
telephone and other wires are to be introduced. No boring or cutting for wires
is to be allowed without the consent of landlord. The location of telephones,
call boxes and other office equipment affixed to the Premises shall be subject
to the approval of Landlord.
9. Upon the termination of the tenancy, Tenant shall deliver to Landlord
all keys and passes for offices, rooms, parking lot and toilet which shall have
been furnished Tenant. In the event
Page 1 of 3
<PAGE>
of the loss of any keys so furnished, Tenant shall pay Landlord therefor. Tenant
shall not make, or cause to be made, any such keys and shall order all such keys
solely from Landlord and shall pay Landlord for any additional such keys over
and above the two sets of keys furnished by Landlord.
10. Tenant shall not install linoleum, tile, carpet or other floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Landlord.
11. No furniture, packages, supplies, equipment or merchandise will be
received in the Building or carried up or down in the freight elevator, except
between such hours and in such freight elevator as shall be designated by
Landlord.
12. Tenant shall cause all doors to the Premises to be closed and securely
locked before leaving the Building at the end of the day.
13. Without the prior written consent of Landlord, Tenant shall not use
the name of the Building or any picture of the Building in connection with, or
in promoting or advertising the business of, Tenant, except Tenant may use the
address of the Building as the address of its business.
14. Tenant shall cooperate fully with Landlord to assure the most
effective operation of the Premises' or the Building's heating and air
conditioning, and shall refrain from attempting to adjust controls. Tenant
shall keep corridor doors closed.
15. Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed and secured.
16. Peddlers, solicitors and beggars shall be reported to the office of
the Building or as Landlord otherwise requests.
17. Tenant shall not advertise the business, profession or activities of
Tenant conducted in the Building in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities.
18. Tenant shall allow no animals or pets to be brought or remain in the
Building or any part thereof, except that blind persons may be accompanied by
"seeing eye" dogs.
19. Tenant acknowledges that Building security problems may occur which
may require the employment of extreme security measures in the day-to-day
operation of the Building.
Accordingly:
(a) Landlord may, at any time, or from time to time, or for regularly
scheduled time periods, as deemed advisable by Landlord and/or its agents,
in their sole discretion, require that persons entering or leaving the
Building or the Property identify themselves to watchmen or other employees
designated by Landlord, by registration, identification or otherwise.
Page 2 of 3
<PAGE>
(b) Tenant agrees that it and its employees will cooperate fully with
Building employees in the implementation of any and all security
procedures.
(c) Such security measures shall be the sole responsibility of
Landlord, and Tenant shall have no liability for any action taken by
Landlord in connection therewith.
20. Tenant shall not sell alcoholic beverages without first obtaining
written consent of Landlord which may be withheld within the sole discretion of
Landlord.
21. Tenant shall not disturb the quiet enjoyment of any other tenant.
22. Tenant shall not provide any janitorial services or cleaning without
Landlord's written consent and then only subject to supervision of Landlord and
at Tenant's sole responsibility and by janitor cleaning contractor or employees
at all times satisfactory to Landlord.
23. Except with respect to Tenant's Sign as defined in Section 9 to the
Rider to the Lease, Tenant shall not install or permit to be installed any signs
which would be visible from the exterior of the Building or from within its
lobbies without Landlord's approval.
Page 3 of 3
<PAGE>
APPENDIX D
----------
WORK LETTER AGREEMENT
---------------------
TWO FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS
This is the Work Letter Agreement referred to in the foregoing lease (the
"Lease") made between American National Bank and Trust Company of Chicago, not
- ------
personally, but as Trustee under Trust Agreement dated October 1, 1988 and known
as Trust No. 106528-08, as Landlord and American Schools of Professional
Psychology, Inc., an Illinois corporation, as Tenant, in which Tenant is
leasing certain space from Landlord in a building known as Two First National
Plaza located at 20 South Clark Street, Chicago, Illinois. Capitalized terms
used herein, unless otherwise in this Tenant Work Letter, shall have the
respective meanings assigned to them in the Lease.
Landlord and Tenant agree as follows:
1. Tenant's Work. Tenant shall, at Tenant's own cost and expense except
-------------
for the Construction Allowance (as hereinafter defined), perform all work
("Tenant's Work") necessary or desirable to improve the Premises to a finished
- ---------------
condition ready for the conduct of Tenant's business therein. Tenant's Work
shall include, among other things, the following:
a. Electrical lighting, fixtures and appliances. Tenant shall apply
and pay for all electrical and other utility meters, including necessary
switchgear feeders and distribution panels required in excess of building
standard.
b. Floor covering required by Tenant, if any.
c. Wall treatment required by Tenant, if any.
d. Fixtures, decorating and furnishings required by Tenant.
e. Water lines, if any, required by Tenant, from then existing
locations in the Premises to locations desired by Tenant.
f. Doors, door frames and hardware.
g. Plumbing facilities, including fixtures required by Tenant.
h. Equipment and facilities for air conditioning and heating.
D-1
<PAGE>
i. Building standard window treatments except on Floor 1 of the
Building, provided that Tenant shall use the existing blinds on Floor 1 of
the Building.
j. Other work to improve the Premises for occupancy which is required
or desired by Tenant.
Tenant's Work shall be performed in accordance with Tenant's Plans (defined
in Section 3(b)(i) hereof) approved in advance by Landlord, and subject to the
other terms and conditions of this Work Letter and to the terms and conditions
of the Lease. Tenant's Work shall not affect the structure or systems of the
Building except as may be expressly permitted by Landlord. In addition to
Tenant's Work as set forth in this Work Letter Agreement, certain other work
shall be performed in the Premises by Landlord as set forth on Schedule I
attached to this Work Letter Agreement and on Appendix F attached to the Lease.
2. Pre-Construction Documentation.
------------------------------
a. Upon execution and delivery of the Lease, Tenant shall submit the
following information and items to Landlord:
(i) The scheduled commencement date of construction of Tenant's
Work and the estimated date of completion of construction.
(ii) An itemized statement of estimated construction cost,
including permits and fees and architectural, engineering
and contracting fees (the "Estimated Cost of Tenant's
--------------------------
Work").
(iii) Tenant shall deposit with Landlord or with a title company
selected by Landlord cash equal to the amount by which the
Estimated Cost of Tenant's Work exceeds the Construction
Allowance ("Tenant's Deposit "), as more particularly
----------------
described in Section 7 hereof.
b. All contracts with Tenant's Contractors (as defined in Section
5(c) below) shall be subject to the prior written approval of Landlord.
Landlord agrees to notify Tenant of its approval or disapproval within ten
(10) days after Tenant's request therefor.
c. Tenant shall submit the following information and items to
Landlord not less than ten (10) days prior to commencement of construction
of Tenant's Work:
(i) The names and addresses of Tenant's Contractors. Landlord
shall have the right to approve Tenant's Contractors and
Tenant shall employ as Tenant's Contractors only those
persons or entities approved by Landlord which approval
shall not be unreasonably withheld or delayed. In addition
to the foregoing. Tenant agrees that it shall select the
contractor for the performance of electrical work from
among the following contractors: Rex Electric or Accord
Electric. Tenant agrees that it shall select the contractor
for the
D-2
<PAGE>
performance of mechanical work from among the following
contractors: Competitive Piping Systems, Inc. or Kroeschell
Engineering Company.
(ii) An updated itemized statement of estimated construction
cost, including permits and fees and architectural,
engineering and contracting fees.
(iii) Certified copies of insurance policies or certificates of
insurance as hereinafter described. Tenant shall not permit
Tenant's Contractors to commence work until the required
insurance has been obtained and certified copies of
policies or certificates have been delivered to Landlord.
d. Tenant will update such information and items by notice to
Landlord of any changes.
3. Submission of Drawings. Tenant shall comply with the following
----------------------
procedure for approval of Tenant's Plans by Landlord:
a. Landlord hereby confirms that it has approved a preliminary
conceptual layout ("Space Plan") of the Premises for use in evaluation of
----------
space utilization in the Premises ("Space Plan ") prepared by Quantum
----------
Design Group, Inc. ("Tenant's Architect") for Tenant at Tenant's expense,
------------------
which Space Plan is attached to the Lease as Appendix I.
b. Not more than forty-five (45) days after the date the Lease is
fully executed and delivered by Landlord and Tenant, Tenant shall deliver
to Landlord for its approval three (3) black-and-white prints and one (1)
reverse sepia transfer of Tenant's plans prepared by Tenant's Architect
based on the approved Space Plan.
(i) "Tenant's Plans" means the plans and specifications
--------------
(including architectural, mechanical and electrical working
drawings) for the supply, installation and finishing in the
Premises of Tenant's Work, including without limitation all
partitions; doors and hardware; ceilings; wiring, lights and
switches; heating, cooling and ventilation equipment and
controls; telephone and electrical outlets; floor covering;
drapes; built-ins; plumbing and fixtures; fire protection,
fire warning and security systems; and other equipment and
facilities attached to and forming part of the Building.
(ii) Tenant's Plans shall be prepared at Tenant's sole cost and
expense by Tenant's Architect and Environmental Systems
Design, Inc. ("Environmental Systems"). Environmental
---------------------
Systems will design the electrical, plumbing and mechanical
components of Tenant's Plans. Tenant shall pay all
reasonable and customary fees and costs of Landlord's
architect and engineer in reviewing the Space Plan,
D-3
<PAGE>
Tenant's Plans, specifications and drawings, in the event
that such review is required by Landlord in its reasonable
discretion.
(iii) Not more than ten (10) days after receipt by Landlord of
the Tenant's Plans, Landlord shall notify Tenant either of
its approval thereof or of changes required, and of any
modifications required. If Landlord notifies Tenant that
changes are required, Tenant shall, within ten (10) days of
that notification, submit to Landlord, for its approval,
Tenant's Plans amended by Tenant and Tenant's Architect in
accordance with the changes so required. Landlord shall
notify Tenant of its approval or disapproval of the amended
Tenant's Plans within five (5) days after Landlord's
receipt thereof and Tenant shall have any changes to the
Tenant's Plans required by Landlord made within five (5)
days after the date Tenant receives notice thereof. Upon
Landlord's notification to Tenant of approval by Landlord
of Tenant's Plans, Tenant shall promptly submit Tenant's
Plans for pricing and to appropriate authorities for the
issuance of a building permit.
(iv) Approvals or disapprovals on behalf of Landlord may be
given by Landlord, its beneficiary or such architect or
other representative as any of such persons may from time
to time designate. Landlord shall give reasons for any
disapproval. Landlord's approval shall not constitute an
assumption by Landlord of responsibility for the accuracy
or sufficiency of Tenant's Plans, for compliance with law
or performance standards or otherwise. Tenant shall submit
any changes to Tenant's Plans to Landlord for approval
before commencing any work with respect to such changes.
Unless otherwise agreed by Landlord, all drawings provided
by Tenant hereunder shall be of uniform size not exceeding
30" x 42" and to a minimum scale of one eighth inch equals
one foot.
4. Delivery of Premises; Commencement of Tenant's Work
---------------------------------------------------
a. Landlord shall deliver possession of the Premises to Tenant as
and when provided in Section 3 to the Rider to the Lease. All of the terms
and provisions of the Lease shall be binding upon Tenant from and after the
date on which Tenant takes possession of the Premises except that Rent
shall accrue only from and after the Commencement Date as provided in the
Lease.
b. No construction work shall be undertaken or commenced by Tenant
in the Premises until:
(i) Landlord's Asbestos Abatement Work (as defined in Section 3
to the Rider to the Lease) has been completed (provided that
Tenant may commence its work on Floor 3 if Landlord's
Asbestos Abatement
D-4
<PAGE>
Work on such floor has been completed and the other
conditions set forth in this Section 4(b) have been
satisfied),
(ii) Tenant's Plans have been submitted to and approved by
Landlord,
(iii) all necessary building permits have been obtained by
Tenant,
(iv) all required insurance coverages have been obtained by
Tenant, and evidence thereof provided to Landlord,
(v) Tenant shall have delivered Tenant's Deposit, if
applicable, to Landlord or to a title company selected by
Landlord pursuant to Section 7 hereof,
(vi) items required to be submitted to Landlord prior to
commencement of construction of Tenant's Work have been so
submitted and have been approved, where required, and
(vii) Landlord has given written notice that the work can
proceed, subject to such reasonable conditions as Landlord
may impose. Landlord agrees to give such notice (and inform
Tenant of such reasonable conditions (if any)) promptly
after satisfaction of the requirements of items (i) through
(vi) of this Section 4(b).
5. Standards of Design and Construction of Tenant's Work and Conditions
--------------------------------------------------------------------
of Performance. All work done in or upon the Premises by Tenant shall be done
- --------------
according to the standards set forth in this Section 5, except as the same may
be modified on Tenant's Plans approved by or on behalf of Landlord.
a. All design and construction shall comply with all applicable
statutes, ordinances, regulations, laws, codes and industry standards.
Approval by Landlord of Tenant's Plans shall not constitute a waiver of
this requirement or assumption by Landlord of responsibility for
compliance. Where several sets of the foregoing laws, codes and standards
must be met, the strictest shall apply where not prohibited by another law,
code or standard. Tenant shall cause Tenant's Architect to become familiar
with the foregoing design criteria and with all construction procedures
which may be established by Landlord for the Building in order to permit
completion of proper and adequate architectural, mechanical, electrical,
plumbing and fire protection working drawings for Tenant's Work in
conformity with the standards provided for herein and in order to assure
proper coordination of Tenant's Work with the construction of other
tenants' premises in the Building.
b. Tenant shall, at its own cost and expense, obtain all required
building permits and when construction has been completed shall, at its own
cost and expense, obtain an occupancy permit for the Premises, which shall
be delivered to Landlord.
D-5
<PAGE>
c. All contractors and subcontractors engaged by or on behalf of
Tenant for construction of Tenant's Work (collectively, "Tenant's
--------
Contractors") shall be licensed contractors, possessing good labor
-----------
relations, capable of performing quality workmanship and working in harmony
with Landlord's contractors and subcontractors and with other contractors
and subcontractors on the job site. Tenant's general contractor shall be
selected by Tenant from any of the following: (i) J. C. Anderson, (ii) ICG,
(iii) Progress Construction, or (iv) another general contractor mutually
agreed upon by Landlord and Tenant. All work shall be coordinated with any
general construction work in the Building in order not to adversely affect
other work being performed by or for Landlord or its contractors and
subcontractors, it being understood that in the event of any conflict,
Landlord and its contractors and subcontractors shall have priority over
Tenant's contractors.
d. Tenant's Contractors, in performing work, shall strictly comply
with such rules and regulations as Landlord shall reasonably require with
respect to the existence of asbestos-containing material in the Premises.
e. Landlord shall have the right, but not the obligation, to perform,
on behalf of and for the account of Tenant, subject to reimbursement by
Tenant for the reasonable actual costs thereof without any profit to
Landlord, any work (i) which Landlord deems necessary to be done on an
emergency basis or (ii) which pertains to structural components of the
Building or (iii) which pertains to the Building's mechanical, electrical,
plumbing and fire protection systems or (iv) which pertains to the erection
of temporary safety barricades or signs during construction or (v) which
pertains to patching of Tenant's Work and other work in the Building. If
Landlord elects to exercise its rights under items (ii) or (iii) of this
Section 5(d), Landlord agrees to give Tenant reasonable prior notice and to
consult with Tenant about the completion of such work so as to minimize
Tenant's costs without adversely affecting the Building's structural
components or mechanical, electrical, plumbing or fire protection systems.
f. Tenant shall use only new, first-class materials in Tenant's Work,
except where explicitly shown in Tenant's Plans approved by Landlord. On
completion of Tenant's Work, Tenant shall provide or cause to be provided
to Landlord warranties of at least one (1) year duration against defects in
workmanship and materials on all work performed and equipment installed in
the Premises as part of Tenant's Work.
g. Tenant's Contractors, in performing work, shall not interfere with
other tenants and occupants of the Building. Tenant shall take all
reasonable precautionary steps to protect its facilities and the facilities
of others affected by Tenant's Work and to properly police same.
Construction equipment and materials are to be kept within the Premises and
delivery and loading of equipment and materials shall be done at such
locations and at such time as Landlord shall direct so as not to burden the
construction or operation of the Building.
h. Landlord shall have the right to order Tenant or any of Tenant's
Contractors who have violated the requirements imposed on Tenant or
Tenant's Contractors pursuant to this Work Letter to cease work and remove
its equipment and employees from the Building
D-6
<PAGE>
unless Tenant or Tenant's Contractors, as the case may be, immediately
complies with such requirements.
i. Tenant shall pay Landlord for the reasonable cost of all work
performed by Landlord on behalf of Tenant pursuant to Section 5(e) of this
Work Letter Agreement, or all materials or labor furnished on Tenant's
behalf, or other amounts required to be paid by Tenant to Landlord, within
thirty (30) days from the date of Landlord's invoice therefor.
j. Charges for any service (including electricity in accordance with
Section 4B of the Lease, water, HVAC, hoisting or charges for a freight
elevator operator and the like) to Tenant or the Premises shall be the
responsibility of Tenant from the date Tenant is obligated to commence or
commences Tenant's Work. Tenant shall pay Landlord's contractors and
Landlord their respective charges for such services and all other support
services which may be provided by Landlord's contractors or by Landlord.
All use of freight elevators is subject to scheduling by Landlord and to
charges established by Landlord for the reimbursement of Landlord's actual,
direct costs for Tenant's use of the freight elevators after the normal
business hours of the Building. Tenant shall pay Landlord's charges for
removal of construction debris and shall not place debris in the Building's
waste containers.
k. Tenant shall permit access to the Premises, and Tenant's Work
shall be subject to inspection by Landlord and Landlord's architects,
contractors and other representatives, at all times during the period when
Tenant's Work is being constructed and installed and following completion
of Tenant's Work.
1. Subject only to circumstances over which Tenant has no control and
which could not have been avoided by Tenant by the exercise of due
diligence, Tenant shall proceed with its work expeditiously, continuously
and efficiently, and shall complete the same prior to the Commencement
Date. Tenant shall notify Landlord upon completion of Tenant's Work.
m. Upon completion of Tenant's Work, Tenant shall notify Landlord and
shall furnish Landlord with final waivers of liens and contractors'
affidavits, in such form as may be required by Landlord, Landlord's title
insurance company or construction lender, from all parties performing labor
or supplying materials or services in connection with Tenant's Work showing
that all of said parties have been compensated in full and waiving all
liens in connection with the Premises and Building. Tenant shall furnish
partial waivers of liens and contractors' affidavits to Landlord from time
to time during the course of construction upon Landlord's request covering
those portions of such labor, materials and services which have been
performed and supplied. Tenant shall submit to Landlord a detailed
breakdown of Tenant's total construction costs, together with such evidence
of payment as is reasonably satisfactory to Landlord.
n. Tenant shall have no authority to deviate from Tenant's Plans in
performance of Tenant's Work, except as approved by Landlord and its
designated representative in writing which approval shall not be
unreasonably withheld to the extent that the requested deviation from
Tenant's Plans does not affect the Building's structure or systems.
Landlord shall make
D-7
<PAGE>
reasonable efforts to promptly review proposed changes to Tenant's Work. If
Landlord fails to grant its approval to a deviation from Tenant's Plans
within five (5) business days after a written request from Tenant, such
approval shall be deemed denied. Upon completion of Tenant's Work, Tenant
shall furnish to Landlord "as-built" drawings of Tenant's Work.
o Landlord shall have the right to run roof drainage lines, utility
lines, pipes, conduits, duct work and component parts of all mechanical and
electrical systems where necessary or desirable through the Premises, to
repair, alter, replace or remove the same, and to require Tenant to install
and maintain proper access panels thereto.
p. Tenant shall impose on and enforce all applicable terms of this
Work Letter against Tenant's Contractors, Tenant's Architect and Tenant's
engineer.
q. Tenant and Tenant's employees shall not be permitted to occupy
the Premises for the purpose of conducting Tenant's business as described
in Item 4 of the Schedule to the Lease until Landlord's architect confirms
that Tenant's Work has been substantially completed in accordance with the
approved Tenant's Plans. Landlord agrees that it shall use reasonable
efforts to obtain such confirmation within two (2) business days after
Tenant's written request therefor.
6. Insurance and Indemnification.
-----------------------------
a. In addition to any insurance which may be required under the
Lease, Tenant shall secure, pay for and maintain or cause Tenant's
Contractors to secure, pay for and maintain during the continuance of
construction and fixturing work within the Building or Premises, insurance
in the following minimum coverages and limits of liability:
(i) Workmen's Compensation and Employer's Liability Insurance
with limits of not less than $500,000.00 and as required by
any Employee Benefit Acts or other statutes applicable where
the work is to be performed as will protect Tenant's
Contractors from liability under the aforementioned acts.
(ii) Comprehensive General Liability Insurance (including
Contractors' Protective Liability) in an amount not less
than $2,000,000.00 per occurrence, whether involving bodily
injury liability (or death resulting therefrom) or property
damage liability, or a combination thereof, with a minimum
aggregate limit of $2,000,000.00, and with umbrella coverage
with limits not less than $10,000,000.00. Such insurance
shall provide for explosion and collapse, completed
operations coverage and broad form blanket contractual
liability coverage and shall insure Tenant's Contractors
against any and all claims for bodily injury, including
death resulting therefrom, and damage to the property of
others arising from its operations under the contracts,
whether such operations are performed by Tenant's
Contractors or by anyone directly or indirectly employed by
any of them.
D-8
<PAGE>
(iii) Comprehensive Automobile Liability Insurance, including the
ownership, maintenance and operation of any automotive
equipment, owned, hired, or non-owned in an amount not less
than $500,000.00 for each person in one accident, and
$1,000,000.00 for injuries sustained by two or more persons
in any one accident and property damage liability in an
amount not less than $ 1,000, 000.00 for each accident.
Such insurance shall insure Tenant's Contractors against
any and all claims for bodily injury, including death
resulting therefrom, and damage to the property of others
arising from its operations under the contracts, whether
such operations are performed by Tenant's Contractors, or
by anyone directly or indirectly employed by any of them.
(iv) "All-risk" builder's risk insurance upon the entire
Tenant's Work to the full insurable value thereof. This
insurance shall include the interests of Landlord and
Tenant (and their respective contractors and subcontractors
of any tier to the extent of any insurable interest
therein) in the Tenant's Work and shall insure against the
perils of fire and extended coverage and shall include
"all-risk" builder's risk insurance for physical loss or
damage including, without duplication of coverage, theft,
vandalism and malicious mischief. If portions of the
Tenant's Work are stored off the site of the Building or in
transit to said site are not covered under said "all-risk"
builder's risk insurance, then Tenant shall effect and
maintain similar property insurance on such portions of
Tenant's Work. Any loss insured under said "all-risk"
builder's risk insurance is to be adjusted with Landlord
and Tenant and made payable to Landlord as trustee for the
insureds, as their interests may appear, subject to the
agreement reached by said parties in interest, or in the
absence of any such agreement, then in accordance with a
final, non-appealable order of a court of competent
jurisdiction. If after such loss no other special agreement
is made, the decision to replace or not replace any such
damaged Tenant's Work shall be made in accordance with the
terms and provisions of the Lease. The waiver of
subrogation provisions contained in the Lease shall apply
to the "all-risk" builder's risk insurance policy to be
obtained by Tenant pursuant to this paragraph.
All policies (except the workmen's compensation policy) shall be endorsed
to include as additional insured parties Landlord and its beneficiaries,
their officers, directors, partners, employees and agents, Landlord's
contractors, Landlord's architects, and such additional persons as Landlord
may designate. Said endorsements shall also provide that all additional
insured parties shall be given not less than thirty (30) days' prior
written notice e of any reduction, cancellation or non-renewal of coverage
(except that not less than ten (10) days' prior written notice shall be
sufficient in the case of cancellation for non-payment of premium) and
shall provide that the insurance coverage afforded to the additional
insured parties thereunder shall be primary to any insurance carried
independently by said additional insured
D-9
<PAGE>
parties. The insurance policies required hereunder shall be considered as
the primary insurance and shall not call into contribution any insurance
maintained by Landlord. Additionally, where applicable, each policy shall
contain in a cross-liability and severability of interest clause.
b. Without limitation of the indemnification provisions contained in
the Lease, Tenant agrees to indemnify, protect, defend and hold harmless
Landlord, Landlord's contractors, Landlord's architects and Landlord's
beneficiaries and their officers, directors, partners, agents and employees
from and against all claims, liabilities, losses, damages and expenses of
whatever nature arising out of or in connection with Tenant's Work or the
entry of Tenant's Contractors into the Building and the Premises,
including, without limitation, the cost of any repairs to the Premises or
Building necessitated by activities of Tenant's Contractors and bodily
injury to persons or damage to the property of Tenant, its employees,
agents, invitees, licensees or others. It is understood and agreed that the
foregoing indemnity shall be in addition to the insurance requirements set
forth above and shall not be in discharge of or in substitution for same.
7. Construction and Architectural Plans Allowance. Landlord shall
----------------------------------------------
reimburse Tenant for up to $1,110,410 (being $35.00 per square foot of rentable
area of the Premises) (the "Construction Grant") of the Cost of Tenant's Work
------------------
(as hereinafter defined). If the Cost of Tenant's Work exceeds $1,110,410.00,
Tenant may, at its option, obtain a loan from Landlord in the amount of up to
$111,041.00 (being $3.50 per square foot of rentable area of the Premises (the
"Construction Loan"; the Construction Grant and the Construction Loan sometimes
- ------------------
collectively referred to herein as the "Construction Allowance") of the Cost of
----------------------
Tenant's Work in excess of the Construction Grant. The Construction Loan shall
be repaid by Tenant to Landlord as hereinafter provided. Tenant shall pay the
amount by which the Cost of Tenant's Work exceeds the Construction Allowance,
and shall, prior to commencement of Tenant's Work, deliver Tenant's Deposit to
Landlord or at Landlord's option, into a construction escrow account with a
title company, pursuant to escrow instructions approved by Landlord and Tenant.
The Construction Allowance or portions thereof, as payments are requested, shall
be paid by Landlord or, at Landlord's option, deposited periodically into the
construction escrow described in the foregoing sentence. The Construction
Allowance and Tenant's Deposit shall be paid out to Tenant or, upon request from
Tenant, to Tenant's Contractor, based upon 90% of the value of the work for
which payment is requested to reimburse Tenant for the Cost of Tenant's Work.
Prior to the payment of any portion of the Construction Allowance or Tenant's
Deposit, Tenant shall deliver, or shall cause to be delivered to Landlord or to
the construction escrowee, as the case may be, evidence that the work for which
reimbursement is then being requested as been performed and paid for by Tenant,
which evidence shall include executed lien waivers, architect's certificates,
contractor's statements, and owner's statements covering the work for which
reimbursement is requested from time to time, and such other documentation as
may be requested by Landlord or the escrowee. Landlord covenants that it will
make disbursements of the Construction Allowance or Tenant's Deposit within
thirty (30) days after receiving the foregoing required documentation. Funds
paid to Tenant from Landlord or the construction escrowee shall be deemed to be
paid out of the Construction Allowance until the full amount of the Construction
Allowance has been disbursed. In no event shall Landlord be required to (1)
make more than one disbursement of the Construction Allowance or Tenant's
Deposit during any single calendar month, or (2) make any disbursement of the
Construction Allowance or Tenant's Deposit at any time that
D-10
<PAGE>
Tenant is in default of any of its monetary obligations under the terms of the
Lease or in Default of any of its non-monetary obligations under the terms of
the Lease. Tenant acknowledges that any request for payment of the Construction
Allowance must be delivered to Landlord, together with executed lien waivers,
architect's certificates, contractor's statements and owner's statements
covering the work for which reimbursement is then being requested, no later than
the last business day of the sixth (6th) full month following the Commencement
Date. Upon Tenant's completion of Tenant's Work and delivery to Landlord of
final lien waivers and other evidence reasonably required by Landlord to confirm
Tenant's Work has been completed and fully paid for, Landlord shall, promptly
after written request from Tenant, return to Tenant any portion of Tenant's
Deposit not theretofore applied toward the Cost of Tenant's Work.
If the Cost of Tenant's Work is less than $35.00 per square foot of
rentable area of the Premises, Tenant shall not be entitled to any credit,
payment or abatement on account of portions of the Construction Allowance not
used to pay for Tenant's Work. Notwithstanding the foregoing, Tenant may direct
Landlord to pay to Tenant a portion of the Construction Grant not used to pay
for Tenant's Work in an amount up to $95,178.00 (the "Moving Allowance") to
----------------
reimburse Tenant for the actual cost (the "Moving Costs") of moving Tenant's
----------------
furnishings, furniture, files and equipment from the space currently occupied by
Tenant at 220 South State Street, Chicago, Illinois, to the Premises. Provided
that Tenant has delivered to Landlord copies of paid invoices and any other
documents or information reasonably required by Landlord to evidence that the
Moving Costs have been fully paid and provided further that Tenant is not then
in default under the terms of the Lease, Landlord shall pay the Moving Allowance
to Tenant promptly after the later to occur of (i) the date on which Landlord's
architect confirms that Tenant's Work has been substantially completed in
accordance with the approved Tenant's Plans, and (ii) Commencement Date (as
defined in the Lease).
8. Construction Loan. The Construction Loan shall accrue interest at the
-----------------
rate of ten percent (10%) per annum and shall be repaid by Tenant to Landlord in
equal monthly of principal together with an interest accrued thereon (with the
first such payment first day of the first full calendar month after the month in
which the Construction Loan is initially disbursed to Tenant (the date on which
the Construction Loan is initially disbursed being referred to herein as the
"Loan Disbursement Date")) so that the entire principal balance of the
- -----------------------
Construction Loan and all interest thereon shall be have been repaid in full by
Tenant on the first day of the calendar month in which the tenth (10th)
anniversary of the Loan Disbursement Date occurs. (A sample amortization
schedule for the Construction Loan based on the full amount of the Construction
Loan is attached to the, Lease as Appendix H). Repayments of the Construction
Loan by Tenant shall be made as additional rent under the Lease. Notwithstanding
the foregoing, Landlord may, at its option, accelerate Tenant's obligation to
repay the entire Construction Loan, together with all interest thereon, if
Tenant is in Default under the terms of the Lease, or if Tenant is in default in
the repayment of the Construction Loan, or if Landlord exercises its right to
terminate the Lease pursuant to Section 5 of the Rider attached to the Lease, or
if the Lease terminates for any reason prior to the tenth (10th) anniversary of
the Loan Disbursement Date.
9. Cost of Tenant's Work. "Cost of Tenant's Work" shall mean costs of
--------------------- ---------------------
all labor and materials, general contractor's fees, architectural and
consulting fees and any permit or necessary for completion of construction of
Tenant's Work.
D-11
<PAGE>
10. Miscellaneous.
-------------
a. Charges due from Tenant to Landlord pursuant to this Work Letter,
if any, be deducted by Landlord from any payment of the Construction
Allowance.
b. If Tenant's Plans require the construction and installation of
more fire hose cabinets or telephone/electrical closets than the number
regularly provided by Landlord in the portion of the Building in which the
Premises are located, Tenant shall pay all costs and expenses arising from
the construction and installation of such additional fire cabinets or
telephone/electrical closets.
c. Any person signing this Work Letter on behalf of Landlord and
Tenant warrants and represents he or she has the authority to do so.
d. This Work Letter shall not be deemed applicable to any additional
office space added to the original Premises at any time or from time to
time, whether by any options under the Lease or otherwise, or to any
portion of the original Premises or any additions thereto in the event of a
renewal or extension of the original Term of this Lease, whether by any
options under the Lease or otherwise, unless expressly so provided in the
Lease or any amendment or supplement thereto.
e. With respect to any amounts owed by Tenant hereunder and not paid
when due or Tenant's failure to perform its obligations hereunder, Landlord
shall have all of rights and remedies granted to Landlord under the Lease
for non-payment by Tenant of any amounts owed thereunder or failure by
Tenant to perform its obligations thereunder.
f. Landlord and Tenant each agree that time is of the essence with
respect to the successful delivery of the completed Premises by the
anticipated Commencement Date. Consequently, both Landlord and Tenant agree
to process and review all documentation which requires their individual
review and approval in a timely and expeditious manner so as to not create
an unnecessary delay in the completion of the Premises by the scheduled
Commencement Date.
g. Landlord shall not charge any fees relative to the supervision of
Tenant's work except for the actual out-of-pocket expenses incurred by
Landlord in retaining consultants with respect to Tenant's Work, which out-
of-pocket expenses shall not include any mark-up or overhead in favor of
Landlord.
h. Neither Tenant nor any of Tenant's Contractors shall perform any
work which would penetrate, damage or alter any of the granite surfaces
located in the Premises, without Landlord's prior written consent.
11. Trustee Exculpation. This instrument is executed by American National
-------------------
Bank and Trust Company of Chicago, not personally but solely as Trustee under
Trust Agreement dated October 1, 1988 and known as Trust No. 106528-08. All the
covenants and conditions to be performed hereunder by said trustee are
undertaken by it solely as trustee aforesaid, and not
D-12
<PAGE>
individually, and no personal liability shall be asserted or be enforceable
against such trustee or its agents by reason of any of the covenants,
statements, representations or warranties contained in this instrument.
D-13
<PAGE>
LANDLORD: TENANT:
AMERICAN NATIONAL BANK AND AMERICAN SCHOOLS OF
TRUST COMPANY OF CHICAGO PROFESSIONAL PSYCHOLOGY, INC.,
not personally but as Trustee as an Illinois corporation
By: /s/ J.M. Whelan By: /s/ Michael Markovitz
------------------------------ ----------------------------
Name: J.M. Whelan Name: Michael Markovitz
------------------------- -----------------------
Title: VP Title: Chairman
------------------------ ----------------------
D-14
<PAGE>
SCHEDULE 1 TO WORK LETTER AGREEMENT
-----------------------------------
1. Base Building.
-------------
Except as otherwise provided herein, Landlord shall, at its sole cost and
expense, deliver Floors 3, 2, 1 and the Mezzanine of the Building to Tenant
in conformity with the following requirements:
(a) Floor Finishing
---------------
Carpeting will be removed and floors will be left in an "as-is"
condition. Any electrical duct cores will be left for future tenant
use.
(b) Floor Loading
-------------
Floor loads shall be per applicable codes and base building standards
throughout. Floor loading is 60 p.s.f. Any floor loads in excess of 60
p.s.f. must be reviewed and approved by Landlord's structural
engineer, at Tenant's expense.
(c) Wall, Column and Perimeter Bulkhead Construction
------------------------------------------------
(1) Floor 3: All core walls and perimeter columns to be drawled and
ready to receive tenant finish.
(2) Floor 2: All core walls to remain as-is. Perimeter columns to be
drywalled and ready to receive tenant finish.
(3) Floor 1: All core walls to remain as-is. Perimeter columns to be
drywalled and ready to receive tenant finish.
(4) Mezzanine: All core walls to remain as-is. Perimeter columns to
be drywalled and ready to receive tenant finish.
(d) Other Perimeter Finishes
------------------------
Building perimeters will be fully finished as relates to water
proofing, caulking, glazing and metal finishing including all required
glass replacement (in the event of defects or cracked or broken
panes), glass cleaning on exterior, metal touch-up and cleaning, and
any other actions required to render the perimeters to a Tenant-ready
condition prior to Tenant starting construction. The windows located
on the West and North sides of Floor 2 will be delivered in their as-
is condition.
The windows located on the North side of Floor 1 and the lower half of (i) the
windows located on the East side of Floor 1 and (ii) the lobby windows and doors
of Floor 1 will be rendered opaque. If Landlord elects to change the lobby doors
to windows on Floor 1 of the Building, such work shall be performed by Landlord
at Landlord's expense.
Schedule 1--1
<PAGE>
(e) Other Core Finishes
-------------------
Fire fighting equipment enclosures, janitors closets, electrical and
mechanical rooms, toilets, fire exit enclosures and related areas
shown on the Plans to be finished to base building standards.
Specifically, the following will be required:
(1) Women's and men's washrooms will be restored to operating
condition with existing fixtures.
(2) Core telephone closets complete.
(3) Janitor closets complete.
(4) Electrical closets complete.
(5) Fire hose cabinets finished and complete with hoses and
extinguishers or as required to code. If Tenant's plan requires
the fire hose cabinets to be relocated, the relocation will be
done at Tenant's expense.
(6) Core corridor doors, shall be in good repair and ready to receive
Tenant's finish.
(7) Locking devices and closets for all exit, stairwell and
electrical/telephone doors and women's/men's washrooms.
(8) All existing openings, pipe sleeves, etc., in floors, slabs,
beams and walls to be patched and sealed as required by code,
except for Walker duct caps.
(9) Landlord agrees to supply, at its expense, four (4) fire alarm
annunciator speakers at Landlord's expense. Tenant shall supply,
at its expense, all other fire alarm annunciator speakers
required by applicable fire codes and shall install, at Tenant's
expense, all of the required fire alarm annunciator speakers,
including those supplied by Landlord.
(10) Ground level complete (elevator lobbies, landscaping, truck dock,
fan rooms, etc.).
(11) Mechanical, electrical, elevator, escalator, tc., base building
systems, all complete and operating.
Note: The closets identified in items (2) and (4) above shall remain secured
by Landlord. However, access will be available to Tenant, as required
upon request and without cost to Tenant.
Schedule 1--2
<PAGE>
(f) Electrical Distribution and Service
-----------------------------------
As part of the base building work, Landlord shall provide an
electrical distribution and service system as follows:
(1) Provide electrical service of 120/208 volts, 3 phase, 4 wire 60
cycles through a switchboard suitable for such service.
Switchboard devices shall be selectively coordinated with a ground
fault protection system.
(2) Distribution voltages for fluorescent lighting, receptacle
circuits, small motors and incandescent fighting shall be 120/208
volts, 4 wire, 3 phase.
(3) The electrical service provided by the electric user system shall
be brought to the premises and shall be five (5.0) watts per
rentable square foot for Tenant's lighting and receptacles only,
excluding HVAC equipment, special systems, miscellaneous
electrical loads and elevator equipment requirements.
(g) Window Treatments
-----------------
Tenant shall provide and install new building standard window
treatment system (track and cords) on Floor 2 and Floor 3. Tenant
shall use the existing window treatments on Floor 1.
(h) Patching
--------
Landlord will do remedial patching and repairs of core drywall and
ceilings in washrooms and elevator lobby to receive Tenant's finishes,
at no added expense to Tenant.
(i) Washrooms
---------
Landlord will provide the existing washrooms with fixtures, fighting
and accessories, toilet partitions, and wall and surface finishes, in
a good working condition.
2. Ceiling
-------
Tenant shall have the option of selecting building standard ceiling grid
and tile or ceiling system of Tenant's choice, with Landlord's approval,
which shall not be unreasonably withheld. Ceiling system will be completed
at Tenant's cost.
3. Heating, Ventilation and Air Conditioning.
------------------------------------------
(a) Tenant shall cause the appropriate mechanical and electrical engineers
(reasonably acceptable to Landlord) to prepare the plans for the HVAC
distribution system for the Premises.
Schedule 1--3
<PAGE>
(b) Interior base building supply ductwork will be restored including any
and all reheat boxes, and primary supply branch ducts with operable
balancing dampers. Perimeter convector unit housings will be restored
to a sound structural condition but left with the existing paint
finishes since convector housings are painted to coordinate with
tenants' design scheme. Convector units will be made fully operational
and thoroughly cleaned of refuse, respray and dust prior to occupancy.
Painting of the convector units, if required, shall be at Tenant's
expense.
(c) Supply outlets shall be selected for minimum drafts and noiseless and
good air distribution, at Tenant's expense.
(d) The type, size and arrangement of the diffusers shall be determined by
Tenant after consultation with Tenant's architect, and shall be
installed at Tenant's expense.
(e) All supply and/or return ducts shall be equipped with fusible link
dampers as prescribed by applicable laws, if any, at Tenant's expense.
4. Electricity, Lighting
---------------------
In addition to the 5 watts per square foot electrical power allowance
provided for Tenant's use for lighting and receptacles, Tenant may obtain
additional future power at Tenant's expense from the existing high voltage
riser serving the building. Landlord shall provide existing building
standard light fixtures for use by Tenant and the same shall be installed
by Tenant at Tenant's expense. Any cleaning, lamps, or part replacement
for these light fixtures will be at Tenant's expense. Telephone risers
provided by Landlord are located at the building core for use by Tenant.
5. Loading Dock, Hoisting, Elevators
---------------------------------
Landlord will permit Tenant to use the Building's loading dock and freight
elevators during normal business hours at no expense to Tenant. All
deliveries must be made at rear of the Building. The loading dock area is
accessible from Madison Street. The freight elevator located in the
loading dock area is to be used for all deliveries during business hours.
The freight elevator hours are 7:30 A.M. to 4:30 P.M., Monday through
Friday. No deliveries are allowed through the Clark Street entrance or in
the passenger elevators during business hours.
Deliveries and rubbish removal requiring extended use of the dock or
freight elevator to be scheduled in advance with the Office of the Building
for after-hours or weekends. Special arrangements can be made to use the
Clark Street entrance. (Carpet must be covered with masonite.) Building
personnel must be present during such times will be charged to the
contractor at a cost of approximately $18.50 an hour. Forty-eight (48)
hours advance notice is needed on all extended deliveries.
Tenant shall not be charged for use of the freight elevator or for freight
elevator operators during Tenant's move into the Building.
Schedule 1--4
<PAGE>
6. Coordination
------------
Landlord will cooperate during Tenant's construction and move-in stages and
assist in coordinating and expediting base building activities and related
services over this period of time. Landlord shall not charge any fees for
their assistance, monitoring and/or supervising construction.
7. Utilities During Construction
-----------------------------
Landlord shall provide, at Tenant's expense, all temporary power.
Stringing of temporary power wiring and temporary lighting on each floor is
Tenant's expense. Tenant shall, at Tenant's expense, schedule dumpsters
for Tenant's use during Tenant's construction and move in.
Schedule 1--5
<PAGE>
APPENDIX E
----------
FORM OF LETTER OF CREDIT
------------------------
IRREVOCABLE STAND-BY LETTER OF CREDIT September ___, 1994
CREDIT NUMBER:
EXPIRY:
APPLICANT BENEFICIARY
- --------- -----------
American Schools of 20 South Clark Street Owners Corp.,
Professional Psychology, Inc. a Delaware corporation
20 South Clark Street c/o Office of the Building
Suite No. 2900 20 South Clark Street
Chicago, Illinois 60603 Chicago, Illinois 60603
AMOUNT
------
See Schedule 1 attached hereto
We hereby issue in your favor our Irrevocable Standby Letter of Credit number
_________________________ -______________________________ (the "Credit") which
is available by your draft(s) drawn on us at sight accompanied by the following
document(s):
A sworn and notarized statement duly signed by an authorized representative of
Beneficiary stating: "BENEFICIARY IS ENTITLED TO DRAW UPON THIS CREDIT IN
ACCORDANCE WITH THE TERMS OF THAT CERTAIN LEASE DATED SEPTEMBER 8,1994, BY AND
BETWEEN AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO AS TRUSTEE UNDER
TRUST NUMBER 106528-08 AND APPLICANT FOR THE LEASE OF CERTAIN SPACE LOCATED AT
20 SOUTH CLARK STREET, CHICAGO, ILLINOIS."
Partial drawings shall be permitted.
If a drawing in respect of payment is made by you hereunder at or prior to 11:00
A.M. (Central Standard Time) on a Business Day (defined below), and provided
that such drawing and the statement presented in connection therewith conform to
the terms and conditions hereof, payment shall be made to you of the amount
specified, in immediately available funds, on the same Business Day. If a
drawing in respect of payment is made by you hereunder after 11:00 A.M. (Central
Standard Time), on a Business Day, and provided that such drawing and the
statement presented in connection therewith conform to the terms and conditions
hereof, payment shall be made to you in the amount specified, in immediately
available funds, on the next Business Day. If requested by you, payment under
this Credit may be made by deposit of immediately available funds into a
designated account that you maintain with the Bank or by wire transfer directly
to an account designated by Beneficiary. As used herein "Business Day" shall
mean any day other than a Saturday, Sunday or a day on which banking
institutions in the jurisdiction in which the Bank is located are authorized or
required by law to close.
E-1
<PAGE>
This Credit is transferable in its entirety (but not in part) to the landlord
(and its successors and assigns) under that certain Lease dated September 8,
1994, by and between American National Bank and Trust Company of Chicago as
Trustee under Trust No. 106528-08, as landlord, and Applicant, as tenant, for
the lease of certain space located at 20 South Clark Street, Chicago, Illinois,
as the same may be amended or modified from time to time.
This Credit shall automatically renew itself (subject to reduction in amounts as
hereinafter set forth) from year to year commencing on the first anniversary of
the date hereof, until May 30, 2005, unless and until the undersigned shall have
given thirty (30) days' prior written notice by certified mail, return receipt
requested, to (i) the Beneficiary at its address set forth above, and (ii) The
Yarmouth Group, Inc., Two Prudential Plaza, 180 North Stetson, Suite 1300,
Chicago, Illinois 60601, Attention: Ms. Doris Parker, of the undersigned's
intent not to renew this Credit at the expiration of such thirty (30) day
period. During said thirty (30) day notice period, this Credit shall remain in
full force and effect and Beneficiary may draw up to the full amount of the sum
when accompanied by a statement described in the second paragraph of this
Credit. The amount of this Credit shall decline in accordance with Schedule 1
attached hereto.
Each draft drawn under this Credit must state: Drawn under ____________________,
Chicago, Illinois, Reference No. _______________ -__________________________.
We hereby engage with you that draft(s) drawn under and in compliance with the
terms of this Credit will be duly honored on presentation.
This Credit sets forth in full the terms of our undertaking and such an
undertaking shall not in any way be modified or amplified by reference to any
documents, instruments or agreements referred to herein, or in which this Credit
is referred to or to which this Credit relates and any such reference shall not
be deemed to incorporate herein by reference any such documents, instruments or
agreements.
_______________________________Bank
___________________________________
Authorized Signature
E-2
<PAGE>
SCHEDULE 1
LETTER OF CREDIT ISSUED BY ______________________ BANK
IN FAVOR OF 20 SOUTH CLARK STREET OWNERS CORP.,
DATED SEPTEMBER ____, 1994
<TABLE>
<CAPTION>
=============================================================
TIME PERIOD AMOUNT OF LETTER OF CREDIT
-------------------------------------------------------------
<S> <C>
09/08/94 to 12/31/95 $675,000.00
-------------------------------------------------------------
01/01/96 to 12/31/96 $550,000.00
-------------------------------------------------------------
01/01/97 to 12/31/97 $450,000.00
-------------------------------------------------------------
01/01/98 to 12/31/98 $350,000.00
-------------------------------------------------------------
01/01/99 to 12/31/99 $250,000.00
-------------------------------------------------------------
01/01/00 to 05/30/2005 $100,000.00
=============================================================
</TABLE>
E-3
<PAGE>
APPENDIX F
----------
LANDLORD'S ASBESTOS ABATEMENT WORK
----------------------------------
1. Removal of accessible and associated overspray ACM fireproofing from
structural steel beams, metal deck and columns and replacement with non-ACM
fireproofing, except where otherwise noted on attached floor plans.
2. Removal of ACM floor tile and mastic, if any.
Landlord shall be deemed to have completed the above-described work at the time
Landlord's asbestos consultant has performed clearance tests which meet the
standards set forth in Landlord's asbestos abatement program for the Building.
Landlord shall deliver a copy of such clearance tests to Tenant promptly
following its receipt of same.
Landlord reserves the right to re-enter the Premises any time during the lease
term in order to abate remaining ACM where noted on the attached floor plans.
F-1
<PAGE>
AMENDMENT TO LEASE
------------------
THIS AMENDMENT TO LEASE (this "Amendment") is entered into as of the 28th
day of November , 1997, by and between AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO, not personally, but as Trustee under Trust Agreement dated October
1, 1988 and known as Trust No. 106528-08 ("Landlord") and AMERICAN SCHOOLS OF
--------
PROFESSIONAL PSYCHOLOGY, INC., an Illinois corporation ("Tenant ").
------
R E C I T A L S:
- - - - - - - -
A. Landlord and Tenant entered into a lease, dated September 8, 1994 (the
"Lease") for a portion of the premises (the "Premises") located at 20 South
--------
Clark Street, Chicago, Illinois and known as "Two First National Plaza" (the
"Building").
- ---------
B. The Premises currently consist of approximately 31,726 square feet of
rentable area (the "Original Space").
--------------
C. Tenant desires to lease an additional portion of the Building containing
approximately 5,655 square feet of rentable area (the "Additional Space"), which
----------------
Additional Space is located on the 4th Floor of the Building and is depicted on
Appendix A-5 attached hereto and by this reference made a part hereof.
D. Landlord and Tenant desire to amend the Lease by, among other things,
adding the Additional Space to the Premises, all on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant agree to amend the Lease as follows:
1. ADDITIONAL SPACE COMMENCEMENT DATE; RENT. Effective January 1, 1998 (the
----------------------------------------
"Additional Space Commencement Date"), the Additional Space shall be added to
- -----------------------------------
the Premises upon all of the terms and conditions of the Lease as modified
herein. The Termination Date of the Lease for the Additional Space shall be
April 30, 2005, or the sooner termination of the Lease. Commencing on the
Additional Space Commencement Date:
(a) the Premises shall be deemed to contain 37,381 square feet of
rentable space in the aggregate;
(b) Annual Base Rent and monthly installments thereof with respect to
the Additional Space shall be payable as follows:
<PAGE>
<TABLE>
<CAPTION>
=========================================================================
BASE RENT PER MONTHLY
RENTABLE SQUARE INSTALLMENTS OF
PERIOD FOOT ANNUAL BASE RENT BASE RENT
-------------------------------------------------------------------------
<S> <C> <C> <C>
01/01/98-12/31/98 $5.00 $28,275.00 $2,356.25
-------------------------------------------------------------------------
01/01/99-12/31/99 $5.25 $29,688.75 $2,474.06
-------------------------------------------------------------------------
01/01/00-12/31/00 $5.50 $31,102.50 $2,591.88
-------------------------------------------------------------------------
01/01/01-12/31/01 $5.75 $32,516.25 $2,709.69
-------------------------------------------------------------------------
01/01/02-12/31/02 $6.00 $33,930.00 $2,827.50
-------------------------------------------------------------------------
01/01/03-12/31/03 $6.25 $35,343.75 $2,945.31
-------------------------------------------------------------------------
01/01/04-12/31/04 $6.50 $36,757.50 $3,063.13
-------------------------------------------------------------------------
01/01/05-04/30/05 $6.75 $38,171.25 $3,180.94
=========================================================================
</TABLE>
The amounts set forth above as "Base Rent per rentable square foot",
"Annual Base Rent", and "Monthly, Installments of Base Rent" are "net"
amounts and are to be paid by Tenant in addition to and not in lieu of
Operating Adjustment Rent, Tax Adjustment Rent and Additional Rent, as such
terms are defined in the Lease.
(c) Tenant's Operating Proportionate Share shall be 10.6639 % for the
purpose of calculating Operating Adjustment Rent for the entire Premises;
and
(d) Tenant's Tax Proportionate Share shall be 10.6639% for the purpose
of calculating Tax Adjustment Rent for the entire Premises.
2. IMPROVEMENTS TO THE ADDITIONAL SPACE. Tenant acknowledges that it is
------------------------------------
leasing the Additional Space in its "as is" condition. No agreement of Landlord
to alter, remodel, decorate, clean or improve the Premises or the Building and
no representation or warranty regarding the condition of the Premises or the
Building or regarding any other matter of any kind or nature has been made by or
on behalf of Landlord to Tenant under or by reason of this Amendment.
3. APPENDIX A-5. Effective as of the Commencement Date of the Lease for
------------
the Additional Space, Appendix A-5 attached hereto is attached to and made part
of the Lease.
4. BROKERS. Landlord and Tenant each represent and warrant to the other
-------
that the only brokers they have dealt with in connection with this Amendment are
The John Buck Company and Cushman & Wakefield of Illinois, Inc., whose
commission and fees shall be paid by Landlord pursuant to a separate written
agreement. Landlord and Tenant each agree to defend, indemnify and hold the
other harmless from and against all claims by any other broker for fees,
commissions or other compensation to the extent such broker alleges to have been
retained by the indemnifying party in
2
<PAGE>
connection with the execution of this Amendment. The provisions of this Section
shall survive the expiration or sooner termination of the Lease.
5. MISCELLANEOUS. Except as modified herein, the Lease and all of the
-------------
terms and provisions thereof shall remain unmodified and in full force and
effect as originally written. All terms used herein but not defined herein
which are defined in the Lease shall have the same meaning for purposes hereof
as they do for purposes of the Lease.
6. TRUSTEE'S EXCULPATION. This Amendment to Lease is executed by
---------------------
American National Bank and Trust Company of Chicago, not personally but solely
as Trustee as aforesaid. All covenants and conditions to be performed hereunder
by American National Bank and Trust Company of Chicago are undertaken by it
solely as Trustee, as aforesaid, and not individually, and no personal liability
shall be asserted or enforced against American National Bank and Trust Company
of Chicago, the beneficiaries thereof, or their agents or representatives by
reason of any of the covenants, statements, representations or warranties
contained in this Amendment to Lease.
IN WITNESS WHEREOF, the undersigned have executed this Amendment to Lease
as of the day and year first above written.
LANDLORD: TENANT:
- -------- -------
AMERICAN NATIONAL BANK AND AMERICAN SCHOOL OF
TRUST COMPANY OF CHICAGO, not PROFESSIONAL PSYCHOLOGY, INC.,
personally but as Trustee as aforesaid an Illinois corporation
By: /s/ J.M Whelan By: /s/ Michael Markovitz
--------------------------- ------------------------------
Its: VP Its: Chairman
------------------------ --------------------------
3
<PAGE>
APPENDIX A-5
------------
THE ADDITIONAL SPACE
--------------------
[FLOOR PLAN TO BE ATTACHED]
A-1
<PAGE>
APPENDIX A-5
SUITE 410
5,655 RSF
American Schools of Professional Psychology
[FLOOR PLAN]
<PAGE>
THE JOHN BUCK COMPANY
February 22, 1995
Dr. Michael Markovitz
ASPP/ISPP
Suite 410
20 South Clark Street
Chicago, Illinois 60603
RE: MARCH BILLING
Dear Dr. Markovitz:
As you know, the commencement date of your lease is March 26, 1995.
Accordingly, you will soon receive a March rent statement which reflects pro-
rated billings as follows:
RENT
----
$9,825.06/Month x 6 Days of 31 = $1,903.56
OPERATING ADJUSTMENT RENT
-------------------------
1995 Operating Costs are projected at $2,141,800. Therefore, your monthly
Operating Proportionate Share will be $16,154. ($2,141,800 x 9.0507%
divided by 12 months).
March Proration: $16,154 x 6 Days of 31 = $3,127
TAX ADJUSTMENT RENT
-------------------
1995 Taxes are projected at $2,785,256. Therefore, your monthly Tax
Proportionate Share will be $21,007 ($2,785,256 x 9.0507% divided by 12
months).
March Proration: $21,007 x 6 Days of 31 = $4,066.
Please review these numbers and call me if you have any questions.
Sincerely,
THE JOHN BUCK COMPANY
Scott Tausk
General Manager
<PAGE>
EXHIBIT 10.11
FIRST AMENDMENT
TO LEASE AGREEMENT DATED June 10, 1994
BETWEEN
CONTINENTAL OFFICES LTD., AND
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY
-------------------------------------------
THIS AGREEMENT, dated July 3, 1996 between CONTINENTAL OFFICES LTD., as
agent for the Owners of the beneficial interest in American national Bank and
trust Company of Chicago Trust No. 40935, Landlord, having its office at Two
Continental Towers, Suite 100, 1701 Golf Road, Rolling Meadows, Illinois, and
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, Tenant.
WITNESSETH
WHEREAS, Landlord and Tenant entered into a Lease Agreement dated June 10,
1994, (the "Lease");
WHEREAS, the parties desire to amend the Lease to include additional space;
NOW, THEREFORE, Landlord and Tenant agree as follows:
1. Effective August 1, 1996, Tenant shall lease an additional 2,432 rentable
square feet on the first floor of Tower Two as shown on the attached Exhibit 'A'
(the "Additional Premises").
2. Effective August 1, 1996, the Building as defined in Section 1(a) of the
Lease shall be deleted and the following shall be inserted in its place:
BUILDING:
BUILDING ONE: BUILDING TWO:
One Continental Towers Two Continental Towers
1701 Golf Road 1701 Golf Road
Rolling Meadows, Illinois 60008 Rolling Meadows, Illinois 60008
Wherever the term Building is used in the Lease it shall apply to both Building
One and Building Two unless either of the terms Building On or Building Two is
specifically used.
3. Effective August 1, 1996, Section 1(i) of the Lease shall be deleted and
the following inserted in its place:
Measurable Area of the Premises - Building One 7,050 Measurable Square Feet
Measurable Area of the Premises - Building Two 2,133 Measurable Square Feet
Measurable area of the Premises - 9,183 Measurable Square Feet
<PAGE>
4. Effective August 1, 1996, Section 1(j) of the Lease shall be deleted and
the following inserted in its place:
Rentable Area of Building One 280,299 Rentable Square Feet
Rentable Area of Building Two 280,607 Rentable Square Feet
5. Effective August 1, 1996, Section 1(l) of the Lease shall be deleted and
the following inserted in its place:
Rentable Area of the Premises - Building One 8,037 Rentable Square Feet
Rentable Area of the Premises - Building Two 2,432 Rentable Square Feet
Rentable Area of the Premises - 10,469 Rentable Square Feet
6. Effective August 1, 1996, the premises as defined in Section 2 of the Lease
shall be amended to include "a portion of the west side of the first floor of
Tower Two" as indicated on Exhibit 'A' attached hereto.
7. Effective August 1, 1996, the Annual Base Rent for the Additional Premises
shall be Thirty-Eight-Thousand-Nine-Hundred-Twelve and 00/100 Dollars
($38,912.00) payable in equal monthly installments of Three-Thousand-Two-
Hundred-Forty-Two-and-67/100-Dollars ($3,242.67).
8. ADDITIONAL RENT CREDIT. In additional to the rent credit stated in Rider
Section 29, Tenant shall receive rent credit in the amount of Thirty-Five-
Thousand-One-Hundred-Fifty-and-00/100-Dollars amortized From August 1, 1996
through August 14, 1999 at Nine-Hundred-Sixty-Three-and-00/100-Dollars ($963.00)
per month.
9. TENANT IMPROVEMENTS. Landlord will remodel the demised premises in
accordance with Space Plan Scheme 8, dated June 25, 1996 and the office portion
of space Plan SP-1, dated May 31, 1995. The cost of the remodeling work is
estimated to be $59,719.00, based upon the scope described on Exhibit 'C'.
Landlord will contribute $12,160.00 towards the cost of remodeling. Tenant has
the right to use the balance of $10,749.23 remaining in their initial tenant
construction allowance towards the cost of remodeling. Tenant will be sent an
invoice within thirty (30) days after the completion of the remodeling for the
remaining cost of the remodeling.
10. BASE RENT ADJUSTMENT. In addition to the Base Rent Adjustment stated in
Section 5(h)(iii), Tenant shall pay as additional rent a sum equal to three
percent (3%) of $27,360.00 in lieu of a Consumer Price Increase commencing
August 1, 1997 for said Additional Premises.
11. Notwithstanding anything to the contrary contained in Section 6(g) of the
Lease, all electricity used in the Additional Premises in Building Two shall be
separately metered and Tenant shall pay electric bills directly to the local
electric utility company.
-2-
<PAGE>
Except as expressly modified in this Amendment, the Lease is ratified and
confirmed in all respects.
-3-
<PAGE>
TENANT LANDLORD
American Schools of Professional Continental Offices Ltd, as
Psychology agent for the owners of the
beneficial interest in American
National Bank and Trust of
Chicago Trust No. 40893
By: ______________________________ By: __________________________
Its: President Its: President
ATTEST ATTEST
By: ______________________________ By: __________________________
Its: Its: Executive Vice President
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June 14, 1994
Mr, Robert Lullo
American Schools of
Professional Psychology
220 S. State Street
Suite 609
Chicago, Illinois 60604
Re: Continental Towers Lease Agreement
Dear Mr. Lullo:
Enclosed please find a draft copy of the Lease Agreement.
Please call Faye Oomen with any questions or comments you may have.
Sincerely,
Julie Banaszek
Lease Administrator
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NET LEASE - TOWER I
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TITLE PAGE NO.
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<S> <C>
Access to Premises 11
Alterations 11
Assignment----Subletting 14
Base Rent Adjustment 2
Basic Lease Provisions 1
Care and Maintenance 10
Certain Rights Reserved by the Landlord 17
Condition of Premises 7
Default Under Other Lease 22
Eminent Domain 13
Failure to Give Possession 7
Good Faith Deposit 23
Holding Over 8
Insurance 12
Landlord's Remedies 19
Miscellaneous 24
Mortgage----Ground Lease 16
Notices 23
Premises 2
Relocation of Tenant 23
Rent 2
Services 5
Subrogation 3
Surrender of Possession 22
Term 2
Untenantability 11
Use of Premises 8
Waiver of Claims and Indemnity 16
</TABLE>
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LEASE AGREEMENT
1. BASIC LEASE PROVISIONS
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(a) BUILDING:
Continental Tower I
1701 Golf Road
Rolling Meadows, Illinois 60008
(b) LANDLORD AND ADDRESS:
Continental Offices Ltd., as Agent for the Owners of the beneficial
interest in American National Bank & Trust Company of Chicago Trust
No. 40935
1701 Golf Road
Rolling Meadows, Illinois 60008
(c) TENANT AND CURRENT ADDRESS:
Prior to Commencement of Lease: After Commencement of Lease:
Robert J. Lullo Robert J. Lullo
American Schools of Professional American Schools of Professional
Psychology Psychology
220 South State Street 220 South State Street
Suite 609 Suite 609
Chicago, Illinois 60604 Chicago, Illinois 60604
(d) DATE OF LEASE: June 10, 1994
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(e) LEASE TERM: Five (5) Years
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(f) COMMENCEMENT DATE OF TERM: August 15, 1994
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(g) EXPIRATION DATE OF TERM: August 14, 1999
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(h) BASE RENT, subject to adjustment as provided herein:
ANNUAL BASE RENT: One-Hundred-Twenty-Eight-Thousand-Five-Hundred-
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Ninety-Two-Thousand-and-00/100
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($128,592.00)
MONTHLY BASE RENT: Ten-Thousand-Seven-Hundred-Sixteen-and-00/100-
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Dollars ($10,716.00)
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(i) MEASURABLE AREA OF THE PREMISES: 7,050 Measurable Square Feet
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(j) RENTABLE AREA OF THE BUILDING: 280,299 Rentable Square Feet
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(k) RENTABLE AREA OF THE COMPLEX: 841,513 Rentable Square Feet
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(l) RENTABLE AREA OF THE PREMISES: 8,037 Rentable Square Feet
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(m) GOOD FAITH DEPOSIT: None ($ - 0 -)
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(n) BASE YEAR (for purposes of the Consumer Price Index adjustment): N/A
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2. PREMISES. Landlord hereby leases to Tenant, and Tenant accepts the demised
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premises (hereinafter known as "demised premises" or "premises"), being a
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portion of the north side of the first floor of Tower One
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and described in the plan attached hereto as Exhibit "A" in the Building
described in Subsection 1(a) for the term and upon the conditions provided in
the Lease, to be occupied and used by the Tenant to operate a college of higher
education and no other purpose, subject to the agreements herein contained.
3. TERM. The term of this Lease shall commence on the date specified in
----
Subsection 1(f) (the "Commencement Date") and shall expire on the date specified
in Subsection 1(g) (the "Expiration Date") unless sooner terminated as otherwise
provided in this Lease.
4. RENT. The Tenant shall pay Base Rent as specified in Subsection 1(h) to
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Continental Towers Associates I or to such other person or at such other place
as Landlord may direct in writing, monthly in advance on or before the first day
of each month of the term, except that the Tenant shall pay the first such
monthly installment on the execution hereof. If the term commences other than
on the first day of a month or ends other than on the last day of the month, the
Base Rent for such month shall be prorated, and the prorated rent for the
portion of the month in which the term commences shall be paid at the time of
execution of this Lease in addition to the rent for the first full month. All
such rent shall be paid without any set-off or deduction whatsoever. Unpaid
rent shall bear interest at the rate set forth in Subsection 28(f), from the
date due until paid. Time is of the essence of this Lease. SEE RIDER SECTION
29.
5. BASE RENT ADJUSTMENT. The Base Rent shall be adjusted in accordance with
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the provisions of this Section 5.
(a) The term "Taxes" shall mean real estate taxes, assessments, sewer
rents, rates and charges, transit taxes, taxes based upon the receipt of
rent, and any other federal, state or local governmental charge, general,
special, ordinary or extraordinary (but not including income or franchise
taxes or any other taxes imposed upon or measured by the Landlord's income
or profits, unless the same shall be imposed in lieu of real estate taxes
and other ad valorem taxes), which may now or hereafter be levied or
assessed against the land upon which the three Continental Towers office
buildings stand and upon the buildings themselves (but not including the
Commercium and enclosed parking facility), including the landscaping
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and surface parking areas that are appurtenant to said buildings,
hereinafter collectively known as the "Complex". In case of special taxes
or assessments which may be payable in installments, only the amount of
each installment paid during a calendar year shall be included in Taxes for
that year. Taxes shall also include any personal property taxes imposed
upon the furniture, fixtures, machinery, equipment apparatus, system and
appurtenances used in connection with said Complex for the operation
thereof. Taxes shall also include amounts paid to anyone hired by Landlord
to contest the amount of any assessment of the Complex or the rate of
taxation or the legality of the imposition of any component of the Taxes
upon the Complex. The Taxes "attributable to" or "for" a calendar year for
the purposes of this Lease shall be those assessed for such year, even
though not due and payable until a subsequent year. If the Complex is not
ninety-five percent (95%) occupied during all or a portion of any year,
then Landlord may elect to make an appropriate adjustment of the Taxes for
such year employing sound accounting and management principles, to
determine the amount of Taxes that would have been attributed to the Tenant
had the Complex been ninety-five percent (95%) occupied, and the amount so
determined shall be deemed to have been the amount of Taxes for such year.
(b) The term "Taxes Per Rentable Square Foot" shall mean Taxes divided
by the Rentable Area of the Complex as provided in Subsection l(k) above.
(c) "Expenses" shall mean and include all those costs and expenses of
every kind and nature associated with the management, maintenance, repair,
replacement, ownership and operation of the Building, landscaping and
parking areas and the personal property used in conjunction therewith with
the exception of costs of alterations of the premises of tenants of the
Building, depreciation charges , interest and principal payments on
mortgages, capital improvements which increase the number of square feet in
the Complex, and expenditures for which Landlord has been reimbursed,
including by payment from other tenants or insurance proceeds (other than
pursuant to rent adjustment provisions in leases). If the Building is less
than occupied during all or a portion of any year, then landlord shall make
an appropriate adjustment of the Expenses for such year, employing sound
accounting management principles to determine the amount of Expenses that
would have been paid or incurred by the Landlord had the Building been
occupied, and the amount so determined shall be deemed to have been the
amount of Expenses for such year. Expenses for parking and landscaping
areas will be allocated among tenants in the Building and the two other
office buildings in the Complex in accordance with sound accounting and
management principles.
(d) The term "Expenses Per Rentable Square Foot" shall mean Expenses
divided by the Rentable Area of the Building as provided in Subsection 1(j)
above.
(e) Tenant shall pay to Landlord, as additional rent, an amount equal
to 1/12 of the sum of (i) Expenses per Rentable Square Foot, as estimated
by Landlord in accordance with Subsection 5(i), multiplied by the Rentable
Area of the Premises as set forth in Subsection 1(l), plus (ii) Taxes per
Rentable Square Foot, as estimated by Landlord in accordance with
Subsection 5(i), multiplied by the Rentable Area of the Premises as set
forth in Subsection 1(l) above, plus (iii) a sum equal to three percent
(3%) of $74,342.25 in lieu
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of a Consumer Price Increase, commencing the thirteenth month of the lease
term. The rental as computed hereunder including adjustments for
projections under Subsection 5(i) hereinbelow shall be referred to as
Adjusted Monthly Base Rent. The amount payable for Expenses and Taxes shall
be subject to readjustment based on actual experience as provided in
Subsection 5(j).
(f) For purposes of estimating Expenses and Taxes for any calendar
year (including the first year that the Lease is in effect), Landlord shall
make reasonable estimates, forecasts or projections (collectively, the
"Projections") of Expenses, and Taxes for each year that the Lease is in
effect. Landlord shall deliver to Tenant a written statement (i) setting
forth the Projections of Expenses and Taxes for the appropriate calendar
year, and (ii) providing a calculation of the adjustment to installments of
Monthly Base Rent based on such Projections, to become effective as of
January 1/st/ of each calendar year; provided, however, that the failure of
Landlord to provide any such statement shall not relieve Tenant from its
obligation to continue to pay and when Tenant receives such statement from
Landlord, Tenant shall pay any increase (or receive credit for any
decrease) to Adjusted Monthly Base Rent reflected thereby effective
retroactively to the most recent preceding January 1/st/. If any
unexpected increase (or decrease) in Expenses for the Complex increase or
decrease of five percent (5%) or more in such Expenses, the Projections may
be revised and the estimated Expenses payments shall be recalculated based
upon the revised Projections. The Projections may also be revised whenever
more current information is received about the Taxes, and, if revised, the
estimated Taxes payments shall be recalculated based upon the revised
Projections. After the end of each calendar year, the actual Expenses and
Taxes shall be calculated and an appropriate adjustment made as provided
herein.
(g) As soon as reasonably feasible after the expiration of each
calendar year, or at such later time as Landlord shall be able to determine
the actual amounts of Expenses and Taxes for such calendar year, Landlord
shall notify Tenant in writing of such actual amounts. If the total
Adjusted Monthly Base Rent paid by Tenant during such calendar year
exceeded the amount thereof payable for such calendar year based upon
actual Expenses and Taxes for such calendar year, then Landlord shall
credit such excess to installments of Adjusted Monthly Base Rent payable
after the date of Landlord's notice until such excess had been exhausted,
or if this Lease shall expire prior to full application of such excess,
Landlord shall pay to Tenant the balance thereof not theretofore applied
against Rent. If the Adjusted Monthly Base Rent based on actual Expenses
and Taxes exceeds the projected Adjusted Monthly Base Rent paid by Tenant
during such calendar year, then Tenant shall, within thirty (30) days after
the date of written notice from Landlord, pay to Landlord an amount equal
to the additional Adjusted Monthly Base Rent payable for the calendar year
last ended based upon actual Expenses and Taxes for such year over the
total Adjusted Monthly Base Rent paid by Tenant during such calendar year.
The obligation to make such payments shall survive the expiration or
earlier termination of the Term.
(h) The Tenant or its representative shall have the right to audit the
Landlord's books and records with respect to the items in the foregoing
statements of Expenses and Taxes during normal business hours at any time
within 30 days following the furnishing by the Landlord to the Tenant of
such statements and after the execution by Tenant of a
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confidentiality agreement prepared by Landlord. Unless the Tenant shall
take written exception to any item within thirty (30) days after the
furnishing of the foregoing statement such statement shall be considered as
final and accepted by the Tenant. Any amount due to the Landlord as shown
on any such statement shall be paid by the Tenant within thirty (30) days
after the Landlord shall have submitted the statement.
(i) If the first year of the term of this Lease commences on any other
than the first day of January, or if the last year of the term of this
Lease ends on any day other than the last day of December, any payment due
to the Landlord for Taxes, or Expenses, shall be prorated, and the Tenant
shall pay any amount due to the Landlord within thirty (30) days after
being billed therefor. This covenant shall survive the expiration or
termination Of this Lease.
6. SERVICES. The Landlord, as long as the Tenant is not in default under any
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of the covenants of this lease, shall furnish:
(a) Air-cooling when necessary to provide a temperature condition required
for comfortable occupancy of the demised premises under normal
business operations, daily from 8:00 A.M. to 6:00 P.M. and on
Saturdays from 8:00 A.M. to 1:00 P.M., Sundays and holidays excepted.
Wherever heat generating machines or equipment are used by Tenant in
the demised premises which effect the temperature, otherwise
maintained by the air-cooling system, Landlord reserves the right to
install supplementary air-conditioning units in the demised premises
and the expense of installation shall be paid by Tenant. The expense
resulting from the operation and maintenance of the supplementary air
conditioning system shall be paid by the Tenant to the Landlord as
additional rent at rates fixed by Landlord. The Landlord agrees to
furnish heat to the demised premises, as required by law, on business
days from 8: 00 A.M. to 6:00 P.M. , Saturdays from 8:00 A.M. to 1:00
P.M., Sundays and holidays excepted. If Tenant requests Landlord to
supply heat or air conditioning at times other than such hours, then
upon at least 24 hours advance notice to Landlord, Landlord will
supply the necessary heat or air conditioning at rates set by
Landlord;
(b) Cold water in common with other tenants for drinking, lavatory and
toilet purposes drawn through fixtures installed by the Landlord, or
by Tenant in the demised premises with Landlord's written consent, and
hot water in common with other tenants for lavatory purposes from
regular Building supply. Tenant shall pay Landlord as additional rent
at rates fixed by Landlord for water furnished for any other purpose.
The Tenant shall not waste or permit the waste of water. If the
Tenant fails to pay within five (5) days the Landlord's proper charges
for water, the Landlord, upon not less than ten (10) days' notice,
may, in addition to any other remedy provided in this lease,
discontinue furnishing that service and no such discontinuance shall
be deemed an eviction or disturbance of Tenant's use of the demised
premises or render Landlord liable for damages or relieve Tenant from
any obligation;
(c) Janitor service and customary cleaning in and about the demised
premises, Saturdays, Sundays and holidays excepted. The Tenant shall
not provide any janitor services or
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cleaning without the Landlord's written consent and then only subject
to supervision of Landlord and at Tenant's sole responsibility and by
janitor or cleaning contractor or employees at all times satisfactory
to Landlord;
(d) Passenger elevator service in common with Landlord and other tenants,
daily from 8:00 A.M. to 6:00 P.M., Saturdays from 8:00 A.M. to 1:00
P.M., Sundays and holidays excepted, and freight elevator service in
common with Landlord and other tenants, daily from 8:00 A.M. to 5:00
P.M., Saturdays, Sundays and holidays excepted. Such normal elevator
service, passenger or freight, if furnished at other times shall be
optional with Landlord and shall never be deemed a continuing
obligation. The Landlord, however, shall provide limited passenger
elevator service daily at all times such normal passenger service is
not furnished. Operatorless automatic elevator service shall be
deemed "elevator service" within the meaning of this paragraph;
(e) Window washing of all windows on the exterior walls of the Building
located in the demised premises, both inside and cut, at such times as
shall be required in the Landlord's sole judgment;
(f) A parking area as shown on Exhibit "B" to be used by Tenant, in common
with Landlord and other tenants in the Complex, for passenger
vehicles. The parking area will be maintained and repaired by the
Landlord.
(g) Electricity for standard lighting fixtures provided by Landlord and
for Tenant's incidental uses. Maintenance of lighting fixtures and
replacement of lamps shall be furnished by Landlord at Tenant's
expense. In respect to such incidental uses, electricity will be
furnished in the premises by Landlord to Tenant without charge,
provided that (i) the connected electrical load of the incidental use
equipment does not exceed an average of two watts per square foot of
the premises; (ii) the electricity so furnished for incidental uses
will be at nominal 120 volts and no electrical circuit for the supply
of such incidental use will have a current capacity exceeding 20
amperes; and (iii) such electricity will be used only for equipment
and accessories normal to office usage. If Tenant's requirements for
electricity for incidental uses are in excess of those set forth in
the preceding sentence, the Landlord reserves the right to require
Tenant to procure electricity for such excess incidental use
requirements at the Tenant's expense by arrangement with Commonwealth
Edison Company or other approved local utility.
(h) The Landlord does not warrant that any of the services above mentioned
will be free from interruptions caused by war, insurrection, civil
commotion, riots, acts of God or the enemy, governmental action,
repairs, renewals, improvements, alternations, strikes, lockouts,
picketing, whether legal or illegal, accidents, inability of the
Landlord to obtain fuel or supplies or any other cause or causes
beyond the reasonable control of the Landlord. Any such interruption
of service shall never be deemed an eviction or disturbance of the
Tenant's use and possession of the premises
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or any part thereof, or render the Landlord liable to the Tenant for
damages, or relieve the Tenant from performance of the Tenant's
obligations under this Lease.
7. CONDITION OF PREMISES. The Tenant's taking possession shall be conclusive
---------------------
evidence as against the Tenant that the demised premises were in good order and
satisfactory condition when the Tenant took possession. No promise of the
Landlord to alter, remodel, decorate, clean or improve the demised premises, the
Building or the Complex and no representation respecting the condition of the
demised premises, the Building or the Complex have been made by the Landlord to
the Tenant, unless the is contained herein, or made a part hereof, or in a
written document signed by or its Agent. This Lease does not grant any rights to
air over property.
8. FAILURE TO GIVE POSSESSION. If the Landlord shall be unable to give
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possession of the demised premises on the date of the commencement of the term f
by reason of any of the following: (i) the Landlord has not completed its of
the demised premises, (ii) the Landlord is unable to give possession of the
demised premises by reason of the holding over or retention of possession of any
tenant, tenants or occupants, or (iii) for any other reason, Landlord shall not
be subject to any liability for the failure to give possession on said date.
SEE RIDER SECTION 38. Under such circumstances the rent reserved and covenanted
to be paid herein shall not commence until the demised premises are available
for occupancy by Tenant, and no such failure to give possession on the date of
commencement of the term hereof shall affect the validity of this Lease or the
obligations of the Tenant hereunder, nor shall the same be construed to extend
the term of this Lease. If the demised premises are ready for occupancy prior
to the date of the commencement of the term hereof and Tenant occupies the
premises prior to said date, Tenant, shall pay rental including amounts stated
in Section 5 for the period of occupancy prior to the date of the commencement
of the term hereof at the proportionate rental to the rent reserved herein. The
said demised premises shall not be deemed to be unready for Tenant's occupancy
or incomplete if only minor or insubstantial details of construction, decoration
or mechanical adjustments remain to be done in the demised premises or any part
thereof, or if special work, changes, alterations or additions required or made
by Tenant in the layout or finish of the demised premises or any part thereof or
shall be caused in whole or in part by Tenant through the delay of Tenant in
submitting plans, supplying information, approving plans, specifications or
estimates, giving authorizations or otherwise or shall be caused in whole or in
part by delay and/or default on the part of Tenant and/or its subtenant or
subtenants. In the event of any dispute as to whether the premises are ready
for Tenant's occupancy, the decision of Landlord's architect shall be final and
binding on the parties.
9. USE OF PREMISES. The Tenant shall occupy and use the demised premises
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during the term for the purpose above specified in Section 2 and none other;
(a) The Tenant will not make or permit to be made any use of the demised
premises which conflicts with exclusive rights granted to any other Tenant
or which directly or indirectly is forbidden by public law, ordinance or
governmental regulation or which ray be dangerous to persons or property,
or which may invalidate or increase the premium cost of any policy of
insurance carried on the Building or covering its operations; the Tenant
shall not do, or permit to be done, any act or thing upon the demised
premises which will be in conflict with fire insurance policies covering
the Building of which the demised premises form a part. The Tenant, at its
sole expense, shall comply with all rules, regulations or
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requirements of the local Inspection and Rating Bureau, or any other
similar body, and shall not do, or permit anything to be done upon said
premises, or bring or keep anything therein in violation of rules,
regulations or requirements of the Fire Department, local Inspection and
Rating Bureau, Fire Insurance Rating Organization or other authority having
jurisdiction and then only in such quantity and manner of storage as not to
increase the rate of fire insurance application to the Building;
(b) any sign installed in the demised premises shall be installed by
landlord at Tenant's cost and in such manner, character and style as
landlord may approve in writing;
(c) the Tenant shall not advertise the business, profession or activities
of the Tenant conducted in the Building in any manner which violates the
letter or spirit of any code of ethics adopted by any recognized
association or organization pertaining to such business, profession or
activities, and shall not use the name of the Building or Complex for any
purpose other than that of business address of the Tenant, and shall never
use any picture or likeness of the Building or Complex in any circulars,
notices, advertisements or correspondence without the Landlord's express
consent in writing;
(d) the Tenant shall not obstruct or use for storage, or for any purpose
other than ingress and egress the sidewalks, entrances, passages courts,
corridors, vestibules, halls, elevators and stairways of the Building;
(e) no bicycle or other vehicle, no dog or other animal or bird shall be
brought or permitted to be in the Building or any part thereof;
(f) the Tenant shall not make or permit any noise or odor that is
objectionable to other occupants of the Building to emanate from the
demised premises, and shall not create or maintain a nuisance thereon, and
shall not disturb, solicit or canvass any occupant of the Building or
Complex, and shall not do any act tending to injure the reputation of the
Building or Complex;
(g) the Tenant shall not install any musical instrument or equipment in the
Building, or any antennas, aerial wires or other equipment inside or
outside the Building, without, in each and every instance, prior approval
in writing by the Landlord. The use thereof, if permitted, shall be
subject to control by the Landlord to the end that others shall not be
disturbed or annoyed;
(h) the Tenant shall not waste water by tying, wedging or otherwise
fastening open any faucet;
(i) no additional locks or similar devices shall be attached to any door.
No keys for any door other than those provided by the Landlord shall be
made. If more than two keys for one lock are desired by the Tenant, the
Landlord may provide the same upon payment by the Tenant. Upon termination
of this Lease or of the Tenant's possession, the Tenant shall surrender all
keys to the demised premises and shall make known to the Landlord the
explanation of all combination locks on safes, cabinets and vaults;
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(j) the Tenant shall be responsible for the locking of doors in and to the
demised premises. Any damage resulting from neglect of this clause shall
be paid for by Tenant;
(k) the Landlord shall at the Tenant's expense, install and maintain all
conduit and cable between (i) the Illinois Bell Demark Board in the
Building and (ii) an agreed point of entry in the demised premises.
Alternatively, Landlord may third party contractor to provide this service
on an exclusive basis for the Building, in which case the Tenant shall pay
such contractor directly for such installation and maintenance. The Tenant
acknowledges that making building cabling the responsibility of a single
party is reasonable and necessary to achieve security, efficiency,
coordination and accountability. Whether building cabling is undertaken by
the Landlord or an exclusive contractor, the Tenant agrees that neither the
Landlord nor the contractor shall be liable for any loss, cost or damage
suffered by the Tenant as a result of cabling installation and maintenance
except to the extent caused by the negligence or willful misconduct of the
party doing such work and that any such claim shall be limited to bodily
injury, death or damage to property, the Tenant hereby waiving and
releasing any claim for consequential damages resulting from an
interruption of service.
(l) shades, draperies or other forms of inside window covering must be of
such shape, color and material as approved and installed by the Landlord;
(m) the Tenant shall not overload any floor, safes, furniture and all large
articles shall be brought through the Building and into the demised
premises at such times and in such manner as the Landlord shall direct and
at the Tenant's sole risk and responsibility. The Tenant shall list all
furniture, equipment and similar articles to be removed from the Building,
and the list must be approved at the office of the Building or by a
designated person before Building employees will permit any article to be
removed;
(n) unless the Landlord gives advance written consent in each and every
instance, the Tenant shall not install or operate any steam or internal
combustion engine, boiler, machinery, refrigerating or heating device or
air-conditioning apparatus in or about the demised premises, or carry on
any mechanical business therein, or use the demised premises for housing
accommodations or lodging or sleeping purposes, or do any cooking therein
or install or permit the installation of any vending machines, or use any
illumination other than electric light, or use or permit to be brought into
the Building any inflammable oils or fluids such as gasoline, kerosene,
naphtha and benzene, or any explosive or other articles hazardous to
persons or property including firearms or other weapons;
(o) the Tenant shall not place or allow anything to be against or near the
glass or partitions, doors or windows of the demised premises which may
diminish the light in, or be unsightly from the exterior of the Building,
public halls or corridors;
(p) the Tenant shall not install in the demised premises any equipment
which uses an unusual amount of electricity without the advance written
consent of the Landlord. "Unusual amount of electricity" shall mean any
one or all of the following: (1) use of a lighting system which requires
more electricity than the standard lighting fixtures provided in the
Building by the Landlord; (2) the electrical load of electrical equipment
(other than
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lighting) used in the premises exceeding an average of two watts per square
foot of the premises; (3) electricity which is not at a nominal 120 volts;
(4) electrical circuits with a capacity exceeding 20 amperes; (5)
electricity used for equipment and/or accessories not normal for ordinary
office use. If Landlord consents to such use of an unusual amount of
electricity, the Tenant shall ascertain from the Landlord the maximum
amount of electrical current which can safely be used in the demised
premises, taking into account the capacity of the electric wiring in the
Building and the demised premises and the needs of the other tenants in the
Building and shall not use more than such safe capacity. The Landlord's
consent to the installation of electric equipment shall not relieve the
Tenant from the obligation not to use more electricity than such safe
capacity;
(q) in addition to all other liabilities for breach of any covenant of this
Section 9, the Tenant shall pay to the Landlord all damages caused by such
breach also pay to the Landlord as additional rent an amount equal to any
increase in insurance premium or premiums caused by such breach. Any
violation to Section 9 may be restrained by injunction. The Tenant shall
be liable to Landlord for all damages resulting from violation of any of
Section 9. The Landlord shall have the right to make such reasonable rules
and regulations as the Landlord or its agent may from time to time adopt on
such reasonable notice to be given as the Landlord may elect. Nothing in
this Lease shall be construed to noose upon the Landlord any duty or
obligation to enforce provisions of this Section 9 or any rules and
regulations hereafter adopted, or the terms, covenants or conditions of any
other lease as against any other tenant, and the Landlord shall not be
liable to the Tenant for violation of the same by any other tenant, its
servants, employees, agents, visitors or licensees.
10. CARE AND MAINTENANCE. Subject to the provisions of Section 13, the Tenant
--------------------
shall, at the Tenant's own expense, keep the demised premises in good order,
condition and repaired during the term. If the Tenant does not make repairs
promptly and adequately, the Landlord may, but need not, make repairs, and the
Tenant shall promptly pay the cost thereof. The Tenant shall pay the Landlord
for overtime and for any other expense incurred in the event repairs,
alterations, decorating or other work in the demised premises are not made
during ordinary business hours at the Tenant's request.
11. ALTERATIONS. There shall be no painting or decorating, carpet
-----------
installation, or erection of any partitions, any alterations in or additions to
the demised premises or any nailing, boring or screwing into the ceilings, walls
or floors, without the Landlord's prior written consent in each and every
instance. All such work shall be performed by or under the direction of
Landlord, but at the cost of Tenant. The Landlord's decision to refuse such
consent shall be conclusive.
All additions, decorations, fixtures, hardware, non-trade fixtures and all
improvements, temporary or permanent, in or upon the demised premises, whether
placed there by the Tenant or by the Landlord, shall, unless the Landlord
requests their removal, become the Landlord's property and shall remain upon the
demised premises at the termination of this Lease by lapse of time or otherwise
without compensation or allowance or credit to the Tenant. If, upon the
Landlord's request for removal, the Tenant does not remove said additions,
decorations, decorations, hardware, non-trade fixtures and improvements, the
Landlord may remove the same and the Tenant shall pay the cost of such removal
to the Landlord upon demand.
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12. ACCESS TO PREMISES. The Tenant shall permit the Landlord to erect, use and
------------------
maintain pipes, ducts, wiring and conduits in and through the demised premises.
The Landlord or Landlord's agents shall have the right to enter upon the
premises, to inspect the same, to perform janitorial and cleaning services and
to make such decorations, repairs, alterations, improvements or additions to the
premises, the Building or the Complex as the Landlord may deem necessary or
desirable, and the Landlord shall be allowed to take all material into and upon
said demised premises that may be required therefor without the same
constituting an eviction of the Tenant in whole or in part and the rent reserved
shall in no way abate (except as provided in section 13) while said decorations,
repairs, alterations, improvements, or additions are being made, by reason of
loss or interruption of business of the Tenant, or otherwise. If the Tenant
shall not be personally present to open and permit an entry into said demised
premises, at any time, when for any reason an entry therein shall be necessary
or permissible, the Landlord or Landlord's agents may enter the same by a master
key, or may forcibly enter the same, without rendering the Landlord or such
agents liable therefore (if during such entry Landlord or Landlord's agents
shall accord reasonable care to Tenant's property) , and without in any manner
affecting the obligations and. covenants of this Lease. Nothing herein
contained, however, shall be deemed or construed to impose upon the Landlord any
obligations, responsibility or liability whatsoever, for the care, supervision
or repair of the Building, the complex or any part thereof, other than as herein
provided. The Landlord shall also have the right at any time, without the same
constituting an actual or constructive eviction and without incurring any
liability to the Tenant therefor, to change the arrangement and/or location of
entrances or passageways, doors and doorways, and corridors, elevators, stairs,
toilets or public parts of the Building, and to close entrances, doors,
corridors, elevators or other facilities. The Landlord shall not be liable to
the Tenant for any expense, injury, loss or damage resulting from work done in
or upon, or the use of, any adjacent or nearby Building, land, street or alley,
SEE RIDER SECTION 39.
13. UNTENANTABILITY. If the demised premises or 50% or more of the Rentable
---------------
Area of the Building is made untenantable by fire or other casualty, Landlord
may elect:
(a) to terminate this Lease of the date of the fire or casualty by notice
to the Tenant within sixty after that date, or
(b) proceed with all due diligence to repair, restore or rehabilitate the
Building or the demised premises, in which event this Lease shall not
terminate.
In the event the Lease is not terminated pursuant to this provision, rent
shall abate on a per diem basis during the period of untenantability. In the
event of the Determination of this Lease pursuant to this section, rent shall be
apportioned on a per diem basis and paid to the date of the fire or other
casualty. In the event that the are partially damaged by fire or other casualty
but are not made wholly untenantable, then Landlord shall, except during the
last year of the term hereof, all due diligence to repair and restore the
demised premises and the rent shall abate in proportion to the nonusability of
the demised premises during the period of untenantability. If a portion of the
demised premises are made untenantable as aforesaid during the last year of the
term hereof, Landlord shall have the right to terminate this Lease as of the
date of the fire or other casualty by giving written notice thereof to Tenant
within thirty (30) days after the date of fire or other casualty, in which
event, the rent shall be apportioned on a per diem basis and paid to the date of
such fire or other casualty.
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In the event the premises or the Building is damaged by fire or other
casualty resulting from the act or neglect of Tenant, its agents, contractors,
employees or invitees, Tenant shall not be released from any of its obligations
hereunder including, without limitation, its duty to repair the premises and its
liability to Landlord for damages caused by such fire or other casualty and its
duty to pay rent, which rent shall not be abated. Tenant acknowledges that
Landlord shall be entitled to the full proceeds of any insurance coverage,
whether carried by Landlord or Tenant, for damage to alterations, additions,
improvements or decorations provided by Landlord either directly or through an
allowance to Tenant (whether by rent abatement or otherwise).
Notwithstanding anything to the contrary herein set forth, Landlord shall
have no duty pursuant to this Section 13 to repair or restore any portion of the
alterations, additions or improvements in the premises or the decorations
thereto except to the extent that such alterations, additions, improvements and
decorations were provided by Landlord at Landlord's cost, at the beginning of
the term.
14. INSURANCE.
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(a) The Landlord shall maintain insurance covering the Complex (including
Landlord Work in the Premises) against loss, damage or destruction by fire
and the perils specified in the standard extended coverage endorsement.
(b) Tenant, at Tenant's expense, shall purchase and maintain insurance
during the entire term of the Lease for the benefit of Tenant and Landlord
(as their interest may appear) with terms, coverages and in companies
satisfactory to Landlord. Tenant agrees to adjust the amounts or type of
coverage set forth herein if the customs or standards in the leasing
community change during the term of this Lease, but initially Tenant shall
maintain the following coverages in the following amounts: (i) Commercial
General Liability Insurance on an occurrence basis with minimum limit of
liability in an amount of $1,000,000 for bodily injury, personal injury, or
death to any one person and $1,000,000 for bodily injury, personal injury
or death to more than one person, and $1,000,000 with respect to damage to
property including water and sprinkler damage for each occurrence; (ii)
Comprehensive Automobile Insurance covering all owned, non-owned and hired
automobiles of Tenant including the loading and unloading of any automobile
with limits of liability of not less than $1,000,000 for bodily injury to
any one person and $1,000,000 for each accident and $1,000,000 for property
damage for each accident; and (iii) insurance against fire, with extended
coverage and vandalism and malicious mischief endorsements, in an amount
adequate to cover the full replacement value of all leasehold improvements,
its personal property, machinery, equipment, moveable partitions, office
furniture, trade fixtures, and wall and floor coverings in the Premises.
Such insurance shall be written on an "all risks" of physical loss or
damage basis, for the full replacement cost value of the covered items and
in amounts that meet any coinsurance clauses of the policies of insurance;
(iv) Workman's Compensation insurance in not less than the statutory
amounts as outlined by State of Illinois.
(c) The policy referred to in Subsection 14(b) (i) shall name Landlord,
beneficiaries of Landlord, and their respective agents and employees as of
additional insureds and shall not provide for deductible amounts in excess
$1, 000.00. Each policy referred to in Subsection
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14 (b) shall be issued by one or more responsible insurance companies
reasonably satisfactory to Landlord and shall contain the endorsement that
such insurance may not be canceled or amended without thirty (30) days'
prior written notice to Landlord and its beneficiaries.
(d) Tenant shall deliver to Landlord certificates of insurance of all
Policies and renewals thereof to be maintained by Tenant hereunder, not
less than ten (10) days prior to the commencement of the term and not less
than ten (10) days prior to the expiration date of each policy.
15. SUBROGATION. The parties hereto agree to use good faith efforts to have
-----------
any and all fire, extended coverage or any and all material damage insurance
which may be carried endorsed with a subrogation clause providing substantially
as follows: "This insurance shall not be invalidated should the insured waive in
writing prior to a loss any or all right of recovery from the other party for
any loss or damage to any of its property insured under valid and collectible
insurance policies to the extent of any recovery collectible under such
insurance, subject to the limitation that this waiver shall apply only when it
is either permitted or, by the use of such good faith efforts could have been so
permitted by the applicable policy of insurance." Landlord agrees to notify
Tenant, prior to the commencement of the Term, if Landlord is unable to obtain a
subrogation clause and Tenant agrees to notify Landlord if Tenant is unable to
obtain such clause.
16. EMINENT DOMAIN. If the Building, or a substantial part of the demised
--------------
premises, shall be lawfully taken or condemned for any public or quasi-public
use or purpose, or conveyed under threat of such condemnation, the term of this
Lease shall end upon, and not before, the date of the taking of possession by
the condemning authority, and without apportionment of the award. Tenant hereby
assigns to the Landlord Tenant's interest in such award, if any. Current rent
shall be apportioned as of the date of such termination. If any part of the
Building, other than the demised premises or any part of the Building not
constituting a substantial part of the demised premises, shall so be taken or
condemned, or if the grade of any street or alley adjacent to the Building is
changed by any competent authority and such taking or change of grade makes it
necessary or desirable to substantially remodel or restore the Building, the
Landlord shall have the right to cancel this Lease upon not less than ninety
(90) days notice prior to the date of cancellation designated in the notice. No
money or other consideration shall be payable by the Landlord to the Tenant for
the right of cancellation, and the Tenant shall have no right to share in the
condemnation award or in any judgement for damages caused by the change of
grade.
17. ASSIGNMENT--SUBLETTING. (a) Tenant shall not assign, hypothecate,
----------------------
mortgage, encumber, or convey this Lease or any interest under it; allow any
transfer thereof or any lien upon Tenant's interest by operation of law or
otherwise; sublet the whole or any part of the demised premises by anyone other
than Tenant and its employees.
If Tenant is a corporation, any dissolution, merger, consolidation or
reorganization of Tenant or the sale or transfer of a controlling percentage of
the capital stock of Tenant, whether by a single transaction or event or by
cumulative transactions or events shall be deemed an assignment of this Lease,
and shall be subject to the restrictions set forth above, If Tenant is a
partnership, a withdrawal or change, voluntary, involuntary or by operation of
law, of any partner or partners owning 51% or
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more of the partnership interest, whether by a single transaction or event or by
cumulative transactions or events, or the dissolution of the partnership shall
be deemed an assignment of the Lease and shall be subject to the restrictions
set forth above. SEE RIDER SECTION 40.
(b) Tenant shall not sublet the whole or any part of the premises without
Landlord's prior written consent. In the event Tenant intends to sublease all
or any portion of the premises, Tenant shall take the following actions:
(i) Tenant shall first notify Landlord in writing of its intention to
sublet prior to any advertising of same, hiring of brokers or
contacting of potential subtenants, such notice shall identify the
space proposed to be sublet, which space must be a legally leasable
unit in compliance with all applicable ordinances and codes, and
shall state the date on which Tenant requests that the sublet
commence, which date shall be no less than one hundred eighty (180)
days from the date of Tenant's notice.
(ii) Landlord shall have thirty (30) days following the receipt of such
notice to notify Tenant whether it elects to recapture the space
Tenant has proposed to sublet. Landlord's failure to send such notice
within such thirty (30) day period shall be deemed to mean Landlord
has not elected to recapture the space.
(iii) In the event the Landlord elects to recapture the space, it shall
notify Tenant of its intent by service of a written notice of
cancellation terminating that portion of the Lease covering the space
Landlord has chosen to recapture, which may include all or any lesser
portion of the space Tenant has proposed to sublet. In such event
Landlord agrees that the space not recaptured by Landlord shall be a
legally leasable unit.
Tenant shall pay all costs of any construction necessary to
accomplish the division of the space. The termination of the Lease as
to the recaptured space shall be effective on the date specified by
the Tenant in its notice pursuant to Subsection 17 (i) and (ii).
(iv) In the event that Landlord elects to recapture any proposed sublet
space under these provisions, the Base Rent, Rentable Area of the
Premises and Measurable Area of the Premises as provided in Section 1
above shall be adjusted as of the termination date designated in the
cancellation notice, and this Lease as so amended shall continue
thereafter in full force and effect.
(v) In the event that the Landlord elects not to recapture part or all of
the proposed sublet space, Landlord shall so notify Tenant as set
forth in (ii) above. Provided Tenant is not in default under the
Lease and has fully complied with the terms of this Section 17,
Tenant may then proceed to contact potential subtenants and shall
have the option to sublet the non-recaptured space in accordance with
the following provisions:
(A) Tenant shall bear all costs and expenses associated with the
subletting including, without limitation, any and all costs and
expenses incurred by Landlord (if any).
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(B) Upon locating a suitable potential subtenant, Tenant shall
notify Landlord in writing. Such notice shall state the name and
address of the proposed subtenant and shall include a true and
complete copy of the proposed sublease. Tenant shall also deliver
to Landlord copies of all financial statements, credit reports
and other such information in its possessions relating to the
prospective subtenant. At Landlord's request, Tenant shall
promptly secure and deliver any additional information Landlord
deems necessary in order to evaluate the potential subtenant.
(C) Landlord shall have fifteen (15) days from the date of its
receipt of the last information provided by Tenant on the
proposed subtenant, during which to evaluate such subtenant and
decide whether to consent to the sublease. Landlord shall notify
Tenant of its decision in writing, and, in the event that
Landlord does not consent to the sublease, its notice thereof to
Tenant shall include an explanation of its reasons for denying
consent. In the event that Landlord consents to the sublease,
Tenant may execute the sublease and collect all rents due
thereunder subject to the provisions of subparagraph (D) below
and subject to the subtenant's agreement to comply with all the
terms of this Lease as they apply to the sublet space.
(D) Following the execution of any sublease to which Landlord has
consented and throughout the term thereof, Tenant shall pay
Landlord sixty percent (60%) of all amounts received by Tenant in
connection with subletting in excess of the rent for the sublet
space Tenant is obligated to pay Landlord hereunder.
(E) The use for which the premises or any part thereof may be
sublet shall be only for lawful office use which is in keeping
with the general character of the Building and Complex, which is
not extra-hazardous on account of fire and which does not
conflict with exclusive rights granted to any other tenant.
(F) The granting consent by Landlord to Tenant for subletting of
the premises or any part thereof shall not release Tenant from
direct and primary liability under this Lease for the performance
of all of the covenants, duties and obligations of Tenant
hereunder, and Landlord shall retain its rights to enforce the
provisions Of this Lease against Tenant or any subtenant without
demand upon or proceeding in any way against any other person.
consent to a particular sublease shall not be denied a consent to
any other or subsequent transaction.
18. WAIVER OF CLAIMS AND INDEMNITY. To the extent permitted by law, the Tenant
------------------------------
releases the Landlord, its beneficiaries, and their respective agents and
servants from, and waives all claims for, damage to person or property sustained
by the Tenant or any occupant of the Building, Complex or premises resulting
from the Building, Complex or premises or any part of either or any equipment or
appurtenance becoming out of repair, or resulting from any accident in or about
the Building or Complex or resulting directly or indirectly from any act or
neglect of any tenant or
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occupant of the Building or Complex or of any other person, including Landlord's
agents and servants. This Section 18 shall apply especially, but not
exclusively, to the flooding of basements or other subsurface areas, and to
damage caused by refrigerators, sprinkling devises, air-conditioning apparatus,
water, snow, frost, steam, excessive heat or cold, falling plaster, broken
glass, sewage, gas, odors or noise, or the bursting or leaking of pipes or
plumbing fixtures, and shall apply equally whether any such damage results from
the act or neglect of the Landlord or of other tenants, occupants or servants in
the Building or Complex or of any other person, and whether such damage be
caused or result from any thing or circumstance above mentioned or referred to,
or any other thing or circumstance whether of a like nature or of a wholly
different nature. If any such damage, whether to the demised Premises or to the
Building or Complex or any part thereof, or whether to the Landlord or to other
tenants in the Building or Complex, results from any act or neglect of the
Tenant, its employees, agents, invitees and customers, the Tenant shall be
liable therefor and the Landlord may, at the Landlord's option, repair such
damage and the Tenant shall, upon demand by Landlord, reimburse the Landlord
forthwith for the total cost of such repairs. The Tenant shall not be liable for
any damage caused by its act or neglect if the Landlord or a tenant has
recovered the full amount of the damage from insurance and the insurance company
has waived its right of subrogation against the Tenant. All property belonging
to the Tenant or any occupant of the premises that is in the Building, the
Complex or the premises shall be there at the risk of the Tenant or other person
only, and the landlord shall not be liable for damage thereto or theft or
misappropriation thereof.
Tenant agrees to indemnify and save the Landlord, its beneficiaries, and
their agents and employees harmless against any and all claim, demands, costs
and expenses, including reasonable attorney's fees for the defense thereof,
arising from Tenant's occupancy of the demised premises or from any breach or
default on the part of Tenant in the performance of any covenant or agreement on
the part of Tenant pursuant to the terms of this Lease, or from any act or
negligence its agents, servants, employees or invitees, in or about the demised
premises. In case of any action or proceeding brought against Landlord, its
beneficiaries, or their respective agents or employees by reason of any such
claim, upon notice from Landlord, Tenant covenants to defend such action or
proceeding by counsel reasonably satisfactory to Landlord.
19. MORTGAGE-GROUND LEASE. Landlord may execute and deliver a mortgage or
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trust deed in the nature of a mortgage, both sometimes hereinafter referred to
as "Mortgage" against the Building, the Complex or any interest thereon, and
may sell and lease back the underlying land on which the Building is situated,
or which forms a part of the Complex. This Lease and the rights of Tenants
hereunder shall be and are hereby made expressly subject and subordinate at all
times to any such Mortgage and/or ground lease, now or hereafter existing and
all amendments, modifications and renewals thereof and extensions,
consolidations or replacements thereof, and to all advances made or hereafter to
be made upon the security thereof. Tenant agrees to execute and deliver such
further instruments subordinating this Lease to said mortgage or ground lease as
may be requested in writing by Landlord from time to time. Tenant hereby
appoints Landlord as attorney-in-fact for Tenant with full power and authority
to execute and deliver in the name of the Tenant any such instruments in the
event Tenant fails to do so.
Should any Mortgage affecting the Building or Complex be foreclosed or if
any ground or underlying lease be terminated:
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(a) The liability of the mortgagee, trustee or purchaser at such
foreclosure sale or the liability of a subsequent owner designated as
Landlord under this Lease shall exist only so long as such trustee,
mortgagee, purchaser or owner is the owner of the Building or Complex and
such liability shall not continue or survive after further transfer of
ownership,
(b) Upon request, of the mortgagee or trustee, Tenant will attorn, as
Tenant under this Lease, to the purchaser at any foreclosure sale
thereunder, or if any ground or underlying lease be terminated for any
reason, Tenant will attorn as Tenant under this Lease to the ground lessor
under the ground lease and will execute such instruments as may be
necessary or appropriate to evidence such attornment.
Tenant covenants and agrees to give any mortgagee and/or trust deed
holders, by certified or Registered Mail, a copy of any notice of default served
upon the Landlord, provided that prior to such notice Tenant has been notified
in writing, (by way of notice of assignment of rents and leases, or otherwise)
of the address of such mortgagee and/or trust deed holder, Tenant further
covenants and agrees that if Landlord shall have failed to cure any default
within thirty (30) days after Tenant gives notice of the default, the mortgagee
and/or trust deed holder shall have an additional thirty (30) days within which
to cure such default or if such default cannot be aired within that time, then
such additional time as may be necessary if within such them (30) days, any
mortgagee and/or trust deed holder has commenced and is diligently pursuing the
remedies to cure such default (including but not limited to commencement of
foreclosure proceedings, if necessary to effect such cure) , in which event the
Lease shall not be terminated while such remedies are being so diligently
pursued.
20. CERTAIN RIGHTS RESERVED BY THE LANDLORD. The Landlord reserves and may
---------------------------------------
exercise the following rights without affecting Tenant's obligations hereunder:
(a) to change the name or street address of the Building or Complex;
(b) to install and maintain a sign or signs on the interior or exterior of
the Building or Complex;
(c) to have access for the Landlord and other tenants of the Building to
any mail chutes located on the demised premises according to the rules of
the United States Post Office;
(d) to designate all sources furnishing sign painting and lettering,
drinking water, towels, coffee service, and toilet supplies, lamps and
bulbs used on the demised premises;
(e) to decorate, remodel, repair, alter or otherwise prepare the demised
premises for reoccupancy if Tenant vacates the demised premises prior to
the expiration of the term;
(f) to retain at all time pass keys to the demised promises;
(g) to grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building or Complex;
(h) to exhibit the demised premises to others;
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(i) to close the Building after regular working hours and on the legal
holidays subject, however, to Tenant's right to admittance, under such
reasonable regulations as Landlord may prescribe from time to time, which
ray include by way of example but not of limitation, that persons entering
or leaving the Building identify themselves to a watchman by registration
or otherwise and that said persons establish their right to enter or leave
the Building;
(j) to approve the weight, size and location of safes or other heavy
equipment or articles, which articles may be moved in, about, or out of the
Building or premises only at such times and in such manner as landlord
shall direct and in all events, however, at Tenant's sole risk and
responsibility;
(k) to take any and all measures, including inspections, repairs,
alterations, decorations, additions and improvements to the praises, the
Building or to the Complex, as may be necessary or desirable for the
safety, protection or preservation of the premises, the Building or the
Complex or the Landlord's interest, or as may be necessary or desirable in,
the operation of the Building or Complex.
The Landlord may enter upon the demised premises and may exercise any or
all of the foregoing rights hereby reserved without being deemed guilty of an
eviction or disturbance of the Tenant's use or possession and without being
liable in any manner to the Tenant, and without abatement of rent or affecting
any of the Tenant's obligations hereunder.
21. HOLDING OVER. If the Tenant retains possession of the demised premises or
------------
any part thereof after the termination of the term or any extension thereof, by
lapse of time or otherwise, the Tenant shall pay the Landlord the monthly rent,
at 150% the rate payable for the month immediately preceding said holding over
(including amounts for Taxes, Expenses and Consumer Price Increases, or any
other applicable increases which Landlord may reasonably estimate), computed on
a per month basis, for each month or part thereof (without reduction for any
such partial month) that the Tenant thus remains in possession, and in addition
thereto, Tenant shall pay the Landlord all damages, consequential as well as
direct, sustained by reason of the Tenant's retention of Possession.
22 LANDLORD'S REMEDIES. All rights and remedies of the Landlord herein
-------------------
enumerated shall be cumulative, and none shall exclude any other right or remedy
allowed by law.
(a) If any involuntary action or proceeding under any section or sections
of any bankruptcy act in any court or tribunal shall adjudge or declare
Tenant insolvent or unable to pay Tenant's debts, or if any voluntary
petition or similar proceeding under any section of any bankruptcy act
shall be filed by Tenant in any court or tribunal to declare Tenant
insolvent or unable to pay Tenant's debts, then and in any such event
Landlord may, if Landlord so elects but riot otherwise, and with or without
notice of such election, and with or without entry or other action by
Landlord, forthwith terminate this Lease, and notwithstanding any other
provision of this Lease, Landlord shall forthwith upon such termination be
entitled to recover damages in an amount equal to the then present value of
the Base Rent specified in section 1 of this Lease, as adjusted, pursuant
to Section 5, for the residue of the stated term thereof, less the present
value of the fair rental value of the premises for the residue of the
stated term.
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(b) If the Tenant defaults in the payment of rent, and the Tenant does not
cure the default within five (5) days after demand for payment of such rent
or if the Tenant defaults in the prompt and full performance of any other
provisions of this Lease, and the Tenant does not cure the default within
twenty (20) days after written demand by the landlord that the default be
cured (unless the default involves a hazardous condition, which shall be
cured forthwith) or if the leasehold interest of the Tenant be levied upon
or be attached by process of law, or if the Tenant makes an assignment for
the benefit of creditors or admits its inability to pay its debts, or if a
receiver be appointed for any property of the Tenant, or if the Tenant
abandons the premises, then and in any such event the Landlord may, if the
Landlord so elects but not otherwise, and with or without notice of such
election, and with or without any demand whatsoever, either forthwith
terminate this Lease and the Tenant's right to possession of the premises,
or without terminating this Lease, forthwith terminate the Tenant's right
to possession of the premises.
(c) Upon any termination of this Lease, whether by lapse of time or
otherwise, or upon any termination of the Tenant's right to possession
without termination of the Lease, the Tenant shall surrender possession and
vacate the premises immediately, and deliver possession thereof to the
Landlord, and hereby grants to the Landlord full and free license to enter
into and upon the premises in such event with or without process of law
and, to repossess the premises and to expel or remove the Tenant and any
others who my be occupying or be within the premises and to remove any and
all property therefrom, using force as may be necessary without being
denied in any manner guilty of trespass, eviction or forcible entry or and
without relinquishing the Landlord's right to rent or any other right given
to the Landlord hereunder or by operation of law.
(d) If the Tenant abandons the premises or otherwise entitles the Landlord
so to elect, and the landlord elects to terminate the Tenant's right to
possession only, without terminating the Lease, the Landlord may, at the
Landlord's option, enter into the premises, remove the Tenant's sign and
other evidences' of Tenant and take and hold possession thereof as in
subsection (c) of this Section 22 provided, without such entry and
possession terminating the Lease or releasing the Tenant, in whole or in
part, from the Tenant's obligation to pay the rent hereunder for the full
term, and in any such case the Tenant shall pay forthwith the Base Rent
specified in Section 1 of this Lease as adjusted in accordance with Section
5, for the residue of the stated term plus any other sum then due hereunder
less the present value of the fair rental value of the demised premises for
such period. In the alternative, upon and after entry into possession
without termination of the Lease, the Landlord shall use its best efforts
to relet the premises or any part thereof for the account of the Tenant to
any person, firm or corporation for such rent for such time and upon such
terms as the Landlord in the Landlord's sole discretion shall determine,
and the Landlord shall not be required to observe any instruction given by
the Tenant about such reletting. In any such case, the Landlord may make
repairs, alterations and additions in or to the premises, and redecorate
the same to the extent deemed by the Landlord necessary or desirable, and
the Tenant shall, upon demand, pay the cost thereof, together with the
Landlord's Expenses of the reletting. If the consideration collected by
the Landlord upon any such reletting for the Tenant's account is not
sufficient to pay monthly the full amount of the rent reserved in this
lease, together with the costs of repairs, alterations, additions,
redecorating and the landlord's expenses, the
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Tenant shall pay to the Landlord the amount of each monthly deficiency upon
demand. If the Landlord, in attempting to mitigate the damages caused by
Tenant's removal from the premises, leases to another entity ("New Lease")
for longer than the remainder of the term of this Lease, the rental for the
remainder of the term of this lease for purposes of this section shall be
deemed to be the average rental payments under the New Lease for the
remainder of the term of this lease. "Average rental payments under the New
Lease" shall be deemed to mean rental payments (net of abatements and rent
credits) under the New Lease, after, deducting the costs of leasing,
including, but not limited to, expenses incurred in repairing, altering or
redecorating the premises, broker's costs, and attorney's fees in
connection with the New Lease, divided by the number of months in the New
Lease. All rentals and other costs under the New lease shall be discounted
to the due dates of payments due under this Lease, at the prime rate then
in existence at The First National Bank of Chicago or bank of similar size
if The First National Bank of Chicago is no longer in existence at the time
this provision becomes operational. Notwithstanding anything in this
subsection to the contrary, in no event shall Landlord be required to pay
Tenant any excess of the rent it receives under the New Lease over the rent
hereunder.
(e) The Tenant hereby constitutes and irrevocably appoints any attorney of
any court to be the true and lawful attorney of the Tenant, and, in the
name, place and stead of the Tenant, to appear for and on behalf of the
Tenant in any court of record at any time, and from time to time, after
default hereunder in any suit or suits brought against the Tenant for the
enforcement of any rights hereunder by the Landlord, to waive the issuance
and service of process and trial by jury, and, from time to time, to
confess judgment or judgments in favor of the Landlord and against the
Tenant for any rent and interest therein due hereunder by the Tenant to the
Landlord, for costs of suit and for a reasonable attorney's fee in favor of
the Landlord to be fixed by the court, and to release all errors that may
occur or intervene in such proceedings, including the issuance of execution
upon any such judgment, and to stipulate that no appeal shall be prosecuted
from such judgment or judgments, or that no proceedings in chancery or
otherwise shall be filed or prosecuted to interfere in any way with the
operation of such judgment or judgments or of any execution issued thereon
or with any supplemental proceedings taken by the Landlord to collect the
amount of any such judgment or judgments, and to consent that execution on
any judgment or decree in favor of the Landlord against the Tenant may
issue forthwith.
(f) Any and all property which may be removed from the premises by the
Landlord pursuant to the authority of the Lease or of law, to which the
Tenant is or may be entitled, may be handled, removed or stored by the
Landlord at the risk, cost and expense of the Tenant, and the Landlord
shall in no event be responsible for the value, preservation or safekeeping
thereof. The Tenant shall pay to the Landlord, upon demand, any and all
expenses incurred in such removal and all storage charges against such
property so long as the same shall be in the Landlord's possession or under
the Landlord's control. Any such property of the Tenant not retaken from
storage by the Tenant within thirty (30) days after the end of the term,
however terminated, shall be conclusively presumed to have been conveyed by
the Tenant to the Landlord under this Lease as a bill of sale without
further payment or credit by the landlord to the Tenant.
-26-
<PAGE>
(g) Tenant hereby grants to Landlord a first lien upon the interest of
Tenant under this Lease to secure the payment of moneys due under this
Lease, which lien may be enforced in equity; and Landlord shall be entitled
as a matter of right to have a receiver appointed to take possession of the
demised premises and relet the same under order of court. In addition to
any statutory lien for rent in Landlord's favor, landlord shall have and
Tenant hereby grants to Landlord a continuing security interest for all
rentals and other sums of money becoming due hereunder from Tenant upon all
goods, wares, equipment, fixtures, furniture, inventory, accounts,
contracts rights, chattel paper and other personal property of Tenant
situated on the Premises, and such property shall not be removed there from
without the consent of Landlord until all arrearages in rent as well as any
and all other sums of money then due to Landlord hereunder shall first have
been paid and discharged. In the event of a default under this lease,
Landlord shall have, in addition to any other remedies provided herein or
by law including without limitation the right to sell the property
described in this Article at public or private sale upon five (5) days'
notice to Tenant. Tenant hereby agrees to execute such financing statements
and other documents necessary or desirable in Landlord's discretion to
perfect the security interest hereby created. Any statutory lien for rent
is not hereby waived, the express contractual lien herein granted being in
addition and supplementary thereto.
(h) The Tenant shall pay upon demand all the Landlord's costs, charges and
expenses, including the fees of counsel, agents and others retained by the
Landlord in any litigation, negotiation or transaction in which the Tenant
causes the Landlord, without the landlord's fault, to become involved or
concerned specifically including, without limitation, any litigation
required by landlord to enforce its rights or remedies pursuant to this
Lease.
23. DEFAULT UNDER OTHER LEASE. If the term of any lease, other than this
-------------------------
lease, made by the Tenant for any demised premises in the Building or Complex
shall be terminated or terminable after the making of this lease because of any
default by the Tenant under such other lease, such fact shall empower the
Landlord, at the landlord's sole option, to terminate this Lease by notice to
the Tenant.
24. SURRENDER OF POSSESSION. Upon the expiration or other termination of the
-----------------------
term of this Lease, Tenant shall quit and surrender to Landlord the premises,
broom clean, in good order and condition, ordinary wear excepted, and Tenant
shall remove all of its property. Landlord shall remove all telephone and other
communication cable from the plenum areas, wall cavities and risers at Tenant's
expense.
If the Tenant does not remove its property of every kind and description
from the demised premises prior to the end of the term, however ended, the
Tenant shall be conclusively presumed to have conveyed the same to the landlord
under this Lease as a bill of sale without further payment or credit by the
Landlord to the Tenant and the Landlord may remove the same and the Tenant shall
pay the cost of such removal to the Landlord upon demand.
Not later than sixty (60) days before this Lease terminates or Tenant
vacates the premises, Tenant shall give Landlord written notice of its intended
departure and shall schedule a joint inspection with Landlord of the premises in
preparation for Tenant's vacation of the premises. At
-27-
<PAGE>
such joint inspection with Landlord shall prepare a list of the following items
for Tenant to resolve before vacating the premises:
1) repairs and restorations that will need to be made to the premises
before vacation, if any;
2) equipment and/or fixtures that may be removed, and a procedure that
must be followed in order to remove such items from the Building,
which may include a "check out" procedure with an employee of Landlord
at the Building;
3) equipment and/or fixtures that may not be removed from the premises
because they rightfully belong to Landlord.
Tenant shall have ten (10) days after receipt, of said list from Landlord
to notify Landlord of any discrepancies it notes on said list. If Tenant does
not so notify Landlord, said list shall be binding on Tenant, and shall be
binding upon Landlord except to the extent that, because of hidden problems,
Landlord could not reasonably ascertain whether certain repairs and/or
restoration would be needed until vacation of the premises. In any event, if
Tenant fails to arrange such joint inspection, any list of needed restoration or
repairs prepared by Landlord as a result of Landlord's inspection at or after
Tenant's vacating the premises shall be conclusively deemed correct for purposes
of determining Tenant's responsibility for repairs and restoration.
Tenant's obligation to observe or perform this covenant shall survive the
expiration or other termination of the term of this Lease.
25. NOTICES. Notices shall be in writing,
-------
(a) Notices shall be effectively served by Landlord upon Tenant in any one
of the following manners:
By forwarding through Certified or Registered Mail, postage
prepaid, to Tenant at the corporate address shown in Subsection
1(c), in which case the time of mailing shall be the time of
notice; or
(b) Notices shall be effectively served by Tenant upon Landlord when
addressed to Landlord and served either:
By forwarding through Certified or Registered Mail, postage
prepaid, to Landlord at the address shown in Subsection 1(b).
The addresses for notices shall be those addresses shown in Section 1 or if
notified in writing of another address by either party, at such latter address.
27. GOOD FAITH DEPOSIT. Tenant agrees to deposit with Landlord, upon the
------------------
execution of this Lease, the sum set forth in Subsection 1(m) above as security
for the full and faithful performance by Tenant of each and every term,
provision, covenant, and condition of this lease.
-28-
<PAGE>
Landlord shall have no obligation to segregate the amount so deposited from its
other funds. If Tenant defaults in respect to any of the terms, provisions,
covenants and conditions of this Lease including, but not limited to, payment of
the Adjusted Monthly Base Rent, Landlord may use, apply, or retain the whole or
any part of the security so deposited for the payment of any such rent in
default, or for any other sum which the Landlord may expend or be required to
expend by reason of Tenant's default including, without limitation, any damages
or deficiency shall have accrued before or after any re-entry by Landlord. If
any of the deposit shall be so used, applied or retained by Landlord at any time
or from time to time, Tenant shall promptly, in each such instance, on written
demand therefor by Landlord, pay to Landlord such additional sum as may be
necessary to restore the deposit to the original amount set forth in Subsection
1(m). If Tenant shall fully and faithfully comply with all the terms,
provisions, covenants, and conditions of this Lease, the deposit, or any balance
thereof , shall be returned to Tenant after the following:
(a) the time fixed as the expiration of the term of this Lease;
(b) the removal of Tenant from the demised premises;
(c) the surrender of the demised premises by Tenant to Landlord in
accordance with this Lease; and
(a) the time required for the escalation charges due pursuant to the Lease
to have been computed by landlord and paid by Tenant.
Except as otherwise required by law, Tenant shall not be entitled to any
interest on the aforesaid deposit, In the absence of evidence satisfactory to
Landlord of an assignment of the right to receive the deposit or the remaining
balance thereof, Landlord may return the deposit to the original Tenant, less of
one or more assignments of this Lease. If Tenant receives notice of sale of the
Building or Complex and a notice to attorn to the new owner, it shall look
solely to the new owner for return of the deposit.
28. MISCELLANEOUS.
-------------
(a) No receipt of money by the Landlord from the Tenant after the
termination of this Lease or after the service of any notice or after the
commencement of any suit, or after final judgment for possession of the
demised premises shall reinstate, continue or extend the term of this Lease
or affect any such notice, demand or suit.
(b) No waiver of any default of the Tenant hereunder shall be implied from
any mission by the Landlord to take any action on account of such default
if such default persists or be repeated, and no express waiver shall affect
any default other than the default specified in the express waiver and that
only for the time and to the extent therein stated.
(c) The words "Landlord" and "Tenant", wherever used in this lease, shall
be construed to mean plural where necessary, and the necessary grammatical
changes required to make the provisions hereof apply either to corporations
or individuals, men or women, shall in all cases be assumed as though in
each case fully expressed.
-29-
<PAGE>
(d) Each provision hereof shall extend to and shall, as the case may
require, bind and inure to the benefit of the Landlord and the Tenant and
their respective heirs, legal representative, successors and assigns in the
event this lease has been assigned with the express written consent of the
Landlord.
(e) Submission of this instrument for examination does not constitute a
reservation of or option for the premises. The instrument does not become
effective as a lease or otherwise until executed and delivered by both
Landlord and Tenant .
(f) All amounts (unless otherwise provided herein, and other than the
Adjusted Monthly Base Rent, which shall be due as hereinbefore provided)
owed by the Tenant to the Landlord hereunder shall be deemed additional
rent and be paid within ten (10) days from the date the Landlord renders
statements of account therefor. All such amounts (including Adjusted
Monthly Base Rent and additional rent) shall bear interest from the date
due until the date paid at the rate of 2% above the prime rate of interest
of The First National Bank of Chicago in effect on the date of payment, or
at the maximum legal rate of interest, allowed by law, if such maximum
legal rate is applicable and lower.
(g) All riders attached to this Lease and initialed. by the Landlord and
the Tenant are hereby made a part of this Lease as though inserted in this
Lease,
(h) The headings of sections are for convenience only and do not limit or
construe the contents of the sections.
(i) If the Tenant shall occupy the premises prior to the beginning of the
term of this lease with the Landlord's consent, all the provisions of this
Lease shall be in full force and effect as soon as the Tenant occupies the
premises.
(j) Should any mortgage, leasehold or otherwise, require a modification or
modifications of this Lease, which modification or modifications will not
bring about any increased cost or expense to Tenant or in any other way
substantially change the rights and obligations of Tenant hereunder, then
and in such event, Tenant agrees that this lease may be so modified.
(k) The Tenant represents that the Tenant has dealt directly with and only
with Julien J. Studley as broker on connection with this lease, and that
insofar as the Tenant knows no other broker negotiated this lease or is
entitled to any commission in connection therewith. Tenant indemnifies and
holds Landlord, its beneficiaries, and their respective agents and
employees harmless from all claim of any other broker or brokers who claim
to have dealt with Tenant in connection with Lease.
(l) The Tenant agrees that from time to time upon not less than ten (10)
days prior request by the Landlord, the Tenant will deliver to the Landlord
a statement in writing certifying (a) that this lease is unmodified and in
full form and effect (or if there have been modifications that the same is
in full force and effect as modified and identifying the modifications),
(b) the dates to which the rent and other charges have been paid, and (c)
that
-30-
<PAGE>
so far as the person making the certificate knows, the Landlord is not
in default under any provisions of this Lease.
(m) The Landlord's title is and always shall be paramount to the title of
the Tenant, and nothing herein contained shall empower the Tenant to do any
act which can, shall or may encumber such title.
(n) The laws of the State in which the demised premises are located shall
govern the validity, performance and enforcement of this Lease.
(o) If any term, covenant or condition 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,
covenant or condition to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby
and each term, covenant or condition of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
(p) Landlord and Tenant agree that to the extent permitted by law, each
shall and hereby does waive trial by jury in any action, proceeding or
counterclaim brought by either against the other on any matter whatsoever
arising out of or in any way connected with this Lease.
(q) There are no oral agreements between Landlord and Tenant affecting this
Lease, and this lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, agreements and understandings, if
any, between Landlord and Tenant or displayed by Landlord to Tenant with
respect to the subject matter of this lease.
(r) In the event the original Landlord hereunder, or any successor owner of
the Complex, shall sell or convey the Complex, all liabilities and
obligations on the part of the original Landlord, or such successor owner,
under this Lease accruing thereafter shall be terminated, and thereupon all
such liabilities and obligations shall be binding upon the new owner.
Tenant agrees to attorn to each such new owner.
(s) The term "Landlord", as used in this lease, means the legal entity
which owns the beneficial interest in American National Bank & Trust
Company of Chicago Trust No. 40935, which holds legal title to the complex,
and any liability or obligation of landlord under this Lease shall be
limited to its assets held in such trust and no owner of the beneficial
interest in such trust shall be individually or personally liable for any
claim arising out of this Lease.
-31-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this lease the date
first above written.
LANDLORD
Continental Offices Ltd., as Agent for the
owners of the beneficial interest in
American National Bank & Trust Company of
Chicago Trust No. 40935.
By_______________________________________
Its President
ATTEST
By_______________________________________
Its Executive Vice President
(SEAL)
TENANT
By_______________________________________
Its:
ATTEST
By_______________________________________
Its
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<PAGE>
RIDER
TO LEASE AGREEMENT DATED JUNE 10, 1994
BETWEEN
CONTINENTAL OFFICES LTD., AND
_______________________________
29. RENT CREDIT. Notwithstanding the foregoing, Tenant shall receive a rent
credit totaling Two-Hundred-Seventy-One-Thousand-One-Hundred-Fifteen-and-00/100-
Dollars ($271,115.00) to be amortized over the entire lease term at Four-
Thousand-Five-Hundred-Eighteen-and-58/100-Dollars ($4,518.58) per month.
30. CONSTRUCTION. Landlord shall provide a construction allowance of $20.00
per rentable square foot ($160,740.00). Should the construction costs be less
160,740.00, any unused construction dollars will be used toward rent credit.
31. ARCHITECTURAL/ENGINEERING. Landlord at its sole expense, shall furnish
complete space plans, including all necessary revisions and advise on design
related issues. Landlord, at its sole expense, shall furnish complete
architectural working drawings including all mechanical, electrical and plumbing
plans. Landlord's expenses for the space plans and working drawings shall not
reduce the amount of the construction allowance. Tenant shall be responsible
for any costs related to changes to the working drawings once Tenant has
furnished initial approval of said drawings. Landlord's architect shall warrant
that the working drawings comply with applicable laws.
32. NON DISTURBANCE. Notwithstanding the foregoing, it shall be a condition
of this Lease and a condition to the effectiveness of the subordination
expressed above that the mortgagee or ground lessor, as the case may be, shall
have executed and delivered to Tenant a Non-Disturbance agreement on the form
customarily employed by such mortgagee or ground lessor, containing provisions
reasonably acceptable to Tenant which shall provide that in the event of a
foreclosure of any such mortgage or termination of any such lease the holder of
such mortgage or the lessor under such lease will not attempt to terminate this
Lease, make Tenant a party defendant to any such foreclosure or any way
foreclose or otherwise extinguish or interfere with the rights of Tenant under
mortgagee or ground lessor within ten (10) days after receipt of written request
to do so from Landlord or such mortgagee or ground lessor.
33. RIGHT OF FIRST DISMISSAL. Provided this Lease is in full force and effect
and that Tenant is not in material default hereunder, Tenant shall have a
continuous right of first refusal on 1,686 rentable square feet contiguous to
the east and south of the Premises on the north side of the first floor of Tower
One and 4,500 rentable square feet on the west end of the south side of the
first floor of Tower One as shown on the attached Exhibit 'C.
34. SIGNAGE. Tenant will be identified with its name on the monument signs
located at the top of the entry drives leading to the Towers.
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<PAGE>
35. QUIET ENJOYMENT. Upon Tenant's paying the rent reserved hereunder and
observing and performing all covenants, conditions and provisions on its part to
be observed and performed under this Lease, Tenant shall have quiet possession
of the premises for the entire term of this Lease.
36. RENEWAL OPTION. So long as there is no material default by Tenant at the
time it exercises the option referred to herein and there is also no material
default by Tenant at the expiration of the pending term of this lease, Tenant
shall have the option to renew this lease for one (1) five (5) year term.
Tenant shall exercise its option by written notice to Landlord nine (9) months
prior to the expiration of the initial term. The terms and conditions during
the renewal term shall be the same as those for the initial term, except that
the rent for the renewal term shall be the rate published and in effect at the
time Tenant renews the Lease.
37. SUBSTANTIAL COMPLETION. Construction of the demised premises or any
portion thereof shall be considered substantially complete as of the date that
construction is complete and in compliance with the construction contract
documents except for punch list items. Construction shall not be considered
substantially complete if there are any material deviations from the contract
documents which would prevent Tenant from occupying and utilizing the demised
premises for all of the purposes for which they are designed and constructed.
38. FAILURE TO GIVE POSSESSION. Continuation of Section 8 - Landlord shall,
however, provide Tenant use of the existing training rooms located on the north
side of the eighth floor of Tower Three as shown on the attached Exhibit 'D', at
no cost to Tenant, until the Premises are ready for Tenant occupancy.
39. ACCESS TO PREMISES. Continuation of Section 12 - Tenant sell have access
to the premises twenty-four (24) hours per day, three-hundred-sixty-five (365)
days per year.
40. ASSIGNMENT - SUBLETTING. Continuation of Section 17(a) - Notwithstanding
anything to the contrary contained in this Section 17, Tenant all have the right
to sublease and or assign its interest in this Lease to any parent, subsidiary,
or affiliated company of Tenant or Tenant's parent without the approval of
Landlord and without affecting the validity of this lease or violating any
restrictions on subleasing or assignment contained herein as long as any such
parent, subsidiary or affiliated occupancy of Tenant does not conflict with
exclusive rights granted to other tenants in the Building or Complex and as long
as such parent, subsidiary or affiliated company of Tenant is as financially
viable as Tenant.
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<PAGE>
EXHIBIT 10.12
OFFICE LEASE
by and between
PRESSON ADVISORY, L.L.C.
-------------------------
An Arizona Limited Liability Company
"Landlord"
and
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
-------------------------------------------------
an Illinois Corporation DBA Arizona School of Professional Psychology
"Tenant"
May 28, 1997
for premises known as
Dunlap Executive Office
2301 West Dunlap Avenue, #211
-----------------------------
Phoenix, Arizona
----------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. BASIC PROVISIONS..................................................................................... 1
2. LEASED PREMISES: NO ADJUSTMENTS...................................................................... 1
3. LEASE TERM; COMMENCEMENT DATE........................................................................ 1
4. SECURITY DEPOSIT..................................................................................... 2
5. RENT; RENT TAX; ADDITIONAL RENT...................................................................... 2
6. OPERATING COSTS...................................................................................... 3
7. CONDITION, REPAIRS AND ALTERATIONS................................................................... 6
8. SERVICES............................................................................................. 7
9. LIABILITY AND CASUALTY INSURANCE..................................................................... 8
10. CASUALTY DAMAGE..................................................................................... 10
11. WAIVER OF SUBROGATION............................................................................... 10
12. LANDLORD'S RIGHT TO PERFORM TENANT OBLIGATIONS...................................................... 11
13. DEFAULT AND REMEDIES................................................................................ 11
14. LATE PAYMENTS....................................................................................... 13
15. SURRENDER........................................................................................... 13
16. INDEMNIFICATION AND EXCULPATION..................................................................... 14
17. ENTRY BY LANDLORD................................................................................... 15
18. ASSIGNMENT AND SUBLETTING........................................................................... 15
19. USE OF LEASED PREMISES.............................................................................. 17
20. SUBORDINATION AND ATTORNMENT........................................................................ 18
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
21. ESTOPPEL CERTIFICATE................................................................................ 19
22. SIGNS............................................................................................... 19
23. PARKING............................................................................................. 20
24. LIENS............................................................................................... 20
25. HOLDING OVER........................................................................................ 20
26. ATTORNEYS' FEES..................................................................................... 20
27. RESERVED RIGHTS OF LANDLORD......................................................................... 21
28. EMINENT DOMAIN...................................................................................... 21
29. NOTICES............................................................................................. 22
30. RULES AND REGULATIONS............................................................................... 22
31. ACCORD AND SATISFACTION............................................................................. 23
32. RENEWAL OPTION...................................................................................... 23
33. MISCELLANEOUS....................................................................................... 23
</TABLE>
ii
<PAGE>
OFFICE LEASE
1. BASIC PROVISIONS
----------------
1.1 DATE: May 28, 1997
----- ------------
1.2 LANDLORD: Presson Advisory, L.L.C.
--------- ------------------------
an Arizona Limited Liability Company
------------------------------------
1.3 LANDLORD'S ADDRESS 501 East Thomas, Suite 200
------------------ --------------------------
Phoenix, Arizona 85012
----------------------
Reliance Management
-------------------
Phone #265-6000; Fax #265-6001
------------------------------
1.4 TENANT: American Schools of Psychology, Inc.
------- ------------------------------------
an Illinois Corporation DBA Arizona
School of Professional Psychology
1.5 TENANT'S ADDRESS: Dual Notice: Send to Premised and to
----------------- ------------------------------------
President of American Schools of
--------------------------------
Professional Psychology at 20 South
-----------------------------------
Clark Street, Chicago, IL 60603
-------------------------------
Telephone # 1/312/899-9900
Fax # 1/312/201-1907
1.6 PROPERTY The parcel of real estate located in
--------
Maricopa County, Arizona, described
on Exhibit "A" attached hereto and
-----------
incorporated herein by this reference.
1.7 BUILDING: That certain office building located
---------
at 2301 West Dunlaps, Phoenix,
---------------------------
Arizona and situated on the Property,
-------
and the landscaping, parking
facilities, and all other
improvements and appurtenances to the
Property.
1.8 LEASED PREMISES: Approximately 8,673 rentable square
----------------
feet of office space located on the
2nd floor of the Building and
commonly known as Suite 211.
Tenant's proportionate share is 26.4%
1.9 PERMITTED USE: Executive and general office,
-------------- -----------------------------
classroom/education facility use only
--------------------------------------
1.10 LEASE TERM: Ten (10) years and zero (0) months.
----------- --------------
<PAGE>
1.11 SCHEDULED COMMENCEMENT DATE July 1, 1997
--------------------------- ------------
1.12 ANNUAL BASIC RENT: See Rider 2
------------------
1.13 SECURITY DEPOSIT: $11,745.00 in the form of an irrevocable
----------------- ----------------------------------------
letter of credit satisfactory to
--------------------------------
Landlord.
---------
1.14 BASE YEAR COSTS: 1997 actual Operating Costs per rentable
----------------
square foot from the Commencement Date
until December 31, 1997 extrapolated
----
over a twelve (12) month period.
1.15 BUILDING HOURS: Landlord shall furnish reasonable
---------------
current as specified and for HVAC,
during Tenant's business hours,
excluding recognized national holidays,
defined as:
Monday-Thursday 9:00 AM - 9:00 PM
Friday 9:00 AM - 5:00 PM
Saturday 8:00 AM - 2:00 PM
1.16 PARKING SPACES: Opportunity for eight (8)
--------------- -------------------------
covered/reserved. Overall parking ratio
---------------------------------------
approximately 1:250.
--------------------
1.17 PARKING CHARGE: If Tenant elects to use set aside
--------------- ---------------------------------
spaces, $25.00/month per space.
-------------------------------
1.18 GUARANTORS: None
----------- ----
1.19 BROKER: DAUM Commercial Real Estate Services
------- ------------------------------------
and Cushman & Wakefield of Arizona
----------------------------------
and Cushman & Wakefield of Illinois
-----------------------------------
1.20 METROPOLITAN AREA Phoenix
----------------- -------
1.21 LATE CHARGE PERCENTAGE: Ten Percent (10%)
----------------------- -----------------
1.22 RIDERS: 1 = Hazardous Materials
-------
2 = Additional Rights and Options
1.23 EXHIBITS: A = Description of the Property
---------
B = Floor Plan
C = Memorandum of Commencement Date
D = Building Rules and Regulations
E = Work Letter
F = EXTERIOR SIGNAGE
2
<PAGE>
2. LEASED PREMISES: NO ADJUSTMENTS
-------------------------------
2.1 LEASED PREMISES. Landlord leases to Tenant, and Tenant leases and
---------------
accepts from Landlord, the Leased Premises, upon the terms and conditions set
forth in this Lease and any modifications, supplements or addenda to this Lease
(the "Lease"), including the Basic Provisions of Article 1 which are
----- ---------
incorporated into this Lease by this reference, together with the non-exclusive
right to use, in common with Landlord and others, the Building Common Areas (as
defined below). For the purposes of this Lease, the term "Building Common Areas"
---------------------
means common hallways, corridors, walkways and footpaths, foyers; and lobbies,
bathrooms and janitorial closets, electrical and telephone closets, landscaped
areas, and such other areas within or adjacent to the Building which are subject
to or are designed or intended solely for the common enjoyment, use and/or
benefits of the tenants of the Building.
2.2 NO ADJUSTMENT. The Annual Basic Rent at the Commencement Date (as
-------------
defined below) is based on the Leased Premises containing approximately the
rentable square footage set forth in Article 1.8 above. The Annual Basic Rent
-----------
shall not be increased or decreased if the actual rentable square footage of the
Leased Premises is more or less than the rentable square footage set forth in
Article 1.8.
- -----------
3. LEASE TERM; COMMENCEMENT DATE
-----------------------------
3.1 LEASE TERM. The Lease Term shall begin on the Commencement Date and
----------
shall be for the period set forth in Article 1.10 above, plus any period of less
------------
than one (1) month between the Commencement Date and the first day of the next
succeeding calendar month, unless sooner terminated in accordance with the
further provisions of this Lease.
3.2 COMMENCEMENT DATE. The Commencement Date shall be the later of July
-----------------
1, 1997 or substantial completion of the Landlord's work.
3.3 MEMORANDUM OF COMMENCEMENT DATE. Landlord and Tenant shall, within
-------------------------------
ten (10) days after the Commencement Date, execute a declaration in the form of
Exhibit "C" attached hereto specifying the Commencement Date should the
- -----------
Commencement Date be a date other than the Scheduled Commencement Date.
3.4 DELAY IN COMMENCEMENT DATE. In the event Landlord shall be unable,
--------------------------
for any reason, to deliver possession of the Leased Premises to Tenant on the
Scheduled Commencement Date, Landlord shall not be liable for any loss or damage
occasioned due to such failure, nor shall such inability affect the validity of
this Lease or the obligations of Tenant. In such event, Tenant shall not be
obligated to pay Annual Basic Rent or Additional Rent until the Commencement
Date. In the event Landlord shall not have delivered possession of the Leased
Premises to Tenant within twenty (20) days after the Scheduled Commencement
Date, and if such failure to deliver possession was (a) caused solely by the
fault or neglect of Landlord, and (b) not caused by any fault or neglect of
Tenant or due to additional time required to plan for and install other work for
Tenant beyond the amount of time which would have been required if only building
standard improvements had been
1
<PAGE>
installed, Tenant shall have the right to terminate this Lease by delivering
written notice of termination to Landlord at any time within twenty (20) days
after the expiration of such twenty (20) day period. Such termination shall be
effective twenty (20) days after receipt by Landlord of Tenant's notice of
termination unless Landlord shall, prior to the expiration of such twenty (20)
day period, deliver possession of the Leased Premises to Tenant. Upon a
termination of this Lease pursuant to the provisions of this Article 3.4, the
-----------
parties shall have no further obligations or liabilities to the other and
Landlord shall promptly return any monies previously deposited or paid by
Tenant.
3.5 LEASE YEAR. Each "Lease Year" shall be a period of twelve (12)
---------- ----------
consecutive calendar months, the first Lease Year beginning on the Commencement
Date or on the first day of the calendar month next succeeding the Commencement
Date if the Commencement Date is not on the first day of a calendar month.
4. SECURITY DEPOSIT
----------------
Tenant shall pay to Landlord, upon the execution of this Lease, the
Security Deposit set forth in Article 1.13 above as security for the performance
------------
by Tenant of its obligations under this Lease. which amount shall be returned to
Tenant after the expiration or Security Deposit, at the election of Landlord,
may be retained by Landlord as and for its full damages or may be applied in
reduction of any loss and/or damage sustained by Landlord by reason of the
occurrence of any breach, nonperformance or default by Tenant under this Lease
without the waiver of any other right or remedy available to Landlord at law, in
equity or under the terms of this Lease. If any portion of the Security Deposit
is so used or applied, Tenant shall, within five (5) days after written notice
from Landlord, deposit with Landlord immediately available funds in an amount
sufficient to restore the Security Deposit to its original amount, and Tenant's
failure to do so shall be a breach of this Lease. Tenant acknowledges and agrees
that in the event Tenant shall file a voluntary petition pursuant to the
Bankruptcy Code, or if an involuntary petition is filed against Tenant pursuant
to the Bankruptcy Code, then Landlord may apply the Security Deposit towards
those obligations of Tenant to Landlord which accrued prior to the filing of
such petition. Tenant acknowledges further that the Security Deposit may be
commingled with Landlord's other funds and that Landlord shall be entitled to
retain any interest earnings on the Security Deposit. In the event of
termination of Landlord's interest in this Lease, Landlord shall transfer the
Security Deposit to Landlord's successor in interest, and Landlord shall be
released from liability by Tenant for the return of such deposit or for an
accounting of the Security Deposit.
5. RENT; RENT TAX; ADDITIONAL RENT
-------------------------------
5.1 PAYMENT OF RENT. Tenant shall pay to Landlord the Annual Basic Rent
---------------
set forth in Article 1.12 above, subject to adjustment as provided for in
------------
Article 1.12. The Annual Basic Rent shall be paid in equal monthly
- ------------
installments, on or before the first day of each and every calendar month during
the Lease Term, in advance, without notice or demand and without abatement,
deduction or set-off, except for the first month's rent which is due and payable
on execution, and pro-rata, in advance for any partial month. The Annual Basic
Rent for the first full month of the Lease Term shall be paid upon the execution
of this Lease. All payments requiring proration shall be prorated on the basis
of a thirty (30) day month. In addition, all payments to be made under this
2
<PAGE>
Lease shall be paid in lawful money of the United States of America to Landlord
or its agent at the address set forth in Article 1.3 above, or to such other
-----------
person or at such other place as Landlord may from time to time designate in
writing.
5.2 RENT TAX. In addition to the Annual Basic Rent and Additional Rent
--------
(as defined below), Tenant shall pay to Landlord, together with the monthly
installments of Annual Basic Rent and payments of Additional Rent, an amount
equal to any state or local sales, rental, occupancy, excise, use or
transnational privilege taxes assessed or levied upon Landlord with respect to
the amounts paid by Tenant to Landlord under this Lease, as well as all taxes
assessed or imposed upon Landlord's gross receipts or gross income from leasing
the Leased Premises to Tenant, including, without limitation, transaction
privilege taxes, education excise taxes, any tax now or subsequently imposed by
the City of Phoenix, the State of Arizona, any other governmental body, and any
taxes assessed or imposed in lieu of or in substitution of any of the foregoing
taxes. Such taxes shall not, however, include any franchise, gift, estate,
inheritance, conveyance, transfer or net income tax assessed against Landlord.
5.3 ADDITIONAL RENT. In addition to Annual Basic Rent all other amounts
---------------
to be paid by Tenant to Landlord pursuant to this Lease (including amounts to be
paid by Tenant pursuant to Article 6 below), if any, shall be deemed to be
---------
Additional Rent, irrespective of whether designated as such, and shall be due
and payable within twenty (20) days after receipt by Tenant of Landlord
statement or together with the next succeeding installment of Annual Basic Rent,
whichever shall first occur. Landlord shall have the same remedies for the
failure to pay Additional Rent as for the nonpayment of Annual Basic Rent.
6. OPERATING COSTS
---------------
6.1 TENANT'S OBLIGATION. The Annual Basic Rent does not include amounts
-------------------
attributable to any increase in the amount of Taxes (as hereinafter defined) or
amounts attributable to any increase in the cost of the use, management, repair,
service, insurance, condition, operation and maintenance of the Building.
Therefore, in order that the Annual Basic Rent payable throughout the Lease Term
shall reflect any such increases, Tenant shall pay to Landlord, in accordance
with the further provisions of this Article 6, an amount per rentable square
---------
foot of the Leased Premises equal to the difference between the Operating Costs
(as hereinafter defined) per rentable square foot and the Base Year Costs.
Tenant acknowledges that the Base Year Costs does not constitute a
representation by Landlord as to the Operating Costs per rentable square foot
that may be incurred during any calendar year. Tenant shall pay for its
proportionate share of any increases in the building's real estate taxes over a
1997 Base Year. Tenant will not be responsible for any increase in real estate
taxes resulting from a sale or transfer of the property.
6.2 LANDLORD'S ESTIMATE. Landlord shall furnish Tenant an estimate of the
-------------------
Operating Costs per rentable square foot for each Fiscal Year (as hereinafter
defined) commencing with the Fiscal Year in which the Commencement Date occurs.
In addition, Landlord may, from time to time, furnish Tenant a revised estimate
of Operating Costs should Landlord anticipate any increase in Operating Costs
from that set forth in a prior estimate. Commencing with the first month to
which an estimate applies, Tenant shall pay, in addition to the monthly
installments of Annual Basic Rent
3
<PAGE>
an amount equal to one-twelfth (1/12th) of the product of the rentable square
footage of the Leased Premises multiplied by the difference (but not less than
zero (0)), if any, between such estimate and the Base Year Costs; provided,
however, if less than ninety-five percent (95%) of the rentable area of the
Building shall be occupied by tenants during the period covered by such
estimate, the estimated Operating Costs for such period shall be, for the
purposes of this Article 6. increased to an amount reasonably determined by
Landlord to be equivalent to the Operating Costs that would be incurred if
occupancy would be at least ninety-five percent (95%) during the entire period.
Within one hundred twenty (120) days after the expiration of each Fiscal Year or
such longer period of time as may be necessary to compile such statement,
Landlord shall deliver to Tenant a statement of the actual Operating Costs for
such Fiscal Year. If the actual Operating Costs for such Fiscal Year are more or
less than the estimated Operating Costs, a proper adjustment shall be made;
provided, however, if less than ninety-five percent (95%) of the rentable area
of the Building shall have been occupied by tenants at any time during such
period, the actual Operating Costs for such period shall be, for the purposes of
this Article 6, increased to an amount reasonably determined by Landlord to be
---------
equivalent to the Operating Costs that would have been incurred had such
occupancy been at least ninety-five (95%) during the entire period. Any excess
amounts paid by Tenant shall be, at Landlord's option, applied to any amounts
then payable by Tenant to Landlord or to the next maturing monthly installments
of Annual Basic Rent or Additional Rent. Any deficiency between the estimated
and actual Operating Costs shall be paid by Tenant to Landlord concurrently with
the monthly installment of Annual Basic Rent next due. Any amount owing for a
fractional Fiscal Year in the first or final Lease Years of the Lease Term shall
be prorated. For the purposes of this Lease, the term "Fiscal Year" 'means the
-----------
fiscal year (or portion of the fiscal year) of Landlord. The Fiscal Year
currently commences on January 1 and ends on December 31; provided, however,
Landlord reserves the right to change the Fiscal Year at any time or times, but
no such change shall result in an increase in the amounts otherwise payable by
Tenant pursuant to the provisions of this Article 6.
---------
6.3 OPERATING COSTS - DEFINED. For the purposes of this Lease, "Operating
------------------------- ---------
Costs" shall mean all costs and expenses accrued, paid or incurred by Landlord,
- -----
or on Landlord's behalf, in respect of the use, management, repair, service,
insurance, condition, operation and maintenance of the Building including, but
not limited to the following: (a) salaries, wages and benefits of all persons
who perform duties in connection with landscaping, parking, janitorial and
general cleaning services, security services and any and all other employees
engaged by or on behalf of Landlord but for the following: compensation paid (i)
to officers or executives of the Landlord above the grade of property manager or
(ii) to employees below the grade of property manager to the extent their time
or services are employed outside the building; (b) payroll taxes, workmen's
compensation, uniforms and related expenses for such employees; (c) the cost of
all charges for oil, gas, steam, electricity, any alternate source of energy,
heat, ventilation, air-conditioning, refrigeration, water, sewer service, trash
collection, pest control and all other utilities, together with any taxes on
such utilities; (d) the cost of painting non-tenant space; (e) the cost of all
charges for rent, casualty, liability, fidelity and other insurance maintained
by Landlord, including any deductible amounts incurred with respect to an
insured loss; (f) the cost of all supplies (including cleaning supplies), tools,
materials, equipment and personal property, the rental of the personal property
and sales, transaction privilege, excise and other taxes on the personal
property; (g) depreciation of hand tools and other moveable equipment; (h) the
cost of all charges for window and other cleaning, janitorial, and security
services; (i) the cost of charges for independent contractors; but for: any
cost representing an amount paid for services
4
<PAGE>
or materials to a related person, firm, or entity to the extent such amount
exceeds the amount that would be paid for such services or materials at the then
existing market rates to an unrelated person, firm, or corporation; (j) the cog
of repairs and replacements made by Landlord at its expense and the fees and
other charges for maintenance and service agreements; (k) the cost of exterior
and interior landscaping, (l) costs relating to the operation and maintenance of
all real property and improvements appurtenant to the Building including,
without limitation, all parking areas, service areas, walkways and landscaping;
(m) the cost of alterations and improvements made by reason of the laws and
requirements of any public authorities or the requirements of insurance bodies;
(n) all management fees and other charges for management services and overhead
costs, (but in no event in excess of 4% of gross rental collections) whether
provided by an independent management company, Landlord or an affiliate of
Landlord, not to exceed, however, the then prevailing range of rates charged in
comparable office buildings in the metropolitan area set forth in Article 1.20;
------------
(o) the cost of any capital improvements or additions which are intended to
enhance the safety of the Building or reduce (or avoid increases in) Operating
Costs, provided, however, that any such costs shall be amortized with interest
over the useful life of the improvement or addition; (p) the cost of licenses
and permits, inspection fees and reasonable legal, accounting and other
professional fees and expenses; (q) taxes (as defined below); and (r) all other
charges properly allocable to the use, management, repair, service, insurance,
condition, operation and maintenance of the Building in accordance with
generally accepted accounting principles.
6.4 OPERATING COSTS - EXCLUSIONS. Excluded from Operating Costs shall be
----------------------------
the following: (a) depreciation, except to the extent expressly included
pursuant to Article 6.3 above; (b) interest on and amortization of debts, except
to the extent expressly included pursuant to Article 6.3 above; (c) leasehold
-----------
improvements, including redecorating made for tenants of the Building; (d)
brokerage commissions and advertising expenses for procuring tenants for the
Building or the Property; (e) refinancing costs; (f) the cost of any repair,
replacement or addition which would be required to be capitalized under general
accepted accounting principles, except to the extent expressly included pursuant
to Article 6.3 above; and (g) the cost of any item included in Operating Costs
-----------
under Article 6.3 above to the extent that such cost is reimbursed or paid
-----------
directly by an insurance company, condemnor, a tenant of the Building or any
other party.
6.5 TAXES - DEFINED. For the purposes of this Lease, "Taxes" shall mean
--------------- -----
and include all real property taxes and property taxes, general and special
assessments, foreseen as well as unforeseen, which are levied or assessed upon
or with respect to the Property any improvements, fixtures, equipment and other
property of Landlord, real or personal, located on the Property and used in
connection with the operation of all or any portion of the Property, as well as
any tax, surcharge or assessment which shall be levied or assessed in addition
to or in lieu of such real or property taxes and assessments. Taxes shall also
include any expenses incurred by Landlord in contesting the amount or validity
of any real or property taxes and assessments. Taxes shall not, however,
include any franchise, gift, estate, inheritance, conveyance, transfer or income
tax assessed against Landlord.
6.6 OPERATING EXPENSE STATEMENT. Landlord will provide to Tenant, in
---------------------------
reasonable detail, an operating expense statement for the previous year, no
later than 150 days after the close
5
<PAGE>
of each fiscal year. If Landlord shall fail to provide such a statement for
Tenant's review, Tenant shall not be responsible for any monies owed to the
Landlord as additional rent for the previous year.
7. CONDITION, REPAIRS AND ALTERATIONS
----------------------------------
7.1 AS-IS CONDITION. Landlord shall provide the Leased Premises to
---------------
Tenant, and Tenant accepts the Leased Premises in an "AS-IS" condition, and
Landlord makes no representations or warranties concerning the condition of the
Leased Premises and has no obligation to construct, remodel, improve, repair,
decorate or paint the Leased Premises or any improvement on or part of the
Leased Premises, except as set forth in Articles 7.4., 10 or as outlined in the
---------------------------------------
"Work Letter" marked as Exhibit "G" below. Tenant represents and warrants that
- -----------------------------------
it has inspected the Leased Premises prior to execution of this Lease, and that
it is relying on its own inspection in executing this Lease and not on any
statement, representation or warranty of Landlord, its agents or employees.
7.2 ALTERATIONS AND IMPROVEMENTS. Tenant shall not make any
----------------------------
improvements or other alterations to the interior or exterior of the Leased
Premises (the "Tenant Improvements") without first obtaining the written consent
-------------------
of Landlord to the proposed work, including the plans, specifications and the
proposed architect and/or contractor(s) for such alterations and/or
improvements. All such Tenant Improvements shall be at the sole cost and
expense of Tenant. Tenant acknowledges and agrees that any review by Landlord of
Tenant's plans and specifications and/or right of approval exercised by Landlord
with respect to any Tenant Improvements is for Landlord's benefit only and
Landlord shall not, by virtue of such review or right of approval, be deemed to
make any representation, warranty or acknowledgment to Tenant or to any other
person or entity as to the adequacy of Tenant's plans and specifications or any
Tenant Improvements.
7.3 TENANT'S OBLIGATIONS. Tenant shall, at Tenant's sole cost and
--------------------
expense, maintain the Leased Premises in a clean, neat and sanitary condition
and shall keep the Leased Premises and every part of the Leased Premises in good
condition and repair except where the same is required to be done by Landlord.
Tenant waives all rights to make repairs at the expense of Landlord as provided
by any law, statute or ordinance now or subsequently in effect. All of Tenant's
Improvements are the property of the Landlord, and Tenant shall, upon the
expiration or earlier termination of the Lease Term, surrender the Leased
Premises, including Tenant's Improvements, to Landlord, broom clean and in the
same condition as when received, ordinary wear and tear excepted. Except as set
forth in Articles 7.4, 10 and the "Work Letter" marked as Exhibit "G" below,
-------------------------------------------------------------
Landlord has no obligation to construct, remodel, improve, repair, decorate or
paint the Leased Premises or any improvement on or part of the Leased Premises.
Tenant shall pay for the cost of all repairs to the Leased Premises not required
to be made by Landlord and shall be responsible for any redecorating,
remodeling, alteration, painting and carpet cleaning other than routine
vacuuming during the Lease Term. Tenant shall pay for any repairs to the Leased
Premises and/or the Building made necessary by any negligence or carelessness of
Tenant, its employees or invitees. Landlord agrees to paint and steam clean the
carpeting upon the fifth (5th) anniversary. Tenant to be responsible for cost of
moving furniture, fixtures and equipment, in relationship to the painting and
cleaning of carpet.
7.4 LANDLORD'S OBLIGATIONS. Landlord shall (a) make all necessary
----------------------
repairs to the exterior walls, exterior windows and corridors of the Building,
(b) keep the Building and the Building
6
<PAGE>
Common Areas clean and operational; and (c) keep the Building equipment such as
elevators, plumbing, heating, air conditioning and similar Building equipment in
good repair, but Landlord shall not be liable or responsible for breakdowns or
interruptions in service when reasonable efforts are 'made to restore such
service.
7.5 REMOVAL OF ALTERATIONS. Upon the expiration or earlier
----------------------
termination of this Lease, Tenant shall remove from the Leased Premises all
movable trade fixtures and other movable personal property, and shall promptly
repair any damage to the Leased Premises and/or the Building caused by such
removal. All such removal and repair shall be entirely at Tenant's sole cost
and expense. At any time within fifteen (15) days prior to the scheduled
expiration of the Lease Term or immediately upon any termination of this Lease,
Landlord may require that Tenant remove from the Leased Premises any
alterations, additions, improvements, trade fixtures, equipment, shelving,
cabinet units or movable furniture (and other personal property) designated by
Landlord to be removed. In such event Tenant shall, in accordance with the
provisions of Article 7.2 above and Article 10 below, complete such removal
----------- ----------
(including the repair of any damage caused thereby) entirely at its own expense
and with in fifteen (15) days after notice from Landlord. All repairs required
of tenant pursuant to the provisions of this Article 7.5 and Article 10 below
----------- ----------
shall be performed in a manner satisfactory to Landlord, and shall include, but
not be limited to, repairing plumbing, electrical wiring and holes in walls,
restoring damaged floor and/or ceiling tiles, repairing any other cosmetic
damage, and cleaning the Leased Premises. There shall be no cost for removal of
Tenant Improvements for the initial installation (existing conditions upon
Tenant's occupancy). Landlord has a review right on any alterations during the
term of the lease and therefore will at that time have the opportunity to
specify that the alteration need to be removed.
7.6 NO ABATEMENT. Except as provided herein, Landlord shall have no
------------
liability to Tenant, nor shall Tenant's covenants and obligations under this
Lease, including without limitation, Tenant's obligation to pay Annual Basic
Rent and Additional Rent, be reduced or abated in any manner whatsoever by
reason of any inconvenience, annoyance, interruption or injury to business
arising from Landlord's making any repairs or changes which Landlord is required
or permitted to make pursuant to the terms of this Lease or by any other
tenant's lease or are required by law to be made in and to any portion of the
Leased Premises or the Building. Landlord shall, nevertheless, use best efforts
to minimize any interference with Tenant's business in the Leased Premises.
8. SERVICES
--------
8.1 CLIMATE CONTROL. Landlord shall provide reasonable climate
---------------
control (72 - 78 Fahrenheit) to the Premises during the Building Hours as is
suitable, in Landlord's judgment, for the comfortable use and occupation of the
Leased Premises, excluding, however, air conditioning, evaporative cooling or
heating for electronic data processing or other equipment requiring
extraordinary climate control.
8.2 JANITORIAL SERVICES. Tenant shall pay to Landlord, within five
-------------------
(5) days after receipt of Landlord's bill, the reasonable costs incurred by
Landlord for extra cleaning in the Leased Premises required because of (a)
misuse or neglect on the part of Tenant, its employees or invitees, (b) use of
portions of the Leased Premises for special purposes requiring greater or more
difficult
7
<PAGE>
cleaning work than office areas, (c) interior glass partitions or unusual
quantities of glass surfaces, (d) non-building standard materials or finishes
installed by Tenant or at its request, (e) removal from the Lease Premises of
refuse and rubbish of Tenant in excess of that ordinarily accumulated in general
office occupancy or at times other than Landlord's standard cleaning times, and
(f) shampooing or other forms of carpet cleaning other than routine vacuuming.
At Tenant's option, Tenant may secure it's own janitorial services for the above
described work.
8.3 ELECTRICITY. Landlord shall, during Building Hours, furnish
-----------
reasonable amounts of electric current as required for normal and usual lighting
purposes and for office machines and equipment such as personal computers,
telecopy or facsimile machines, typewriters, adding machines, copying machines,
calculators and similar machines and equipment normally utilized in general
office use. Tenant's use of electric energy in the Leased Premises shall not at
any time exceed the capacity of any of the risers, piping, electrical conductors
and other equipment in or serving the Leased Premises.
8.4 WATER. Landlord shall furnish cold and heated water for drinking
-----
and lavatory purposes to the Building Common Areas.
8.5 LIGHT BULBS. Landlord shall perform such replacement of lamps,
-----------
fluorescent tubes and lamp ballasts in the Leased Premises and in the Building
as may be required from time to time. If the lighting fixtures in the Leased
Premises are other than those furnished at the beginning of the Lease Term,
Tenant shall pay Landlord's charge for replacing the lamps, lamp ballasts and
fluorescent tubes in such lighting fixtures so installed by Tenant within ten
(10) days after receipt of Landlord's bill.
8.6 ADDITIONAL SERVICES. Tenant shall pay to Landlord, monthly as
-------------------
billed, as Additional Rent, Landlord's charge for services furnished by Landlord
to Tenant in excess of that agreed to be furnished by Landlord pursuant to this
Article 8 including, but not limited to (a) any utility services utilized by
- ---------
Tenant during other than Building Hours, and (b) climate control in excess of
that to be furnished by Landlord pursuant to Article 8.1 above or provided at
-----------
times other than Building Hours. Tenant shall be billed at the hourly rate of
$32.00 for excess climate control.
8.7 INTERRUPTIONS IN SERVICE. Landlord does not warrant that any of
------------------------
the foregoing services or any other services which Landlord may supply will be
free from interruption. If such interruption shall persist, upon the 10th day
rent shall abate. If interruption shall persist still after thirty (30) days,
then Tenant shall have the option to cancel this lease.
9. LIABILITY AND CASUALTY INSURANCE
--------------------------------
9.1 LIABILITY INSURANCE. Tenant shall, during the Lease Term, keep
-------------------
in full force and effect, a policy or policies of commercial general liability
insurance for bodily injury, personal injury (including wrongful death) and
damage to property resulting from (i) any occurrence in the Leased Premises,
(ii) any act or omission by Tenant, by any subtenant of Tenant, or by any of
their respective invitees, agents, servants, contractors or employees anywhere
in the Leased Premises or the Building, (iii) the business operated by Tenant or
by any subtenant of Tenant in the Leased
8
<PAGE>
Premises, and (iv) the contractual liability of Tenant to Landlord pursuant to
the indemnification provisions of Article 16.1 below, which coverage shall not
------------
be less than One Million and No/100 Dollars ($ 1, 000,000.00), combined single
limit, per occurrence. The liability policy or policies shall contain an
endorsement naming Landlord as an additional insured.
9.2 CASUALTY INSURANCE. Tenant shall, during the Lease Term, keep in
------------------
full force and effect, a policy or policies of so called "All Risk" or "All
Peril" insurance, including coverage for vandalism or malicious mischief,
insuring the Tenant Improvements and Tenant's stock in trade, furniture,
personal property, fixtures, equipment and other items in the Leased Premises,
with coverage in an amount equal to the replacement cost.
9.3 WORKER'S COMPENSATION INSURANCE. Tenant shall, during the Lease
-------------------------------
Term, keep in full force and effect, a policy or policies of worker's
compensation insurance with an insurance carrier and in amounts approved by the
Industrial Commission of the State of Arizona.
9.4 INSURANCE REQUIREMENTS. Each insurance policy and certificate of
----------------------
such insurance policy obtained by Tenant pursuant to this Lease shall contain a
clause that the insurer will provide Landlord with at least thirty (30) days
prior written notice of any material change, non-renewal or cancellation of the
policy. Each such insurance policy shall be with an insurance company authorized
to do business in the State of Arizona and reasonably acceptable to Landlord. A
certificate (e.g. Acord Form 27) evidencing the coverage under each such policy,
as well as a certified copy of the required additional insured endorsement(s)
shall be delivered to Landlord prior to commencement of the Lease Term. All
insurance policies required pursuant to this Article 9 shall be written as
---------
primary policies, not contributing with or in excess of any coverage which
Landlord may carry. Tenant shall procure and maintain all policies entirely at
its own expense and shall, at least twenty (20) days prior to the expiration of
such policies, furnish Landlord with renewal certificates of such policies.
Tenant shall not do or permit to be done anything which shall invalidate the
insurance policies maintained by Landlord or the insurance policies required
pursuant to this Article 9 or the coverage under such policies.
---------
9.5 CO-INSURANCE. If on account of the failure of Tenant to comply
------------
with the provisions of this Article 9, Landlord is deemed a co-insurer by its
---------
insurance carrier, then any loss or damage which Landlord shall sustain by
reason of such failure shall be borne by Tenant, and shall be paid by Tenant
within ten (10) days after receipt of a bill for such loss or damage.
9.6 ADEQUACY OF INSURANCE. Landlord makes no representation or
---------------------
warranty to Tenant that the amount of insurance to be carried by Tenant under
the terms of this Lease is adequate to fully protect Tenant's interests. If
Tenant believes that the amount of any such insurance is insufficient, Tenant is
encouraged to obtain, at its sole cost and expense, such additional insurance as
Tenant may deem desirable or adequate. Tenant acknowledges that Landlord shall
not, by the fact of approving, disapproving, waiving, accepting, or obtaining
any insurance, incur any liability for or with respect to the amount of
insurance carried, the form or legal sufficiency of such insurance, the solvency
of any insurance companies or the payment or defense of any lawsuit in
connection with such insurance coverage, and Tenant hereby expressly assumes
full responsibility for and all liability, if any, with respect to, Tenant's
insurance coverage.
9
<PAGE>
9.7 LANDLORD'S INSURANCE. Landlord shall maintain throughout the
--------------------
life of the lease and any renewal periods, insurance coverage consistent with
other comparable properties in the Phoenix Metropolitan area.
10. CASUALTY DAMAGE
---------------
10.1 OBLIGATION TO REPAIR. In the event of any damage to the Leased
--------------------
Premises, Tenant shall promptly notify Landlord in writing. If the Leased
Premises or any part of the Building are damaged by fire or other casualty not
due to the fault or negligence of Tenant, its employees, invitees, agents,
contractors or servants, the damage to the Building and/or the Leased Premises
shall be repaired by and at the expense of Landlord, except for those
improvements as they existed at the commencement of the Lease Term unless this
Lease is terminated in accordance with the provisions of Article 10.2 below.
Until such repairs by Landlord are completed, Annual Basic Rent and Additional
Rent shall be abated in proportion to the part of the Leased Premises which is
unusable by Tenant in the conduct of its business. If, however, such damage is
due in whole or in part to the fault or neglect of Tenant or any subtenant of
Tenant, or any of their respective agents, employees, servants, contractors or
invitees, there shall be no abatement of Annual Basic Rent or Additional Rent
and Tenant shall be required to repair all such damage at its sole cost and
expense. There shall be no abatement of Annual Basic Rent or Additional Rent on
account of damage to the Building or the Property unless there is also damage to
the Leased Premises, or damage which interferes with Tenant's use of Premises.
10.2 LANDLORD'S OPTION. If the damage is not fully covered by
-----------------
Landlord's insurance, or if Landlord determines in good faith that the cost of
repairing the damage is more than one-third of the then replacement cost of the
Building, or if Landlord has determined in good faith that the required repairs
to the Building cannot be made within a one hundred twenty (120) day period
without the payment of overtime or other premiums, or in the event a holder of a
mortgage or a deed of trust against the Building or the Property requires that
all or any portion of the insurance proceeds be applied in reduction of the
mortgage debt, or if such damage occurs during the final year of the Lease Term,
then Landlord may, by written notice to Tenant within sixty (60) days after the
occurrence of such damage, terminate this Lease as of the date set forth in
Landlord's notice to Tenant. If Landlord does not elect to terminate this
Lease, Landlord shall, at its sole cost and expense, repair the Building and the
Leased Premises, excluding any alterations or improvements made by Tenant, and
while such repair work is being performed, the Annual Basic Rent and Additional
Rent shall be abated as provided above. Nothing in this Article 10 shall be
----------
construed as a limitation of Tenant's liability for any such damage, should such
liability otherwise exist.
11. WAIVER OF SUBROGATION
---------------------
Landlord and Tenant each hereby waives its rights and the subrogation
rights of its insurer against the other party and any other tenants of space in
the Building or the Property as well as their respective officers, employees,
agents, authorized representatives and invitees, with respect to any claims
including, but not limited to, claims for injury to any persons, and/or damage
to the Property, the Building or the Leased Premises and/or any fixtures,
equipment, personal property, furniture, improvements and/or alterations in or
to the Leased Premises, which are caused by or result from
10
<PAGE>
(a) risks or damages required to be insured against under this Lease, or (b)
risks and damages which are insured against by insurance policies maintained by
Landlord and Tenant from time to time. Landlord and Tenant shall obtain for the
other party from its insurers under each policy required by this Lease or
otherwise maintained a waiver of all rights of subrogation which such insurers
of Landlord or Tenant might otherwise have against the other party.
12. LANDLORD'S RIGHT TO PERFORM TENANT OBLIGATIONS
----------------------------------------------
All covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Annual Basic Rent or Additional Rent. If
Tenant shall fail to pay any sum of money, other than Annual Basic Rent,
required to be paid by it under this Lease, or shall fail to perform any other
act on its part to be performed under this Lease, and such failure shall
continue for ten (10) days after notice of such failure by Landlord (or such
shorter period of time as may be reasonable in the event of an emergency),
Landlord may (but shall not be obligated to do so) without waiving or releasing
Tenant from any of Tenant's obligations, make any such payment or perform any
such other act on behalf of Tenant. All sums so paid by Landlord and all
necessary incidental costs, together with interest at the rate of interest per
annum publicly announced, quoted or published, from time to time, by Bank of
America, at its Phoenix, Arizona office as its "reference rate" plus four (4)
percentage points, from the date of such payment by Landlord until reimbursement
in full by Tenant (the "Default Rate"), shall be payable to Landlord as
------------
Additional Rent with the next monthly installment of Annual Basic Rent;
provided, however, in no event shall the Default Rate exceed the maximum rate
(if any) permitted by applicable law.
13. DEFAULT AND REMEDIES
--------------------
13.1 EVENT OF DEFAULT. If Tenant shall fail to pay any installment
----------------
of Annual Basic Rent, any Additional Rent, and such failure shall continue for
ten (10) days, or if Tenant shall fail to perform any of the other covenants or
conditions which Tenant is required to observe and perform and such failure
shall continue for twenty (20) days (or such shorter period of time as may be
specified by Landlord in the event of an emergency) after written notice of such
failure by Landlord to Tenant, or if Tenant makes or has made any warranty,
representation or statement to Landlord in connection with this Lease which is
or was materially false or misleading when made or furnished, or if Tenant shall
commit a of Default under any other agreement between Landlord and Tenant, or if
the interest of Tenant in this Lease or any of Tenant's equipment, fixtures, or
personal property located on the Leased Premises shall be levied upon under
execution or other legal process, or if any petition shall be filed by or
against Tenant or any Guarantor to declare Tenant or any Guarantor a bankrupt or
to delay, reduce or modify Tenant's or any Guarantor's debts or obligations, or
if any petition shall be filed or other action taken to reorganize or modify
Tenant's or any Guarantor's capital structure, or if Tenant or any Guarantor
shall be declared insolvent according to law, or if any assignment of Tenant's
or any Guarantors property shall be made for the benefit of creditors, or if a
receiver or trustee is appointed for Tenant or any Guarantor or all or any of
their respective property, or if Tenant or any Guarantor shall file a voluntary
petition pursuant to the Bankruptcy Code or any successor the Bankruptcy Code or
if an involuntary petition be filed against Tenant or
11
<PAGE>
any Guarantor pursuant to the Bankruptcy Code or any successor the Bankruptcy
Code, then Tenant shall have committed a material breach and default under this
Lease (an "Event of Default").
----------------
13.2 REMEDIES. Upon the occurrence of an Event of Default under this
--------
Lease by Tenant, Landlord may, without prejudice to any other rights and
remedies available to a landlord at law, in equity or by statute, Landlord may
exercise one or more of the following remedies, all of which shall be construed
and held to be cumulative and non-exclusive: (a) Terminate this Lease and re-
enter and take possession of the Leased Premises, in which event, Landlord is
authorized to make such repairs, redecorating, refurbishments or improvements to
the Leased Premises as may be necessary in the reasonable opinion of Landlord
acting in good faith for the purposes of reletting the Leased Premises and the
costs and expenses incurred in respect of such repairs, redecorating and
refurbishments and the expenses of such reletting (including brokerage
commissions) shall be paid by Tenant to Landlord within twenty (20) days after
receipt of Landlord's statement; or (b) Without terminating this Lease, re-enter
and take possession of the Leased Premises; or (c) Without such re-entry,
recover possession of the Leased Premises in the manner prescribed by any
statute relating to summary process, and any demand for Annual Basic Rent, re-
entry for condition broken, and any and all notices to quit, or other
formalities of any nature to which Tenant may be entitled, are hereby
specifically waived to the extent permitted by law; or (d) without terminating
this Lease, Landlord may relet the Leased Premises as Landlord may see fit
without thereby avoiding or terminating this Lease, and for the purposes of such
reletting, Landlord is authorized to make such repairs, redecorating,
refurbishments or improvements to the Leased Premises as may be necessary in the
reasonable opinion of Landlord acting in good faith for the purpose of such
reletting, and if a sufficient sum is not realized from such reletting (after
payment of all costs and expenses of such repairs, redecorating and
refurbishments and expenses of such reletting (including brokerage commissions)
and the collection of rent accruing therefrom) each month to equal the Annual
Basic Rent and Additional Rent payable under this Lease, then Tenant shall pay
such deficiency each month within twenty (20) days after receipt of Landlord's
statement; or (e) Landlord may declare immediately due and payable all the
remaining installments of Annual Basic Rent and Additional Rent, and such
amount, less the fair rental value of the Leased Premises for the remainder of
the Lease Term shall be paid by Tenant within twenty (20) days after receipt of
Landlord's statement. Landlord shall not by re-entry or any other act, be deemed
to have terminated this Lease, or the liability of Tenant for the total Annual
Basic Rent and Additional Rent reserved under this Lease or for any installment
of Annual Basic Rent and Additional Rent then due or subsequently accruing, or
for damages, unless Landlord notifies Tenant in writing that Landlord has so
elected to terminate this Lease. After the occurrence of an Event of Default,
the acceptance of Annual Basic Rent or Additional Rent, or the failure to re-
enter by Landlord shall not be deemed to be a waiver of Landlord's right to
subsequently terminate this Lease and exercise any other rights and remedies
available to it, and Landlord may re-enter and take possession of the Leased
Premises as if no Annual Basic Rent or Additional Rent had been accepted after
the occurrence of an Event of Default. Upon an Event of Default, Tenant shall
also pay to Landlord all costs and expenses incurred by Landlord, including
court costs and attorneys' fees, in retaking or otherwise obtaining possession
of the Leased Premises, removing and storing all equipment, fixtures and
personal property on the Leased Premises and otherwise enforcing any of
Landlord's rights, remedies or recourses arising as a result of an Event of
Default.
12
<PAGE>
13.3 INTEREST ON PAST DUE AMOUNTS. In addition to the late charge
----------------------------
described in Article 14 below, if any installment of Annual Basic Rent or
----------
Additional Rent is not paid promptly when due, it shall bear interest at the
Default Rate; provided, however, this provision shall not relieve Tenant from
any default in the making of any payment at the time and in the manner required
by this Lease; and provided, further, in no event shall the Default Rate exceed
the maximum rate (if any) permitted by applicable law.
13.4 LANDLORD DEFAULT. In the event Landlord should neglect or fail
----------------
to perform or observe any of the covenants, provisions or conditions contained
in this Lease on its part to be performed or observed, and such failure
continues for twenty (20) days after written notice of default (or if more than
twenty (20) days shall be required because of the nature of the default, if
Landlord shall fail to commence the curing of such default within such twenty
(20) day period and proceed diligently to completion), then Landlord shall be
responsible to Tenant for any actual damages sustained by Tenant as a result of
Landlord's breach, but not special or consequential damages. Notwithstanding any
other provisions in this Lease, any claim which Tenant may have against Landlord
for failure to perform or observe any of the covenants, provisions or conditions
contained in this Lease shall be deemed waived unless such claim is asserted by
written notice of such claim to Landlord within twenty (20)days of commencement
of the alleged default or of occurrence of the cause of action and unless suit
be brought upon such claim within six (6) months subsequent to the occurrence of
such cause of action. Tenant shall have no right to terminate this Lease, except
as expressly provided elsewhere in this Lease.
14. LATE PAYMENTS
-------------
Tenant hereby acknowledges that the late payment by Tenant to
Landlord of any monthly installment of Annual Basic Rent, any Additional Rent or
any other sums due under this Lease will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult and impracticable to ascertain. Such costs include but are not
limited to processing, administrative and accounting costs. Accordingly, if any
monthly installment of Annual Basic Rent, any Additional Rent or any other sum
due from Tenant shall not be received by Landlord within ten (10) days after the
date when due, Tenant shall pay to Landlord a late charge equal to the greater
of the Late Charge Percentage set forth in Article 1.21 multiplied by such
------------
overdue amount or One Hundred and No/100 Dollars ($100.00). Tenant acknowledges
that such late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of late payments by Tenant. Nothing contained in
this Article 14 shall be deemed to condone, authorize, sanction or grant to
----------
Tenant an option for the late payment of Annual Basic Rent, Additional Rent or
any other sum due under this Lease. If any check of Tenant is returned for
insufficient funds, Tenant shall pay to Landlord a Fifty and No/100 Dollars
($50.00) processing charge, in addition to payment of the amount due plus
applicable interest and late charges.
13
<PAGE>
15. SURRENDER
---------
Tenant shall, upon the expiration or earlier termination of this
lease, peaceably surrender the Leased Premises, including any Tenant
Improvements, in a broom clean condition and otherwise in as good condition as
when Tenant took possession, except for (i) reasonable wear and tear subsequent
to the last repair, replacement, restoration, alteration or renewal; (ii) loss
by fire or other casualty, and (iii) loss by condemnation. If Tenant shall
abandon, vacate or surrender the Leased Premises, or be dispossessed by process
of law or otherwise, any personal property and fixtures belonging to Tenant and
left in the Leased Premises shall be deemed abandoned and, at Landlord's option,
title shall pass to Landlord under this Lease as by a bill of sale. Landlord
may, however, if it so elects, remove all or any part of such personal property
from the Leased Premises and the costs incurred by Landlord in connection with
such removal, including storage costs and the cost of repairing any damage to
the Leased Premises and/or the Building caused by such removal shall be paid by
Tenant within ten (10) days after receipt of Landlord's statement. Upon the
expiration or earlier termination of this Lease, Tenant shall surrender to
Landlord all keys to the Leased Premises and shall inform the Landlord of the
combination of any vaults, locks and safes left on the Leased Premises. The
obligations of Tenant under this Article 15 shall survive the expiration or
----------
earlier termination of this Lease. Tenant shall indemnify Landlord against any
loss or liability resulting from delay by Tenant in so surrendering the
Premises, including, without limitation, any claims made by any succeeding
Tenant founded on such delay. Tenant shall give written notice to Landlord at
least thirty (30) days prior to vacating the Leased Premises for the express
purpose of arranging a meeting with Landlord for a joint inspection of the
Leased Premises. In the event of Tenant's failure to give such notice or to
participate in such joint inspection, Landlord's inspection at or after Tenant's
vacation of the Leased Premises shall be conclusively deemed correct for
purposes of determining Tenant's liability for repairs and restoration under
this Lease.
16. INDEMNIFICATION AND EXCULPATION
-------------------------------
16.1 INDEMNIFICATION. Tenant shall indemnify, protect, defend and
---------------
hold Landlord harmless for, from and against all claims, damages, losses, costs,
liens, encumbrances, liabilities and expenses, including reasonable attorneys',
accountants' and investigators' fees and court costs (collectively, the
"Claims"), 'however caused, arising in whole or in part from Tenant's use of all
------
or any part of the Leased Premises and/or the Building or the conduct of
Tenant's business or from any activity, work or thing done, permitted or
suffered by Tenant or by any invitee, servant, agent, contractor, employee or
subtenant of Tenant in the Leased Premises and/or the Building, and shall
further indemnify, protect, defend and hold Landlord harmless for, from and
against all Claims arising in whole or in part from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease or arising in whole or in part from any act, neglect fault or
omission by Tenant or by any invitee, servant agent, employee or subtenant of
Tenant anywhere in the Leased Premises and/or the Building. In case any action
or proceeding is brought against Landlord to which this indemnification shall be
applicable, Tenant shall pay all Claims resulting therefrom and shall defend
such action or proceeding, if Landlord shall so request, at Tenant's sole cost
and expense, by counsel reasonably satisfactory to Landlord. The obligations of
Tenant under this Article 16.1 shall survive the expiration or earlier
------------
termination of this Lease.
14
<PAGE>
16.2 EXCULPATION. Tenant, as a material part of the consideration to
-----------
Landlord, hereby assumes all risk of damage to property, injury and death to
persons and all claims of any other nature resulting from Tenant's use of all or
any part of the Leased Premises and/or the Building, and Tenant hereby waives
all claims against Landlord arising out of Tenant's use of all or any part of
the Leased Premises and/or the Building. Neither Landlord nor its agents or
employees shall be liable for any damaged property of Tenant entrusted to any
employee or agent of Landlord or for loss of or damage to any property of Tenant
by theft or otherwise. Landlord shall not be liable for any injury or damage to
persons or property resulting from any cause, including, but not limited to,
fire, explosion, falling plaster, steam, gas, electricity, sewage, odor, noise,
water or rain which may leak from any part of the Building or from the pipes,
appliances or plumbing works in the Building, or from the roof of any structure
on the Property, or from any streets or subsurface on or adjacent to the
Building or the Property, or from any other place or resulting from dampness or
any other causes whatsoever, unless caused solely by the gross negligence or
willful misconduct of Landlord. Neither Landlord nor its employees or agents
shall be liable for any defects in the Leased Premises and/or the Building, nor
shall Landlord be liable for the negligence or misconduct, including, but not
limited to, criminal acts, by maintenance or other personnel or contractors
serving the Leased Premises and/or the Building, other tenants or third parties,
unless Landlord is grossly negligent or guilty of willful misconduct. All
property of Tenant kept or stored on the Property shall be so kept or stored at
the risk of Tenant only, and Tenant shall indemnify, defend and hold Landlord
harmless for, from and against any Claims arising out of damage to the same,
including subrogation claims by Tenant's insurance carriers, unless such damage
shall be caused by the willful act or gross neglect of Landlord and through no
fault of Tenant.
16.3 LANDLORD'S INDEMNIFICATION. Landlord agrees to indemnify,
--------------------------
defend, and hold Tenant harmless from and against any loss, cost, liability,
damage or expense including, without limitation, reasonable attorneys fees,
incurred in connection with or arising from (a) any cause whatsoever in or on
the common areas of the building (any portion of the building except the
premises) including without limitation the negligence of Landlord or it's
employees, agents or contractors, other than the act, negligence or omission of
Tenant, or (b) the negligence or intentional acts of Landlord or it's employees,
agents, or contractors in or on the premises.
17. ENTRY BY LANDLORD
-----------------
Landlord reserves and shall at any and all times have, upon twenty
four (24) hours prior written notice (except in the event of an emergency), the
right to enter the Leased Premises, to inspect the same, to submit the Leased
Premises to prospective purchasers or tenants, to post notices of non-
responsibility, and to alter, improve or repair the Leased Premises and any
portion of the Building of which the Leased Premises are a part, without
abatement of Annual Basic Rent or Additional Rent, and may for that purpose
erect scaffolding and other necessary structures where reasonably required by
the character of the work to be performed, always providing that access into the
Leased Premises shall not be blocked thereby, and further providing that the
business of Tenant shall not be interfered with unreasonably. Tenant hereby
waives any claim for damages for any injury or inconvenience to or interference
with Tenant's business, any loss of occupancy or quiet enjoyment of the Leased
Premises or any loss occasioned thereby. For each of the aforesaid purposes,
Landlord shall at all times have and retain a key with which to unlock all the
doors in,
15
<PAGE>
upon or about the Leased Premises excluding Tenant's vaults and safes, and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open such doors in an emergency in order to obtain entry to the Leased
Premises, and any entry to the Leased Premises obtained by Landlord by any such
means or otherwise shall not under any circumstances be construed or deemed to
be a forcible or unlawful entry into, or a detainer of, the Leased Premises or
an eviction of Tenant from all or any portion of the Leased Premises. Nothing in
this Article 17 shall be construed as obligating Landlord to perform any
----------
repairs, alterations or maintenance except as otherwise expressly required
elsewhere in this Lease.
18. ASSIGNMENT AND SUBLETTING
-------------------------
18.1 ASSIGNMENT AND SUBLETTING PROHIBITED. Tenant shall not transfer
------------------------------------
or assign this Lease or any right or interest under this Lease, or sublet the
Leased Premises or any part of the Leased Premises, without first obtaining
Landlord's prior written consent, which consent Landlord shall not unreasonably
withhold. No transfer or assignment (whether voluntary or involuntary, by
operation of law or otherwise) or subletting shall be valid or effective without
such prior written consent. Should Tenant attempt to make or allow to be made
any such transfer, assignment or subletting, except as stated above, or should
any of Tenant's rights under this Lease be sold or otherwise transferred by or
under court order or legal process or otherwise, then, and in any of the
foregoing events Landlord may, at its option, treat such act as an Event of
Default by Tenant. Should Landlord consent to a transfer, assignment or
subletting, such consent shall not constitute a waiver of any of the
restrictions or prohibitions of this Article 19, and such restrictions or
----------
prohibitions shall apply to each successive transfer, assignment or subletting
under this Article 19 if any, SEE RIDER "2", ITEM 2.
----------
18.2 DEEMED TRANSFERS. If Tenant is a corporation, an unincorporated
----------------
association, a limited liability company or a partnership, the transfer,
assignment or hypothecation of twenty-five percent (25%) or more of any stock or
interest in such corporation, association, limited liability company or
partnership shall be deemed a transfer within the meaning of and subject to the
provisions of this Article 19.
----------
18.3 LANDLORD'S CONSENT REQUIRED. If Tenant desires at any time to
---------------------------
assign this Lease or sublet the Leased Premises or any portion of the Leased
Premises, it shall first notify Landlord of its desire to do so and shall submit
in writing to Landlord: (a) the name, address, telephone number and social
security number or taxpayer identification number, if applicable, of the
proposed sub-tenant or assignee; (b) the nature of the proposed subtenant's or
assignee's business to be carried on in the Leased Premises; (c) the terms and
the provisions of the proposed sublease or assignment; and (d) such financial
information as Landlord may reasonably request concerning the proposed subtenant
or assignee. Tenant's failure to comply with the provisions of this Article
-------
19.3 shall entitle Landlord to withhold its consent to the proposed assignment
- ----
or subletting.
18.4 RECAPTURE. If Tenant proposes to assign its interest in this
---------
Lease or sublet all or any part of the Leased Premises, Landlord may, at its
option, upon written notice to Tenant within thirty (30) days after Landlord's
receipt of the information specified in Article 19.3 above, elect to recapture
------------
all or any portion of the Leased Premises, and within sixty (60) days after
notice of such
16
<PAGE>
election has been given to Tenant, this Lease shall terminate as to the portion
of the Leased Premises recaptured. If all or a portion of the Leased Premises is
recaptured by Landlord pursuant to this Article 19.4 Tenant shall promptly
------------
execute and deliver to Landlord a termination agreement setting forth the
termination date with respect to the Leased Premises or the recaptured portion
of the Leased Premises, and prorating the Annual Basic Rent, Additional Rent and
other charges payable under this Lease to such date. If Landlord does not elect
to recapture as set forth above, Tenant may then after enter into a valid
assignment or sublease with respect to the Leased Premises, provided that
Landlord consents to such assignment or sublease pursuant to this Article 19 and
----------
provided further, that (a) such assignment or sublease is executed within ninety
(90) days after Landlord has given its consent (b) Tenant pays all amounts then
owed to Landlord under this Lease, (c) there is not in existence an Event of
Default as of the effective date of the assignment or sublease, (d) there have
been no material changes with respect to the financial condition of the proposed
subtenant or assignee or the business such party intends to conduct in the
Leased Premises, and (e) a fully executed original of such assignment or
sublease providing for an express assumption by the assignee or subtenant of all
of the terms, covenants and conditions of this Lease is promptly delivered to
Landlord.
18.5 NO RELEASE FROM LIABILITY. Landlord may collect Annual Basic
-------------------------
Rent and Additional Rent from the assignee, subtenant, occupant or other
transferee, and apply the amount so collected, first to the monthly installments
of Annual Basic Rent, then to any Additional Rent and other sums due and payable
to Landlord, and the balance, if any, to Landlord, but no such assignment,
subletting, occupancy, transfer or collection shall be deemed a waiver of
Landlord's rights under this Article 19 or the acceptance of the proposed
----------
assignee, subtenant, occupant or transferee. Notwithstanding any assignment,
sublease or other transfer (with or without the consent of Landlord), Tenant
shall remain primarily liable under this Lease and neither Tenant nor any
Guarantor shall be released from performance of any of the terms, covenants and
conditions of this Lease.
18.6 LANDLORD'S EXPENSES. If Landlord consents to an assignment,
-------------------
sublease or other transfer by Tenant of all or any portion of Tenant's interest
under this Lease, Tenant shall reimburse Landlord for its actual administrative
expenses and for legal, accounting and other out of pocket expenses incurred by
Landlord, all not to exceed an aggregate of Two Hundred Fifty and No/ 100
Dollars ($250.00).
18.7 ASSUMPTION AGREEMENT. If Landlord consents to an assignment,
--------------------
sublease or other transfer by Tenant of all or any portion of Tenants interest
under this Lease, Tenant shall execute and deliver to Landlord, and cause the
transferee to execute and deliver to Landlord, an instrument in the form and
substance acceptable to Landlord in which (a) the transferee adopts this Lease
and assumes and agrees to perform, jointly and severally with Tenant, all of the
obligations of Tenant under this Lease, (b) Tenant acknowledges that it remains
primarily liable for the payment of Annual Basic Rent, Additional Rent and other
obligations under this Lease,(c) Tenant subordinates to Landlord's statutory
lien, contract lien and security interest, any liens, security interests or
other rights which Tenant may claim with respect to any property of transferee
and (d) the transferee agrees to use and occupy the Leased Premises solely for
the purpose specified in Article 20 and otherwise in strict accordance with this
Lease.
17
<PAGE>
19. USE OF LEASED PREMISES
----------------------
The Leased Premises are leased to Tenant solely for the Permitted Use set
forth in Article 1.9 above and for no other purpose whatsoever. If Tenant wishes
-----------
to change the Permitted Use set forth in Article 1.9 above, Tenant shall first
-----------
seek Landlord's prior written consent. Within thirty (30) days after receipt by
Landlord of Tenants request for consent, Landlord shall provide Tenant written
notice that Landlord has (i) consented to the proposed change in the Permitted
Use, or (ii) decline to consent to the change, or (iii) elected to terminate
this Lease, in which event this Lease shall terminate ten (10) days following
receipt by Tenant of Landlord's Notice of Termination. Tenant shall not do or
permit anything to be done in or about the Leased Premises nor bring or keep
anything in the Leased Premises which will in any way increase the existing rate
of or affect any casualty or other insurance on the Building, the Property, or
any of their respective contents, or cause a cancellation of any insurance
policy covering the Building, the Property, or any part of the Building or the
Property, or any of their respective contents. Tenant shall not do or permit
anything to be done in or about the Leased Premises and/or the Building which
will in any way obstruct or interfere with the rights of other tenants or
occupants of the Building, or injure or annoy them. Tenant shall not use or
allow the Leased Premises to be used for any unlawful purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about the Leased Premises
and/or the Building. In addition, Tenant shall not commit or suffer to be
committed any waste in or upon the Leased Premises and/or the Building. Tenant
shall not use the Leased Premises and/or the Building or permit anything to be
done in or about the Leased Premises and/or the Building which will in any way
conflict with any matters of record, or any law, statute, ordinance or
governmental rule or regulation now in force or which may subsequently be
enacted or promulgated, and shall, at its sole cost and expense, promptly comply
with all matters of record and all laws, statutes, ordinances and governmental
rules, regulations and requirements now in force or which may subsequently be in
force and with the requirements of any Board of Fire Underwriters or other
similar body now or subsequently constituted, foreseen or unforeseen, ordinary
as well as extraordinary, relating to or affecting the condition, use or
occupancy of the Property, excluding structural changes not relating to or
affected by Tenant's improvements or acts. The judgment of any court of
competent jurisdiction or the admission by Tenant in any action against Tenant,
irrespective of whether Landlord is a party, that Tenant has violated any
matters of record, or any law, statute, ordinance or governmental rule,
regulation or requirement, shall be conclusive of that fact between Landlord and
Tenant. In addition, Tenant shall not place a load upon any floor of the Leased
Premises which exceeds the load per square foot which the floor was designed to
carry, nor shall Tenant install business machines or other mechanical equipment
in the Leased Premises which cause noise or vibration that may be transmitted to
the structure of the Building.
20. SUBORDINATION AND ATTORNMENT
20.1 SUBORDINATION. This Lease and all rights of Tenant under this Lease
-------------
shall be, at the option of Landlord, subordinate to (a) all matters of record,
(b) all ground leases, overriding leases and underlying leases (collectively
referred to as the "leases") of the Building or the Property now or subsequently
existing, (c) all mortgages and deeds of trust (collectively referred to as the
"mortgages") which may now or subsequently encumber or affect the Building or
---------
the Property, and (d) all renewals, modifications, amendments, replacements and
extensions of leases and mortgages
18
<PAGE>
and to spreaders and consolidations of the mortgages, irrespective of whether
leases or mortgages shall also cover other lands, buildings or leases. The
provisions of this 'Article 21.1 shall be self-operative and no further
------------
instruments of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the lessor under any lease or the holder of any
mortgage or any of their respective assigns or successors in interest may
reasonably request to evidence such subordination. Any lease to which this Lease
is subject and subordinate is called a "Superior Lease" and the lessor under a
--------------
Superior Lease or its assigns or successors in interest is called a "Superior
--------
Lessor". Any mortgage to which this Lease is subject and subordinate is called a
- ------
"Superior Mortgage" and the holder of a Superior Mortgage is called a "Superior
----------------- --------
Mortgagee". If Landlord, a Superior Lessor or a Superior Mortgagee requires that
- ---------
such instruments be executed by Tenant, Tenant's failure to do so within ten
(10) days after request for such instrument shall be deemed an Event of Default
under this Lease. Tenant waives any right to terminate this Lease because of any
foreclosure proceedings. Tenant hereby irrevocably constitutes and appoints
Landlord (and any successor Landlord) as Tenant's attorney-in-fact to execute
and deliver to any Superior Lessor or Superior Mortgagee any documents required
to be executed by Tenant for and on behalf of Tenant if Tenant shall have failed
to do so within ten (10) days after the request for execution and delivery.
20.2 ATTORNMENT. If any Superior Lessor or Superior Mortgagee (or any
----------
purchaser at a foreclosure sale) succeeds to the rights of Landlord under this
Lease, whether through possession or foreclosure action, or the delivery of a
new lease or deed (a "Successor Landlord"), Tenant shall attorn to and
------------------
recognize such Successor Landlord as Tenant's landlord under this Lease and
shall promptly execute and deliver any instrument that such Successor Landlord
may reasonably request to evidence such attornment. Further, any successor
shall attorn to Tenant and shall recognize this lease as valid and will fulfill
all the obligations of Landlord hereunder.
20.3 QUIET ENJOYMENT. Landlord covenants that upon paying the annual
---------------
rent and additional rent, if any, and observing and keeping the covenants,
agreements, and conditions applicable to it under this lease, Tenant shall
peaceably and quietly have, hold and enjoy the premises, without hindrance or
molestation from Landlord or anyone claiming by, through, under Landlord.
21. ESTOPPEL CERTIFICATE
--------------------
Tenant shall, from time to time, within ten (10) days after written request
by Landlord, execute, acknowledge and deliver to Landlord a statement in writing
certifying: (a) that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect); (b) the dates to which
Annual Basic Rent, Additional Rent and other charges are paid in advance, if
any; (c) that there are not, to Tenant's knowledge, any uncured defaults on the
part of Landlord under this Lease or specifying such defaults if any are
claimed; (d) that Tenant has paid Landlord the Security Deposit; (e) the
Commencement Date and the scheduled expiration date of the Lease Term; (f) the
rights (if any) of Tenant to extend or renew this Lease or to expand the Leased
Premises; and (g) the amount of Annual Basic Rent, Additional Rent and other
charges currently payable under this Lease. In addition, such statement shall
provide such other information and facts Landlord may reasonably
19
<PAGE>
require. Any such statement may be relied upon by any prospective or existing
purchaser, ground lessee or mortgagee of all or any portion of the Property, as
well as by any other assignee of Landlord's interest in this Lease. Tenant's
failure to deliver such statement within such time shall be conclusive upon
Tenant (i) that this Lease is in full force and effect, without modification
except as may be represented by Landlord; (ii) that there are no uncured
defaults in Landlord's performance under this Lease; (iii) that Tenant has paid
to Landlord the Security Deposit; (iv) that not more than one month's
installment of Annual Basic Rent or Additional Rent has been paid in advance;
(v) that the Commencement Date and the scheduled expiration date of the Lease
Term are as stated in the statement, (vi) that Tenant has no rights to extend or
renew this Lease or to expand the Leased Premises except as contained herein;
(vii) that the Annual Basic Rent, Additional Rent and other charges are as set
forth in the certificate; and (viii) that the other information and facts set
forth in the certificate are true and correct.
22. SIGNS
-----
Landlord shall retain absolute control over the exterior appearance of the
Building and the exterior appearance of the Leased Premises as viewed from the
public halls. Tenant shall not install, or permit to be installed, any drapes,
shutters, signs, lettering, advertising, or any items that will in anyway alter
the exterior appearance of the Building or the exterior appearance of the Leased
Premises as viewed from the public halls or the exterior of the Building.
Notwithstanding the foregoing, Landlord shall install, at Tenant's sole cost and
expense, letters or numerals at or near the entryway to the Leased Premises
provided Tenant obtains Landlord's prior written consent as to size, color,
design and location. All such letters or numerals shall be in accordance with
the criteria established by Landlord for the Building. In addition, Tenant's
name and suite number shall be identified on the Building directory.
23. PARKING
-------
Tenant is allocated the number of parking spaces designated in Article 1.16
------- ----
above entitling Tenant to park in parking spaces located in the Parking Facility
as designated by Landlord from time to time for use by Tenant, its employees and
licensees, and for which Tenant shall pay the monthly charges set forth in
Article 1.17 above. The parking spaces shall be available to Tenant, its
- ------------
employees and licensees on a first come, first serve basis. Landlord reserves
the right to increase the parking charges set forth in Article 1.17 in such
------------
reasonable amounts as Landlord deems necessary based upon increased costs of
operating and maintaining the Parking Facility. Holders of parking passes shall
not be entitled to park in visitor parking spaces so designated by Landlord, or
in any other parking spaces other than those designated by Landlord for use by
holders of parking passes.
24. LIENS
-----
Tenant shall keep the Leased Premises free and clear of all mechanic's and
materialmen's hens. If, because of any act or omission (or alleged act or
omission) of Tenant, any mechanics', materialmen's or other lien, charge or
order for the payment of money shall be filed or recorded against the Leased
Premises, the Property, or the Building, or against any other property of
Landlord (irrespective of whether such lien, charge or order is valid or
enforceable as such), Tenant shall, at
20
<PAGE>
its own expense, cause the same to be canceled or discharged of record within
thirty (30) days after Tenant shall have received written notice of the filing
of such lien, or Tenant may, within such thirty (30) day period, furnish to
Landlord, a bond pursuant to A.R.S. (S)33 -1004 (or any successor statute) and
satisfactory to Landlord and all Superior Lessors and Superior Mortgagees
against the lien, charge or order, in which case Tenant shall have the right to
contest, in good faith, the validity or amount of such lien.
25. HOLDING OVER
------------
It is agreed that the date of termination of this Lease and the right of
Landlord to recover immediate possession of the Leased Premises thereupon is an
important and material matter affecting the parties hereto and the rights of
third parties, all of which have been specifically considered by Landlord and
Tenant. In the event of any continued occupancy or holding over of the Leased
Premises without the express written consent of Landlord beyond the expiration
or earlier termination of this Lease or of Tenants right to occupy the Leased
Premises, whether in whole or in part, or by leaving property on the Leased
Premises or otherwise, this Lease shall be deemed a monthly tenancy and Tenant
shall pay 150% times the Annual Basic Rent then in effect, in advance at the
beginning of the hold-over month(s), plus any Additional Rent or other charges
or payments contemplated in this Lease.
26. ATTORNEYS' FEES
---------------
If any action shall 'be instituted by either of the parties hereto for the
enforcement or interpretation of any of their respective rights or remedies in
or under this Lease, the prevailing party shall be entitled to recover from the
losing party all costs incurred by the prevailing party in such action and any
appeal therefrom, including reasonable attorneys' fees to be fixed by the court.
27. RESERVED RIGHTS OF LANDLORD
---------------------------
Landlord reserves the following rights, exercisable without liability to
Tenant for damage or injury to property, persons or business and without
effecting an eviction, constructive or actual, or disturbance of Tenant's use or
possession or giving rise to any claim: (a) to name the Building and the
Property and to change the name or street address of the Building and the
Property; (b) to install and maintain all signs on the exterior and interior of
the Building and the Property; (c) to designate all sources furnishing sign
painting and lettering; (d) during the last ninety (90) days of the Lease Term,
if Tenant has vacated the Leased Premises, to decorate, remodel, repair, alter
or otherwise prepare the Leased Premises for re-occupancy, without affecting
Tenant's obligation to pay Annual Basic Rent; (e) on reasonable prior notice to
Tenant, to exhibit the Leased Premises to any prospective purchaser, mortgagee,
or assignee of any mortgage on the Building or the Property and to others having
interest in the Leased Premises, Building and/or the Property, at any time
during the Lease Term, and to prospective tenants during the last six (6) months
of the Lease Term; (f) to take any and all measures, including entering the
Leased Premises for the purposes of making inspections, repairs, alterations,
additions and improvements to the Leased Premises or to the Building (including,
for the purposes of checking, calibrating, adjusting and balancing controls and
other parts of the Building systems) as may be necessary or desirable for the
operation, improvement, safety,
21
<PAGE>
protection or preservation of the Leased Premises or the Building, or in order
to comply with all laws, orders and requirements of governmental or other
authorities, or as may otherwise be permitted or required by this Lease;
provided, however, that Landlord shall endeavor (except in an emergency) to
minimize interference with Tenant's business in the Leased Premises; (g) to
relocate various facilities within the Building and on the Property if Landlord
shall determine such relocation to be in the best interest of the development of
the Building and/or the Property, provided, that such relocation shall not
materially restrict access to the Leased Premises; (h) to change the nature,
extent, arrangement, use and location of the Building Common Areas; (i) to make
alterations or additions to and to build additional stories on the Building and
to build additional buildings or improvements on the Property; and (j) to
install vending machines of all kinds in the Leased Premises and the Building,
and to receive all of the revenue derived therefrom, provided, however, that no
vending machines shall be installed by Landlord in the Leased Premises unless
Tenant so requests. Landlord further reserves the exclusive right to the roof of
the Building. No easement for light, air, or view is included in the leasing of
the Leased Premises to Tenant. Accordingly, any diminution or shutting off of
light, air or view by any structure which may be erected on the Property or
other properties in the vicinity of the Building shall in no way affect this
Lease or impose any liability upon Landlord.
28. EMINENT DOMAIN
--------------
28.1 TAKING. If the whole of the Building is lawfully and permanently
------
taken by condemnation or any other manner for any public or quasi-public
purpose, or by deed in lieu of condemnation, this Lease shall terminate as of
the date of vesting of title in such condemning authority and the Annual Basic
Rent and Additional Rent shall be pro rated to such date. If any part of the
Building or Property is so taken, or if the whole of the Building is taken, but
not permanently, then this Lease shall be unaffected thereby, except that (a)
Landlord may terminate this Lease by notice to Tenant within sixty (60) days
after the date of vesting of title in the condemning authority, and (b) if
twenty 20% or more of the Leased Premises shall be permanently taken and the
remaining portion of the Leased Premises shall not be reasonably sufficient for
Tenant to continue operation of its business, Tenant may terminate this Lease by
notice to Landlord within sixty (60) days after the date of vesting of title in
such condemning authority. This Lease shall terminate on the thirtieth (30th)
day after receipt by Landlord of such notice, by which date Tenant shall vacate
and surrender the Leased Premises to Landlord. The Annual Basic Rent and
Additional Rent shall be pro rated to the earlier of the termination of this
Lease or such date as Tenant is required to vacate the Leased Premises by reason
of the taking. If this Lease is not terminated as a result of a partial taking
of the Leased Premises, the Annual Basic Rent and Additional Rent shall be
equitably adjusted according to the rentable area of the Leased Premises and
Building remaining.
28.2 AWARD. In the event of a taking of all or any part of the Building
-----
or the Property, all of the proceeds or the award, judgment, settlement or
damages payable by the condemning authority shall be and remain the sole and
exclusive property of Landlord, and Tenant hereby assigns all of its right,
title and interest in and to any such award, judgment, settlement or damages to
Landlord. Tenant shall, however, have the right, to the extent that the same
shall not reduce or prejudice amounts available to Landlord, to claim from the
condemning authority, but not from Landlord, such compensation as may be
recoverable by Tenant in its own right for relocation benefits, moving expenses,
and damage to Tenant's personal property and trade mixtures.
22
<PAGE>
29. NOTICES
-------
Any notice or communication given under the terms of this Lease shall be in
writing and shall be delivered in person, sent by any public or private express
delivery service or deposited with the United States Postal Service or a
successor agency, certified or registered mail, return receipt requested,
postage pre-paid, addressed as set forth in the Basic Provisions, or at such
other address as a party may from time to time designate by notice under this
Article 30. Notice given by personal delivery or by public or private express
delivery service shall be effective upon delivery, notice sent by mail shall be
deemed to have occurred upon deposit of the notice in the United States mail.
The inability to deliver a notice because of a changed address of which no
notice was given or a rejection or other refusal to accept any notice shall be
deemed to be the receipt of the notice as of the date of such inability to
deliver or rejection or refusal to accept. Any notice to be given by Landlord
may be given by the legal counsel and/or the authorized agent of Landlord.
30. RULES AND REGULATIONS
---------------------
Tenant shall abide by all rules and regulations (the "Rules and
---------
Regulation") of the Building imposed by Landlord, as attached hereto as Exhibit
- ---------- -------
"E" or as may subsequently be issued by Landlord. The Rules and Regulations may
- ---
be changed from time to time upon ten (10) days notice to Tenant. Breach of the
Rules and Regulations, by Tenant shall constitute an Event of Default if such
breach is not fully cured within ten (10) days after written notice to Tenant by
Landlord; provided, however, no notice or opportunity to cure shall be required
in connection with a breach of rule number 39. Landlord shall not be
responsible to Tenant for nonperformance by any other tenant, occupant or
invitee of the Building of any Rules or Regulations.
31. ACCORD AND SATISFACTION
-----------------------
No payment by Tenant or receipt by Landlord of a lesser amount than the
monthly installment of Annual Base Rent and Additional Rent (jointly called
"Rent" in this Article 32), shall be deemed to be other than on account of the
---- ----------
earliest stipulated Rent due and not yet paid, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as Rent
be deemed an accord and satisfaction. Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such Rent or to
pursue any other remedy in this Lease. No receipt of money by Landlord from
Tenant after the termination of this Lease, after the service of any notice
relating to the termination of this Lease, after the commencement of any suit,
or after final judgment for possession of the Leased Premises, shall reinstate,
continue or extend the Lease Tenn or affect any such notice, demand, suit or
judgment.
32. RENEWAL OPTION
--------------
Tenant, upon paying the rent herein reserved and performing all the terms,
covenants and conditions herein contained on its part to be kept performed,
shall have an option to renew this Lease for an two (2) additional five (5) year
term. Any or such extension of this Lease for an additional term shall be upon
the same covenants and conditions as are set forth herein except that Tenant
shall have no option to further extend this Lease, and except that the rental
shall be based upon "fair
23
<PAGE>
market rental" rate for similar space in the area at the time of the exercise or
this option. Fair market rental shall mean the rental that the Landlord could
reasonably expect to obtain through a third party desiring to lease the premises
for the renewal term taking into account the age of the of the building, the
size, location and floor level of the premises in the locality of the building
and all other factors that would be relevant to a third party desiring to lease
the premises for the renewal term (including, but not limited to concessions and
build-out allowances). Landlord shall inform Tenant of it's initial
determination of fair market rental within the (30) days after it's receipt of
Tenant's intention to renew, whereupon Landlord and Tenant shall attempt in good
faith to agree fair market rental. If Landlord and Tenant are unable to reach
agreement within sixty (60) days after Landlord's receipt of Tenant's notice
then Tenant may forfeit Option to Renew.
Tenant must notify Landlord in writing not less than ninety (90) days nor
more than one hundred twenty (120) days prior to the expiration or this Lease of
its election to enter into negotiations with the Landlord for the additional
term stated above. In the event Tenant fails to so notify Landlord or declines
to exercise said Option to Renew, such right shall terminate and no longer be in
effect.
33. MISCELLANEOUS
-------------
33.1 ENTIRE AGREEMENT, AMENDMENTS. This Lease and any Exhibits attached
----------------------------
to and forming a part of this Lease set forth all of the covenants, promises,
agreements, conditions and understandings between Landlord and Tenant concerning
the Leased Premises and there are no covenants, promises, agreements,
representations, warranties, conditions or understandings either oral or written
between them other than as contained in this Lease. Except as otherwise provided
in this Lease, no subsequent alteration, amendment, change or addition to this
Lease shall be binding unless it is in writing and signed by both Landlord and
Tenant.
33.2 TIME OF THE ESSENCE. Time is of the essence of each and every term,
-------------------
covenant and condition of this Lease.
33.3 BINDING EFFECT. The covenants and conditions of this Lease shall,
--------------
subject to the restrictions on assignment and subletting, apply to and bind the
heirs, executors, administrators, personal representatives, successors and
assigns of the parties to this Lease.
33.4 RECORDATION. Neither this Lease nor any memorandum of this Lease
-----------
shall be recorded by Tenant.
33.5 GOVERNING LAW. This Lease and all the terms and conditions of this
-------------
Lease shall be governed by and construed in accordance with the laws of the
State of Arizona.
33.6 NO PARTNERSHIP. Nothing contained in this Lease shall be deemed or
--------------
construed as creating an agency, partnership or joint venture relationship
between Landlord and Tenant or between Landlord and any other party, or cause
Landlord to be responsible in any way for the debts or obligations of Tenant or
any other party.
24
<PAGE>
33.7 AUTHORITY. If Tenant executes this Lease as a partnership, each
---------
individual executing this Lease on behalf of the partnership represents and
warrants that he or she is a general partner of the partnership and that this
Lease is binding upon the partnership in accordance with its terms. If Tenant
executes this Lease as a corporation, each of the persons executing this Lease
on behalf of Tenant covenants and warrants that Tenant is a duly authorized and
existing corporation, that Tenant has and is qualified to transact business in
Arizona, that the corporation has full right, authority and power to enter into
this Lease and to perform its obligations under this Lease, that each person
signing this Lease on behalf of the corporation is authorized to do so and that
this Lease is binding upon the corporation in accordance with its terms.
33.8 NO WAIVER. The failure of either party to insist in any one or more
---------
instances upon the strict performance of any one or more of the obligations of
this Lease, or to exercise any election contained in this Lease, shall not be
construed as a waiver or relinquishment for the future of the performance of
such one or more obligations of this Lease or the right to exercise such
election, but the same shall continue and remain in full force and effect with
respect to any subsequent breach, act or omission.
33.9 SEVERABILITY. If any clause or provision of this Lease is or
------------
becomes illegal or unenforceable because of any present or future law or
regulation of any governmental body or entity effective during the Lease Term,
the intention of the parties is that the remaining provisions of this Lease
shall not be affected by such determination.
33.10 EXHIBITS. If any provision contained in an Exhibit or Addenda to
--------
this Lease is inconsistent with any other provision of this Lease, the provision
contained in this Lease shall supersede the provisions contained in such Exhibit
or Addenda, unless otherwise provided.
33.11 FAIR MEANING. The language of this Lease shall be construed to its
------------
normal and usual meaning and not strictly for or against either Landlord or
Tenant. Landlord and Tenant acknowledge and agree that each party has reviewed
and revised this Lease and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not apply to the
interpretation of this Lease, or any Exhibits, Riders or amendments to this
Lease.
33.12 NO MERGER. The voluntary or other surrender of this Lease by Tenant
---------
or a mutual cancellation of this Lease shall not work as a merger and shall, at
Landlords option, either terminate any or all existing subleases or
subtenancies, or operate as an assignment to Landlord of any or all of such
subleases or subtenancies.
33.13 FORCE MAJEURE. Any prevention, delay or stoppage due to strikes.
-------------
lockouts, labor disputes. acts of God, inability to obtain labor or materials or
reasonable substitutes for labor or materials, governmental restrictions,
regulations or controls, judicial orders, enemy or hostile government actions,
civil commotion, fire or other casualty and other causes beyond the reasonable
control of Landlord shall excuse the Landlords performance tinder this Lease for
the period of any such prevention, delay, or stoppage.
25
<PAGE>
33.14 TRANSFER OF LANDLORDS INTEREST. The term "Landlord" as used in this
------------------------------ --------
Lease, insofar as the covenants or agreements on the part of the Landlord are
concerned, shall be limited to mean and include only the owner or owners of
Landlords interest in this Lease at the time in question. Upon any transfer or
transfers of such interest, the Landlord herein named in this Lease (and in the
case of any subsequent transfer, the then transferor) shall be relieved of all
liability for the performance of any covenants or agreements on the part of the
Landlord contained in this Lease.
33.15 LIMITATION ON LANDLORDS LIABILITY. If Landlord becomes obligated to
---------------------------------
pay Tenant any judgment arising out of any failure by the Landlord to perform or
observe any of the terms, covenants, conditions or provisions to be performed or
observed by Landlord under this Lease, Tenant shall be limited in the
satisfaction of such judgment solely to Landlords interest in the Building and
the Property or any proceeds arising from the sale of the Building or the
Property, and no other property or assets of Landlord or the individual
partners, directors, officers or shareholders of Landlord or its constituent
partners shall be subject to levy, execution or other enforcement procedure
whatsoever for the satisfaction of any such money judgment.
33.16 BROKERAGE FEES. Tenant warrants and represents that it has not
--------------
dealt with any realtor, broker or agent in connection with this Lease except the
Broker identified in Article 1.19 above. Tenant shall indemnify, defend and hold
------------
Landlord harmless for, from and against any cost, expense or liability
(including the cost of suit and reasonable attorneys fees) for any compensation,
commission or charges claimed by any other realtor, broker or agent in
connection with this Lease or by reason of any act of Tenant.
33.17 CONTINUING OBLIGATIONS. All obligations of Tenant under this Lease
----------------------
not fully performed as of the expiration or earlier termination of this Lease
shall survive the expiration or earlier termination of this Lease, including,
without limitation, all payment obligations with respect to Annual Basic Rent,
Additional Rent and all obligations concerning the condition of the Leased
Premises.
33.18 CONFIDENTIALITY. Tenant shall keep the term, rental rate and all
---------------
other provisions of this lease confidential and shall prevent the publication or
other disclosure thereof by Tenant, its shareholders, officers, directors,
employees, agents or representatives unless Tenant receives the prior written
consent of Landlord, which consent Landlord may withhold in its sole and
absolute discretion. A breach by Tenant of the provisions of this paragraph
shall constitute an Event of Default under this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
date and year first above written.
26
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
LANDLORD TENANT
PRESSON ADVISORY L.L.C., American Schools of Professional Psychology,
an Arizona Limited Liability Company an Illinois Corporation DBA Arizona School
By: Presson Corporation, An Arizona of
Corporation Professional Psychology
Its: General Manager
By: /s/ Daryl R. Burton By: /s/ Michael Markovitz
-------------------------- ----------------------------
Daryl R. Burton Michael Markovitz
Its: President Its: Chairman
</TABLE>
27
<PAGE>
RIDER "1"
---------
Rider 1 to Office Lease dated May 28,1997, between PRESSON ADVISORY
-----------
L.L.C., an Arizona Limited Liability Company ("Landlord") and American Schools
of Professional Psychology, Inc., an Illinois Corporation DBA Arizona School
Professional Psychology ("Tenant"). UNLESS OTHERWISE REQUIRED BY THE CONTEXT,
CAPITALIZED TERMS USED HEREIN SHALL HAVE THE MEANING ASCRIBED TO SUCH TERMS IN
THE LEASE. IN THE EVENT OF A CONFLICT BETWEEN THE TERMS AND PROVISIONS OF THIS
RIDER "1" AND THE LEASE THE TERMS OF THIS RIDER "1" SHALL CONTROL.
1. Hazardous Materials Laws. "Hazardous Materials Laws" means any and
------------------------ ------------------------
all federal, state or local laws, ordinances, rules, decrees, orders,
regulations or court decisions (including the so-called "common-law") relating
----------
to hazardous substances, hazardous materials, hazardous waste, toxic substances,
environmental conditions on, under or about the Property, or soil and ground
water conditions, including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended, 42
------
U.S.C. (S)9601, et seq., the Resource Conservation and Recovery Act. ("RCRA") 42
----
U.S.C. (S)6901, et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
(S) 1801, et seq., any amendments to the foregoing, and any similar federal,
state or local laws, ordinances, rules, decrees, orders or regulations.
2. Hazardous Materials. "Hazardous Materials" means any chemical,
------------------- -------------------
compound, material, substance or other matter that: (i) is a flammable
explosive, asbestos, radioactive material, nuclear medicine material, drug,
vaccine, bacteria, virus, hazardous waste, toxic substance, petroleum product,
or related injurious or potentially injurious material, whether injurious or
potentially injurious by itself or in combination with other materials; (ii) is
controlled, designated in or governed by any Hazardous Materials Law; (iii)
gives rise to any reporting, notice or publication requirements tinder any
Hazardous Materials Law; or (iv) gives rise to any liability, responsibility or
duty on the part of Tenant or Landlord with respect to any third person under
any Hazardous Materials Law.
3. Use. Tenant shall not allow any Hazardous Material to be used,
---
generated, released, stored or disposed of on, under or about, or transported
from, the Leased Premises, the Building or the Property, unless: (i) such use is
specifically disclosed to and approved by Landlord in writing prior to such use;
and (ii) such use is conducted in compliance with the provisions of this Rider
-----
1. Landlord may approve such use subject to reasonable conditions to protect the
- -
Leased Premises, the Building or the Property, and Landlords interests.
Landlord may withhold approval if Landlord determines that such proposed use
involves a material risk of a release or discharge of Hazardous Materials or a
violation of any Hazardous Materials Laws or that Tenant has not provided
reasonable assurances of its ability to remedy such a violation and fulfill its
obligations under this Rider 1.
-------
4. Compliance With Laws. Tenant shall strictly comply with, and shall
--------------------
maintain the Leased Premises in compliance with, all Hazardous Materials Laws.
Tenant shall obtain and maintain in full force and effect all permits, licenses
and other governmental approvals required for Tenants operations on the Leased
Premises under any Hazardous Materials Laws and shall comply
28
<PAGE>
with all terms and conditions of any Hazardous Materials laws. At Landlords
request, Tenant shall deliver copies of, or allow Landlord to inspect, all such
permits, licenses and approvals. Tenant shall perform any monitoring,
investigation, clean-up, removal and other remedial work (collectively,
"Remedial Work") required as a result of any release or discharge of Hazardous
-------------
Materials affecting the Leased Premises or the Building, or any violation of
Hazardous Materials Laws by Tenant or any assignee or sublessee of Tenant or
their respective agents, contractors, employees, licensees, or invitees.
Landlord shall have the right to intervene in any governmental action or
proceeding involving any Remedial Work, and to approve performance of the work,
in order to protect Land lords interests.
5. Compliance With Insurance Requirements. Tenant shall comply with the
--------------------------------------
requirements of Landlords and Tenants respective insurers regarding Hazardous
Materials and with such insurers recommendations based upon prudent industry
practices regarding management of Hazardous Materials.
6. Notice: Reporting. Tenant shall notify Landlord, in writing, within
------------------
two (2) days after any of the following: (a) a release or discharge of any
Hazardous Material, whether or not the release or discharge is in quantities
that would otherwise be reportable to a public agency; (b) Tenants receipt of
any order of a governmental agency requiring any Remedial Work pursuant to any
Hazardous Materials Laws; (c) Tenants receipt of any warning, notice of
inspection, notice of violation or alleged violation, or Tenants receipt of
notice or knowledge of any proceeding, investigation of enforcement action,
pursuant to any Hazardous Materials Laws; or (d) Tenants receipt of notice or
knowledge of any claims made or threatened by any third party against Tenant or
the Leased Premises, the Building or the Property, relating to any loss or
injury resulting from Hazardous Materials. Tenant shall deliver to Landlord
copies of all test results, reports and business or management plans required to
be filed with any governmental agency pursuant to any Hazardous Materials Laws.
7. Termination: Expiration. Upon the termination or expiration of this
-----------------------
Lease, Tenant shall remove any equipment, improvements or storage facilities
utilized in connection with any Hazardous Materials and shall, clean up,
detoxify, repair and otherwise restore the Leased Premises to a condition free
of Hazardous Materials.
8. Indemnity. Tenant shall protect, indemnify, defend and hold Landlord
---------
harmless for, from and against any and all claims, costs, expenses, suits,
judgments, actions, investigations, proceedings and liabilities arising out of
or in connection with any breach of any provisions of this Rider 1 or directly
-------
or indirectly arising out of the use, generation, storage, release, disposal or
transportation of Hazardous Materials by Tenant or any sublessee or assignee of
Tenant, or their respective agents, contractors, employees, licensees, or
invitees, on, under or about the Leased Premises, the Building or the Property
during the Lease Term or Tenants occupancy of the Leased Premises, including,
but not limited to, all foreseeable and unforeseeable consequential damages and
the cost of any Remedial Work. Neither the consent by Landlord to the use,
generation, storage, release, disposal or transportation of Hazardous Materials
nor the strict compliance with all Hazardous Material Laws shall excuse Tenant
from Tenants indemnification 222 obligations pursuant to this Rider 1. The
-------
foregoing indemnity shall be in addition to and not a limitation of the
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indemnification provisions of Rider 1 of the Lease. Tenants obligations
-------
pursuant to tie is Rider 1 shall survive the termination or expiration of this
-------
Lease.
9. Assignment Subletting. If Landlords consent is required for an
----------------------
assignment of this Lease or a subletting of the Leased Premises, Landlord shall
have the right to refuse such consent if the possibility of a release of
Hazardous Materials is materially increased as a result of the assignment or
sublease or if Landlord does not receive reasonable assurances that the new
tenant has the experience and the financial ability to remedy a violation of the
Hazardous Materials Laws and fulfill its obligations under this Rider 1.
-------
10. Entry and Inspections; Cure. Landlord and its agents, employees and
---------------------------
contractors, shall have the right, but not the obligation, to enter the Leased
Premises at all reasonable times to inspect the Leased Premises and Tenants
compliance with the terms and conditions of this Rider 1 or to conduct
-------
investigations and tests. No prior notice to Tenant shall be required in the
event of an emergency, or if Landlord has reasonable cause to believe that
violations of this Rider 1 have occurred, or if Tenant consents at the time of
-------
entry. In all other cases, Landlord shall give at least twenty-four (24) hours
prior notice to Tenant. Landlord shall have the right. but not the obligation.
to remedy any violation by Tenant of the provisions of this Rider 1 or to
-------
perform any Remedial Work which is necessary or appropriate as a result of any
governmental order, investigation or proceeding. Tenant shall pay, upon demand,
as Additional Rent, all costs incurred by Landlord in remedying such violations
or performing all Remedial Work, plus interest on such costs incurred at the
Default Rate from the date of demand until the date received by Landlord.
11. Event of Default. The release or discharge of any Hazardous Material
----------------
or the violation of any Hazardous Materials Law shall constitute an Event of
Default by Tenant under this Lease. In addition to and not in lieu of the
remedies available under this Lease as a result of such Event of Default,
Landlord shall have the right, without terminating this Lease, to require Tenant
to suspend its operations and activities on the Leased Premises until Landlord
is satisfied that appropriate Remedial Work has been or is being adequately
performed and Landlord's election of this remedy shall not constitute a waive of
Landlord's right to subsequently pursue the other remedies set forth in this
Lease.
<TABLE>
<CAPTION>
<S> <C>
LANDLORD TENANT
PRESSON ADVISORY L.L.C., American Schools of Professional Psychology,
an Arizona Limited Liability Company an Illinois Corporation DBA Arizona School
By: Presson Corporation, An Arizona of
Corporation Professional Psychology
Its: General Manager
By: /s/ Daryl R. Burton By: /s/ Michael Markovitz
------------------------- ---------------------------
Daryl R. Burton Michael Markovitz
Its: President Its: Chairman
</TABLE>
30
<PAGE>
RIDER "2"
Rider 2 to Office Lease dated May 28, 1997, between PRESSON ADVISORY
------------
L.L.C., an Arizona Limited Liability Company ("Landlord") and American Schools
of Professional Psychology, Inc., an Illinois Corporation DBA Arizona School of
Professional Psychology ("Tenant"). Unless otherwise required by the context,
capitalized terms used herein shall have the meaning ascribed to such terms in
the Lease. In the event of a conflict between the terms and provisions of this
Rider "2" and the Lease, the terms of this Rider "2" shall control.
1. RENTAL SCHEDULE:
1. July 1, 1997 through June 30, 1998. $119,253.75 ($9,937.81/Month)
based upon a rental rate of $13.75 PSF
2. July 1, 1998 through June 30, 1999. $123,590.25 ($10,299.19/Month)
based upon a rental rate of $14.25 PSF
3. July 1, 1999 through June 30, 2000. $127,590.25 ($10,660.56/Month)
based upon a rental rate of $14.75 PSF
4. July 1, 2000 through June 30, 2001. $134,431.50 ($11,202.63/Month)
based upon a rental rate of $15.50 PSF
5. July 1, 2001 through June 30, 2002. $140,936.25 ($11,744.69/Month)
based upon a rental rate of $16.25 PSF
6. July 1, 2002 through June 30, 2003. $149,609.25 ($12,467.44/Month)
based upon a rental rate of $17.25 PSF
7. July 1, 2003 through June 30, 2004. $158,282.25 ($13,190.19/Month)
based upon a rental rate of $18.25 PSF
8. July 1, 2004 through June 30, 2005. $166,955.25 ($13.912.94/Month)
based upon a rental rate of $19.25 PSF
9. July 1, 2005 through June 30, 2006. $175,628.25 ($14,635.69/Month)
based upon a rental rate of $20.25 PSF
10. July 1, 2006 through June 30, 2007. $184,301.25 ($15,358.44/Month)
based upon a rental rate of $21.25 PSF
2. SUBLEASE ASSIGNMENT RIGHTS:
"Tenant" shall be permitted to assign or sublease all or any portion of the
Premises during the term to any subsidiary, parent commonly controlled entity,
or any entity resulting from a merger of "Tenant" without Landlords consent.
In addition, "Tenant" shall have the right to assign or sublease all or any
portion of the Premises to unaffiliated third parties with Landlords consent
which shall not be unreasonably withheld or delayed provided that said third
party shall be as creditworthy as "Tenant" and is in a business considered
compatible with the other tenants in the building, both of which will be in the
sole discretion of the Landlord. Landlord will maintain the right of recapture.
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<PAGE>
3. EXPANSION OPTION:
Expansion space shall be provided on an "as-is" basis predicated on the
then escalated rate. Tenant shall have Right of First Refusal on any vacant
space greaterthan 4,000sq.ft. within the project. Said Right of First Refusal
shall expire within forty-eight (48) business hours after formal written
presentation to Tenant, unless otherwise accepted by Tenant. Landlord shall
provide a Tenant Improvement Allowance for such Expansion Space, not to exceed
Five and No/100 Dollars ($5.00) per square foot. Any such allowance used shall
be considered as additional rent and amortized into the existing Lease Rate over
the remaining term of the Lease.
4. VENDING:
"Tenant" shall have the right to place vending machines within the
premises.
5. SIGNAGE:
Landlord shall allow Tenant exterior building signage facing the lighted
intersection of 23rd Avenue and Dunlap. Cost of said signage shall be borne by
Tenant, and is hereby approved by Landlord as noted on Exhibit "H" attached
hereto. Sign shall be constructed of metal reverse pan channel letters. No
other sign all be permitted within twenty (20) feet on the same face of the
building.
6. Tenant shall have the right to cancel this Lease upon the 5th and 7th
anniversary dates of this Lease with six (6) months prior written notice.
<TABLE>
<CAPTION>
<S> <C>
LANDLORD TENANT
PRESSON ADVISORY L.L.C., American Schools of Professional Psychology,
an Arizona Limited Liability Company an Illinois Corporation DBA Arizona School
By: Presson Corporation, An Arizona of
Corporation Professional Psychology
Its: General Manager
By: /s/ Daryl R. Burton By: /s/ Michael Markovitz
------------------------- ---------------------------
Daryl R. Burton Michael Markovitz
Its: President Its: Chairman
</TABLE>
32
<PAGE>
EXHIBIT "A"
DESCRIPTION OF THE PROPERTY
PARCEL NO. 1:
- -------------
A portion of the South half of the Northwest quarter of Section 36, Township 3
North, Range 2 East of the Gils and Salt River Base and Meridian, Maricopa
County, Arizona, more particularly described as follows:
BEGINNING at the Northwest corner of the Southwest quarter of the Northwest
quarter of said Section 36;
Thence North 89 degrees 57 minutes 15 seconds East along the North line of the
South half of the Northwest quarter of said Section 36, a distance of 226.63
feet to a point of the East right of way line of The Black Canyon Highway, also
known as the Phoenix-Cordes Junction Highway, as established by Docket 326, page
9, records of Maricopa County, Arizona;
Thence Southeasterly along the Easterly right of way line of the Black Canyon
Highway or Phoenix Cordes Junction Highway, as established by Docket 326 page 9,
records of Maricopa County, Arizona, along a curve concave Northeasterly whose
center point bears North 75 degrees 20 minutes 45 seconds East 3819.72 feet and
through a central angle of 06 degrees 30 minutes 29 seconds a distance of 442.94
feet;
Thence continuing Southeasterly along the Easterly right of way line of The
Black Canyon Highway or Phoenix Cordes Junction Highway, as established by
Docket 326 page 9, records of Maricopa County, Arizona, a distance of 139.30
feet along a curve concave Northeasterly having a radius of 3819.72 feet and a
central angle of 05 degrees 47 minutes 02 seconds to the True Point of Beginning
of the herein described property;
Thence continuing Southeasterly along the Easterly right of way line of The
Black Canyon Highway or Phoenix Cordes Junction Highway, as established by
Docket 326 page 9, records of Maricopa County, Arizona, a distance of 246.30
feet to the most Westerly corner of Freeway Park Subdivision, according to Book
73 of Maps, page 32, records of Maricopa county, Arizona,
Thence North 62 degrees 17 minutes 55 seconds East along the Northerly boundary
of said Freeway Park, 258.56 feet;
Thence North 31 degrees 07 minutes 35 seconds East along the Northerly boundary
of said Freeway Park, 17.07 feet;
Thence North 00 degrees 02 minutes 45 seconds West along the Westerly boundary
of said freeway Park, 88.46 feet;
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<PAGE>
Thence South 89 degrees 57 minutes 15 seconds West 342.14 feet to a point on the
Easterly right of way line of The Black Canyon Highway or Phoenix-Cordes
Junction Highway as established by Docket 326 page 9, records of Maricopa
County, Arizona, and the TRUE POINT OF BEGINNING.
EXCEPT that certain parcel condemned by the State of Arizona at Docket 4477 page
500 described as follows:
BEGINNING at the Northwest corner of the Southwest quarter of the Northwest
quarter of said Section 36:
Thence Easterly along the North line of said Southwest quarter of the Northwest
quarter of Section 36 a distance of 226.63 feet to a point of the previous
Easterly right of way line of The Black Canyon Highway also known as Phoenix-
Cordes Junction Highway, as established by Docket 326 page 9, records of
Maricopa County, Arizona;
Thence Southeasterly along the Easterly right of way line, as established by
Docket 326 page 9, records of Maricopa County, Arizona, along a curve concave
Northwesterly whose center point bears North 75 degrees 20 minutes 45 seconds
East 3819.72 feet and through a central angle of 06 degrees 38 minutes 29
seconds a distance of 442.54 feet;
Thence continuing Southeasterly along the East right of way line of The Black
Canyon Highway or Phoenix-Cordes Junction Highway, as established by Docket 326
page 9, records of Maricopa County, Arizona, a distance of 139.30 feet along a
curve concave Northeasterly having a radius of 2819.72 feet and a central angle
of 05 degrees 47 minutes 02 seconds to the True Point of Beginning of the herein
described property;
Thence continuing Southeasterly along the Easterly right of way line of The
Black Canyon Highway or Phoenix-Cordes Junction Highway, as established by
Docket 326 page 9, records of Maricopa County, Arizona, a distance of 246 30
feet to the most Westerly corner of Freeway Park Subdivision, according to Book
73 of Maps, page 32, records of Maricopa County, Arizona;
Thence North 62 degrees 17 minutes 55 seconds East along the Northerly right of
way line of said Freeway Park, a distance of 24.83 feet to a point on the
Easterly right of way line of the relocated Black Canyon Highway or Phoenix-
Cordes Junction Highway, as established by Docket 4477 page 500, records of
Maricopa County, Arizona;
Thence North 24 degrees 66 minutes 30 seconds West along said Easterly right of
way line a distance of 222.93 feet;
Thence South 89 degrees 57 minutes 15 seconds West to a point on the Easterly
right of way line of The Black Canyon Highway or Phoenix-Cordes Junction
Highway, as established by Docket 326 page 9, records of Maricopa County,
Arizona, a distance of 28.84 feet to the True Point of Beginning.
A-2
<PAGE>
PARCEL NO. 2:
- -------------
That portion of the South half of the Northwest quarter of Section 36, Township
3 North, Range 2 East of the Gils and Salt River Base and Meridian, Maricopa
County, Arizona, more particularly described as follows:
BEGINNING at the most Westerly corner of the Subdivision entitled Freeway Park,
according to Book 73 of Maps, page 32, records of Maricopa county.
Thence North 62 degrees 17 minutes 55 seconds East along the Northerly boundary
of said Freeway Park, a distance of 24.65 feet to a brass cap marking the
Southeast corner of that certain parcel of land condemned by the State of
Arizona at Docket 4477 page 500, records of Maricopa county, Arizona;
Thence North 24 degrees 44 minutes 33 seconds West along the Northeasterly
boundary of said parcel a distance of 233.09 feet to the True Point of
Beginning;
Thence continuing along said line North 24 degrees 44 minutes 33 seconds West a
distance of 141.99 feet to the North boundary of that parcel described at Docket
11159 page 515, records of Maricopa County, Arizona;
Thence North 89 degrees 57 minutes 15 seconds East along said line a distance of
372.71 feet to the Westerly boundary of said Freeway Park;
Thence South 00 degrees 0 1 minutes 40 seconds East along said boundary a
distance of 129.50 feet;
Thence South 89 degrees 57 minutes 15 seconds West a distance of 323.42 feet to
the TRUE POINT OF BEGINNING.
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EXHIBIT "C"
-----------
MEMORANDUM OF COMMENCEMENT DATE
-------------------------------
THIS MEMORANDUM OF COMMENCEMENT DATE is entered into this _____day of
___________________, 1997 by Presson Equity Partners a(n) Arizona General
Partnership Corporation ("Landlord"), and ____________________________
--------
("Tenant").
------
RECITALS
--------
A. Landlord and Tenant have previously executed that certain Office Lease
dated ("Lease"), pursuant to which Tenant has leased from Landlord certain
-----
premises more particularly described in the Lease.
B. Pursuant to the provisions of Article 3.4 of the Lease, Landlord and Tenant
-----------
have agreed to execute this Memorandum of Commencement Date to specify the
Commencement Date of the Lease Term.
NOW, THEREFORE, in consideration of the foregoing recitals, the execution
and delivery of the Lease and other good and valuable considerations, the
receipt, sufficiency Find validity which is hereby acknowledged, Landlord and
Tenant agree as follows:
1. Commencement Date. The Commencement Date is ________________________.
-----------------
All reference in the Lease to Commencement Date shall be deemed to be references
to ______________________.
2. Definitions. Capitalized terms used in this Memorandum of
-----------
Commencement Date without definition shall have the meanings assigned to such
terms in the Lease, unless the context requires otherwise.
3. Full Force and Effect. Except as specifically modified by this
---------------------
Memorandum of Commencement Date, the Lease remains in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum of
Commencement Date as of the date and year First above written.
TENANT: LANDLORD:
C-1
<PAGE>
EXHIBIT "E"
-----------
RULES AND REGULATIONS
---------------------
1. Unless otherwise specifically defined in this Exhibit, all capitalized
terms in these Rules and Regulations shall have the meaning set forth in the
Lease to which these Rules and Regulations are attached.
2. The sidewalks, driveways, entrances, passages, courts, elevators,
vestibules, stairways, corridors or halls of the Building shall not be
obstructed or encumbered or used for any purpose other than ingress and egress
to and from the premises leased to any tenant or occupant. The halls, passages,
exits, entrances, elevators, stairways, balconies and roof are not for the use
of the general public, and the Landlord shall in all cases retain the right to
control and prevent access thereto by all persons whose presence in the Judgment
of Landlord shall be prejudicial to the safety, character, reputation and
interests of the Building and its tenants.
3. No awnings or other projection shall be attached to the outside walls
or windows of the Building. No curtains, blinds, shades, or screens shall be
attached to or hung in, or used in connection with, any window or door of the
premises leased to any tenant or occupant, without the prior written consent of
Landlord. All electrical fixtures hung in any premises leased to any tenant or
occupancy must be of a type, quality, design, color, size and general appearance
approved by Landlord. Landlord will provide standard window blinds as required
on windows without blinds.
4. No tenant shall place objects against glass partitions, doors or
windows which would be in sight from the Building corridors or from the exterior
of the Building and such tenant will promptly remove any such objects when
requested to do so by Landlord.
5. The windows and doors that reflect or admit light and air into the
halls, passageways or other public places in the Building shall not be covered
or obstructed, nor shall any bottles, parcels, or other articles be placed on
any window sills.
6. No show cases or other articles shall be put in front of or affixed to
any part of the exterior of the Building nor placed in the halls, corridors,
walkways, landscaped areas, vestibules or other public parts of the Building.
7. The restrooms, water and wash closets and other plumbing fixtures
shall not be used for any purposes other than those for which they were
constructed, and no sweepings, rubbish, rags or other substances shall be thrown
in the restrooms, water and wash closets. The reasonable costs incurred by
Landlord (a) for extra cleaning in any restroom, water or wash closet required
because of any misuse of such restroom, water or wash closet, and/or (b) to
repair any damage resulting from any misuse of the fixtures will be borne by the
tenant who, or whose employees, agents, visitors or licensees, caused the same.
No tenant shall bring or keep, or permit to be brought or kept, any inflammable,
combustible, explosive or hazardous fluid, material, chemical or substance in or
about the premises leased to such tenant or the Property.
E-1
<PAGE>
8. No tenant or occupant shall mark, paint, drill into, or in any way
deface any part of the Building or the premises leased to such tenant or
occupant. No boring, cutting or strings of wires shall be permitted, except
with the prior consent of Landlord, and as Landlord may direct. No tenant or
occupant shall install any resilient tile or similar floor covering in the
premises leased to such tenant or occupant except in a manner approved by
Landlord.
9. Any carpeting cemented down by a tenant shall be installed with a
releasable adhesive. In the event of a violation rf this paragraph by a tenant,
Landlord may charge the expense incurred to remove the carpeting to such tenant.
10. No bicycles, vehicles or animals of any kind (except seeing eye dogs)
shall be brought into or kept in or about the premises leased to any tenant. No
cooking shall be done or permitted in the Building by any tenant without the
written approval of Landlord. No tenant shall cause or permit any unusual or
objectionable odors to emanate from the premises leased to such tenant.
11. No space in the Building shall be used for manufacturing, for the
storage of merchandise, or for the sale of merchandise, goods or property of any
kind at auction.
12. No tenant and no employee, visitor, agent, or licensee of any Tenant
shall make, or permit to be made, any unseemly or disturbing noises or
vibrations or disturb or interfere with other tenants or occupants of the
Building, or neighboring buildings or premises whether by the use of any musical
instrument, radio, television set broadcasting equipment or other audio device,
unmusical noise. whistling, singing, yelling or screaming, or in any other way.
Nothing shall be thrown out of any doors. No tenant and no employee, visitor,
agent, or licensee of any Tenant shall conduct itself in any manner that is
inconsistent with the character of the Building as a first quality building or
that will impair the comfort, convenience or safety of other tenants in the
Building.
13. No additional locks or bolts of any kind shall be placed upon any of
the doors, nor shall any changes be made in locks or the mechanism of such
locks. Each tenant must, upon the termination of its tenancy, restore to
Landlord all keys of stores, offices and toilet rooms, either Furnished to, or
otherwise procured by, such tenant.
14. All removals from the Building, or the carrying in or out of the
Building or from the premised leased to any tenant, of any safes, freight,
furniture or bulky matter of any description must take place at such time and in
such manner as Landlord or its agents may determine, from time to time.
Landlord reserves the right to inspect all freight to be brought into the
Building and to exclude from the Building all freight which violates any of the
Rules and Regulations or the provisions of such tenants lease.
15. Each tenant, before closing and leaving the premises leased to such
tenant at any time, shall see that all entrance doors are locked and all
electrical equipment and lighting fixtures are turned off. Corridor doors, when
not in use, shall be kept closed.
E-2
<PAGE>
16. Each tenant shall, at its expense, provide artificial light in the
premises leased to such tenant for Landlords agents, contractors and employees
while performing janitorial or other cleaning services and making repairs or
alterations in said premises.
17. No premises shall be used, or permitted to be used for lodging or
sleeping, or for any immoral or illegal purposes or in any manner that, in
Landlord's reasonable judgment, threatens the safety of the Building or the
tenants of the Building and their employees and invitees.
18. The requirements of tenants will be attended to only upon application
of the office of Landlord. Building employees shall not be required to perform,
and shall not be requested by any tenant or occupant to perform, and work
outside of their regular duties, unless under specific instructions from the
office of Landlord.
19. Canvassing, soliciting and peddling in the Building are prohibited and
each tenant and occupant shall cooperate in seeking their prevention.
20. There shall not be used in the Building, either by any tenant or
occupant or by their agents or contractors, in the delivery or receipt of
merchandise, freight or other matter, any hand trucks or other means of
conveyance except those equipped with rubber tires, rubber side guards and such
other safeguards as Landlord may require.
21. If the premises leased to any tenant become infested with vermin, such
tenant, at its sole cost and expense, shall cause its premises to be
exterminated, from time to time, to the satisfaction of Landlord, and shall
employ such exterminators for the extermination of the vermin as shall be
approved in writing by Landlord.
22. No premises shall be used, or permitted to be used, at any time,
without the prior written approval of Landlord, as a store for the sale or
display of goods, wares or merchandise of any kind, or as a restaurant, shop,
booth, bootblack or other stand, or for the conduct of any business or
occupation which predominantly involves direct patronage of the general public
in the premises leased to such tenant, or for manufacturing or for other similar
purposes. American Schools of Professional Psychology's Bookstore is excepted.
23. No tenant shall clean any window of the Building from the outside
24. No tenant shall move, or permit to be moved, into or out of the
Building or the premises leased to such tenant, any heavy or bulky matter,
without the specific approval of Landlord. If any such matter requires special
handling, only a qualified person shall be employed to perform such special
handling. No tenant shall place or permit to be placed, on any part of the
floor or floors of the premises leased to such tenant, a load exceeding the
floor load per square foot which such floor was designed to carry and which is
allowed by law. Landlord reserves the right to prescribe the weight and
position of safes and other heavy objects, which must be placed so as to
distribute the weight.
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<PAGE>
25. With respect to work being performed by a tenant in its premises with
the approval of Landlord, the tenant shall refer all contractors, contractor's
representatives and installation technicians to Landlord for its supervision,
approval and control prior to the performance of any work or services. This
provision shall apply to all work performed in the Building including
installation of telephones, telegraph equipment, electrical devices and
attachments, and installations of every nature affecting floors, walls,
woodwork, trim, ceilings, equipment and any other physical portion of the
Building.
26. Landlord shall not be responsible for lost or stolen personal
property, equipment, money, or jewelry from the premises of tenants or public
rooms whether or not such loss occurs when the Building or the premises are
locked against entry.
27. Landlord may permit entrance to the premises of tenants by use of pass
keys controlled by Landlord employees, contractors, or service personnel
directly supervised by Landlord and employees of the United States Postal
Service.
28. Each tenant and all of tenant's representatives, shall observe and
comply with the directional and parking signs on the property surrounding the
Building, and Landlord shall not be responsible for any damage to any vehicle
towed because of noncompliance with parking regulations.
29. No tenant shall install any radio, telephone, television, microwave or
satellite antenna, loudspeaker, music system or other device on the roof or
exterior walls of the Building or on common walls with adjacent tenants.
30. Each tenant shall store all trash and garbage within its premises. No
material shall be placed in the trash boxes or receptacles in the Building
unless such material may be disposed of in the ordinary and customary manner of
removing and disposing of trash and garbage and will not result in a violation
of any law or ordinance governing such disposal. All garbage and refuse
disposal shall be made only through entryways and elevators provided for such
purposes and at such times as Landlord shall designate.
31. No tenant shall employ any persons other than the janitor of Landlord
for the purpose of cleaning its premises without the prior written consent of
Landlord.
32. Each tenant shall give prompt notice to Landlord of any accidents to
or defects in plumbing, electrical or heating apparatus so that same may be
attended to properly.
33. No tenant shall bring into the Building any pollutants, contaminants,
inflammable, gasoline, kerosene or hazardous substances (as now or later defined
under State or Federal law).
34. Landlord reserves the right to restrict access to and from the
Building between the hours of 6:00 P.M. and 8:00 A.M. on business days and at
all hours on Saturdays, Sundays and holidays. American Schools of Professional
Psychology's premises and hours excepted.
E-4
<PAGE>
35. All tenant and tenant's servants, employees, agents, visitors,
invitees and licensees shall observe faithfully and comply strictly with these
Rules and Regulations and such other and further appropriate Rules and
Regulations as Landlord or Landlords agent from time to time adopt.
Each tenant shall at all times keep the premises leased to such tenant, its
employees, agents and invitees under its control so as to prevent the
performance of any act that would damage the Building or its reputation or the
premises leased to Such tenant or could injure, annoy, or threaten the security
of the other tenants in the Building or their respective employees, agents or
invitees or the public.
36. Landlord may deny entrance to the Building and may remove from the
Building any person or persons who appear to be or are intoxicated, or who
appear to be or are under the influence of liquor or drugs, or who are in any
manner violating any of the Building Rules and Regulations, or who present a
hazard or nuisance to any other person. The reasonable costs incurred by
Landlord for security services or other costs reasonably incurred by Landlord to
remove any such persons shall be borne by the tenant whose employees, agents
and/or invitees are so removed.
37. Landlord shall furnish each tenant at Landlords expense, with two (2)
keys to unlock the entry level doors and two (2) keys to unlock each corridor
door entry to each tenants premises and, at such tenants expense, with such
additional keys as such tenant may request. No tenant shall install or permit
to be installed any additional lock on any door into or inside of the premises
leased to that tenant or make or permit to be made any duplicate of keys to the
entry level doors or the doors to such premises. Landlord shall be entitled at
all times to possession of a duplicate of all keys to all doors into or inside
of the premises leased to tenants of the Building. All keys shall remain the
property of Landlord. Upon the expiration of the Lease Term, each tenant shall
surrender all such keys to Landlord and shall deliver to Landlord the
combination to all locks on all safes, cabinets and vaults which will remain in
the premises leased to that tenant. Landlord shall be entitled to install,
operate and maintain security systems in or about the Property which monitor, by
computer, close circuit television or otherwise, persons entering or leaving the
Property, the Building and/or the premises leased to any tenant. For the
purposes of this rule the term "keys" shall mean traditional metallic keys,
----
plastic or other key cards and other lock opening devices.
38. Each person using the Parking Facility or other areas designated by
Landlord where parking will be permitted shall comply with all Rules and
Regulations adopted by Landlord with respect to the Parking Facility or other
areas, including any employee or visitor parking restrictions, and any sticker
or other identification system established by Landlord. Landlord may refuse to
permit any person who violates any parking rule or regulation to park in the
Parking Facility or other areas, and may remove any vehicle which is parked in
the Parking Facility or other areas in violation of the parking Rules and
Regulations. The Rules and Regulations applicable to the Parking Facility and
the outside parking areas are as follows:
a. The maximum speed limit within the Parking Facility shall be 5 miles
per hour, the maximum speed limit in other parking areas shall be 15 miles per
hour.
b. All directional signs and arrows must be strictly observed
c. All vehicles must be parked entirely within painted stall lines.
E-5
<PAGE>
EXHIBIT 10.15
LEASE AGREEMENT
d. No intermediate or full-size car may be parked in any parking space
reserved for a compact car; no bicycle, motorcycle or other two or three wheeled
vehicle, and no truck, van or other oversized vehicle, may be parked in any area
not specifically designated for use by such vehicle.
e. No vehicle may be parked (1) in an area not striped for parking, (ii)
in a space which has been reserved for visitors or for another person or firm,
(iii) in an aisle or on a ramp, (iv) where a "no parking" sign is posted or
which has otherwise designated as a no parking area, (v) in a cross hatched
area, (vi) in an area bearing a "handicapped parking only" or similar
designation unless the vehicle bears an appropriate handicapped designation,
(vii) in an area bearing a "loading zone" or similar designation unless the
vehicle is then engaged in a loading or unloading function and (viii) in an area
with a posted height limitation if the vehicle exceeds the limitation.
f. Parking passes, stickers or other identification devices supplied by
Landlord shall remain the property of Landlord and shall not be transferable. A
replacement charge determined by Landlord will be payable by each tenant for
loss of any magnetic parking card or parking pass or sticker.
g. Garage managers or attendants shall not be authorized to make or allow
any exceptions to these Rules and Regulations.
h. Each operator shall be required to park and lock his or her own
vehicle, shall use the Parking Facilities at his or her own risk and shall bear
full responsibility for all damage to or loss of his or her vehicle, and for all
injury to persons and damage to property caused by his or her operation of the
vehicle.
i. Landlord reserves the right of tow away, at the expense of the owner,
any vehicle which is inappropriately parked or parked in violation of these
Rules and Regulations.
39. Landlord has designated the Building a "non-smoking" building in
accordance with The Smoking Pollution Control Ordinance adopted by the City of
Phoenix. Arizona as set forth in Sections 23 - 101, etc. of the City of Phoenix
Municipal Code. Accordingly, smoking of tobacco or any other weed plant is
prohibited in the Building Common Areas located within the Building. including
the Building lobby, public corridors, lavatories, elevators and other public
areas. Further, smoking of tobacco or any other weed plant is prohibited within
the Leased Premises.
40. Landlord reserves the right at any time and from time to time to
rescind, alter or waive, in whole or in part, any of the Building Rules and
Regulations when it is deemed necessary, desirable or proper, in Landlord's
judgment for its best interest or of the best of the tenants of the Building.
Landlord will uniformily enforce the above rules.
TENANT:
American Schools of Professional Psychology, Inc.
an Illinois Corporation DBA Arizona School of Professional Psychology
E-6
<PAGE>
By: /s/ Michael Markovitz
---------------------------------
Michael Markovitz
Its: Chairman
E-7
<PAGE>
EXHIBIT "G"
-----------
WORK LETTER
-----------
1. Landlord shall construct and finish the premises in accordance with
the space plan dated April 15, 1997, prepared by Space Concepts & Associates
Architects, and the preliminary construction budget prepared by Landlords
contractor dated April 23, 1997. Any telephone and computer cabling costs shall
be borne by Tenant.
Landlord shall endeavor to substantially complete construction of the Leasehold
Improvements on/or before file scheduled Commencement Date. Construction shall
be performed by Landlord's contractor in accordance with space plan prepared by
Space Concepts & Associates dated April 23, 1997. No additional construction
documents shall be generated.
Landlord shall not be liable for any direct or indirect damages as a result of
delays in construction beyond Landlord's reasonable control, including, but not
limited to strikes, availability of materials and labor, or delays by Tenant.
2. Additionally, Landlord shall provide a $7,500.00 allowance to cover
the cost of construction change orders, which can also be contributed toward the
cost of telephone and computer/data cabling.
G-1
<PAGE>
EXHIBIT 10.13
December 8, 1994
Mr. Paul Olson
Minnesota Schools of Professional Psychology
3103 East 80th Street, Suite 290
Bloomington, MN 55425
Dear Paul:
Pursuant to our conversations regarding changes to your existing space in Suite
290, as well as the addition of 1,300 rentable square feet in Mod B of the
Atrium Center, the following represent our discussions:
1. The 1,330 rentable square feet in Mod B will be charged at the operating
expense rate only. Terms of this leased space shall coincide with the
original lease through June 20, 2000. All other terms and conditions shall
be the same as stated in the original lease.
1995 Operating Expenses are projected at $7.97 per rentable square foot,
per year for a total yearly cost of $10,600.10 (monthly cost will be
$883.34).
Please acknowledge your acceptance below where appropriate. If you have any
questions, please call me at 853-2926.
Sincerely,
/s/ Tom Threlkeld
Tom Threlkeld
TLT:y
___________________________________________________________________________
MINNESOTA SCHOOLS OF
PROFESSIONAL PSYCHOLOGY CERIDIAN
By /S/ By ___________________________
------------------------
Its ________________________ Its___________________________
<PAGE>
April 7, 1992
Mr. Chris Moarn
Towle Real Estate
333 South Seventh Street
Minneapolis, MN 55402
Dear Chris,
Thank you for your efforts in securing proposals for the relocation of our
Minnesota School of Professional Psychology. We have reviewed each of the
proposals submitted from both an economic and functional perspective. We would
like to pursue the proposal submitted by Control Data Corporation subject to the
following revisions:
Commencement July 1, 1992
Date:
Occupancy June 26, 1992
Date:
Term: Approximately Five (5) Years;
August 31, 1997 termination
Option: One - 3 Year Option
Base Net
Rental Rate: Year Rate per RSF
---- ------------
1 $2.75
2 3.25
3 3.75
4 4.25
5 4.75
Option Rate: 6 5.25
7 5.25
8 5.25
Operating Expenses
and Taxes: Same as proposed
Tenant
Improvements It is understood that tenant improvements will be amortized over
the term the lease and added to the base rental rate. Tenant
improvements should include new
<PAGE>
carpeting to be selected by tenant and certain upgrades to the entry
and common reception area.
Parking: No underground parking will be required.
This proposal is non-binding on either party and shall be subject to the
execution of a mutually acceptable final lease agreement. Please review these
revised terms with the building representative so that we may proceed toward a
successful lease agreement with one of these landlords in a timely manner.
Sincerely,
Robert J. Lullo
Controller/CFO
<PAGE>
LEASE
This Lease is entered into as of May 3,1992, between CONTROL DATA CORPORATION, a
Delaware Corporation ("Landlord") and a American Schools of Professional
Psychology ("Tenant").
1. Definitions. In this Lease:
-----------
(a) "Actual Operating Cost" means the Operating Cost actually incurred for
a calendar year.
(b) "Actual Tax Cost" means the Tax Cost actually incurred for a year.
(c) "Additional Costs" means the estimated monthly Tax Cost plus the
estimated monthly Operating Cost. The current estimate of Tenant's
Share of Additional Costs is $2.32 for Tax Cost and $5.72 for Operating
Cost.
(d) "Base Operating Cost" means the operating Cost of $2.32 estimated for
1992.
(e) "Base Tax Cost" means the Tax Cost of $5.72 estimated to be payable in
1992.
(f) "Building" means the building at 8100 34th Avenue South, Bloomington,
Minnesota, located on the Land, commonly known as the Control Data
Headquarters Building.
(g) "Casualty" means a fire, explosion, tornado, or other cause of damage
to or destruction of the Building.
(h) "Commencement Date" means the first day of the Term.
(i) "Exhibit" means an Exhibit attached to and thereby made a part of this
Lease.
(j) "Land" means the land described on Exhibit B attached to this Lease.
(k) "Lease" means this Lease, all Exhibits attached to this Lease, and all
properly executed amendments, modifications and supplements to this
Lease.
(l) "Monthly Base Rent" means the Base Rent plus the amortized build-out
cost per month,, which amount will not change during the Term unless
space is added to or deleted from the Premises. The Monthly Base Rent
for Tenant through the Term of the Lease shall be as follows:
Year 1 $2,790.27 per month
Year 2 $3,128.89 per month
Year 3 $3,467.52 per month
<PAGE>
Year 4 $3,806.15 per month
Year 5 $4,144.77 per month
Year 6 $4,483.39 per month
Year 7 $4,483.39 per month
Year 8 $4,483.39 per month
(m) "Monthly Rent" means the Monthly Base Rent plus the Additional Costs.
The initial monthly Rent is $8,235.36, comprised of a Monthly Base Rent
of $2,790.27 plus a monthly Operating Cost estimated at $3,873.87 and a
monthly Tax Cost estimated at $1,571.22.
(n) "Normal Business Hours" means 8:00 a.m. to 9:00 p.m. Monday through
Friday and 8:00 a.m. to 1:00 p.m on Saturdays, excluding Sundays and
legal holidays.
(o) "Operating Costs" means all costs, charges and expenses incurred by
Landlord in connection with ownership, operation, security, maintenance
and repair of the Land, the Building, other improvements on the Land,
appurtenances to the Building, parking, roadways, landscaping,
lighting, sidewalks, and common or public areas, including but not
limited to real estate taxes and insurance on common areas, interior
and exterior maintenance, insurance, utilities, fees or expenses for
management by Landlord or any other party, and amortization of repairs
made to extend the life of the Building and other improvements.
Operating Cost will not include mortgage interest, depreciation on the
Building or fixtures, advertising expenses, real estate brokers'
commissions or the cost of tenant improvements.
(p) "Premises" means the space referred to as Suite No. 211 on the second
floor of the Building, which space is shown crosshatched on the drawing
attached to this Lease as Exhibit A, and which for purposes of this
Lease will be deemed to contain 8,127 rentable square feet regardless
of actual measurements.
(q) "Section" means a section of this Lease.
(r) "Taking" means acquisition by a public authority having the power of
eminent domain of all or part of the Land or Building by condemnation
or conveyance in lieu of condemnation.
(s) "Tax Cost" means all real estate taxes, levies, charges, and
installments of assessments (including interest on deferred
assessments) assessed, levied or imposed on, or allocated to, the Land
and Building and all attorneys' fees, witness fees, court costs and
other expenses of Landlord in connection with any proceeding to contest
these amounts.
-2-
<PAGE>
(t) "Tenant's Share" means the percentage obtained by dividing the square
foot area of the Premises by the total square foot area of the rentable
office space in the Building, which percentage on the date of this
Lease is 1.73% based on the number of square feet stated in paragraph
(m) above and based upon a current total rentable square footage for
the Building of 470,000 square feet.
(u) "Term" means the period of 8 years and 0 months, beginning on July 1,
1992, and ending on June 30, 2000, subject to the provisions of Section
7 and the other provisions of this Lease.
2. Premises.
--------
Landlord leases the Premises to Tenant, and Tenant leases the Premises from
Landlord, for the Term, under the terms 3nd conditions of this Lease.
3. Rent.
----
Tenant will pay the Monthly Rent to Landlord at Post Office Box 0, 8100 - 34th
Avenue South, Bloomington, Minnesota 55425, Attention: Corporate Real Estate
(HQ5036), or such other place as Landlord may designate, in advance on or before
the Commencement Date and on or before the first day of each month during the
Term, without demand, deduction or setoff. The Monthly Rent may change as the
Additional Costs are adjusted annually under Sections 4 and 5. Monthly Rent will
begin on the Commencement Date. If the Term begins on a day other than the
first day of a month, the Monthly Rent for that month will be prorated by
multiplying the Monthly Rent by the number of days of that month included in the
Term and dividing the product by the number of days in that month.
Any Monthly Rent or other amounts payable by Tenant to Landlord under this Lease
which are not paid within 10 days after the date due will bear interest from the
date due to the date paid at the rate of 18% per annum or the maximum rate of
interest permitted by law, whichever is less, and the interest will be paid to
Landlord on demand. All amounts to be paid by Tenant to Landlord under this
Lease will be deemed to be additional rent for purposes of payment and
collection.
If any taxes, special assessments, fees or other charges are imposed against
Landlord by any governmental unit or agency with respect to rentals under this
Lease, Tenant will pay these amounts to Landlord when due, except that Tenant
will have no obligation to pay any income tax on rentals unless the tax is
imposed in lieu of real estate taxes.
4. Cost Adjustments.
----------------
The initial Monthly Rent is based in part on the Base Tax Cost and the Base
Operating Cost. Prior to the first day of each calendar year after the date of
this Lease, or as soon as reasonably
-3-
<PAGE>
possible after the first day of the year, Landlord will furnish Tenant with an
estimate of the Tax Cost for that year if it is greater than or decreases the
Base Tax Cost, and with an estimate of the operating Cost for that year if it is
greater than the Base Operating Cost, and the Monthly Rent for each month of
that calendar year will be increased by 1/12th of Tenant's Share of the
differences between the Tax Cost estimate and the Base Tax Cost and between the
Operating Cost estimate and the Base Operating Cost.
After the end of each calendar year, including the year in which the Term
expires, Landlord will give Tenant a statement of the Actual Tax Cost and Actual
Operating Cost for that calendar year. If the actual costs exceed the estimated
costs for that year, Tenant will immediately pay to Landlord Tenant's Share of
the excess. If the actual costs are less than the estimated costs for that
year, Landlord will credit Tenant with Tenant's Share of the difference, which
credit will be applied to the payments of Monthly Rent as they become due. If
Landlord contests Tax Cost and receives a refund or incurs additional Tax Cost
after adjustments for Actual Tax Cost have been made, the Actual Tax Cost will
be corrected accordingly and the appropriate adjustment will be made between
Landlord and Tenant. The portion of the Actual Tax Cost and Actual Operating
Cost to be paid by Tenant for the years in which the Term begins and ends will
be prorated by multiplying the Actual Tax Cost and Actual Operating Cost amounts
by a fraction, the numerator of which is the number of days of that year in the
Term and the denominator of which is 365.
5. Cost Computations and Allocations.
----------------------------------
Notwithstanding any other provision of this Lease to the contrary, it is agreed
that Landlord will in its reasonable discretion, determine from time to time,
the method of computing and allocating Operating Cost and Tax Cost, the
allocation of Operating Cost and Tax Cost on the tenant's pro rata share of the
building with reasonable discretion used by the Landlord; that if the Building
is not fully occupied during any partial or full year, an adjustment will be
made in computing the Actual Operating Cost for such year so that it is computed
as though the Building had been fully occupied during that year; and that if the
Tax Cost payable in any year does not reflect a building that is fully completed
and fully occupied, an adjustment will be in computing the Tax Cost so that it
reflects what the Tax Cost would have been had the Building been fully complete
and fully occupied.
6. Fiscal Year.
-----------
The year used to determine Additional Costs may be changed to a different 12-
month period designated by Landlord. If the calendar year is changed to a
fiscal year, or if a fiscal year is changed to a different fiscal year,
prorations will be made for the estimated Additional Costs and the actual
Additional Costs so that the same time period is used to determine each and so
that Additional Costs are not included in more than one time period.
-4-
<PAGE>
7. Possession
----------
If Tenant begins to conduct business in all or any portion of the Premises
before the Commencement Date, Tenant will pay to Landlord Monthly Rent for the
period from the date Tenant begins to conduct business in the Premises to the
Commencement Date and all other provisions of this Lease will be applicable
during that period. Tenant will have the right to occupy the space or move
supplies and furniture into the space in the event the tenant improvements are
completed before July 1, 1992.
If Landlord is delayed in delivering possession of all or any portion of the
Premises to Tenant on the Commencement Date, Tenant will take possession of the
Premises on the date when Landlord delivers possession of all of the Premises,
which date will then become the Commencement Date.
This Lease will not be void or voidable and Landlord will not be liable to
Tenant for any loss or damage resulting from any delay in delivering possession
of the Premises to Tenant, but unless the delay is principally caused by or
attributable to Tenant, its employees, agents or contractors, no Monthly Rent
will be due for the period prior to the date Landlord delivers possession of the
Premises, unless Tenant elects to take possession of a portion of the Premises,
in which case Monthly Rent will be due for the portion of the Premises taken.
Tenant's written verification of the Premises will constitute Tenant's
acceptance of the Premises.
Tenant may vacate or abandon the Premises during the Term without Landlord's
prior written consent. If Tenant pays the Monthly Rent and other charges and
performs all of Tenant's obligations under this Lease, Landlord promises that
Tenant may peaceably and quietly possess and enjoy the Premises under this
Lease.
8. Use.
---
Tenant will use the Premises for general office work and as a teaching facility
and no other purpose. Tenant will not commit or permit any act or omission
which results in the violation of any law, governmental regulation, or insurance
policy of Landlord, relating to the Building, or which will increase Landlord's
insurance rates on the Building. Tenant will not permit any conduct or
condition which may unduly disturb or endanger other occupants of the Building.
9. Care of Premises.
----------------
Tenant will keep the Premises and the fixtures and equipment in the Premises in
as good condition and repair as they were in at the time possession of the
Premises is tendered to Tenant, except for ordinary wear and damage from fire or
other casualty beyond Tenant's control. Prior to making any such repairs,
Tenant will advise Landlord in writing of any repairs which are required.
Tenant will then notify Landlord when the repairs have been completed. If
Tenant fails to perform any maintenance or repairs required under this Section,
Landlord may enter the
-5-
<PAGE>
Premises to perform the maintenance and repairs and charge the costs to Tenant,
together with interest as provided in Section I.
10. Building Rules.
--------------
Regulations for the Premises and the Building in effect on the date of this
Lease are attached as Exhibit C. Landlord will have the right to adopt different
or additional reasonable rules and regulations, and to rescind or amend the
attached rules and regulations, by written notice to Tenant so long as the
changes do not interfere with the normal operation of tenant business. Tenant
will abide by the rules and regulations then in force and will cause Tenant's
employees to observe and comply with them.
11. Compliance with Laws.
--------------------
Tenant will, at its expense, promptly comply with all laws, ordinances, rules,
orders, regulations and other requirements of governmental authorities now or
subsequently pertaining to the Premises. Tenant will pay any taxes or other
charges by any governmental authority on Tenant's property or trade fixtures in
the Premises or relating to Tenant's use of the Premises. Landlord recognizes
that tenant's business is subject to the regulation of various governmental
authorities and accrediting agencies. If any of these regulating entities
imposes specific requirements on the tenant which pertain to the premises, it is
the obligation of the Landlord to either adopt the premises to comply with the
requirement or have the option to terminate the Lease with 90 days' notice.
12. Signs.
-----
Tenant will not place or permit any signs on the exterior or windows of the
Building, or within the Premises if visible from the exterior of the building or
from hallways or other common areas of the Building, except lettering and
numerals for identification purposes on or near doorways as approved in advance
by Landlord.
13. Alterations.
-----------
Tenant accepts the Premises on an "as is" basis in their present condition.
Landlord will have no obligation to do any redecorating or remodeling or to make
any repairs or alterations, except for the alterations, if any, shown on the
attached Exhibit D.
Tenant will not make any alterations, additions or improvements in or to the
Premises without first obtaining the written consent of Landlord. Tenant will
get Landlord's prior written approval of any contractor or subcontractor who is
to perform work on the Premises at Tenant's request. Landlord may require Tenant
to post a bond, cash or other security to protect the Premises from mechanic's
liens. All alterations by Tenant will be constructed with new materials, in a
good and workmanlike manner, and in compliance with the plans and specifications
approved by Landlord
-6-
<PAGE>
and all applicable permits, laws, ordinances, rules, orders, regulations, or
other requirements of governmental authorities. Tenant will pay for any labor,
services, materials, supplies or equipment furnished or alleged to have been
furnished to Tenant in or about the Premises, and will pay and discharge any
mechanic's, materialmen's or other lien against the Premises resulting from
Tenant's failure to make such payment, or will contest the lien and deposit with
Landlord cash equal to 150% of the amount of the lien If the lien is reduced to
final judgment, Tenant will discharge the judgment and Landlord will return the
cash deposited by Tenant. Landlord may post notices of nonresponsibility on the
Premises as provided by law.
All alterations, additions and improvements to the Premises made at Landlord's
or Tenant's expense, except movable office furniture and Tenant's movable trade
fixtures and equipment, will become the property of Landlord upon installation
and will be surrendered with the Premises upon termination of this Lease unless
Landlord elects otherwise in writing.
14. Utilities and Services.
----------------------
Landlord will supply reasonable janitor service, elevator service, heat and air
conditioning appropriate to the season during Normal Business Hours, and
electricity in reasonable amounts for ordinary office purposes. The cost of all
such services will be a part of the Operating Cost, except that Landlord will
have the right to review Tenant's use of electrical service and to charge Tenant
for use m excess of amounts for ordinary office purposes, or to install separate
meters for Tenant (at Tenant's expense), in which case Tenant will pay for its
own electrical service. Landlord will not be liable for any loss or damage
resulting from any temporary interruption of these services due to repairs,
alterations or improvements, or any variation, interruption or failure of these
services due to governmental controls, unavailability of energy, or any other
cause beyond Landlord's control. No such interruption or failure of these
services will be deemed as an eviction of Tenant or will relieve Tenant from any
of its obligations under this Lease. Tenant will promptly reimburse Landlord
for the cost of all electric lamps, starters and ballasts used on the Premises.
Except for payment of Monthly Rent, Tenant will not be required to pay for these
services for ordinary office purposes, but Tenant will pay to Landlord any
charges Landlord establishes for utilities or services provided outside Normal
Business Hours at Tenant's request, or provided because of uses other than
ordinary office uses.
15. Entry by Landlord.
-----------------
Landlord and its agents and contractors and mortgagees will have the right to
enter the Premises at reasonable times for inspecting, cleaning, repairing, or
exhibiting the Premises, but Landlord will have no obligation to make repairs,
alterations or improvements except as expressly provided in this Lease.
16. Relocation.
----------
-7-
<PAGE>
Landlord may relocate Tenant in substitute leased premises of equal square
footage and approximately equal configuration within the Building upon 60 days'
written notice to Tenant specifying the effective date of the relocation. If
this is done, Landlord will provide Tenant with paint, wall covering and
carpeting comparable to those in the original location, and will move Tenant's
office furnishings to the new location, all at Landlord's expense.
17. Subordination.
-------------
At the request of any mortgagee, this Lease will be subject and subordinate to
any mortgage or ground lease which may now or hereafter encumber the Building,
and Tenant will execute, acknowledge and deliver to Landlord any document
requested by Landlord to evidence the subordination.
18. Estoppel Certificates.
---------------------
Within 10 days after written request from Landlord, Tenant will execute,
acknowledge and deliver to Landlord a document furnished by Landlord, which
document may be relied upon by Landlord and any prospective purchaser or
mortgagee of the Building, stating (a) that this Lease is unmodified and is in
full force and effect (or if modified, that the Lease is in fun force and effect
as modified and stating the modifications), (b) the dates to which rent and
other charges have been paid, (c) the current Monthly Rent, (d) the dates on
which the Term begins and ends, (e) that Tenant has accepted the Premises and is
in possession, W that Landlord is not in default under this Lease, or, if
Landlord is in default, specifying any such default, and (g) including such
other information as the prospective purchaser or mortgagee may require.
19. Assumption of Risks.
-------------------
Tenant assumes all risk of loss or damage of Tenant's property within the
Premises, including any loss or damage caused by water leakage, fire, windstorm,
explosion, theft, act of any other tenant,, or other cause except as caused
through the negligence by the Landlord or its employees. Landlord will not be
liable to Tenant, or those claiming through Tenant, for injury, death or
property damage occurring in the Premises.
20. Indemnification.
---------------
Tenant will indemnify Landlord and its agents and employees against all claims,
demands and actions, and all related costs and expenses (including attorneys'
fees) for injury, death, disability or illness of any person, or damage to
property, occurring in the Premises or arising out of Tenant's use of the
Premises, except to the extent caused by the willful misconduct or negligence of
Landlord or someone acting on its behalf.
21. Insurance.
---------
-8-
<PAGE>
Tenant will keep public liability insurance in force at its expense by an
insurer and policy acceptable to Landlord in its reasonable opinion. The policy
will name Landlord and its mortgagee as additional insured, for limits of at
least $1,000,000 for bodily injuries or death of one or more persons and at
least $100,000 for property damage. Tenant will carry fire and "all risk"
coverage insurance for Tenant's property and improvements in the Premises.
Prior to Tenant's occupancy of the Premises, Tenant will deliver to Landlord the
liability and casualty policies or certificates by the insurer showing this
coverage to be in effect with premiums paid. The insurance will provide that
Landlord will be notified in writing 30 days prior to cancellation of, material
change in, or failure to renew, the insurance.
22. Waiver of Insurable Claims.
--------------------------
Landlord and Tenant release each other from any liability for loss or damage by
fire or other casualty coverable by a standard form of "all risk" insurance
policy, whether or not the loss or damage resulted from the negligence of the
other, its agents or employees. Each party will use reasonable efforts to
obtain policies of insurance which provide that this release will not adversely
affect the rights of the insured under the policies. The releases in this
Section will be effective whether or not the loss was actually covered by
insurance.
23. Assignment and Subletting
-------------------------
Tenant may not transfer, assign, or mortgage this Lease or any interest of
Tenant under this Lease or sublet the Premises or any part of the Premises,
without Landlord's prior written consent, such consent shall not be unreasonably
withheld, and this Lease will not be assignable by operation of law without
Landlord's written consent. If Landlord consents to one or more assignments or
sublettings, Tenant will still remain liable for all obligations of the Tenant
under this Lease. Landlord's consent to one assignment or subletting will not be
deemed consent to any subsequent assignment or subletting. Any assignment or
subletting by an assignee or subtenant will also require Landlord's prior
written consent, and no assignee or subtenant will use the Premises for any
purpose not permitted under this Lease or in any other way contrary to the
provisions of this Lease.
Landlord's interest in this Lease will be freely assignable and the obligations
of the Landlord arising or accruing under this Lease after an assignment will be
enforceable only against the assignee.
24. Damage or Destruction.
---------------------
If the Premises or Building is damaged by Casualty, the damage (excluding damage
to improvements paid for by Tenant or trade fixtures, equipment or personal
property of Tenant) will be repaired by Landlord at its expense to a condition
as near as reasonably possible to the condition prior to the Casualty, but if
more than 25% of the total rentable area of the Building is rendered
untenantable, Landlord may terminate this Lease as of the date of the Casualty
by giving
-9-
<PAGE>
written notice to Tenant within 30 days after the Casualty. If this Lease is not
terminated, Landlord will begin repairs within 90 days after the Casualty and
complete the repairs within a reasonable time, subject to acts of God., strikes
and other matters not within the control of Landlord. If Landlord fails to begin
and proceed with repairs as required, Tenant may give Landlord notice to do so.
If Landlord has not begun the repairs within 30 days after Tenant's notice,
Tenant may terminate this Lease by written notice to Landlord within 15 days
after expiration of the 30-day period. If this Lease is terminated because of
the Casualty, rents and other payments will be prorated as of the termination
and will be proportionately refunded to Tenant or paid to Landlord, as the case
may be. During any period in which the Premises or any portion of the Premises
is made untenantable as a result of the Casualty, the Monthly Rent will be
abated for the period of time untenantable in proportion to the square foot area
untenantable. In the event the Premises remain untenantable for a period of 30
days or longer, Tenant may terminate this Lease at any time thereafter upon
written notice to Landlord.
25. Eminent Domain.
--------------
If there is a Taking of 25% or more of the 8100 Building, either party may
terminate this Lease as of the date the public authority takes possession, by
written notice to the other party within 30 days after the Taking. If this
Lease is so terminated, any rents and other payments will be prorated as of the
termination and will be proportionately refunded to Tenant, or paid to Landlord,
as the case may be. All damages, awards and payments for the Taking will belong
to Landlord irrespective of the basis upon which they were made or awarded,
except that Tenant will be entitled to any amounts specifically awarded for
Tenant's trade fixtures or equipment or as a relocation payment or allowance.
If this Lease is not terminated as a result of the Taking, Landlord will restore
the remainder of the Premises to a condition as near as reasonably possible to
the condition prior to the Taking, the rent will be abated for the period of
time the space is untenantable in proportion to the square foot area
untenantable and this Lease will be amended appropriately to reflect the
deletion of the space taken.
26. Hazardous Substance.
-------------------
The term "Hazardous Substances", as used in this Lease, means pollutants,
contaminants,, toxic or hazardous wastes or any other substances, the removal of
which is required or the use of which is restricted, prohibited or penalized by
an "Environmental Law", which term means any federal, state or local law or
ordinance relating to pollution or the protection of the environment. Tenant
agrees that (a) no activity will be conducted on the Premises that will produce
any Hazardous Substance, except for activities which are part of the ordinary
course of Tenant's business (the "Permitted Activities"), provided the Permitted
Activities are conducted in accordance with all Environmental Laws and have been
approved in advance in writing by Landlord; (b) the Premises will not be used
for storage of any Hazardous Substances, except for temporary storage of
materials used in the Permitted Activities (the "Permitted Materials"), provided
the Permitted Materials are properly stored in a manner and location meeting all
Environmental Laws and approved in advance in writing by Landlord; (c) no
portion of the Premises or Land will be used
-10-
<PAGE>
by Tenant as a landfill or a dump; (d) Tenant will not install any underground
tanks of any type; (e) Tenant will not cause any surface or subsurface
conditions to exist or come into existence that constitute, or with the passage
of time may constitute, a public or private nuisance; (f) Tenant will not permit
any Hazardous Substances to be brought onto the Premises, except for Permitted
Materials, and if so brought or found, Tenant will immediately remove them, with
proper disposal, and will undertake all required cleanup procedures under the
Environmental Laws. If, at any time during or after the term of the Lease, the
Premises are found to be contaminated or subject to conditions prohibited in
this Lease, Tenant will indemnify and hold Landlord harmless from all claims,
demands, actions, liabilities, costs, expenses, damages and obligations of any
nature arising from or as a result of the use of the Premises by Tenant. The
foregoing indemnification will survive the termination or expiration of this
Lease.
27. Security Regulations.
--------------------
Landlord is required to establish and enforce certain security regulations in
the Building. Landlord will have the right to adopt reasonable security
regulations, and to modify its security regulations by notice to Tenant, during
the Term. Tenant agrees to comply with Landlord's security regulations in force
during the Term and will cause Tenant's employees and students to observe and
comply with them so long as the regulations do not reasonably interfere with the
normal operation of tenant's business.
28. Defaults.
--------
If (a) Tenant defaults in the payment of rent or other amounts under this Lease
and the default continues for 10 days after written notice by Landlord to
Tenant, (b) Tenant defaults in any other obligation under this Lease and the
default continues for 30 days after written notice by Landlord to Tenant, (c)
any proceeding is begun by or against Tenant to subject the assets of Tenant to
any bankruptcy or insolvency law or for an appointment of a receiver of Tenant
or for any of Tenant's assets, or (d) Tenant makes a general assignment of
Tenant's assets for the benefit of creditors, then Landlord may, with or without
terminating this Lease, cure the default and charge Tenant all costs and
expenses of doing so, and Landlord also may re-enter the Premises, remove all
persons and property, and regain possession of the Premises, without waiver or
loss of any of Landlord's rights under this Lease, including Landlord's right to
payment of Monthly Rent. Landlord also may terminate this Lease as to all
future rights of Tenant.
Tenant waives any right of restoration to possession of the Premises after re-
entry, notice of termination, or after judgment for possession. If this Lease
is terminated under this Section, Tenant will indemnify Landlord against all
loss of rents and against other damages which Landlord may incur as a result of
the termination for he remainder of the original Term, and against all related
attorneys' fees and other .expenses. If Tenant defaults in any of its
obligations under this Lease, it will promptly reimburse Landlord for all costs
(including attorneys' fees) incurred by Landlord in enforcing Tenants'
obligations, whether or not this Lease is terminated and whether or not suit is
brought. No right or remedy will preclude any other right or remedy,
-11-
<PAGE>
no right or remedy will be exclusive of or dependent upon any other right or
remedy, and any right or remedy may be exercised independently or in
combination.
If Tenant is in default and notice of termination of Tenant's right to
possession has been mailed to Tenant at the Premises and it appears in
Landlord's reasonable judgment that Tenant has abandoned or vacated the
Premises, Landlord may re-enter the Premises and retake possession without legal
action and without relieving Tenant of the obligation to pay Monthly Rent or any
other obligations under this Lease.
29. Waiver of Lease Provisions.
--------------------------
No waiver of any provision of this Lease will be deemed a waiver of any other
provision or a waiver of that same provision on a subsequent occasion. The
receipt of rent by Landlord with knowledge of a default under this Lease by
Tenant will not be deemed a waiver of the default. Landlord will not be deemed
to have waived any provision of this Lease unless it is done by expressed
written agreement by Landlord.
Any payment by Tenant and acceptance by Landlord of a lesser amount than the
full amount of all Monthly Rent and other charges then due will be applied to
the earliest amounts due. No endorsement or statement on any check or letter
for payment of rent or other amount will be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to its right to
recover the balance of any rent or other amount or to pursue any other remedy
provided in this Lease.
30. Return of Possession to Landlord.
--------------------------------
On expiration of the Term or sooner termination of this Lease, Tenant will
return possession of the Premises to Landlord, without notice from Landlord, in
good order and condition, except for ordinary wear and damage, destruction or
conditions Tenant is not required to remedy under this Lease. Landlord will
have the right to require Tenant to remove alterations or additions made by
Tenant and return the Premises to its condition at the commencement of the Term.
If Tenant does not return possession of the Premises to Landlord in the
condition required under this Lease, Tenant will pay Landlord all resulting
damages Landlord may suffer and will indemnify Landlord against all claims made
by any new tenant of all or any part of the Premises. Tenant will give Landlord
all keys for the Premises and will inform Landlord of combinations on any locks
and safes on the Premises. Any property left in the Premises after expiration
or termination of this Lease or after abandonment of the Premises will be deemed
abandoned by Tenant and will be the property of Landlord to dispose of as
Landlord chooses.
31. Holding Over.
------------
If Tenant remains in possession of the Premises after expiration of the Term
without a new lease, it may do so only with written consent by Landlord, and any
such holding over will be from
-12-
<PAGE>
month-to-month subject to all the same provisions of this Lease, except that the
Monthly Base Rent will be the Monthly Base Rent stated in Landlord's consent if
a new Monthly Base Rent is stated, or 125% the Monthly Rent under this Lease if
no new Monthly Rent is stated in Landlord's consent. Any holding over without
Landlord's consent will be at double the Monthly Rent under this Lease. The
month-to-month occupancy may be terminated by Landlord or Tenant on the last day
of any month by at least 30 days' prior written notice to the other.
32. Security Deposit.
----------------
Tenant deposits $2,790 with Landlord as a security deposit. Landlord may
commingle the security deposit with other funds. This security deposit will be
used to pay the first month's rent.
33. Cafeteria.
---------
Landlord warrants that a full-service cafeteria will continue operation till the
conclusion of this Lease.
34. Notices.
-------
Any notice under this Lease will be in writing, and will be sent by prepaid
certified mail, or by telegram confirmed by certified mail, addressed to Tenant
at the Premises and to Landlord at Post Office Box 0, 8100 - 34th Avenue South,
Bloomington, Minnesota 55425, Attn: Corporate Real Estate (HQ5036), or to such
other address as is designated in a notice given under this Section. A notice
will be deemed given on the date of first attempted delivery. Landlord's
statements of Additional Costs and other routine mailings to tenants need not be
sent by certified mail.
35. Governing Law.
-------------
This Lease will be construed under and governed by the laws of Minnesota. If
any provision of this Lease is illegal or unenforceable, it win be severable and
all other provisions will remain in force as though the severable provision had
never been included.
36. Entire Agreement.
----------------
This Lease contains the entire agreement between Landlord and Tenant regarding
the Premises. Tenant agrees that it has not relied on any statement,
representation or warranty of any person except as set out in this Lease. This
Lease may be modified only by an agreement in writing signed by Landlord and
Tenant. No surrender of the Premises, or of the remainder of the Term, will be
valid unless accepted by Landlord in writing.
37. Successors and Assigns.
----------------------
All provisions of this Lease will be binding on and for the benefit of the
successors
-13-
<PAGE>
and assigns of Landlord and Tenant, except that no person or entity holding
under or through Tenant in violation of any provision of this Lease will have
any right or interest in this Lease or the Premises.
38. Americans with Disabilities Act Compliance.
------------------------------------------
Notwithstanding anything contained herein to the contrary, Tenant, at its
expense, shall take all actions and make all improvements, modifications, and
alterations necessary to assure that the Premises comply with all applicable
provisions of the Americans with Disabilities Act (the "ADA"). All such
actions, improvements, modifications, and alterations shall be made in
compliance with the terms of Section 13 of this Lease.
Landlord and Tenant have executed this Lease to be effective as of the date
stated in the first paragraph of this Lease.
Landlord:
CONTROL DATA CORPORATION
By /S/
---------------------------------
Its _________________________________
Tenant:
By /s/ Harold J. O'Donell
---------------------------------
Its President
--------------------------------
-14-
<PAGE>
EXHIBIT A
PREMISES
(Attach drawing with Premises crosshatched)
<PAGE>
(Floor Plan)
<PAGE>
EXHIBIT B
LAND
Legal Description
(Site Plan)
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
1. Tenant will not use the Premises in any manner which conflicts with any
law, ordinance, or governmental rule or regulation now or subsequently in
force.
2. Tenant will not install any awnings or other attachments or structures on
the exterior of the Building.
3. No curtains, draperies or other window coverings will be installed in the
Premises.
4. No food will be prepared or cooked on the Premises, and no coffee pots will
be used or operated in the Premises. The Premises will not be used for
housing, lodging, sleeping or for any immoral or illegal purpose.
5. Tenant will not connect any apparatus, equipment or device to the water
lines in the Building without first obtaining the written consent of
Landlord.
6. No electrically powered machines or equipment will be used by Tenant in the
Premises except typewriters, adding machines, dictating equipment, personal
computers, micro computers and small electric units of a similar nature and
using comparable amounts of electricity.
7. Tenant will not operate or permit to be operated in the Premises any
musical or sound producing instrument or device which can be heard outside
the Premises.
8. Tenant will not bring into the Building any pollutants, contaminants or
hazardous substances (as now or later defined under state or federal law)
or any items likely to cause fire or explosion.
9. Tenant will not bring or permit to be brought into the Building any animals
or birds.
10. Tenant will not disturb, solicit or canvass any occupant of the Building
and will cooperate to prevent same.
11. Tenant will not use any power for the operation of any equipment or device
other than electricity provided by Landlord.
12. Tenant will refer to Landlord all contractors or installation technicians
rendering any service for Tenant for approval by Landlord before any
contractual services are performed. This will include but is not limited
to installation of telephone or telegraph equipment, electrical devices and
attachments, and any installations affecting floors, walls, woodwork, trim,
windows, ceilings, equipment or other portions of the Building.
<PAGE>
13. The work of the janitor or cleaning personnel after 5:00 p.m. will not be
hindered by Tenant, and the windows may be cleaned at any time. Tenant
will provide adequate waste and rubbish receptacles to facilitate cleaning
14. Movement in or out of the Building of furniture or office equipment, or the
sending or receipt by Tenant of merchandise or materials which requires use
of elevators or stairways or movement through Building entrances will be
restricted to hours designated by Landlord. All such movement will be as
directed by Landlord and will be done in a manner approved by Landlord in
advance. Tenant assumes all risk of damage to any items moved and for any
injury to any person or property, and Tenant will indemnify Landlord
against any resulting loss or damages.
15. Landlord will not be responsible for any property, equipment., money or
jewelry lost or stolen from the Premises or the public areas of the
Building, regardless of whether or not the loss occurs when the Premises
are locked.
16. Landlord may designate the maximum weight and proper position of any heavy
equipment, including safes and large files to be placed in the Building,
and only those which in the opinion of Landlord will not damage the floors,
structures or elevators may be moved into the Building.
17. Any damage in connection with the moving or installing of Tenant's'
furniture, equipment, appliances or other articles will be paid for by
Tenant.
18. Landlord may permit entrance to the Premises by use of pass keys controlled
by Landlord or its employees, contractors or service personnel, for the
purpose of preforming Landlord's janitorial services.
19. Landlord may at its option set aside a parking area to be used by Tenant
and its employees, which area will be used by Tenant and its employees to
the exclusion of other areas.
20. Tenant may have no vending machines in the Premises.
<PAGE>
EXHIBIT D
TENANT IMPROVEMENTS
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY
4/29/92
8200 BUILDING - SECOND FLOOR
NORTH WING CONSTRUCTION ESTIMATE
<TABLE>
<CAPTION>
<S> <C>
CONSTRUCTION:
New Kaiser Wall 300'................................ $16,500.00
Relocation of 15 Single Doors....................... 1,853.00
Sidelight........................................... 400.00
Replace 273' of Old Panels.......................... 3,822.00
Install Glass and Hardware in Double Doors.......... 1,000.00
ELECTRICAL:
Install 12 New Switches............................. $ 1,080.00
Install 14 New 110V Outlets......................... 1,260.00
CARPETING:
New Carpet for Entire Area.......................... $21,160.00
----------
47,075.00
15% Contingency......... 7,061.00
----------
$54,136.00
10% Profit.............. $ 5,414.00
Total Construction Estimate.......... $59,550.00
</TABLE>
NOTES:
Does not include pulling of any network type of cable or providing
terminations.
Window Treatments not included.
Assume standard office electrical power, any special requirements are not
addressed in this proposal
Standard HVAC is provided, any special cooling requirements are not
included in this proposal.
Cost to replace existing ceiling tile with all new ceiling tile add
$6,300.00 to total construction estimate.
<PAGE>
ADDENDUM TO LEASE
This agreement is attached to and made a part of the Lease Agreement dated May
3, 1992, between CONTROL DATA CORPORATION, a Delaware Corporation ("Landlord")
and a American Schools of Professional psychology, Inc., an Illinois Corporation
("Tenant") for the premises known as 8100 34th Avenue South, Suite 211,
Bloomington, MN.
The following paragraphs of the original lease agreement shall be amended as
follows:
14. Landlord shall only exercise its right to either charge tenant for
excessive electric utility usage or to install separate electric meters if
tenant electrical consumption is in excess of the average consumption measured
on a per square foot basis as compared with other occupants of the building.
16. Any relocation must be to a substitute leased premises which is acceptable
to Tenant.
20. If Landlord brings an improper action against Tenant and a court finds in
favor of the Tenant then Landlord shall reimburse Tenant for all reasonable
costs and expenses (including attorney's fees) arising from this court action
and Tenant shall have no obligation to reimburse Landlord for its costs and
expenses incurred in bringing the action.
21. Landlord shall be required to maintain public liability insurance in force
with limits of at least $1,000.000 for bodily injuries or death of one or more
persons and at least $100,000 for property damage.
27. Change the term "reasonably" to the term "unreasonably" in the last
sentence of this paragraph.
The following paragraphs of "EXHIBIT C - RULES AND REGULATIONS" shall be amended
as follows:
13. Change the time reference fro 5:00 pm to 9:30 pm.
19. Landlord may at its option set aside an adequate parking area to be used by
--------
Tenant and its employees and students, which area will be used by Tenant, its
------------
employees and students to the exclusion of other areas.
------------
20. However, tenant may operate coin operated copy machines in the premises for
the convenience of its students.
In addition to the above modifications Landlord will exercise diligent
management efforts throughout the term of this lease including prompt response
to the specific maintenance and repair needs of Tenant. Landlord will attempt
to repair or maintain the premises in a condition similar to the condition upon
initial occupancy at all times during this lease. If at any time during the
term of the lease Landlord fails to make routine or normal repairs to the
premises Tenant reserves the right to make the repairs at its own expense and to
offset the cost of such repairs against any future rental
<PAGE>
payment due to Landlord after first notifying Landlord of its intent to exercise
this privilege and giving Landlord 30 days to correct the problem.
Landlord further understands that Tenant operates in the State of Minnesota
under the assumed name of the Minnesota School of Professional Psychology and
should direct all correspondence, signage and advertising to the school under
its assumed name.
AGREED AND ACCEPTED THIS _____ DAY OF MAY, 1992 BY:
LANDLORD:
CONTROL DATA CORPORATION
BY /s/ Harold J. O'Donnell
----------------------------------
ITS President
----------------------------------
TENANT:
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
BY __________________________________
ITS __________________________________
<PAGE>
AMERICAN SCHOOLS OF PROF. PSYCHOLOGY 08/06/92
8100 BUILDING 2ND FLOOR
NORTH WING CONSTRUCTION ESTIMATE
<TABLE>
<CAPTION>
Construction:
- -------------
<S> <C>
New Kaiser Wall 322'........................ $17,710.00
Relocation of 18 Single Doors............... $ 2,223.00
2 - Sidelights.............................. $ 800.00
Replace 188' of Old Panels.................. $ 2,632.00
Install Glass and Hardware in Double Doors
Install Glass Wall & Permanent Walls........ $ 8,691.00
Graphics Specialties Signage................ $ 359.00
Furniture................................... $ 550.00
Add Sound Batten Insulation Between
Classrooms, Student Lounge, and
Paul Olson's Office......................... $ 1,825.00
Electrical:
- -----------
Install 12 New Switches..................... $ 1,080.00
Install 21 New 110V Outlets................. 1,890.00
Carpeting:
- ----------
New Carpet for Entire Area.................. $21,160.00
----------
$58,920.00
Administration.............................. $ 5,892.00
----------
$64,812.00
2% Profit.......... $ 1,296.00
TOTAL CONSTRUCTION ESTIMATE.. $66,108.00
</TABLE>
<PAGE>
Notes:
- ------
Does not include pulling of any network type of cable or providing
terminations.
Window Treatments not included.
Assume standard office electrical power, any special requirements are not
addressed in this proposal
Standard HVAC is provided, any special cooling requirements are not
included in this proposal.
Cost to replace existing ceiling tile with all new ceiling tile add
$6,300.00 to total construction estimate.
<PAGE>
EXHIBIT D
TENANT IMPROVEMENTS
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY
4/29/92
8200 BUILDING - SECOND FLOOR
NORTH WING CONSTRUCTION ESTIMATE
<TABLE>
<CAPTION>
<S> <C>
CONSTRUCTION:
New Kaiser Wall 300'................................. $16,500.00
Relocation of 15 Single Doors........................ 1,853.00
Sidelight............................................ 400.00
Replace 273' of Old Panels........................... 3,822.00
Install Glass and Hardware in Double Doors........... 1,000.00
ELECTRICAL:
Install 12 New Switches.............................. $ 1,080.00
Install 14 New 110V Outlets.......................... 1,260.00
CARPETING:
New Carpet for Entire Area........................... $21,160.00
----------
47,075.00
15% Contingency............. 7,061.00
----------
$54,136.00
10% Profit.................. $ 5,414.00
Total Construction Estimate................ $59,550.00
</TABLE>
NOTES:
Does not include pulling of any network type of cable or providing
terminations.
Window Treatments not included.
Assume standard office electrical power, any special requirements are not
addressed in this proposal
Standard HVAC is provided, any special cooling requirements are not
included in this proposal.
Cost to replace existing ceiling tile with all new ceiling tile add
$6,300.00 to total construction estimate.
<PAGE>
(Floor Plan)
<PAGE>
(Site Plan)
<PAGE>
(Site Plan)
<PAGE>
EXHIBIT 10.14
LEASE
- -----
Dated at Duluth, Minnesota August 1, 1997
LESSOR ONEIDA REALTY COMPANY
LESSEE AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC., AN ILLINOIS
COMPANY dba MINNESOTA SCHOOL OF PROFESSIONAL PSYCHOLOGY. INC.
SPACE Suite 510 Lonsdale Building
USE Office and Classroom Space
TERM OF LEASE September 1, 1997 through August 31, 1999
RENT: ONE THOUSAND TWO HUNDRED THREE AND NO/100THS ($1,203.00) Dollars per
month, payable in advance on the first day of each month plus charges for
electric current used, with a minimum of $1.00 per month, and for bulbs or lamps
replaced.
Lessor will furnish heat, air cooling, elevators and janitor service, but
will not be liable for damages occasioned by a failure to furnish the same for
any cause not within Lessor's reasonable control. No interruption of such
services shall be deemed an eviction, or a disturbance of Lessee's use and
possession of the premises, or any part thereof, or render Lessor liable to
Lessee for damages, or relieve Lessee from performance of Lessee's obligation
under this lease.
Lessee accepts the premises as they are, and will not assign or sublet this
lease or these premises or make any alterations in premises without the written
consent of Lessor, and Lessee will keep premises in good order and pay for any
breakage or damage for which Lessee is responsible. Lessee shall use premises
only for above purpose and shall not use them in such manner as to give either
governmental authorities, other tenants, or Lessor just cause to complain.
Lessee may surrender possession of premises and thus terminate this lease if
Lessee does so within a reasonable time after premises have been destroyed or
rendered unfit for occupancy, as now provided by statute.
Lessor shall have reasonable right of entry for the performance of any of its
obligations hereunder, but no obligation to repair shall be implied from such
right or such entry.
Lessor may immediately cancel this lease by written notice to Lessee without
liability for damages to Lessee if (a) premises are materially damaged by fire
or other casualty or are taken or required to be substantially altered by public
authority, in which latter case all damages shall belong to Lessor; (b) if
Lessee breaks any covenant of this lease or is adjudged bankrupt, insolvent, or
insane, and on the happening of any of said events, Lessor may also pursue any
remedy allowed by law. A re-leasing of the premises by Lessor upon such
cancellation will not cancel Lessee's liability hereunder unless otherwise
agreed.
Lessee shall be liable for any expense to which Lessor is put in enforcing
this lease, and in case of default of Lessee. Lessor shall have a
warehouseman's lien on the personal property of Lessee on the premises to
protect Lessor's claim.
It is further agreed that as operating costs increase for the building in
which the demised premises are located, Lessor shall have the right, on May 1st
of any year of this lease, and upon sixty (60) days written notice, to increase
Lessee's rent in the same percentage that Lessor's operating costs have
increased since the last general rate adjustment for the building, which
occurred at the time of or prior to the beginning date of this lease. Lessor
shall have the further right, and with sixty (60) days written notice, to
increase Lessee's rent on May 1st of any year of this lease, by a proportionate
share of any increase in ad valorem taxes that are payable for the building and
land in such year in excess of the taxes paid in the immediately preceding
calendar year. The proportionate share increase shall be an amount determined
by a fraction, the numerator of which shall be the square feet rental area
covered by this lease, and the denominator being the net useable area of the
building. The result shall be added to the rent otherwise payable hereunder,
and shall be paid in twelve (12) equal monthly amounts commencing at May 1st.
The failure of Lessee to give Lessor written notice sixty (60) days in
advance of the expiration of this lease of a desire to cancel or renew the same,
shall entitle Lessor to continue said lease in full force and effect for one (1)
year from and after the date of its expiration, on the same terms and
conditions, this renewal clause included.
Lessee assumes all liability for any loss or damage whatsoever to any person
or property, howsoever caused or by whomsoever caused, occurring on or in the
premises leased herein to Lessee and arising out of, by reason of or during
Lessee's use, possession or occupancy of said premises, and agrees to assume and
hold Lessor harmless and indemnified from all such injury, loss or damage,
except that Lessee does riot hereby assume any liability for loss or damage
caused by the negligence of Lessor, its agents or employees.
The word 'Lessee' shall be construed in conformity with the number and nature
of Lessees herein, and this lease shall bind and inure to the benefit of the
successors in interest of both parties, except as otherwise provided herein.
Lessee's classes are scheduled for Friday's, approximately 1:00 p.m. until
6:00 p.m. and Saturdays's approximately 9:00 a.m. until 5:00 p.m. Lessor agrees
to provide validated parking for students attending classes during those hours.
AMERICAN SCHOOLS OF PROFESSIONAL ONEIDA REALTY COMPANY, LESSOR
PSYCHOLOGY, INC, LESSEE
By: /s/ Charles T. Gradowski By:
--------------------------------- ______________________________
Steven G. LaFlamme, President
<PAGE>
EXHIBIT 10.15
LEASE AGREEMENT
LANDLORD:
ARLINGTON PARK REALTY CORPORATION
and
TENANT:
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
May 3, 1994
<PAGE>
DEED OF LEASE AGREEMENT
between
ARLINGTON PARK REALTY CORPORATION
and
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
<TABLE>
<CAPTION>
Table of Contents
-----------------
SECTION PAGE
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1. DEFINITIONS................................................. 1
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2. LEASE TERM.................................................. 5
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3. BASIC RENTAL................................................ 6
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4. BASIC RENTAL ESCALATION..................................... 7
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5. SECURITY DEPOSIT............................................ 7
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6. LANDLORD'S OBLIGATIONS...................................... 8
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7. IMPROVEMENT OF THE PREMISES................................. 9
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8. OPERATING EXPENSES.......................................... 11
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9. USE......................................................... 13
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10. TENANT'S REPAIRS AND ALTERATIONS............................ 17
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11. ASSIGNMENT AND SUBLETTING................................... 19
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12. INDEMNITY................................................... 22
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13. SUBORDINATION............................................... 23
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14. RULES AND REGULATIONS....................................... 24
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15. INSPECTION.................................................. 25
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16. CONDEMNATION................................................ 25
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17. FIRE OR OTHER CASUALTY...................................... 26
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18. HOLDING OVER................................................ 27
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19. TAXES....................................................... 28
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20. EVENTS OF DEFAULT........................................... 29
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21. REMEDIES.................................................... 30
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22. SURRENDER OF PREMISES....................................... 32
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23. ATTORNEYS' FEES............................................. 33
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24. LANDLORD'S LIEN............................................. 33
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25. MECHANICS' LIENS............................................ 34
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26. WAIVER OF SUBROGATION; INSURANCE............................ 34
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27. INTENTIONALLY DELETED....................................... 36
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28. BROKERAGE................................................... 36
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29. ESTOPPEL CERTIFICATES....................................... 36
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30. NOTICES..................................................... 36
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31. FORCE MAJEURE............................................... 38
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32. SEVERABILITY................................................ 38
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33. AMENDMENTS; WAIVER; BINDING EFFECT.......................... 38
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34. QUIET ENJOYMENT............................................. 38
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35. LIABILITY OF TENANT......................................... 38
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36. LANDLORD LIABILITY.......................................... 39
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37. CERTAIN RIGHTS RESERVED BY LANDLORD......................... 39
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38. FINANCIAL STATEMENTS........................................ 40
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39. REPRESENTATIONS............................................. 40
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40. ADDITIONAL RENT............................................. 41
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41. ENTIRE AGREEMENT............................................ 41
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42. WAIVER OF JURY TRIAL........................................ 41
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43. LAWS AND REGULATIONS........................................ 41
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44. SIGNAGE..................................................... 42
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45. RENEWAL OPTION.............................................. 42
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46. RIGHT OF FIRST OFFER........................................ 44
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47. EXHIBITS.................................................... 46
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</TABLE>
(i) Exhibit A - Outline of Premises
(ii) Exhibit A-1 - A-1 Premises
(iii) Exhibit A-2 - A-2 Premises
(iv) Exhibit A-3 - Expansion Area
(v) Exhibit B - Legal Description
(vi) Exhibit C - Rules and Regulations
(vii) Exhibit D - Specifications for Construction
(viii) Exhibit E - Tenant Space Plan
(ix) Exhibit F - Tenant Acceptance Letter for the A-1 Premises
(x) Exhibit G - Tenant Acceptance Letter for the A-2 Premises
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DEED OF LEASE AGREEMENT
between
ARLINGTON PARK REALTY CORPORATION
and
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
DATA SHEET
This Data Sheet is an integral part of this Lease and all of the terms hereof
are incorporated into this Lease in all respects. In addition to the other
provisions which are elsewhere in this Lease, the following, whenever used in
this Lease, shall have the meanings set forth in this Data Sheet.
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(a) Premises Suite No. 110 in the Building, generally outlined on the
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floor plan attached hereto as Exhibit A (Section 1(m)).
(b) Area of Premises Approximately 6,620 rentable square feet on the first
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(1st) floor of the Building (Exhibit A and Section 1(m)).
(c) Building An office building located at 1400 Wilson Boulevard,
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Arlington, Virginia 22209 (Section 1(e)).
(d) Annual Basic Rental $125,780.00 per year payable in equal monthly
-------------------
installments of $10,481.67,
subject to adjustment as herein
provided (Sections 1(b) and 3).
(e) Annual Basic Rental Two and 50/100 percent (2.51k) of the escalated Basic
-------------------
Escalation Rental then in effect (Section 4).
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(f) Additional Rent See Section 41.
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(g) Lease Term Approximately five (5) years, commencing on the
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Commencement Date and expiring on August 31, 1999
(Sections 1(k) and 2).
(h) Commencement Date See Section 1(f).
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(i) Building Operation Hours Monday through Friday, 7:00 a.m. to 6:00 p.m.
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(j) Permitted Use Any general business office, college of higher
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education, classroom and administrative office
purpose and for no other purposes
(Sections 1(1) and 9).
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(k) Tenant's Proportionate 6.27% (See Section 1(t)).
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Share of Building Space
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for Operating Costs
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(l) Tenant's Proportionate 6.27% (See Section 1(u)).
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Share of Building Space
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for Real Estate Taxes
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(m) Tenant's Proportionate One (1) per 500 rental square feet (Section 9(i)).
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Share of Parking Spaces
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(n) Brokers Involved Carey Winston Company and Julien J. Studley
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(o) Security Deposit See Sections 1(o) and 5.
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(p) Notices If to Landlord:
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NEW 1211 CONNECTICUT, INC.
c/o The Carey Winston Company
1350 Eye Street, N.W.
Suite 510
Washington, D.C. 20005
If to Tenant prior to Commencement Date:
Robert J. Lullo, Controller/CFO
AMERICAN SCHOOLS OF PROFESSIONAL
PSYCHOLOGY, INC.
220 S. State Street
Suite 609
Chicago, IL 60604
If to Tenant after Commencement Date:
AMERICAN SCHOOLS OF PROFESSIONAL
PSYCHOLOGY, INC.
1400 Wilson Boulevard
Suite 110
Arlington, VA 22209
</TABLE>
<PAGE>
DEED OF LEASE AGREEMENT
THIS DEED OF LEASE AGREEMENT is entered into as of the 3rd day of May,
1994, by and between ARLINGTON PARK REALTY CORPORATION, a Delaware corporation
(hereinafter called "Landlord"), and AMERICAN SCHOOLS OF PROFESSIONAL
PSYCHOLOGY, INC., an Illinois corporation (hereinafter called "Tenant").
1. DEFINITIONS.
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(a) "Basic Cost": The actual costs incurred by the Landlord in
operating and maintaining the Building and the Land during each calendar year of
the Lease Term for which Landlord has not been reimbursed by insurance proceeds,
condemnation awards or otherwise.
Such costs shall include, by way of example rather than of limitation,
(i) charges or fees for, and taxes on, the furnishing of electricity, water,
sewer service, gas, fuel, or other utility services to the Building and the
Land; (ii) costs of providing elevator, janitorial and trash removal service,
restripping, resurfacing, maintaining and repairing all walkways, roadways and
parking areas on the Land, security costs, and costs of maintaining grounds,
common areas and mechanical systems of the Building and the Land; (iii) all
other costs of maintaining and repairing any or all of the Building or Land;
(iv) charges or fees for any necessary governmental permits and licenses; (v)
management fees not to exceed the prevailing fees charged by unaffiliated third
party property management firms operating in Washington, D.C. for the management
of comparable office buildings, overhead and expenses reasonably related to
management of the Building (including salaries for personnel directly
responsible for management of the Building); (vi) premiums for hazard,
liability, workers, compensation or similar insurance upon any or all of the
Building and the Land; (vii) costs arising under service contracts with
independent contractors; and (viii) costs of any other items which, under
generally accepted accounting principles consistently applied from year to year
with respect to the Building or the Land, constitute operating or maintenance
costs attributable to any or all of the Building or the Land.
Such costs shall not include (i) the expense of principal and interest
payments made by the Landlord pursuant to the provisions of any mortgage or deed
of trust covering the Building or the Land; (ii) any deduction for depreciation
of the Building taken on the Landlord's income tax returns; or (iii) the cost of
capital improvements made to the Building, other than capital improvements,
modifications or equipment required by federal, state or local ordinance, rule,
regulation or law or determined by Landlord in good faith to result in savings
or reductions in Basic Cost generally, in which case the cost thereof shall be
included in Basic Cost for the calendar year in which the cost shall have been
incurred and in subsequent calendar years, on a straight line basis, such items
will be amortized over an appropriate period and with an appropriate interest
factor selected in good faith by Landlord. If Landlord shall have leased any
such items of capital equipment designed to result in savings or reductions in
Basic Cost, then the rental and other costs paid pursuant to such leasing shall
be included in Basic Cost for each calendar year in which they shall have been
incurred. In addition to the foregoing exclusions,
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Basic Cost shall not include any of the following and in the event of any
conflict between any of the other provisions of this Lease and this
subparagraph, the provisions of this subparagraph shall prevail unless otherwise
specified herein: (1) amounts paid to any officer of Landlord, for salary or
other compensation; (2) costs of correcting any violation of Title III of The
Americans with Disabilities Act of 1990, as amended, in the common areas of the
Building, which violation exists prior to the Commencement Date of this Lease;
(3) costs of repairs, restoration or other work (x) paid by insurance required
to be maintained by Landlord under this Lease or which would have been covered
by such insurance had Landlord not elected to self-insure, or (y) paid by the
proceeds of any condemnation award; (4) costs incurred (less costs of recovery)
for any item to the extent reimbursed by a manufacturer's, materialman's,
vendor's or contractor's warranty and paid by such manufacturer, materialman,
vendor or contractor (Landlord shall pursue a breach of warranty claim for items
covered by a warranty unless Landlord determines in its reasonable discretion
that such action would not be in the best interest of the tenants in the
Building); (5) ground rents; (6) payment of principal and interest or other
finance charges made on any debt payments made under any mortgage, except to the
extent that a portion of such payments is expressly for ad valorem/real estate
taxes or insurance premiums on the Building or is otherwise permitted above; (7)
any special levies or assessments applicable to any period prior to the
Commencement Date of this Lease; (8) costs and expenses incurred in completing,
fixturing, furnishing, renovating or otherwise improving, decorating or
redecorating space for tenants (including Tenant), prospective tenants or other
occupants and prospective occupants of the Building, or vacant, leasable space
in the Building; (9) leasing commissions incurred in connection with
negotiations for leases with tenants (including Tenant), other occupants, or
prospective tenants or other occupants of the Building; (10) original
construction costs of the Building and costs of repairing, replacing or
otherwise correcting latent defects of the Building; (11) Landlord's general
corporate overhead and general and administrative expenses; (12) costs which are
not evidenced by reasonably adequate records kept in the ordinary course of
business; (13) interest or penalties arising by reason of Landlord's failure to
timely pay any Basic Cost, unless incurred as a result of Tenant's act or
omission; and (14) all amounts which would otherwise be included in Basic Cost
which are paid to any affiliate or subsidiary of Landlord, or any
representative, employee or agent of an affiliate or subsidiary of Landlord, to
the extent the costs of such services exceed the competitive rates for similar
services of comparable quality rendered by persons or entities of similar skill,
competence and experience.
In determining Basic Cost, where less than 95% of the Building's
rentable square footage is occupied during all or any part of a year, those
items of the Basic Cost which vary according to occupancy, such as electricity
and janitorial services, shall be increased to that amount which would have been
incurred had the Building been 95% occupied during the entire year.
Notwithstanding anything to the contrary in the foregoing sentence, in the event
the lease between Landlord and GSA for approximately 85,000 rentable square feet
in the Building ("GSA Premises") terminates, then in such event, the electrical,
janitorial and cleaning costs for the common areas located on floors 2 through
8, inclusive, shall not be included in Basic Cost; provided, however, that at
any time after Landlord executes a lease with a tenant for any portion of the
GSA Premises ("Replacement Tenant"), then in such event, the electrical,
janitorial and
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cleaning costs for the common areas located on the floor(s) on which the
Replacement Tenant's premises are located shall once again be included in Basic
Cost.
(b) "Basic Rental": $125,780.00 per year payable in equal monthly
installments of $10,481.67, subject to adjustment as herein provided.
(c) "Base Year Stop": The Basic Cost incurred during the calendar year
1994 divided by the rentable square feet in the Building.
(d) "Base Real Estate Taxes": The Real Estate Taxes for the calendar
year 1994.
(e) "Building": The office building located at 1400 Wilson Boulevard,
Arlington, VA 22209.
(f) "Commencement Date": The Commencement Date shall be the earlier of
(i) June 1, 1994, or (ii) the date of Substantial Completion of that portion of
the Premises consisting of approximately 2,217 square feet generally outlined on
the floor plan attached hereto as Exhibit A-1 ("A-l Premises") or (iii) the date
the A-1 Premises would have been Substantially Completed but for Tenant Delays.
It is understood and agreed that after the Commencement Date, Landlord may
continue to construct that portion of the Premises consisting of approximately
4,403 square feet generally outlined on the floor plan attached hereto as
Exhibit A-2 ("A-2 Premises").
(g) "Event of Default': As defined in Section 20 of this Lease.
(h) "Excess": As defined in Section 8 of this Lease.
(i) "Land": The entire tract of land on which the Building is located
as further described in Exhibit B attached hereto for all purposes. The term
Land shall also include any property that must be maintained by Landlord due to
the existence of any public or private easement.
(j) "Landlord's Contractor": As defined in Section 7(c) of this Lease.
(k) "Lease Term": The period commencing on the Commencement Date and
expiring on August 31, 1999.
(l) "Permitted Use": Any general business office, college of higher
education, classroom and administrative office purpose and for no other purpose.
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(m) "Premises": Suite No. 110 in the Building, generally outlined on
the floor plan attached hereto as Exhibit A and consisting of approximately
6,620 rentable square feet as determined using the Washington, D.C. Board of
Realtor's Standard Methods of Measurement.
(n) "Rules and Regulations": The Landlord's rules and regulations sent
to Tenant in writing from time to time, as amended or substituted from time to
time, the current form of which is attached hereto as Exhibit C.
(o) "Security Deposit": $26,204.17 as reduced in accordance with
Section 5.
(p) "Special Tenant work": Intentionally Deleted.
(q) "Standard Tenant Work": Intentionally Deleted.
(r) "Substantial Completion": The date when the work to be performed
by Landlord in the Premises in accordance with this Lease shall have been
substantially completed notwithstanding that certain details of construction,
mechanical adjustment or decoration remain to be performed, the noncompletion of
which would not materially interfere with the Tenant's use of the Premises.
For purposes of determining the date of Substantial Completion, there
shall not be considered the duration of any delay which is caused by: (i)
changes in the work to be completed by Landlord in readying the Premises for
Tenant's occupancy, which changes have been requested by Tenant after the
approval by Landlord and Tenant of the Working Drawings; (ii) delays, not caused
by Landlord, in furnishing materials or procuring labor required by Tenant for
installations or work in the Premises which are not encompassed within the
Working Drawings; (iii) any failure by Tenant, to furnish any required plan,
information, approval or consent (including, without limitation, the Working
Drawings) within the required period of time, or any failure to fully and
completely cooperate with Landlord in the preparation of the working Drawings or
(iv) the performance of any work or activity in the Premises by Tenant or any of
its employees, agents or contractors.
(s) "Working Drawings": As defined in Section 7(a) of this Lease and
Exhibit D.
(t) "Tenant's Proportionate Share for Operating Costs": 6.27%. Such
percentage is equal to a fraction, the numerator of which equals the number of
rentable square feet within the Premises and the denominator of which equals the
total number of rentable square feet of office area in the Building.
(u) "Tenant's Proportionate Share For Real Estate Taxes": 6.27%.
Such percentage is equal to a fraction, the numerator of which equals the number
of rentable square
4
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feet within the Premises and the denominator of which equals the total number of
rentable square feet in the Building.
2. LEASE TERM.
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(a) Landlord, in consideration of the rent to be paid and the other
covenants and agreements to be performed by Tenant and upon the terms
hereinafter stated, does hereby lease, demise and let unto Tenant the Premises,
as defined herein and generally outlined on the floor plan attached hereto as
Exhibit A, commencing on the Commencement Date and ending, without the necessity
of notice from either party to the other, such notice being expressly waived, on
the last day of the Lease Term, unless sooner terminated as herein provided.
Notwithstanding the foregoing, Tenant shall occupy only the A-1 Premises on the
Lease Commencement Date. Landlord shall make available the A-2 Premises for
Tenant's occupancy on or before September 1, 1994; provided, however, that
Tenant may only occupy the A-2 Premises prior to September 1, 1994 with
Landlord's prior written consent and provided the A-2 Premises is Substantially
Completed.
(b) If Landlord shall be unable to tender possession of the Premises
on the Commencement Date, Landlord shall not be liable for any damage caused
thereby, nor shall this Lease be void or voidable by Tenant, but in such event,
unless the delay results (i) from failure of Tenant to approve plans or
otherwise perform in accordance with the requirements of the Lease or (ii) from
any delay in Landlord's ability to tender possession of the Premises caused by
Tenant, no rental shall be payable by Tenant prior to actual tender to Tenant of
possession of the Premises.
(c) By occupying the A-1 Premises, Tenant shall be deemed to have
accepted the same as suitable for the purpose herein intended and to have
acknowledged that the A-1 Premises comply fully with Landlord's obligations
pursuant to the Working Drawings, with the exception of any "punch list" type
items which may not have been completed. Tenant agrees that its failure to
deliver to Landlord such a written "punch list" within thirty (30) days
following occupancy shall be conclusive proof that no such items exist. Within
thirty (30) business days of delivery to Tenant by Landlord, whichever is
sooner, Tenant agrees to execute and return to Landlord a letter prepared by
Landlord confirming the Commencement Date, a copy of which is attached hereto as
Exhibit F, certifying that Tenant has accepted delivery of the A-1 Premises and
that the condition of the A-1 Premises complies with Landlord's obligations
pursuant to the Working Drawings, subject to any "punch list" items which may
not have been completed.
(d) By occupying the A-2 Premises, Tenant shall be deemed to have
accepted the same as suitable for the purpose herein intended and to have
acknowledged that the A-2 Premises comply fully with Landlord's obligations
pursuant to the working Drawings, with the exception of any "punch list" type
items which may not have been completed. Tenant agrees that its failure to
deliver to Landlord such a written "punch list" within thirty (30) days
following occupancy shall he conclusive proof that no such items exist. Within
thirty (30) business days of
5
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delivery to Tenant by Landlord, whichever is sooner, Tenant agrees to execute
and return to Landlord a letter prepared by Landlord confirming the Commencement
Date, a copy of which is attached hereto as Exhibit G, certifying that Tenant
has accepted delivery of the A-2 Premises and that the condition of the A-2
premises complies with Landlord's obligations pursuant to the Working Drawings,
subject to any "punch list" items which may not have been completed.
3. BASIC RENTAL.
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(a) Tenant promises and agrees to pay Landlord the Basic Rental
(subject to adjustment as hereinafter provided) without demand, notice,
deduction, counterclaim or set-off, for each month of the entire Lease Term.
The first full monthly installment shall be due and payable upon execution of
this Lease. The Basic Rental for each subsequent month shall be paid in advance
beginning on the first day of the calendar month following the expiration of the
first calendar month of the Lease Term and continuing thereafter on or before
the first day of each succeeding calendar month during the term hereof. If the
Lease Term begins on a date other than on the first day of a month, rent for the
first partial month of the Lease Term shall be prorated at the rate of one-
thirtieth (1/30th) of the monthly installment of rent for each day, payable in
advance on the Lease Commencement Date. Tenant will pay all rent to Landlord at
the office of Landlord or to such other party or to such other address as
Landlord may designate from time to time by written notice to Tenant.
Notwithstanding the foregoing, the Basic Rental for the first year of
the Lease shall be divided into two portions consisting of (1) Basic Rental for
the A-1 Premises totalling $42,123.00 annually, payable in equal monthly
installments of $3,510.25 each ("A-1 Basic Rental") and (2) Basic Rental for the
A-2 Premises totalling $83,657.00 annually, payable in equal monthly
installments of $6,971.42 each ("A-2 Basic Rental"), for a total Basic Rental of
$125,780.00 annually during the first year of the Lease prior to adjustment as
set forth in Section 4 hereof. During the first year of the Lease as set forth
in the preceding sentence, Tenant's payment of Basic Rental for the A-1 Premises
shall commence on the Commencement Date ("A-1 Rent Commencement Date"); and
Tenant's payment of Basic Rental for the A-2 Premises shall commence on the
earlier to occur of (1) September 1, 1991; or (2) Tenant's occupancy of the A-2
Premises ("A-2 Rent Commencement Date"). Notwithstanding the foregoing, Landlord
agrees to abate the A-1 Basic Rental for the first two full calendar months
following the A-1 Rent Commencement Date for a total abatement of A-1 Basic
Rental in the amount of $7,020.50; and Landlord agrees to abate the A-2 Basic
Rental for the first full two calendar months following the A-2 Rent
Commencement Date for a total abatement of A-2 Basic Rental in the amount of
$13,942.84. Effective on the first anniversary of the Commencement Date, or if
the Commencement Date is not on the first day of a month, then on the first day
of the first full calendar month after the Commencement Date, the Basic Rental
(including both the A-1 Basic Rental and the A-2 Basic Rental) shall be
increased pursuant to Section 4 hereof and payable as set forth in the first
paragraph of this Section 3(a).
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(b) All sums payable by Tenant under this Lease shall be payable
without demand, set-off or deduction and shall be paid to Landlord in legal
tender of the United States by wire transfer or by bank check (subject to
collection). Landlord's acceptance of rent after it shall have become due and
payable shall not excuse a delay upon any subsequent occasion or constitute a
waiver of any of Landlord's rights.
(c) In the event any installment of the Basic Rental, or any other
sums which become owing by Tenant to Landlord under the provisions hereof, are
not received within five (5) days of the due date thereof, without regard to any
grace periods specified in Section 20 hereof, Tenant shall pay, in addition to
such installment of the Basic Rental or such other sums owed, and not as a
penalty, additional rent in the form of a late payment charge equal to five
percent (5%) of such monthly installment of the Basic Rental or such other sums
owed for each month or part thereof such payment is overdue. In addition, such
payment and such late charge shall bear interest at the Default Rate as set
forth in Section 21(d) from the date such payment was due to the date of payment
hereof. Such late charge and interest shall constitute agreed liquidated
damages and not penalties, and shall be in addition to, and not in lieu of, all
other rights and remedies provided to Landlord in this Lease, at law, or in
equity.
(d) All costs and expenses which Tenant assumes or agrees to pay to
Landlord pursuant to this Lease, including, without limitation, operating
Expenses and Real Estate Taxes, shall be deemed to be additional rent and, in
the event of nonpayment thereof, Landlord shall have all the rights and remedies
provided for in case of nonpayment of rent, including assessment of interest and
late payment charges. Basic Rental and additional rent are sometimes referred
to collectively herein as "rent".
(e) Notwithstanding any expiration or termination of this Lease prior
to the end of the Lease Term, Tenant's obligations to pay any and all additional
rent pursuant to this Lease shall continue and shall cover all periods up to the
expiration or termination date of this Lease. Tenant's obligation to pay any
and all additional rent or other sums owing by Tenant to Landlord under this
Lease shall survive any expiration or termination of this Lease.
4. BASIC RENTAL ESCALATION.
-----------------------
The Basic Rental shall be increased annually, effective on each
anniversary of the Commencement Date, or if the Commencement Date is not on the
first day of a month, then on the first day of the first full calendar month
after the Commencement Date during the term hereof, by an amount equal to two
and 50/100 percent (2.5%) of the escalated Basic Rental then in effect.
5. SECURITY DEPOSIT.
----------------
The Security Deposit, which shall be paid upon execution of this
Lease, shall be held by Landlord without liability for interest and not in trust
or in a separate account, as security
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for the performance by Tenant of Tenant's covenants and obligations under this
Lease. The Security Deposit shall not be considered an advance payment of rental
or a measure of Landlord's damages in case of default by Tenant. Upon the
occurrence of any Event of Default by Tenant, Landlord may, from time to time in
its sole discretion, without prejudice to any other remedy, use and apply the
Security Deposit to the extent necessary to make good any arrearages of rent and
any other damage, injury, expense or liability suffered by Landlord by such
Event of Default. Following any such application of the Security Deposit, Tenant
shall pay to Landlord on demand as additional rent the amount so applied in
order to restore the Security Deposit to its original amount. If Tenant is not
then in default hereunder, any remaining balance of the Security Deposit shall
be returned by Landlord to Tenant within a reasonable period of time after the
termination of this Lease and (i) Tenant shall have surrendered the entire
Premises to Landlord, (ii) Landlord shall have inspected the Premises after such
vacation, and (iii) Tenant shall have complied with all of the terms, conditions
and covenants in the Lease. If Landlord transfers the Security Deposit to any
transferee of the Building or Landlord's interest therein, then said transferee
shall be liable to Tenant for the return of the Security Deposit, and Landlord
shall be released from all liability for the return of the Security Deposit. The
holder of any mortgage shall not be liable for the return of the Security
Deposit unless such holder actually receives the Security Deposit.
Notwithstanding the foregoing paragraph, provided an Event of Default does
not exist under the terms and conditions of this Lease and Landlord has not
previously used and applied all or any portion of the Security Deposit (unless
Tenant has restored such amount used and applied): (1) Landlord shall return to
Tenant $10,481.67 of the Security Deposit within thirty (30) days of the first
anniversary of the Commencement Date and (2) Landlord shall return to Tenant
$5,240.83 of the Security Deposit within thirty (30) days of the second
anniversary of the Commencement Date.
6. LANDLORD'S OBLIGATIONS.
----------------------
(a) Subject to the limitations hereinafter set forth, Landlord agrees,
while Tenant is occupying the Premises and is not in breach of or in default
under this Lease, to furnish to Tenant; (i) facilities to provide water at those
points of supply both within the Premises and those provided for general use of
tenants of the Building; (ii) facilities to provide a supply of electrical
current reasonably necessary for general business office use and occupancy of
the Premises and electric lighting and a supply of electrical current to the
common areas of the Building; (iii) heating and refrigerated air conditioning in
season; and (iv) elevator and janitorial service to the Premises, all such
services to be provided in scope, quality and frequency to those services being
customarily provided by landlords in comparable office buildings in the
surrounding area. Landlord shall provide Tenant supplementary HVAC equipment in
a configuration in accordance with Option A or option B as set forth in Exhibit
D. Tenant shall choose either Option A or option B. Option A can operate
independently from the Building HVAC system and therefore, Option A can be
operated without turning on the Building HVAC system. Option B requires that
the Building system be turned on. Heating, ventilation and air
8
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conditioning requirements and standards under this Lease shall be subject,
however, to such regulations as the Department of Energy or any other local,
state or federal governmental agency, Board or commission shall adopt from time
to time. In addition, Landlord agrees to maintain the public and common areas of
the Building, such as lobbies, stairs, corridors and restrooms, in reasonably
good order and condition; provided, however, that Tenant shall reimburse
Landlord, upon demand, for all repairs and additional maintenance resulting from
damages to such public or common areas caused by Tenant, or its employees,
agents or invitees. Landlord reserves the right, exercisable without notice and
without liability to Tenant for damage or injury to property, persons or
business and without effecting an eviction, constructive or actual, or
disturbance of Tenant's use or possession of the Premises, or giving rise to any
claim by Tenant for setoff or abatement of rent, to decorate and to make
repairs, alterations, additional modifications, changes or improvements, whether
structural or otherwise, in and about the Building, or any part thereof, and for
such purposes to enter upon the Premises and, during the continuance of any such
work, to temporarily close doors, entryways, public space and corridors in the
Building and to interrupt or temporarily suspend Building services and
facilities.
(b) If Landlord, to any extent, fails to make available any of the
services to be provided by Landlord expressly set forth above or if any
slowdown, stoppage or interruption of, or any change in the quantity, character
or availability of, the services to be provided by Landlord expressly set forth
above occurs, such failure or occurrence shall not render Landlord liable in any
respect for damages to either person, property or business, nor be construed as
an eviction of Tenant or work an abatement of rent, nor relieve Tenant from
fulfillment of any covenant or agreement hereof. Should any equipment or
machinery furnished by Landlord break down or for any cause beyond Landlord's
reasonable control cease to function properly, Landlord shall use reasonable
diligence to repair same promptly, but Tenant shall have no claim for abatement
of rent or damages on account of any interruptions in service occasioned thereby
or resulting therefrom.
7. IMPROVEMENT OF THE PREMISES.
---------------------------
(a) Landlord and Tenant agree to comply with the following schedule in
buildout of the Premises:
(i) A Space Plan has been prepared and approved by Landlord and
Tenant and is attached hereto as Exhibit E and incorporated herein for all
purposes. Any modifications to the Space Plan made after the date of this Lease
shall be made at Tenant's expense and, if delay in Substantial Completion of the
A-1 Premises or the A-2 Premises occurs as a result of such modifications,
Tenant shall commence paying A-1 Basic Rental on the date that the A-1 Premises
would have been Substantially Completed but for the days of delay caused by the
changes in the Space Plan and commence paying A-2 Basic Rental on the date that
the A-2 Premises would have been Substantially Completed but for the days of
delay caused by the changes in the Space Plan.
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(ii) Upon the execution of this Lease by Landlord and Tenant,
Landlord shall prepare and deliver to Tenant detailed floor plan layouts,
together with working drawings and written instructions sufficiently detailed to
enable Landlord to bid firm contracts (herein called "Working Drawings") with
respect to and reflecting the partitions and improvements in the Premises. The
Working Drawings shall include all of the work described in the Specifications
for Construction attached hereto as Exhibit D and incorporated herein for all
purposes and the Space Plan. Tenant shall fully and completely cooperate with
Landlord in the preparation of the Working Drawings, shall promptly respond to
Landlord's requests for information and approvals within three (3) business days
after inquiry, and shall use its best efforts to assist Landlord to complete the
Working Drawings as soon as possible. Tenant agrees to deliver to Landlord, not
later than three (3) business days after delivery of the Working Drawings to
Tenant, an original executed copy of the Working Drawings approved by Tenant;
provided, however, if Tenant, in good faith, reasonably objects to any aspect of
the Working Drawings submitted by Landlord, Tenant shall specify in detail any
objection to such Working Drawings as submitted to Tenant in a written notice to
Landlord within such 3-day period. Landlord shall, if applicable, modify such
Working Drawings to address Tenant's written objections, and submit new Working
Drawings to Tenant for approvals. Notwithstanding the foregoing, the Working
Drawings shall remain subject to Landlord's review and approval, which approval
shall not be unreasonably withheld, and shall be deemed modified to take account
of any changes reasonably required by Landlord. If Tenant fails to timely
deliver the Working Drawings as required herein, makes modifications to the
Working Drawings after the deadlines provided in this subsection or requests any
changes to the Specifications for Construction, Tenant shall (1) pay to Landlord
all reasonable expenses incurred by Landlord due to Tenant's modifications
and/or delay in delivering the working Drawings or the Specifications for
Construction; and (2) commence paying to Landlord the A-1 Basic Rental on the
date the A-1 Premises would have been substantially Completed but for the days
of delay caused by Tenant's failure to timely comply with the requirements in
this Section and commence paying to Landlord the A-2 Basic Rental on the date
the A-2 Premises would have been Substantially Completed but for the days of
delay caused by Tenant's failure to timely comply with the requirements of this
Section.
(iii) Time is of the essence as to all dates provided in this
subsection.
(b) Any changes ("Changes") to any approved Working Drawings or the
Specifications for Construction desired by Tenant shall be submitted in writing
and in detail to Landlord and shall be subject to Landlord's consent, which
consent shall not be unreasonably withheld. If Tenant requests any Changes to
the Working Drawings or the Specifications for Construction, Tenant shall be
responsible for all costs and expenses, including architectural, engineering and
related design costs, resulting from such Changes. Landlord shall not be
responsible for any delay in performing the construction of the tenant
improvements caused by any Changes to the Working Drawings or the Specifications
for Construction. If Tenant requests any Changes to the Working Drawings the
Specifications for Construction, Landlord shall notify Tenant in writing of the
cost which will be chargeable to Tenant by reason of such Changes and
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Tenant shall, within three (3) days, notify Landlord in writing whether it
desires to proceed with such Changes. If Tenant does not notify Landlord whether
it desires such Changes within the aforesaid three (3) day period, Landlord
shall not be obligated to continue work on Tenant's Premises and may suspend all
work until such notice is given by Tenant, and Tenant shall be responsible for
any and all delays in completing the tenant improvements resulting from Tenant's
failure to so notify Landlord. If Tenant authorizes any Changes pursuant to this
Section 7, Tenant shall pay the entire cost of same to Landlord prior to
Landlord's making such Changes.
(c) Landlord shall, in a good and workmanlike manner, cause the
Premises to be improved and completed in accordance with the Working Drawing by
a general contractor or construction manager ("Landlord's Contractor") selected
by Landlord (which may be an affiliate of Landlord or a partner in Landlord or
an affiliate of a partner in Landlord). Landlord reserves the right however,
(i) to make substitutions of material of equivalent grade and quality when and
if any specified material shall not be readily and reasonably available, and
(ii) to make changes necessitated by conditions met in the course of
construction, provided that Tenant's approval of any substantial change shall
first be obtained (which approval shall not be unreasonably withheld,
conditioned or delayed so long as there shall be general conformity with the
Working Drawings).
(d) Any costs or expenses to be paid by Tenant pursuant to this
Section 7 shall be deemed additional rent. Any failure by Tenant to pay such
costs and expenses shall constitute a failure to pay rent when due and an Event
of Default by Tenant hereunder, giving rise to all remedies available to
Landlord under this Lease and at law or equity for non-payment of rent.
(e) Upon Substantial Completion of the A-1 Premises, Tenant and
Landlord's representatives shall make a final inspection of the A-1 Premises to
ascertain that the construction of the Tenant Improvements has been accomplished
in accordance with the Working Drawings. A punch-list of items to be completed
or connected shall be prepared in accordance with Section 2(c).
(f) Upon Substantial Completion of the A-2 Premises, Tenant and
Landlord's representatives shall make a final inspection of the A-2 Premises to
ascertain that the construction of the Tenant Improvements has been accomplished
in accordance with the Working Drawings. A punch-list of items to be completed
or connected shall be prepared in accordance with Section 2(d).
8. OPERATING EXPENSES.
------------------
(a) During the term of this Lease, Tenant shall pay as additional rent
an amount (per each square foot within the Premises) equal to the excess
("Excess") from time to time of the per square foot Basic Cost (which shall be
calculated by dividing the Basic Cost by the total rentable square feet of
office area in the Building) over the Base Year Stop. Landlord, at its option,
may collect such additional rent for each calendar year in a lump sum, to be due
and
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payable within thirty (30) days after Landlord furnishes to Tenant a statement
of actual Basic Cost for the previous year, or, beginning with the first
anniversary of the Commencement Date, or if the Commencement Date is not on the
first day of a month, then on the first day of the first full calendar month
after the Commencement Date, and on each anniversary of such date thereafter,
Landlord shall also have the option to make a good faith estimate of the Excess
for each upcoming calendar year and may require the monthly payment of such
additional rent equal to one-twelfth (1/12) of such estimate, except that
commencing in calendar year 1996 and each calendar year thereafter, Tenant's
first payment shall include the one-twelfth (1/12th) monthly payments for the
months from January 1st through the month in which Landlord submitted the
estimate of the Excess for the then-current calendar year.
(b) By April 1st of each calendar year during Tenant's occupancy and
the calendar year following termination of this Lease, or as soon thereafter as
practical, Landlord shall furnish to Tenant a statement of Landlord's actual
Basic Cost for the previous year. If for any calendar year additional rent
collected for the prior year as a result of Landlord's estimate of Basic Cost is
(i) in excess of the additional rent actually due during such prior year, then
Landlord shall either credit such overpayment towards Tenant's next installment
of Basic Rental becoming due or refund to Tenant any overpayment, or (ii) less
than the additional rent actually due during such prior year, then Tenant shall
pay to Landlord, within fifteen (15) days of demand, any underpayment with
respect to the prior year. If the Lease Expiration Date is a day other than the
first day or last day of a calendar year, respectively, then Tenant's liability
for its proportionate share of the Basic Cost incurred during such calendar year
shall be apportioned by multiplying the amount of Tenant's liability therefor
for the full calendar year by a fraction, the numerator of which is the number
of days during such calendar year falling within the Lease Term, and the
denominator of which is 365. Once the Basic Cost for the last calendar year of
the Lease Term has been determined, Landlord shall provide Tenant with a
statement of the actual Basic Cost for which Tenant is liable. If Tenant owes
an additional amount, such amount is due on or before thirty (30) days after
receipt of the statement. If Tenant is entitled to a refund, Landlord shall
have thirty (30) days from the date of the statement within which to remit
payment to Tenant. Tenant's obligation for this increase shall survive any
termination of the Lease by lapse of time or otherwise.
(c) Each statement furnished by Landlord to Tenant shall be conclusive
and binding upon Tenant unless, within thirty (30) days after receipt of such
statement, Tenant delivers to Landlord a written notice specifying the
particular details for which such statement is claimed to be incorrect. Pending
the determination of such dispute, Tenant shall pay without delay the full
amount of the additional rent payable by Tenant in accordance with each such
statement that Tenant is disputing, less the amount that Tenant is disputing.
Without limiting the preceding sentence, Tenant, or its authorized agent, shall
have the right, during Landlord's normal business hours and after reasonable
notice, to inspect the books and records of Landlord applicable to the
determination of any statement of any additional rent payable by Tenant for the
purpose of verifying in good faith the information contained in such statement
for a period of up to one year after the receipt of such statement by Tenant.
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(d) Should Tenant require any additional work or service, including
but not limited to heating, ventilation and air conditioning ("HVAC") furnished
outside Landlord's normal operating hours of 7:00 a.m. to 6:00 p.m., Monday
through Friday, excluding holidays, Landlord may, upon reasonable advance notice
by Tenant, furnish such additional services at a charge not less than Landlord's
actual cost, plus overhead for the additional services provided, it being agreed
that the cost to the Landlord of such additional services shall not be
considered or treated as Basic Cost.
(e) Landlord may, at any time in its sole discretion, require separate
metering for gas, electric power or for any other utility service required by
Tenant if such service is deemed by Landlord to be in excess of Building
standard usage or for any other reason, in which case the cost of such metering
shall be at Tenant's sole cost and expense, due and payable upon demand by
Landlord, and in which event Tenant shall pay for all such utility service in
excess of its normal and customary usage, as metered. For any utility services
that are separately metered as prescribed herein, the amount of said services
which had been included in the calculation of the Base Year Stop or the
calculation of Basic Cost shall be excluded therefrom.
(f) Notwithstanding any expiration or termination of this Lease prior
to the end of the Lease Term, Tenant's obligations to pay any and all additional
rent pursuant to this Lease shall continue and shall cover all periods up to the
expiration or termination date of this Lease. Tenant's obligation to pay any
and all additional rent or other sums owing by Tenant to Landlord under this
Lease shall survive any expiration or termination of this Lease.
9. USE.
---
(a) Tenant shall use the Premises only for the Permitted Use. Tenant
will not occupy or use the Premises, or permit any portion of the Premises to be
occupied or used, for any business or purpose other than the Permitted Use or
for any use or purpose which is unlawful, in part or in whole, disreputable in
any manner, or extra hazardous, nor will Tenant permit anything to be done which
shall in any way cause substantial noise (except for routine graduate school
activities), vibrations or fumes, or increase the rate of insurance on the
Building or contents or cause any cancellation of any insurance policy covering
the Building or any portion of its contents. Tenant will comply, at Tenant's
cost and expense, with all present and future laws, ordinances, regulations and
orders of the United States of America, the Commonwealth of Virginia, and any
other public or quasi-public authority having jurisdiction over the Premises.
In the event that, by reason of acts or omissions of Tenant, there shall be any
increase in the rate of insurance on the Building or contents created by
Tenant's acts, omissions or conduct of business, Tenant hereby agrees to pay to
Landlord the amount of such increase on demand; provided, however, that Landlord
provides to Tenant a letter from Landlord's insurer stating that Tenant's acts
or omissions have caused the increase in Landlord's insurance premiums. Tenant
will conduct its business and control its agents, employees and invitees in such
a manner as not to create any nuisance, nor interfere with or disturb the
possession of other tenants or Landlord in
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the management of the Building. In addition to, and not in limitation of, the
foregoing, Tenant agrees that neither Tenant nor its employees, students,
clients, customers, agents, guests and/or business invitees shall loiter,
linger, congregate or wait in or around the restrooms, parking areas, sidewalks,
walks, lobby entries, lobbies, corridors, staircases, elevators, or any and all
other common areas of the Building. The parking areas, sidewalks, walks, lobby
entries, lobbies, corridors, staircases, elevators, and any and all other common
areas of the Building shall not be obstructed or used for any purpose other than
ingress and egress to and from the Premises or the Building. Tenant shall cause
its employees, students, clients, customers, agents, guests and/or business
invitees to comply with this Section 9(a).
(b) Notwithstanding the generality of subsection (a) above, Tenant
represents, warrants and covenants that (1) the Premises will not be used for
any dangerous, noxious or offensive trade or business and that it will not cause
or maintain a nuisance therein, (2) it shall at all times comply with all
Environmental Laws (as hereinafter defined) and shall cause the Premises to
comply, and (3) Tenant will keep the Premises, the Building or the Land free of
any lien imposed pursuant to any Environmental Laws. Tenant shall also cause
its subtenants and assignees (if subtenants and assignees are permitted by this
Lease or are hereafter approved by Landlord), licensees, invitees, agents,
contractors, subcontractors and employees to comply with all Environmental Laws.
Tenant and its permitted subtenants, licensees, invitees, agents, contractors,
subcontractors and employees shall obtain, maintain, and comply with all
necessary environmental permits, approvals, registrations and licenses.
In addition to and not in limitation of the foregoing, Tenant, its
permitted subtenants and assignees, licensees, invitees, agents, contractors,
subcontractors and employees shall not generate, refine, produce, transfer,
treat, store, use, process or transport Hazardous Materials on, above, beneath
or near the Premises, the Building or the Land. As used herein, the term
"Hazardous Materials" shall include, without limitation, all of the following:
(1) hazardous substances, as such term is defined in the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 (14), as amended by the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613 (Oct. 17, 1986) ("SARA"); (2)
regulated substances, within the meaning of Title I of the Resource Conservation
and Recovery Act, 42 U.S.C. Sections 6991-6991(i), as amended by SARA; (3)
hazardous materials as defined in Va. Code Ann. (S) 44-146-34 (1950), as
amended from time to time and regulations promulgated thereunder; (4) any
element, compound or material which can pose a threat to the public health or
the environment when released into the environment; (5) asbestos and any
asbestos containing material and any substance that is then defined or listed
in, or otherwise classified pursuant to, any Environmental Laws or any
applicable laws or regulations as a "hazardous substance", "hazardous material",
"hazardous waste", "infectious waste", "toxic substance", "toxic pollutant" or
any other formulation intended to define, list, or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, or Toxicity Characteristic
Leaching Procedure (TCLP) toxicity; (6) any petroleum and drilling fluids,
produced waters, and other wastes associated with the exploration, development
or production of crude oil, natural gas,
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or geothermal resources; (7) petroleum, petroleum byproducts, petroleum
products, polychlorinated biphenyls, urea formaldehyde, radon gas, radioactive
material (including any source, special nuclear, or by-product material), and
medical waste; (8) an object or material which is contaminated with any of the
foregoing; (9) any other substance designated by any of the Environmental Laws
or a federal, state or local agency as detrimental to public health, safety and
the environment.
(c) "Environmental Laws" collectively means and includes all present
and future laws and any amendments (whether common law, statute, rule, code,
regulation or otherwise), permits, and other requirements or guidelines of
governmental authorities applicable to the Premises and relating to the
environment and environmental conditions or to any Hazardous Material(s)
(including, without limitation, CERCLA, 42 U.S.C. (S)9601, et. seq.; the
Resource Conservation and Recovery Act of 1976, 42 U.S.C., (S)6901, et. seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. (S)1801, et. seq.; the
Federal Water Pollution Control Act, 33 U.S.C. (S)1251, et. seq.; the Clean Air
Act, 33 U.S.C. (S)7401, et. seq., the Clean Air Act, 42 U.S.C. (S)741, et. seq.;
the Toxic Substances Control Act, 15 U.S.C. (S)2601-2629; the Safe Drinking
Water Act, 42 U.S.C. (S)300f-300j; the Emergency Planning and Community Right-
To-Know Act, 42 U.S.C. (S)1101, et. seq., and any so-called "Super Fund" or
"Super Lien" law, any law requiring the filing of reports or notices relating to
Hazardous Materials, environmental laws administered by the Environmental
Protection Agency and any similar state and local laws and regulations, all
amendments thereto and all regulations, orders, decisions, and decrees now or
hereafter promulgated thereunder concerning the environment, industrial hygiene
or public health or safety.)
(d) Tenant shall protect, indemnify, defend (with counsel approved by
Landlord) and save Landlord and Landlord's affiliates, shareholders, directors,
officers, employees and agents harmless from and against any and all
liabilities, losses, damages (including consequential damages), claims,
judgments, penalties, fines, suits, administrative proceedings, costs or
expenses (including reasonable attorneys' fees) of any kind or nature, known or
unknown, contingent or otherwise, that Landlord may suffer or incur as a result
of any claims, demands, damages, losses, liabilities, costs, expenses, fines,
charges, suits, orders, judgments or adjudications asserted, assessed, filed, or
entered against Landlord or the Premises or any of the Building or the Land, by
any third party, including, without limitation, any governmental authority,
arising from Tenant's breach of the Environmental Laws or otherwise arising from
or related to the alleged generation, refining, production, storage, handling,
use, transfer, processing, transportation, release, spillage, pumping, pouring,
emission, emptying, dumping, discharge or escape of Hazardous Materials on, from
or affecting the Premises, the Building or the Land, including, without
limitation, liability for costs and expenses of abatement, correction, clean-up
or other remedies, fines, damages, responses (including death), property damage
and loss or restriction on use of rentable or usable space of the Building.
(e) Tenant, its permitted subtenants and assignees, licensees,
invitees, agents, contractors, subcontractors and employees shall not release,
spill, pump, pour, emit, empty, dump
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or otherwise discharge or allow to escape Hazardous Materials onto the Land,
Building or the Premises, and Tenant shall take all action necessary to remedy
the results of any such release, spillage, pumping, pouring, emission, emptying,
dumping, discharge, or escape. Tenant shall give to Landlord immediate verbal
and follow-up written notice of any actual or threatened spills, releases or
discharges of Hazardous Materials on the Premises, caused by the acts or
omissions of Tenant or its agents, employees, representatives, invitees,
licensees, subtenants, customers or contractors. Tenant covenants to promptly
investigate, clean up and otherwise remediate any spill, release or discharge of
Hazardous Materials caused by the acts or omissions of Tenant or its agents,
employees, representatives, invitees, licensees, subtenants, customers or
contractors at Tenant's sole cost and expense; such investigation, clean up and
remediation to be performed in accordance with all Environmental Laws and to the
satisfaction of Landlord and after Tenant has obtained Landlord's written
consent, which shall not be unreasonably withheld. Tenant shall return the
Premises to the condition existing prior to the introduction of any such
Hazardous Materials.
In the event of (1) a violation of any Environmental Laws, (2) a
release, spill or discharge of any Hazardous Materials on or from the Premises,
or (3) the discovery of an environmental condition requiring response which
violation, release, or condition is attributable to the acts or omissions of
Tenant, its agents, employees, representatives, invitees, licensees, subtenants,
customers, or contractors, or (4) an emergency environmental condition (together
"Environmental Defaults"), Landlord shall have the right, but not the
obligation, to immediately enter the Premises, to supervise and approve any
actions taken by Tenant to address the Environmental Default(s); and in the
event Tenant fails to immediately address such Environmental Default(s), or if
the Landlord deems it necessary, then Landlord may perform, at Tenant's expense,
any lawful actions necessary to address the Environmental Default(s).
Landlord has the right but not the obligation to cure any
Environmental Default(s), has the right to suspend some or all of the operations
of the Tenant until it has determined to its sole satisfaction that appropriate
measures have been taken, and has the right to terminate the Lease upon the
occurrence of any Environmental Default(s).
(f) Tenant shall within 48 hours deliver to the Landlord (1) copies of
any documents received from the United States Environmental Protection Agency
and/or any state, county or municipal environmental or health agency concerning
the Tenant's operations upon the Premises; (2) copies of any documents submitted
by the Tenant to the United States Environmental Protection Agency and/or any
state, county or municipal environmental or health agency concerning its
operations on the Premises, including but not limited to copies of permits,
licenses, annual filings, registration forms and; (3) upon the request of
Landlord, Tenant shall provide Landlord with evidence of compliance of
Environmental Laws.
(g) Landlord shall have the right, but not the obligation, at all
times during the term of this Lease to (1) inspect the Premises, (2) conduct
tests and investigations and take samples to determine whether Tenant is in
compliance with the provisions of this Section 9, and
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(3) request lists of all Hazardous Materials used, stored or located on the
Premises; the cost of all such inspections, tests and investigations to be borne
by Tenant.
Tenant will cooperate with Landlord and allow Landlord and Landlord's
representatives access to any and all parts of the Premises and to the records
of Tenant with respect to the Premises for environmental inspection purposes at
any time. In connection therewith, Tenant hereby agrees that Landlord or
Landlord's representatives may perform any testing upon or in the Premises that
Landlord deems reasonably necessary for the valuation of environmental risks,
costs, or procedures, including soils or other sampling or coring.
(h) The provisions of this Section 9 shall survive the expiration or
earlier termination of this Lease.
(i) Tenant, its permitted subtenants and assignees, licensees,
invitees, agents, contractors, subcontractors and employees shall have the right
to contract for that number of parking spaces set out on the attached Data Sheet
which has been reasonably determined by Landlord to be Tenant's proportionate
share of the total parking spaces available on the Building and Land ("Parking
Spaces") within one hundred eighty (180) days of the Commencement Date.
Notwithstanding anything contained herein, if any governmental regulation or
ordinance is enacted or amended after the effective date of this Lease so as to
allow or require a modification in Tenant's number of Parking Spaces, Landlord
reserves the right to make such modification without modifying in any way the
rent due hereunder or any other obligations of Tenant. Tenant's right to
contract for the Parking Spaces as set forth above shall expire if Tenant does
not exercise said right within one hundred eighty (180) days after the
Commencement Date. Notwithstanding the foregoing, if there are parking spaces
available up to the amount of the Parking Spaces after the one hundred eighty
(180) days period has expired ("Additional Spaces"), Tenant and its employees
shall have the right to contract for the Additional Spaces on an "as available"
basis throughout the remaining term of the Lease at the then competitive rates
charged for such parking spaces. Landlord shall have no obligation to maintain
or keep Additional Spaces available and Landlord shall have the right to lease
such Additional Spaces to other tenants or occupants of the Building. Tenant
shall comply with all reasonable rules and regulations which Landlord or the
parking garage manager may make from time to time with respect to the use of the
parking areas. Landlord's remedies under such rules and regulations may include,
but shall not be limited to, the right to tow away at the owner's expense .any
vehicles not parked in compliance with such rules and regulations. Landlord
shall not be responsible to Tenant for the noncompliance or breach of such rules
and regulations by the parking garage manager or by any other tenant, its
agents, employees and invitees or members of the public who may park in the
parking area.
10. TENANT'S REPAIRS AND ALTERATIONS.
--------------------------------
(a) Tenant shall not in any manner deface or injure or make unapproved
modifications of the Premises or the Building and will pay the cost of repairing
any damage or
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injury done to the Premises or the Building or any part thereof by Tenant or
Tenant's agents, employees or invitees. Tenant shall throughout the Lease Term
take good care of the Premises and keep them free from waste and nuisance of any
kind. Tenant agrees, at Tenant's sole cost and expense, to keep the Premises,
including, without limitation, all fixtures installed by Tenant and any plate
glass and special store fronts, in good condition, normal wear and tear
excepted, and make all necessary non-structural repairs and replacements except
those caused by fire, casualty or acts of God covered by Landlord's fire
insurance policy covering the Building. Such repairs and replacements shall be
in quality equal to the original work and installation. If Tenant fails to make
such repairs within fifteen (15) days after the occurrence of the damage or
injury, Landlord may, at its sole option, make such repair, and Tenant shall,
upon demand therefor, pay Landlord for Landlord's cost thereof plus fifteen
percent (15%) for overhead costs.
(b) The original improvements of the Premises shall be accomplished by
Landlord in accordance with the Working Drawings and Title III of the Americans
with Disabilities Act of 1990, as amended. Landlord is under no obligation to
make any structural or other alterations, decorations, additions, improvements
or other changes including computer or telephone cabling (collectively
"Alterations") in or to the Premises except as set forth in the Working Drawings
or otherwise expressly provided in this Lease. Any additional Alterations,
which are necessary in order for the Premises to comply with the requirements of
Title III of the Americans with Disabilities Act of 1990, as amended, or such
other laws or amendments thereto which may be hereinafter enacted during the
term of this Lease or any extensions or renewals hereof shall be the
responsibility of Tenant, and Tenant hereby agrees to indemnify Landlord for any
loss, claim or damages incurred by Landlord as a result of Tenant's failure to
make such additional Alterations.
(c) Notwithstanding anything in the Lease to the contrary, Tenant
shall not make or allow to be made any Alterations without the prior written
consent of Landlord, which shall not be unreasonably withheld. All maintenance,
repairs or Alterations shall be conducted only by contractors or subcontractors
approved in advance in writing by Landlord, it being understood that Tenant
shall procure and maintain, and shall cause such contractors and subcontractors
engaged by or on behalf of Tenant to procure and maintain, insurance coverage
against such risks, in such amounts and with such companies as Landlord may
require in connection with any such maintenance, repair or Alterations. Any
Alterations made by Tenant shall be made: (a) in a good, workmanlike, first-
class and prompt manner; (b) using new materials only; (c) by a contractor and
in accordance with plans and specifications approved in writing by Landlord; (d)
in accordance with all applicable legal requirements and requirements of any
insurance company insuring the Building or portion thereof, including, but not
limited to, compliance with Title III of the Americans with Disabilities Act of
1990, as amended; and (e) after Tenant has obtained and delivered to Landlord
written, unconditional waivers of mechanics' and materialmen's liens against the
Premises and the Building from all proposed contractors, subcontractors,
laborers and material suppliers for all work and materials in connection with
such Alterations. Landlord shall require a guarantee by each of Tenant's prime
contractors and materialmen for the benefit of Landlord, Tenant and such other
parties as Landlord shall
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designate that all work performed and materials and equipment furnished by such
contractors will conform to the requirements of the plans and specifications as
to the kind, quality, function of the equipment and characteristics of material
and workmanship and will remain so for a period of at least one year from the
date that the work has been completed, said guarantees to be effective whether
or not any part of the aforesaid work has been subcontracted by the contractor.
In the event any deficiencies, defects, faults or imperfections of materials,
equipment or workmanship shall appear prior to the expiration of such one year
period, the contractor, upon receiving written notice thereof from Landlord or
Tenant, will immediately correct and repair the same at the expense of such
contractor.
(d) At the expiration or other termination of this Lease, Tenant shall
surrender the Premises with all Alterations located therein in good repair and
condition, reasonable wear and tear excepted, and shall deliver to Landlord all
keys to the Premises. All Alterations (whether temporary or permanent in
character) made in or upon the Premises by Landlord or Tenant shall be
Landlord's property upon termination of this Lease and shall remain on the
Premises without compensation to Tenant; provided, however, that if Landlord
elects to have Tenant remove the Alterations as provided below, Tenant shall
remove the specified Alterations and shall restore the Premises to its original
condition by the date of termination of this Lease or upon earlier vacating of
the Premises. Upon receiving Tenant's written request to make any Alterations,
and if Landlord consents to the Alterations requested, Landlord shall specify
whether and to what extent Landlord will require Tenant to remove the
Alterations in question at or prior to the termination or earlier vacation of
the Premises. If Landlord fails to so specify, Tenant shall have no further
obligation to remove the Alterations which were the subject of Tenant's request.
If Tenant fails to restore the Premises upon Landlord's request, Landlord shall
have the right to perform such restoration and Tenant shall be liable for all
costs and expenses incurred by Landlord therefor.
11. ASSIGNMENT AND SUBLETTING.
-------------------------
(a) Neither Tenant nor Tenant's representatives, successors and
assigns nor any subtenant or assignee will assign, transfer, mortgage or
otherwise encumber this Lease or sublet or rent (or permit the occupancy or use
of) the Premises, or any part thereof, without obtaining the prior written
consent of Landlord, which consent will not be unreasonably withheld or delayed
as provided in subsection (b) below, nor shall any assignment or transfer of
this Lease or the right of occupancy hereunder be effectuated by operation of
law or otherwise without the prior written consent of Landlord. The transfers,
whether a single transfer or multiple transfers, of fifty percent (50%) or more
of the ownership interests of Tenant shall be deemed equivalent to an assignment
or subletting requiring consent of Landlord. Any reasonable expenses incurred
by Landlord with respect to the review and consent or denial of consent of the
foregoing, including reasonable attorneys' fees, shall be paid by Tenant to
Landlord as additional rent, and shall be due and payable with the next monthly
Installment of rent when billed.
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(b) Subject to the provisions of Section 11(c) hereof, Landlord shall
not unreasonably withhold or delay its consent hereunder to any sublease by
Tenant, provided that all of the following conditions are met:
(i) Tenant must first notify Landlord, in writing, of any
proposed sublease, at least thirty (30) days prior to the effective date of such
proposed sublease. The notice to Landlord must include a copy of the proposed
sublease and a copy of the proposed subtenant's financial statement for its most
recent fiscal year, prepared in accordance with generally accepted accounting
principles and certified by a public accountant or an executive officer of the
proposed subtenant.
(ii) The subtenant must have a credit rating satisfactory to
Landlord (in Landlord's reasonable judgment).
(iii) The sublease must be expressly subject and subordinate to
this Lease, must require that any subtenant must comply with and abide by all of
the terms of the Lease, and must provide that any termination of this Lease
shall extinguish the sublease as well.
(iv) The subtenant may not propose to change, without the
Landlord's prior written consent, the use of the Premises to a purpose other
than as stated in Section 9 hereof, nor conduct its business in a manner which,
in Landlord's reasonable judgment, is not appropriate for a first-class office
building in the metropolitan Washington, D.C. area.
(v) The Tenant may not be in default under this Lease, or have
committed two Events of Default hereunder during the precious twelve (12)
months, whether cured or not.
(vi) Any sublease, assignment or other transfer shall be
affected on a form approved by Landlord.
(vii) The sublease shall contain the following clause:
"Underlying Lease Agreement. This Sublease and Subtenant's
--------------------------
rights under this Sublease shall at all times be subject and subordinate to
the underlying Lease identified in Paragraph _ hereof and Subtenant shall
perform all obligations of Tenant under said Lease, with respect to the
Sublease Premises. Subtenant acknowledges that any termination of the
underlying Lease shall extinguish this Sublease. Landlord's consent to
this Sublease shall not make Landlord a party to this Sublease, shall not
create any privity of contract between Landlord and Subtenant or other
contractual liability or duty on the part of the Landlord to the Subtenant,
shall not constitute its consent or waiver of consent to any subsequent
sublease or sub-sublease, and shall not in any manner increase, decrease or
otherwise affect the rights and obligations of Landlord and Tenant under
the underlying Lease, in respect of the Sublease Premises. Subtenant shall
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have no right to assign this Sublease or further sublet the Premises
without the prior written consent of Landlord. Any term of this Sublease
that in any way conflicts with or alters the provisions of the underlying
Lease shall be of no effect as to Landlord and Landlord shall not assume
any obligations as landlord under the Sublease and Tenant shall not acquire
any rights under the Sublease directly assertable against Landlord under
the underlying Lease. Tenant hereby collaterally assigns to Landlord this
Sublease and any and all payments due to Tenant from Subtenant as
additional security for Tenant's performance of all of its covenants and
obligations under the underlying Lease, and authorizes Landlord to collect
the same directly from Subtenant and otherwise administer the provisions of
this Sublease, at the option of Landlord. Subtenant hereby consents to such
collateral assignment of this Sublease to Landlord and agrees to observe
its obligations created hereby."
(c) Landlord shall have the right, within thirty (30) days after
receipt of the notice from Tenant required under Section 11(b)(i) above, that
Tenant proposes to sublease all or a portion of the Premises, to elect (i) to
sublet the Premises from Tenant at the rent then being paid by Tenant for the
Premises under Section 3 hereof (or that portion thereof which Tenant proposes
to sublease) by a proportionate reduction in the rent as hereinafter set forth;
(ii) to terminate this Lease in its entirety if Tenant intends to sublet all or
substantially all of the Premises or, if Tenant proposes to sublet a portion of
the Premises, to terminate this Lease only with respect to such portion of the
Premises; or (iii) to require Tenant to pay Landlord, within ten (10) days of
receipt, fifty percent (50%) of the amount of rent payable by such sublease in
excess of the amount of rent payable by Tenant hereunder with respect to the
portion of the Premises sublet, offset by any direct reasonable expenses
incurred by Tenant in subleasing such portion of the Premises (amortized in
equal monthly payments over the initial term of such sublease). Upon exercise
by Landlord of either of the options set forth in (i) or (ii) above, Tenant
shall surrender the Premises or such portion of the Premises, as the case may
be, to Landlord, and thereafter the rent to be paid by Tenant pursuant to
Section 3 above shall be that portion of the total rent which the amount of
square foot area remaining in the possession of Tenant bears to the total square
foot area of the Premises. In the event that Landlord does not exercise its
right to sublet the Premises, or such portion of the Premises, as the case may
be, or to terminate this Lease, within said thirty (30) day period, Tenant shall
have the right, subject to the provisions of (iii) above, to sublet the Premises
or a portion thereof after first obtaining the written consent of Landlord as
provided in Section 11(a) above. Upon exercise by Landlord of the option set
forth in (iii) above, Tenant covenants and agrees to provide Landlord with semi-
annual statements, prepared and verified by a certified public accountant or
executive officer of Tenant, stating the amount of rent received by Tenant from
its subtenant(s) during such semi-annual period. If such statement shows Tenant
failed to make the full payment required by (iii) above, a late charge equal to
ten percent (10%) of the amount due shall be paid by Tenant to Landlord as
additional rent, and shall be due and payable with the monthly installment of
rent next becoming due. For purposes of calculating any amounts due from Tenant
pursuant to (iii) above, the "amount of rent payable by Tenant" exclusive of
such amounts due pursuant to (iii) shall be that portion of the total rent
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which the amount of square foot area sublet by Tenant bears to the total square
foot area of the Premises.
(d) The consent by Landlord to any assignment or subletting shall not
be construed as a waiver or release of Tenant from the terms of any covenant or
obligation under this Lease, nor shall the collection or acceptance of rent from
any such assignee, subtenant or occupant constitute a waiver or release of
Tenant of any covenant or obligation contained in this Lease, nor shall any such
assignment or subletting be construed to relieve Tenant from obtaining the
consent in writing of Landlord to any further assignment or subletting. Tenant
hereby assigns to Landlord the rent due from any subtenant of Tenant and hereby
authorizes each such subtenant to pay said rent directly to Landlord, at
Landlord's option, in the event of any default by Tenant under the terms of this
Lease. In the event of default by any assignee of Tenant or any successor of
Tenant in the performance of any of the terms hereof, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against
such assignee or successor. Landlord may consent to subsequent assignments or
sublettings of this Lease or amendments or modifications to this Lease with
assignees of Tenant, without notifying Tenant, or any successor of Tenant, and
without obtaining its or their consent thereto and such action shall not relieve
Tenant of liability under this Lease. All restrictions and obligations imposed
pursuant to this Lease on Tenant shall be deemed to extend to any subtenant,
assignee or occupant of Tenant, and Tenant shall cause such persons to comply
with all such restrictions and obligations.
(e) Notwithstanding the foregoing provisions of this Section 11, if
consent of any assignment is required by the holder of any mortgage on the
Building, no assignment shall be permitted without the prior written consent of
such holder.
12. INDEMNITY.
---------
Landlord shall not be liable for, and Tenant shall indemnify and save
harmless Landlord, ground lessor, if any, and Landlord's managing agent, and
Landlord's subsidiaries, directors, officers, agents and employees, if any, from
and against all fines, damages, suits, claims, demands, costs, expenses, losses
and actions (including court costs and reasonable attorneys' fees) for any
injury to person (including death) or damage to or loss of property on or about
the Premises, Building or Land caused by Tenant, its employees, contractors,
subtenants, agents, invitees or by any other person entering the Premises or the
Building or the Land under the express or implied invitation of Tenant, or
arising out of Tenant's use of the Premises, Building or Land or the acts or
omissions of Tenant, its employees, contractors, subtenants, agents or invitees.
Landlord shall not be liable or responsible for any loss or damage to any
property or death or injury to any person occasioned by theft, fire, act of God,
public enemy, criminal conduct of third parties, injunction, riot, strike,
insurrection, war, court order, requisition or other governmental body or
authority, by other tenants of the Building or any other matter beyond the
reasonable control of Landlord, or for any injury or damage or inconvenience
which may arise through repair or alteration of any part of the Building, or
failure to make repairs, or from any cause whatsoever except Landlord's gross
negligence or willful misconduct.
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13. SUBORDINATION.
-------------
(a) This Lease and all rights of Tenant hereunder shall be and are
subject and subordinate at all times to any deeds of trust, mortgages,
installment sale agreements and other instruments or encumbrances, as well as to
any ground leases or primary leases, that now or hereafter cover all or any part
of the Building, the Land or an interest of Landlord therein, and to any and all
advances made on the security thereof, and to any and all increases, renewals,
modifications, consolidations, replacements and extensions of any of such deeds
of trust, mortgages, installment sale agreements, instruments, encumbrances or
leases, as well as any substitutions therefor, all automatically and without the
necessity of any further action on the part of Tenant to effectuate such
subordination. Provided, however, that notwithstanding the foregoing, the party
secured by any such deed of trust shall have the right to recognize this Lease,
and in the event of any foreclosure sale under such deed of trust, this Lease
shall continue in full force and effect at the option of the party secured by
such deed of trust or the purchaser under any such foreclosure sale, in which
event Tenant shall attorn to such party secured by such deed of trust or
purchaser and shall recognize such party secured by such deed of trust or
purchaser as the Landlord under this Lease. Tenant shall upon demand at any
time execute, acknowledge and deliver to Landlord's mortgagee (including the
beneficiary under any deed of trust) or other holder any and all instruments and
certificates that in the judgment of Landlord's mortgagee may be necessary or
proper to confirm or evidence such attornment. Tenant hereby appoints Landlord
the Tenant's attorney-in-fact to execute any such certificate or certificates
for and on behalf of the Tenant. Upon such attornment such party secured by
such deed of trust or purchaser shall not be (i) bound by any payment of rent or
additional rent more than one (1) month in advance, (ii) bound by any amendment
of this Lease made without the consent of the holder of the deed of trust
existing as of the date of such amendment, (iii) liable for damages for any
breach, act or omission of any prior landlord, or (iv) subject to any offsets or
defenses which Tenant might have against any prior landlord; provided, however,
that after succeeding to Landlord's interest, such party secured by such deed of
trust or purchaser shall perform, in accordance with the terms of this Lease,
all obligations of Landlord arising after the date of acquisition of title to
the Building. within fifteen (15) days after the request of Landlord's
successor, Tenant shall execute, acknowledge, and deliver any requisite or
appropriate document submitted to Tenant confirming such attornment. Landlord
agrees to use its best efforts to obtain from any holder of any mortgage or deed
of trust securing the Land or the Building ("Mortgagee") a subordination, non-
disturbance and attornment agreement for the benefit of Tenant and which is
acceptable to Mortgagee. For purposes of this Section 13, Landlord shall be
deemed to have used its best efforts if (1) Landlord has diligently inquired in
writing to such Mortgagee requesting the Mortgagee to provide a subordination,
non-disturbance and attornment agreement for the benefit of Tenant and (2)
Landlord has sent Tenant a copy of such written request. Tenant agrees to pay
any fees, costs or expenses required to be paid by the Mortgagee for reviewing
such request, whether or not granted. Landlord shall have no liability if such
Mortgagee refuses to give Tenant a subordination, non-disturbance and attornment
agreement.
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(b) Tenant covenants and agrees that it will, at the written request
of the party secured by any such deed of trust, execute, acknowledge and deliver
any instrument that has for its purpose and effect the subordination of said
deed of trust to the lien of this Lease. At the option of any landlord under any
ground or underlying lease to which this lease is now or may hereafter become
subject or subordinate, Tenant agrees that neither the cancellation nor
termination of such ground or underlying lease shall, by operation of law or
otherwise, result in cancellation or termination of this Lease or the
obligations of Tenant hereunder and Tenant covenants and agrees to attorn to
such landlord or to any successor to Landlord's interest in such ground or
underlying lease, and in that event, this Lease shall continue as a direct lease
between Tenant herein and such landlord or its successor.
(i) After receiving notice from any person, firm or other
entity that it holds a mortgage or deed of trust on the Building or the Land, no
notice from Tenant to Landlord alleging any default by Landlord shall be
effective unless and until a copy of the same is given to such holder, provided
that Tenant shall have been furnished with the name and address of such holder.
Any such holder shall have thirty (30) days, or such additional time as may
reasonably be necessary, after receipt of notice from Tenant of a default by
Landlord under this Lease to cure such default before Tenant may exercise any
remedy hereunder. The curing of any of Landlord's default by such holder shall
be treated as performance by Landlord.
(ii) In the event that any lender providing construction or
permanent financing or any refinancing for the Building requires, as a condition
of such financing, that modifications to this Lease be obtained, and provided
that such modifications (a) are reasonable; (b) do not adversely affect in a
material manner Tenant's use of the Premises as herein permitted; and (c) do not
increase the rent or other sums to be paid by Tenant hereunder, Landlord may
submit to Tenant a written amendment to this Lease incorporating such required
changes, and Tenant hereby covenants and agrees to execute, acknowledge, and
deliver such amendment to Landlord within fifteen (15) days of Tenant's receipt
thereof.
14. RULES AND REGULATIONS.
---------------------
Tenant will comply and Tenant shall cause Tenant's agents,
contractors, employees and invitees to comply fully with all requirements of the
Rules and Regulations of the Building, as specified in the Rules and Regulations
attached hereto as Exhibit C. Landlord shall at all times have the right to
change such Rules and Regulations and to promulgate other Rules and Regulations
in such manner as Landlord may deem advisable, in its reasonable discretion, for
the operation, maintenance, safety, care or cleanliness of the Building or the
Premises, and for preservation of good order therein, all of which Rules and
Regulations, changes and amendments will be forwarded to Tenant in writing and
shall be carried out and observed by Tenant; provided, however, that no changes
and amendments to the Rules and Regulations shall prevent Tenant from using the
Premises as a college of higher education. Tenant shall be responsible for
compliance therewith by the agents, contractors, employees and invitees of
Tenant. Nothing contained in this Lease shall be construed to impose upon
Landlord any duty or obligation to
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enforce such rules and regulations, or the terms, conditions or covenants
contained in any other lease, as against any other tenant, and Landlord shall
not be liable to Tenant for violation of the same by any other tenant, its
employees, agents, or invitees. If there is any inconsistency between this Lease
and the rules and regulations as set forth in Exhibit C, this Lease shall
govern. Landlord shall enforce all Rules and Regulations in a non-discriminatory
manner.
15. INSPECTION.
----------
Landlord or its officers, agents and representatives, and any ground
lessor or mortgagee thereof, shall have the right to enter into and upon any and
all parts of the Premises at all reasonable hours upon reasonable advance
notice, which may be oral, (or, in any emergency or for the purpose of
performing routine maintenance, at any hour and without advance notice) to (a)
inspect the Premises at any time, (b) clean or make repairs or alterations or
additions as Landlord may deem necessary (but without any obligation to do so,
except as expressly provided for herein), or (c) show the Premises to
prospective tenants (in the last twelve (12) months of the term or at any time
if an Event of Default exists under the terms and provisions of this Lease),
purchasers or lenders; and Tenant shall not be entitled to any abatement or
reduction of rent by reason thereof, nor shall such be deemed to be an actual or
constructive eviction.
16. CONDEMNATION.
------------
(a) If the whole or, as determined by Landlord in its sole discretion,
any substantial part of the Land or the Building or if any portion of the
Premises should be taken for any public or quasi-public use under governmental
law, ordinance or regulation, or by right of eminent domain, or by private
purchase in lieu thereof and the taking would prevent or materially interfere
with the use of the Premises for the purpose for which they are being used, as
determined by Landlord, this Lease shall terminate, effective on the date of
possession thereof by the authority and the rent shall be apportioned as of such
date. If part of the Land or Building, which does not include the Premises,
shall be taken for any public or quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain, or by private purchase
in lieu thereof, and this Lease is not terminated as provided in the sentence
above, this Lease shall not terminate but the rent payable hereunder during the
unexpired portion of this Lease shall be reduced to such extent as Landlord
shall determine may be fair and reasonable under all of the circumstances;
provided, however, that if such taking prevents access to the Premises or the
use of the Premises as a college of higher education, then Tenant shall have the
right to terminate this Lease, effective on the date of possession by the
authority and the rent shall be apportioned as of such date.
(b) All awards, damages and other compensation paid by such authority
on account of such condemnation shall belong to Landlord, and Tenant assigns to
Landlord all rights to such awards, damages and compensation. Tenant shall not
make any claim against Landlord or the authority for any portion of such award,
damages or compensation attributable to damage to the Premises, value of the
unexpired portion of the Lease Term, loss of profits or goodwill,
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leasehold improvements or severance damages. Tenant may, if allowed by statute,
seek such awards or damages for moving expenses, loss of profits and fixtures
and other equipment installed by it which do not, under the terms of this Lease,
become the property of Landlord at the termination hereof. Such awards or
damages must be made by a condemnation court or other authority and must be
separate and distinct from any award to Landlord for the Land and Building and
shall not diminish any award of Landlord.
17. FIRE OR OTHER CASUALTY.
----------------------
(a) In the event of damage to or destruction of the Premises or the
Building, or the entrances and other common facilities necessary to provide
normal access to the Premises, caused by fire or other casualty, Tenant shall
provide immediate notice thereof to Landlord, and Landlord shall make repairs
and restorations as hereafter expressly provided, unless this Lease shall be
terminated by Landlord or unless any mortgagee which is entitled to receive
casualty insurance proceeds fails to make available to Landlord a sufficient
amount of such proceeds to cover the cost of such repairs and restoration.
(b) If (i) the damage is of such nature or extent, in the judgment of
Landlord's architect, that more than two hundred ten (210) consecutive days,
after the casualty date, would be required (with normal work crews and hours and
taking into account the time needed for effecting a satisfactory settlement with
any insurance company involved, removal of debris, preparation of plans and
issuance of all required governmental permits) to repair and restore the part of
the Premises or Building which has been damaged, or (ii) a substantial portion
of the Premises or the Building is so damaged that, in Landlord's sole judgment,
it is uneconomic to restore or repair the Premises or the Building, as the case
may be, Landlord shall so advise Tenant promptly; and Landlord or Tenant, for a
period of thirty (30) days thereafter, shall have the right to terminate this
Lease by written notice to the other, as of the date specified in such notice,
which termination date shall be no later than thirty (30) days after the date of
such notice. If this Lease is terminated, then all rent shall be apportioned
(based on the portion of the Premises which is useable after such damage or
destruction). If this Lease is not terminated pursuant to the terms of this
Section 17, and if (i) sufficient casualty insurance proceeds are available for
use for such restoration or repair, and (ii) this Lease is then in full force
and effect, Landlord shall proceed promptly and diligently to restore the
Premises to its substantially similar condition prior to the occurrence of the
damage, provided that Landlord shall not be obligated to repair or restore any
alterations, additions, improvements or fixtures which Tenant or any other
tenant may have installed. The validity and effect of this Lease shall not be
impaired in any way by, and Landlord shall have no liability as a result of, the
failure of Landlord to complete repairs and restoration of the Premises or of
the Building within two hundred ten (210) consecutive days after commencement of
work (taking into account the time needed for effecting a satisfactory
settlement with any insurance company involved, removal of debris, preparation
of plans and issuance of all required governmental permits), even if Landlord
had in good faith notified Tenant that it estimated that the repair and
restoration would be completed within such period, provided that Landlord
proceeds diligently with such repair and restoration.
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(c) In the case of damage to the Premises not caused by the negligence
or willful misconduct of the Tenant or any of its agents, employees or invitees,
and which is of a nature or extent that Tenant's continued occupancy is
substantially impaired, the rent otherwise payable by Tenant hereunder shall be
equitably abated or adjusted for the duration of such impairment as determined
by Landlord. In no event, however, shall any damages be payable by Landlord to
Tenant in respect of business interruption resulting from any fire or other
casualty on the Premises or Building or for any inconvenience or annoyance
occasioned by any such damage, repair or restoration. Tenant shall be
responsible to insure and/or repair all of Tenant's leasehold improvements and
all equipment, fixtures and personal property located in the Premises.
(d) Notwithstanding anything herein to the contrary, Landlord shall
not be obligated to restore the Premises or the Building and shall have the
right to terminate this Lease if (a) the holder of any mortgage fails or refuses
to make insurance proceeds available for such repair and restoration, (b) zoning
or other applicable laws or regulations do not permit such repair and
restoration, or (c) the cost of repairing and restoring the Building would
exceed fifty percent (50%) of the replacement value of the Building, whether or
not the Premises are damaged or destroyed, provided the leases of all other
tenants in the Building are similarly terminated.
18. HOLDING OVER.
------------
Tenant shall, at the termination of this Lease by lapse of time or
otherwise, yield up immediate possession to Landlord. If Tenant or any party
claiming under Tenant remains in possession of the Premises, or any portion
thereof at the termination of this Lease, no tenancy or interest in the Premises
shall result therefrom, unless Landlord elects as hereinafter provided, but such
holding over shall be an unlawful detainer and all such parties shall be subject
to immediate eviction and removal. If, without the written consent of Landlord,
Tenant or any party claiming under Tenant remains in possession of the Premises,
or any part thereof, after the termination of this Lease, Landlord may, in
addition to its other rights, including without limitation, rights of ejectment
and damages, elect, in its sole discretion, to treat such holding over by Tenant
as a creation of a month-to-month tenancy subject to all of the terms, covenants
and conditions in this Lease insofar as the same are applicable to a month-to-
month tenancy, except that Tenant shall pay a monthly Basic Rental in an amount
equal to one hundred fifty percent (150%) of the monthly Basic Rental in effect
during the last month of the term of this Lease. In the event Tenant holds over
pursuant to this Section 18, then Tenant shall give Landlord at least thirty
(30) days prior written notice of any intention to quit the Premises and Tenant
shall be entitled to thirty (30) days prior written notice to quit the Premises,
except in the event of nonpayment of rent in advance or the breach of any other
covenant by Tenant, in which event, Tenant shall not be entitled to any notice
to quit, the usual thirty (30) days notice to quit being hereby expressly
waived. If Landlord agrees in writing that Tenant may hold over after the
expiration or termination of this Lease, unless the parties hereto otherwise
agree in writing on the terms of such holding over, the holdover tenancy shall
be subject to termination by either Landlord or Tenant at any time upon not less
than thirty (30) days advance written notice (except in the event
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of nonpayment of rent in advance or the breach of any other covenant by Tenant,
in which event, Tenant shall not be entitled to any notice to quit, the usual
thirty (30) days notice to quit being hereby expressly waived), and all of the
other terms and provisions of this Lease shall be applicable during that period,
except Tenant shall pay Landlord in advance, as the monthly Basic Rental for the
period of any holdover, an amount equal to one hundred fifty percent (150%) of
the monthly Basic Rental in effect on the termination date, computed on a daily
basis for each day of the holdover period. No holding over by Tenant, whether
with or without consent of Landlord, shall operate to extend this Lease except
as otherwise expressly provided in this Lease.
19. TAXES.
-----
(a) During each calendar year or portion thereof included in the Lease
Term, and any renewal thereof, Tenant shall pay to Landlord as additional rent,
Tenant's Proportionate Share of any increase in Real Estate Taxes over the Base
Real Estate Taxes. Real Estate Taxes shall mean (i) all real estate taxes,
including general and special assessments, if any, which are imposed upon
Landlord or assessed against the Building and/or the Land during any calendar
year, and (ii) any other present or future taxes or governmental charges that
are imposed upon Landlord with respect to the Building and/or the Land or
assessed against the Building and/or the Land during any calendar year which are
in the nature of, in addition to or in substitution for real estate taxes,
including, without limitation, any license fees, tax measured by or imposed upon
rents, or other tax or charge upon Landlord's business of leasing the Building,
but shall not include any federal, state or local income tax. Real Estate Taxes
shall also include all expenses incurred by Landlord in obtaining or attempting
to obtain a reduction of Real Estate Taxes, including but not limited to, legal
fees.
(b) Commencing on the first anniversary of the Commencement Date, or
if the Commencement Date is not the first day of a month, then on the first day
of the first full calendar month after the Commencement Date, and each
anniversary of such date thereafter, Landlord may deliver to Tenant a statement
of Landlord's estimate of any increase in the annual Real Estate Taxes for the
then current calendar year over the Base Real Estate Taxes and Tenant's
percentage thereof. Within thirty (30) days after delivery of such statement,
(including any statement delivered after the expiration or termination of this
Lease), Tenant shall pay to Landlord, as additional rent, Tenant's aforesaid
percentage share of such estimated increase in the annual Real Estate Taxes,
except that commencing in calendar year 1996 and each calendar year thereafter,
Tenant's first payment shall include the one-twelfth (1/12th) monthly shares for
the months from January 1st through the month in which Landlord submitted the
estimate of the increase in the annual Real Estate Taxes for the then current
calendar year.
(c) Commencing January 1, 1996, Landlord shall deliver to Tenant a
statement showing the determination of the increase in the annual Real Estate
Taxes for the preceding calendar year and Tenant's total percentage thereof,
such statement to be delivered on or before April 1st of the then current
calendar year and on or before April 1st of each subsequent calendar year, or as
soon thereafter as possible. If such statement shows that Tenant's payments,
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<PAGE>
if any, of the estimated monthly increase in the annual Real Estate Taxes for
said preceding calendar year exceeded Tenant's actual increases for said year,
then Tenant may deduct such overpayment from its next payment or payments of
monthly rent. If such statement shows that Tenant's percentage share of
Landlord's actual increases in the annual Real Estate Taxes exceeded Tenant's
payments, if any, of the estimated monthly increase in the annual Real Estate
Taxes for said preceding calendar year, then Tenant shall pay the total amount
due to Landlord, which amount shall constitute additional rent hereunder due and
payable with the first monthly installment of rent due after delivery of said
statement.
(d) In the event that the Lease date or other termination is not
December 31st, the increase to be paid by Tenant for the calendar year in which
the Lease date or other termination occurs shall be determined by multiplying
the amount of Tenant's share thereof for the full calendar year by a fraction
with the number of days during such calendar year prior to the Lease date as the
numerator, and with 365 as the denominator. The expiration or other termination
of this Lease shall not affect the obligations of Landlord and Tenant pursuant
to this Section 19 to be performed after such expiration or other termination.
(e) Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the Premises, and
if any such taxes for which Tenant is liable are in any way levied or assessed
against Landlord, Tenant shall pay the Landlord upon demand that part of such
taxes for which Tenant is primarily liable hereunder.
20. EVENTS OF DEFAULT.
-----------------
The occurrence of any of the following events shall be deemed to be an
event of default ("Event of Default") by Tenant under this Lease:
(a) Tenant shall fail to pay when due any rental or other sums payable
by Tenant hereunder; provided that, on up to one (1) occasion in any twelve (12)
month period, there shall exist no Event of Default unless Landlord gives to
Tenant written notice of such failure and Tenant shall have failed to make such
payment within five (5) days following the giving of such notice.
(b) Tenant shall fail to comply with or observe Section 9 of this
Lease (or a comparable section of any other lease now or hereafter executed by
Tenant in connection with space in the Building).
(c) Tenant shall fail to comply with or observe any other provision of
this Lease (or any other lease now or hereafter executed by Tenant in connection
with space in the Building), and same is not cured within fifteen (15) days
after Landlord's written notice thereof to Tenant.
(d) Intentionally deleted.
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<PAGE>
(e) Tenant or any partner or guarantor of Tenant, as the case may be,
shall apply for or consent to the appointment of a receiver, trustee or
liquidator of itself or himself or any of its or his property, admit in writing
its or his inability to pay its or his debts as they mature, make a general
assignment for the benefit of creditors, be adjudicated a bankrupt, insolvent or
file a voluntary petition in bankruptcy or a petition or an answer seeking
reorganization or an arrangement with creditors or to take advantage of any
bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or
liquidation law or statute, or an answer admitting the material allegations of a
petition filed against it or him in any proceeding under any such law, or if
action shall be taken by Tenant or any partner or guarantor of Tenant for the
purposes of effecting any of the foregoing or the filing of an involuntary
petition against Tenant, or any partner or guarantor of Tenant is the subject
debtor under any bankruptcy law or insolvency law.
(f) Any court of competent jurisdiction shall enter an order, judgment
or decree approving a petition seeking reorganization of Tenant or all or a
substantial part of the assets of Tenant or any partner or guarantor of Tenant,
or appointing a receiver, sequestrator, trustee or liquidator of Tenant or any
partner or guarantor of Tenant or any of its or his property, and such order,
judgment or decree shall continue unstayed and in effect for any period greater
than thirty (30) days.
(g) Tenant's failure to take possession of the Premises after notice
to Tenant that the same are substantially completed.
21. REMEDIES.
--------
(a) If there shall be an Event of Default, including an Event of
Default prior to the Commencement Date, then Landlord shall have the right, at
its sole option, to terminate this Lease. In addition, with or without
terminating this Lease, Landlord may re-enter, terminate Tenant's right of
possession, and take possession of the Premises. The provisions of this Section
shall operate as a notice to quit, any other notice to quit or of Landlord's
intention to re-enter the Premises being hereby expressly waived. If necessary,
Landlord may proceed to recover possession of the Premises under and by virtue
of the laws of the Commonwealth of Virginia, or by such other proceedings,
including re-entry and possession, as may be applicable. If Landlord elects to
terminate this Lease and/or elects to terminate Tenant's right of possession,
then everything contained in this Lease to be done and performed by Landlord
shall cease, without prejudice, however, to Landlord's right to recover from
Tenant all rent and other sums due under the terms and conditions of this Lease.
Whether or not this Lease and/or Tenant's right of possession is terminated,
Landlord may, but shall not be obligated to, relet the Premises or any part
thereof, alone or together with other premises, for such rent and upon such
terms and conditions (which may include concessions, free rent, or alterations
of the Premises) as Landlord, in its sole discretion, may determine, but
Landlord shall not be liable for, nor shall Tenant's obligations be diminished
by reason of, Landlord's failure to relet the Premises or collect any rent
30
<PAGE>
due upon such reletting. Whether or not this Lease is terminated, Tenant
nevertheless shall remain liable for any rent, additional rent or damages which
may be due or sustained prior to such default, and all costs, fees and expenses
(including without limitation reasonable attorneys' fees, brokerage fees,
expenses incurred in placing the Premises in a first-class rentable condition
and tenant finish necessitated to obtain the new tenant) incurred by Landlord in
pursuit of its remedies and in renting the Premises to others from time to time.
Tenant shall also be liable for additional damages which, at Landlord's
election, shall be either:
(i) an amount equal to the rent and additional rent which would
have become due during the remainder of the Lease Term, less the amount of
rental, if any, which Landlord receives during such period from others to whom
the Premises may be rented (other than any additional rent payable as a result
of any failure of such other person to perform any of its obligations), which
damages shall be computed and payable in monthly installments, in advance, on
the first day of each calendar month following Tenant's default and continuing
until the date on which the Lease Term would have expired but for Tenant's
default. Separate suits may be brought to collect any such damages for any
month(s), and such suits shall not in any manner prejudice Landlord's right to
collect any such damages for any subsequent month(s), or Landlord may defer any
such suit until after the expiration of the Lease Term, in which event the cause
of action shall be deemed not to have accrued until the expiration of the Lease
Term; or
(ii) an amount equal to the present value (as of the date of
Tenant's default) of the rent and additional rent which would have become due
during the remainder of the Lease Term, less the rent received by Landlord under
any reletting of the Premises, which damages shall be payable to Landlord in one
lump sum on demand; provided that Landlord has relet the Premises which
reletting may occur at any time up to the date on which the Lease Term would
have expired but for Tenant's default. For purposes of this subparagraph (ii),
present value shall be computed by discounting at a rate equal to one (1) whole
percentage point above the discount rate then in effect at the Federal Reserve
Bank of New York. Tenant waives any right of redemption, re-entry or restoration
of the operation of this Lease under any present or future law, including any
such right which Tenant would otherwise have if Tenant shall be dispossessed for
any cause.
(b) Landlord's rights and remedies set forth in this Lease are
cumulative and in addition to Landlord's other rights and remedies at law or in
equity, including those available as a result of any anticipatory breach of this
Lease. Landlord's exercise of any such right or remedy shall not prevent the
concurrent or subsequent exercise of any other right or remedy. Landlord's
delay or failure to exercise or enforce any of Landlord's rights or remedies or
Tenant's obligations shall not constitute a waiver of any such rights, remedies
or obligations. Landlord shall not be deemed to have waived any default unless
such waiver expressly is set forth in an instrument signed by Landlord. If
Landlord waives in writing any default, then such waiver shall not be construed
as a waiver of any covenant or condition set forth in this Lease except as to
the specific circumstances described in such written waiver. Neither Tenant's
payment of a lesser amount than the sum due hereunder nor Tenant's endorsement
or statement on any check or letter
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<PAGE>
accompanying such payment shall be deemed an accord and satisfaction, and
Landlord may accept the same without prejudice to Landlord's right to recover
the balance of such sum or to pursue any other remedy available to Landlord.
Landlord's re-entry and acceptance of keys shall not be considered an acceptance
of a surrender of this Lease.
(c) If more than one natural person and/or entity shall execute this
Lease as Tenant, then the liability of each such person or entity shall be joint
and several. Similarly, if Tenant is a general partnership or other entity the
partners or members of which are subject to personal liability, then the
liability of each such partner or member shall be joint and several.
(d) If Tenant fails to perform any covenant or observe any condition
to be performed or observed by Tenant hereunder or acts in violation of any
covenant or condition hereof or fails to make any payment to any third party
related to the use or operation of the Building, Landlord may, but shall not be
required to on behalf of Tenant, perform such covenant and/or take such steps,
including entering upon the Premises, as may be necessary or appropriate, in
which case Landlord shall have the right to proceed immediately and all costs
and expenses incurred by Landlord in so doing, including reasonable legal fees,
shall be paid by Tenant to Landlord upon demand, plus interest thereon at the
rate per annum ("Default Rate") equal to the greater of (i) eighteen percent
(18%) per annum; provided such rate is not usurious or (ii) the highest non-
usurious rate permitted under the laws of the jurisdiction where the Building is
located, from the date of expenditure(s) by Landlord, as additional rent.
Landlord's proceeding under the rights reserved to Landlord under this Section
shall not in any way prejudice or waive any rights Landlord might otherwise have
against Tenant by reason of Tenant's default.
(e) Any concessions of the Landlord (which may include among other
items: (i) brokerage fees; (ii) moving allowances; (iii) Tenant improvements;
(iv) Lease assumptions; (v) unamortized portions of the buildout; and (vi) any
other cash allowances or payments, all of which are individually or collectively
referred to as "Landlord's Concessions") are subject to the condition that,
throughout the Lease Term, Tenant will perform and comply with all of the terms,
covenants and conditions of this Lease to be performed or complied with by
Tenant. If, after the occurrence of an Event of Default, Landlord terminates
this Lease or reenters and takes possession of the Premises without such a
termination, all Landlord's Concessions shall cease to apply and Tenant shall be
obligated, within ten (10) days after demand, to pay to Landlord the value of
all Landlord's Concessions. Landlord's right to recover the value of all
Landlord's Concessions shall be in addition to any other remedies available to
Landlord.
22. SURRENDER OF PREMISES.
---------------------
No act done and no failure to act by Landlord or its agents during the
Lease Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept a surrender of the Premises shall be valid unless the same
be made in writing and signed by Landlord. At the termination of this Lease by
lapse of time or otherwise, Tenant shall surrender possession of the Premises to
Landlord and deliver all keys to the Premises and all locks therein
32
<PAGE>
to Landlord and make known to Landlord the combination of all combination locks
in the Premises, and shall return the Premises and all equipment and fixtures of
Landlord therein to Landlord in broom clean condition and in as good condition
as when Tenant originally took possession, ordinary wear and tear excepted,
failing which Landlord may restore the Premises and such equipment and fixtures
to such condition and Tenant shall pay the cost thereof to Landlord on demand.
All obligations of Tenant under this Section shall survive the termination of
this Lease by lapse of time or otherwise.
23. ATTORNEYS' FEES.
---------------
If either party to this Lease brings an action to enforce the terms
hereof or declare rights hereunder, the prevailing party in any such action
shall be entitled to recover its reasonable attorneys' fees and costs from the
losing party. The losing party shall reimburse the prevailing party within ten
(10) days following written demand therefor.
24. LANDLORD'S LIEN.
---------------
In addition to any statutory Landlord's lien, Landlord shall have, at
all times, and Tenant hereby grants to Landlord, a valid security interest to
secure payment of all rentals and other sums of money becoming due hereunder
from Tenant, and to secure payment of any damages or loss which Landlord may
suffer by reason of the breach by Tenant of any covenant, agreement or condition
contained herein, upon all goods, wares, equipment, fixtures, furniture,
improvements and other personal property ("Personal Property") of Tenant
presently or which may hereafter be situated on the Premises, and all proceeds
therefrom; and such Personal Property shall not be removed therefrom without the
consent of Landlord until all arrearages in rent as well as any and all other
sums of money then due to Landlord hereunder shall first have been paid and
discharged and all the covenants, agreements and conditions hereof have been
fully complied with and performed by Tenant. Upon the occurrence of any Event
of Default, Landlord may, in addition to any other remedies provided herein,
enter upon the Premises and take possession of any and all Personal Property of
Tenant situated on the Premises, without liability for trespass or conversion,
and sell the same at public or private sale. Any surplus shall be paid to Tenant
or as otherwise required by law; and Tenant shall pay any deficiencies therein
to Landlord forthwith. Upon request by Landlord, Tenant agrees to execute and
deliver to Landlord a financing statement in form sufficient to perfect the
security interest of Landlord in the aforementioned property and proceeds
thereof under the provisions of the Uniform Commercial Code in force in the
jurisdiction in which the Building is located. Notwithstanding anything in this
Section 24 to the contrary, and subject to the conditions contained herein,
Landlord agrees at Tenant's written request to subordinate Landlord's lien in
Tenant's Personal Property (except for Landlord's Superior Lien Amount, as
hereinafter defined) to the lien of any bona fide financial lending institution
("Lender"), which Lender requires a security interest in Tenant's Personal
Property as a condition of making a loan to Tenant in connection with the
operation of Tenant's business. The term "Landlord's Superior Lien Amount" shall
mean the sum of (i) the amount equal to three (3) months, Basic Rental as
escalated pursuant to Section 4 of the
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<PAGE>
Lease, (ii) the amount equal to three (3) months of Tenant's Proportionate Share
of Real Estate Taxes and (iii) the amount equal to three (3) months of Tenant's
Proportionate Share of Basic Costs. The foregoing subordination shall be
conditioned upon Lender (x) giving Landlord prior written notice of Lender's
intent to remove Tenant's Personal Property and (xi) submitting to Landlord with
Lender's written notice the amount of Landlord's Superior Lien Amount. Provided
the Lender has give Landlord written notice and paid to Landlord Landlord's
Superior Lien Amount as aforesaid, Lender may enter the Premises and remove
Tenant's Personal Property, or any part thereof, at any time in the exercise of
Lender's rights to Tenant's Personal Property.
25. MECHANICS' LIENS.
----------------
Tenant shall not permit any mechanics' lien or other liens to be
placed upon the Premises, the Building or improvements thereon or the Land
during the Lease Term, caused by or resulting from any work performed, materials
furnished or obligation incurred by or at the request of Tenant. In the case of
the filing of any such lien or notice of intent with respect thereto Tenant will
promptly, and in any event within thirty (30) days after the filing thereof,
satisfy or release such lien by means of payment thereof, bonding Landlord
against any loss occasioned thereby (in which case Tenant shall have the right
in due diligence to contest and dispute such lien so long as such bond remains
in place), or take such other action as may be otherwise acceptable to Landlord.
Tenant hereby agrees to indemnify and save Landlord harmless from any legal
expenses which Landlord may reasonably incur as a result of the filing of the
lien or notice of intent and/or from any loss or liability incurred as a result
of any lien filed against the Premises, the Building or improvements thereon,
the Land and/or Tenant. If Tenant shall fail to discharge any such mechanics,
or materialmen's lien, Landlord may, at its option, discharge the same and treat
the cost thereof as additional rent payable with the monthly installment of
Basic Rental next becoming due; it being hereby expressly covenanted and agreed
that such discharge by Landlord shall not he deemed to waive or release the
default of Tenant in not discharging the same.
26. WAIVER OF SUBROGATION; INSURANCE.
--------------------------------
(a) Throughout the Lease Term, Tenant shall insure the contents of the
Premises, including, without limitation, Alterations, decorations, furnishings,
fixtures and equipment used or installed in the Premises by or on behalf of
Tenant, and the other personal property of Tenant in the Premises, against loss
due to fire and other property risks included in standard all risk coverage
insurance policies, in an amount equal to the replacement cost thereof and
covering loss of income from such property risk. All insurance carried by
Tenant hereunder shall be primary and not contributing with any insurance
carried by Landlord.
(b) Landlord and Tenant agree that the insurance policy to be carried
under Section 26(a) shall either permit or contain an express waiver of any
right of recovery (by subrogation or otherwise) by the insurance company against
Landlord, its managing agent and any mortgagee of Landlord. Landlord and Tenant
hereby release the other from any and all
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liability or responsibility to the other or anyone claiming through or under
them by way of subrogation or otherwise for any loss or damage to property, but
only to the extent that such loss or damage is covered by any insurance then in
force, or would have been covered under the insurance policies required
hereunder if such insurance policies had been maintained as required pursuant to
this Lease, even if such fire or other casualty shall have been caused by the
fault or negligence of the other party, or anyone for whom such party may be
responsible; provided, however, that such release shall be applicable and in
force and effect only with respect to any loss or damage occurring during such
time as the policy or policies of insurance covering said loss shall contain a
clause or endorsement to the effect that this release shall not adversely affect
or impair said insurance or prejudice the right of the insured to recover
thereunder.
(c) Tenant shall maintain throughout the Lease Term, at Tenant's sole
cost and expense, commercial general liability insurance on an occurrence basis
protecting against any liability occasioned by any occurrence on or about the
Premises, Building or Land and containing contractual liability coverages. Such
limits shall be in an amount as may be reasonably required by Landlord from time
to time, but in any event not less than Three Million Dollars ($3,000,000) per
occurrence for death or injury and Three Million Dollars ($3,000,000) per
occurrence for property damage or destruction. All insurance policies shall
name Landlord, Landlord's Building manager, (and, at Landlord's or such
mortgagee's or paramount lessor's or installment seller's request) any mortgagee
of all or any portion of the Building and any paramount lessor, or installment
seller as additional insured parties, and shall provide that the insurance
policies shall not be modified or cancelled without at least thirty (30) days,
prior written notice to Landlord and any other party designated as aforesaid.
All insurance policies shall be issued by insurers of recognized responsibility
licensed to do business in the jurisdiction in which the Building is located and
acceptable to Landlord. on or before the Commencement Date and not less than
thirty (30) days prior to the expiration dates of such policies, Tenant shall
provide copies of all such policies certified by the insurers to be true and
complete to Landlord and such mortgagees, paramount lessors and installment
sellers or certificates of insurance (Accord 27) evidencing the coverage
required under this Section 26.
(d) Tenant shall also maintain throughout the Lease Term, at Tenant's
sole cost and expense, workers' compensation in statutory limits and Employer's
Liability in an amount not less than $100,000 per occurrence.
(e) Landlord makes no representation that the limits of liability
specified to be carried by Tenant under the terms of this Lease are adequate to
protect Tenant against Tenant's undertaking under this Lease, and in the event
Tenant believes that any such insurance coverage called for under this Lease is
insufficient, Tenant shall provide, at its own expense, such additional
insurance as Tenant deems adequate.
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27. INTENTIONALLY DELETED.
28. BROKERAGE.
---------
Landlord recognizes the Broker(s) as the sole broker(s) procuring this
Lease and shall pay said Broker(s) a commission therefor pursuant to a separate
agreement between said Broker(s) and Landlord. Landlord and Tenant each
represent and warrant to one another that except as set forth herein neither of
them has employed any broker, agent or finder in carrying on the negotiations
relating to this Lease. Landlord shall indemnify and hold Tenant harmless, and
Tenant shall indemnify and hold Landlord harmless, from and against any claim or
claims for brokerage or other commissions arising from or out of any breach of
the foregoing representation and warranty by the respective indemnitors.
29. ESTOPPEL CERTIFICATES.
---------------------
Tenant shall from time to time, within ten (10) days after Landlord
shall have requested the same of Tenant, execute, acknowledge and deliver to
Landlord a written instrument in recordable form and otherwise in such form as
required by Landlord (i) certifying that this Lease is in full force and effect
and has not been modified, supplemented or amended in any way (or, if there have
been modifications, supplements or amendments thereto, that it is in full force
and effect as modified, supplemented or amended and stating such modifications,
supplements and amendments); (ii) stating the rent payable and dates to which
the rent and other charges hereunder have been paid by Tenant; (iii) stating
whether or not to the best knowledge of Tenant, Landlord is in default in the
performance of any covenant, agreement or condition contained in this Lease, and
if so, specifying each such default of which Tenant may have knowledge; (iv)
stating the commencement and expiration dates of this Lease, including any
optional renewals; and (v) stating any other fact or certifying any other
condition reasonably requested by Landlord or requested by any mortgagee or
prospective mortgagee or purchaser of the Building or Land or of any interest
therein. In the event that Tenant shall fail to return a fully executed copy of
such certificate to Landlord within the foregoing ten (10) day period, then
Tenant shall be deemed to have approved and confirmed all of the terms,
certifications and representations contained in such certificate, and Tenant
irrevocably authorizes and appoints Landlord as its attorney-in-fact to execute
such certificate on behalf of Tenant. Any such statement delivered pursuant
hereto may be relied upon by any owner of the Building or the Land, any
mortgagee or prospective mortgagee or purchaser of the Building, Land or any
interest therein or any prospective assignee of any mortgagee.
30. NOTICES.
-------
Each provision of this Lease or of any applicable governmental laws,
ordinances, regulations and other requirements with reference to the sending,
mailing or delivery of any notice or the making of any payment by Landlord to
Tenant or with reference to the sending,
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<PAGE>
mailing or delivery or the making of any payment by Tenant to Landlord shall be
deemed to he complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address for Landlord set
forth below or at such other address as Landlord may specify from time to time
by written notice delivered in accordance herewith. Tenant's obligation to pay
rent and any other amounts to Landlord under the terms of this Lease shall not
be deemed satisfied until such rent or other amounts have been actually received
by Landlord.
(b) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address set forth below, or at such other
address within the continental United States as Tenant may specify from time-to-
time by written notice delivered in accordance herewith.
(c) With the exception of subsection (a) above, any notice or document
required or permitted to be delivered hereunder shall be deemed to be delivered
(i) when delivered personally or (ii) whether actually received or not, when
deposited in the United States Mail, postage prepaid, registered or certified
mail, return receipt requested, addressed to the parties hereto at the
respective addresses set out below, or at such other address as they have
previously specified by written notice delivered in accordance herewith.
If to Landlord, at:
New 1211 Connecticut, Inc.
c/o The Carey Winston Company
1350 Eye Street, N.W.
Suite 510
Washington, D.C. 20005
If to Tenant, at:
American Schools of Professional Psychology, Inc.
1400 Wilson Boulevard
Suite 110
Arlington, VA 22209
If and when included within the term "Landlord", as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such notice specifying some
individual at the specific address for the receipt of notices and payments to
Landlord if and when included within the term "Tenant", as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such notice
specifying some individual at some specific
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<PAGE>
address within the continental United States for the receipt of notices and
payment to Tenant. All parties included within the terms "Landlord" and
"Tenant", respectively, shall be bound by notices given in accordance with the
provisions of this Section to the same effect as if each had received such
notice.
31. FORCE MAJEURE.
-------------
Whenever a period of time is herein prescribed for action to be taken
by Landlord or whenever Landlord is otherwise obligated to perform hereunder,
Landlord shall not be liable or responsible for, and there shall be excluded
from the computation for any such period of time, any delays or failures to
perform due to strikes, riots, acts of God, shortages of labor or materials,
war, governmental laws, regulations or restrictions or any other causes of any
kind whatsoever which are beyond the reasonable control of Landlord.
32. SEVERABILITY.
------------
If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the Lease Term, then
and in that event, the remainder of this Lease shall not be affected thereby.
Each covenant and agreement contained in the Lease shall be construed as a
separate and independent covenant or agreement.
33. AMENDMENTS; WAIVER; BINDING EFFECT.
----------------------------------
The provisions of this Lease may not be waived, altered, changed or
amended, except by instrument in writing signed by both parties hereto, and such
instrument may be subject to the approval of any mortgagees and ground lessors
of record. The terms and conditions contained in this Lease shall apply to,
inure to the benefit of, and be binding upon the parties hereto, and upon their
respective successors in interest and legal representatives, except as otherwise
herein expressly provided. Landlord may freely assign its interest hereunder.
34. QUIET ENJOYMENT.
---------------
Provided Tenant has performed all of the terms and conditions of this
Lease, including the payment of rent, to be performed by Tenant, Tenant shall
peaceably and quietly hold and enjoy the Premises for the Lease Term, without
hindrance from Landlord or others claiming through Landlord, subject to the
terms and conditions of this Lease and to all mortgages, ground leases and other
encumbrances to which this Lease is subject and subordinate.
35. LIABILITY OF TENANT.
-------------------
If there is a guarantor of Tenant's obligations hereunder, the
obligations hereunder imposed upon Tenant shall be the joint and several
obligations of Tenant and such guarantor, and Landlord need not first proceed
against Tenant before proceeding against such guarantor nor
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<PAGE>
shall any such guarantor be released from its guaranty for any reason
whatsoever, including without limitation any extensions or renewals hereof, any
amendments hereto, any waivers hereof or failure to give such guarantor any
notices hereunder.
36. LANDLORD LIABILITY.
------------------
(a) The liability of Landlord and all officers, employees,
shareholders, venturers or partners (general or limited) of Landlord to Tenant
for any default by Landlord under the terms of this Lease shall be non-recourse
and limited to the interest of Landlord in the Building, and Landlord or any
officer, employee, shareholder, venturer or partner (general or limited) of
Landlord shall have the right to sell or transfer all or any portion of the Land
or the Building to any third party, and upon any such sale or other transfer of
all of the Building or the Land, and the corresponding assignment of this Lease,
the previous Landlord shall have no further liability or obligation to Tenant
hereunder or otherwise.
(b) In the event that at any time during the Lease Term Tenant shall
have a claim against Landlord, Tenant shall not have the right to deduct the
amount allegedly owed to Tenant from any rent or other sums payable to Landlord
hereunder, it being understood that Tenant's sole method for recovering upon
such claim shall be to institute an independent action against Landlord. Tenant
shall not seek the consolidation of any such action brought by Tenant with any
action brought by Landlord hereunder.
37. CERTAIN RIGHTS RESERVED BY LANDLORD.
-----------------------------------
Landlord shall have the following rights, exercisable without notice,
except as provided herein, and without liability to Tenant for damage or injury
to property, persons or business and without effecting an eviction, constructive
or actual, or disturbance of Tenant's use or possession or giving rise to any
claim or setoff or abatement of rent or affecting any of Tenant's obligations
hereunder;
(a) To change the name by which the Building is designated upon four
(4) months written notice to Tenant.
(b) To decorate and to make repairs, alterations, additions, changes
or improvements, whether structural or otherwise, in and about the Building, or
any part thereof, and for such purposes to enter upon the Premises and, during
the continuance of any such work, to temporarily close doors, entry ways, public
space and corridors in the Building, to interrupt or temporarily suspend
Building services and facilities and to change the arrangement and location of
entrances or passageways, doors and doorways, corridors, elevators, stairs,
toilets, or other public parts of the Building, so long as the Premises are
reasonably accessible.
39
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(c) To grant to anyone the exclusive right to conduct any business or
render any service in or to the Building, provided such exclusive right shall
not operate to exclude Tenant from the use expressly permitted herein.
(d) To take all such reasonable measures as Landlord may deem
advisable for the security of the Building and its occupants, including without
limitation, the search of all persons entering or leaving the Building, the
evacuation of the Building for cause, suspected cause, or for drill purposes,
the temporary denial of access to the Building, and the closing of the Building
after normal business hours and on Saturdays, Sundays and holidays; subject,
however, to Tenant's right to admittance when the Building is closed after
normal business hours under such reasonable regulations as Landlord may
prescribe from time to time which may include, by way of example but not of
limitation, that person entering or leaving the Building, whether or not during
normal business hours, identify themselves to a security officer by registration
or otherwise and that such persons establish their right to enter or leave the
Building.
38. FINANCIAL STATEMENTS.
--------------------
Tenant agrees to provide to Landlord within fourteen (14) days of
request by Landlord (but no more than one (1) time in any twelve (12) month
period unless there shall exist an Event of Default under the terms and
provisions of this Lease), the most recent audited annual financial statements
of Tenant, including balance sheets, income statements, and financial notes
("Statements"). Tenant consents that Landlord may release the Statements to
Landlord's subsidiaries, affiliates, lenders, advisors, joint venture partners,
or potential purchasers of the property for the purposes of evaluating Tenant's
financial condition with respect to performance under the Lease or to any third
party pursuant to any order of any governmental agency or court. Landlord agrees
to keep the Statements confidential and not to release the Statements to third
parties except as set forth herein.
39. REPRESENTATIONS.
---------------
(a) Any approval by Landlord and Landlord's architects and/or
engineers of any of Tenant's drawings, plans and specifications which are
prepared in connection with any construction of improvements in the Premises
shall not in any way be construed or operate to bind Landlord or to constitute a
representation or warranty of Landlord as to the adequacy or sufficiency of such
drawings, plans and specifications, or the improvements to which they relate, or
any use, purpose, or condition, but such approval shall merely be the consent of
Landlord as may be required hereunder in connection with Tenant's construction
of improvements in the Premises in accordance with such drawings, plans and
specifications.
(b) Each and every covenant and agreement contained in this Lease is,
and shall be construed to be, a separate and independent covenant and agreement.
40
<PAGE>
(c) Neither Landlord nor Landlord's agents or brokers have made any
representations or promises with respect to the Premises, the Building or the
Land except as herein expressly set forth and no rights, easements or licenses
are acquired by Tenant by implication or otherwise except as expressly set forth
in the provisions of this Lease.
(d) The submission of this Lease to Tenant shall not be construed as
an offer, nor shall Tenant have any rights with respect thereto unless and until
Landlord shall, or shall cause its managing agent to, execute a copy of this
Lease and deliver the same to Tenant.
40. ADDITIONAL RENT.
---------------
The Tenant shall pay as additional rent any money required to be paid
pursuant to the provisions of this Lease whether or not the same be designated
"additional rent". If such amounts or charges are not paid at the time provided
in this Lease, they shall nevertheless, if not paid when due, be collectable as
additional rent with the next installment of rent thereafter falling due
hereunder, but nothing herein contained shall be deemed to suspend or delay the
payment of any amount of money or charge at the time the same becomes due and
payable hereunder, or limit any other remedy of the Landlord.
41. ENTIRE AGREEMENT.
----------------
The Lease contains all covenants and agreements between Landlord and
Tenant relating in any manner to the rent, use and occupancy of Premises and
Tenant's use of the Building and other matters set forth in this Lease. No
prior agreement or understanding pertaining to the same shall be valid or of any
force or effect and the covenants and agreements of this Lease shall not be
altered, modified or added to except in writing signed by Landlord and Tenant.
42. WAIVER OF JURY TRIAL.
--------------------
LANDLORD AND TENANT AND ALL GUARANTORS AND GENERAL PARTNERS HEREBY
WAIVE THE RIGHT TO A JURY TRIAL IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BETWEEN TENANT AND LANDLORD OR THEIR SUCCESSORS ARISING OUT OF THIS LEASE OR
TENANT'S OCCUPANCY OF THE PREMISES OR TENANT'S RIGHT TO OCCUPY THE SAME OR THE
RELATIONSHIP OF LANDLORD AND TENANT HEREUNDER, OR ANY CLAIM OF INJURY OR DAMAGES
AND/OR ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE.
43. LAWS AND REGULATIONS.
--------------------
41
<PAGE>
Tenant agrees at Tenant's expense to comply with all applicable laws,
ordinances, rules, and regulations, whether now in effect or hereafter enacted
or promulgated, of any governmental entity or agency having jurisdiction of the
Premises.
44. SIGNAGE.
-------
No sign, advertisement or notice shall be inscribed, painted, affixed
or otherwise displayed on any part of the outside or inside of the Building
except on the directories and doors of offices, and then only in such place,
number, size, color and style as approved by Landlord. If any such sign,
advertisement or notice is nevertheless exhibited by Tenant, Landlord shall have
the right to remove the same and Tenant shall be liable for any and all expenses
incurred by Landlord in such removal. On the Commencement Date, Landlord shall,
at Landlord's sole cost and expense, provide Tenant with building standard
signage on Tenant's suite entrance door and four (4) directory strips on the
Building's directory. In the event Tenant requests any changes or modifications
to such suite entrance door or such directory, all such changes or modifications
shall be at Tenant's sole cost and expense. In addition, on the Commencement
Date, Landlord shall, at Landlord's cost and expense, provide and install
Tenant's signage on the northeast corner of the first floor outside facade of
the Building; provided, however, that (a) the installation of such sign shall be
subject to Landlord's ability to obtain, using its reasonable efforts, all
necessary government, community and other permits and approvals (Landlord agrees
to use its reasonable efforts to obtain such permits and governmental approvals
at Landlord's cost and expense up to Four Thousand and 00/100 Dollars
($4,000.00); and Tenant shall be responsible for and shall pay all costs and
expenses for obtaining the permits and governmental approvals for such sign in
excess of Four Thousand and 00/100 Dollars ($4,000.00) as additional rent due
hereunder within thirty (30) days of Landlord's invoice for same); (b) the size,
materials, color, design, location and other aspects of such sign shall be
acceptable to Landlord in its sole discretion and in accordance with Exhibit D,
letter O; (c) all costs related to such sign other than its provision and
installation, including maintenance and utilities, shall be borne by Tenant; and
(d) Landlord shall have the right to remove such sign at the expiration or
earlier termination of the Lease Term at Landlord's expense.
45. RENEWAL OPTION.
--------------
(a) Landlord hereby grants to Tenant the conditional right,
exercisable at Tenant's option, to renew the term of this Lease for one (1) term
("Renewal Term") of sixty (60) months. If exercised, and if the conditions
applicable thereto have been satisfied, the Renewal Term shall commence
immediately on the day following the date the Lease Term would otherwise have
ended as provided in this Lease. The right of renewal herein granted to Tenant
with respect to the Renewal Term shall be subject to, and shall be exercised in
accordance with, the following terms and conditions:
42
<PAGE>
(i) Tenant shall exercise its right of renewal with respect to
the Renewal Term by giving Landlord written notice ("Renewal Option Notice")
thereof not later than twelve (12) months prior to the expiration date of the
then-current Lease Term.
(ii) In the event the Renewal Option Notice is not given timely
or is not given, Tenant's right of renewal with respect to the Renewal Term
shall lapse and be of no further force or effect.
(iii) The renewal option may be exercised only with respect to
the entire Premises, not with respect to only a part of the Premises.
(iv) In the event there exists an Event of Default under this
Lease on the date the Renewal Option Notice is sent or any time thereafter up to
and including the date such Renewal Term is to commence, then, at Landlord's
option, such Renewal Term shall not commence and the Lease Term shall expire on
the date the Lease Term would have expired without such renewal.
(v) If at the time Tenant provides the Renewal Option Notice
described in subsection (a) hereof, or at any time thereafter until the Renewal
Term is to commence, Tenant has assigned or subleased the Premises, then, at
Landlord's option, Tenant's rights pursuant to this Section 45 shall lapse and
be of no further force or effect.
(vi) Landlord and Tenant must execute a lease for the Renewal
Term nine (9) months prior to the expiration date of the then-current Lease
Term. If Landlord and Tenant do not execute a lease in accordance with the
foregoing sentence, then Tenant's right pursuant to this Section 45 shall lapse
and be of no further force or effect.
(b) During the Renewal Term, all the terms, conditions, covenants and
agreements set forth in this Lease, including but not limited to the full pass-
through of Common Area Costs and Real Estate Taxes shall continue to apply and
be binding upon Landlord and Tenant, except that: (i) the Basic Rental for the
Premises shall be determined as provided in Section 45(c); (ii) in no event
shall Tenant have the right to renew the Lease Term beyond the expiration of the
Renewal Term provided for in this Section 45; and (iii) Landlord shall have the
right to terminate the Lease as provided in Section 45(d).
(c) Following the giving of the Renewal Option Notice, Landlord and
Tenant shall commence negotiations concerning the amount of the Basic Rental
payable during the Renewal Term. The parties shall have thirty (30) days after
the date Tenant delivers its Renewal Option Notice in which to agree on such
Basic Rental. If, during such negotiation period, the parties are unable in
good faith to agree on such Basic Rental, then Tenant's right of renewal shall
lapse and be of no further force or effect.
43
<PAGE>
(d) Notwithstanding the foregoing, at any time during the Renewal
Term, Landlord shall have the right to terminate this Lease upon one hundred
eighty (180) days written notice to Tenant ("Termination Notice"). Tenant shall
vacate and surrender the Premises on or prior to the date specified in
Landlord's Termination Notice ("Termination Date") and this Lease shall
terminate at 11:59 p.m. on the Termination Date. In the event Landlord elects
to terminate this Lease as provided in this Section 45(d), Landlord shall pay to
Tenant a moving allowance ("Moving Allowance") in the amount of One Dollar
($1.00) per rentable square foot of the Premises, said Moving Allowance to be
paid to Tenant after Tenant vacates aid surrenders the Premises to Landlord.
46. RIGHT OF FIRST OFFER.
--------------------
(a) Landlord hereby grants to Tenant the conditional, continual right
throughout the Lease Term, exercisable at Tenant's option, to lease all or any
portion of the approximately 6,669 rentable square feet located on the first
(1st) floor of the Building ("Expansion Area"), and identified as set forth on
Exhibit A-3 attached hereto and incorporated herein for all purposes, subject to
the terms and conditions set forth in this Section 46.
(b) Landlord shall give Tenant written notice that it has received a
bona fide, written and signed offer from a prospective tenant for all or any
portion of the Expansion Area (an "Expansion Area Notice"). Each space that is
offered to Tenant pursuant to the Expansion Area Notice is, at the time of such
offering, referred to as the "Expansion Premises".
(c) Tenant shall have a period of seven (7) days following receipt of
Landlord's Expansion Area Notice to notify Landlord in writing whether Tenant
desires to lease all or any portion of the Expansion Premises ("Tenant's
Expansion Premises Acceptance Notice"). In the event Tenant elects to lease
less than all of the Expansion Premises, then the portion of the Expansion
Premises that Tenant leases must comply with all applicable building and safety
codes. In addition, all of the remaining Expansion Premises not leased by
Tenant must also (i) comply with all applicable building and safety codes, (ii)
be regular in shape with adequate means of ingress and egress and (iii) be
suitable and marketable for normal renting purposes as office space. For
purposes hereinbelow, the term "Expansion Premises" shall be deemed to include
all of or that portion of the Expansion Premises actually leased by Tenant. If
the Expansion Premises is leased to Tenant, the lease term shall be coterminous
with the term of this Lease, as the same may be extended pursuant to the terms
hereof. The leasing of the Expansion Premises shall be on the same terms and
conditions as are set forth in this Lease except that W the Base Rent for the
Expansion Premises shall be the Market Rent determined as provided in Section
46(i) below, and (ii) the abatement of rent provided in Section 3(a) and all
buildout and other allowances shall not be applicable. Landlord shall prepare,
and Landlord and Tenant shall promptly execute, an amendment to this Lease
confirming the lease to Tenant of the Expansion Premises upon such terms and
conditions. Upon the delivery of the Expansion Premises to Tenant, the Expansion
Premises shall become part of the Premises. If Tenant does not timely provide
Landlord with Tenant's Expansion Premises Acceptance Notice to lease all or
44
<PAGE>
a portion of the Expansion Premises or does not lease the Expansion Premises,
then Landlord shall be free to lease all of the Expansion Premises or any
portion thereof to any other person or entity (the "Expansion Premises
Occupant") on such terms and conditions as Landlord in its sole discretion may
determine. Upon the expiration of an Expansion Premises Occupant's lease, Tenant
shall once again have the conditional right, exercisable at Tenant's option, to
lease all or any portion of the Expansion Premises Occupant's leased premises,
upon and subject to the terms and conditions as set forth in this Section 46.
(d) In the event there exists an Event of Default under this Lease on
the date of Tenant's Expansion Premises Acceptance Notice, or at any time
thereafter up to and including the date possession of the Expansion Premises is
to be delivered to Tenant, then, at Landlord's option, possession of the
Expansion Premises shall not be delivered to Tenant and Tenant's rights to lease
the Expansion Premises shall lapse and be of no further force or effect and
Landlord may freely lease the Expansion Premises to an Expansion Premises
Occupant on such terms and conditions as Landlord in its sole discretion may
determine.
(e) Landlord shall incur no liability, and the expiration date of the
term for which the Expansion Premises is leased shall not be extended, if
Landlord is unable to deliver possession of the Expansion Premises to Tenant due
to any holdover tenant's refusal to vacate, or for any other reason not within
Landlord's reasonable control.
(f) Tenant's rights under this Section 46 may be exercised only by
Tenant, and shall not be exercised by any assignee, transferee, mortgagee or
subtenant of Tenant.
(g) Notwithstanding anything in this Section 46 to the contrary,
Landlord shall not be obligated to send Tenant an Expansion Area Notice, and
Tenant shall have no rights hereunder, with respect to any space (i) that
Landlord proposes to lease to the then-current tenant of such space or (ii) that
becomes available for leasing at a time when less than twelve (12) months remain
in the Lease Term and Tenant has not exercised its renewal option hereunder.
(h) Notwithstanding any provisions of this Section 46, or any other
provision of this Lease, Tenant shall have no rights pursuant to this Section
46, as if this Section 46 had not been included in this Lease, if Tenant has
assigned this Lease in whole or in part or has subleased the Premises. The
preceding sentence shall not impair Tenant's lease of the Expansion Premises
that Tenant has leased pursuant to this Section before the occurrence of one of
the events set forth above in this subsection. Without limiting the other
provisions of this Lease with respect to which time is of the essence, time is
of the essence of each of the provisions of this Section with respect to the
exercise by Tenant of its options.
(i) "Market Rent" shall be the fair market amount of Basic Rental
(including escalations) determined as follows:
45
<PAGE>
(1) Following the giving of the Expansion Premises Acceptance
Notice, Landlord and Tenant shall commence negotiations concerning the amount of
Basic Rental that shall constitute Market Rent. The parties shall have thirty
(30) days after the date Tenant delivers its option notice in which to agree on
such Market Rent. If, during such negotiation period, the parties are unable to
agree on such Market Rent, then Tenant's right of first offer pursuant to this
Section 46 shall lapse and be of no force or effect.
(2) Among the factors to be considered in determining Market Rent
shall be the rental rates then being quoted by (a) Landlord for space in the
Building, and (b) other landlords for similar space in comparable office
buildings in the vicinity of the Building. All determinations shall reflect
market conditions expected to exist as of the date Basic Rental based on Market
Rent is to commence (including base rents, escalations, concessions, buildouts
and other terms expected to be agreed to in market leases entered into at such
time).
47. EXHIBITS.
--------
(i) Exhibit A - Outline of Premises
(ii) Exhibit A-1 - A-1 Premises
(iii) Exhibit A-2 - A-2 Premises
(iv) Exhibit A-3 - Expansion Area
(v) Exhibit B - Legal Description
(vi) Exhibit C - Rules and Regulations
(vii) Exhibit D - Specifications for Construction
(viii) Exhibit E - Tenant Space Plan
(ix) Exhibit F - Tenant Acceptance Letter for the A-1 Premises
(x) Exhibit G - Tenant Acceptance Letter for the A-2 Premises
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease under
seal and affixed their seals as of the date first above written.
Tenant:
WITNESS/ATTEST: AMERICAN SCHOOLS OF
PROFESSIONAL PSYCHOLOGY
/s/ Robert J. Lullo, CFO By: /s/ Harold J. O'Donnell
- --------------------------- ------------------------------(SEAL)
Name: Harold J. O'Donnell
----------------------------------
Title: President
---------------------------------
Landlord:
ARLINGTON PARK REALTY
CORPORATION
WITNESS/ATTEST:
/s/ Lisa By: /s/ R. Paul Mehlman
- ------------ ------------------------------(SEAL)
Name: R. Paul Mehlman
----------------------------------
Title: Vice President
---------------------------------
STATE OF ILLINOIS )
) ss:
COUNTY OF COOK )
On this the 7th day of April, 1994, before me, Beth J. Corey, the
undersigned, personally appeared Harold J. O'Donnell, known to me (or
satisfactorily proven) to be the person whose name is subscribed to the
foregoing document, and acknowledged that he/she executed the foregoing document
for the purposes therein contained and that he/she is duly authorized to execute
said document.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Beth J. Corey
---------------------------------------
Notary Public
My Commission Expires:
_____________________________
48
<PAGE>
DISTRICT OF )
) ss:
COLUMBIA )
On this the 4th day of May, 1994, before me, Carolyn S. Dunlap, the
undersigned, personally appeared R. Paul Mehlman, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the foregoing document, and
acknowledged that he/she executed the foregoing document for the purposes
therein contained and that he/she is duly authorized to execute said document.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Carolyn S. Dunlap
--------------------------------------------
Notary Public
My Commission Expires:
6-1-95
- ------------------------
49
<PAGE>
EXHIBIT B
---------
Property Description
--------------------
All of Lots Numbered one (1), Two (2), Three (3), Four (4) and Five (5) in
Block numbered Ten (10), "WHARTON'S ADDITION TO FORT MEYER HEIGHTS," as shown on
Plat of said subdivision duly recorded among the Land Records of Arlington
County, Virginia in Deed Book M-4, Page 557, LESS AND EXCEPT all that portion of
Lot numbered one (1) conveyed to the County of Arlington, State of Virginia, by
Deed from Mae M. Payne Edwards, et vir, dated December 12, 1929 and recorded on
December 28, 1931, in Deed Book 329, Page 236, among said Land Records, as more
particularly described by metes and bounds as follows:
Beginning at a point in 17th Street, North, said point
marking the Northwest corner of Lot 6 and the Southwest
corner of Lot 5, Wharton's Addition to Fort Meyer Heights;
thence with North Oak Street N 1' 35" 00" W 242.70 feet to a
point in Wilson Boulevard marking the Northwest corner of
Part of Lot 1 of said subdivision; thence with Wilson
Boulevard S 85' 55" 40" E 43.28 feet to a point; thence
continuing with Wilson Boulevard N. 89' 08" 00" E 107.34
feet to a point marking the Northeast corner of Part of Lot
1; thence with North Nash Street S 1' 35" 00" E 237.06 feet
to a point marking the Southeast corner of Lot 5 and the
Northeast corner of Lot 6 of said subdivision; thence with
17th Street North S 88' 25" 00" W 150.62 feet to the point
and place of beginning containing approximately 35,938
square feet of land, as shown on plat of survey made by
Schiller & Associates dated June 13, 1966, and recertified
July 11, 1983.
<PAGE>
EXHIBIT C
---------
RULES AND REGULATIONS
No part or the whole of the sidewalks, plaza areas, entrance, passages,
courts, elevators, vestibules, stairways, corridors or halls of the
Building or the Land shall be obstructed or encumbered by any tenant or
used for any purpose other than ingress or egress to and from the space
demised to such tenant.
2. No awnings or other projections shall be attached to the outside walls or
windows of the Building. No curtains, blinds, shades, or screens (other
than those furnished by Landlord as part of Landlord's Work) shall be
attached to or hung in, or used in connection with, any window or door of
the space demised to any tenant.
3. No sign, advertisement, object, notice, or other lettering shall be
exhibited or inscribed on any part of the outside or inside of the space
demised to any tenant or of the Building or the Land. Interior signs on
doors and directory tablets, if any, shall be inscribed, painted, or
affixed for each tenant by Landlord at Tenant's expense, and shall be of a
size, color, and style approved by Landlord.
4. No show cases or other articles shall be put in front of or affixed to any
part of the exterior of the Building, nor placed in the halls, corridors,
vestibules, or other public parts of the Building.
5. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances (including, without
limitation, coffee grounds) shall be thrown therein.
6. No tenant shall bring or keep, or permit to be brought or kept, any
inflammable, combustible, or explosive fluid, material, chemical, or
substance in or about the space demised to such tenant.
7. No tenant shall mark, paint, drill into, or in any way deface, any part of
the Building or the space demised to such tenant. No boring, cutting, or
stringing of wires shall he permitted.
8. No cooking shall be done or permitted in the Building by any tenant, except
for use of microwave ovens and coffee machines by Tenant's employees for
their own consumption. Tenant may install microwave ovens and coffee
machines in the kitchen and lounge areas of the Premises; however, no other
microwave ovens or coffee machines may be installed in any other area of
the Premises without Landlord's prior written approval of such equipment
and its location. No tenant shall cause or permit any unusual or
objectional odors to emanate from the space demised to such tenant.
<PAGE>
9. Neither the whole nor any part of the space demised to any tenant shall be
used for manufacturing, for the storage of merchandise, or for the sale of
merchandise, goods, or property of any auction.
10. No tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with other tenants or occupants of the
Building or neighboring buildings or premises whether by the use of any
musical instrument, radio, television set, or other audio device, unmusical
noise, whistling, singing or in any other way. Tenant shall not construct,
maintain, use or operate within the Premises any electrical device, wiring
or apparatus in connection with a loud speaker system or other sound system
without Landlord's prior written consent. Tenant shall not construct,
maintain, use or operate any such loud speaker or sound system outside of
the Premises. Nothing shall be thrown out of any doors, windows, or
skylights or down any passageways.
11. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows in the space demised to any tenant, nor shall any changes
be made in locks or the mechanism thereof. Each tenant must, upon the
termination of his tenancy, restore to Landlord all keys to offices and
toilet rooms, either furnished to, or otherwise procured by, such tenant,
and in the event of the loss of any such keys, such tenant shall pay
Landlord the reasonable cost of replacement keys.
12. All removals from the Building, or the carrying in or out of the Building
or the space demised to any tenant of any safes, freight, furniture, or
bulky matter of any description must take place during such hours and in
such manner as Landlord or its agents may prescribe. Tenant shall
coordinate in advance with Landlord's property management department all
deliveries to the Building so that arrangements can be made to minimize
interference to other tenants.
13. No tenant shall use or occupy or permit any portion of the space demised to
such tenant to be used or occupied as an employment bureau or for the
storage, manufacture, or sale of liquor, narcotics or drugs. No tenant
shall engage or pay any employees in the Building, except those actually
working for such tenant in the Building, nor advertise for laborers giving
an address at the Building.
14. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord's reasonable opinion, tends to impair the reputation of
the Building or its desirability as a building for offices, and upon notice
from Landlord, such tenant shall refrain from or discontinue such
advertising.
15. Landlord reserves the right to control and operate the public portions of
the Building and the public facilities, as well as facilities furnished for
the common use of the tenants, in such manner as it deems best for the
benefit of the tenants generally, including, without limitation, the right
to exclude from the Building, between the hours of 6:00 p.m. to 8:00 a.m.
on business days and at all hours on Saturdays, except 9:00 a.m. to 1:00
p.m.,
<PAGE>
Sundays and holidays, all persons who do not present a pass to the Building
signed by Landlord or other suitable identification satisfactory to
Landlord. Landlord will furnish passes to persons for whom any tenant
requests such passes. Each tenant shall be responsible for all persons for
whom it requests such passes and shall be liable to Landlord for all acts
of such persons. Tenant shall not permit the visit to the Premises of
persons in such numbers or under such conditions as to interfere with the
use and enjoyment of the entrances, corridors, elevators and other public
portions or facilities of the Building by other tenants.
16. Each tenant, before closing and leaving the space demised to such tenant at
any time, shall see that all entrance doors and windows are locked and that
all lights are turned off.
17. No space demised to any tenant shall be used, or permitted to be used, for
lodging or sleeping or for any immoral or illegal purpose.
18. The requirements of tenants will be attended to only upon application at
the office of Landlord. Building employees shall not be required to
perform, and shall not be requested by any tenant to perform, any work
outside of their regular duties, unless under specific instructions from
the office of the Landlord.
19. Canvassing, soliciting, and peddling in the Building are prohibited, and
each tenant shall cooperate in seeking their prevention.
20. There shall not be used in the Building, either by any tenant or by its
agents or contractors, in the delivery or receipt of merchandise, freight,
or other matter, any hand trucks or other means of conveyance except those
equipped with rubber tires, rubber side guards, and such other safeguards
as Landlord may require. Tenant shall be responsible for any loss or
damage resulting from any deliveries made by or for Tenant.
21. No animals, bicycles, vehicles, birds or pets of any kind shall be brought
into or kept about the Building by any tenant.
22. No tenant shall place, or permit to be placed, on any part of the floor or
floors of the space demised to such tenant a load exceeding the floor load
per square foot which such floor was designed to carry and which is allowed
by law.
23. Landlord reserves the right to specify where in the space demised to any
tenant business machines and mechanical equipment shall be placed or
maintained in order, in Landlord's judgment, to absorb and prevent
vibration, noise, and annoyance to other tenants of the Building.
24. No vending machines shall be permitted to be placed or installed in any
part of the Building by any tenant, except that Tenant may place and
install vending machines in the
<PAGE>
lounge or kitchen area of Tenant's Premises. Landlord reserves the right to
place or install vending machines in any of the common areas of the
Building.
25. Tenant will cooperate with Landlord in complying with all present and
future laws, orders, and regulations of the state, federal, municipal, and
local governments, departments, commissions, agencies and boards regarding
the collection, sorting, separation, and recycling of trash. Tenant shall
sort and separate its trash into such categories as are provided by law.
Each separately sorted category of trash shall be placed in separate
receptacles as directed by Landlord. Landlord reserves the right to refuse
to collect or accept from Tenant any trash that is not separated and sorted
as may be required by law.
26. Tenant will not conduct or permit to be conducted any activity, or place
any equipment in or about the Premises or the Building, which will in any
way increase the rate of fire insurance or other insurance on the Building;
and if any increase in the rate of fire insurance or other insurance is
stated by any insurance company or by the applicable insurance Rating
Bureau to be due to any activity or equipment of Tenant in or about the
Premises or the Building, such statement shall be conclusive evidence that
the increase in such rate is due to such activity or equipment and as a
result thereof, Tenant shall be liable for such increase and shall
reimburse Landlord therefor upon demand and any such sum shall be
considered additional rent payable hereunder.
27. Landlord may, upon request of Tenant, waive Tenant's compliance with any of
the rules, provided that (a) no waiver shall be effective unless signed by
Landlord, (b) no waiver shall relieve Tenant from the obligation to comply
with such rule in the future unless otherwise agreed in writing by
Landlord, (c) no waiver granted to any tenant shall relieve any other
tenant from the obligation of complying with these rules and regulations,
and (d) no waiver shall relieve Tenant from any liability for any loss or
damage resulting form Tenant, failure to comply with any rule.
28. Landlord reserves the right, at any time and from time to time, to rescind,
alter, or waive, in whole or in part, any of these Rules and Regulations
when it is deemed necessary, desirable, or proper, in Landlord's judgment,
for its best interest or for the best interest of the tenants.
<PAGE>
EXHIBIT D
Specifications on Materials for Construction of Demised Premises for American
Schools of Professional Psychology at 1400 Wilson Boulevard, Arlington,
Virginia.
A. Partitions: Partitions are constructed of 2 1/2" steel
studs and channel framing from slab to
underside of finished ceiling with 1/2"
gypsum wallboard panels having no visible
joints. Demising partitions between the
Demised Premises and building corridors will
be slab to slab and sound insulated. Interior
partitioning around classrooms and seminar
rooms will be slab to slab fire-rated drywall
and will be sound insulated. Vinyl wall base
will be included.
B. Doors: As required by Tenant plans, up to one 3'-0"
x 7'-0" solid core, interior painted door
with cylindrical latchset and all necessary
hardware and metal frame for each 250 square
feet of rentable area leased. Four (4) of
these will be 3'0" x 7'0" solid core with
integral vertical insulated glass lite 0'8" x
6'0" with jambs and drop seals. Hardware
shall be Schlage S-Series Saturn with lever
in polished chrome (interior door) or split
finish (suite entry door). One (1) suite
entrance door into office portion of Premises
shall be 3'0" x 7'0" solid core, stain grade
with adjacent 3'0" x 7'0" glass side lite in
hollow metal frame. One (1) entry/exit door
with electronic strike plate at back-end of
students lounge along building facade with
metal frame to match adjacent mullions. The
existing glass double suite entrance doors
from the building lobby into the Demised
Premises will be retained provided they are
not in violation of any codes.
C. Painting and
Wall Covering: All partitions, columns, walls and door
frames will be primed and painted in flat
finish. The color will be chosen by the
Tenant from color samples provided by the
Landlord. Landlord will provide vinyl
wallcovering on all office and school
corridor walls and in the reception area.
D. Ceiling: Landlord will provide a suspended 2' x 2'
tegular acoustical ceiling tile (Armstrong
Tundra, White) with exposed grid at a height
of 8'6", unless agreed to otherwise.
<PAGE>
E. Window Covering: Landlord will provide thin line horizontal
venetian blinds for all exterior windows
within suites. Blind color shall be off
white.
F. Lighting: Landlord will provide one fully recessed 2' x
4' fluorescent light fixture with a parabolic
lens for each 80 square feet of rentable
area. Landlord will also provide 6 recessed
incandescent with dimmers in the reception
area and 8 in the conference room.
G. Telephone and
Electrical: Outlets: Two duplex 110 volt electrical wall
outlets per 150 square feet of rentable area
and one telephone wall outlet (plate and pull
string only) for each 150 rentable area.
Included in this ratio shall be 3 duplexes in
each classroom and seminar room, 6 duplexes
on a dedicated circuit for personal computers
in the computer area, and a reasonable number
of dedicated outlets (including 2-30 amp
copier outlets, 1-15 amp server outlet, 1-15
amp telephone closet outlet) to service
copies, file servers, and phone switches.
Wall plate finish is brushed stainless.
H. Suite Entry
Signage: The Landlord will provide one building
standard plaque with tenant name and suite
number. Landlord will also provide signage
either over or on the back entrance/exit
door.
I. Sprinkler: An automatic sprinkler system has been
installed within the building. There shall be
one sprinkler head for every 150 square feet
of rentable space. Sprinkler heads are semi-
recessed, chrome finish. Landlord shall
relocate existing heads per Tenant's plans.
J. Floor Covering: 30 oz nylon cut pile commercial grade glue
down carpet (Wellco: Vogue) will be provided
throughout Tenant's suite. Tenant may select
color for carpeting throughout premises from
color samples provided by Landlord. Tenant
may designate areas to be covered
<PAGE>
with vinyl floor tile, colors samples to be
provided by Landlord.
K. Floor Load: Floors are designed for 80 pounds per square
foot live load and 20 pounds per square foot
dead load unless noted otherwise.
L. Millwork: Landlord will provide one (1) 8 foot long
plastic laminated counter and cabinet below
and a reasonable amount of shelving in each
of the two (2) file rooms. Landlord will also
provide a 5 foot long plastic laminate
counter with wall and base cabinets (merrilat
or equal) and a cold water supply line in the
galley area near the reception area.
M. HVAC: The building is heated and cooled via two
hydronic water loops, circulating heated or
chilled water through main air handier units,
exterior wall mounted fan coil units and
newly installed floor space fan coil units.
Additional cooling capacity has also been
recently added to the building by means of a
plate-to-plate heat changer. Heating water is
generated by means of a single hot water
boiler located in the mechanical penthouse.
Chilled water is generated by means of a
single centrifical chiller located in the
mechanical penthouse. Two main air handlers,
located in the mechanical penthouse, deliver
tempered air to the interior space on all
floors. The building is divided into a north
zone and a south zone; however, the main
building system must be turned on for after
hours use. This building does not have floor-
by-floor after hours flexibility. The air is
returned to the mechanical room via two large
return air fans, located in the mechanical
penthouse. Exterior floor space conditioning
is handled by fan coils at each level,
mounted on the interior of perimeter walls.
The units have on/off air speed. Landlord
will provide one (1) thermostatic control for
every 300 rentable square feet.
All heating and air conditioning equipment
are monitored and controlled via automatic
pneumatic control equipment. The domestic hot
water is
<PAGE>
produced by one free standing atmospheric gas
fired hot water heater.
The estimated charge for after hours usage is
$90.00 per hour.
Landlord shall provide and install
supplementary HVAC equipment in a
configuration according to either option A or
B outlined below. (Tenant to select an option
prior to lease execution).
Option A: 12 tons of HVAC capacity comprised of (1) 6
ton supplemental split system serving those
areas requiring evening and weekend
operation, and one 6 ton heat pump unit
tapped into the building condenser water
system to service the office function areas.
Option B: (2) 1 ton water source heat pump for 2
seminar rooms.
(2) 2 ton water source heat pumps for 2
classrooms.
(2) 2 ton water source heat pumps for the
lounge and library areas.
N. Fire and Life
Safety Systems: The building's renovation included a fire and
life safety system which meets state and
local codes and federal requirements. This
includes a fire control room with annunciator
panel, a voice communication system and fully
sprinklered floors. Landlord will provide
code-compliant exit lights per Tenant's
plans.
O. Exterior Signage: Landlord shall provide and install
individual, back-lighted letters in a size,
nature and configuration in compliance with
all applicable codes and in the reasonable
but sole discretion of the Landlord. These
letters shall read "American Schools of
Professional Psychology, Inc" and be affixed
to the Northeast corner of the first floor
facade.
P. Design Services: Landlord shall provide design services for
space planning and architectural and
engineering construction documents.
<PAGE>
EXHIBIT F
TENANT ACCEPTANCE LETTER
------------------------
Arlington Park Realty Corporation
c/o Equitable Real Estate Investment
Management, Inc.
1875 Eye Street, N.W.
Suite 900
Washington, D.C. 20006
The undersigned, by the execution of this letter, hereby confirms that the
Commencement Date of the Lease Term of that certain lease agreement (the "Lease
Agreement") by and between Arlington Park Realty Corporation (the "Landlord")
and the undersigned (the "Tenant") is ____________________, 199__, and Tenant
hereby accepts delivery of the A-1 Premises and recognizes that the Landlord has
fulfilled all obligations regarding the delivery of the A-1 Premises. All
capitalized terms not defined herein shall have the meanings assigned to them in
the Lease Agreement.
ACCEPTED AND AGREED to this _____ day of ____________________, 199__.
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
By:_______________________________________
Title:_____________________________________
<PAGE>
EXHIBIT G
TENANT ACCEPTANCE LETTER
------------------------
Arlington Park Realty Corporation
c/o Equitable Real Estate Investment
Management, Inc.
1875 Eye Street, N.W.
Suite 900
Washington, D.C. 20006
The undersigned, by the execution of this letter, hereby confirms that
the Commencement Date of the Lease Term of that certain lease agreement (the
"Lease Agreement") by and between Arlington Park Realty Corporation (the
"Landlord") and the undersigned (the "Tenant") is _______________________,
199__, and Tenant hereby accepts delivery of the A-2 Premises and recognizes
that the Landlord has fulfilled all obligations regarding the delivery of the A-
2 Premises. All capitalized terms not defined herein shall have the meanings
assigned to them in the Lease Agreement.
ACCEPTED AND AGREED to this _____ day of ____________________, 199__.
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC.
By:_______________________________________
Title:_____________________________________
<PAGE>
AMENDMENT TO LEASE AGREEMENT
----------------------------
This Amendment to Lease Agreement (the "Amendment") is made and entered
into this 13th day of September 1996, between ARLINGTON PARK REALTY CORPORATION
("Landlord") and AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY, INC. ("Tenant").
WHEREAS, Landlord and Tenant entered into a Lease Agreement, dated May 3,
1994 (the "Lease") for 6,620 rentable square feet of space (the "Premises") on
the first (1st) floor of the building located at 1400 Wilson Boulevard,
Arlington, Virginia (the "Building"); and
WHEREAS, the Lease is scheduled to terminate on August 31, 1999; and
WHEREAS, pursuant to the provisions of Section 46 of the Lease, Tenant has
a conditional right of first offer to lease additional space on the first floor
of the Building; and
WHEREAS, space on the first floor of the Building has become available; and
WHEREAS, Tenant wishes, among other matters, to expand the Premises it
leases from Landlord in the Building.
NOW THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which is acknowledged by
the parties, the parties agree as follows:
1. Expansion Premises. Landlord hereby demises and leases to Tenant
------------------
and Tenant hereby leases and accepts from Landlord, for a term
and upon the conditions hereinafter provided, an additional one
thousand three hundred fifty-six (1,356) rentable square feet of
space on the first (1st) floor of the Building, known as Suite
150, outlined on the floor plan attached hereto and incorporated
herein by reference as Exhibit A (the "Expansion Premises").
---------
2. Expansion Premises Term. The Lease for the Expansion Premises
-----------------------
will commence upon Substantial Completion of the Expansion
Premises (the "Expansion Premises Commencement Date"), and expire
on August 31, 1999 or upon the earlier termination of the Lease
(the "Expansion Premises Term"). The Anticipated Expansion
Premises Commencement Date is November 1, 1996; provided,
however, that, if Landlord shall be unable to tender possession
of the Expansion Premises on the Anticipated Expansion Premises
Commencement Date, Landlord shall not be liable for any damage
caused thereby, nor shall the Lease or this Amendment be void or
voidable by Tenant. In no event shall the Expansion Premises
Commencement Date be prior to September 1, 1996.
<PAGE>
3. Expansion Premises Basic Rental. Tenant shall pay Landlord as
-------------------------------
Basic Rental for the Expansion Premises, in legal tender, the
annual sum of twenty-nine thousand eight hundred thirty-two and
00/100 dollars ($29,832.00) (the "Expansion Premises Basic
Rental"), payable in equal monthly installments of two thousand
four hundred eighty-six and 00/100 dollars ($2,486.00), in
advance, promptly on the first day of each calendar month of the
Expansion Premises Term (except for the first month's installment
which is due and payable upon Tenant's execution of this
Amendment), without notice or demand, the same being hereby
waived, and without any setoff, deduction, counterclaim, or
recoupment whatsoever; provided, however, that the installment of
Expansion Premises Basic Rental for the second calendar month
shall be prorated based on one-three hundred sixtieth (1/360th)
of the current annual Expansion Premises Basic Rental for each
day of the first partial month, if any, of the Expansion Premises
Term and shall be due and payable as aforesaid. The Expansion
Premises Basic Rental provided in this paragraph shall be in
addition to any other rent due to the Landlord under the Lease
with respect to the Premises.
4. Escalation in Expansion Premises Basic Rental. The Basic Rental
---------------------------------------------
for the Expansion Premises shall be increased annually, effective
on each anniversary of the Expansion Premises Commencement Date
during the term hereof, by an amount equal to two and one-half
percent (2.5%) of the escalated Expansion Premises Basic Rental
then in effect, payable as follows
<TABLE>
<CAPTION>
ANNUAL
YEAR RENT MONTHLY RENT
------ -------- --------------
<S> <C> <C>
1 $29,832.00 $2,486.00
2 $30,577.80 $2,548.15
3 $31,342.25 $2,611.85
</TABLE>
5. Expansion Premises Operating Expenses. Beginning with the first
-------------------------------------
anniversary of the Expansion Premises Commencement Date, Tenant
shall pay as additional rent an amount (per each square foot
within the Expansion Premises) equal to the excess ("Excess")
from time to time of the per square foot Basic Cost over the Base
Year Stop for the Expansion Premises, all as more fully provided
in Section 8 of the Lease. The Base Year Stop for the Expansion
Premises shall be the per square foot Basic Cost incurred during
the 1996 calendar year. Tenant's proportionate share (for the
Expansion Premises) of any such costs or expenses shall be 1.28%.
This proportionate share is solely for the Expansion Premises,
and
-2-
<PAGE>
is in addition to any proportionate share of Basic Cost to be
paid by Tenant for the Premises.
6. Expansion Premises Real Estate Taxes.
------------------------------------
(a) During each calendar year or portion thereof included in the
Expansion Premises Term, and any renewal or extension thereof, Tenant shall pay
to Landlord as additional rent, Tenant's proportionate share for the Expansion
Premises of any increase of Real Estate Taxes over the Expansion Premises Base
Real Estate Taxes, all as more fully provided in Section 19 of the Lease. The
Expansion Premises Base Real Estate Taxes shall be Real Estate Taxes paid during
the 1996 calendar year. Tenant's proportionate share of Real Estate Taxes for
the Expansion Premises shall be 1.28%. This proportionate share is solely for
the Expansion Premises, and is in addition to any proportionate share of Real
Estate Taxes to be paid by Tenant for the Premises.
(b) Commencing on the first anniversary of the Expansion Premises
Commencement Date, Landlord may deliver the statement provided for in Section
19(b) of the Lease.
(c) Commencing January 1, 1998, Landlord shall deliver to Tenant the
statement provided for in Section 19(c) of the Lease.
7. Tenant Improvements for Expansion Premises.
------------------------------------------
(a) Landlord and Tenant agree to comply with the following schedule
in buildout of the Expansion Premises:
(i) Landlord has prepared, and Tenant has approved a Space
Plan for the Expansion Premises, which Space Plan is attached hereto as EXHIBIT
B. Any modifications to the Space Plan made after such date shall be made at
Tenant's expense and, if delay in occupancy occurs as a result of such
modifications, Tenant shall be liable to Landlord for Expansion Premises Basic
Rental attributable to each day beyond the Anticipated Expansion Premises
Commencement Date that delivery of the Expansion Premises is delayed.
(ii) Landlord shall prepare and deliver to Tenant detailed
floor plan layouts, together with working drawings and written instructions
sufficiently detailed to enable Landlord to let firm contracts (herein called
"Tenant Plans") with respect to and reflecting the partitions and improvements
in the Premises. Tenant shall fully and completely cooperate with Landlord-in
the preparation of the Tenant Plans, shall promptly respond to Landlord's
requests for information and approvals within three (3) business days after
inquiry, and shall use its best efforts to assist Landlord to complete the
Tenant Plans as soon as possible. Tenant agrees to deliver to Landlord, not
later than three (3) business days after delivery of the Tenant Plans to Tenant,
an original executed copy of the Tenant Plans approved by Tenant; provided,
however, if
-3-
<PAGE>
Tenant, in good faith, reasonably objects to any aspect of the Tenant Plans
submitted by Landlord, Tenant shall specify in detail any objection to such
Tenant Plans as submitted to Tenant in a written notice to Landlord within such
3-day period. Landlord shall, if applicable, modify such Tenant Plans to address
Tenant's written objections, and submit new Tenant Plans to Tenant for approval.
Notwithstanding the foregoing, the Tenant Plans shall remain subject to
Landlord's review and approval, which approval shall not be unreasonably
withheld, and shall be deemed modified to take account of any changes reasonably
required by Landlord. If Tenant fails to timely deliver the Tenant Plans as
required herein or makes modifications to the Tenant Plans after the deadlines
provided in this subsection, Tenant shall (1) pay to Landlord all reasonable
expenses incurred by Landlord due to Tenant's modifications and/or delay in
delivering the Tenant Plans; and (2) pay to Landlord as additional rent a per
diem Expansion premises Basic Rental charge for each day beyond the initially
Anticipated Expansion Premises Commencement Date that occupancy is delayed due
to Tenant's failure to timely comply with the requirements in this Section.
(iii) Time is of the essence as to all dates provided in this
subsection.
(b) Any changes to any approved Tenant Plans desired by Tenant shall
be submitted in writing and in detail to Landlord and shall be subject to
Landlord's consent, which consent shall not be unreasonably withheld.
(c) Landlord shall, in a good and workmanlike manner, cause the
Expansion Premises to be improved and completed in accordance with the Tenant
Plans by "Landlord's Contractor" (as hereinafter defined). Landlord reserves
the right however, (i) to make substitutions of material of equivalent grade and
quality when and if any specified material shall not be readily and reasonably
available, and (ii) to make changes necessitated by conditions met in the course
of construction, provided that Tenant's approval of any substantial change shall
first be obtained (which approval shall not be unreasonably withheld or delayed
so long as there shall be general conformity with Tenant Plans).
(d) In the completion and preparation of the Expansion Premises in
accordance with the Tenant Plans, Landlord agrees to perform at its own expense
up to the amount of the Expansion Premises Tenant Allowance (as defined in
subsection (f) below) those items of work set forth on EXHIBIT B - Tenant Space
Plan (all work therein referred to as "Standard Tenant Work"), to the extent
required by Tenant Plans. All work to be performed by Landlord in addition to
or in substitution for Standard Tenant Work is hereinafter referred to as
"Special Tenant Work." All Special Tenant Work shall be furnished, installed
and performed by Landlord, utilizing a general contractor or construction
manager ("Landlord's Contractor") selected by Landlord (which may be an
affiliate of Landlord or a partner in Landlord or an affiliate of a partner in
Landlord) for and on behalf of Tenant and at Tenant's sole expense, based on
Landlord's out-of-pocket contract or purchase price for materials, labor and
service, including, without limit, any reasonable contractor's fee for the
contractor's overhead and profit and charges for cutting, patching, cleaning up
and removal of waste and debris, plus architects, and engineers'
-4-
<PAGE>
fees, plus the product obtained by multiplying all of the foregoing (as reduced
by appropriate credits for substituted Standard Tenant Work) by fifteen percent
(15%) for Landlord's expenses and profit in handling the substitution. Tenant
shall pay Landlord for all Special Tenant Work, within two (2) business days
after receiving an estimated invoice therefor, prior to Landlord's performing
such Special Tenant Work. Any amounts paid under such estimated invoice not
expended by Landlord for the Special Tenant Work shall be returned to Tenant
upon conclusion of the buildout.
(e) Within two (2) business days after receiving notice from Landlord
that the cost of the buildout of the Expansion Premises is estimated to exceed
the Expansion Premises Tenant Allowance, Tenant shall pay Landlord the amount by
which Landlord estimates the total costs will exceed the Expansion Premises
Tenant Allowance, as such estimate changes from time to time, prior to
Landlord's performing such work. Any amounts paid by Tenant pursuant to this
Section 7(e) not expended by Landlord for the buildout shall be returned to
Tenant upon conclusion of the buildout. Any failure by Tenant to pay for all
work in excess of the Expansion Premises Tenant Allowance or all Special Tenant
Work, in advance, shall constitute failure to pay rent when due and an Event of
Default by Tenant hereunder, giving rise to all remedies available to Landlord
under the Lease, this Amendment and at law or equity for non-payment of rent.
(f) Landlord shall contribute up to $37,968.00 (the "Expansion
Premises Tenant Allowance") towards the completion of the buildout of the
Expansion Premises, which Expansion Premises Tenant Allowance shall include the
cost of preparation of the Tenant Plans and the Space Plan, construction costs
and Landlord's construction management fee. Any costs in excess of the
Expansion Premises Tenant Allowance shall be paid solely by Tenant as set forth
in Section 7(e) above. The Expansion Premises Tenant Allowance is calculated at
a rate of $28.00 per rentable square foot of the Expansion Premises.
8. Additional Services for Expansion Premises. Should Tenant
------------------------------------------
require any additional work or service, including but not limited
to heating, ventilation and air conditioning ("HVAC") furnished
outside Landlord's normal operating hours, as such are defined in
the Lease, Landlord may, upon twenty-four (24) hours notice by
Tenant, furnish such additional services at a charge of $90.00
per hour, subject to upward adjustment in Landlord's discretion,
it being agreed that the cost to Landlord of such additional
services shall not be considered or treated as Basic Cost for the
Expansion Premises.
9. Parking for Expansion Premises. By virtue of its occupation of
------------------------------
the Expansion Premises, Tenant shall have the right to contract
for three (3) additional unreserved parking spaces on the
Building's parking lot at a charge equal to the rate charged by
Landlord or the third-party vendor for such spaces from time to
time.
-5-
<PAGE>
10. Tenant Access. Subject to Landlord's reasonable regulations,
-------------
Tenant shall have access to the Expansion Premises 24 hours per
day, 365 days per year, except in the case of an emergency or
when the Building may be closed by governmental authorities.
Landlord shall provide Tenant with a restricted entry access
system for after-hours access to the Building.
11. Security Deposit for Expansion Premises. Upon execution of this
---------------------------------------
Amendment, the second paragraph of Section 5 of the Lease shall
be deleted in its entirety, and Tenant shall not be entitled to
the return of the $5,240.83 as set forth in clause (2) of such
second paragraph. The amount of $15,722.50, currently held by
Landlord as the Security Deposit at the time of execution of this
Amendment, shall be held as the Security Deposit for the Premises
and the Expansion Premises for the Lease Term and the Expansion
Premises Term.
12. Notices. Section (p) of the Data Sheet and Section 30(c) of the
-------
Lease shall be amended to reflect the following address for
notices to Landlord:
Arlington Park Realty Corporation
c/o The Carey Winston Company
1667 K Street, N.W.
Suite 700
Washington, D.C. 20006
13. Inapplicable Lease Sections. Notwithstanding any other terms
---------------------------
contained herein, the second paragraph of Section 3(a) of the
Lease shall not be applicable to the Expansion Premises.
14. Defined Terms. Except as otherwise expressly provided herein,
-------------
all defined terms shall have the same meanings as provided in the
Lease.
15. Headings. Headings contained in this Amendment are for
--------
convenience only and are not substantive to the provisions of
this Amendment.
16. Lease Terms Ratified. Except as otherwise expressly provided
--------------------
herein, and unless inconsistent with the terms hereof, all other
terms, conditions and covenants of the Lease are hereby ratified
and confirmed and shall apply to the Expansion Premises.
IN WITNESS WHEREOF, the parties have executed this Amendment by affixing
their hands and seals as of the date noted above.
-6-
<PAGE>
Landlord:
ATTEST: ARLINGTON PARK REALTY
CORPORATION
/s/ By: /s/ Margaret S. Cleary
- -------------------------- ---------------------------------------
Name: Margaret S. Cleary
-------------------------------------
Title: Vice President
------------------------------------
Tenant:
WITNESS/ATTEST: AMERICAN SCHOOLS OF
PROFESSIONAL PSYCHOLOGY, INC.
/s/ Charles T. Gradowski By: /s/ Harold J. O'Donnell
- -------------------------- ---------------------------------------
Name: Harold J. O'Donnell
-------------------------------------
Title: President
------------------------------------
-7-
<PAGE>
EXHIBIT 10.16
DAUM Addendum
ADDENDUM TO THE STANDARD INDUSTRIAL COMMERCIAL
MULTI-TENANT LEASE-MODIFIED NET
DATED NOVEMBER 3, 1995
BY AND BETWEEN
THE GORDON FAMILY TRUST AS LESSOR AND
THE ADVANCED TRAINING IN THE BEHAVIORAL SCIENCES, INC.,
A CALIFORNIA CORPORATION AS LESSEE
________________________________________________________________________________
10.2 Definition of Real Property Tax:
Notwithstanding any other provision in the Lease, Paragraph 10.2 to
the contrary, Lessee shall have no responsibility for any increase in
property taxes due to the transfer of ownership of all or part of the
building in which Lessee's Premises are located.
49. Tenant Improvements:
During the term of the lease, Lessee at Lessee's sole cost and expense
shall be permitted to contract Lessee's improvements per Exhibit "A",
attached hereto. Any additional improvements not listed on Exhibit
"A" shall require Lessor's prior written approval. All work shall be
done to code, with approval from the City of Ventura and be completed
in a workmanlike manner. Lessee shall not be required to return said
improvements outlined on Exhibit "A" to it's current condition at the
termination of the lease. Lessor at Lessor's sole cost and expense
shall be required to seal demising wall prior to December 1, 1995.
50. Early Possession:
Lessor shall grant to Lessee the right to Early Possession upon
execution of lease for the purpose of constructing Lessee's
Improvements per Exhibit "A". All improvements shall be constructed
to code and in a workmanlike manner.
52.(v) Failure give timely notice to extend or terminate the Lease shall
result in a month to month tenancy, terminable by either party upon
thirty (30) days written notice and subject to all terms and
conditions of this Lease except holdover rent as set forth in Section
26.
<PAGE>
RENT ADJUSTMENT(S)
ADDENDUM TO
STANDARD LEASE
Dated November 3, 1995
By and Between (Lessor) Gordon Family Trust
(Lessee) Advanced Training in the Behavioral
Sciences, Inc., A California Corporation
Property Address: 5125 Ralston Street, Ventura, CA 93003
Paragraph 51
A. RENT ADJUSTMENTS:
The monthly rent for each month of the adjustment period(s) specified below
shall be increased using the method(s) indicated below:
(Check Method(s) to be Used and Fill In Appropriately)
[_] I. Cost of Living Adjustment(s) (COL)
(a) On (Fill in COL Adjustment Date(s): ___________________________
________________________________________________________________________________
the monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be adjusted by the change, if any, from the Base Month specified below, in
the Consumer Price Index of the Bureau of Labor Statistics of the U.S.
Department of Labor for (select one): [_]CPI U (All Urban Consumers), for (Fill
in Urban Area): ________________________________________. All items (1982-1984)
= 100), herein referred to as "C.P.I."
(b) The monthly rent payable in accordance with paragraph A1(s) of this
Addendum shall be calculated as follows: the Base Rent set forth in paragraph
1.5 of the attached Lease, shall be multiplied by a fraction the numerator of
which shall be the C.P.I. of the calendar month 2 (two) months prior to the
month(s) specified in paragraph A1(a) above during which the adjustment is to
take effect, and the denominator of which shall be the C.P.I., of the calendar
month which is two (2) months prior to (select one): [_] the first month of the
term of this Lease as set forth in paragraph 1.3 ("Base Month") or [_] (Fill in
Other "Base Month"): _________________________. The sum so calculated shall
constitute the new monthly rent hereunder, but in no event, shall any such new
monthly rent be less than the rent payable for the month immediately preceding
the date for rent adjustment.
(c) In the event the compilation and/or publication of the C.P.I. shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the C.P.I. shall be used to
make such calculation, in the event that Lessor and Lessee cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
[_] II. Market Rental Value Adjustment(s) (MRV)
(a) On (Fill in MRV Adjustment Date(s): _____________________________
_______________________________________________________________________________
the monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be adjusted to the "Market Rental Value" of the property as follows:
1) Four months prior to the Market Rental Value (MRV) Adjustment
Date(s) described above, Lessor and Lessee shall meet to establish an agreed
upon new MRV for the specified term. If agreement cannot be reached, then:
(i) Lessor and Lessee shall immediately appoint a mutually
acceptable appraiser or broker to establish the new MRV within the next 30 days.
Any associated costs will be split equally between the parties, or
(ii) Both Lessor and the Lessee shall each immediately select and
pay the appraiser or broker of their choice to establish a MRV within the next
30 days. If, for any reason, either one of the appraisals is not completed
within the next 30 days, as stipulated, then the appraisal that is completed at
that time shall automatically become the new MRV. If both appraisals are
completed and the two appraisers/brokers cannot agree on a reasonable average
MRV then they shall immediately select a third mutually acceptable
appraiser/broker to establish a third MRV within he next 30 days. The average of
the two appraisals closest in value shall then become the new MRV. The costs of
the third appraisal will be split equal between the parties.
2
<PAGE>
Initials: _________ Initials: _______
_________ _______
RENT ADJUSTMENTS
Page 1 of 2
NOTICE: These terms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form. American Industrial Real Estate Association, 345 South Figueroa
Street, Suite M-1, Los Angeles, CA 90071. (213) 687-8777 Fax No. (213) 687-
0418.
2) In any event, the new MRV shall not be less than the rent payable
for the month immediately preceding the date for rent adjustment.
(b) Upon the establishment of each New Market Rental Value as described in
paragraph AII:
1) the monthly rental sum so calculated for each term as specified
in paragraph All(a) will become the new "Base Rent" for the purpose of
calculating any further Cost of Living Adjustments as specified in paragraph
A1(a) above and
2) the first month of each Market Rental Value term as specified in
paragraph All(a) shall become the new "Base Month" for the purpose of
calculating any further cost of Living Adjustments as specified in paragraph
A1(b).
[_] III. Fixed Rental Adjustment (FRA)
The monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be increased to the following amounts on the dates set forth below:
On (Fill in FRA Adjustment Date(s)): The New Base Rental shall be:
December 1, 1996 $6,110.64
December 5, 1997 $6,324.51
B. NOTICE: Unless specified otherwise herein, notice of any escalations other
than Fixed Rental Adjustment(s) shall be made as specified in paragraph 23 of
the attached Lease.
C. BROKER'S FEE:
The Real Estate Brokers specified in paragraph 1.10 of the attached Lease
shall be paid a Brokerage Fee for each adjustment specified above in
accordance with paragraph 15 of the attached Lease.
Initials:_______ Initials:_______
_______ _______
RENT ADJUSTMENTS
Page 2 of 2
NOTICE: These terms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form. American Industrial Real Estate Association, 345 South Figueroa
Street, Suite M-1, Los Angeles, CA 90071. (213) 687-8777 Fax No. (213) 687-
0418.
3
<PAGE>
DAUM Hazardous Substances
&
American Disabilities Act
Notice to Owners, Buyers and Tenants Regarding hazardous Substances and
-----------------------------------------------------------------------
Underground Storage Tanks
-------------------------
Comprehensive Federal, state and local regulations have recently been enacted to
control the use, storage, handling, clean-up, removal and disposal of hazardous
and toxic wastes and substances. Extensive legislation has also been adopted
with regard to underground storage tanks. As real estate licensees, we are not
experts in the area of hazardous substances and we encourage you to consult with
your legal counsel with respect to your rights and liabilities with regard to
hazardous substances laws and regulations and to obtain technical advice with
regard to the use, storage, handling, clean-up, removal or disposal of hazardous
substances from professionals, such as a civil engineer, geologist or other
persons with experience in these matters to advise you concerning the property.
We also encourage you to review the past uses of the property, which may provide
information as to the likelihood of the existence of hazardous substances or
storage tanks on the property.
DAUM Commercial Real Estate Services will disclose any knowledge it actually
possesses with respect to the existence of hazardous substances or underground
storage tanks on the property. DAUM Commercial Real Estate Services has not
made any investigations or obtained reports regarding the property, unless so
indicated in a separate document signed by DAUM Commercial Real Estate Services.
DAUM Commercial Real Estate Services makes no representation or warranty
regarding the existence or non-existence of hazardous substances or underground
storage tanks on the property.
With regard to the sale of real property, recently enacted California Health and
Safety Code Section 25359.7 provides that any owner of non-residential real
property who knows, or has reasonable cause to believe, that any release of
hazardous substances has come to be located on or beneath real property, shall,
prior to the sale of real property, give written notice of that condition to the
buyer of the real property. Failure of the owner to provide written notice when
required shall subject the owner to actual damages and other remedies provided
by the law. In addition, where the owner has actual knowledge of the presence
of any hazardous substance and knowingly and willfully fails to provide written
notice to the buyer, the owner is liable for a civil penalty not to exceed
$5,000 for each separate violation.
With regard to leases of real property, Section 25359.7 of the California Health
and Safety Code provides that any lessee of real property who knows, or has
reasonable cause to believe, that any release of hazardous substances has come
to be located on or beneath real property, shall, upon discovery by the lessee
of the presence or suspected presence of a hazardous substance release, give
notice of that condition to the owner of the real property. Failure of the
lessee to provide written notice as required to the owner shall make the lease
voidable at the discretion of the owner. The Health and Safety Code provides
that if the lessee has actual knowledge of the presence of any hazardous
substance release and knowingly and willfully fails to provide written notice as
required to the owner, the lessee is liable for a civil penalty not to exceed
$5,000 for each separate violation.
As used in this notice, the term "hazardous substances" is used in the broadest
sense and includes all hazardous and toxic materials, substances, or waste as
defined by applicable Federal, state and local laws and regulations and
includes, but is not limited to petroleum products, paints and solvents, PCBs,
asbestos, pesticides and other substances. Hazardous substances may be found on
any type of real property, improved or unimproved, occupied or vacant.
Notice to Owners, Buyers, and Tenants Regarding the "Americans with Disabilities
- --------------------------------------------------------------------------------
Act"
----
Legislation known as the "Americans with Disabilities Act" ("ADA") was recently
adopted and may affect The Property and/or its intended use. As real estate
licensees, we are not experts in the legal or technical aspects of ADA as it may
pertain to you. We encourage you to consult your legal counsel, architect
and/or other professionals with appropriate experience with regard to your
rights or obligations for compliance with ADA.
DAUM Commercial Real Estate Services makes no representation or warranty
regarding the compliance or non-compliance of The Property Under ADA.
Advanced Training in the Behavioral Sciences, Inc.,
a California Corporation
By ___________________________________ Dated 11/5/95
-------------------------
Gordon Family Trust
By ___________________________________ Dated 11/15/95
-------------------------
4
<PAGE>
OPTION(S) TO EXTEND
ADDENDUM TO
STANDARD LEASE
Dated November 3, 1995
----------------
By and Between (Lessor) Gordon Family Trust
-------------------
Lessee) Advanced Training in the Behavioral
-----------------------------------
Sciences, Inc., A California Corporation
Property Address: 5126 Ralston Street, Ventura, CA 93003
--------------------------------------
Paragraph 52
----------
A. OPTION(S) TO EXTEND
Lessor hereby grants to Lessee the option to extend the term of the Lease
for [3] additional 12 month period(s) commencing when the prior term expires
upon each and all of the following terms and conditions:
(i) Lessee gives to Lessor, and Lessor actually receives on a date which
is prior to the date that the option period would commence (if exercised) by at
least 3 and not more than 6 months, a written notice of the exercise of the
option(s) to extend this Lease for said additional term(s), time being of
essence. If said notification of the exercise of said option(s) is (are) not so
given and received, the option(s) shall automatically expire; said option(s) may
(if more than one) only be exercised consecutively:
(ii) The provisions of paragraph 39, including the provision relating to
default of Lessee set forth in paragraph 39.4 of this Lease are conditions of
this Option;
(iii) All of the terms and conditions of this Lease except where
specifically modified by this option shall apply;
(iv) The monthly rent for each month of the option period shall be
calculated as follows, using the method(s) indicated below:
(Check Method(s) to be Used and Fill in Appropriately)
[_] I. Cost of Living Adjustment(s) (COL)
(a) On (Fill in COL Adjustment Date(s)):_____________________________
________________________________________________________________________________
the monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be adjusted by the change, if any, from the Base Month specified below, in
the Consumer Price Index of the Bureau of Labor Statistics of the U.S.
Department of Labor for (select one): [_] CPI W (Urban Wage Earners and Clerical
Workers) or [_] CPI U (All Urban Consumers), for (Fill in Urban Area):__________
________________________________________________________________________________
All items (1982-1984 - 100), herein referred to as "C.P.I."
(b) The monthly rent payable in accordance with paragraph AI(a) of this
Addendum shall be calculated as follows: the Base Rent set forth in paragraph
1.5 of the attached Lease, shall be multiplied by a fraction the numerator of
which shall be the C.P.I. of the calendar month 2 (two) months prior to the
month(s) specified in paragraph AI(a) above during which the adjustment is to
take effect, and the denominator of which shall be the C.P.I. of the calendar
month which is two (2) months prior to (select one): [_] the first month of the
term of this Lease as set forth in paragraph 1.3 ("Base Month") or [_] (Fill in
Other "Base Month"): _________.
________________. The sum so calculated shall constitute the new monthly rent
hereunder, but in no event, shall any such new monthly rent be less than the
rent payable for the month immediately preceding the date for rent adjustment.
(c) In the event the compilation and/or publication of the C.P.I. shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the Index most nearly the same as the C.P.I. shall be used to
make such calculation. In the event that Lessor and Lessee cannot agree on such
alternative Index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
[_] II. Market Rental Value Adjustment(s) (MRV)
(a) On (Fill in MRV Adjustment Date(s)): _____________________________
_______________________________________________________________________________
5
<PAGE>
the monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be adjusted to the "Market Rental Value" of the property as follows:
1) Four months prior to the market Rental Value (MRV) Adjustment
Date(s) described above, Lessor and Lessee shall meet to establish an agreed
upon new MRV for the specified term. If agreement cannot be reached, then:
Initials: ________ Initials: _________
________ _________
OPTIONS TO EXTEND
Page 1 of 2
NOTICE: These terms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form. American Industrial Real Estate Association, 345 South Figueroa
Street, Suite M-1, Los Angeles, CA 90071. (213) 687-8777 Fax No. (213) 687-
0418.
i) Lessor and Lessee shall immediately appoint a mutually acceptable
appraiser or broker to establish the new MRV within the next 30 days. Any
associated costs will be split equally between the parties, or
ii) Both Lessor and Lessee shall each immediately select and pay the
appraiser or broker of their choice to establish a MRV within the next 30 days.
If, for any reason, either one of the appraisals is not completed within the
next 30 days, as stipulated, then the appraisal that is completed at that time
shall automatically become the new MRV. If both appraisals are completed and
the two appraisers/brokers cannot agree on a reasonable average MRV then they
shall immediately select a third mutually acceptable appraiser/broker to
establish a third MRV within the next 30 days. The average of the two
appraisals closest in value shall then become the new MRV. The costs of the
third appraisal will be split equally between the parties.
2) In any event, the new MRV shall not be less than the rent payable
for the month immediately preceding the date for rent adjustment.
(b) Upon the establishment of each New Market Rental Value as described in
paragraph AII(a):
1) the monthly rental sum so calculated for each term as specified
in paragraph AII(a) will become the new "Base Rent" for the purpose of
calculating any further Cost of Living Adjustments as specified in paragraph
AI(a) above and
2) the first month of each Market Rental Value term as specified in
paragraph AII(a) shall become the new "Base Rent" for the purpose of calculating
any further Cost of Living Adjustments as specified in paragraph AI(b).
[X] III. Fixed Rental Adjustment(s) (FRA)
The monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be increased to the following amounts on the dates set forth below:
On (Fill in FRA Adjustment Date(s)): The New Base Rental shall be:
December 1, 1998 $ 6,545.87
------------------- ------------
December 1, 1999 $ 6,774.98
------------------- ------------
December 1, 2000 $ 7,012.1--
------------------- ------------
___________________ $ ____________
B. NOTICE: Unless specified otherwise herein, notice of any escalations
other than Fixed Rental Adjustments shall be made as specified in paragraph 23
of the attached Lease.
C. BROKER'S FEE:
The Real Estate Brokers specified in paragraph 1.10 of the attached Lease
shall be paid a Brokerage Fee for each adjustment specified above in
accordance with paragraph 15 of the attached Lease.
Initials: _________ Initials: ________
_________ ________
OPTIONS TO EXTEND
Page 2 of 2
NOTICE: These terms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form. American Industrial Real Estate Association, 345 South Figueroa
Street, Suite M-1, Los Angeles, CA 90071. [(213) 687-8777 Fax No. (213) 687-
0418].
6
<PAGE>
GUARANTY OF LEASE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
WHEREAS, Gordon Family Trust hereinafter referred to as "Lessor" and
Advanced Training in the Behavioral Sciences, Inc., a California Corporation
hereinafter referred to as "Lessee" are about to execute a document entitled
"Lease" dated November 3, 1995 concerning the premises commonly known as 5126
Ralston Street, Ventura, CA 93003 wherein Lessor will lease the premises to
Lessee and
WHEREAS, Steve Santini hereinafter referred to as "Guarantors" have a
[licensed] interest in Lessee and
WHEREAS, Lessor would not execute the Lease if Guarantors did not execute
and deliver to Lessor this Guarantee of Lease.
NOW THEREFORE, for and in consideration of the execution of the foregoing
Lease by Lessor and as a material inducement to Lessor to execute said Lease,
Guarantors hereby jointly, severally, unconditionally and irrevocably guarantee
the prompt payment by Lessee of all rentals and all other sums payable by Lessee
under said Lease and the faithful and prompt performance by Lessee of each and
every one of the terms, conditions and covenants of said Lease to be kept and
performed by Lessee.
It is specifically agreed and understood that the terms of the foregoing
Lease may be altered, [effected], modified or changed by agreement between
Lessor and Lessee, or by a course of conduct, and said lease may be assigned by
lessor or any assignee of Lessor without consent or notice to Guarantors and
that this Guaranty shall thereupon and thereafter guarantee the performance of
said Lease as so changed, modified, altered or assigned.
The Guaranty shall not be released, modified or effected by failure or
delay on the part of Lessor to enforce any of the rights or remedies of the
Lessor under said Lease, whether pursuant to the terms thereof or at law or in
equity.
No notice of default need be given to Guarantors. It being specifically
agreed and understood that the guarantee of the undersigned is a continuing
guarantee under which Lessor may proceed forthwith and immediately against
Lessee or against Guarantors following any breach or default by Lessee or for
the enforcement of any rights which Lessor may have as against Lessee pursuant
to or under the terms of the written Lease or at law or in equity.
Lessor shall have the right to proceed against Guarantors hereunder
following any breach or default by Lessee without first proceeding against
Lessee and without previous notice to or demand upon either Lessee or
Guarantors.
Guarantors hereby waive (a) notice of acceptance of this Guaranty, (b)
demand of payment, presentation and protest, (c) all right to assert or plead
any statute of limitations as to or relating to this Guaranty and the Lease, (d)
any right to require the Lessor to proceed against the Lessee or any other
Guarantor or any other person or entity liable to Lessor, (e) any right to
require Lessor to apply to any default any security deposit or other security it
may hold under the Lease, (f) any right to require Lessor to proceed under any
other remedy Lessor may have before proceeding against Guarantors, (g) any right
of subrogation.
Guarantors do hereby subrogate all existing or future indebtedness of
Lessee to Guarantors to the obligations owed to Lessor under the Lease and this
Guaranty.
Any married woman who signs this Guaranty expressly agrees that recourse
may be had against her separate property for all of her obligations hereunder.
The obligations of Lessee under the Lease to execute and delivery estoppel
statements and financial statements, as therein provided, shall be deemed to
also require the Guarantors hereunder to do and provide the same relative to
Guarantors.
The term "Lessor" whenever hereinabove used refers to and means the Lessor
in the foregoing Lease specifically named and also any assignee of said Lessor,
whether by outright assignment or by assignment for security, and also any
successor to the interest of said Lessor or of any assignee in such Lease or any
part thereof, whether by assignment or otherwise. So long as the Lessor's
interest in or to the leased premises or the rents, issues and profits
therefrom, or in, to or under said Lease, are subject to any mortgage or deed of
trust or assignment for security, no acquisition by Guarantors of the Lessor's
interest in the leased premises or under said Lease shall affect the continuing
obligation of Guarantors under this Guaranty which shall nevertheless continue
in full force and effect for the benefit of the mortgagee, beneficiary, trustee
or assignee under such mortgage, deed of trust or assignment, of any purchase or
sale by judicial foreclosure or under private power of sale, and of the
successors and assigns of any such mortgagee, beneficiary, trustee, assignee or
purchaser.
The term "Lessee" whenever hereinabove used refers to and means the Lessee
in the foregoing Lease specifically named and also any assignee or sublessee of
said lease and also any successor in the interests of said Lessee, assignee or
sublessee of such Lease or any part thereof whether by assignment, sublease or
otherwise.
In the event any action be brought by said Lessor against Guarantors
hereunder to enforce the obligations of Guarantors hereunder, the unsuccessful
party in such action shall pay to the prevailing party therein a reasonable
attorney's fee which shall be fixed by the court.
If this Form has been filled in it has been prepared for submission to your
attorney for his approval. No representation or recommendation is made by
the real estate broker or its agents or employees as to the legal
sufficiency, legal effect, or for consequences of this Form or the
transaction ________ thereto.
Executed at Ventura Steve Santini
------------ ---------------------------
on 11/5/95 /s/ Steve Santini
--------------------- ---------------------------
Address 2425 Lincoln ___________________________
------------------
7
<PAGE>
Ventura. CA 93001 "GUARANTORS"
-----------------
* 1977 - American Industrial real estate Association.
All rights reserved. No part of these works may be reproduced in any form
without permission in writing.
NOTE: These terms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing the
most current form. AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 345 So.
Figueroa Street, M-1, Los Angeles, CA 90071. (213) 687 -8777
8
<PAGE>
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD SUBLEASE
(LONG-FORM TO BE USED WITH PRE-1996 AIR LEASES)
1. PARTIES. This Sublease, dated, for reference purposes only, August
26, 1997, is made by and between STEVEN H. SANTINI, as assignee of Association
for Advanced Training in the Behavioral Sciences ("Sublessor") and ASSOCIATION
FOR ADVANCED TRAINING IN THE BEHAVIORAL SCIENCES ("Sublessee").
2. PREMISES. Sublessor hereby subleases to Sublessee and Sublessee
hereby subleases from Sublessor for the term, at the rental, and upon all of the
conditions set forth herein, that certain real property, including all
improvements therein, and commonly known by the street address of 5126 Ralston
Street, Ventura, located in the County of Ventura, State of California and
generally described as (describe briefly the nature of the property)
approximately 8,250 square feet of office/warehouse space, as per the map
attached hereto, part of a larger 57,500 square foot building within Walker-
Ralston square, together with all "Common Areas" as described in the master
Lease ("Premises").
3. TERM.
3.1 TERM. The term of this Sublease shall be for 17 months
commencing on September 1, 1997 and ending on January 31, 1999 unless sooner
terminated pursuant to any provision hereof.
3.2 DELAY IN COMMENCEMENT. Sublessor agrees to use its best
commercially reasonable efforts to deliver possession of the Premises by the
commencement date. If, despite said efforts, Sublessor is unable to deliver
possession as agreed, Sublessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Sublease. Sublessee shall
not, however, be obligated to pay Rent or perform its other obligations until it
receives possession of the Premises. If possession is not delivered within
thirty days after the commencement date, Sublessee may, at its option, by notice
in writing within ten days after the end of such thirty day period, cancel this
Sublease, in which event the Parties shall be discharged from all obligations
hereunder. If such written notice is not received by Sublessor within said ten
day period, Sublessee's right to cancel shall terminate. Except as otherwise
provided, if possession is not tendered to Sublessee when required and Sublessee
does not terminate this Sublease, as aforesaid, any period of rent abatement
that Sublessee would otherwise have enjoyed shall run from the date of delivery
of possession and continue for a period equal to what Sublessee would otherwise
have enjoyed under the terms hereof, but minus any days of delay caused by the
acts or omissions of Sublessee. If possession is not delivered within 120 days
after the commencement date, this Sublease shall automatically terminate unless
the Parties agree, in writing, to the contrary.
4. RENT.
4.1 BASE RENT. Sublessee shall pay to Sublessor as Base Rent for
the Premises equal monthly payments of $4,125.00 in advance, on the 1st day of
each month of the term hereof. Sublessee shall pay Sublessor upon the execution
hereof 4,125.00 as Base Rent for the month of September 1997. Base Rent for any
period during the term hereof which is for less than one month shall be a pro
rata portion of the monthly installment.
4.2 RENT DEFINED. All monetary obligations of Sublessee to Sublessor
under the terms of this Sublease (except for the Security Deposit) are deemed to
be rent ("Rent"). Rent shall be payable in lawful money of the United States to
Sublessor at the address stated herein or to such other persons or at such other
places as Sublessor may designate in writing.
5. SECURITY DEPOSIT. Sublessee shall deposit with Sublessor upon
execution hereof $4,125.00 as security for Sublessee's faithful performance of
Sublessee's obligations hereunder. If Sublessee fails to pay Rent or other
charges due hereunder, or otherwise defaults with respect to any provision of
this Sublease, Sublessor may use, apply or retain all or any portion of said
deposit for the payment of any Rent or other charge in default or for the
payment of any other sum to which Sublessor may become obligated by reason of
Sublessee's default, or to compensate Sublessor for any loss or damage which
Sublessor may suffer thereby. If Sublessor so uses or applies all or any
portion of said deposit, Sublessee shall within ten days after written demand
therefore forward to Sublessor an amount sufficient to restore said Deposit to
the full amount provided for herein and Sublessee's failure to do so shall be a
material breach of this Sublease. Sublessor shall not be required to keep said
Deposit separate from its general accounts. If Sublessee performs all of
Sublessee's obligations hereunder, said Deposit, or so much thereof as has not
therefore been applied by Sublessor, shall be returned, without payment of
interest to Sublessee (or at Sublessor's option, to the last assignee, if any,
of Sublessee's interest hereunder) at the expiration of the term hereof, and
after Sublessee has vacated the Premises. No trust relationship is created
herein between Sublessor and Sublessee with respect to said Security Deposit.
6. USE.
6.1 AGREED USE. The Premises shall be used an d occupied only for
creating and producing instructional courses, materials and products, printing
said materials, and storing said material and products, any other purpose
permitted under the Master Lease and for no other purpose.
6.2 COMPLIANCE. Sublessor warrants that the improvements on the
Premises comply with all applicable covenants or restrictions of record and
applicable building codes, regulations and ordinances ("Applicable
Requirements") in effect on the commencement date. Said warranty does not apply
to the use to which Sublessee will put the Premises or to any alterations or
utility installations made or to be made by Sublessee. NOTE: Sublessee is
responsible for determining whether or not the zoning is appropriate for its
intended use, and acknowledges that past uses of the Premises may no longer be
allowed. If the Premises do not comply
9
<PAGE>
with said warranty, Sublessor shall, except as otherwise provided, promptly
after receipt of written notice from Sublessee setting forth with specificity
the nature and extent of such non-compliance, rectify the same at the
Sublessor's expense. If Sublessee does not give Sublessor written notice of a
non-compliance with this warranty within six months following the commencement
date, correction of that non-compliance shall be the obligation of Sublessee at
its sole cost and expense. If the Applicable Requirements are hereafter changed
so as to require during the term of this Sublease the construction of an
addition to or an alteration of the Building, the remediation of any Hazardous
Substance, or the reinforcement or other physical modification of the Building
("Capital Expenditure"), Sublessor and Sublessee shall allocate the cost of such
work as follows: Sublessor shall pay all costs of any Capital Expenditures.
(a) If such Capital Expenditures are required as a result of the specific
and unique use of the Premises by Sublessee as compared with uses by tenants in
general, Sublessee shall be fully responsible for the cost thereof provided,
however, that if such Capital Expenditure is required during the last two years
of this Sublease and the cost thereof exceeds six months' Base Rent, Sublessee
may instead terminate this Sublease unless Sublessor notifies Sublessee in
writing, within ten days after receipt of Sublessee's termination notice that
Sublessor has elected to pay the difference between the actual cost thereof and
the amount equal to six months' Base Rent. If the Parties elect termination,
Sublessee shall immediately cease the use of the Premises which requires such
Capital Expenditure and deliver to Sublessor written notice specifying a
termination date at least ninety days thereafter. Such termination date shall,
however, in no event be earlier then the last day that Sublessee could legally
utilize the Premises without commencing such Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific and
unique use of the Premises by Sublessee (such as governmentally mandated seismic
modifications, then Sublessor shall pay for said Capital Expenditure and the
cost thereof shall be prorated between the Sublessor and Sublessee and the
Sublessee shall only be obligated to pay, each month during the remainder of the
term of this Sublease, on the date on which Rent is due, an amount equal to the
product of multiplying the cost of such Capital Expenditure by a fraction, the
numerator of which is one, and the denominator of which is the number of months
of the useful life of such Capital Expenditure as such useful life is specified
pursuant to Federal income tax regulations or guidelines for depreciation
thereof (including interest on the unamortized balance as is then commercially
reasonable in the judgment of Sublessor's accountant), with Sublessee reserving
the right to prepay its obligation at any time. Provided, however, that if such
Capital Expenditure is required during the last two years of this Sublease or if
Sublessor reasonably determines that it is not economically feasible to pay its
share thereof, Sublessor shall have the option to terminate this Sublease upon
ninety days prior written notice to Sublessee unless Sublessee notifies
Sublessor, in writing, within ten days after receipt of Sublessor' s termination
notice that Sublessee will pay for such Capital Expenditure. If Sublessor does
not elect to terminate, and fails to tender its share of any such Capital
Expenditure, Sublessee may advance such funds and deduct same, with interest,
from Rent until Sublessor's share of such costs have been fully paid. If
Sublessee is unable to finance Sublessor's share, or if the balance of the Rent
due and payable for the remainder of this Sublease is not sufficient to fully
reimburse Sublessee on an offset basis, Sublessee shall have the right to
terminate this Sublease upon ten days written notice to Sublessor.
(c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Sublessee as a result of an actual or proposed change in use, change in
intensity of use, or modification to the Premises then, and in that event,
Sublessee shall be fully responsible for the cost thereof, and Sublessee shall
not have any right to terminate this Sublease.
6.3 ACCEPTANCE OF PREMISES AND LESSEE. Sublessee acknowledges that:
(a) it has been advised by Brokers to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical, HVAC and
fire sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements), and their suitability for Sublessee's intended use.
(b) Sublessee has made such investigation as it deems necessary with
reference to such matters and assumes all responsibility therefor as the same
relate to its occupancy of the Premises, and
(c) neither Sublessor, Sublessor's agents, nor any Broker has made any oral
or written representations or warranties with respect to said matters other than
as set forth in this Sublease.
In addition, Sublessor acknowledges that:
(a) Broker has made no representations, promises or warranties concerning
Sublessee's ability to honor the Sublease or suitability to occupy the Premises,
and
(b) it is Sublessor's sole responsibility to investigate the financial
capability and/or suitability of all proposed tenants.
7. MASTER LEASE
7.1 Sublessor is the lessee of the Premises by virtue of a lease,
hereinafter the "Master Lease", a copy of which is attached hereto marked
Exhibit 1, wherein Gordon Family Trust is the lessor, hereinafter the "Master
Lessor"
7.2 This Sublease is and shall be at all times subject and
subordinate to the Master Lease.
7.3 The terms, conditions and respective obligations of Sublessor and
Sublessee to each other under this Sublease shall be the terms and conditions of
the Master Lease except for those provisions of the Master Lease which are
directly contradicted by this Sublease in which event the terms of this Sublease
document shall control over the Master Lease. Therefore, for the purposes of
this Sublease, wherever in the Master Lease the word "Lessor" is used it shall
be deemed to mean the Sublessor herein and wherever in the Master Lease the
word "Lessee" is used it shall be deemed to mean the Sublessee herein.
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7.4 During the term of this Sublease and for all periods subsequent
for obligations which have arisen prior to the termination of this Sublease, and
only with respect to the Premises covered by this Sublease, Sublessee does
hereby expressly assume and agree to perform and comply with, for the benefit of
Sublessor and Master Lessor (as to the "Premises" under this Sublease only) each
and every obligation of Sublessor under the Master Lease except for the
following paragraphs which are excluded therefrom: 1.2-1, 7, 1.10, 1.11, 2.1-
2,5, 3.1-3, 3, 4.1, 4.2, 5, 6.2, 7.1, 7.2, 7.4(b), 8.4, 10.3, 12.1(b), 13.4, 15,
37, 49, 50, 51., 52
7.5 The obligation that Sublessee has assumed under paragraph 7.4
hereof are hereinafter referred to as the "Sublessee's Assumed Obligations".
The obligations that sublessee has not assumed under paragraph 7.4 hereof are
hereinafter referred to as the "SUBLESSOR'S REMAINING OBLIGATIONS".
7.6 Sublessee shall hold Sublessor free and harmless from all
liability, judgments, costs, damages, claims or demands, including reasonable
attorneys fees, arising out of Sublessee's failure to comply with or perform
Sublessee's Assumed Obligations.
7.7 Sublessor agrees to maintain the Master Lease during the entire
term of this Sublease, subject, however, to any earlier termination of the
Master Lease without the fault of the Sublessor, and to comply with or perform
Sublessor's Remaining Obligations and to hold Sublessee free and harmless from
all liability, judgments, costs, damages, including reasonable attorneys fees,
claims or demands arising out of Sublessor's failure to comply with or perform
Sublessor's Remaining Obligations.
7.8 Sublessor represents to Sublessee that the Master Lease is in
full force and effect and that no default exists on the part of any Party to the
Master Lease.
8. ASSIGNMENT OF SUBLEASE AND DEFAULT.
8.1 Sublessor hereby assigns and transfers to Master Lessor the
Sublessor's interest in this Sublease, subject however to the provisions of
Paragraph 8.2 hereof.
8.2 Master Lessor, by executing this document, agrees that until a
Default shall occur in the performance of Sublessor's Obligations under the
Master Lease, that Sublessor may receive, collect and enjoy the Rent accruing
under this Sublease. However, if Sublessor shall Default in the performance of
its obligations to Master Lessor then Master Lessor may, at its option, receive
and collect, directly from Sublessee, all Rent owing and to be owed under this
Sublease. Master Lessor shall not, by reason of this assignment of the Sublease
nor by reason of the collection of the Rent from the Sublessee, be deemed liable
to Sublessee for any failure of the Sublessor to perform and comply with
Sublessor's Remaining Obligations.
8.3 Sublessor hereby irrevocably authorizes and directs Sublessee
upon receipt of any written notice from the Master Lessor stating that a Default
exists in the performance of Sublessor's obligations under the Master Lease, to
pay to Master Lessor the Rent due and to become due under the Sublease.
Sublessor agrees that Sublessee shall have the right to rely upon any such
statement and request from Master Lessor, and that Sublessee shall pay such Rent
to Master Lessor without any obligation or right to inquire as to whether such
Default exists and notwithstanding any notice from or claim from Sublessor to
the contrary and Sublessor shall have no right or claim against Sublessee for
any such Rent so paid by Sublessee.
8.4 No changes or modifications shall be made to this Sublease
without the consent of Master Lessor.
9. CONSENT OF MASTER LESSOR.
9.1 In the event that the Master Lease requires that Sublessor obtain
the consent of Master Lessor to any subletting by Sublessor then, this Sublease
shall not be effective unless, within ten days of the date hereof, Master Lessor
signs this Sublease thereby giving its consent to this Subletting.
9.2 In the event that the obligations of the Sublessor under the
Master Lease have been guaranteed by third parties then neither this Sublease,
nor the Master Lessor's consent, shall be effective unless, within 10 days of
the date hereof, said guarantors sign this Sublease thereby giving their consent
to this Sublease.
9.3 In the event that Master Lessor does give such consent then:
(a) Such consent shall not release Sublessor of its obligations
or alter the primary liability of Sublessor to pay the Rent and perform and
comply with all of the obligations of Sublessor to be performed under the Master
Lease.
(b) The acceptance of Rent by Master Lessor from Sublessee or
anyone else liable under the Master Lease shall not be deemed a waiver by Master
Lessor of any provisions of the Master Lease.
(c) The consent to this Sublease shall not constitute a consent
to any subsequent subletting or assignment.
(d) In the event of any Default of Sublessor under the Master
Lease, Master Lessor may proceed directly against Sublessor, any guarantors or
anyone else liable under the Master Lease or this Sublease without first
exhausting Master Lessor's remedies against any other person or entity liable
thereon to Master Lessor.
(e) Master Lessor may consent to subsequent sublettings and
assignments of the Master Lease or this Sublease or any amendments or
modifications thereto without notifying Sublessor or anyone else liable under
the Master Lease and without obtaining their consent and such action shall not
relieve such persons from liability.
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(f) In the event that Sublessor shall Default in its obligations
under the Master Lease, then Master Lessor, at its option and without being
obligated to do so, may require Sublessee to attorn to Master Lessor in which
event Master Lessor shall undertake the obligations of Sublessor under this
Sublease from the time of the exercise of said option to termination of this
Sublease but Master Lessor shall not be liable for any prepaid Rent nor any
Security Deposit paid by Sublessee, nor shall Master Lessor be liable for any
other Defaults of the Sublessor under the Sublease.
9.4 The signatures of the Master Lessor and any Guarantors of
Sublessor at the end of this document shall constitute their consent to the
terms of this Sublease.
9.5 Master Lessor acknowledges that, to the best of Master
Lessor's knowledge, no Default presently exists under the Master Lease of
obligations to be performed by Sublessor and that the Master Lease is in full
force and effect.
9.6 In the event that Sublessor Defaults under its obligations to be
performed under the Master Lease by Sublessor, Master Lessor agrees to deliver
to Sublessee a copy of any such notice of default. Sublessee shall have the
right to cure any Default of Sublessor described in any notice of default within
ten days after service of such notice of default on Sublessee. If such Default
is cured by Sublessee then Sublessee shall have the right of reimbursement and
offset from and against Sublessor.
10. BROKERS FEE.
10.1 Upon execution hereof by the parties, Sublessor shall pay to
__________________ a licensed real estate broker, ("BROKER"), a fee as set forth
in a separate agreement between Sublessor and Broker, or in the event there is
no such separate agreement, the sum of $________________ for brokerage services
rendered by Broker to Sublessor in this transaction.
10.2 Sublessor agrees that if Sublessee exercises any option or right
of first refusal as granted by Sublessor herein, or any option or right
substantially similar thereto, either to extend the term of this Sublease, to
renew this Sublease, to purchase the Premises, or to lease or purchase adjacent
property which Sublessor may own or in which Sublessor has an interest, then to
Sublessor shall pay to Broker a fee in accordance with the schedule of Broker in
effect at the time of the execution of this Sublease. Notwithstanding the
foregoing, Sublessor's obligation under this Paragraph 10.2 is limited to a
transaction in which Sublessor is acting as a Sublessor, lessor or seller.
10.3 INTENTIONALLY OMITTED.
10.4 INTENTIONALLY OMITTED.
10.5 INTENTIONALLY OMITTED.
11. ATTORNEY'S FEES. If any party or the Broker named herein
brings an action to enforce the terms hereof or to declare rights hereunder, the
prevailing party in any such action, on trial and appeal, shall be entitled to
his reasonable attorney's fees to be paid by the losing party as fixed by the
Court.
12. ADDITIONAL PROVISIONS. [If there are no additional provisions,
draw a line from this point to the next printed word after the space left here.
If there are additional provisions place the same here.] SEE ADDENDUM ATTACHED.
- --------------------------------------------------------------------------------
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY REAL ESTATE BROKER AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS SUBLEASE OR THE
TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
SUBLEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE
SUITABILITY OF THE PREMISES FOR SUBLESSEE'S INTENDED USE.
WARNING: IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA,
- -------
CERTAIN PROVISIONS OF THE SUBLEASE MAY NEED TO BE REVISED TO COMPLY WITH THE
LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED .
- --------------------------------------------------------------------------------
Executed at:
on: ________________________________ _________________________________
Address: 242 Lincoln Drive, Ventura, By_____________________________
CA 93001 "Sublessor (Corporation Seal)
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Executed at: __________________ ASSOCIATION FOR ADVANCED TRAINING IN THE
BEHAVIORAL SCIENCE, a California corporation
on:____________________________ By_________________________________
Address: 5127 Ralston St., Ventura By_________________________________
CA 93003 "Sublessee" (Corporation Seal)
Executed at:___________________ GORDON FAMILY TRUST
on:____________________________ By_________________________________
Address:_______________________ By BRUCE GORDON, Trustee
"Master Lessor" (Corporation Seal)
NOTE: THESE FORMS ARE OFTEN MODIFIED TO MEET CHANGING REQUIREMENTS OF LAW AND
NEEDS OF THE INDUSTRY. ALWAYS WRITE OR CALL TO MAKE SURE YOU ARE UTILIZING THE
MOST CURRENT FORM: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 SO. FLOWER
ST., SUITE 600, LOS ANGELES, CA 90017. (213) 687-8777.
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ADDENDUM TO STANDARD SUBLEASE
-----------------------------
12. Additional Provisions.
---------------------
12.1 The Master Lease consists of the Standard Industrial/Commercial
Multi-Tenant Lease -- Modified Net dated November 3, 1995, together with all
Addenda thereto, as amended by the First Amendment to the Standard
Industrial/Commercial Multi-Tenant Lease -- Modified Net executed on December
13, 1995 by Sublessee and on December 18, 1995 by Master Lessor, as assigned and
transferred by Sublessee to Sublessor pursuant tot he Assignment and Acceptance
dated August _____, 1997, and consented to by Master Lessor.
12.2 Sublessee shall be entitled to ______ parking spaces.
12.3. Sublessor covenants that there have not been any brokers
involved in this Sublease transaction, and agrees to indemnify and hold
Sublessee harmless f and from any claims by or commissions due to any broker
arising b y this Sublease transaction or the Master Lease.
12.4. Sublease agrees to assume and be bound by Section 6.2 of the
Master Lease, provided that "Lessee" is replaced with "Sublessee" and "Lessor"
is replaced with "Sublessor and Master Lessor", and that said Section 6.2 shall
apply only tot he "Premises" described in this Sublease.
12.5. Sublease agrees that it shall keep the Premises in good and
clean condition, without the obligation to undertake any repair, restoration or
replacement work unless such repair, restoration or replacement is due to
Sublessee's gross negligence or willful misconduct in its use of the Premises
and the fixtures therein.
12.6. For purposes of "Sublessee's Assumed Obligations" the terms
"Lessee-Owned Alterations," "Utility Installations" and "Trade Fixtures" as used
in the Master Lease shall only be deemed to be such improvements or property
owned or installed by Sublessee.
12.7. Sublessee agrees to assume and be bound by Section 7.4(b) of
the Master Lease, provided that Section 12.6 above shall apply, "Lessee" is
replaced with "Sublease and "Lessor" is replaced with "Sublessor and Master
Lessor."
12.8. Sublessee agrees to be bound by Section 8.4 of the Master
lease, provided that Section 12.6 above shall apply, "Lessor," is replaced with
"Sublessee" and "Lessor" is replaced with "Sublessor and "Sublessor and Master
Lessor," and that Section 8.4 of the Master lease shall apply only to the
"Premises" described in this Sublease.
12.9. Sublessee shall be liable for any increase in Real Property
Taxes (as defined in the Master Lease) attributable solely to Alterations (as
defined in the Master Lease), Trade Fixtures or Utility Installations placed
upon the Premises by Sublessee or at Sublease's request.
12.10. For purposes of delivery of notices to Sublessee, the
provisions of Section 23 of the Master Lease shall govern as long as such
notices are sent to Sublessee at the following address:
Association For Advanced Training in the Behavioral Sciences
Attn: Michael C. Markovitz, Ph.D
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STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
November 3, 1995, is made by and between Gordon Family Trust ("Lessor") and
Advanced Training in the Behavioral Sciences, Inc., a California Corporation
("Lessee"), (collectively the "Parties," or individually a "Party").
1.2(a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 5126 Ralston Street, located in the City
of Ventura, County of Ventura, State of California, with zip code 93003, as
outlined on Exhibit __ attached hereto ("Premises"). The "Building" is that
certain building containing the Premises and generally described as (describe
briefly the nature of the Building): Approximately 15,540 square feet of
office/industrial space, part of a larger 57,500 square foot building within
Walker-Ralston Square. In addition to Lessee's right to use and occupy the
Premises as hereinafter specified, Lessee shall have non-exclusive rights to the
Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but
shall not have any rights to the roof, exterior walls or utility raceways of the
Building or to any other Building in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along with
other buildings and improvements thereon, are herein collectively referred to
as the "Industrial Center." (Also see Paragraph 2.)
1.2(b) Parking: Thirty (30) unreserved vehicle parking spaces ("Unreserved
Parking Spaces"); and 0 reserved vehicle parking spaces ("Reserved Parking
Spaces"). (Also see Paragraph 2.6.)
1.3 Term: 3 years and 0 months ("Original Term") commencing December
1995 ("Commencement Date") and ending November 30, 1998. See Addendum
("Expiration Date"). (Also see Paragraph 3.)
1.4 Early Possession: 15 days prior to commencement date ("Early
Possession Date"). (Also see Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $5,904.00 per month ("Base Rent"), payable on the first
day of each month commencing December 1, 1995. (Also see Paragraph 4.)
[X] If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum 51, attached hereto.
1.6(a) Base Rent Paid upon Execution: $5,904.00 as Base Rent for the
period December 1, 1995 to December 31, 1995.
1.6(b) Lessee's Share of Common Area Operating Expenses: Thirteen and one-
half percent (13 1/2%) ("Lessee's Share") as determined by:
[X] prorata square footage of the Premises as compared to the total
square footage of the Building or [_] other criteria as described
in Addendum ____.
1.7 Security Deposit: $5,904.00 ("Security Deposit"). (Also see
Paragraph 5.)
1.8 Permitted Use: Professional offices for consulting, storage,
education and printing of related material ("Permitted Use"). (Also see
Paragraph 6.)
1.9 Insuring Party: Lessor is the "Insuring Party." (Also see Paragraph
8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
[X] DAUM Commercial Real Estate Services represent Lessors exclusively
("Lessor's Broker");
[X] CS Commercial represents Lessee exclusively ("Lessee's Broker"); or
[_] _______________ represents both Lessor and Lessee ("Dual Agency").
(Also see Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Broker(s) (or in the event there is no
separate written agreement between Lessor and said Broker(s), the sum of $[as
agreed]) for brokerage services rendered by said Broker(s) in connection with
this transaction.
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by Steve Santini ("Guarantor"). (Also see Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 49 through 52, and Exhibits A through ___, all of which
constitute a part of this Lease.
2. Premises, Parking and Common Areas.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square
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footage set forth in this Lease, or that may have been used in calculating
rental and/or Common Area Operating Expenses, is an approximation which Lessor
and Lessee agree is reasonable and the rental and Lessee's Share (as defined in
Paragraph 1.6(b)) based thereon is not subject to revision whether or not the
actual square footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement
Date, Lessor shall except as otherwise provided in this Lease, promptly after
receipt of written notice form Lessee setting forth with specificity the nature
and extent of such non-compliance, rectify same at Lessor's expense. If Lessee
does not give Lessor written notice of a non-compliance with this warranty
within one (1) year after the Commencement Date, correction of that non-
compliance shall be the obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, take such action, at Lessor's expense, as may be
reasonable or appropriate to rectify the non-compliance. Lessor makes no
warranty that the Permitted Use in Paragraph 1.8 is permitted for the Premises
under Applicable Laws (as defined in Paragraph 2.4). SEE ADDENDUM.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disability Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "APPLICABLE LAWS") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In
such event, Lessee shall, at Lessee's sole cost and expense, correct any non-
compliance of the Premises with said warranties.
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designed from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than full-
size passenger automobiles or pick-up trucks, herein called "PERMITTED SIZE
VEHICLES." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide the
parking facilities required by Applicable Law.
2.7 COMMON AREAS - DEFINITION. The term "COMMON AREAS" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designed by the Lessor from time to time for the general non-
exclusive use of Lessor, Lessee and other lessees of the Industrial Center and
their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas. SEE
ADDENDUM.
2.8 COMMON AREAS - LESSEE'S RIGHTS. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lese, the non-exclusive right to
use, in common with others entitled to such use, the Common Areas as they exist
from time to time, subject to any rights, powers, and privileges reserved by
Lessor under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Industrial Center. Under no circumstances
shall the right herein granted to use the Common Areas be deemed to include the
right to store any property, temporarily or permanently, in the Common Areas.
Any such storage shall be permitted only by the prior written consent of Lessor
or Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
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2.9 COMMON AREAS - RULES AND REGULATIONS. Lessor such other person(s) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the right, from time to time. to establish, modify, amend
and enforce reasonable Rules and Regulations with respect thereto in accordance
with Paragraph 40. Lessee agrees to abide by and conform and to all such Rules
and Regulations, and to cause its employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees of the Industrial Center.
2.10 COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's sole
discretion, form time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the Industrial
Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Industrial Center as Lessor may, in
the exercise of sound business judgment, deem to be appropriate. SEE ADDENDUM.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. SEE ADDENDUM.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Commencement Date, Lessor shall not
be subject to any liability therefor, nor shall such failure affect the validity
of this Lease, or the obligations of Lessee hereunder, or extend the term
hereof, ut in such case, Lessee shall not, except as otherwise provided herein,
be obligated to pay rent or perform any other obligation of Lessee under the
terms of this Lease until Lessor delivers possession of the Premises to Lessee.
If possession of the Premises is not delivered to Lessee within sixty (60) days
after the Commencement Date, Lessee may, at its option, by notice in writing to
Lessor within ten (10) days after the end of said sixty (60) day period, cancel
this Lease, in which event the parties shall be discharged form all obligations
hereunder; provided further, however, that if such written notice of Lessee is
not received by Lessor within said ten (10) day period, Lessee's right to cancel
this Lease hereunder shall terminate and be of no further force or effect.
Except as may be otherwise provided, and regardless of when the Original Term
actually commences, if possession is not tendered to Lessee when required by
this Lease and Lessee does not terminate this Lease, as aforesaid, the period
free of the obligation to pay Base Rent, if any, that Lessee would otherwise
have enjoyed shall run from the date of delivery of possession and continue for
a period equal to the period during which the Lessee would have otherwise
enjoyed under the terms hereof, but minus any days of delay caused by the acts,
changes or omissions of Lessee. SEE ADDENDUM.
4. RENT.
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it is
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee. SEE ADDENDUM.
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:
(a) "COMMON AREA OPERATING EXPENSES" are defined, for purposes of
this Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:
(i) The operation, repair and maintenance, in neat, clean, good
order and condition, of the following:
aa) The Common Areas, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities, fences and gates, elevators and roof.
bb) Exterior signs and any tenant directories.
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cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to
service the Common Areas.
(iii) SEE ADDENDUM.
(iv) Reserves set aside for maintenance and repair of Common
Areas. SEE ADDENDUM.
(v) Real Property Taxes (as defined in Paragraph 10.2) to be
paid by Lessor for the Building and the Common Areas under Paragraph 10 hereof.
(vi) The cost of the premiums for the insurance policies
maintained by Lessor under Paragraph 8 hereof.
(vii) Any deductible portion of an insured loss concerning the
Building or the Common Areas. SEE ADDENDUM.
(viii) Any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area Operating Expense.
(b) DELETED
(c) The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere in this Lease to provide
the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time of Lessee's Share of annual
Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month period of the Lease
term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to
Lessee within sixty (60) days after the expiration of each calendar year a
reasonably detailed statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee's payments
under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as
indicated on said statement, Lessee shall be credited the amount of such
overpayment against Lessee's Share of Common Area Operating Expenses next
becoming due. If Lessee's payments under this Paragraph 4.2(d) during said
preceding year were less than Lessee's Share as indicated on said statement,
Lessee shall pay to Lessor the amount of the deficiency within ten (10) days
after delivery by Lessor to Lessee of said statement. SEE ADDENDUM.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit of or the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefore
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the initial Security Deposit bears to the
Initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option,
to the last assignee, if any, of Lessee's interest herein), that portion of the
Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. USE.
6.1 PERMITTED USE.
(a) Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit
the use of the Premises in a manner that is unlawful, creates waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage to the
Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees an subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not conflict with sues by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall
within five (5) business days after such request give a written notification of
same, which notice shall include an explanation of Lessor's reasonable
objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
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(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS SUBSTANCE"
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment, or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereof. Lessee
shall not engage in any activity in or about the Premises which constitutes a
Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (as
Lessee's sole cost and expense) with all Applicable Requirements (as defined in
Paragraph 6.3). "REPORTABLE USE" shall mean (i) the installation or use of any
above or below ground storage tank, (ii) the generation, possession, storage,
use, transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority, and (iii) the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but upon notice to Lessor and in compliance
with all Applicable Requirements, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of the Permitted
Use, so long as such use is not a Reportable Use and does not expose the
Premises or neighboring properties to any meaningful risk of contamination or
damage or expose Lessor to any liability therefor. In addition, Lessor may (but
without any obligation to do so) condition its consent to any Reportable Use of
any hazardous Substance by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefor, including but not limited to
the installation (and, at Lessor's option, removal on or before Lease expiration
or earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises or the Building, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, under or about the Premises
(including, without limitation, through the plumbing or sanitary sewer system).
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with all
"APPLICABLE REQUIREMENTS," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
SEE ADDENDUM.
6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises ("LENDERS") shall have the right
to enter the Premises at any time in the case of an emergency, and otherwise at
reasonable times, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Lessee with this Lease and all Applicable
Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to
employ experts and/or consultants in connection therewith to advise Lessor with
respect to Lessee's activities, including but not limited to Lessee's
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor's
Lender, as the case may be, for the costs and expenses of such inspections.
7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
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(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repair occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.
(b) DELETED
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair, in accordance with Paragraph
13.2 below.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate this
Lease because of Lessor's failure to keep the Building, Industrial Center or
Common Areas in good order, condition and repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY INSTALLATIONS"
is used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "TRADE FIXTURES"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "ALTERATIONS" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "LESSEE-OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined
as Alterations and/or Utility Installations made by Lessee that are not yet
owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause
to be made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make non-
structural Utility Installations to the interior of the Premises (excluding the
roof) without Lessor's consent but upon the notice to Lessor, so long as they
are not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed $10,000.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall promptly upon completion thereof furnish
Lessor with as-built plans and specifications therefor. Lessor may, (but
without obligation to do so) condition its consent to any requested Alteration
or Utility Installation that costs $2,500.00 or more upon Lessee's providing
Lessor with a lien and completion bond in an amount equal to one and one-half
times the estimated cost of such Alteration or Utility Installation.
(c) LIEN PROTECTION. Lessee shall pay when due all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good fait, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises. If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to one
and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In
addition, Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
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(a) OWNERSHIP. Subject to Lessor's right to require their removal and
to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee-Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease.
Except as otherwise agreed or specified herein, the premises, as surrendered,
shall include the Alterations na Utility Installations. The obligation of
Lessee shall include the repair of any damage occasioned by the
installation,maintenance or removal of Lessee's Trade Fixtures, furnishings,
equipment, and Lessee-Owned Alterations and Utility Installations, as well as
the removal of any storage tank installed by or for Lessee, and the removal,
replacement, or remediation of any soil, material or ground water contaminated
by Lessee, all as may then be required by Applicable Requirements and/or good
practice. Lessee's Trade Fixtures shall remain the Property of Lessee and shall
be removed by Lessee subject to its obligation to repair and restore the
Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUMS. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be pro-
rated to coincide with the corresponding Commencement Date or Expiration Date.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve the Lessee of any
obligation hereunder. All insurance to be carried by Lessee shall be primary to
and not contributor with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
(b) CARRIED BY LESSOR. Lessor shall also maintain liability insurance
described in Paragraph 8.2(a) above, in addition to and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost. Lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available
and commercially appropriate, Lessor's policy or policies shall insure against
all risks of direct physical loss or damage (except for the perils of flood
and/or earthquake unless required by a Lender), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Building required
to be demolished or removed by reason of the enforcement of any building,
zoning, safety or land use laws as the result of a covered loss, but not
including plate glass insurance. Said policy or policies shall also contain an
agreed valuation provision in lieu of any co-insurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers of the
city nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall also obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled and rental increases). Said insurance may provide
that in the event the Lease is terminated by reason of an insured loss, the
period of indemnity for such coverage shall be extended beyond the date of the
completion of repairs or replacement of the Premises, to provide for one full
year's loss of rental revenues from the date of any such loss. Said insurance
shall contain an agreed valuation provision in lieu of any co-insurance clause,
and the amount of coverage shall be adjusted annually to reflect the projected
rental income, Real Property
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Taxes, insurance premium costs and other expenses, if any, otherwise payable,
for the next 12-month period. Common Area Operating Expenses shall include any
deductible amount in the event of such loss.
(c) ADJACENT PREMISES. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in questions has become the Property of Lessor
under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed $1,000
per occurrence. The proceeds from any such insurance shall be used by Lessee
for the replacement of personal property and the restoration of Trade Fixture
and Lessee-Owned Alterations and Utility Installations. Upon request from
Lessor, Lessee shall provide Lessor with written evidence that such insurance is
in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender, as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall not
do or permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance required under Paragraph 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior written notice to Lessor. Lessee shall at least thirty (30) days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out of or incident to
the perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited to the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any actin or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee upon notice from Lessor shall defend the
same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid
any such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not, Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cot of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and
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Trade Fixtures of any lessees of the Building, the cost of which damage or
destruction is fifty percent (50%) or more of the then Replacement Cost
(excluding Lessee-Owned Alterations and Utility Installations and Trade Fixtures
of any lessees of the Building) of the Building shall, at the option of Lessor,
be deemed to be Premises Total Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage
limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PREMISES PARTIAL DAMAGE - INSURED LOSS. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request thereof. If Lessor receives said funds or adequate assurance thereof
within said ten (10) days period, Lessor shall complete them as soon as
reasonably possible and this lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect. If Lessor does not receive such funds or assurance within
such ten (10) day period, and if Lessor does not so elect to restore and repair,
then this Lease shall terminate sixty (60) days following the occurrence of the
damage or destruction. Unless otherwise agreed, Lessee shall in no event have
any right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor may at Lessor's
option, either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage totally at Lessee's expense and without
reimbursement form Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following such
commitment from Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the funds or assurance thereof within the times specified
above, this Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7. SEE ADDENDUM.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extent this lease or to purchase the premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof), needed to make the
repairs on or before the earlier of (i) the date which is ten (10) days after
Lessee's receipt of Lessor's written notice purporting to terminate this lease,
or (ii) the day prior to the date upon which such option expires. If Lessee
duly exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall at Lessor's expense repair such damage as soon as reasonably possible and
this lease shall continue in full force and effect. If Lessee fails to exercise
such option and provide such funds or assurance during such period, then this
Lease shall terminate as of the date set forth in the first sentence of this
Paragraph 9.5.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses an other charges, if any payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired. Except for abatement
of Base Rent, Common Area Operating Expenses and other charges, if any,
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as aforesaid, all other obligations of Lessee hereunder shall be performed by
Lessee, and Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial or meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee give such notice to Lessor and such lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect. "Commence" as used in this Paragraph
9.6 shall mean either the conditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises, whichever
occurs first.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefore (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
to Lessor's rights under Paragraph 6.2(c) and Paragraph 6.2(c) and Paragraph
13), Lessor may, at Lessor's option either (i) investigate and remediate such
Hazardous Substance Condition, if required, as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) if the estimated cost to investigate and remediate such
condition exceeds twelve (12) times the then monthly Base Rent or $100,000
whichever is greater, give written notice to Lessee within thirty (30) days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition of Lessor's desire to terminate this Lease as of the date
sixty (60) days following the date of such notice. In the event Lessor elects
to give such notice of Lessor's intention to terminate this Lease, Lessee shall
have the right within ten (10) days after the receipt of such notice to give
written notice to Lessor of Lessee's commitment to pay for the excess costs of
(a) investigation and remediation of such Hazardous Substance Condition to the
extent required by Applicable Requirements, over (b) an amount equal to twelve
(12) times the then monthly Base Rent or $100,000, whichever is greater. Lessee
shall provide Lessor with the funds required of Lessee or satisfactory assurance
thereof within thirty (30) days following said commitment by Lessee. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such investigation and remediation as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the required funds or assurance thereof within the time
period specified above, this Lease shall terminate as of the date specified in
Lessor's notice of termination. SEE ADDENDUM.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this lease
pursuant to this Paragraph 9, Lessor shall return to lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9 WAIVER OF STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.
10.2 REAL PROPERTY TAX DEFINITION. As used herein, the term "REAL PROPERTY
TAXES" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed upon the Industrial Center by any authority having the
direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage, or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Industrial Center or any portion thereof, Lessor's
right to rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "REAL PROPERTY TAXES" shall also include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason of events
occurring, or changes in Applicable Law taking effect, during the term of this
Lease, including but not limited to a change in the ownership of the Industrial
Center or in the improvements thereon, the execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not contemplated by
the Parties. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the calculation
of Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in
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the Premises or stored within the Industrial Center. When possible, Lessee
shall cause its Lessee-Owned Alterations and Utility Installations, Trade
Fixtures, furnishings, equipment and all other personal property to be assessed
and billed separately from the real property of Lessor. If any of Lessee's said
property shall be assessed with Lessor's real property, Lessee shall pay Lessor
the taxes attributable to Lessee's property within ten (10) days after receipt
of a written statement setting forth the taxes applicable to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon. If
any such utilities or services are not separately metered to the Premises or
separately billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by Lessor of all such charges jointly metered or
billed with other premises in the Building, in the manner and within the time
periods set forth in Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of _______ or
more of the voting control of Lessee shall constitute a change in control of
this purpose. SEE ADDENDUM.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition,financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of full
execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent. "NET
WORTH OF LESSEE" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.
(d) DELETED
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting shall
not (i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this lease, (ii) release Lessee of
any obligations hereunder, nor (iii) after the primary liability of Lessee for
the payment of Base Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies of for the Default or Breach
by Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. however, Lessor may consent to subsequent sublettings and
assignments of the sublease or any amendments or modifications thereto without
notifying Lessee or anyone else liable under this Lease or the sublease and
without obtaining their consent, and such action shall not relief such persons
from liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation under
this Lease, Lessor may proceed directly against Lessee, any Guarantors or anyone
else responsible for the performance of the Lessee's obligations under this
Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor. SEE ADDENDUM.
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(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to confirm and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) DELETED
(h) DELETED
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions should apply to any subletting by Lessee of all
or any part of the Premises and shall be deemed included in all subleases under
this lease whether or not expressly incorporated therein:
(a) SEE ADDENDUM
(b) In the event of a Breach by Lessee in the performance of the
obligations under this lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in preparation and service of a notice of Default,
and that Lessor may include the cost of such services and costs in such notice
as rent due and payable to cure said default. A "DEFAULT" by Lessee is defined
as a failure by Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this lease. A
"BREACH" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent, Lessee's Share of Common Area
Operating Expenses, or any other monetary payment required to be made by the
Lessee hereunder as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of ____
days following written notice thereof by or on behalf of Lessor to Lessee. SEE
ADDENDUM.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (i) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non- subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) r (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the premises or of Lessee's interest in this Lease, where
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possession is not restored to Lessee within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Lessee's
assets located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
(f) The discovery by lessor that any financial statement of Lessee or
of any Guarantor, given to lessor by Lessee or any Guarantor, was materially
false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (ii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in the case of an emergency, without notice), Lessor may at its
option (but without obligation to do so), perform such duty or obligation on
Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee to Lessor upon invoice therefor. If any check given
to lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at it sown option, may require all future payments to be made under this
Lease by Lessee to be made only to cashier's check, in the event of a breach of
this lease by Lessee (as defined in Paragraph 13.1), with or without further
notice or demand, and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee: (i) the worth at
the time of the aware of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of aware of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the
provisional remedy of unlawful detainer, Lessor shall have the right to recover
in such proceeding the unpaid rent and damages as are recoverable therein, of
Lessor may reserve the right to recover all or any part thereof in a separate
suit for such rent and/or damages. If a notice and grace period required under
Subparagraph 13.1(b), (c) or (d) was not previously given, a notice to pay rent
or quit, or to perform or quit, as the case may be, given to Lessee under any
statute authorizing the forfeiture of leases for unlawful detainer shall also
constitute the applicable notice for grace period purposes required by
Subparagraph 13.1(b), (c) or (d). In such case, the applicable grace period
under the unlawful detainer statute shall run concurrently after the one such
statutory notice, and the failure of Lessee to cure the Default within the
greater of the two (2) such grace periods shall constitute both an unlawful
detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. Lessor and Lessee agree that
the limitations on assignment and subletting in this Lease are reasonable. Acts
of maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver to protect the Lessor's interest under this Lease,
shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.
(d) The expiration or termination of this Lease and/or the termination
of Lessee's right to possession shall not relieve Lessee from liability under
any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "INDUCEMENT PROVISIONS" shall be
deemed conditioned upon Lessor's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which
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initiated the operation of this Paragraph 13.3 shall not be deemed a waiver by
Lessor of the provisions of this Paragraph 13.3 unless specifically so stated in
writing by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this Lease
unless Lessor falls within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by any Lender(s) whose name and address shall have been furnished to Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion. SEE ADDENDUM.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five (25%) of the portion of the
Common Areas designated for Lessee's parking, is taken by condemnation, Lessee
may, at Lessee's option, to be exercised in writing within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the Base Rent shall be reduced in
the same proportion as the rentable floor area of the Premises taken bears to
the total rentable floor area of the Premises. No reduction of Base Rent shall
occur if the condemnation does not apply to any portion of the Premises. Any
award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such power
shall be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease
is not terminated by reason of such condemnation, Lessor shall to the extent of
its net severance damages received, over and above Lessee's Share of the legal
and other expenses incurred by Lessor in the condemnation matter, repaid any
damage to the Premises caused by such condemnation authority. SEE ADDENDUM.
15. BROKERS' FEES.
15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.10 is/are the
procuring cause of this Lease.
15.2 ADDITIONAL TERMS. Unless Lessor and Broker(s) have otherwise agreed
in writing, Lessor agrees that: (a) if Lessee exercises any Option (as defined
in Paragraph 39.1) granted under this Lease or any Option subsequently granted,
or (b) if Lessee acquires any rights to the Premises or other premises in which
Lessor has an interest, or (c) if Lessee remains in possession of the Premises
with the consent of Lessor after the expiration of the term of this Lease after
having failed to exercise an Option, or (d) if said Brokers are the procuring
cause of any other Lease or sale entered into between the Parties pertaining to
the Premises and/or any adjacent property in which Lessor has an interest, or
(e) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then as to any of said transactions, Lessor shall pay
said Broker(s) a fee in accordance with the schedule of said Broker(s) in effect
at the time of the execution of this Lease.
15.3 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
lessor and its successors.
15.4 REPRESENTATIONS AND WARRANTIES. Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. Each Party (as "RESPONDING PARTY") shall within
ten (10) days after written notice from the other Party (the "REQUESTING PARTY")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form
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similar to the then most current "TENANCY STATEMENT" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 FINANCIAL STATEMENT. If Lessor desires to finance, refinance, or sell
the Premises or the Building, or any part thereof, Lessee and all Guarantors
shall deliver to any potential lender or purchase designated by Lessor such
financial statements of Lessee and such Guarantors as may be reasonably required
by such lender or purchaser, including but not limited to Lessee's financial
statements for the past three 93) years. All such financial statements shall be
received by Lessor and such lender or purchase in confidence and shall be used
only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises. In the
event of a transfer of Lessor's title or interest in the Premises or in this
Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit)
any unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this lease thereafter to be performed by the lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the sate in which
the Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to lessor under the terms
of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this lese and as to
the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party
beneficiary of the provisions of this Paragraph 22.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (y hand or by messenger or
courier service) or may e sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours, and shall be deemed sufficiently given if served
in a manner specified in this Paragraph 23. The addresses noted adjacent to a
Party's signature on this Lease shall be that Party's address for delivery or
mailing of notice purposes. Either Party may be written notice to the other
specify a different address for notice purposes, except that upon Lessee's
taking possession of the Premises, the Premises shall constitute Lessee's
address for the purpose of mailing or delivering notices to Lessee. A copy of
all notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, of if no delivery date is shown, the postmark thereon. If
sent by regular mail, the notice shall be deemed given forty-eight (48) hours
after the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall e deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or any subsequent Default or Breach by
Lessee of the same or any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any Default or Breach by
Lessee of any provision hereof. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
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26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises. SEE ADDENDUM.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. ATTORNEYS' FEES. If any Party or broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "PREVAILING PARTY" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of
Lessor shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by lessor. The installation of any sign
on the Premises by or for Lessee shall be subject to the provisions of Paragraph
7 (Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
30
<PAGE>
of the roof of the Building and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten 910) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment or
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgement that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. GUARANTOR.
37.1 FORM OF GUARANTY. If there are to be any Guarantors of this Lease per
Paragraph 1.11, the form of the guaranty to be executed by each such Guarantor
shall be in the form most recently published by the American Industrial Real
Estate Association, and each such Guarantor shall have the same obligations as
Lessee under this Lease, including but not limited to the obligation to provide
the Tenancy Statement and information required in Paragraph 16.
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. It shall constitute a Default of
the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
38. QUIET POSSESSION. Upon payment of Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Lease, the word "OPTION" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
39.3 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have the right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of separate Defaults under Paragraph 13.1, during the twelve
(12) month period immediately preceding the exercise of the Option, whether or
not the Defaults are cured.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
31
<PAGE>
40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions. SEE ADDENDUM.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. OFFER. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of formal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
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<PAGE>
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S
REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS,
UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS
TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE
OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON
THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN
ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at:________________________ Executed at:__________________________
on:_________________________________ on:___________________________________
By LESSOR:__________________________ By LESSEE:____________________________
____________________________________ ______________________________________
____________________________________ ______________________________________
By:_________________________________ By:___________________________________
Name Printed:_______________________ Name Printed:_________________________
Title:______________________________ Title:________________________________
By:_________________________________ By:___________________________________
Name Printed:_______________________ Name Printed:_________________________
Title:______________________________ Title:________________________________
Address:____________________________ Address:______________________________
____________________________________ ______________________________________
Telephone: ( )___________________ Telephone: ( )____________________
Facsimile: ( )___________________ Facsimile: ( )____________________
BROKER: BROKER:
Executed at: Executed at:
on: on:
By:_________________________________ By:___________________________________
Name Printed:_______________________ Name Printed:_________________________
Title:______________________________ Title:________________________________
Address:____________________________ Address:______________________________
____________________________________ ______________________________________
Telephone: ( )___________________ Telephone: ( )____________________
Facsimile: ( )___________________ Facsimile: ( )____________________
[
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DAUM ADDENDUM
ADDENDUM TO THE STANDARD INDUSTRIAL/COMMERCIAL
MULTI-TENANT LEASE-MODIFIED NET
DATED NOVEMBER 3, 1995
BY AND BETWEEN
THE GORDON FAMILY TRUST AS LESSOR AND
THE ADVANCED TRAINING IN THE BEHAVIORAL SCIENCES, INC.,
A CALIFORNIA CORPORATION AS LESSEE
________________________________________________________________________________
2.4 ACCEPTANCE OF THE PREMISES: LESSEE HAS ACCEPTED THE PREMISES, SUBJECT TO
THE FOLLOWING:
A. If any American with Disabilities Act (ADA) improvements and/or
repairs are required in the Premises by any State, Local or County
Government at the time Lessee receives occupancy, Lessor shall bear
all financial responsibility and liability associated with the
installment of such improvements and/or repairs.
6.2(d) INDEMNIFICATION OF LESSEE:
Lessor shall indemnify, protect, defend and hold Lessee, its agents,
employees, lenders and ground lessor, if any, and the Premises, harmless
from and against any and all damages, liabilities, judgments, costs,
claims, liens, expenses, penalties, loss of permits and attorneys' fees
and consultants' fees arising out of or involving any Hazardous
Substance brought onto the Premises prior to the Commencement Date by or
for Lessor, prior lessees, or anyone under Lessor's or prior lessee's
control. Lessor's obligations under this Paragraph 6.2(d) shall include,
but not be limited to, the effects of any contamination or injury to
person, property or to the environment created or suffered by Lessor,
and the cost of investigation (including consultants' fees, expenses,
attorneys' fees and testing), removal, remediation, restoration and/or
statement thereof, or of any contamination therein involved, and shall
survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor
and Lessee shall release Lessor from its obligations under this Lease
with respect to Hazardous Substances, unless specifically so agreed by
Lessee in writing at the time of such agreement.
8.8 PARTIAL EXEMPTION OF LESSOR FROM LIABILITY:
Lessee hereby agrees that Lessor shall not be liable for injury to
Lessee's business or any loss of income therefrom or from the loss of or
damage to goods, wares, or merchandise or other property of Lessee,
lessee's employees, invitees, customers, or any other person in and
about the Premises or the Walker-Ralston Square should such damages,
loss or injury occur from the negligence of the Lessee or any of its
invitees, or the negligence of any other Lessor or any of its invitiees.
9.2 PREMISES DAMAGE:
Lessee shall retain all insurance proceeds for insurance paid by Lessee
for damage to Lessee's fixtures and equipment.
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EXHIBIT 10.17
10/14/91
LEASE
This Lease is entered into as of October 11, 1991, between MEPC AMERICAN
PROPERTIES INCORPORATED, a Delaware Corporation, ("Lessor") and MEDICAL
INSTITUTE OF MINNESOTA, INC., a Minnesota corporation, ("Tenant").
1. Definitions. In this Lease:
-----------
(a) "Actual Operating Cost" means the Operating Cost (as defined in
Section 1(u)) actually incurred for a calendar year.
(b) "Actual Tax Cost" means the Tax Cost (as defined in Section 1(y))
actually incurred for a year.
(c) "Additional Costs" means the estimated monthly Tax Cost (as defined
in Section 1(y)) plus the estimated monthly Operating Cost.
(d) "Base Operating Cost" means the Operating Cost of $215,523.00
estimated for 1992.
(e) "Base Rent" means the following amounts for each Lease Year:
Lease Years 1 - 5 $168,600.00
Leases Years 6 - 10 $201,936.00.
(f) "Base Tax Cost" means the Tax Cost (as defined in Section 1(y)) of
$184,593.00 estimated to be payable in 1992.
(g) "Building" means the building at 5503 Green Valley Drive,
Bloomington, Minnesota 55437, located on the Land, commonly known as
Norman Center II.
(h) "Casualty" means a fire, explosion, tornado, or other cause of damage
to or destruction of the Building.
(i) "Commencement Date" means the first day of the Term.
(j) "Environmental Regulation" means any law, rule, regulation, permit,
agreement, order, determination or requirement of any Governmental
Authority relating to the environment, human health or safety, or
animal health or safety.
<PAGE>
(k) "Exhibit" means an Exhibit attached to and thereby made a part of
this Lease.
(l) "Governmental Authority" means any federal, state, or local
government body, including elected bodies, departments, agencies,
commissions, boards or instrumentalities.
(m) "Hazardous Substance" means any substance, pollutant, or contaminant,
as those terms are defined in any Environmental Regulation, and
specifically includes asbestos, asbestos-containing materials,
petroleum or petroleum-base products, formaldehyde, polychlorinated
biphenyls, and Medical Waste.
(n) "Land" means the land described on Exhibit B attached to this Lease.
(o) "Lease" means this Lease, all Exhibits attached to this Lease, and
all properly executed amendments, modifications and supplements to
this Lease.
(p) "Lease Year" means each successive 12-month period from and after the
Commencement Date.
(q) "Medical Waste" means all 'blood," "infectious waste," "laboratory
waste," "pathological waste," "research animal waste," and "sharps,"
as such terms in quotation marks are defined in Minn. Stat. (S)
116.76 (1990) .
(r) "Monthly Base Rent" means $14,050.00 per month for Lease Years 1 - 5
and $16,828.00 per month for Lease Years 6 - 10.
(s) "Monthly Rent" means the Monthly Base Rent plus Tenant's Share of the
Additional Costs. The initial Monthly Rent is $30,055.00, comprised
of a Monthly Base Rent of $14,050.00 plus a monthly Operating Cost
estimated at $8,621.00 and a monthly Tax Cost estimated at $7,384.00.
(t) "Normal Business Hours" means 7:30 a.m. to 6:00 p.m. Monday through
Friday and 8:00 a.m. to 1:00 p.m. on Saturdays, excluding Sundays and
legal holidays.
(u) "Operating Cost" means all costs, charges and expenses incurred by
Lessor in connection with ownership, operation, security, maintenance
and repair of the Land, the Building, other improvements on the Land,
appurtenances to the Building, parking, roadways, landscaping,
lighting, sidewalks, and common or public areas, including but not
limited to real estate taxes and insurance on common areas, interior
and exterior maintenance, snow plowing, insurance, utilities, fees or
expenses for management by Lessor or any other party, amortization of
capital investments made to reduce operating costs, and amortization
of repairs made to extend the life of the Building and other
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<PAGE>
improvements. Operating Cost will not include charges for services or
utilities which are separately charged or metered to Tenant or other
tenants of the Building, mortgage interest, depreciation on the
Building or fixtures, advertising expenses, real estate brokers'
commissions or the cost of tenant improvements. Operating Cost will
not include the cost of janitorial service for the tenant areas
within the Building except the restrooms located in the Premises on
the basement level of the Building, but Operating Cost will include
the cost of janitorial service for the common areas within the
Building.
(v) "Premises" means the space referred to as Suite No. 100 on the first
floor and in the basement of the Building, which space is shown
crosshatched on the drawing attached to this Lease as Exhibit A, and
which for purposes of this Lease will be deemed to contain a total of
33,332 rentable square feet consisting of 17,151 rentable square feet
on the first floor of the Building and 16,181 rentable square feet in
the basement of the Building, regardless of actual measurements.
(w) "Section" means a section of this Lease.
(x) "Taking" means acquisition by a public authority having the power of
eminent domain of all or part of the Land or Building by condemnation
or conveyance in lieu of condemnation.
(y) "Tax Cost" means all real estate taxes, levies, charges, and
installments of assessments (including interest on deferred
assessments) assessed, levied or imposed on, or allocated to, the
Land and Building and all attorneys' fees, witness fees, court costs
and other reasonable expenses of Lessor in connection with any
proceeding to contest these amounts. If property, in addition to the
Land and the Building, is included within the tax parcel which covers
the Land and Building, then Lessor shall make a reasonable allocation
between the other property and the Land and the Building.
(z) "Tenant's Share" means the percentage obtained by dividing the
rentable square foot area of the Premises by the total rentable
square foot area of the Building, which percentage on this date of
this Lease is 48% based upon the total number of rentable square feet
of the Premises stated in paragraph (v) above and based upon a
current total rentable square footage for the Building of 69,078
square feet.
(aa) "Term" means the period of 10 years and 0 months, beginning on
January 1, 1992 and ending on December 31, 2001, subject to the
provisions of Section 7 and the other provisions of this Lease.
2. Premises.
--------
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<PAGE>
Lessor leases the Premises to Tenant, and Tenant leases the Premises from
Lessor, for the Term, under the terms and conditions of this Lease.
3. Rent.
----
Tenant will pay the Monthly Rent to Lessor at P. O. Box 73547, Chicago, Illinois
60673-7547, or such other place as Lessor may designate, in advance on or before
the Commencement Date and on or before the first day of each month during the
Term, without demand, deduction or setoff. The Monthly Rent may change as the
Additional Costs are adjusted annually under Sections 4 and 5. Monthly Rent will
begin on the Commencement Date. If the Term begins on a day other than the
first day of a month, the Monthly Rent for that month will be prorated by
multiplying the Monthly Rent by the number of days of that month included in the
Term and dividing the product by the number of days in that month.
Any Monthly Rent or other amounts payable by Tenant to Lessor under this Lease
which are not paid within 10 days after the date due will bear interest from the
date due to the date paid at the rate of 12% per annum or the maximum rate of
interest permitted by law, whichever is less, and the interest will be paid to
Lessor on demand. In addition, Tenant will pay Lessor a $100 service charge for
all Monthly Rent not paid by the 10th day of the month for which it is payable,
which service charge is to partially cover expense involved in handling
delinquent payments. All amounts to be paid by Tenant to Lessor under this
Lease will be deemed to be additional rent for purposes of payment and
collection.
If any taxes, special assessments, fees or other charges are imposed against
Lessor by any governmental unit or agency with respect to rentals under this
Lease, Tenant will pay these amounts to Lessor when due, except that Tenant will
have no obligation to pay any income tax on rentals unless the tax is imposed in
lieu of real estate taxes.
4. Cost Adjustments.
----------------
Prior to the first day of each calendar year after the date of this Lease, or as
soon as reasonably possible after the first day of the year, Lessor will furnish
Tenant with an estimate of the Tax Cost for that year if it is greater than, the
Base Tax Cost, and with, an estimate of the Operating Cost, and the Monthly Rent
for each month of that calendar year will be increased by 1/12th of Tenant's
Share of the differences between the Tax Cost estimate and the Base Tax Cost and
between the Operating Cost estimate and the Base Operating Cost.
After the end of each calendar year, including the year in which the Term
expires, Lessor will give Tenant a statement of the Actual Tax Cost and Actual
Operating Cost for that calendar year. If the actual costs exceed the estimated
costs for that year, Tenant will immediately pay to Lessor Tenant's Share of the
excess. If the actual costs are less than the estimated costs for that year,
Lessor will immediately pay to Tenant Tenant's Share of the difference. If
Lessor contests Tax Cost and receives a refund or incurs additional Tax Cost
after adjustments for Actual Tax Cost
-4-
<PAGE>
have been made, the Actual Tax Cost will be corrected accordingly and the
appropriate adjustment will be made between Lessor and Tenant. The portion of
the Actual Tax Cost and Actual Operating Cost to be paid by Tenant for the years
in which the Term begins and ends will be prorated by multiplying the Actual Tax
Cost and Actual Operating Cost amounts by a fraction, the numerator of which is
the number of days of that year in the Term and the denominator of which is 365.
5. Cost Computations and Allocations.
---------------------------------
Notwithstanding any other provision of this Lease to the contrary, it is agreed
that Lessor will in its reasonable discretion, determine from time to time, the
method of computing and allocating Operating Cost and Tax Cost, the allocation
of Operating Cost and Tax Cost to various types of space within the Building,
and Tenant will be bound thereby; that if the Building is not fully occupied
during any partial or full year, an adjustment will be made in computing the
Actual Operating Cost for such year so that it is computed as though the
Building had been fully occupied during that year; and that if the Tax Cost
payable in any year does not reflect a building that is fully completed and
fully occupied, an adjustment will be made in computing the Tax Cost so that it
reflects what the Tax Cost would have been had the Building been fully complete
and fully occupied.
6. Fiscal Year.
-----------
The year used to determine Additional Costs may be changed to a different 12-
month period designated by Lessor. If the calendar year is changed to a fiscal
year, or if a fiscal year is changed to a different fiscal year, prorations will
be made for the estimated Additional Costs and the actual Additional Costs so
that the same time period is used to determine each and so that Additional Costs
are not included in more than one time period.
7. Possession
----------
If Tenant begins to conduct business in all or any portion of the Premises
before the Commencement Date, Tenant will pay to Lessor a portion (as described
below) of the Additional Costs for the period from the date Tenant begins to
conduct business in the Premises to the Commencement Date and all other
provisions of this Lease will be applicable during that period. The portion of
the Additional Costs to be paid by Tenant under such circumstances shall be the
percentage obtained by dividing the reputable square foot area of the portion of
the Premises in which Tenant is conducting business by 62,301 which is the
rentable square foot area of the Building.
If Lessor is delayed in delivering possession of all or any portion of the
Premises to Tenant on the Commencement Date, Tenant will take possession of the
Premises on the date when, Lessor delivers possession of all of the Premises,
which date will then become the Commencement Date, and the last day of the term
will be extended so that the length of the Term, remains the same. If
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<PAGE>
the extended Term would end on a day other than the last day of a month, the
Term will be further extended to the last day of the month in which the Term
ends.
This Lease will not be void or voidable and Lessor will not be liable to Tenant
for any loss or damage resulting from any delay in delivering possession of the
Premises to Tenant, but unless the delay is principally caused by or
attributable to Tenant, its employees, agents or contractors, no Monthly Rent
will be due for the period prior to the date Lessor delivers possession of the
Premises, unless Tenant elects to take possession of a portion of the Premises
in which case Monthly Rent will be due for the portion of the Premises taken.
Tenant's occupancy of the Premises will constitute Tenant's acceptance of the
Premises, subject to the completion of any punch list items on work to be
performed by Lessor. Tenant will submit to Lessor a punch list on work to be
performed by Lessor within 30 days after Tenant's occupancy of the Premises.
Tenant will not vacate or abandon the Premises during the Term without Lessor's
prior written consent. If Tenant pays the Monthly Rent and other charges and
performs all of Tenant's obligations under this Lease, Lessor promises that
Tenant may peaceably and quietly possess and enjoy the Premises under this
Lease.
8. Use.
---
Tenant will use the Premises for a post-secondary school for the training of
medical and veterinary technicians and for no other purpose. Without limiting
the generality of the foregoing, the Premises will not be used for a human or
animal clinic providing services to the general public, hospital or research
facility. Tenant will not commit or permit any act or omission which results in
the violation of any law, governmental regulation, or reasonable insurance
policy of Lessor, relating to the Building. If Tenant's use of the Building
increases Lessor's insurance rates on the Building, then Tenant shall promptly
reimburse Lessor for the full amount of the increase. Tenant will not permit
any conduct or condition which may unreasonably disturb or endanger other
occupants of the Building.
9. Care of Premises
----------------
Tenant will keep the Premises and the fixtures and equipment in the Premises in
as good condition and repair as they were in at the time possession of the
Premises is tendered to Tenant, except for ordinary wear and damage from fire or
other casualty beyond Tenant's control. If Tenant fails to do so, Lessor may
enter the Premises to perform the maintenance and repairs and charge the
reasonable costs to Tenant, together with interest as provided in Section 3.
10. Building Rules.
--------------
Rules and Regulations for the Premises and the Building in effect on the date of
this Lease are attached as Exhibit C. Lessor will have the right to adopt
different or additional reasonable rules and regulations, and to rescind or
amend the attached rules and regulations, by written notice to
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<PAGE>
Tenant, so long as such rules and regulations are equitably applied to other
tenants at Norman Center. Tenant will abide by the rules and regulations then in
force and will cause Tenant's employees to observe and comply with them.
11. Compliance with Laws.
--------------------
Tenant will, at its expense, promptly comply with all laws, ordinances, rules,
orders, regulations and other requirements of any Governmental Authority now or
subsequently pertaining to the Premises. Tenant will pay any taxes or other
charges by any Governmental Authority on Tenant's property or trade fixtures in
the Premises or relating to Tenant's use of the Premises.
12. Signs.
-----
Tenant will not place or permit any signs on the exterior or windows of the
Building, or within the Premises if visible from the exterior of the building or
from hallways or other common areas of the Building, except lettering and
numerals for identification purposes on or near doorways as approved in advance
by Lessor. Subject to approval by any Governmental Authority with jurisdiction
over exterior signs for the Building, Lessor shall establish a system of
exterior signage for the Building which will identify the tenants within the
Building. Tenant will be identified on the exterior signage along with other
tenants of the Building in a manner similar to the other tenants. If a sign is
approved for the front of the Building at the corner of Highway 494 and Highway
100, Tenant will reimburse Lessor for Tenant's pro rata share of the costs of
constructing and maintaining the sign, which pro rata share shall be based upon
the percentage of the sign allocated to Tenant as opposed to other tenants.
Subject to the approval of any Governmental Authority with jurisdiction over
exterior signs for the Building, Lessor shall endeavor to provide exterior
signage which faces both Highway 494 and Norman Center Drive.
13. Alterations; and Allowances.
---------------------------
Tenant accepts the Premises in their present condition and Lessor will have no
obligation to do any redecorating or remodeling or to make any repairs or
alterations, except for the alterations, if any, shown on the attached Exhibit
D,
Tenant shall pay Lessor for the costs of the work shown on the attached Exhibit
D. Lessor shall contribute a credit against the cost to Lessor of the work equal
to $20.00 per rentable square foot of the Premises. Tenant shall pay to Lessor
upon request the amount by which the cost of the work exceeds $20.00 per
rentable square foot of the Premises. If the credit of $20.00 per rentable
square foot of the Premises exceeds the cost of the work on the attached Exhibit
D, then the excess shall be applied as a credit against future installments of
Monthly Base Rent payable by Tenant. Within 14 days after the Commencement
Date, provided that Tenant has actually moved
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<PAGE>
into the Premises, Lessor shall pay to Tenant, in cash, a move-in allowance of
$1.00 per rentable square foot of the Premises.
As an alternative to the construction by Lessor of the alterations shown on the
attached Exhibit D, Tenant may construct the alterations shown on the attached
Exhibit D. Such construction of the alterations shown on the attached Exhibit D
by Tenant shall be subject to all of the requirements of the next paragraph
below concerning alterations by Tenant, including but not limited to the
requirement that Tenant first obtain Lessor's prior written approval of any
contractor or subcontractor who is to perform work on the Premises at Tenant's
request, which approval shall not unreasonably be withheld. If Tenant elects to
construct the alterations shown on the attached Exhibit D but the alterations
are not substantially completed by January 1, 1992, then the Commencement Date
will be the earlier of February 1, 1992 or the date on which Tenant has
substantially completed the alterations shown on the attached Exhibit D. If the
completion of the alterations is delayed due to the fault of Lessor, then the
February 1, 1992 date referred to in the preceding sentence shall be delayed one
day for each day of delay in completion which is due to the fault of Lessor.
Upon final completion of the alterations shown on the attached Exhibit D and the
submission of final lien waivers for all of such work to Lessor, Lessor will
reimburse Tenant for the cost to Tenant of the work shown on the attached
Exhibit D for an allowance up to $20.00 per rentable square foot of the
Premises. If the credit of $20.00 per rentable square foot of the Premises
exceeds the cost to Tenant of the work shown on the attached Exhibit D, then the
excess shall be applied as a credit against future installments of Monthly Base
Rent payable by Tenant. Within 14 days after the final completion by Tenant of
the work shown on the attached Exhibit D, provided that Tenant has actually
moved into the Premises, Lessor shall pay to Tenant, in cash, a move-in
allowance of $1.00 per rentable square foot of the Premises.
Tenant will not make any alterations, additions or improvements in or to the
Premises without first obtaining the written consent of Lessor, which approval
shall not unreasonably be withheld. Tenant will get Lessor's prior written
approval of any contractor or subcontractor who is to perform work on the
Premises at Tenant's request, which approval shall not unreasonably be withheld.
Lessor may require Tenant to post a bond, cash or other security to protect the
Premises from mechanic's liens. All alterations by Tenant will be constructed
with new materials unless the materials are already in the Premises, in a good
and workmanlike manner, and in compliance with the plans and specifications
approved by Lessor and all applicable laws, ordinances, rules, orders,
regulations, or other requirements of governmental authorities. Tenant will pay
for any labor, services, materials, supplies or equipment furnished or alleged
to have been furnished to Tenant in or about the Premises, and will pay and
discharge any mechanic's, materialmen's or other lien against the Premises
resulting from Tenant's failure to make such payments or will contest the lien
and deposit with Lessor cash equal to 150% of the amount of the lien. If the
lien is reduced to final judgment., Tenant will discharge the judgment and
Lessor will return the cash deposited by Tenant. Lessor may post notices of
nonresponsibility on the Premises as provided by law.
-8-
<PAGE>
All alterations., additions and improvements to the Premises made at Lessor's or
Tenant's expense, except movable office furniture and Tenant's movable trade
fixtures and equipment, will become the property of Lessor upon installation and
will be surrendered with the Premises upon termination of this Lease, except as
other-wise agreed in writing by Lessor and Tenant.
14. Utilities and Services.
----------------------
Lessor will supply reasonable elevator service (if elevators exist in the
Building) and heat and air conditioning appropriate to the season during Normal
Business Hours. The cost of all such services will be a part of the Operating
Cost. Lessor will not be liable for any loss or damage resulting from any
temporary interruption of these services due to repairs, alterations or
improvements, or any variation, interruption or failure of these services due to
governmental controls, unavailability of energy, or any other cause beyond
Lessor's control. No such interruption or failure of these services will be
deemed as an eviction of Tenant or will relieve Tenant from any of its
obligations under this Lease. Tenant will promptly reimburse Lessor for the cost
of all electric lamps, starters and ballasts used on the Premises.
Except for payment of Monthly Rent, Tenant will not be required to pay for these
services for ordinary office purposes, but Tenant will pay to Lessor any charges
Lessor reasonably establishes for utilities or services provided outside Normal
Business Hours at Tenant's request, or provided because of uses other than
ordinary office uses. The charges for such utilities or services shall be equal
to the actual costs incurred by Lessor,
The electricity for the Premises will be separately metered. The cost of
installing the separate electric meters for the Premises will be paid by Tenant,
with the cost of thereof being taken out of the $20.00 per rentable square foot
alterations allowance referred to in Section 13.
Lessor will have no obligation to provide any janitor service to the Premises.
Tenant shall separately obtain and pay for all janitor service for the Premises.
Tenant shall obtain such janitor service as is necessary to maintain the
Premises at a level of cleanliness at least equivalent to the standard in
similar office buildings in the Bloomington/Edina, Minnesota area.
Notwithstanding anything in the foregoing to the contrary, Lessor will provide
janitor service in the restrooms located in the Premises on the basement level
of the Building.
15. Entry by Lessor.
---------------
Lessor and its agents and contractors and mortgagees will have the right to
enter the Premises at reasonable times for inspecting, cleaning, repairing, or
exhibiting the Premises, but Lessor will have no obligation to make repairs,
alterations or improvements except as expressly provided in this Lease.
16. Relocation.
----------
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<PAGE>
Lessor may relocate Tenant in substitute leased premises of equal square footage
and approximately equal configuration within the office complex which includes
the Building upon 90 days written notice to Tenant specifying the effective date
of the relocation. If this is done, Lessor will construct space which is
comparable to the original location, and will move Tenant's office furnishings
to the new location, all at Lessor's expense. Lessor will reimburse Tenant for
all out-of-pocket costs reasonably incurred by Tenant in connection with the
relocation, including without limitation costs for moving, printing of new
stationery and other materials, and telephone system relocation charges. If the
then current base rental rate at the new location is less than the Monthly Base
Rent, the Monthly Base Rent will be reduced accordingly. If the then current
base rental rate at the new location is higher than the Monthly Base Rent, the
Monthly Base Rent will not be increased. If Lessor requests Tenant to relocate
and Tenant gives Lessor written notice of objection to relocation within 10 days
after Lessor's notice, Lessor may withdraw the request for relocation by written
notice to Tenant within 10 days after the notice from Tenant. If the request is
not withdrawn by Lessor within the 10-day period, Tenant may terminate this
Lease effective as of the relocation date specified in Lessor's original notice
by written notice to Lessor within 10 days after expiration of the 10-day period
for Lessor to withdraw its request to relocate Tenant.
17. Subordination.
-------------
At the request of any mortgagee or ground lessor, this Lease will be subject and
subordinate to any mortgage or ground lease which may now or hereafter encumber
the Building, and Tenant will execute, acknowledge and deliver to Lessor any
document requested by lessor to evidence the subordination, provided that such
subordination is conditional upon the agreement of the mortgagee or ground
lessor that it will not disturb Tenant's right to possession pursuant to this
Lease so long as Tenant is not in default under this Lease.
18. Estoppel Certificates.
---------------------
Within 10 days after written request from Lessor, Tenant will execute,
acknowledge and deliver to Lessor a document furnished by Lessor, which document
may be relied upon by Lessor and any prospective purchaser or mortgagee of the
Building stating (a) that this Lease is unmodified and is in full force and
effect (or if modified, that the Lease is in full force and effect as modified
and stating the modifications), (b) the dates to which rent and other charges
have been paid, (c) the current Monthly Rent, (d) the dates on which the Term
begins and ends, (e) that Tenant has accepted the Premises and is in possession,
(f) that Lessor is not in default under this Lease, or, if Lessor is in default,
specifying any such default, and (g) including such other information as the
prospective purchaser or mortgagee may reasonably require.
19. Assumption of Risks.
-------------------
Tenant assumes all risk of loss or damage of Tenant's property within the
Premises, including any loss or damage caused by water leakage, fire, windstorm,
explosion, theft, act of any other tenant, or other cause. Lessor will not be
liable to Tenant, or those claiming through Tenant, for injury,
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<PAGE>
death or property damage occurring in the Premises, except to the extent caused
by the willful misconduct or negligence of Lessor or someone acting on its
behalf.
20. Indemnification.
---------------
Tenant will indemnify Lessor and its agents and employees against all claims,
demands and actions, and all related costs and expenses (including attorneys'
fees) for injury, death, disability or illness of any person, or damage to
property, occurring in the Premises or arising out of Tenant's use of the
Premises, except to the extent caused by the willful misconduct or negligence of
Lessor or someone acting on its behalf. To the extent caused by the willful
misconduct or negligence of Lessor or someone acting on its behalf, Lessor will
indemnify Tenant and its agents, employees and invitees against all claims,
demands, and actions, and all related costs and expenses (including attorneys'
fees) for injury, death, disability or illness of any person, or damage to
property occurring in the Premises or arising out of Tenant's use of the
Premises.
21. Insurance.
---------
Tenant will keep public liability insurance in force at its expense by an
insurer and policy acceptable to Lessor in its reasonable opinion. The policy
will name Lessor and its mortgagee as additional insureds, for limits of at
least $1,000,000 for bodily injuries or death of one or more persons and at
least $100,000 for property damage. Tenant will carry fire and "all risk"
coverage insurance for Tenant's property and improvements in the Premises.
Prior to Tenant's occupancy of the Premises, Tenant will deliver to Lessor the
liability and casualty policies or certificates by the insurer showing this
coverage to be in effect with premiums paid. The insurance will provide that
Lessor will be notified in writing 30 days prior to cancellation of, material
change in, or failure to renew, the insurance.
22. Waiver of Insurable Claims.
--------------------------
Lessor and Tenant release each other from any liability for loss or damage by
fire or other casualty coverable by a standard form of "all risk" insurance
policy, whether or not the loss or damage resulted from the negligence of the
other, its agents or employees. Each party will use reasonable efforts to
obtain policies of insurance which provide that this release will not adversely
affect the rights of the insureds under the policies. The releases in this
Section will be effective whether or not the loss was actually covered by
insurance.
23. Assignment and Subletting.
-------------------------
Tenant may not transfer, assign, or mortgage this Lease or any interest of
Tenant under this Lease or sublet the Premises or any part of the Premises,
without Lessor's prior written consent, and this Lease will not be assignable by
operation of law without Lessor's written consent. If Tenant receives a bona
fide offer for an assignment of Tenant's interest under this Lease or to
sublease all or part of the Premises and Tenant requests Lessor's consent, a
copy of the offer will be furnished
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<PAGE>
to Lessor. In the case of a proposed assignment or sublease of all of the
Premises, Lessor may terminate this Lease, either conditioned on execution of a
new lease between Lessor and the party making the offer on the same terms as the
offer to Tenant or without that condition. In the case of a proposed sublease
for less than all of the Premises, Lessor may amend this Lease to exclude the
portion of the Premises to be subleased, either conditioned on execution of a
new lease between Lessor and the party making the offer on the same terms as in
the offer to Tenant or without that condition.
If Lessor fails to give Tenant written notice of its decision to terminate or
amend this Lease within 20 days after receiving a copy of the offer to Tenant,
Lessor may not unreasonably withhold its consent to the assignment or sublease
described in the offer. The provisions of this Section will be binding on Tenant
and any assignee or subtenant of Tenant and will apply to all portions of the
Premises remaining subject to this Lease and to each request by Tenant, or its
assignee or subtenant for Lessor's consent to a further or subsequent assignment
or subletting.
If Lessor consents to one or more assignments or sublettings, Tenant will still
remain liable for all obligations of the Tenant under this Lease. Lessor's
consent to one assignment or subletting will not be deemed consent to any
subsequent assignment or subletting. Any assignment or subletting by an
assignee or subtenant will also require Lessor's prior written consent, and no
assignee or subtenant will use the Premises for any purpose not permitted under
this Lease except for general office purposes or in any other way contrary to
the provisions of this Lease.
Lessor's interest in this Lease will be freely assignable and the obligations of
the Lessor arising or accruing under this Lease after an assignment will be
enforceable only against the assignee.
24. Damage or Destruction
---------------------
If the Premises or Building is damaged by Casualty, the damage (excluding damage
to improvements paid for by Tenant or trade fixtures, equipment or personal
property of Tenant) will be repaired by Lessor at its expense to a condition as
near as reasonably possible to the condition prior to the Casualty, but if more
than 50% of the total rentable area of the Building is rendered untenantable,
Lessor may terminate this Lease as of the date of the Casualty by giving written
notice to Tenant within 30 days after the Casualty. If this Lease is not
terminated, Lessor will begin repairs within 90 days after the Casualty and
complete the repairs within a reasonable time, subject to acts of God, strikes
and other matters not within the control of Lessor. If Lessor fails to begin
and proceed with repairs as required, Tenant may give Lessor notice to do so.
If Lessor has not begun the repairs within 30 days after Tenant's notice, Tenant
may terminate this Lease by written notice to Lessor within 5 days after
expiration of the 30-day period. If this Lease is terminated because of the
Casualty, rents and other payments will be prorated as of the termination and
will be proportionately refunded to Tenant or paid to Lessor, as the case may
be. During any period in which the Premises or any portion of the Premises is
made untenantable as a result of the Casualty, the Monthly Rent will be abated
for the period of time untenantable in proportion to the square foot area
untenantable.
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25. Eminent Domain.
--------------
If there is a Taking of 25% or more of the Premises or 25% or more of the total
rentable area of the Building, either party may terminate this Lease as of the
date the public authority takes possession, by written notice to the other party
within 30 days after the Taking. If this Lease is so terminated any rents and
other payments will be prorated as of the termination and will be
proportionately refunded to Tenant, or paid to Lessor, as the case may be. All
damages, awards and payments for the Taking will belong to Lessor irrespective
of the basis upon which they were made or awarded, except that Tenant will be
entitled to any amounts specifically awarded for Tenant's trade fixtures or
equipment or as a relocation payment or allowance. If this Lease is not
terminated as a result of the Taking, Lessor will restore the remainder of the
Premises to a condition as near as reasonably possible to the condition prior to
the Taking, the rent will be abated for the period of time the space is
untenantable in proportion to the square foot area untenantable and this Lease
will be amended appropriately to reflect the deletion of the space taken.
26. Defaults.
--------
If (a) Tenant defaults in the payment of rent or other amounts under this Lease
and the default continues for 10 days after written notice by Lessor to Tenant,
(b) Tenant defaults in any other obligation under this Lease and the default
continues for 30 days after written notice by Lessor to Tenant and Tenant fails
to proceed promptly after the giving of such notice with all due diligence to
cure the default and thereafter to prosecute the curing of such default with all
due diligence (it being intended that in connection with a default not
susceptible of being cured with due diligence within 30 days, the time within
which the Tenant is to cure the same shall be extended for such period as may be
reasonably necessary to complete the same with all due diligence), (c) any
proceeding is begun by or against Tenant to subject the assets of Tenant to any
bankruptcy or insolvency law or for an appointment of a receiver of Tenant or
for any of Tenant's assets, or (d) Tenant makes a general assignment of Tenant's
assets for the benefit of creditors, then Lessor may, with or without
terminating this Lease, cure the default and charge Tenant all costs and
expenses of doing so, and Lessor also may re-enter the Premises, remove all
persons and property, and regain possession of the Premises, without waiver or
loss of any of Lessor's rights under this Lease, including Lessor's right to
payment of Monthly Rent. Lessor also may terminate this Lease as to all future
rights of Tenant.
Lessor may elect to receive from Tenant a lump sum equal to all Monthly Rent
payable from the date of default through what would have been the remainder of
the Term, minus the estimated rental value of the Premises for the same period.
If Lessor elects this remedy, the rental value will be based on Lessor's
reasonable estimates and assumptions, unless they are clearly shown to be
erroneous, and the Monthly Rent and rental value will be reduced to present
worth using a discount factor equal to the discount rate of the Federal Reserve
Bank in Minneapolis, Minnesota, at the time of Lessor's election.
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<PAGE>
Tenant waives any right of restoration to possession of the Premises after re-
entry, notice of termination, or after judgment for possession. If this Lease
is terminated under this Section, Tenant will indemnify Lessor against all loss
of rents and against other damages which Lessor may incur as a result of the
termination for the remainder of the original Term, and against all related
attorneys' fees and other expenses. If Tenant defaults in any of its
obligations under this Lease, it will promptly reimburse Lessor for all costs
(including attorneys' fees) incurred by Lessor in enforcing Tenants's
obligations, whether or not this Lease is terminated and whether or not suit is
brought. No right or remedy will preclude any other right or remedy, no right
or remedy will be exclusive of or dependent upon any other right or remedy, and
any right or remedy may be exercised independently or in combination.
If Tenant is in default and notice of termination of Tenant's right to
possession has been mailed to Tenant at the Premises and it appears in Lessor's
reasonable judgment that Tenant has abandoned or vacated the Premises, Lessor
may re-enter the Premises and retake possession without legal action and without
relieving Tenant of the obligation to pay Monthly Rent or any other obligations
under this Lease.
27. Waiver of Lease Provisions.
--------------------------
No waiver of any provision of this Lease will be deemed a waiver of any other
provision or a waiver of that same provision on a subsequent occasion. The
receipt of rent by Lessor with knowledge of a default under this Lease by
Tenant will not be deemed a waiver of the default. Lessor will not be deemed to
have waived any provision of this Lease unless it is done by express written
agreement by Lessor. Any payment by Tenant and acceptance by Lessor of a lesser
amount than the full amount of all Monthly Rent and other charges then due will
be applied to the earliest amounts due. No endorsement or statement on any
check or letter for payment of rent or other amount will be deemed an accord and
satisfaction unless Tenant and Lessor have specifically agreed in writing to the
same, and Lessor may accept such check or payment without prejudice to its right
to recover the balance of any rent or other amount or to pursue any other remedy
provided in this Lease.
28. Return of Possession to Lessor.
------------------------------
On expiration of the Term or sooner termination of this Lease, Tenant will
return possession of the Premises to Lessor, without notice from Lessor, in good
order and condition, except for ordinary wear and damage, destruction or
conditions Tenant is not required to remedy under this Lease. If Tenant does
not return possession of the Premises to Lessor, Tenant will pay Lessor all
resulting damages Lessor may suffer and will indemnify Lessor against all claims
made by any new tenant of all or any part of the Premises. Tenant, will give
Lessor all keys for the Premises and will inform Lessor of combinations on any
locks and safes on the Premises. Any property left in the Premises after
expiration or termination of this Lease or after abandonment of the Premises
will be deemed abandoned by Tenant and will be the property of Lessor to dispose
of as Lessor chooses.
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29. Holding Over.
------------
If Tenant remains in possession of the Premises after expiration of the Term
without a new lease, it may do so only with written consent by Lessor, and any
such holding over will be from month-to-month subject to all the same provisions
of this Lease, except that the Monthly Base Rent will be the Monthly Base Rent
stated in Lessor's consent if a new Monthly Base Rent is stated, or 150% of the
Monthly Base Rent under this Lease if no new Monthly Base Rent is stated in
Lessor's consent. Any holding over without Lessor's consent will be at double
the Monthly Rent under this Lease. The month-to-month occupancy may be
terminated by Lessor or Tenant on the last day of any month by at least 30 days
prior written notice to the other.
30. Security Deposit.
----------------
Tenant agrees to deposit with Lessor as a security deposit an amount equal to
the initial Monthly Base Rent. Such deposit shall be made at the time of the
execution of this Lease by Tenant. Lessor may commingle the security deposit
with other funds but will refund this amount to Tenant without interest on the
fifth anniversary of the Commencement Date of this Lease, less any amounts
necessary in Lessor's reasonable opinion to pay the cost of repair or
restoration of the Premises to the condition required under this Lease or to
cure any defaults of Tenant under this Lease.
31. Brokers.
-------
Lessor and Tenant represent and warrant one to another that neither of them has
employed or otherwise used any broker or agent in relation to this Lease, except
Charles E. Snyder and William P. Nichols of The Shelard Group Incorporated.
Lessor will indemnify and hold Tenant harmless, and Tenant will indemnify and
hold Lessor harmless, from and against any claims for brokerage or other
commissions or fees arising out of any breach of the foregoing representation
and warranty by the respective indemnitors.
32. Notices.
-------
Any notice under this Lease will be in writing, and will be sent by prepaid
certified mail, or by telegram confirmed by certified mail, addressed to Tenant
at the Premises and to Lessor at 1550 Utica Avenue South, Suite 120, St Louis
Park, Minnesota 55416, or to such other address as is designated in a notice
given under this Section. A notice will be deemed given on the date of first
attempted delivery. Lessor's statements of Additional Costs and other routine
mailings to tenants need not be sent by certified mail.
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33. Governing Law.
-------------
This Lease will be construed under and governed by the laws of Minnesota. If
any provision of this Lease is illegal or unenforceable, it will be severable
and all other provisions will remain in force as though the severable provision
had never been included.
34. Entire Agreement.
----------------
This Lease contains the entire agreement between Lessor and Tenant regarding the
Premises. Tenant agrees that it has not relied on any statement, representation
or warranty of any person except as set out in this Lease. This Lease may be
modified only by an agreement in writing signed by Lessor and Tenant. No
surrender of the Premises, or of the remainder of the Term, will be valid unless
accepted by Lessor in writing.
35. Successors and Assigns.
----------------------
All provisions of this Lease will be binding on and for the benefit of the
successors and assigns of Lessor and Tenant, except that no person or entity
holding under or through Tenant in violation of any provision of this Lease will
have any right or interest in this Lease or the Premises.
Lessor and Tenant have executed this Lease to be effective as of the date stated
in the first paragraph of this Lease.
36. Termination.
-----------
If Lessor decides to demolish the Building, Lessor will have the right to
terminate this Lease by at least 15 months' prior written notice to Tenant
provided that the leases of all other tenants in the Building are also
terminated on or before the termination date of this Lease. If this Lease is
terminated due to the demolition of the Building, then on the termination date,
Lessor shall pay to Tenant a relocation fee of $2.00 per rentable square foot of
the Premises. If Lessor fails to demolish the Building within two years after
the termination date, then Lessor will pay $100,000.00, not as a penalty, but as
final and liquidated damages.
37. Renewal Option.
--------------
Lessor grants Tenant the option to extend the Term for 60 months subject to the
following conditions:
(a) At the time Tenant exercises the option, Tenant is not in default
under this Lease.
(b) Tenant gives Lessor at least twelve months' prior written notice of
Tenant's election to extend the Term.
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(c) The extended Term will be on the same terms, covenants and conditions
provided during the initial Term except that there will be no further
option to extend the Term, and the Monthly Base Rent will be the
greater of the Monthly Base Rent for the final month of the initial
Term, or monthly base rent at a rate which would then be charged by
Lessor for the Premises considering the condition of the Premises and
based on rates then being charged by Lessor for comparable space in
the Building.
(d) On written request by Tenant no more than 30 days prior to the date
Tenant's notice to extend must be given, Lessor will provide Tenant
with the monthly base rental rate it would charge for the Premises
under paragraph (c) above.
(e) At the request of either, Lessor and Tenant will execute and deliver
appropriate documents covering extension of the Term, the new Monthly
Base Rent and other terms of this Lease during the extended Term.
(f) The rights of Tenant under this Section will not be severed from this
Lease or separately sold, assigned or transferred, and will expire on
the expiration or earlier termination of this Lease
38. School For Medical and Veterinary Technicians.
---------------------------------------------
Sections 39 - 46 pertaining specifically to the operation of a school for the
training of medical and veterinary technicians on the Premises shall control
over anything to the contrary in the more general provisions of this Lease;
provided, however, that except in the case of inconsistencies, Sections 39 - 46
shall be construed to be in amplification rather than limitation of the more
general provisions of this Lease.
39. Approvals.
---------
Tenant shall be solely responsible at its sole cost and expense, for obtaining
all licenses, permits, certifications, or approvals of any other kind
(collectively, "Approvals" and each an "Approval") which are necessary for the
operation of a post-secondary school for training of medical and veterinary
technicians, including but not limited to any Approvals required by any
Governmental Authority, any Approvals required any non-governmental
certification or accreditation boards, authorities, or organizations. Lessor
makes no representation or warranty, whether express or implied, that the
Premises are suitable for the operation of a post-secondary school for training
of medical and veterinary technicians or for any other particular purpose. If,
at any time, Tenant loses any Approval which is necessary for the operation of a
post-secondary school for the training of medical and veterinary technicians,
then Tenant will promptly take all necessary action to regain the Approval and
Tenant shall promptly cease any prohibited activities until Tenant regains the
Approval. Tenant shall continue to be responsible for all of its obligations
under this
-17-
<PAGE>
Lease even if Tenant is unable, in whole or in part, to operate its post-
secondary school for the training of medical and veterinary technicians due to
the lack of any necessary Approval.
40. Contingency for Accreditation Approval.
--------------------------------------
Tenant will be seeking accreditation from the Minnesota Department of Education
to operate a post-secondary school for the training of medical and veterinary
technicians on the Premises. If Tenant is unable to obtain satisfactory
assurances from the Minnesota Department of Education on or before October 22,
1991 that such accreditation will be forthcoming, then, upon written notice to
Lessor, Tenant may terminate this Lease. In order to be effective, Tenant's
notice of termination of this Lease must be deposited in the United States mail,
by prepaid, certified mail in accordance with Section 32, on or before October
22, 1991. If Tenant fails to give notice of termination in the manner specified
in this Section on or before October 22, 1991, then this Lease shall remain in
full force and effect and Tenant shall remain fully obligated hereunder
notwithstanding any subsequent failure of Tenant to gain accreditation.
41. Hazardous Substances; Medical Waste.
-----------------------------------
(a) Tenant shall not bring into or permit the existence of any Hazardous
Substance on the Premises, the Building, or the Land without the prior
written consent of Lessor, which consent shall not unreasonably be
withheld. Tenant may use or permit the presence of those substances
listed in Exhibit E attached hereto and made a part hereof, but only
so long as such use or presence is in strict compliance with all
Environmental Regulations. Tenant shall file any management plans with
any Governmental Authority which are required for the use of the
substances listed in Exhibit E and shall provide Lessor with proof of
the filing of such plans. If Tenant discovers the presence of any
Hazardous Substance on or in the Premises, the Building, or the Land
which is contrary to any Environmental Regulation, Tenant shall
promptly give Lessor notice thereof. If the existence of a Hazardous
Substance is caused or permitted by Tenant, (i) Tenant shall remove
such Hazardous Substance and dispose of it as required by any
Environmental Regulation, or (ii) Lessor, by notice to Tenant, may
elect to remove any Hazardous Substance and dispose of it as required
by any Environmental Regulation, in which case Tenant shall pay the
entire cost of such disposal within 10 days after receipt of a
statement for such cost by Lessor. If any Governmental Authority shall
require any remedial action or other response with respect to the
Premises, the Building, or the Land as the result of any Hazardous
Substance brought into or permitted by Tenant on or in the Premises,
the Building, or the Land, Tenant shall notify Lessor of such action
or response and shall, with the prior written approval of Lessor, be
responsible for satisfying the requirements of said response or
remedial action to the satisfaction of the applicable Governmental
Authority.
-18-
<PAGE>
(b) Tenant shall, at its sole cost, expense and risk, remove or cause to
be removed from the Premises, the Building, and the Land, all Medical
Waste. Tenant shall not dispose of any Medical Waste in any
receptacles provided by Lessor for disposal of normal refuse.
(c) Tenant agrees to indemnify and hold Lessor harmless from any and all
claims, causes of action, damages, penalties and costs (including
attorneys' fees, consultant fees and related expenses) which may be
asserted against or incurred by Lessor resulting from: the presence of
any Hazardous Substance on or in the Premises, the Building, or the
Land caused or permitted by Tenant; any violation or alleged violation
of any Environmental Regulation caused or permitted by Tenant; or
Tenant's failure to properly dispose of any Medical Waste in
accordance with this Lease. Tenant's duty to indemnify and hold
harmless includes, but is not limited to, proceedings or actions
commenced by any Governmental Authority. Tenant shall indemnify Lessor
against all expenses incurred by Lessor pursuant to this Section as
they are incurred, rather than waiting for the ultimate outcome of the
litigation or administrative proceeding.
(d) The foregoing covenants and indemnifications shall be deemed
continuing covenants and indemnifications for the benefit of Lessor,
and its successors and assigns, and shall survive the expiration or
termination of this Lease.
(e) Nothing in this Section shall be intended to impose any liability or
obligation to act of any kind whatsoever on Tenant as a result of the
presence of any Hazardous Substance on the Premises at the time that
Tenant first takes possession of the Premises or as a result of any
Hazardous Substance on the Premises through the actions of any person
other than the Tenant, its officers, employees, agents, contractors,
subcontractors, subtenants, assignees, visitors, invitees, or
students.
42. Compliance With Standards; Inspection of Records.
------------------------------------------------
In its operation of a post-secondary school for the training of medical and
veterinary technicians on the Premises, Tenant shall comply with all of the
following
(a) The applicable requirements and standards, as they may be supplemented
or amended from time to time, of the American Veterinary Medical
Association, the American Medical Association, the Accrediting Bureau
of Health Education Schools, the Minnesota Higher Education
Coordinating Board, the Minnesota Department of Education, the United
States Department of Education, the United States Department of
Agriculture, and the Minnesota Board of Animal Health.
(b) The applicable requirements and standards, as they may be supplemented
or amended from time to time, of any other Governmental Authority or
non-
-19-
<PAGE>
governmental board, authority or organization which provides
certification, accreditation, or licensing of Tenant's post-secondary
school for training of medical and veterinary technicians.
Tenant shall keep complete records of the status of all certifications,
accreditations and licenses which it receives or maintains, and complete records
of all inspections or review reports issued by any Governmental Authority or
non-government board, authority or organization with respect to Tenant's
operation of a post-secondary school for the training of medical and veterinary
technicians on the Premises. Lessor, upon reasonable request during Normal
Business Hours, shall have the right to inspect Tenant's records to determine if
Tenant is in compliance with all applicable requirements and standards. The
Lessor's right to review such records shall not be deemed for any purpose to
create an obligation for Lessor to monitor the compliance by Tenant with
applicable requirements and standards.
43. Incompatible Conditions
-----------------------
Tenant will make its best efforts not to permit or conduct any condition which
materially detracts from the desirability of the Building as a rental office
building of its type in the Bloomington/Edina, Minnesota area. Without limiting
the generality of the foregoing, Tenant will make its best efforts to prevent
any animal, medical, or laboratory noises or odors produced in the Premises from
being detectable elsewhere on the interior or exterior of the Building. Tenant
shall be responsible, at its sole cost and expense, for installing any
specialized noise or odor control equipment or improvements which are necessary
to control noises or odors in accordance with this Section. If such specialized
noise or odor control equipment or improvements are necessary, then Tenant shall
propose plans and specifications for such equipment or improvements to Lessor
for Lessor's approval, which approval shall not unreasonably be withheld. After
the installation of such specialized noise or odor control equipment or
improvements in accordance with the approved plans and specifications, Tenant
will not be required to install additional specialized noise or odor control
equipment or improvements unless Lessor notifies Tenant in writing within 6
months after the installation of the specialized equipment or improvements that
such equipment or improvements are inadequate or conditions regarding Tenant's
use of the Premises change such that additional specialized equipment or
improvements are necessary.
44. Animals.
-------
Tenant shall promptly comply with all laws, ordinances, rules, orders,
regulations and other requirements of any Governmental Authority pertaining to
the keeping and use of animals on the Premises and the transportation of animals
to and from the Premises. Lessor makes no representation or warranty that the
keeping or use of animals on the Premises or the transportation of animals to
and from the Premises is or will necessarily from time to time be permitted by
Governmental Authorities. To the extent permitted by Governmental Authorities,
Tenant may keep animals on the Premises in accordance with the following:
-20-
<PAGE>
(a) The only types of animals which may be kept on the Premises are dogs,
cats, guinea pigs, white mice and other small laboratory animals that
are approved by Lessor in writing, which consent shall not
unreasonably be withheld.
(b) The maximum number of each type of animal which may be kept or located
on the Premises at any one time shall be as follows:
Dogs: 20
Cats: 20
Guinea Pigs white mice,
and other small
laboratory animals
approved by Lessor
in writing: 40
(c) All kennels, cages, and other areas for the keeping of animals, and
all areas in which animals are to be used, examined, or otherwise
located for any purpose, shall be on the basement level of the
Premises; no animals except for seeing eye dogs shall be allowed for
any purposes whatsoever on the first floor of the Premises.
(d) Tenant shall obtain Lessor's prior written approval, which approval
shall not unreasonably be withheld, for the particular locations on
the basement level of the Premises in which animals may be kept.
Landlord's written approval of construction documents shall constitute
such approval.
(e) All animals entering or leaving the Premises shall enter and leave
through the loading door dock to the Building. Notwithstanding
anything in the foregoing or elsewhere in this Lease to the contrary,
if the loading dock door to the Building is obstructed or unuseable,
then animals entering or leaving the Premises may enter and leave
through the door on the south end of the Building and animals may be
transported through the first floor of the Premises to the basement
level of the Premises. Under such circumstances, the elevators within
the Building shall not be used to transport animals from the first
floor of the Building to the basement level of the Building.
(f) All animals entering or leaving the Premises shall enter and leave in
closed cages, except that dogs may be walked on leashes.
(g) No animal shall be walked or exercised in the common areas of the
Building or on the Land; provided, however, that subject to the
limitations of this Lease on the doors which may be used for animals
entering or leaving the Premises, dogs may be walked on leashes to and
from vehicles used in the transportation of the dogs.
-21-
<PAGE>
(h) Notwithstanding anything in the foregoing or elsewhere in this Lease
to the contrary, with Lessor's prior consent (not unreasonably to be
withheld), Tenant may occasionally bring animals of no greater weight
than 70 pounds onto the Premises for up to one day for instructional
purposes through the loading dock door to the Building, but no such
animals shall be kept in the Premises overnight.
45. Conduct of Students.
-------------------
Tenant shall promulgate and enforce such written rules for the conduct of its
students as are necessary to maintain the character of the Building as a rental
office building of its type in the Bloornington/Edina, Minnesota area. Such
written rules shall include, but not be limited to, the following:
(a) All student vehicles shall be parked in the rear of the Building in
the parking lot located on the land described on Exhibit F attached to
this Lease, the use of which lot by Tenant and its students shall be
governed by a separate Parking Lease between Lessor and Tenant; no
student vehicles shall be parked in the parking lot in the front of
the Building or on any other land owned by Lessor except the land
described on Exhibit F attached to this Lease. A default of any
material kind under the Parking Lease where Tenant has not taken
reasonable steps to cure shall be a default under this Lease.
(b) Tenant shall use its best efforts to encourage students to enter and
exit the Building through the door on the south side of the Building;
Tenant shall use its best efforts to encourage students not to enter
or exit through the front door of the Building or any other door
except the door on the south side of the Building.
(c) Tenant shall use its best efforts to encourage students not to loiter
in, sit in, congregate in, smoke in, eat in, or use for lounge or
social purposes any of the common areas of the Building or the Land,
including but not limited to the front lobby and front steps of the
Building. In addition to promulgating and enforcing rules which
restrict student use of the common areas of the Building and the Land,
Tenant shall provide smoking and break rooms within the Premises to
provide the students with locations within the Premises for smoking,
eating, lounging, social, and other similar activities.
Notwithstanding anything in the foregoing to the contrary, it is
acknowledged that the portion of the Land consisting of a lawn to the
south and west of the Building may be used by students in a reasonable
manner for outdoor smoking, eating, and socializing. If a cafeteria or
vending area is established in the Building and is generally available
to all of the tenants of the Building, then students may use the
cafeteria or vending area.
-22-
<PAGE>
46. Parking.
-------
As noted above, Lessor and Tenant have entered into a separate Parking Lease
between Lessor and Tenant for parking spaces in the parking lot on the land
described on Exhibit F attached to this Lease. In addition, Tenant may use, on
a nonexclusive basis in common with other tenants of Lessor, up to 150 parking
spaces in the parking lot located on the Land to the east and southeast of the
Building. Lessor shall designate 15 parking spaces on the Land near the front
entrance to the Building as visitor parking spaces which shall be available on a
non-exclusive, first-come-first-served basis for visitors to all tenants of the
Building. Enrolled students of Tenant shall not park in the visitor parking
spaces in front of the Building. At the present time, there are two indoor
garage parking spaces within the Building. Tenant shall be permitted to use the
two existing indoor parking spaces for the parking of cars at no cost until
Lessor leases or otherwise allocates the two existing indoor parking spaces to
other tenants of the Building. If, in the future, the Lessor constructs
additional indoor parking spaces within the Building, Tenant shall have the
option to lease two of the new indoor parking spaces at Lessor's market rental
rate, which rate shall be adjusted from time to time. Upon the construction of
additional indoor parking spaces, Tenant shall be given written notice of its
option to lease two indoor spaces. If Tenant does not enter into a written
agreement to lease the two indoor spaces on landlord's standard lease form
within 15 days after Lessor's notice to Tenant, then Tenant's right to lease the
two spaces shall terminate.
Lessor:
MEPC AMERICAN PROPERTIES
INCORPORATED
By _____________________________________
Its Senior Vice President
------------------------------------
And ____________________________________
Its Vice President, Property Management
------------------------------------
Tenant:
MEDICAL INSTITUTE OF
MINNESOTA, INC.
By _____________________________________
-23-
<PAGE>
Its President
-----------------------------------
And /s/ Wendy Kline
-----------------------------------
Its Vice President
-----------------------------------
-24-
<PAGE>
(Floor Plan)
<PAGE>
(Floor Plan)
<PAGE>
EXHIBIT B
Legal Description
Building 2 - 5503 Green Valley Drive, Bloomington, MN
All that part of Lot 1, Block 1, Norman Center, Inc. Third Addition, according
to the plat thereof on file or of record in the office of the Hennepin County
Recorder, lying Southwesterly of the following described line: commencing at the
most Westerly corner of said Lot 1; thence North 72 09' East along the Northerly
line of said Lot 1 a distance of 296.46 feet to the actual point of beginning of
the line to be described, thence South 49 39' 30'' East a distance of 486.82
feet, more or less, to a point being 271.54 feet Southwesterly of the most
Easterly corner of said Lot 1 and there terminating. (All or part of this
property is Torrens, evidenced by Certificate of Title No. 573985.)
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
1. Tenant will not use the Premises in any manner which conflicts with any
law, ordinance, or governmental rule or regulation now or subsequently in
force.
2. Tenant will not install any awnings or other attachments or structures on
the exterior of the Building.
3. Curtains, draperies or other window coverings will not be installed in the
Premises without first obtaining written approval by Lessor of the exterior
color and material
4. Except for normal microwave usage, no food will be prepared or cooked in
the Premises without prior written consent by Lessor, and the Premises will
not be used for housing, lodging, sleeping or for any immoral or illegal
purpose.
5. Tenant will not connect any apparatus, equipment or device to the water
lines in the Building without first obtaining the written consent of
Lessor.
6. No electrically powered machines or equipment will be used by Tenant in the
Premises except typewriters, adding machines, dictating equipment, personal
computers, micro computers and similar small electric units and other
machines which are normal to the permitted uses of the Premises as allowed
under the Lease.
7. Tenant will not operate or permit to be operated in the Premises any
musical or sound producing instrument or device which can be heard outside
the Premises.
8. Tenant will not bring into the Building any pollutants, contaminants or
hazardous substances (as now or later defined under state or federal law)
or any items likely to cause fire or explosion, except as may be expressly
permitted under and subject to the terms and conditions of the Lease.
9. Tenant will not bring or permit to be brought into the Building any animals
or birds, except as may be expressly permitted under and subject to the
terms and conditions of the Lease.
10. Tenant will not disturb, solicit or canvass any occupant of the Building
and will cooperate to prevent same.
11. Tenant will not use any power for the operation of any equipment or device
other than electricity provided by Lessor.
12. Tenant will refer to Lessor all contractors or installation technicians
rendering any ser-vice for Tenant for approval by Lessor before any
contractual services are performed. This
<PAGE>
will include but is not limited to installation of telephone or telegraph
equipment, electrical devices and attachments, and any installations
affecting floors, walls, woodwork, trim, windows, ceilings, equipment or
other portions of the Building.
13. The work of the Janitor or cleaning personnel after 5:00 P.M. will not be
hindered by Tenant, and the windows may be cleaned at any time. Tenant
will provide adequate waste and rubbish receptacles to facilitate cleaning
services.
14. Movement in or out of the Building of furniture or office equipment, or the
sending or receipt by Tenant of merchandise or materials which requires use
of elevators or stair-ways or movement through Building entrances will be
restricted to hours designated by Lessor. All such movement will be as
directed by Lessor and will be done in a manner approved by Lessor in
advance. Tenant assumes all risk of damage to any items moved and for any
injury to any person or property, and Tenant will indemnify Lessor against
any resulting loss or damages.
15. Lessor will not be responsible for any property, equipment, money or
jewelry lost or stolen from the Premises or the public areas of the
Building, regardless of whether or not the loss occurs when the Premises
are locked.
16. Lessor may designate the maximum weight and proper position of any heavy
equipment, including safes and large files to be placed in the Building,
and only those which in the opinion of Lessor will not damage the floors,
structures or elevators may be moved into the Building.
17. Any damage in connection with the moving or installing of Tenant's
furniture, equipment, appliances or other articles will be paid for by
Tenant.
18. Lessor may permit entrance to the Premises by use of pass keys controlled
by Lessor or its employees, contractors or service personnel, for the
purpose of performing Lessor's janitorial services.
19. Lessor may at its option set aside a parking area to be used by Tenant and
its employees, which area will be used by Tenant and its employees to the
exclusion of other areas.
20. If there is a vending area in the Building which is available to tenants of
the Building during Normal Business Hours and Tenant's school hours, Tenant
may have no vending machines in the Premises.
<PAGE>
EXHIBIT D
TENANT IMPROVEMENTS
<PAGE>
EXHIBIT E
CHEMICALS/STAINS/GASES
USED BY THE MEDICAL INSTITUTE OF MINNESOTA
- --------------------------------------------------------------------------------
Radiology
- ---------
Developing Solution
Fixer Solution
Surgical Suite
- --------------
Oxygen
Isofluorane
Halothane
Metofane
Nitrousoxide
Clinical Laboratories
- ---------------------
Bleach Barium Chloride
Chlorhexidine Diacetate Sodium Chloride
Sulfuric Acid Barium Sulfate
Hydrochloric Acid Ammonium Sulfate
Acetic Acid Ammonium Oxalate
Acetone Ammonium Molybdate
Methanol Glycerol
Isopropanol Ferric Chloride
Potassium Dichromate Ferric Nitrate
Sodium Bicarbonate Cupric Sulfate
Calcium Carbonate Potassium Iodide
Sodium Phosphate Phenophthalein
Sodium Sulfate Barium Hydroxide
Calcium Chloride Lithium Sulfate
Sodium Phosphate Sodium Oxalate
Magnesium Sulfate Mercuric Chloride
Benzoid Acid Mercuric Nitrate
Potassium Sodium Tartarate Iodine
Sulfanilic Acid Sodium Citrate
Glucose Salicylic Acid
Ammonium Sulfate Sulfosalicylic Acid
Sodium Hydroxide Sodium Metabisulfite
Sodium Sulfate Sodium Nitrate
Sodium Nitrite Sodium Bicarbonate
Sodium Bisulfite Zinc Sulfate
Sodium Carbonate Urea
Hydrogen Peroxide
Stains
Bromsulphathalein Sudan III
Methylene Blue Brilliant Cresyl Blue
Phloxine B Wrights
Ponceau Crystal Violet
Safranine
Gases
Oxygen
Propane
Natural Gas
Cultures
Appropriate cultures used for instruction of Laboratory Technique
<PAGE>
EXHIBIT F
LEGAL DESCRIPTION OF STUDENT PARKING LOT
Parking Lot
Lot 2, Block 1, Norman Center Inc. , Fourth Addition, according to the plat
thereof on file or of record in the office of the Registrar of Titles in
and for Hennepin County. (This property is Torrens, evidenced by
certificate of Title No. 573985.)
<PAGE>
AMENDMENT OF LEASE
------------------
This Amendment of Lease is entered into as of May 18, 1992 between MEPC
AMERICAN PROPERTIES INC., a Delaware corporation ("Lessor"), and MEDICAL
INSTITUTE OF MINNESOTA, INC., a Minnesota corporation ("Tenant").
A. Lessor and Tenant entered into a lease dated October 11, 1991 (the
"Lease") under which Lessor leased to Tenant certain space on the first floor
and in the basement of the building at 5503 Green Valley Drive, Bloomington,
Minnesota, which is located on the land described on Exhibit B attached to this
Amendment.
B. Tenant wishes to lease from Lessor certain Additional Premises
consisting of 5,505 square feet on the first floor of the Building as
crosshatched on the floor plan attached hereto as Exhibit A (the "Additional
Premises").
C. Lessor and Tenant want to amend the Lease to cover the Additional
Premises and to modify and amend the Lease in certain other respects.
In consideration of the above facts and in consideration of the mutual
agreements contained in this Amendment, Lessor and Tenant agree that the Lease
is amended as follows:
1. Section l(e) of the Lease is amended to read as follows:
"Base Rent" means the following amounts for each Lease Year:
Lease Year 1 $178,233.00
Lease Years 2 through 5 $207,132.00
Lease Years 6 through 10 $245,976.00
2. Section 1(r) of the Lease is amended to read as follows:
"Monthly Base Rent" means the following monthly amounts
throughout the Term:
January 1, 1992 through
September 30, 1992: $14,050.00 per month
October 1, 1992 through
December 31, 1996: $17,261.00 per month
Lease Years 6 through 10: $20,498.00 per month
<PAGE>
3. Monthly Rent" as defined in section 1(s) is amended to increase the
initial Monthly Rent, effective October 1, 1992 to $35,923.00, which
is comprised of a Monthly Base Rent of $17,261.00 plus a monthly
Operating Cost estimated at $10,052.00 and a monthly Tax Cost
estimated at $8,610.00.
4. Effective October 1, 1992, Section 1(v) of the Lease is amended to
read as follows:
"Premises" means the space referred to as Suite No. 100 on the
first floor and in the basement of the Building, which consists
of the space crosshatched on the drawing attached to the original
Lease as Exhibit A together with the space crosshatched on the
drawing attached as Exhibit A to the Amendment of Lease dated May
18, 1992, and which for purposes of this Lease will be deemed to
contain a total of 38,837 rentable square feet, consisting of
22,656 rentable square feet on the first floor of the Building
and 16,181 rentable square feet in the basement of the Building,
regardless of actual measurements.
5. 'Tenant's Share", as defined in Section l(z), is increased to 55.97%
effective October 1, 1992.
6. The provisions of the first three paragraphs of Section 13 of the
Lease relating to alterations and allowances will not apply to the
Additional Premises, and the following will apply to the Additional
Premises in place thereof.
Tenant accepts the Additional Premises in their present condition
and Lessor will have no obligation to do any redecorating or
remodeling or to make any repairs or alterations, except for the
alterations, if any, shown on the attached Exhibit D.
Tenant shall pay Lessor for the costs of the work shown on the
attached Exhibit D. Lessor shall contribute a credit against the
cost to Lessor of the work equal to $20.00 per rentable square
foot of the Additional Premises. Tenant shall pay to Lessor upon
request the amount by which the cost of the work exceeds $20.00
per rentable square foot of the Additional Premises. If the
credit of $20.00 per rentable square foot of the Additional
Premises exceeds the cost of the work on the attached Exhibit D,
then the excess shall be applied as a credit against future
installments of Monthly Base Rent payable by Tenant.
The last two paragraphs of Section 13 of the Lease will apply to the
Additional Premises in the same manner in which they apply to the
initial Premises.
7. Except as specifically provided to the contrary in this Amendment of
Lease, all provisions of the Lease, including but not limited to, the
provisions of Sections 39 through 45 pertaining to the operation of a
school for the training of medical and veterinary technicians, will
apply to the Additional Premises in the same manner in which they
apply to the initial Premises.
<PAGE>
8. Except as expressly amended in this Amendment of Lease, all of the
terms of the original Lease are ratified and confirmed.
LESSOR:
MEPC AMERICAN PROPERTIES INC.
By ________________________________
Its Senior Vice President
And________________________________
Its Vice President, Property
Management
TENANT:
MEDICAL INSTITUTE OF
MINNESOTA, INC
By ________________________________
Its President
-----------------------------
And________________________________
Its ____________________________
<PAGE>
(Floor Plan)
<PAGE>
EXHIBIT B
Legal Description
Building 2 - 5503 Green Valley Drive, Bloomington, MN
All that part of Lot 1, Block 1, Norman Center., Inc, Third Addition, according
to the plat thereof on file or of record in the office of the Hennepin County
Recorder, lying Southwesterly of the following described line: Commencing at the
most Westerly corner of said Lot 1; thence North 72 09' East along the
Northerly line of said Lot 1 a distance of 296.46 feet to the actual point of
beginning of the line to be described, thence South 49 39' 30'' East a distance
of 486.82 feet, more or less, to a point being 271.54 feet Southwesterly of the
most Easterly corner of said Lot 1 and there terminating. (All or part of this
property is Torrens, evidenced by Certificate of Title No. 573985.)
<PAGE>
EXHIBIT D
Tenant Improvements
-------------------
<PAGE>
SECOND
------
AMENDMENT OF LEASE
------------------
This Second Amendment of Lease is entered into as of ________________, 1993
between MEPC AMERICAN PROPERTIES INC., a Delaware corporation ("Lessor"), and
MEDICAL INSTITUTE OF MINNESOTA, INC., a Minnesota corporation ("Tenant").
A. Lessor and Tenant entered into a lease dated October 11, 1991, which
was amended by an Amendment of Lease (the 'First Amendment") dated May 18, 1992
(together referred to as the "Lease"), under which Lessor leased to Tenant
certain space on the first floor and in the basement of the building at 5503
Green Valley Drive, Bloomington, Minnesota (the "Building"), which is located on
the land described on Exhibit A attached to this Amendment.
B. Tenant wishes to lease from Lessor certain space in the Building
consisting of approximately 23,464 square feet on the second floor of the
Building (the "Second Floor Space").
C. Lessor and Tenant want to amend the Lease to add the Second Floor
Space to the Premises and to modify and amend the Lease in certain other
respects.
In consideration of the above facts and in consideration of the mutual
agreements contained in this Amendment, Lessor and Tenant agree that the Lease
is amended as follows:
1. The Second Floor Space to be added to the Premises pursuant to this
Amendment is shown on the floor plan attached hereto as Exhibit B and made a
part hereof. The Second Floor Space consists of approximately 11,305 square
feet identified on Exhibit B as Space A ("Space A"), and approximately 12,159
square feet identified on Exhibit B as Space B ("Space B"). Lessor and Tenant
agree that Space A will become a part of the Premises on October 1, 1993, and
that Space B will become a part of the Premises on October 1, 1994. Effective
October 1, 1993, without further act of either party, Space A shall become a
part of the Premises covered by the Lease.
2. Effective October 1, 1994, Space B shall, without further act of
either party, become a part of the Premises covered by the Lease.
3. Section 1(r) of the Lease is amended to provide that commencing
October 1, 1993, the "Monthly Base Rent" shall increase from $17,261.00 per
month to $23,836.00 per month. Commencing October 1, 1994, the "Monthly Base
Rent" shall increase from $23,856.00 per month to $30,949.00 per month for the
period through December 31, 1996. Section 1(r) is further amended to provide
that for Lease Years 6 through 10, the Monthly Base Rent is increased from
$20,498.00 per month to $36,141.00 per month. The annual Base Rents set forth
in Section 1(e) of the Lease, and the "Monthly Rents" referred to in the Lease,
are amended to correspond to all of the changes in Monthly Base Rent set forth
in this paragraph.
4. "Tenants Share", as defined in Section 1(z) is increased from 55.97%
to 72.60% effective October 1, 1993, and from 72.60% to 90.19% effective October
1, 1994.
<PAGE>
5. The provisions of the first three paragraphs cf Section 13 of the
Lease relating to alterations and allowances will not apply to the Second Floor
Space, and the following will apply to the Second Floor Space in place thereof:
Tenant will accept the Second Floor Space in its present condition and
Lessor will have no obligation to do any redecorating or remodeling or to
make any repairs, Alterations or improvements to the Second Floor Space.
Tenant shall pay Lessor for all costs of any improvements to the Second
Floor Space. Lessor shall contribute a credit against the cost to Lessor of
the improvements equal to $20.00 per rentable square foot of the Space
added to the Premises on October 1, 1993, and $20.00 per rentable square
foot of the Space added to the Premises on October 1, 1994. Tenant shall
pay to Lessor upon request the amount by which the cost of the work exceeds
the allowance amounts set forth in this paragraph. lf the credit for the
Space added to the Premises on October 1, 1993 exceeds the cost of the
improvements to that Space, then the excess shall be applied as a credit
against the cost of improvements to the remainder of the Second Floor Space
after it is added on October 1, 1994. If any credit remains after payment
of the cost of the improvements to the Space which is added on October 1,
1994, then the excess shall be applied as a credit against future
installments of Monthly Base Rent payable by Tenant.
The last two paragraphs of Section 13 of the Lease will apply to the Second
Floor Space in the same manner in which they apply to the initial Premises.
6. Except as specifically provided to the contrary in this Second
Amendment of Lease, all provisions of the Lease, including but not limited to,
the provisions of Sections 39 through 45 pertaining to the operation of a school
for the training of medical and veterinary technicians, will apply to the Second
Floor Space in the same manner in which they apply to the initial Premises.
7. Section 1(aa) of the Lease is amended to read as follows:
(aa) "Term" means the period of 15 years, beginning on January 1,
1992 and ending on December 31, 2006.
8. Section 37 of the Lease, entitled "Renewal Option" is hereby deleted.
9. Section 1(e) of the Lease, as amended by the First Amendment, is
amended to add the following:
Lease Years 11 through 15 $558,288
10. Section 1(r) of the Lease, as amended by the First Amendment, is
amended to add the following:
Lease Years 11 through 15 $46,524
<PAGE>
11. During Lease Years 10, 11 and 12, if Tenant makes improvements to any
part of the Premises, Lessor will contribute a credit against the cost thereof
equal to $5.00 per square foot in the Premises. If the cost of the improvements
exceeds $5.00 per square foot, Tenant will pay any excess. If the cost of the
improvements is less than $5.00 per square foot, Lessor will pay only the actual
cost of the improvements. If Tenant makes such improvements to the Premises
after Lease Year 7 but before Lease Year 10, Lessor will contribute the credit
described in this Section in Lease Year 10 without interest. If any portion of
the $5.00 per square foot credit remains after such a payment for improvements
made prior to Lease Year 10, the unused portion will be available for further
improvements in Lease Years 10, 11 and 12 as provided in this Section.
12. Except as expressly amended in this Second Amendment of Lease, all of
the terms of the original Lease are ratified and confirmed.
LESSOR:
MEPC AMERICAN PROPERTIES INC.
By_________________________________
Its Senior Vice President
And________________________________
Its Vice President, Property
Management
<PAGE>
TENANT:
MEDICAL INSTITUTE OF
MINNESOTA, INC.
By_________________________________
Phillip Miller
Its President
And________________________________
Its________________________________
CONSENT OF GUARANTOR
The undersigned, as the Guarantor under that certain Guaranty of Lease dated
October 11, 1991 ("Guaranty") guarantying the obligations of the Tenant under
the Lease described in the foregoing Second Amendment of Lease, hereby consents
to the foregoing Second Amendment of Lease and agrees that the provisions of the
Guaranty will apply to the Lease as amended by the Amendment of Lease dated May
18, 1992 and as amended by the foregoing Second Amendment of Lease.
______________________________
Phillip Miller
<PAGE>
EXHIBIT A
Legal Description
Building 2 - 5503 Green Valley Drive, Bloomington, MN
All that part of Lot 1, Block 1, Norman Center, Inc, Third Addition, according
to the plat thereof on file or of record in the office of the Hennepin County
Recorder, lying Southwesterly of the following described line: Commencing at the
most Westerly corner of said Lot 1; thence North 72 09' East along the Northerly
line of said Lot 1 a distance of 296.46 feet to the actual point of beginning of
the line to be described, thence South 49 39' 30'' East a distance of 486.82
feet, more or less, to a point being 271.54 feet Southwesterly of the most
Easterly corner of said Lot 1 and there terminating. (All or part of this
property is Torrens, evidenced by Certificate of Title No. 573985.)
<PAGE>
(Floor Plan)
<PAGE>
THIRD
-----
AMENDMENT OF LEASE
------------------
This Third Amendment of Lease is entered into as of _______________, 1993
between MEPC AMERICAN PROPERTIES INC., a Delaware corporation ("Lessor"), and
MEDICAL INSTITUTE OF MINNESOTA, INC., a Minnesota corporation ("Tenant").
A. Lessor and Tenant entered into a lease dated October 11, 1991, which
was amended by an Amendment of Lease (the "First Amendment") dated May 18,1992,
and a Second Amendment of Lease dated March 22, 1993 ("Second Amendment") (said
Lease as amended being herein referred to as the "Lease"), under which Lessor
leased to Tenant certain space on the first floor and in the basement of the
building at 5503 Green Valley Drive, Bloomington, Minnesota (the "Building"),
which is located on the land described on Exhibit A attached to this Amendment.
B. Under the Second Amendment, Tenant agreed to lease from Lessor certain
space in the Building consisting of approximately 23,464 square feet on the
second floor of the Building (the "Second Floor Space").
C. Lessor and Tenant have agreed to certain changes in "Space A" and
"Space B", which were described in the Second Amendment.
D. Lessor and Tenant want to amend the Lease to change the descriptions
of "Space A" and "Space B" and to amend the Lease in certain respects based upon
such changes.
In consideration of the above facts and in consideration of the mutual
agreements contained in this Amendment, Lessor and Tenant agree that the Lease
is amended as follows:
1. The Second Floor Space to be added to the Premises pursuant to the
Second Amendment is shown on the floor plan attached hereto as Exhibit B and
made a part hereof. The Second Floor Space consists of approximately 12,376
square feet identified on Exhibit B as Space A ("Space A"), and approximately
11,088 square feet identified on Exhibit B as Space B ("Space B"). Lessor and
Tenant agree that Space A will become a part of the Premises on October 1, 1993,
and that Space B will become a part of the Premises on October 1, 1994.
Effective October 1, 1993, without further act of either party, Space A shall
become a part of the Premises covered by the Lease.
2. Effective October 1, 1994, Space B shall, without further act of
either party, become a part of the Premises covered by the Lease.
3. Section 1(r) of the Lease is amended to provide that commencing
October 1, 1993, the "Monthly Base Rent' shall increase from $17,261.00 per
month to $24,480.00 per month. Commencing October 1, 1994, the "Monthly Base
Rent" shall increase from $24,480.00 per month to $30,949.00 per month for the
period through December 31, 1996. The annual Base Rents set forth in Section
1(e) of the Lease, and the "Monthly Rents" referred to in the Lease, are amended
to correspond to all of the changes in Monthly Base Rent set forth in this
paragraph.
<PAGE>
4. "Tenant's Share", as defined in Section 1(z), is increased from 55.97%
to 74.14% effective October 1, 1993, and from 74.14% to 90.19% effective October
1, 1994.
5. Except as expressly amended in this Third Amendment of Lease, all of
the terms of the original Lease and the First Amendment and Second Amendment are
ratified and confirmed.
LESSOR:
MEPC AMERICAN PROPERTIES INC.
By_________________________________
Its Senior Vice President
And________________________________
Its Vice President, Property
Management
<PAGE>
TENANT:
MEDICAL INSTITUTE OF
MINNESOTA, INC.
By_________________________________
Phillip Miller
Its President
And________________________________
Its_______________________________
CONSENT OF GUARANTOR
The undersigned, as the Guarantor under that certain Guaranty of Lease dated
October 11, 1991 ("Guaranty") guarantying the obligations of the Tenant under
the Lease described in the foregoing Third Amendment of Lease, hereby consents
to the foregoing Third Amendment of Lease and agrees that the provisions of the
Guaranty will apply to the Lease as amended by the Amendment of Lease dated May
18, 1992 and the Second Amendment of Lease dated March 22, 1993, as amended by
the foregoing Third Amendment of Lease.
______________________________
Phillip Miller
<PAGE>
EXHIBIT A
Legal Description
Building 2 - 5503 Green Valley Drive, Bloomington, MN
All that part of Lot 1, Block 1, Norman Center., Inc, Third Addition, according
to the plat thereof on file or of record in the office of the Hennepin County
Recorder, lying Southwesterly of the following described line: Commencing at the
most Westerly corner of said Lot 1; thence North 72 09' East along the
Northerly line of said Lot 1 a distance of 296.46 feet to the actual point of
beginning of the line to be described, thence South 49 39' 30'' East a distance
of 486.82 feet, more or less, to a point being 271.54 feet Southwesterly of the
most Easterly corner of said Lot 1 and there terminating. (All or part of this
property is Torrens, evidenced by Certificate of Title No. 573985.)
<PAGE>
(Floor Plan)
<PAGE>
10/10/91
PARKING LEASE
-------------
This Lease is entered into as of October 11, 1991, between MEPC AMERICAN
PROPERTIES INCORPORATED, a Delaware Corporation, ("Lessor") and MEDICAL
INSTITUTE OF MINNESOTA, INC., a Minnesota corporation, ("Tenant").
1. Leased Premises. Lessor leases 150 parking spaces (the
---------------
"Spaces"), in the parking area outlined in red on Exhibit A attached to this
Lease ("Parking Area") behind the Norman Center II Building ("Building") in
Bloomington, Minnesota, to Tenant, and Tenant leases the Spaces from Lessor,
under the terms and conditions of this Lease, for the sole purpose of parking
automobiles. Tenant's use of the Parking Area will be in common with other
tenants of the Parking Area, subject to Lessor's right hereunder to assign
specific parking spaces.
2. Term. The term ("Term") of this Lease begins on the commencement
----
date under that certain Lease of even date herewith between Lessor and Tenant
for space within the Building ("Building Lease") and ends on the expiration or
earlier termination of the Building Lease, unless earlier terminated as provided
in this Lease.
3. Rent. As used herein, the following terms have the following
----
definitions:
(a) "Actual Operating Cost" means the Operating Cost actually incurred for
a calendar year.
(b) "Actual Tax Cost" means the Tax Cost actually incurred for a year.
(c) "Base Operating Cost" means the Operating Cost of $15,000.00 estimated
for 1992.
(d) "Base Tax Cost" means the Tax Cost of $48,431.00 estimated to be
payable in 1992.
(e) "Monthly Rent" means Tenant's Share of the estimated monthly Tax Cost
plus Tenant's Share of the estimated monthly Operating Cost. The
initial Monthly Rent is $3,551.00.
(f) "Operating Cost" means all reasonable costs, charges and expenses
incurred by Lessor in connection with ownership, operation, security,
maintenance and repair of the Parking Area and the improvements
located thereon, including but not limited to costs for maintenance,
snow removal, insurance, utilities, fees or expenses for management by
Lessor or any other party, repairing, restriping, amortization of
capital investments made to reduce operating costs, and amortization
of repairs made to extend the life of the improvements. Operating Cost
will not include mortgage interest, depreciation on the improvements,
advertising expenses, or real estate brokers' commissions.
<PAGE>
(g) "Tax Cost" means all real estate taxes, levies, charges, and
installments of assessments (including interest on deferred
assessments) assessed, levied or imposed on, or allocated to, the
Parking Area and all reasonable attorneys' fees, witness fees, court
costs and other expenses of Lessor in connection with any proceeding
to contest these amounts. If the Parking Area is not a separate tax
parcel, then Lessor shall make a reasonable allocation of the Tax Cost
to the Parking Area.
(h) "Tenant's Share" means the following:
(1) If there are no other tenants of the Parking Area, then Tenant's
Share shall be 100% as regards Operating Cost and 57% as regards
Tax Cost.
(2) If there are other tenants of the Parking Area, then Tenant's
Share shall be 57% as regards Operating Cost and 57% as regards
Tax Costs.
Tenant will pay the Monthly Rent to Lessor at P. O. Box 73547.,
Chicago, Illinois 60673-7547, or such other place as Lessor may designate, in
advance on or before the first day of each month during the Term, without
demand, deduction or setoff. The Monthly Rent may change as the estimated
monthly Tax Costs and Operating Costs are adjusted annually. Monthly Rent will
begin on the first day of the Term. If the Term begins on a day other than the
first day of a month, the Monthly Rent for that month will be prorated by
multiplying the Monthly Rent by the number of days of that month included in the
Term and dividing the product by the number of days in that month.
Any Monthly Rent or other amounts payable by Tenant to Lessor under
this Lease which are not paid within 10 days after the date due will bear
interest from the date due to the date paid at the rate of 12% per annum or the
maximum rate of interest permitted by law, whichever is less, and the interest
will be paid to Lessor on demand. In addition, Tenant will pay Lessor a $100
service charge for all Monthly Rent not paid by the 10th day of the month for
which it is payable, which service charge is to partially cover expense involved
in handling delinquent payments. All amounts to be paid by Tenant to Lessor
under this Lease will be deemed to be additional rent for purposes of payment
and collection.
If any taxes, special assessments, fees or other charges are imposed
against Lessor by any governmental unit or agency with respect to rentals under
this Lease, Tenant will pay these amounts to Lessor when due, except that Tenant
will have no obligation to pay any income tax on rentals unless the tax is
imposed in lieu of real estate taxes.
Prior to the first day of each calendar year after the date of this
Lease, or as soon as reasonably possible after the first day of the year, Lessor
will furnish Tenant with an estimate of the Tax Cost for that year if it is
greater than the Base Tax Cost, and with an estimate of the Operating Cost for
that year if it is greater than the Base Operating Cost, and the Monthly Rent
for each month of that calendar year will be increased by 1/12th of Tenant's
Share of the differences between the Tax Cost estimate and the Base Tax Cost and
between the Operating Cost estimate and the Base Operating Cost.
<PAGE>
After the end of each calendar year, including the year in which the
Term expires or is terminated, Lessor will give Tenant a statement of the Actual
Tax Cost and Actual Operating Cost for that calendar year. If the actual costs
exceed the estimated costs for that year, Tenant will immediately pay to Lessor
Tenant's Share of the excess. If the actual costs are less than the estimated
costs for that year, Lessor will immediately pay to Tenant Tenant's Share of the
difference. If Lessor contests Tax Cost and receives a refund or incurs
additional Tax Cost after adjustments for Actual Tax Cost have been made, the
Actual Tax Cost will be corrected accordingly and the appropriate adjustment
will be made between Lessor and Tenant. The portion of the Actual Tax Cost and
Actual Operating Cost to be paid by Tenant for the years in which the Term
begins and ends will be prorated by multiplying the Actual Tax Cost and Actual
Operating Cost amounts by a fraction, the numerator of which is the number of
days of that year in the Term and the denominator of which is 365.
4. Other Tenants. Assigned Spaces. If there are no other tenants
-------------------------------
of the Parking Area, then Tenant may use all of the parking spaces within the
Parking Area. If there is any other tenant of the Parking Area, then Tenant
shall be limited to the use of the 150 Spaces leased by Tenant. If there is any
other tenant of the Parking Area, then Lessor, in its reasonable discretion, may
assign specific parking spaces to Tenant or the other tenant or tenants.
5. Alterations. Tenant may make no alteration, change or addition
-----------
to the Spaces or any other part of the Parking Area.
6. Interruptions. Lessor will not be liable for any temporary
-------------
interruption of access, heat or lighting for the Spaces because of maintenance,
repairs or alterations by Lessor or for any cause beyond Lessor's control, and
there will be no abatement or reduction of rent for any such cause.
7 Rules and Regulations. Tenant will comply with the reasonable
---------------------
rules and regulations from time to time adopted by Lessor for use of the Parking
Area ("Rules and Regulations").
8. Security. Lessor may exclude from the Parking Area during
--------
security hours, as defined in the Rules and Regulations, all persons who are not
identified to the satisfaction of Lessor.
9. Assumption of Risks. Tenant assumes all risk of loss or damage
-------------------
of Tenant's property within the Parking Area, including any loss or damage
caused by water leakage, fire, windstorm, explosion, theft, act of any other
tenant, or other cause. Lessor will not be liable to Tenant, or those claiming
through Tenant, for injury, death or property damage occurring in the Parking
Area.
10. Tenant's Liability. Tenant will hold Lessor harmless from any
------------------
claims, suits, injuries, damages, or demands brought or asserted by any person
who entered the Parking Area at the request or invitation of Tenant, except to
the extent caused by the willful misconduct or negligence of Lessor or someone
acting on its behalf.
11. Termination; Cross Defaults. This Lease will terminate
---------------------------
automatically upon expiration or earlier termination of the Building Lease, upon
destruction of the Parking Area or
<PAGE>
Spaces by fire or other casualty, or upon acquisition of the Parking Area or
Spaces by a public authority having the power of eminent domain. If there is an
acquisition by a public authority, Tenant will be entitled to no part of any
award or purchase price. If as a result of damage, deterioration or governmental
directive, it is necessary for Lessor to remove or replace the Parking Area,
Lessor may terminate this Lease upon written notice to Tenant. A default under
the Building Lease shall be a default under this Lease and vice versa.
12. Relationship. Neither this Lease nor the storage of a vehicle in
------------
the Parking Area will constitute a bailment or create the relationship of bailor
and bailee.
13. Assignment and Subletting. Tenant may not assign this Lease, or
-------------------------
sublet all or any of the Spaces without Lessor's prior written consent, which
consent shall not unreasonably be withheld.
14. License Numbers. Upon request by Lessor, Tenant shall promptly
---------------
provide Lessor with a list of the license plate numbers of the automobiles which
will use the Spaces and Tenant shall promptly update the list from time to time.
If Lessor requests a list of license plate numbers, then the automobiles which
are identified on the list, as updated from time to time, will be the only
automobiles which are allowed to use the Spaces. Lessor sha1l have the right
but not the obligation to exclude or tow automobiles which are not on the list.
15. Default. If Tenant defaults under this Lease and such default
-------
continues for a period of 30 days after written notice, Lessor may terminate
this Lease unless the default is non-monetary in nature and Tenant has taken and
is diligently pursuing measures to cure the default. Tenant will indemnify
Lessor against all loss of rents and other damages which it may incur because of
the termination during the remainder of the Term. If Tenant defaults, Tenant
will promptly reimburse Lessor for all attorneys' fees and other costs and
expenses incurred by Lessor in enforcing this Lease, whether or not this Lease
is terminated and whether or not suit is brought.
16. Notices. Any notices under this Lease will be in writing, and
-------
will be sent by prepaid certified mail, or by telegram confirmed by certified
mail, addressed to Tenant at its address in the Building, and to Lessor at 1550
Utica Avenue South, Suite 120, St. Louis Park, Minnesota 55416, or to such other
address as is designated in a notice given under this Section. A notice will be
deemed given on the date of first attempted delivery,
Tenant: Lessor:
MEDICAL INSTITUTE OF MEPC AMERICAN PROPERTIES
MINNESOTA, INC. INCORPORATED
By _______________________ By ________________________________________
Its President Its Vice President, Propersty Management
--------------------- -----------------------------------------
And /s/ Wendy Kline
----------------------
Its Vice President
--------------------
<PAGE>
EXHIBIT 10.18
THIS INDENTURE of Sublease made as of the 9th day of June, 1997.
IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT.
B E T W E E N
ROYAL BANK OF CANADA
(hereinafter called the "Tenant")
OF THE FIRST PART
- and -
PRIMETECH CORPORATION
(hereinafter called the "Subtenant")
OF THE SECOND PART
WHEREAS by a Lease dated the 20th day of November, 1990 (hereinafter called
the "Head Lease"), a copy of which is annexed hereto as Appendix "I", Hollywood
Office Developments Inc. leased to the Tenant certain premises containing
approximately thirty-four thousand (34,000) square feet of which approximately
13,500 square feet is on the 2nd Floor and approximately 20,500 square feet is
on the 3rd Floor (hereinafter called the "Premises") located upon those lands
and premises known municipally as 5001 Yonge St., North York, Ontario and more
particularly described in Schedule "B" attached to the Head Lease together with
access thereto, for and during a term set out therein and expiring on the 31st
day of August, 2011.
AND WHEREAS Hollywood Office Developments Inc. sold and assigned their
interest in the Head Lease to Pen York Properties Inc. (hereinafter called the
"Landlord"). Pursuant to Article 10.01 of the Head Lease, the Tenant is
permitted to sublet the Premises with the consent of the Landlord, said consent
is attached hereto as Schedule "C".
The Subtenant desires to sublease a portion of the Premises from the Tenant
pursuant to the terms
of the Lease and this Sublease.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of these
premises and other good and valuable consideration (the receipt and sufficiency
whereof is hereby
acknowledged by each of the parties hereto) and the covenants and agreements
hereinafter set forth:
1. PREAMBLE
--------
The parties agree that the preamble hereto shall form a part hereof and the
Tenant represents and warrants the accuracy of the matters set forth in the
first and second recitals.
<PAGE>
2. TERM
----
The Tenant hereby subleases to the Subtenant Nine thousand, One Hundred and
Ninety-nine (9,199) square feet of rentable area on a portion of the 3rd
Floor as shown in blue on Schedule "A" attached hereto (hereinafter called
the "Demised Premises"), for and during a term of ten (10) years and four
(4) months from and including the 1st day of November, 1996, to and
including the 28th day of February, 2007, in accordance with and subject to
the terms, covenants and conditions contained in this Sublease to be
observed and performed by the Subtenant together with all other rights of
the Tenant as though the Subtenant were named as the Tenant in the Lease
(other than as expressly limited in this Sublease) at minimum annual rent
payable to the Tenant as contained hereinafter Clause 3.
3. MINIMUM RENT
------------
The Subtenant shall pay from and after the Commencement Date to the Tenant
at the offices of the Tenant, or at such other place designated by the
Tenant in lawful money of Canada, without and prior demand therefore and
without any deduction, abatement, set off or compensation whatsoever as
Rent the following:
a) Subject to Clause 4 hereinafter, during the period commencing the 1st
day of March, 1997, and ending the 29th day of February, 1999, the
Subtenant shall pay Minimum Rent, the sum of Twenty-Seven Thousand,
Five Hundred and Ninety- Seven Dollars ($27,597.00) payable in advance
in equal monthly instalments of Two Thousand, Two Hundred and Ninety-
Nine Dollars and Seventy-Five Cents ($2,299.75) each on the first day
of each month and the Subtenant shall be responsible for the payment
of Additional Rent during said period. The aforesaid Minimum Rent is
calculated on Three Dollars ($3.00) per rentable square foot.
b) During the period commencing the 1st day of March 1999 and ending the
28th day of February, 2001, the Subtenant shall pay Minimum Rent, the
sum of Thirty-Six Thousand, Seven Hundred and Ninety-Six Dollars
($36,796.00) payable in advance in equal monthly instalments of Three
Thousand and Sixty-Six Dollars and Thirty Three Cents ($3,066.33) each
on the first day of each month and the Subtenant shall be responsible
for the payment of Additional Rent during said period. The aforesaid
Minimum Rent is calculated on Four Dollars ($4.00) per rentable square
foot.
c) During the period commencing the 1st day of March, 2001 and ending the
28th day of February, 2003, the Subtenant shall pay Minimum Rent, the
sum of Fifty-Five Thousand One Hundred and Ninety-Four Dollars
($55,194.00) payable in advance in equal monthly instalments of Four
Thousand Five Hundred and Ninety-Nine Dollars and Fifty Cents
($4,599.50) each on the first day of each month and the Subtenant
shall be responsible for the payment of Additional Rent during said
period. The aforesaid Minimum Rent is calculated on Six Dollars
($6.00) per rentable square foot.
-3-
<PAGE>
d) During the period commencing the 1st day of March, 2003 and ending the
28th of February, 2005 the Subtenant shall pay Minimum Rent, the sum
of Sixty-Four Thousand, Three Hundred and Ninety-Three Dollars
($64,393.00) payable in advance in equal monthly instalments of Five
Thousand Three Hundred and Sixty Six Dollars and Eight Cents
($5,366.08) each on the first day of each month and the Subtenant
shall be responsible for the payment of Additional Rent during the
said period. The aforesaid Minimum Rent is calculated on Seven
dollars ($7.00) per rentable square foot.
e) During the period commencing the 1st day of March, 2005 and ending the
28th day of February, 2007 the Subtenant shall pay Minimum Rent the
sum of Seventy-Three Thousand, Five Hundred and Ninety-Two Dollars
($73,592.00) payable in advance in equal monthly instalments of Six
Thousand One Hundred and Thirty-Two Dollars and Sixty-Six Cents
($6,132.66) each on the first day of each month and the Subtenant
shall be responsible for the payment of Additional Rent during said
period. The aforesaid Minimum Rent is calculated on Eight Dollars
($8.00) per rentable square foot.
f) The Tenant acknowledges receipt of a cheque in the amount of Twenty-
Seven Thousand Three Hundred and Thirty Dollars and Fifty-Three Cents
($27,330.53) to be applied toward the Rent for the first two (2)
months as it becomes due.
g) Each monthly instalment payment of fixed annual rent shall be payable
at the times determined by the Tenant at the offices of the Tenant and
addressed as follows:
ROYAL BANK OF CANADA
Real Estate Operations
21st Floor, North Tower
Royal Bank Plaza
Toronto, Ontario
M5J 2J5
h) It is understood that all rental payments will be subject to the Goods
and Services Tax (G.S.T.).
i) All rental payments will be based on the certified rentable area.
-4-
<PAGE>
4. RENT FREE PERIOD
----------------
The Subtenant shall be permitted to occupy the Demised Premises if the
leasehold improvements are substantially completed prior to the
commencement date, without the payment of Minimum Rent and any Additional
Rent during the first four (4) months of the Term under this Sublease such
period being the 1st day of November, 1996 to the 28th day of February,
1997. All terms and conditions of the Sublease shall be in effect during
the Rent Free Period.
5. ADDITIONAL RENT
---------------
a) The Subtenant shall pay its proportionate share of the Tenant's realty
taxes, hydro and cost of operating, maintaining and managing the
Building (the "Additional Rent") currently estimated at $13.23 plus
G.S.T. per rentable square foot for 1997 as more set out in the Head
Lease attached as Appendix "I". The Additional Rent shall be paid in
advance in equal monthly instalments of one-twelfth (1/12) of the
annual amount on the first day of each month of the Term.
b) The Tenant shall arrange for a janitorial contact to clean the Demised
Premises for the Subtenant's account.
6. LEASEHOLD IMPROVEMENTS
----------------------
a) The Subtenant shall obtain from the Tenant and Landlord the prior
written approval for its leasehold improvements and shall be
responsible for all costs of such improvements. The Subtenant shall
provide a floor plan showing all partitions, doors, sink, carpeting,
and any other improvements that are to be constructed in the Demised
Premises. The Subtenant will obtain all required municipal/provincial
permits prior to commencing any construction within the Demised
Premises.
b) The Tenant shall provide to the Subtenant an allowance (the
"Inducement") equal to $11.00 per square foot of rentable area of the
Demised Premises plus G.S.T. towards the cost of the Subtenant's
Leasehold Improvements. Seventy percent (70%) of the Inducement shall
be paid to the Subtenant upon substantial completion of the
improvements and the remaining thirty percent (30%) upon expiry of the
45-day lien period in accordance with the Construction Lien Act.
7. NO RESTORATION
--------------
It is agreed that the Subtenant shall not be obligated to restore the
Demised Premises at the expiry of the Term to base building standard. The
Tenant agrees to accept the Demised Premises in the configuration in which
structured at that time subject to reasonable wear and tear. Subtenant
shall be responsible to remove any Leasehold Improvements that it installed
-5-
<PAGE>
without the written approval of the Head Landlord and to replace or restore
the areas so affected to their original condition.
8. SUB-SUBLET OR ASSIGN
--------------------
The Subtenant shall have the right to sub-sublease or assign the Demised
Premises subject to the approval of the Tenant and Landlord, such approval
not to be unreasonably withheld or denied, as per the Head Lease.
9. EXISTING SHELVING
-----------------
The existing shelving currently in the large kitchen/storage room within
the Demised Premises shall remain in the Demised Premises throughout the
Term for the sole use of the Subtenant. The Subtenant shall maintain such
items as would a prudent owner of same and shall, upon the expiration or
earlier termination of the Term, deliver same to the Tenant in the
condition which existed, subject to reasonable wear and tear.
10. PARKING
-------
If available the Tenant shall provide up to three (3) unreserved
underground parking spaces in the Building throughout the Term at the
prevailing rate which may change from time to time. The current rate is
$90.00 per month per space.
11. SIGNAGE
-------
The Subtenant, at its cost, shall be permitted to erect a small bronze
plaque mounted in the Lobby or in front of the building. The exact size and
location to be determined by the Head Landlord and in accordance with the
design criteria of the Building.
12. COVENANT OF SUBTENANT
---------------------
12.01 The Subtenant hereby covenants, and agrees to and with the Tenant
that it shall, throughout the Term hereby granted (subject as
otherwise provided herein or in the Head Lease):
(a) To use the Demised Premises for the operation of a commercial
school specializing in business skills training and ancillary
offices.
(b) To pay the Minimum Rent as provided in Article 3.
(c) In addition to the payments required by Article 3, to pay or
cause to be paid to the Tenant as Additional Rent and to
discharge before delinquency but in any event, within twenty
(20) days after the same become due and payable, all taxes,
rates, duties and assessments and other charges that may be
levied,
-6-
<PAGE>
rated, charged or assessed against or in respect of any and every
business carried on by the Subtenant or in the Demised Premises
or any part or parts thereof.
(d) To pay to the Tenant or as it otherwise directs, as Additional
Rent, all direct costs, charges, expenses and outlays of any
nature whatsoever arising from or relating to the Demised
Premises or to the contents thereof, which the Tenant is required
to pay under the Head Lease, including but not limited to, the
total cost of supplying water, fuel, power, telephone and other
utilities and any and all heating and air conditioning charges
(including repairs and maintenance) used or consumed in or with
respect to the Premises but excluding income or corporate taxes
of the Tenant or any payments of rent to be paid by the Tenant
under the Head Lease.
(e) To pay for the replacement of fluorescent tubes and starters.
(f) To permit the Tenant and the Landlord and persons authorized by
them at all reasonable times to enter and examine the condition
of the Demised Premises and upon notice in writing from either of
them to repair in accordance with such notice (provided the
Subtenant has the obligation under this Sublease to so repair)
and to indemnify the Tenant against the consequences of any
breach of any covenant of this Sublease.
(g) To take out and keep in full force and effect during the entire
Tenn hereby granted at its sole cost and expense and in the names
of the Landlord, the Tenant and the Subtenant such insurance as
is required of the Tenant pursuant to the terms of the Head
Lease.
(h) During the last three (3) months of the Term hereby granted, to
permit the Tenant or the Landlord to affix upon the Demised
Premises a notice to let the Demised Premises, or during such
period to permit the Tenant or the Landlord and their agents
and/or respective tenants at all reasonable times to view the
Premises.
(i) Subject as otherwise provided in this Sublease to yield up the
Demised Premises with all fixtures and improvements (other than
the Subtenant's trade fixtures) and additions at the termination
of this Sublease in good and tenantable repair.
(j) To pay for its own business taxes.
12.02 The Subtenant shall observe and perform all covenants and
obligations of the Subtenant under this Sublease and to indemnify the
Tenant against all liabilities,
-7-
<PAGE>
losses, fines, suits, claims, demands and actions of any kind
whatsoever arising from any breach of the same.
12.03 The Subtenant shall not do or omit to do any or thing upon the
Demised Premises which would cause a breach of any of the Tenant's
obligations under the Head Lease and to indemnify the Tenant against
all liabilities, losses, fines, suits, claims, demands and actions
of any kind whatsoever arising from any breach of same.
12.04 The Subtenant shall perform or cause to be performed with respect to
the Demised Premises all of the covenants of the Tenant under the
Head Lease, including the performance of the Tenant's obligations
and the performance generally of the Tenant's repairs therein but
except as to rent and other monetary obligations of the Tenant under
the Head Lease.
13. RIGHT TO CANCEL
---------------
The Subtenant shall have the right to cancel this Sublease at any time
after the seventh (7th) year of the Term with six (6) months prior written
notice to the Tenant and upon payment of a cancellation penalty equal to
two (2) months Net and Additional Rent for every full or partial year
remaining in the Term.
14. HEAD LEASE
----------
In all other respects, except as expressly amended or altered hereby and
except as not disclosed to the Subtenant; the Head Lease shall apply to the
Demised Premises and to the Tenant and the Subtenant; and the Tenant and
the Subtenant shall observe and perform all of the terms, covenants and
conditions contained therein as though respectively named as Landlord and
Tenant therein. The rights and remedies available to the Landlord in the
Head Lease in the event of default by the Tenant shall be available to the
Tenant as against the Subtenant in respect of the Subtenant's occupation of
the Demised Premises as though the Tenant were named as Landlord therein.
The rights and remedies available to the Tenant in the Head Lease as
against the Landlord shall be available to the Subtenant as against the
Tenant as though the Tenant were named as Landlord and the Subtenant named
as Tenant.
15. QUIET ENJOYMENT
---------------
If the Subtenant pays the Rent and other sums herein provided and observes
and performs all the terms, covenants and conditions on the Subtenant's
part to be observed and performed pursuant to the terms of this Sublease
and the Head Lease, the Subtenant shall peaceably and quietly hold and
enjoy the Demised Premises for the Term hereby granted without hindrance or
interruption by the Tenant, or any other person lawfully claiming by,
through or under the Tenant.
-8-
<PAGE>
16. NOTICE
------
Any notice required hereunder shall be deemed effectually given to the
Tenant if addressed by mail postage paid or delivered by hand to the Tenant
at Royal Bank of Canada, Real Estate Operations, 200 Bay Street, West, 21st
Floor, North Tower, Toronto, Ontario M5J 2J5 or such address as the Tenant
may from time to time designate in writing. Any notice required hereunder
shall be deemed effectually given to the Subtenant if addressed by mail
postage paid or delivered by hand to the Subtenant at the Demised Premises.
Every such notice shall be deemed to have been given 72 hours after the day
it was so mailed delivered.
17. FULFILMENT OF TERMS OF HEAD LEASE
---------------------------------
The Tenant agrees with the Subtenant to pay all rents reserved by the Head
Lease and to perform and observe the covenants on its part contained in the
Head Lease with respect to the Demised Premises insofar as such covenants
are not required to be performed and observed by the Subtenant and at all
times to keep the Subtenant indemnified against all expenses, claims and
demands on account of the Tenant's non-performance of the covenants under
the Head Lease. The Tenant covenants that if the Subtenant shall discharge
its obligations under this Sublease, the Subtenant shall have and enjoy the
quiet possession and undisturbed possession of the Demised Premises subject
only as set forth in this Sublease.
18. SUCCESSORS AND ASSIGNS
----------------------
This Agreement shall ensure to the benefit of and be binding upon the
Parties hereto, their respective heirs, executors, administrators,
successors and assigns.
-9-
<PAGE>
IN WITNESS WHEREOF the Tenant has caused its duly authorized attorneys to
sign in that behalf, and the Subtenant has caused its corporate seal to be
affixed, duly attested by the hand of its proper signing officer in that behalf.
SIGNED, SEALED AND DELIVERED ROYAL BANK OF CANADA
Per:_________________________________________
A.M. Vagners
Assistant Manager, Leasing
Per:_________________________________________
H. L. Seymour, Manager
Property Management and Leasing
WE HAVE THE AUTHORITY TO
BIND THE BANK
PRIMETECH CORPORATION
Per:_________________________________________
Per:_________________________________________
Per:_________________________________________
WE HAVE THE AUTHORITY TO
BIND THE CORPORATION
-10-
<PAGE>
EXHIBIT 10.19
CUMBERLAND-BELLAIR INVESTMENT INC.
- and -
1184266 ONTARIO INC.
--------------------
L E A S E
--------------------
<PAGE>
OFFICE LEASE
BASIC PROVISIONS
----------------
Landlord: Cumberland-Bellair Investment Inc.
Address: 94 Cumberland Street
Suite 808
Toronto, Ontario
M5R 1A3
Tenant: 1184266 Ontario Inc.
Address: 94 Cumberland Street
Toronto, Ontario
M5R 1A3
Suite No.: 700
Area: Rentable Space - 8681 square feet
Term of Lease: 10 Years
From: August 1, 1997
To: July 31, 2007
Option to Renew: One further five (5) year term
Exercise Date: Six (6) months and not more than eighteen (18) months prior
to the expiration of the Term.
<PAGE>
INDEX
-----
ARTICLE CAPTION
- ------- -------
1.00 GRANT AND WORK
2.00 TERM AND POSSESSION
3.00 RENT AND OPERATING COSTS
4.00 TAXES AND UTILITIES
5.00 USE OF LEASED PREMISES
6.00 SERVICES, MAINTENANCE, REPAIR, ALTERATIONS
AND ACCESS BY THE LANDLORD AND CONTROL
OF COMMON AREAS
7.00 MAINTENANCE, REPAIR, ALTERATIONS,
IMPROVEMENTS AND SIGNS BY THE TENANT
8.00 INSURANCE
9.00 INJURY TO PERSON OR PROPERTY
10.00 ASSIGNMENT AND SUBLETTING
11.00 SURRENDER
12.00 HOLDING OVER
13.00 RULES AND REGULATIONS
14.00 DAMAGE AND DESTRUCTION
15.00 ACKNOWLEDGMENTS, ATTORNMENT,
SUBORDINATION
16.00 NOTICES
17.00 DEFAULT
18.00 MISCELLANEOUS
19.00 OPTION TO EXTEND
SCHEDULE "A" DEFINITIONS
SCHEDULE "B" LEGAL DESCRIPTION
SCHEDULE "C" FLOOR PLAN
SCHEDULE "D" RULES AND REGULATIONS
SCHEDULE "E" LANDLORD'S WORK AND TENANT'S WORK
SCHEDULE "F" SPECIAL PROVISIONS
SCHEDULE "G" PHOTOGRAPH SHOWING LOCATION OF BUILDING
SIGNAGE
SCHEDULE "H" SIGNAGE FOR PRIMETECH
<PAGE>
Office Lease
THIS LEASE made this 14th day of March, 1997.
BETWEEN:
CUMBERLAND-BELLAIR INVESTMENT INC.
(hereinafter called the "Landlord"),
OF THE FIRST PART;
- and -
1184266 ONTARIO INC.
(hereinafter called the "Tenant"),
OF THE SECOND PART.
ARTICLE 1.00
------------
GRANT AND WORK
1.01 Grant The Landlord hereby demises and leases the Leased Premises to
-----
the Tenant and the Tenant hereby leases and accepts the Leased Premises from the
Landlord, subject to the covenants and terms of this Lease.
1.02 Quiet Enjoyment The Landlord covenants with the Tenant for quiet
---------------
enjoyment subject to the Tenant's full compliance with the terms of this Lease.
<PAGE>
-2-
ARTICLE 2.00
------------
TERM AND POSSESSION
2.01 Term The Landlord leases the Leased Premises to the Tenant for a Term
----
of ten (10) years to be computed from the 1st day of August, 1997, and to be
fully completed and ended on the 31st day of July, 2007, save as hereinafter
provided for early termination.
Within a reasonable period of time following the Commencement Date,
the Landlord shall provide to the Tenant a certificate of measurement from the
Landlord's Architect, measured in accordance with the provisions of this Lease,
verifying the Rentable Space of the Leased Premises and the Rent shall be
adjusted accordingly. It is understood and agreed that the Rent payable
hereunder shall be payable on the Rentable Space of the Leased Premises.
2.02 Delayed Possession If for any reason other than delay caused by the
------------------
Tenant or failure of the Tenant to complete its work, the Leased Premises are
not completed and ready for occupancy on the Commencement Date, Rent shall abate
until the Leased Premises are completed and ready for occupancy as certified by
the Architect's Certificate and such abatement of Rent shall be in full
settlement of all claims which the Tenant may otherwise have by reason of the
delay.
2.03 Acceptance of Premises Taking possession of all or any portion of the
----------------------
Leased Premises by the Tenant shall be conclusive evidence as against the Tenant
that the Leased Premises or such portion thereof are in satisfactory condition
on the date of taking possession. Any warranties available to the Landlord in
respect of work done in the Leased Premises shall be pursued by the Landlord for
the benefit of the Tenant.
ARTICLE 3.00
------------
RENT AND OPERATING COSTS
3.01 Minimum Rent Yielding and paying therefor unto the Landlord yearly and
------------
every year and during the Term hereby granted:
(a) for the period commencing on the 1st day of August, 1997 until the
31st day of July, 2000, an annual Minimum Rent of FIFTY-SIX THOUSAND,
FOUR HUNDRED AND TWENTY-SIX DOLLARS AND FIFTY CENTS ($56,426.50) of
lawful money of Canada, payable at par at Toronto in equal consecutive
monthly instalments of FOUR THOUSAND, SEVEN HUNDRED AND TWO DOLLARS
AND TWENTY-ONE CENTS ($4,702.21), each in advance on the first day of
each month during the Term. It is understood and agreed that the
foregoing Minimum
<PAGE>
-3-
Rent is calculated on the basis of SIX DOLLARS AND FIFTY CENTS ($6.50)
per square foot of the Rentable Space of the Leased Premises per
annum;
(b) for the period commencing on the 1st day of August, 2000 until the
31st day of July, 2003, an annual Minimum Rent of SIXTY-NINE THOUSAND,
FOUR HUNDRED AND FORTY-EIGHT DOLLARS ($69,448.00) of lawful money of
Canada, payable at par at Toronto in equal consecutive monthly
instalments of FIVE THOUSAND, SEVEN HUNDRED AND EIGHTY-SEVEN DOLLARS
AND THIRTY-THREE CENTS ($5,787.33), each in advance on the first day
of each month during the Term. It is understood and agreed that the
foregoing Minimum Rent is calculated on the basis of EIGHT DOLLARS
($8.00) per square foot of the Rentable Space of the Leased Premises
per annum; and
(c) for the period commencing on the 1st day of August, 2003 until the
31st day of July, 2007, an annual Minimum Rent of SEVENTY-EIGHT
THOUSAND, ONE HUNDRED AND TWENTY-NINE DOLLARS ($78,129.00) of lawful
money of Canada, payable at par at Toronto in equal consecutive
monthly instalments of SIX THOUSAND, FIVE HUNDRED AND TEN DOLLARS AND
SEVENTY-FIVE CENTS ($6,510.75), each in advance on the first day of
each month during the Term. It is understood and agreed that the
foregoing Minimum Rent is calculated on the basis of NINE DOLLARS
($9.00) per square foot of the Rentable Space of the Leased Premises
per annum.
Provided the Tenant is in good standing under the terms of this Lease,
the Tenant shall not be responsible for payment of Minimum Rent or Additional
Rent during the first three (3) months of the Term.
3.02 Operating Costs The Tenant shall pay to the Landlord as Additional
---------------
Rent, at the times and in the manner provided in Section 3.05, its Proportionate
Share of the Operating Costs.
3.03 Payment of Rent - General All amounts payable by the Tenant to the
-------------------------
Landlord under this Lease or payable to a government authority by reason of the
Tenant's occupancy hereof other than Minimum Rent shall be considered
"Additional Rent" and shall be deemed to be Rent and shall be payable and
recoverable as Rent in the manner herein provided, and the Landlord shall have
all rights against the Tenant for default in any such payment as in the case of
arrears of Minimum Rent. Rent shall be paid to the Landlord, without the
requirement of notice and without deduction or set-off, in legal tender of
Canada, at the address of the Landlord as set forth in this Lease, or to such
other Person or at such other address as the Landlord may from time to time
designate in writing. The Tenant's obligation to pay Rent shall survive the
expiration or earlier termination of this Lease. If the time and manner of the
payment of any Rent is not provided in this Lease, the Landlord shall be
permitted to determine the time and manner of such payment. All Additional Rent
shall commence to be payable on the Commencement Date unless otherwise provided
for herein.
<PAGE>
-4-
3.04 Rent - Adjustment If the Term commences or ends on a day other than
-----------------
the first or last day of a calendar month, the monthly instalment of Minimum
Rent and Additional Rent under this Lease shall be calculated on a per diem
basis and pro rated accordingly using the Minimum Rent or Additional Rent
payable during the calendar month in question.
3.05 Payment - Operating Costs
-------------------------
(a) Prior to the Commencement Date (or within a reasonable period of time
thereafter) and the beginning of each Lease Year thereafter, the Landlord shall
compute and deliver to the Tenant a bona fide estimate of Operating Costs for
the ensuing Lease Year.
(b) The Tenant shall pay to the Landlord in equal monthly instalments one-
twelfth of the Tenant's Proportionate Share of the Landlord's estimate of
Operating Costs for each Lease Year, simultaneously with the Tenant's monthly
instalment of Minimum Rent during such Lease Year.
(c) Unless delayed by causes beyond the Landlord's control, the Landlord
shall deliver to the Tenant within one hundred and twenty (120) days after the
end of each Lease Year a written statement (the "Operating Costs Statement")
setting out in reasonable detail the amount of Operating Costs for such Lease
Year. If the aggregate of such monthly instalments of Operating Costs actually
paid by the Tenant to the Landlord during such Lease Year differs from the
amount of Operating Costs payable for such Lease Year under Article 3.02, the
Tenant shall pay or the Landlord shall refund the difference (as the case may
be) without interest within thirty (30) days after the delivery of the Operating
Costs Statement.
(d) The Tenant shall not claim a readjustment in respect of Operating
Costs for a Lease Year, except by notice delivered to the Landlord within six
(6) months of the date of delivery of the Operating Costs Statement.
3.06 Deposit The Landlord hereby acknowledges receipt of the sum of
-------
$33,206.99 to be applied as a deposit against the first and last month's Minimum
Rent, Operating Costs, (including hydro), Taxes and Goods and Services Tax when
due.
3.07 Net Lease It is the intent of the parties hereto that the Minimum
---------
Rent payable under this Lease shall be absolutely net and carefree to the
Landlord. Any obligation which is not expressly declared herein to be that of
the Landlord pertaining to the Leased Premises shall be deemed to be that of the
Tenant to be paid by the Tenant or to be performed by or at the expense of the
Tenant. Notwithstanding the generality of the foregoing, the Tenant shall have
no responsibility for the income or capital taxes of the Landlord, and any
principal, interest or other carrying charges in any mortgage of the Building.
<PAGE>
-5-
ARTICLE 4.00
------------
TAXES AND UTILITIES
4.01 Taxes Payable by the Landlord The Landlord shall pay all Taxes,
-----------------------------
subject to Sections 4.02, 4.03, 4.04 and 4.05, provided that it may defer such
payments or compliance with any taxing statute, law, by-law, regulation or
ordinance to the fullest extent permitted by law, so long as it diligently
pursues any contest or appeal of any such Taxes.
4.02 Taxes Payable by the Tenant
---------------------------
(a) If separate real property tax bills and separate real property
assessment notices for the Leased Premises are issued, the Tenant shall;
(i) pay promptly when due to the taxing authorities all Taxes imposed,
assessed, levied, rated or charged from time to time against the
Leased Premises or any part thereof and forthwith provide the Landlord
with evidence of payment upon request; and
(ii) provide the Landlord with a copy of each separate real property tax
bill and separate assessment notice within ten (10) days after receipt
thereof;
provided that if the Landlord so elects by notice to the Tenant, the Tenant
shall add any amounts payable under this Section 4.02(a) to the monthly
instalments of Minimum Rent payable under Section 3.01 and the Landlord shall
remit such amounts to the appropriate authorities.
(b) If separate real property tax bills and separate real property
assessment notices for the Leased Premises are not issued, the Tenant shall pay
to the Landlord at the times and in the manner provided in Section 4.03, a
share, as allocated to the Leased Premises by the Landlord in its discretion, of
all Taxes, imposed, assessed, levied, rated or charged against the Building and
the Lands.
4.03 Payment of Taxes
----------------
(a) In the event that the provisions of Section 4.02(b) shall apply,
the Tenant shall pay to the Landlord in equal monthly instalments, one-twelfth
(1/12) of the Landlord's estimate of the amount payable by the Tenant pursuant
to Section 4.02(b) above for each Lease Year, simultaneously with the Tenant's
monthly instalment of Minimum Rent during such Lease Year.
(b) Unless delayed by causes beyond the Landlord's control, the
Landlord shall deliver to the Tenant within one hundred and twenty (120) days
after the end of each Lease Year a written statement (the "Tax Statement")
setting out in reasonable detail the amount of Taxes imposed, assessed, levied,
rated or charged against the Building and the Lands for such Lease Year
<PAGE>
-6-
and the amount of such Taxes payable by the Tenant for such Lease Year under
Section 4.02(b). If the aggregate of such monthly instalments of Taxes actually
paid by the Tenant to the Landlord during such Lease Year differs from the
amount of Taxes payable by the Tenant for such Lease Year under Section 4.02(b),
the Tenant shall pay or the Landlord shall refund the difference (as the case
may be) without interest within thirty (30) days after the delivery of the Tax
Statement.
(c) The Tenant shall not claim a re-adjustment in respect of Taxes for
a Lease Year except by notice delivered to the Landlord within six (6) months
after the date of delivery of the Tax Statement.
4.04 Business Taxes and Other Taxes of the Tenant In addition to the Taxes
--------------------------------------------
payable by the Tenant pursuant to Section 4.02, the Tenant shall pay to the
taxing authorities or to the Landlord as it directs, before delinquency, all
"Business Taxes". "Business Taxes" means, (a) the taxes, rates, duties,
assessments and other charges that are imposed against or in respect of the
improvements, equipment and facilities of the Tenant on or in the Leased
Premises or the Building or the Lands or any part of them or the Landlord on
account of its ownership of or interest in either of them; and (b) every tax and
license fee that is imposed against or in respect of any and every business
carried on in the Leased Premises or in respect of the use or occupancy of the
Leased Premises or any part of the Building or the Lands by the Tenant or its
subtenants or licensees, or against the Landlord on account of its ownership of
or interest in either of them. If there is not a separate bill issued by the
relevant authority for Business Taxes, the Landlord shall be entitled to
reasonably allocate Business Taxes and the Tenant shall pay the amount so
allocated upon demand. The Landlord will remit amounts that it collects for
Business Taxes to the relevant authority.
4.05 Separate School Taxes If the Tenant designates that Taxes go to
---------------------
support separate schools, the Tenant shall pay to the Landlord forthwith upon
demand, the difference, if any, between the rate for separate and public
schools, together with any other payment required pursuant to this Article 4.00.
4.06 Right to Contest The Landlord and the Tenant shall each have the
----------------
right to contest in good faith the validity or amount of any tax, assessment,
licence fee, excise fee and other charge which it is responsible to pay under
this Article 4.00, provided that; (a) the Tenant obtains the Landlord's prior
written consent to any such contest before commencing same; (b) no contest by
the Tenant may involve the possibility of forfeiture, sale or disturbance of the
Landlord's interest in the Leased Premises; (c) that the Tenant indemnifies and
agrees to save the Landlord harmless from any and all losses, costs or damages
that the Landlord may suffer by reason of such contest by the Tenant; and (d)
that, prior to contesting such charge, the Tenant shall immediately pay and
satisfy the amount claimed to be due, together with any costs, penalties and
interest and provide evidence of such payment to the Landlord.
4.07 Utility Charges and Services All electricity or other utilities
----------------------------
supplied to the Leased Premises shall be at the expense of the Tenant. If the
Leased Premises are not separately metered, the Landlord shall pay the cost of
such electricity or other utilities and apportion such costs among
<PAGE>
-7-
all those tenants supplied therefrom on a reasonable and equitable basis. Upon
receipt of a statement from the Landlord for such electricity or utility
charges, the Tenant shall pay to the Landlord the amount shown on such
statement. Notwithstanding the above, the Landlord may elect by notice to the
Tenant to estimate the amounts for which the Tenant is liable hereunder and
require the Tenant to pay same in monthly instalments at the times and in the
manner provided under this Lease for payment of Minimum Rent, in which case the
provisions of Section 3.05 shall apply.
4.08 Goods and Services Taxes Notwithstanding any other Section of this
------------------------
Lease, the Tenant shall pay to the Landlord an amount equal to any and all goods
and services taxes, sales taxes, value added taxes, business transfer taxes, or
any other taxes imposed on the Landlord or the Tenant with respect to the Rent
payable by the Tenant to the Landlord under this Lease, or in respect of the
rental of space under this Lease, whether characterized as a goods and services
tax, sales tax, value added tax, business transfer tax, or otherwise (herein
collectively and individually called "Sales Taxes"). The amount of the Sales
Taxes so payable by the Tenant shall be calculated by the Landlord in accordance
with the applicable legislation and will be paid to the Landlord at the same
time as the amounts to which such Sales Taxes apply are payable to the Landlord
under the terms of this Lease or upon demand at such other time or times as the
Landlord from time to time determines. Notwithstanding any other Section of
this Lease, the amount payable by the Tenant pursuant to the provisions hereof
shall be deemed not to be Rent, but the Landlord shall have all of the same
remedies for and rights of recovery of the amount as it has for the recovery of
Rent under this Lease.
ARTICLE 5.00
------------
USE OF LEASED PREMISES
5.01 Use The Leased Premises shall be used and occupied only as a
---
commercial school and ancillary offices. As of the date of the Lease, the
Landlord warrants that the Leased Premises are in compliance with all necessary
by-laws and regulations (including fire code) to permit the said use.
5.02 Compliance with Laws The Leased Premises shall be used and occupied
--------------------
in a safe, careful and proper manner so as not to contravene any present or
future governmental or quasi-governmental laws, by-laws, rules or regulations or
orders. If improvements, alterations, repairs or replacements are necessary to
comply with any of the foregoing or with the requirements of insurance carriers,
the Tenant shall pay the entire cost thereof.
5.03 Abandonment The Tenant shall not vacate or abandon the Leased
-----------
Premises at any time during the Term without the written consent of the
Landlord.
<PAGE>
-8-
5.04 Nuisance The Tenant shall not cause or maintain any nuisance in or
--------
about the Leased Premises, and shall keep the Leased Premises free of debris,
rodents, vermin and anything of a dangerous, noxious or offensive nature or
which could create a fire hazard (through undue load on electrical circuits or
otherwise) or undue vibration, heat, noise or odours.
ARTICLE 6.00
------------
SERVICES, MAINTENANCE, REPAIR, ALTERATIONS
ACCESS BY THE LANDLORD AND
CONTROL OF COMMON AREAS
6.01 Operating of Building During the Term, the Landlord shall operate
---------------------
and maintain the Building in accordance with all applicable laws and regulations
and with standards from time to time prevailing for a similar multi-use building
of a similar age and size in the area in which the Building is located and,
shall provide the services set out in Sections 6.02, 6.03 and 6.04 subject in
all cases to reimbursement by the Tenant as part of Operating Costs.
The Building and the Lands are at all times subject to the exclusive
control, management and operation of the Landlord. Without limiting the
generality of the preceding sentence, the Landlord has the right, in its
control, management and operation of the Building and the Lands and by the
establishment of Rules and Regulations and general policies with respect to the
operation of the Building and the Lands or any part thereof, at all times
throughout the Term, to:
(i) construct improvements in or to the Building and make alterations
thereof, additions thereto, subtractions therefrom, rearrangements
thereof (including all entrances and exits thereto), build
additional storeys on the Building and construct additional
facilities adjoining or proximate to the Building;
(ii) relocate or rearrange the various facilities and improvements
comprising the Building or erected on the Lands from those existing
at the Commencement Date;
(iii) control, supervise and regulate any parking facilities which may be
used in conjunction with the Building in such manner as the Landlord
determines from time to time, including, without limitation,
imposing charges or rates as may from time to time be determined by
the Landlord for the use of any such parking facilities;
(iv) do and perform such other acts in and to the Building and the Lands
or any part thereof as, in the use of good business judgment, the
Landlord determines to be advisable for the more efficient and
proper operation of the Building and the Lands.
<PAGE>
-9-
6.02 Services to Premises Subject to the Additional Services which may be
--------------------
provided pursuant to Section 6.05, the Landlord (except during periods of repair
and maintenance) shall provide in the Leased Premises:
(a) heat, ventilation and cooling as required for the use and occupancy of
the Leased Premises during Normal Business Hours.
(b) janitor services, including window washing, as reasonably required to
keep the Leased Premises in a clean and wholesome condition, provided
that the Tenant shall leave the Leased Premises in a reasonably tidy
condition at the end of each business day,
(c) electric power for normal lighting and small business office equipment
but not equipment using amounts of power disproportionate to that used
by other tenants in the Building,
(d) replacement of Building standard fluorescent tubes, light bulbs and
ballasts as required from time to time as a result of normal usage,
and
(e) maintenance, repair and replacement as set out in Article 6.04.
6.03 Building Services The Landlord shall (except during periods of repair
-----------------
and maintenance) provide in the Building:
(a) domestic running water and necessary supplies in washrooms sufficient
for the normal use thereof by occupants of the Building,
(b) access to and egress from the Leased Premises during Normal Business
Hours of the Building, including elevator or escalator service if
included in the Building,
(c) heat, ventilation, cooling, lighting, electric power, domestic running
water and janitor service in those portions of the Common Areas from
time to time designated by the Landlord for use during Normal Business
Hours by the Tenant in common with all tenants and other Persons in
the Building but under the exclusive control of the Landlord,
(d) a general directory board on which the Tenant shall be entitled to
have its name shown, provided that the Landlord shall have exclusive
control thereof, including the right to require a fee to be paid for
the privilege of displaying the name of the Tenant thereon and any
additions or deletions, the Landlord being solely responsible for the
allocation of space to tenants, and
(e) maintenance, repair and replacement as set out in Article 6.04.
<PAGE>
-10-
6.04 Maintenance, Repair and Replacement The Landlord shall operate,
-----------------------------------
maintain, repair and replace the systems, facilities and equipment necessary for
the proper operation of the Building and for provision of the Landlord's
services under Articles 6.02 and 6.03 (except as may be installed by or be the
property of the Tenant) and shall be responsible for and shall expeditiously
maintain and repair the foundations, structure and roof of the Building and
repair damage to the Building which the Landlord is obligated to insure against
under Article 8.01 hereof, provided that:
(a) if all or part of such systems, facilities and equipment are
destroyed, damaged or impaired, the Landlord shall have a reasonable
time in which to complete the necessary repair or replacement and
during that time shall be required only to maintain such services as
are reasonably possible in the circumstances,
(b) the Landlord may temporarily discontinue such services or any of them
at such times as may be necessary due to causes beyond the reasonable
control of the Landlord,
(c) if all or part of such systems, facilities and equipment are
destroyed, damaged or impaired by reason of the actions or inactions
of the Tenant, then the cost of repair or replacement shall be at the
expense of the Tenant.
6.05 Additional Services
-------------------
(a) If from time to time requested in writing by the Tenant and to the
extent that it is reasonably able to do so, the Landlord shall provide in the
Leased Premises services in addition to those set out in Articles 6.02 and 6.03,
provided that the Tenant shall within ten (10) days of receipt of any invoice
for any such additional service pay the Landlord therefor at such reasonable
rates as the Landlord may from time to time establish and as well comply with
all reasonable security requirements of the Landlord.
(b) The Tenant shall not without the Landlord's written consent install in
the Leased Premises equipment (including telephone equipment) which generates
sufficient heat to affect the temperature otherwise maintained in the Leased
Premises by the air conditioning system as normally operated. The Landlord may
install supplementary air conditioning units, facilities or services in the
Leased Premises, or modify its air conditioning system, as may be required in
the reasonable opinion of the Landlord to maintain proper temperature levels,
and the Tenant shall pay the Landlord within ten (10) days of receipt of any
invoice for the cost thereof, including installation, operation and maintenance
expense.
(c) If the Landlord shall from time to time reasonably determine that the
use of electricity or any other utility or service in the Leased Premises is
disproportionate to the use of other tenants, the Landlord may separately charge
the Tenant for the excess costs attributable to such disproportionate use. The
Landlord shall provide the Tenant with detailed invoices and calculations to
support the charges. At the Landlord's request, the Tenant shall install and
maintain, at the
<PAGE>
-11-
Tenant's expense, metering devices for checking the use of any such utility or
service in the Leased Premises.
6.06 Alterations by Landlord The Landlord may from time to time make
-----------------------
repairs, replacements, changes or additions to the structure, systems,
facilities and equipment in the Leased Premises where necessary to serve the
Leased Premises or other parts of the Building.
6.07 Access by Landlord The Tenant shall permit the Landlord to enter the
------------------
Leased Premises outside Normal Business Hours and during Normal Business Hours
where such will not unreasonably disturb or interfere with the Tenant's use of
the Leased Premises and operation of its business, to examine, inspect and show
the Leased Premises to Persons wishing to lease same, to provide services or
make repairs, replacements, changes or alterations as set out in this Lease, and
to take such steps as the Landlord may deem necessary for the safety,
improvement or preservation of the Leased Premises or the Building. The Landlord
shall whenever possible consult with or give reasonable notice to the Tenant
prior to such entry, but no such entry shall constitute an eviction or entitle
the Tenant to any abatement of Rent. During the last six (6) months of the Term
(or renewals), the Landlord shall be entitled to enter the Leased Premises for
the purposes of showing the Leased Premises to Persons wishing to lease same.
6.08 Policies The Landlord shall be deemed to have observed and performed
--------
the terms and conditions to be performed by the Landlord under this Lease,
including those relating to the provision of utilities and services, if in so
doing it acts in accordance with a directive, policy or request of a
governmental or quasi-governmental authority serving the public interest in the
fields of energy, conservation or security.
6.09 Limitation Notwithstanding anything contained in this Article or
----------
Lease, the Landlord shall not be liable under any circumstances for any loss or
damage to any Person or property arising out of any obligation of the Landlord
contained in this Article or Lease. No reduction or discontinuance of any
services set out in Article 6.00 herein or elsewhere in this Lease nor any
exercise by the Landlord of any of its rights set out in this Article 6.00 or
elsewhere in this Lease shall be construed as an eviction of the Tenant or a
release of the Tenant from any of its obligations under this Lease or a breach
of any covenant for quiet enjoyment contained in this Lease or implied by law.
ARTICLE 7.00
------------
MAINTENANCE, REPAIR, ALTERATIONS, IMPROVEMENTS
AND SIGNS BY THE TENANT
7.01 Condition of Premises. Except to the extent that the Landlord is
---------------------
specifically responsible therefor under this Lease, the Tenant shall maintain
the Leased Promises and all improvements therein in good order and condition as
reasonably requested by the Landlord and at least to the standard of the repair
of the Building, including:
<PAGE>
-12-
(a) repainting and redecorating the Leased Premises and cleaning drapes
and carpets at reasonable intervals as needed,
(b) making repairs, replacements and alterations as needed, including
those necessary to comply with the requirements of any governmental or
quasi-governmental authority having jurisdiction, and
(c) notifying the Landlord promptly of any damage to the Leased Premises
or Building.
7.02 Failure to Maintain Premises If the Tenant fails to perform any
----------------------------
obligations under Section 7.01, then on not less than ten (10) days' notice to
the Tenant the Landlord may enter the Leased Premises and perform such
obligations without liability to the Tenant for any loss or damage to the Tenant
thereby incurred, and the Tenant shall pay the Landlord for the cost thereof,
plus fifteen percent (15%) of such cost for overhead and supervision, within ten
(10) days of receipt of the Landlord's invoice therefor.
7.03 No Alteration Without-Consent The Tenant shall not make any
------------------------------
alterations repairs, changes, additions, fixturing, installations or
improvements (hereinafter collectively referred to as "Improvements") to the
Leased Premises without the prior written consent of the Landlord. All
Improvements (other than the Tenant's trade fixtures, furniture, drapery or
equipment) made, erected or installed in the Leased Premises shall immediately
upon their placement be and become the property of the Landlord without
compensation therefor to the Tenant and the Tenant shall not remove any such
Improvements either before or after the termination of this Lease without the
prior written consent of the Landlord. Prior to the Landlord giving
consideration to any application for the Landlord's consent pursuant to this
Section 7.03, the Tenant shall provide to the Landlord detailed plans, drawings
and specifications of such Improvements. Any costs incurred by the Landlord,
including, without limiting the generality of the foregoing, fees paid to
architects, engineers or other consultants, shall be paid by the Tenant to the
Landlord forthwith upon demand.
7.04 Construction of Improvements All Improvements, when approved by the
----------------------------
Landlord, shall be effected by such contractor, contractors or sub-contractors
as the Tenant may select but, in each case, only under written contract approved
in writing by the Landlord and subject to all reasonable conditions which the
Landlord may impose. It is expressly understood and agreed that, without
limiting the generality of the foregoing, it shall be reasonable for the
Landlord to impose as conditions of the granting of its consent any one or more
of the following:
(a) that the Tenant shall exhibit to the Landlord prior to the
commencement of the making of Improvements all building permits,
consents and other authorizations as may be required for the effecting
of such Improvements;
(b) that the Tenant shall, prior to the commencement of the making of
Improvements, furnish to the Landlord such security, whether by way of
performance bond, cash
<PAGE>
-13-
deposit or otherwise, as the Landlord may require, to ensure the due
and proper carrying out and completion of the improvements and payment
therefor;
(c) that the Tenant shall permit the Landlord to supervise the carrying
out of the improvements; and
(d) that the Tenant shall pay to the Landlord all costs incurred by the
Landlord in supervising and inspecting the Improvements) including
fees paid to architects, engineers and other consultants, and salaries
paid to Persons on the Landlord's staff or on staff of any Person
managing or administering the Building as well as an administration
fee equal to five (5%) percent of the full contract price for all
approvals, supervision to ensure compliance with approved plans and
building code requirements, attendance at site meetings if necessary,
security, hoisting, elevator service, temporary power.
The Landlord may in its absolute discretion require that the whole or
any part of such Improvements be carried out by contractors or subcontractors
designated by the Landlord, but at the expense of the Tenant. Each such
contractor or subcontractors whether or not designated by the Landlord, shall be
the Tenant's contractor and subcontractor and the Tenant hereby undertakes that
any work performed by or for the Tenant shall be performed by competent workmen
whose labour union affiliations are not incompatible with those of any workmen
who may be employed in the Building by the Landlord its contractors or sub-
contractors.
7.05 Trade Fixtures The Tenant may install in the Leased Premises its
--------------
trade fixtures in a proper manner, provided that no such installation shall
interfere with or damage the mechanical or electrical systems or the structure
of the Building. If the Tenant is not then in default hereunder, trade fixtures
installed in the Leased Premises may be removed from the Leased Premises from
time to time in the ordinary course of the Tenants business or in the course of
reconstruction, renovation or alteration of the Leased Premises by the Tenant
and during a reasonable period prior to the expiration of the Term, provided
that the Tenant promptly repairs at its own expense any damage to the Leased
Premises resulting from such installation and removal. The foregoing reference
to trade fixtures which may be removed shall not include any Improvements which
as stated in Section 7.03 become the property of the Landlord upon installation.
7.06 Construction Liens The Tenant shall pay all costs for work done or
------------------
caused to be done by the Tenant in the Leased Premises which could result in any
lien or encumbrance on the Landlord's interest in the Building or the Lands or
any part thereof, shall keep the title to the Building and the Lands and every
part thereof free and clear of any lien or encumbrance in respect of such work,
and shall indemnify and hold harmless the Landlord against any claim, loss,
cost, demand and legal or other expense, whether in respect of any lien or
otherwise, arising out of the supply of material, services or labour for such
work. The Tenant shall immediately notify the Landlord of any such lien, claim
of lien or other action of which it has or reasonably should have knowledge and
which affects the title to the Building or the Lands or any part thereof, and
shall cause the same to
<PAGE>
-14-
be removed within five (5) days, failing which the Landlord may take such action
as the Landlord deems necessary to remove same and the entire cost thereof
together with all legal fees and expenses expended by the Landlord shall be
immediately due and payable by the Tenant to the Landlord as Additional Rent.
7.07 Signs The Tenant shall not inscribe or affix any sign, lettering or
-----
design in the Leased Premises or the Building which is visible from the exterior
of the Building or on the interior or exterior of the Leased Premises. Any
sign, lettering or design of the Tenant which is visible from the exterior of
the Leased Premises, for example, in the Common Areas must be approved by the
Landlord, which approval may be arbitrarily withheld. Any sign, lettering or
design of the Tenant which is approved of by the Landlord shall be at the
Tenant's expense and shall conform to the uniform pattern (based on Building
standard and quality) of identification signs for tenants in the Building as
prescribed from time to time by the Landlord. Notwithstanding the foregoings the
Tenant, at the Tenant's sole cost, shall have the right to install building
signage in the south-west corner of the building (at second floor level - below
windows) and a plaque sign on either one (but not both) of the columns located
at the front entrance of the Building as illustrated in Schedules G and H. The
Landlord acknowledges having approved the Tenant's signage. Any future changes
to signs and/or plaques shall be subject to the Landlord's approval, which
approval shall not be unreasonably withheld and shall comply with all applicable
laws and by-laws. The Tenant shall be responsible for repairing any damage
caused to the Building as a result of installing such signage. The Tenant shall
also be responsible for removing said signage at the end of the Term, and any
renewals thereof, and the Tenant shall be responsible to make good any damage
caused by such removal.
ARTICLE 8.00
------------
INSURANCE
8.01 Landlord's Insurance
--------------------
(a) During the Term, the Landlord shall maintain liability insurances fire
insurance with extended coverage, boiler and pressure vessel insurance, loss of
rental income insurance or insurable gross profits and other insurance on the
Building and all property and interest of the Landlord in the Building with
coverage and in amounts not less than those which are from time to time
acceptable to a prudent owner in the area in which the Building is located. The
costs of such insurance shall be reimbursed by the Tenant to the Landlord as
part of Operating Costs.
(b) Notwithstanding any contribution by the Tenant to the cost of the
Landlord's insurance premiums, the Tenant acknowledges and agrees that:
(i) the Tenant is not relieved of any liability arising from or
contributed to by its negligence or its wilful act or omission;
<PAGE>
-15-
(ii) no insurable interest is conferred upon the Tenant under any
insurance policies carried by the Landlord;
(iii) the Tenant has no right to receive any proceeds of any
insurance policies carried by the Landlord; and
(iv) the right of any insurer of the Landlord to be subrogated to
the rights of the Landlord is not limited or in any way
restricted.
8.02 Tenant not to Jeopardize Landlord's Insurance Tenant shall neither
---------------------------------------------
do, permit or omit to be done, nor keep or sell, anything in or about the Leased
Premises or the Building or the Lands which might result in any increase in the
premiums for Landlord's insurance coverage on the Building or which might result
in the actual or threatened reduction or cancellation of or material adverse
change in such coverage.
If the premiums for Landlord's insurance are increased as a result of
Tenants use or occupancy of the Leased Premises or any article kept by Tenant on
the Leased Premises or any act or omission of Tenant in the Building or the
Lands or any part thereof, Tenant shall pay such increase in premiums as
Additional Rent forthwith upon demand. In determining Tenant's responsibility
as aforesaid for any increased premiums a statement issued by the organization
or company establishing the insurance rate(s) on the Building shall be
conclusive evidence of the various components of such rate(s).
If any insurance coverage on the Building or any part thereof is
actually, or threatened to be, either canceled, reduced or materially adversely
changed by the insurer by reason of the use or occupancy of the Leased Premises
or any part thereof, and if Tenant fails to remedy the condition or use or
occupancy giving rise to such actual or threatened cancellation, reduction or
change within twenty-four (24) hours after notice thereof by Landlord then the
Landlord may at its option either:
(a) re-enter and take possession of the Leased Premises forthwith by
leaving upon the Leased Premises a notice in writing of its intention
to do so and thereupon the provisions of this Lease respecting
Landlord's remedies shall apply; or
(b) enter upon the Leased Premises and remedy the condition, use or
occupancy giving rise to such actual or threatened cancellation
reduction or change, and Tenant shall pay to Landlord on demand as
Additional Rent the cost thereof to Landlord. Tenant agrees that no
such entry by Landlord shall be deemed a re-entry or a breach of any
covenant of quiet enjoyment contained in this Lease.
Tenant agrees that Landlord shall not be liable for any loss or damage
to any Person or property located on the Leased Premises as a result of any
entry or re-entry by Landlord pursuant to this Section 8.02.
<PAGE>
-16-
8.03 Tenant's Insurance
------------------
(a) Tenant shall, at its sole cost and expense, take out and keep in full
force and effect and pay all premiums for, throughout the Term and during such
other time as Tenant occupies the Leased Premises or any part thereof, the
following insurance:
(i) comprehensive general liability insurance including but not
limited to property damage, bodily injury liability,
contractual liability, non-owned automobile liability and
owners' and contractors' protective insurance coverage with
respect to the Leased Premises and Tenant's use of the
Building and the Lands, coverage to include the activities
conducted by Tenant and any other Person on the Leased
Premises, and by Tenant, those for whom Tenant is in law
responsible and any other Person performing work on behalf of
Tenant in any other part of the Building or the Lands. Such
policies shall have inclusive limits of at least Two Million
($2,000,000.00) Dollars for each occurrence involving bodily
injury, death or property damage, or such higher limits as
Landlord may from time to time reasonably require;
(ii) insurance upon property of every kind and description owned by
Tenant, or for which Tenant is legally liable, or installed by
or on behalf of Tenant in the Building, without limitation,
stock-in-trade, if appropriate, furniture, fixtures, interior
plate glass and leasehold improvements, in an amount of not
less than the full replacement cost thereof, which amount
shall be conclusively determined by Landlord in the event of
any dispute with respect thereto. Such coverage shall insure
at least against fire and such other perils as are from time
to time included in the standard "all-risks" coverage
including, without limitation, sprinkler leakages (where
applicable), earthquake, flood and collapse;
(iii) if appropriate, broad form comprehensive boiler and machinery
insurance on a blanket repair and replacement basis with
limits for each accident in an amount not less than the full
replacement costs of all leasehold improvements and of all
boilers, pressure-vessels, air-conditioning equipment and
miscellaneous electrical apparatus owned or operated by Tenant
or by others (other than Landlord) on behalf of Tenant in or
relating to or serving the Leased Premises;
(iv) business interruption insurance in such amounts as are from
time to time necessary to reimburse Tenant for direct or
indirect loss of earnings attributable to any of the perils
required to be insured against by Tenant pursuant hereto or
any other perils commonly insured against by prudent
<PAGE>
-17-
tenants in similar circumstances or attributable to prevention
of access to Leased Premises or the Building as a result of
such perils;
(v) tenant's legal liability insurance for the whole replacement
cost of the Leased Premises, including loss of use thereof;
(vi) standard owners' form automobile policy providing third party
liability insurance with inclusive limits of not less than one
Million ($1,000,000.00) Dollars, and accident benefit
insurance, covering all licensed vehicles owned or operated by
or on behalf of Tenant; and
(vii) any other form of insurance, in such amounts and against such
risks, as Landlord may from time to time reasonably require.
(b) Each of Tenant's insurance policies shall name Landlord and any
Persons designated by Landlord as additional named insured as their respective
interests may appear and shall contain, as appropriate,
(i) the standard mortgage clause as may be required by any
mortgagee of Landlord;
(ii) a waiver of any subrogation rights which Tenant's insurers
would have against Landlord or any Person for whom Landlord is
in law responsible;
(iii) a severability of interests clause and a cross-liability
clause;
(iv) a provision stating that Tenant's insurance policy shall be
primary and shall not call into contribution any other
insurance available to Landlord; and
(v) a waiver, as respects the interests of Landlord and of any
mortgagee, of any provision in any of Tenant's insurance
policies with respect to any breach of any warranties,
representations, declarations, or conditions contained in the
said policies.
(c) All policies shall be taken out with such insurers and be in such form
as are satisfactory from time to time to Landlord. Tenant shall deliver to
Landlord either certificates of insurance in the form designated by Landlord or
certified copies of Tenant's insurance policies as soon as practicable after the
placement of such insurance, and shall from time to time furnish to Landlord
certificates or other evidences acceptable to Landlord as to Tenant's insurance
in effect and its renewal or continuation in force, together with such evidence
as may be required by the Landlord as to the method of determination of the full
replacement cost of Tenant's stock-in-trade, furniture, fixtures, interior plate
glass and leasehold improvements.
<PAGE>
-18-
(d) All policies shall contain an undertaking by the insurers that no
material change, cancellation or termination of any policy will be made unless
Landlord has received not less than thirty (30) days prior written notice
thereof, delivered in accordance with the provisions of this Lease.
8.04 Landlord's Right to Place Tenant's Insurance If Tenant at any time
--------------------------------------------
fails to take out, keep in force or pay the premiums on, any such insurance as
required herein, or if Tenant fails from time to time to deliver to Landlord
satisfactory proof of the good standing of any such insurance or the payment of
premiums thereon as required herein then in any such event Landlord shall,
without prejudice to any of its other rights and remedies under this Lease, have
the right but not the obligation to effect such insurance on behalf of Tenant
and the cost thereof together with all reasonable expenses incurred by Landlord
shall be paid by Tenant to Landlord upon demand.
ARTICLE 9.00
------------
INJURY TO PERSON OR PROPERTY
9.01 Loss or Damages. The Landlord shall not be liable for any death or
---------------
injury arising from or out of any occurrence in, upon, at, or relating to, the
Building or the Lands, or damage to property of the Tenant or of others located
on the Leased Premises or elsewhere in the Building or upon the Lands, nor shall
the Landlord be responsible for any loss of or damage to any property of the
Tenant or others from any cause whatsoever, whether or not any such death,
injury, loss or damage results from the negligence of the Landlord, its agents,
servants or employees or other Persons for whom it may, in law, be responsible.
Without limiting the generality of the foregoing, the Landlord shall not be
liable for any injury or damage to Persons or property resulting from fire,
explosion, falling plaster, failing ceiling tile, falling ceiling fixtures and
diffuser coverings, steam, gas, electricity, water, rain, flood, snow or leaks
from any part of the Leased Premises or from the pipes, sprinklers, appliances,
plumbing works, root windows or subsurface of any floor or ceiling of the
Building or from the adjoining streets or any other place or by dampness or by
any other cause whatsoever. The Landlord shall not be liable for any such
damage caused by other tenants or Persons in the Building or by occupants of
adjacent property thereto, or the public, or caused by construction or by any
private, public or quasi-public work. All property of the Tenant kept or stored
on the Leased Premises shall be so kept or stored at the risk of the Tenant only
and the Tenant shall indemnify the Landlord and save it harmless from any claims
arising out of any damages to the same including, without limitation, any
subrogation claims by the Tenant's insurers.
9.02 Indemnity by Tenant The Tenant will indemnify the Landlord and save it
-------------------
harmless from and against any and all claims, actions, damages, liability and
expense in connection with the loss of life, personal injury and/or damage to
property arising from or out of any occurrence in, upon or at the Leased
Premises, the occupancy or use by the Tenant of the Leased Premises or any part
thereof or occasioned wholly or in part by any act or omission of the Tenant
provided that such claims are not due to the gross negligence of the Landlord or
those for whom the Landlord is responsible at law. In case the Landlord shall,
without fault on its part, be made a party to any
<PAGE>
-19-
litigation commenced by or against the Tenant, then the Tenant shall protect and
hold the Landlord harmless and shall pay all costs, expenses and solicitors'
fees on a solicitor and his client basis incurred or paid by the Landlord in
connection with such litigation. The foregoing obligation of the Tenant shall
survive the expiration or earlier termination of the Term.
ARTICLE 10.00
-------------
ASSIGNMENT AND SUBLETTING
10.01 Assignment, Subletting and Transfers The Tenant shall not assign this
------------------------------------
Lease or sublet the Leased Premises in whole or in part or otherwise transfer
its rights to all or any part of the Leased Premises or the occupancy thereof,
and will not mortgage charge or otherwise encumber this Lease or the Leased
Premises (such assignments subletting transfer, mortgage, charge and
encumbrance being herein called a "Transfer") to or in favour of any Person
(herein called a "Transferee") without the prior written consent of the Landlord
in each instance, which consent shall not be unreasonably withheld but shall be
subject to the Landlord's rights under Section 10.02 and, notwithstanding any
statutory provision to the contrary, it shall not be considered unreasonable for
the Landlord to take into account the following factors in deciding whether to
grant or withhold its consent:
(a) whether such Transfer is in violation or in breach of any covenants or
restrictions made or granted by the Landlord to other tenants or
occupants or prospective tenants or occupants of the Building;
(b) whether in the Landlord's opinion, the financial background, business
history and capability of the proposed Transferee is satisfactory; and
(c) if the Transfer is to an existing tenant of the Landlord; and
the consent by the Landlord to any Transfer if granted shall not constitute a
waiver of the necessity for such consent to any subsequent Transfer. This
prohibition against a Transfer shall include a prohibition against any Transfer
by operation of law and no Transfer shall take place by reason of the failure of
the Landlord to give notice to the Tenant within 30 days as required by Section
10.02.
10.02 Landlord's Right to Terminate If the Tenant intends to effect a
-----------------------------
Transfer or if a Transfer occurs by operation of law, the Tenant shall give at
least thirty (30) days prior written notice to Landlord of such intent or
occurrence specifying the identity of the Transferee, the type of Transfer
intended or occurring, the portion of the Leased Premises affected thereby, and
the financial and other terms of the Transfer, and shall provide such financial,
business or other information relating to the proposed Transferee and its
principals as the Landlord or its mortgagee requires, together with copies of
any documents which record the particulars of the intended or occurring
<PAGE>
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Transfer. The Landlord shall, within 30 days after having received such notice
and all requested information notify the Tenant either that it:
(a) consents or does not consent to the Transfer in accordance with the
provisions and qualifications of this Article 10.00; or
(b) elects to terminate this Lease as to the whole or parts as the case
may be, of the Leased Premises affected by the intended or occurring
Transfer.
If the Landlord elects to terminate this Lease in whole or in part it
shall stipulate in its notice the termination date of this Lease, which date
shall be no less than 30 days nor more than 90 days following the giving of such
notice termination.
10.03 Conditions of Landlord's Consent The Landlord's consent to any
--------------------------------
subletting or parting with possession of all or any part of the Leased Premises
or to an assignment of this Lease shall be subject to the condition that:
(a) the minimum rent and additional rent payable by the sublessee,
occupant or assignee, as the case may be, shall not be proportionately
less than the Minimum Rent and Additional Rent payable hereunder as at
the effective date of the sublease, parting with possession or
assignment, as the case may be (including any increases provided for
in this Lease);
(b) if the minimum rent and/or additional rent to be paid by the
sublessee, occupant or assignee, as the case may be, proportionately
exceeds the Minimum Rent and/or Additional Rent payable hereunder, the
amount of such excess shall be paid by the Tenant to the Landlord as
Additional Rent, if, as and when received the Tenant; and
(c) if the Tenant receives from any sublessee, occupant or assignee, as
the case may be, either directly or indirectly, any consideration
other than minimum rent or additional rent for such sublease,
occupancy or assignment as the case may be, either in the form of
cash, goods or services, the Tenant shall forthwith pay to the
Landlord an amount equivalent to such consideration.
10.04 Conditions of Transfer If there is a permitted Transfer, the
----------------------
Landlord may collect rent from the Transferee and apply the net amount collected
to the Rent payable hereunder but no acceptance by the Landlord of any payments
by a Transferee shall be deemed a waiver of the Tenant's covenants or an
acceptance of the Transferee as tenant or a release of the Tenant from the
further performance by the Tenant of its obligations under this Lease. Any
consent by the Landlord shall be subject to the Tenant and the Transferee
executing an agreement with the Landlord agreeing that the Transferee will be
bound by all of the terms of this Lease as if it had originally executed this
Lease as tenant; and so as to incorporate any conditions imposed by the Landlord
in its consent or required by Section 10.03 and Section 10.04.
<PAGE>
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10.05 Tenant Not Released Notwithstanding any Transfer permitted or
-------------------
consented to by the Landlord, the Tenant shall remain liable under this Lease
and shall not be released from performing any of the terms of this Lease.
10.06 No Partial Payments of Rent Notwithstanding the effective date of any
---------------------------
permitted Transfer as between the Tenant and the Transferee, all Minimum Rent
and Additional Rent for the month in which such effective date occurs shall be
paid in advance by the Tenant so that the Landlord will not be required to
accept partial payments of minimum Rent and Additional Rent for such month from
either the Tenant or its Transferee.
10.07 Documentation Any document evidencing any Transfer permitted by the
-------------
Landlord, or setting out any terms applicable to such Transfer or the rights and
obligations of the Tenant or Transferee thereunder, shall be prepared by the
Landlord or its solicitors and all associated legal costs shall be paid by the
Tenant.
10.08 Change of Control If the Tenant is at any time a company,
-----------------
corporation or partnership, any actual or proposed Change of Control in such
company, corporation or partnership shall be deemed to be a Transfer and subject
to all of the provisions of this Article 10.00. The Tenant shall make available
to the Landlord or its representatives all of its corporate or partnership
records, as the case may be, for inspection at all reasonable times, in order to
ascertain whether any Change of Control has occurred. For the purposes of this
Section, Change of Control means the transfer, or issue of any shares, voting
rights or interests by sale, assignment subscriptions transmission on death, or
by operation of law (and shall be deemed to include a mortgage, charge or
security interest granted on such shares, voting rights or interest), where such
transfer, issue, mortgage or charge would result in any change in the effective
control of such company, corporation or partnership unless such change occurs as
a result of trading on a recognized stock exchange in Canada or the United
States and then only so long as the Landlord receives assurances reasonably
satisfactory to it that there will be continuity of management and of the
business practices of such company or corporation notwithstanding such Change of
Control.
10.09 No Advertising The Tenant shall not advertise that the whole or part
--------------
of the Leased Premises are available for assignment or sublease and shall not
permit any broker or other Person to do so unless the text and format of such
advertisement is approved in writing by the Landlord. No such advertisement
shall contain any reference to the Rent for the Leased Premises.
10.10 Assignment by Landlord The Landlord shall have the unrestricted right
----------------------
to sell, lease, convey or otherwise dispose of all or any part of the Building
and the Lands or this Lease or any interest of the Landlord therein. To the
extent that the purchaser, lessee or assignee from the Landlord assumes the
obligations of the Landlord under this Lease, the Landlord shall thereupon and
without further agreement be released of liability under this Lease to the
extent of such assumption.
<PAGE>
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ARTICLE 11.00
-------------
SURRENDER
11.01 Possession Upon the expiration or other termination of the Term, the
----------
Tenant shall immediately quit and surrender possession of the Leased Premises in
the condition in which the Tenant is required to maintain the Leased Premises.
Upon such surrender, all right, title and interest of the Tenant in the Leased
Premises shall cease.
11.02 Trade Fixtures and Improvements Subject to the Tenant's rights under
-------------------------------
Section 7.05, after the expiration or other termination of the Term all of the
Tenant's trade fixtures and Improvements remaining in the Leased Premises shall
be deemed conclusively to have been abandoned by the Tenant and may be
appropriated, sold, destroyed or otherwise disposed of by the Landlord without
notice or obligation to compensate the Tenant or to account therefor, and Tenant
shall pay to the Landlord on written demand all reasonable costs incurred by the
Landlord in connection therewith. The Landlord shall not require the Tenant to
remove any Improvements made to the Leased Premises by or on behalf or at the
request of the Tenant (and whether installed by the Tenant or not) or to restore
the Leased Premises to the state that existed prior to the making of any such
Improvements therein whether by Landlord or Tenant. In any event, the Tenant
shall promptly repair at its own expense any damage to the Leased Premises
resulting from any removal of Improvements or trade fixtures.
11.03 Payments after Termination No payments of money by the Tenant to the
--------------------------
Landlord after the expiration or other termination of the Term or after the
giving of any notice (other than a demand for payment of money) by the Landlord
to the Tenant, shall reinstate, continue or extend the Term or make ineffective
any notice given to the Tenant prior to the payment of such money. After the
service of notice of the commencement of a suit, or after final judgment
granting the Landlord possession of the Leased Premises, the Landlord may
receive and collect any sums of Rent due under the Lease, and the payment
thereof shall not make ineffective any notice, or in any manner affect any
pending suit or any judgment theretofore obtained.
ARTICLE 12.00
-------------
HOLDING OVER
12.01 Month to Month Tenancy If the Tenant remains in possession of the
----------------------
Leased Premises with or without the Landlord's written consent after the
expiration or other termination of the Term, the Tenant shall be deemed to be
occupying the Leased Premises on a month to month tenancy only, at a monthly
rental equal to one hundred and fifty percent (150%) of the Minimum Rent and
Additional Rent in the last month of the Term or such other rental as is agreed
in writing by the Landlord and the Tenant, and such month to month tenancy may
be terminated by the Landlord or the Tenant on the last day of any calendar
month by delivery of at least thirty (30) days' advance notice of termination to
the other.
<PAGE>
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12.02 General Any month to month tenancy shall be subject to all other
-------
terms conditions of this Lease except any right of renewal and nothing contained
in this Article 12.00 shall be construed to limit or impair any of the
Landlord's rights of re-entry eviction or constitute a waiver thereof.
ARTICLE 13.00
RULES AND REGULATIONS
13.01 Purpose The Rules and Regulations in Schedule "D' have been adopted
-------
by the Landlord for the safety, benefit and convenience of all tenants and other
Persons in the Building.
13.02 Observance The Tenant shall at all times comply with, and shall cause
----------
its employees, agents, licensees and invitees to comply with, the Rules and
Regulations from time to time in effect.
13.03 Modification The Landlord may from time to time, for the purposes set
------------
out in Section 13.0 1, amend, delete from or add to the Rules and Regulations,
provided that any such modification:
(a) shall not be repugnant to any other provision of this Lease,
(b) shall be reasonable and have general application to all tenants in the
Building, and
(c) shall be effective upon delivery of a copy thereof to the Tenant at
the Leased Premises.
13.04 Non-Compliance The Landlord shall not be responsible to the Tenant
--------------
for failure of any Person to comply with such Rules and Regulations.
ARTICLE 14.00
-------------
DAMAGE AND DESTRUCTION
14.01 No Abatement If the Leased Premises or the Building are damaged or
------------
destroyed in whole or in part by fire or any other occurrence, this Lease shall
continue in force and effect and there shall be no abatement of Rent except as
provided in this Article 14.00.
14.02 Damage to Leased Premises. If the Leased Premises are at any time
-------------------------
destroyed or damaged as a result of fire or any other occurrence insured against
by the Landlord and not caused or contributed to by the Tenant and such damage
is such that, in the opinion of the Landlord, the Leased Premises can be rebuilt
or restored and made fit for the purpose of the Tenant within one hundred and
eighty (180) days of the happening of such damage or destruction then the
following provisions shall apply:
<PAGE>
-24-
(a) if the Leased Premises are rendered untenantable only in part, the
Landlord shall proceed to diligently repair the Leased Premises to
the extent only of its obligations under Section 6.04 and Rent shall
abate proportionately to the portion of the Leased Premises rendered
untenantable from the date of destruction or damage until the
Landlord's repairs have been substantially completed;
(b) if the Leased Premises are rendered wholly untenantable, the Landlord
shall proceed to diligently repair the Leased Premises to the extent
only of its obligations pursuant to Section 6.04 and Rent shall abate
entirely from the date of destruction or damage until the Landlord's
repairs have been substantially completed;
(c) if the Leased Premises are not rendered untenantable in whole or in
part, the Landlord shall diligently perform such repairs to the
Leased Premises to the extent only of its obligations under Section
6.04, but in such circumstances Rent shall not abate;
(d) upon being notified by the Landlord that the Landlord's repairs have
been substantially completed, the Tenant shall diligently perform all
repairs to the Leased Premises which are the Tenant's responsibility
under Section 7.01 and all other work required to fully restore the
Leased Premises for use in the Tenant's business, in every case at
the Tenant's cost and without any contribution to such cost by the
Landlord, whether or not the Landlord has at any time made any
contribution to the cost of supply, installation or construction of
Improvements in the Leased Premises;
(e) nothing in this Section shall require the Landlord to rebuild the
Leased Premises in the condition which existed before any such damage
or destruction occurred so long as the Leased Premises as rebuilt
will have reasonably similar facilities to those in the Leased
Premises prior to such damage or destruction, having regard, however,
to the age of the Building at such time; and
(f) nothing in this Section shall require the Landlord to undertake any
repairs having a cost in excess of the insurance proceeds actually
received by the Landlord with respect to such damage or destruction.
14.03 Right of Termination If the damage or destruction which has
--------------------
occurred in the Leased Premises is such that in the reasonable opinion of the
Landlord the Leased Premises cannot be rebuilt or made fit for the purposes of
the Tenant within one hundred and eighty (180) days of the happening of the
damage or destruction, the Landlord may, at its option, terminate this Lease on
notice to the Tenant given within thirty (30) days after such damage or
destruction. If such notice is given, Minimum Rent and Additional Rent shall be
apportioned and paid to the date of such damage or destruction and the Tenant
shall immediately deliver vacant possession of the Leased Premises in accordance
with the terms of this Lease.
<PAGE>
-25-
14.04 Destruction of Building Notwithstanding any other provision of this
-----------------------
Lease, if:
(a) 35% or more of the Total Rentable Space in the Building is destroyed
or damaged by any cause; or
(b) portions of the Building which affect services essential thereto are
damaged or destroyed and, in the reasonable opinion of the Landlord,
cannot be reasonably repaired within one hundred and eighty (180)
days after the occurrence of the damage or destruction; then
the Landlord may, by notice to the Tenant given within thirty (30) days of such
damage or destruction, terminate this Lease, in which event neither the Landlord
nor the Tenant shall be bound to repair and the Tenant shall surrender the
Leased Premises to the Landlord within thirty (30) days after delivery of its
notice of termination and minimum Rent and Additional Rent shall be apportioned
and paid to the date on which the Tenant delivers vacant possession of the
Leased Premises, subject to any abatement to which the Tenant may be entitled
under Section 14.02 and provided that if the Landlord does not so elect to
terminate this Lease, the Landlord shall proceed to diligently repair that Part
of the Building damaged or destroyed, but only to the extent of the Landlord's
obligations under Section 6.04 and exclusive of any Tenant's responsibilities
with respect to such repair. If the Landlord elects to repair the Building, the
Landlord may do so in accordance with plans and specifications other than those
used in the original construction of the Building-
14.05 Architect's Certificate For the purposes of Sections 14.02 and
-----------------------
14.04 above, the certificate of the Architect appointed by the Landlord shall
bind the parties as to:
(a) the percentage of the Total Rentable Space in the Building damaged or
destroyed;
(b) whether or not the Leased Premises are rendered untenantable and the
percentage of the Leased Premises rendered untenantable;
(c) the time required to rebuild, restore and make the Leased Premises
fit for the purposes of the Tenant;
(d) the date upon which either the Landlord's or the Tenant's work of
reconstruction or repair is substantially completed; and
(e) the state of completion of any work of the Landlord or the Tenant.
<PAGE>
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ARTICLE 15.00
ACKNOWLEDGMENTS, ATTORNMENT, SUBORDINATION
15.01 Acknowledgment of Tenancy Within ten (10) days after request
-------------------------
therefor by the Landlord, or in the event that upon any sale, assignment,
mortgage, charge or hypothecation of the Leased Premises, the Lands and/or the
Building by the Landlord and an acknowledgment of tenancy is required from the
Tenant, the Tenant agrees to deliver a certificate to any proposed mortgagee or
purchaser, or to the Landlord, certifying (if such be the case) that this Lease
is in full force and effect; that Rent is paid currently without any defences or
offsets thereto; that the Tenant is in possession; that there are no prepaid
rents or security deposits other than those set out in this Lease; that there
are no uncured defaults by the Landlord or stating those claimed by the Tenant,
and such other matters as the Landlord may reasonably require. Any such
statement may be relied upon by any prospective transferee or encumbrancer of
all or any portion of the Leased Premises, the Lands and/or the Building, or any
assignee of any such transferee or encumbrancer.
15.02 Attornment The Tenant shall, in the event any proceedings are
----------
brought for the foreclosure of, or in the event of exercise of the power of sale
under any mortgage made by the Landlord covering the Building and/or the Lands
or any part thereof, attorn to the mortgagee or purchaser upon any such
foreclosure or sale and recognize such purchaser as the Landlord under this
Lease.
15.03 Subordination Upon request of the Landlord, the Tenant will
-------------
subordinate or postpone its rights hereunder to the lien of any mortgage or the
lien resulting from any other method of financing or refinancing, now or
hereafter in force against the Building and/or the Lands or any part thereof and
to all advances made or hereafter to be made upon the security thereof or will
acknowledge the subordination or postponement of any such mortgage or lien or
its rights hereunder.
15.04 Power of Attorney The Tenant, upon request of any Party, shall
-----------------
execute promptly such instruments or certificates to carry out the intent of
Sections 15.01, 15.02 and 15.03 above as shall be requested. If fifteen (15)
days after the date of a written request by the Landlord to execute such
instruments, the Tenant shall not have executed the same, the Landlord may at
its option, execute such instruments or certificates as the attorney for the
Tenant and the Tenant hereby authorizes the Landlord to do so.
15.05 Financial Information. The Tenant shall, upon request, provide
---------------------
the Landlord with such reasonable information as to the Tenant's and/or the
Indemnifier's financial standing and corporate organization as the Landlord or
its mortgagee(s) may reasonably require from time to time. Failure of the Tenant
to comply with the Landlord's request herein shall constitute a default under
the terms of this Lease and the Landlord shall be entitled to exercise all of
its rights and remedies provided for in this Lease.
<PAGE>
-27-
ARTICLE 16.00
-------------
NOTICES
16.01 Notices Any demand, approval, consent or notice from one party
-------
to the other hereunder shall be in writing and shall be deemed duly served if
delivered personally to a responsible employee of the party being served, or if
mailed by registered mail addressed to the Tenant at the Leased Premises
(whether or not the Tenant has departed from, vacated or abandoned the same) or
to the Landlord at the place from time to time established for the payment of
Rent. Any notice shall be deemed to have been given at the time of personal
delivery or, if mailed, three (3) business days after the date of mailing
thereof. Either party shall have the right to designate by notice, in the
manner above set forth, a different address to which notices are to be mailed.
ARTICLE 17.00
-------------
DEFAULT
17.01 Interest and Costs The Tenant shall pay monthly to the Landlord
------------------
interest at the Stipulated Rate of Interest on all Rent required to be paid
hereunder from the due date for payment thereof until the same is fully paid and
satisfied. The Tenant shall indemnify the Landlord against all costs and
charges (including legal fees) lawfully and reasonably incurred in enforcing
payment thereof and in obtaining possession of the Leased Premises after default
of the Tenant, or upon expiration or earlier termination of the Term of this
Lease or in enforcing any covenant, proviso or agreement of the Tenant herein
contained.
17.02 Right to Re-enter
-----------------
When:
(a) the Tenant shall be in default in the payment of any Rent whether
lawfully demanded or not and such default shall continue for a
period of five (5) consecutive days following written notice from
the Landlord of such default; or
(b) the Tenant shall be in default of any of its covenants,
obligations or agreements under this Lease or of any term or
condition of this Lease (other than its covenant to pay Rent) and
such default shall continue for a period of fifteen (15)
consecutive days after written notice by the Landlord to the
Tenant specifying with reasonable particularity the nature of
such default and requiring same to be remedied;
then and in any of such cases the then current month's Rent, together with the
Rent for the three (3) months next ensuing shall immediately become due and
payable and at the option of the Landlord,
<PAGE>
-28-
the Term shall become forfeited and void, and the Landlord may without notice or
any form of legal process whatsoever forthwith re-enter upon the Leased Premises
or any part thereof in the name of the whole and repossess and enjoy the same as
of its former estate, anything contained in any statute or law to the contrary
notwithstanding provided, however, that such forfeiture shall be wholly without
prejudice to the right of the Landlord to recover arrears of Rent or damages for
any antecedent default by the Tenant of its covenants, obligations or agreements
under this Lease or any term or condition of this Lease and provided further
that notwithstanding any such forfeiture the Landlord may subsequently recover
from the Tenant damages for loss of Rent suffered by reason of this Lease having
been prematurely determined.
17.03 Right to Relet Should the Landlord elect to re-enter as herein
--------------
provided, or should it take possession pursuant to legal proceedings or pursuant
to any notice provided for by law, it may either terminate this Lease or it may
from time to time without terminating this Lease, make such alterations and
repairs as may be necessary in order to relet the Leased Premises, and relet the
Leased Premises or any part thereof as agent for the Tenant for such term or
terms (which may be for a term extending beyond the Term of this Lease) and at
such rental or rentals and upon such other terms and conditions as the Landlord
in its sole discretion may deem advisable; upon each reletting all rentals
received by the Landlord from such reletting shall be applied; first, to the
payment of any indebtedness other than Rent due hereunder from the Tenant to the
Landlord; second, to the repayment of any costs and expenses of such reletting,
including brokerage fees and solicitors' fees and the costs of such alterations
and repairs; third, to the payment of Rent due and unpaid hereunder, and the
residue, if any, shall be held by the Landlord and applied in payment of future
Rent as the same may become due and payable hereunder. If such Rent received
from such reletting during any month be less than that to be paid during that
month by the Tenant hereunder, the Tenant shall pay any such deficiency to the
Landlord. Such deficiency shall be calculated and paid monthly.
No such re-entry or taking possession of the Leased Premises by
the Landlord shall be construed as an election on its part to terminate this
Lease unless a written notice of such intention be given to the Tenant or unless
the termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination, the Landlord may at any
time thereafter elect to terminate this Lease for such previous breach. Should
the Landlord at any time terminate this Lease for any breach, in addition to any
other remedies it may have, it may recover from the Tenant all damages it may
incur by reason of such breach, including the cost of recovering the Leased
Premises, and including the worth at the time of such termination of the excess,
if any, of the amount of Rent and charges equivalent to Rent reserved in this
Lease for the remainder of the Term hereof, all of which amounts shall be
immediately due and payable from the Tenant to the Landlord. In determining the
Rent which would be payable by the Tenant hereunder, subsequent to default, the
Minimum Rent for each year of the unexpired Term shall be equal to the then
annual Minimum Rent required to be paid by the Tenant as the time of default,
together with all Additional Rent which would have been payable during the
calendar year in which this Lease was terminated, pro-rated over a full calendar
year, if required.
<PAGE>
-29-
17.04 Legal Expenses ln case suit shall be brought for recovery of
--------------
possession of the Leased Premises, for the recovery of Rent or any other amount
due under the provisions of this Lease, or because of the breach of any other
covenant herein contained on the part of the Tenant to be kept or performed and
a breach shall be established, the Tenant shall pay to the Landlord all expenses
incurred therefor, including reasonable solicitors' and counsel fees on a
solicitor and his client basis.
17.05 Bankruptcy The Tenant covenants and agrees that if the Term or
----------
any of the goods and chattels of the Tenant on the Leased Premises shall be at
any time during the Term seized or taken in execution or attachment by any
creditor of the Tenant or if the Tenant shall make any assignment for the
benefit of creditors or any bulk sale or, becoming bankrupt or insolvent, shall
take the benefit of any Act now or hereafter in force for bankrupt or insolvent
debtors or if any order shall be made for the winding up of the Tenant, or if a
Receiver or Manager should be appointed for or should take possession of the
assets or undertaking of the Tenant, or if the Leased Premises shall without the
written consent of the Landlord become and remain vacant for a period of fifteen
(15) days, or be used by any other Persons than such as are entitled to use them
under the terms of this Lease, or if the Tenant shall without the written
consent of the Landlord abandon or attempt to abandon the Leased Premises or to
sell or dispose of goods or chattels of the Tenant or to remove them or any of
them from the Leased Premises so that there would not in the event of such
abandonment, sale or disposal be sufficient goods on the Leased Premises subject
to distress to satisfy the Rent above due or accruing due, then and in every
such case the then current month's Rent and the next ensuing three (3) month's
Rent shall immediately become due and be paid and the Landlord may re-enter and
take possession of the Leased Premises as though the Tenant or the servants of
the Tenant or any other occupant of the Leased Premises were holding over after
the expiration of the Term and the Term shall, at the option of the Landlord,
forthwith become forfeited and determined, and in every one of the cases above
such accelerated Rent shall be recoverable by the Landlord in the same manner as
the Rent hereby reserved and as if Rent were in arrears and the said option
shall be deemed to have been exercised if the Landlord or its agents give notice
to the Tenant as provided for herein.
17.06 The Landlord May Perform Covenants If the Tenant shall fail to
----------------------------------
perform any of its covenants or obligations under or in respect of this Lease,
the Landlord may from time to time at its discretion, perform or cause to be
performed any of such covenants or obligations, or any part thereof, and for
such purpose may do such things upon or in respect of the Leased Premises or any
part thereof as the Landlord may consider requisite or necessary.
All expenses incurred and expenditures made by or on behalf of
the Landlord under this Section shall be forthwith paid by the Tenant and if the
Tenant fails to pay the same, the Landlord may add the same to the Rent and
recover the same by all remedies available to the Landlord for the recovery of
Rent in arrears.
17.07 Landlord May Follow Chattels Provided that in the case of
----------------------------
removal by the Tenant of the goods and Chattels of the Tenant from the Leased
Premises, the Landlord may follow the same
<PAGE>
-30-
for thirty (30) days in the same manner as is provided for in the Landlord and
Tenant Act, R.S.O. 1990, c.L. 7 as amended.
17.08 Waiver of Exemptions The Tenant hereby covenants and agrees with
--------------------
the Landlord in consideration of the premises and of the leasing and letting by
the Landlord to the Tenant of the Leased Premises for the Term hereby created
(and it is upon that express understanding that these presents are entered into)
that notwithstanding anything contained in Section 30 of the Landlord and Tenant
Act R.S.O. 1990, c.L. 7, as amended, or in any other Statute which may hereafter
be passed to take the place of the said Act or to amend the same, none of the
goods or chattels of the said Tenant at any time during the continuance of the
Term hereby created on the Leased Premises shall be exempt from levy by distress
for Rent in arrears by the Tenant as provided for by any Section or Sections of
the said Act, or any amendment or amendments thereto, and that upon any claim
being made for such exemption by the tenant or on distress being made by the
Landlord this covenant and agreement may be pleaded as an estoppel against the
Tenant in any action brought to test the right to the levying upon any such
goods as are named as exempted in said Section or Sections or amendment or
amendments thereto, the Tenant waiving as the Tenant hereby does, all and every
benefit that could or might have accrued to the Tenant under and by virtue of
the said Section or Sections of the said Act or any amendment or amendments
thereto but for this covenant.
ARTICLE 18.00
-------------
MISCELLANEOUS
18.01 Waiver Failure by the Landlord to require performance of any
------
term, covenant or condition herein contained shall not be deemed to be a waiver
of such term, covenant or condition or of any subsequent breach of the same or
of any other term, covenant or condition herein contained. The subsequent
acceptance of Rent hereunder by the Landlord shall not be deemed to be a waiver
of any preceding breach by the Tenant of any term, covenant or condition of this
Lease, other than the failure of the Tenant to pay the particular Rent so
accepted, regardless of the Landlord's knowledge of such preceding breach at the
time of acceptance of such Rent. No covenant, term or condition of this Lease
shall be deemed to have been waived by the Landlord, unless such waiver be in
writing by the Landlord.
18.02 Accord and Satisfaction No payment by the Tenant or receipt by
-----------------------
the Landlord of a lesser amount than the Rent herein stipulated shall be deemed
to be other than on account of the earliest stipulated Rent, nor shall any
endorsement or statement or any cheque or any letter accompanying any cheque or
payment as Rent be deemed an accord and satisfaction, and the Landlord may
accept such cheque or payment without prejudice to the Landlord's right to
recover the balance of such Rent or pursue any other remedy in this Lease
provided.
<PAGE>
-31-
18.03 Entire Agreement This Lease and the Schedules and Riders, if any,
----------------
attached hereto and forming a part hereof, set forth all the covenants,
promises, agreements, conditions and understandings between the Landlord and the
Tenant concerning the Leased Premises and there are no covenants, promises,
warranties, agreements, conditions or representations, either oral or written,
between them other than are herein set forth. Except as herein otherwise
provided no subsequent alteration amendments change or addition to this Lease
shall be binding upon the Landlord or the Tenant unless reduced to writing and
signed by them.
18.04 No Partnership The Landlord does not, in any way or for any
--------------
purpose, become a partner of the Tenant in the conduct of its business, or
otherwise, or joint venturer or a member of a joint enterprise with the Tenant
under the terms of this Lease.
18.05 Force Majeure In the event that either party hereto shall be
-------------
delayed or hindered in or prevented from the performance of any act required
hereunder by reason of strikes, lock-outs, labour troubles, inability to procure
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrection, war or other reason of a like nature not the fault of the
party delayed in performing work or doing acts required under the terms of this
Lease, then performance of such act shall be excused for the period of the delay
and the period for the performance of any such act shall be extended for a
period equivalent to the period of such delay. Notwithstanding anything herein
contained, the provisions of this Section 18.05 shall not operate to excuse the
Tenant from the prompt payment of Rent, nor entitle the Tenant to compensation
for any inconvenience, nuisance or discomfort thereby
18.06 Name of Building The Landlord shall have the right to change
----------------
the name, number or designation of the Building during the Term without
liability to the Tenant.
18.07 Consent not Unreasonably Withheld Except as otherwise
---------------------------------
specifically provided, whenever consent or approval of the Landlord or the
Tenant is required under the terms of this Lease, such consent or approval shall
not be unreasonably withheld or delayed. The Tenant's sole remedy if the
Landlord unreasonably withholds or delays consent or approval shall be an action
for specific performance or with respect to Article 10.00 such other remedies as
are available under the Landlord and Tenant Act, R.S.O. 1990, c.L. 7, as
amended, and the Landlord shall not be liable for damages. If either party
withholds any consent or approval, such party shall on written request deliver
to the other party a written statement giving the reasons therefor.
18.08 Approval in Writing Wherever the Landlord's consent is required
-------------------
to be given hereunder or wherever the Landlord must approve any act or
performance by the Tenant, such consent or approval, as the case may be, shall
be given in writing by the Landlord before same shall be deemed to be effective.
18.09 Registration The Tenant shall not register this Lease without
------------
the written consent of the Landlord. However, upon the request of either party
hereto the other party shall join in the execution of a memorandum or notice of
this Lease for the purpose of registration. Said
<PAGE>
-32-
memorandum or notice of this Lease shall describe the parties, the Leased
Premises and the Term and shall be prepared and registered at the expense of the
Tenant.
18.10 Governing Law The Lease is to be governed by and construed
-------------
according to the laws of the Province of Ontario.
18.11 Captions and Section Numbers The captions, section numbers and
----------------------------
article numbers appearing in this Lease are inserted only as a matter of
convenience and in no way define, limit, construe or describe the scope or
intent of such sections or articles or of this Lease, nor in any way affect this
Lease.
18.12 Partial Invalidity If any term, covenant or condition 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 and/or the
application of such term covenant or condition to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Lease shall be
separately valid and enforceable to the fullest extent permitted by law.
18.13 No Option The submission of this Lease for examination does not
---------
constitute a reservation of or option for the Leased Premises and this Lease
becomes effective as a Lease only upon execution and delivery thereof by the
Landlord and the Tenant.
18.14 Compliance with The Planning Act It is an expressed condition of
---------------------------------
the within lease and the Landlord and the Tenant so agree and declare that the
provisions of Section 50 of The Planning Act, R.S.O. 1990, c.P. 13, and
amendments thereto, be complied with if applicable in law. Until any necessary
consent to the Lease is obtained the Term (including any extensions thereof) and
the Tenant's rights and entitlement granted by this Lease are deemed to extend
for a period not exceeding twenty-one (21) years less one (1) day from the
Commencement Date. The Tenant shall apply diligently to prosecute such
application for such consent forthwith upon the execution of the Lease by both
the Landlord and the Tenant and the Tenant shall be responsible for all costs,
expenses, taxes and levies imposed, charged or levied as a result of such
application and in order to obtain such consent. The Tenant shall keep the
Landlord informed, from time to time, of its progress in obtaining such consent
and the Landlord shall cooperate with the Tenant in regard to such application.
Notwithstanding the foregoing provisions of this Section 18.14, the Landlord
reserves the right at any time to apply for such consent in lieu of the Tenant
(on behalf and at the expense of the Tenant) and the Tenant's application is
hereby expressly made subject to any application which the Landlord intends to
make.
18.15 Letter of Credit The Tenant hereby covenants and agrees to
----------------
provide to the Landlord an irrevocable Letter of Credit in a form acceptable to
it, its advisors and its bank in the sum of ONE HUNDRED AND SEVENTY-THREE
THOUSAND, SIX HUNDRED AND TWENTY DOLLARS ($173,620.00) to be held by the
Landlord as security for the performance by the Tenant of all the covenants,
obligations and agreements herein to be observed and performed by the Tenant.
<PAGE>
-33-
The Letter of Credit is to be provided by the Tenant to the Landlord on or
before the Commencement Date and in any event prior to the date that the Tenant
takes possession of the Leased Premises. If the Tenant shall default in the
observance or performance of any of such covenants, obligations or agreements
the Landlord may, at its option and with five (5) days notice to the Tenant,
draw upon the Letter of Credit, or so much of it as may in the Landlord's sole
discretion and opinion be necessary to compensate the Landlord for Rent
outstanding or loss or damage suffered or sustained by the Landlord arising out
of or in connection with any default by the Tenant. Notwithstanding the
foregoing, it is understood and agreed by the Landlord and the Tenant that the
aggregate amount available to the Landlord to draw upon under the Letter of
Credit shall be reduced by FOURTEEN THOUSAND, SIX HUNDRED AND THIRTEEN DOLLARS
($14,613.00) per month on the fifteenth day of months four (4) and fifteen (15)
both inclusive of the Term and therefore to be fully reduced on the expiration
of the fifteenth (15th) month of the Term.
18.16 Time To Be of the Essence Time shall be of the essence of this
-------------------------
Indenture of Lease.
18.17 Successors and Assigns Except as otherwise specifically
----------------------
provided, the covenants, terms and conditions contained in this Lease shall
apply to and bind the heirs, successors, executors administrators and/or assigns
of the parties hereto.
18.18 Relocation of Leased Premises The Landlord shall have the right
-----------------------------
at any time during the Tenant, upon sixty (60) days' prior written notice to the
Tenant, to relocate the Tenant to other premises located in the Office Portion
of the Building (the "Relocated Premises") and in such event the following terms
and conditions shall be applicable:
(a) The Relocated Premises (which term shall mean the Leased Premises
after relocation) shall contain approximately the same Rentable
Space as the Leased Premises prior to relocation;
(b) The Landlord shall provide at its expense leasehold improvements
in the Relocated Premises at least equal to the standard of the
leasehold improvements in the Leased Premises which have been
completed or which the Landlord is obligated hereunder to provide
in the Leased Premises;
(c) The Landlord shall pay for the reasonable costs (if any) of
moving the Tenant's trade fixtures and furnishings from the
Leased Premises to the Relocated Premises;
(d) All other terms and conditions of this Lease shall apply to the
Relocated Premises except insofar as they are inconsistent with
the terms and conditions of this Section 18.18.
<PAGE>
-34-
ARTICLE 19.00
-------------
OPTION TO EXTEND
19.00 Provided the Tenant is not then in material default and has not
been habitually in default under the Lease, the Landlord will, upon the request
in writing by the Tenant given at least six (6) months and not more than
eighteen (18) months prior to the expiration of the Term (the "Notice Period"),
grant to the Tenant one (1) consecutive right to extend its lease for a further
term of five (5) years upon and subject to the same covenants, conditions and
agreements stated in the Proposal save and except for rental rate, inducement
Landlord's Work, this option to extend, parking and storage charges. The new
basic net rent shall be the fair market net rental for the Leased Premises at
the time when such rental is determined, (the "New Basic Net Rent"). The New
Basic Net Rent shall be mutually agreed to by the Landlord and the Tenant at
least ninety (90) days prior to the expiration of the Term, however in no event
shall the Basic Net Rent be less than the last year of the original Term, and
failing agreement, shall be determined by arbitration in the manner hereinafter
provided. In the event that the Landlord and the Tenant fail to agree on the
New Basic Net Rent, then the Landlord and the Tenant, within eighty (80) days
prior to the expiry of the Term, shall notify the other of an arbitrator
selected by such party and, within seventy (70) days prior to the expiry of the
Term, the two arbitrators so nominated shall name a third arbitrator. In the
event that either the Landlord or the Tenant fail to name an arbitrator within
the period of time herein before specified, the arbitrator named by the other
party shall determine the New Basic Net Rent. In the event the two arbitrators
named fail to agree on a third arbitrator within the time herein before
specified, the third arbitrator shall be such person as shall be appointed by a
Judge of the Supreme court of Ontario upon application by either of the Landlord
or the Tenant. In no event shall the New Basic Net Rent be less than the Basic
Net Rent payable in the last year of the Term.
<PAGE>
-35-
IN WITNESS WHEREOF the Landlord and Tenant have signed and sealed this
Lease as of the day and year first above written.
CUMBERLAND-BELLAIR INVESTMENT INC.
Per: /s/ Stanley Kwan
----------------------------------- c/s
Name: Stanley Kwan
Title: Director
Per:
___________________________________
Name:
Title:
1184266 ONTARIO INC.
Per: /s/ George Schwartz
----------------------------------- c/s
Name: George Schwartz
Title: President
Per:____________________________________
Name:
Title:
<PAGE>
SCHEDULE "A"
------------
DEFINITIONS
-----------
In this Lease:
(a) "Architect" means such firm of professional architects, surveyors,
consultants or engineers as the Landlord may from time to time engage
(b) "Architect's Certificate" means a certificate of the Architect.
(c) "Building" means the buildings housing the integrated retail and
office complex and its related improvements and facilities, all
constructed and located on the Lands, as same may from time to time
be altered, expanded or reduced.
(d) "Commencement Date" means the first day of the Term.
(e) "Common Areas" means (a) those areas, facilities, utilities,
improvements, equipment and installations in the Building which,
from time to time, are not designated or intended to be leased to
tenants of the Building, and (b) those areas, facilities,
utilities, improvements, equipment and installations which serve or
are for the benefit of the Building, whether or not located within,
adjacent to, or near the Building and which are designated from
time to time as part of the Common Areas. Common Areas includes,
without limitation, all areas, facilities, utilities, improvements,
equipment and installations which are provided or designated (and
which may be changed from time to time) for the use or benefit of
the tenants, their employees, customers and other invitees in
common with others entitled to the use or benefit thereof in the
manner and for the purposes permitted by the Lease.
Without limiting the generality of the foregoing, Common Areas includes the
roof, exterior wall assemblies (including weather walls), exterior and interior
structural elements and bearing wails in the buildings and improvements
comprising the Building; parking areas, all vestibules for and entrances and
exits thereto and all structural elements thereof; driveways; truckways; related
areas; pedestrian sidewalks; landscaped and planted areas; public seating and
service areas; corridors; equipment, furniture, furnishings and fixtures;
stairways, escalators, ramps and elevators and other transportation equipment
and systems; tenant common and public washrooms; electrical, telephone, meter,
valve, mechanical, mail, storage, service and janitor rooms and galleries;
music, fire prevention, security and communication systems; general signs,
including, without limitation, directory signs and canopy signs; columns; pipes;
electrical, plumbing, drainage, mechanical, and all other installations
equipment or services located therein or related thereto as well as the
structures housing the same (including, without limitation, the heating,
ventilating and air-conditioning system of the Building).
(f) "Landlord" means the Landlord, its successors, assigns and authorized
representatives.
<PAGE>
-37-
(g) "Lands" means the lands underneath, adjacent and appurtenant to the
Building, as more particularly described in Schedule "B" attached hereto as
such lands may from time to time be altered, expanded or reduced.
(h) "Lease" means this lease.
(i) "Lease Year'" means a period of time, the first Lease Year commencing
on the Commencement Date and ending on the 31st day of December in the calendar
year of the Commencement Date. Thereafter, Lease Years shall consist of
consecutive periods of twelve calendar months ending in each case on December
31st, save for the last Lease Year of the Term which shall terminate upon the
expiration or earlier termination of this Lease.
(j) "Leased Premises" means the previous leased to the Tenant together
with all improvements, equipment and fixtures therein (other than those
servicing more than one (1) tenant) containing approximately 8681 square feet of
Rentable Space, more or less, on the 7/th/ floor of the Building which Leased
Premises are shown outlined in red on Schedule "C" attached hereto.
(k) "Minimum Rent" means the amount payable by the Tenant to the Landlord
in respect of each year of the Term under Section 3.01 herein.
(l) "Normal Business Hours" means 8:00 a.m. to 7:00 p.m. Monday through
Friday and Saturday from 9:00 a.m.. to 2:00 p.m. excluding days which are legal
or statutory holidays in the jurisdiction in which the Building is located.
(m) "Occupiable Space" means the "rentable area" of such premises as
defined in American National Standard Z65.1-1980 as recognized by the Building
Owners and Managers Association International. Occupiable Space may be adjusted
from time to time to reflect any expansion, reduction or rearrangement. The
Architect's Certificate as to Occupiable Space shall be final and binding on the
Parties hereto.
(n) "Operating Costs" means all costs and expenses incurred or accrued by
the Landlord or by others on behalf of the Landlord without duplication and
calculated in accordance with generally accepted accounting principles (as if
the Building had been 100-% occupied during the whole of the particular Lease
Year) in connection with the supervision, security, maintenance, operation,
cleaning, repair, replacement and insurance of the Building, the Lands and all
appurtenances thereto including any pedestrian tunnels or underground walkways
to adjacent buildings and all common driveways, walkways, sidewalks, ramps and
entrances on the street level of the Building and includes without limitation,
any tax or levy imposed on the Building and/or the Lands or on the Landlord by
reason of its ownership of the Building and/or the Lands, based on total gross
area or floor area whether known as a Commercial Concentration Tax or otherwise,
all Taxes not recovered from tenants of the Building, all Taxes assessed,
levied, rated or charged from time to time against the Common Areas to the
extent only that such Taxes on the Common Area have not
<PAGE>
-38-
been included in the Taxes otherwise charged to the Tenant under the Lease, the
cost of all repairs required in the maintenance of the Building, heating,
ventilating and air conditioning costs, elevator and escalator maintenance and
repair costs, equipment rental, providing hot and cold water, the costs of
plumbing and sanitary drainage, the cost of electricity and of replacing
electrical fixtures, ballasts, tubes and bulbs not otherwise chargeable to any
tenant of the Building, window cleaning, snow removal, landscaping, uniforms and
security, all fire, casualty, liability and other insurance costs, telephone and
other utility costs, amounts paid under service contracts with independent
contractors, all salaries, wages and other remuneration and the cost of benefits
paid to employees of the Landlord engaged in operating, managing and maintaining
the Building and/or the Lands, depreciation on an amortized basis established by
the Landlord's auditors or accountants on fixtures or equipment paid for by the
Landlord and used to provide services to the Building and/or the Lands, legal,
appraisal, accounting, auditing and other professional fees incurred for the
purposes of attempting to reduce Taxes and various costs referred herein, cost
of accounting services and operational auditing and accounting fees, the cost of
any modification or addition to the Building or the machinery and equipment
therein where, in the reasonable opinion of the Landlord, such expenditure may
reduce Operating Costs, or the cost of any additional equipment or improvements
required by law or, in the Landlord's reasonable opinion, made for the benefit
or safety of the users of the Building and including repairs, replacements and
maintenance to the structural elements of the Building (including, without
limitation, the bearing walls, foundations, structural beams and roof, including
the roof membrane and roofing) and including any capital replacement of the
heating or air-conditioning system servicing the Building, and an administration
and management fee of fifteen (15%) percent of the total of all of the above
costs. The Tenant acknowledges and agrees that the Operating Costs may be
attributed to the Landlord to the various components of the Building (being the
Office Portion and the Retail Portion) in accordance with reasonable and current
practices on a basis consistent with the nature of the particular costs being
attributed, and the costs so attributed may be allocated to the tenants of such
components separately.
(o) "Person", if the context allows, includes any Person, firm,
partnership or corporation, or any group of persons, firms, partnerships or
corporations or any combination thereof
(p) "Proportionate Share"' means a fraction, the numerator of which is the
Rentable Space in the Leased Premises and the denominator of which is the Total
Rentable Space in the Building.
(q) "Rent" means any and all amounts payable by the Tenant under this Lease
including Minimum Rent and Additional Rent.
(r) "Rentable Space" means 110% of Occupiable Space. Rentable Space may be
adjusted from time to time to reflect any expansion, reduction or rearrangement.
The Architect's Certificate as to Rentable Spare shall be final and binding upon
the parties hereto.
(s) "Total Rentable Space of the Building" means the aggregate of each
Rentable Space of a floor in the Building. The Total Rentable Space of the
Building shall (i) exclude the main telephone, mechanical, electrical end other
utility rooms and enclosures, the management office for
<PAGE>
-39-
the Building, public lobbies on the ground floor and other public space common
to the entire Building and all areas in the Building located below grade. The
Total Rentable Space of the Building may be adjusted from time to reflect any
expansion, reduction or rearrangement. The Architect's Certificate as to the
Total Rentable Space of the Building shall be final and binding upon the parties
hereto.
(t) "Stipulated Rate of Interest" means the prime rate of interest charged
from time to time by the chartered bank of the Landlord at their respective head
offices expressed as an annual rate by the Bank from time to time as a reference
rate for commercial loans denominated in Canadian dollars and made by the said
Bank in Canada as announced and adjusted from time to firm by the said Bank plus
five percent (5%) per annum..
(u) "Taxes" means all duties, real property taxes, business taxes,
assessments and payments, extraordinary as well as ordinary, whether foreseen or
unforeseen, as shall fix during the Term hereby demised be laid, levied,
assessed or imposed upon or become liens upon the Leased Premises or the
Building or the Lands or any part thereof or any appurtenances thereto or the
leasehold estate hereby created or as may be levied, assessed or imposed upon
the Landlord by reason of its ownership of the Leased Premises, the Building and
the Lands Imposed or levied upon the, Landlord, and all governmental charges
including an increase in income taxes wholly or partially submitted for any real
property taxes, all by virtue of any present or future law, order or ordinance
of Canada or of the provincial, city, county, local or regional government or of
any department, office or bureau of any governmental authority. Taxes shall
also include any and all penalties, late payment or interest charges imposed by
any municipality or other taxing authority as a result of the Tenant's late
payments of any Taxes or instalments thereof but not as a result of the
Landlord's delinquency.
(v) "Tenant" means the Tenant herein and those for whom in law the Tenant
is responsible.
(w) "Term" means the period of time set out in Article 2.01.
<PAGE>
-40-
SCHEDULE "B"
------------
LEGAL DESCRIPTION
-----------------
<PAGE>
-41-
SCHEDULE "C"
------------
FLOOR PLAN
----------
<PAGE>
-42-
SCHEDULE "D"
------------
RULES AND REGULATIONS
---------------------
1. The Landlord may prohibit any persons from entering the Building
except during Normal Business Hours unless such person has a key to the premises
to which such person seeks entry and has complied with the security arrangements
of the Landlord as same may exist from time to time. The Landlord shall be
under no responsibility for failure to enforce this rule.
2. The Common Areas of the Buildings shall be used only for their
intended purposes. The Tenant shall not use any entrance or exits, passageway,
corridor, lobby, sidewalk, ramp, stairway, escalator or elevator except for
ingress to and egress from the Leased Premises. The Tenant shall not obstruct
such areas in any way and shall not deposit any footwear, waste, garbage or
refuse therein. The Landlord may remove at the expense of the Tenant any such
obstruction at the expense of and without notice or obligation to the Tenant.
The Landlord reserves the right to restrict or prohibit canvassing, soliciting
or peddling in the Building.
3. All plumbing fixtures shall be used only for their intended purposes
and no sweeping, rubbish, rags, ashes or other substances shall be thrown
therein. The Tenant shall not permit any toilet or drain to be obstructed.
Taps shall be turned off when not in use.
4. The Leased Premises shall not be used for any residential purpose
including sleeping accommodation and cooking, the storage of any personal
effects or articles not required for the use of the Leased Premises in
accordance with the lease or the storage of any inflammable, explosive or
dangerous materials.
5. No musical instruments or sound producing equipment or amplifier which
may be heard outside the Leased Premises shall be played or operated on the
Leased Premises.
6. No drapes or window coverings shall be installed on any exterior
windows of the Leased Premises without the prior written consent of the
Landlord. Any drapes or window, coverings so approved shall not interfere with
the climate control central system of the Building and shall present a uniform
exterior appearance for the Building.
7. The Tenant shall not obstruct or interfere with access to janitor and
electrical closets or heating, ventilating or air conditioning ducts or
equipment in the Leased Premises. In the event of any such obstruction or
interference the Tenant shall be responsible for the cost of providing access to
same.
8. The Tenant shall leave the Leased Premises in a reasonably tidy
condition at the end of each business day.
<PAGE>
-43-
9. The Tenant shall not mark, drill into, bore or cut or in any way
damage or deface the walls, ceilings or floors of the Leased Premises. No
broadloom or carpeting shall be affixed to the Leased Premises by means of a
non-soluble adhesive or similar product.
10. (a) No safe, heavy equipment, bulky materials or office furniture or
equipment shall be brought into or removed from the Building except during such
hours and by such means as the Landlord may approve. The Landlord may prohibit
the installation of the Leased Premises of any safe or equipment which exceeds
the load-bearing capacity of the floor of the Leased Premises.
(b) Any hand trucks, carryalls or similar appliances used in the
Building with the consent of the Landlord shall be equipped with rubber tires,
side guards and such other safeguards as the Landlord requires or as agreed upon
by the parties acting reasonably.
11. No machine dispensing food, beverages of merchandise for sale shall be
installed in the Leased Premises without prior written approval of the Landlord
which may be arbitrarily withheld. No food, beverage or merchandise shall be
delivered to the Leased Premises except during such hours and by persons
authorized by the Landlord.
12. The Tenant shall not hinder or prevent window cleaners from cleaning
the windows of the Leased Premises during Normal Business Hours.
13. The directory board for the Building, the style thereof and the
lettering thereon and the manner and order in which the names are displayed
thereon shall be within the sole discretion of the Landlord.
14. The Tenant shall not use the name of the Building for any purpose
except as the business address of the Leased Premises.
15. The use of car parking spaces (if any) shall be in accordance with
reasonable rules and regulations of the Landlord.
16. No cleaning, maintaining. replacement or servicing of the whole or any
part of the Leased Premises including electric lighting fixtures shall be done
or performed by any person or persons other than persons employed by the
Landlord. Only Building standard fluorescent tubes shall be used in the Leased
Premises.
17. The Tenant shall at all times provide the Landlord with a duplicate
key for the Leased Premises. No additional locks shall be placed upon, nor
shall changes be made to the existing locks in any doors of the Leased Premises
without the prior written consent of the Landlord, provided that all locks shall
conform to the master keying system for the Building established by the
Landlord. Additional keys to the door locks shall be obtained from the Landlord
at the cost of the Tenant.
<PAGE>
-44-
18. All loading and unloading of goods shall be done only at such times,
in the areas and through the entrances designated for such purposes from time to
time by the Landlord. Any movers or moving company moving furniture or equipment
in or out of the Leased Premises shall be reputable, established movers and
shall make prior arrangements with the Landlord as to the times of such moving
of furniture or equipment. The Tenant shall promptly pay or cause to be paid to
the Landlord the cost of repairing any damage in the Building caused by such
movement of furniture or equipment.
19. All work in connection with additions or changes requested by the
Tenant to the lighting fixtures, air conditioning apparatus or other mechanical
or electrical apparatus of the Building shall, if the landlord so elects, be
performed for the Tenant by the Landlord and, if the landlord does not so elect,
shall not be performed except with the prior written consent of the Landlord and
in any event the cost of such work shall be paid by the Tenant.
20. The Tenant shall give the Landlord prompt written notice of any
accident to or defect in the plumbing, heating, air conditioning, mechanical or
electrical apparatus or any other part of the Building.
21. No bicycles or other vehicles and no dog or other animal or bird shall
be brought into or kept in the Building other than those bicycles or other
vehicles as may be permitted in the parking areas of the Building.
22. No inflammable oils or other inflammable, dangerous or explosive
materials (save those approved in writing by the Landlord's insurers), shall be
kept or permitted to be kept in the Leased Premises which the landlord's
insurers prohibit, and if not prohibited by the Landlord's insurers shall be
kept in protective containers.
23. The Tenant shall not permit or allow any odours, vapours, steam,
water, vibrations, noises or other undesirable effects to emanate from the
Leased Premises or any equipment or installation therein which, in the
Landlord's opinion, are objectionable or cause any interference with the safety,
comfort or convenience of the Building by the Landlord or the occupants and
tenants thereof or their agents, servants, invitees or employees.
24. The Tenant shall permit the cleaning staff to clean the Leased
Premises after Normal Business Hours. For purposes of security, efficiency and
uniformity of housekeeping standards, any special cleaning. or shampooing
required by the Tenant shall be performed by the Landlord's cleaning contractor,
unless otherwise authorized by the Landlord in writing.
25. Canvassing, soliciting and peddling in or about the Building is
prohibited.
26. No bankruptcy, liquidation or auction sales shall be allowed to take
place in the Leased Premises.
<PAGE>
-45-
SCHEDULE "E"
------------
LANDLORD'S WORK AND TENANT'S WORK
---------------------------------
1. General
-------
1. Items enumerated under the heading "Landlord's Work" will be
provided by and at the expense of the Landlord and all other
items including those enumerated under the heading "Tenant's
Work" will be provided by and at the expense of the Tenant. The
Tenant shall deliver to the Landlord, within a reasonable time
after the date of this Lease, but in any event not later than ten
(10) days after being requested so to do, three (3) copies and
one (1) set of sepias of each of its plans and specifications and
such other information as may be necessary for the Landlord's
Work to proceed and for the Tenant's Work to be reviewed under
the terms of this Lease. If the Tenant fails to deliver the
required copies, the Landlord may obtain them from the Tenant's
architect or designer at the Tenant's expense. Such plans and
specifications shall include working plans and specifications for
the following:
(a) floor layout, and complete interior finishing schedules;
(b) reflected ceiling plan;
(c) electrical plans and specifications for wiring, fixtures, security,
power, fire alarm, life safety, telephone systems and any of the
special features or installations that effect the Leased Premises;
(d) mechanical plans and specifications for plumbing, heating, ventilating
and air conditioning system sprinklers, fire hose cabinets and fire
detection devices, building automation system and any other special
features or installations that affect the Leased Premises.
Plans and specifications shall be professionally designed and
generally to a scale of 1/4 inch to 1 foot. The Landlord recommends that the
Tenant retain Base Building mechanical/electrical engineering consultants to
ensure compatibility of Base Building and Tenant systems. If the Landlord
requires revisions of the Tenant's Plans and specifications prior to giving
review, such revisions shall be made expeditiously by the Tenant and in any
event within ten (10) days of the request therefor.
<PAGE>
-46-
2. Landlord May Perform Tenant' Work
---------------------------------
The Tenant acknowledges that if the performance of the Tenant's Work
is to be properly integrated with the Landlord's Work, the performance of
portions of the Landlord's Work cannot be proceeded with or completed until such
plans and specifications, information and revisions have been delivered by the
Tenant to the Landlord and reviewed by the Landlord. Accordingly, unless they
have been delivered within the times aforesaid, the Landlord may, in such manner
as in the absolute discretion of the landlord is sufficient for the tenant's
purpose, perform on the Tenant's behalf and at the Tenant's expenses all
Tenant's Work required to permit the Landlord's Work to be proceeded with and
completed.
3. Landlord's Work
---------------
The item enumerated under this heading constitute the Landlord's Work
and will be provided by and completed at the expense of the Landlord in
accordance with its base building plans and specifications.
Provided the Lease has been executed by the Tenant in a form
acceptable to the Landlord, the Landlord shall complete, prior to the
Commencement Date at its sole cost and expense the following;
(a) ensure that all electrical outlets are in working order;
(b) modify existing HVAC to Tenant's needs to be approved by and in
co-ordination with the Tenant's project manager acting
reasonably;
(c) install suitable HVAC distribution for an open Plan;
(d) install suitable lighting for an open Plan;
(e) install building standard signage on the building directory and
on the front entrance of the suite;
(f) replace all ceiling tiles and window coverings;
(g) demolish all existing partitions and doors remove carpets, pot
lights, and stucco from existing columns; and
(h) provide $15,000.00 towards the cost of upgrading the washrooms on
the floor in which the Leased Premises are situate with all work
to be co-ordinated by the Tenant's Project Manager.
<PAGE>
-47-
The Tenant, at the Tenant's sole cost, may make any further
renovations to the Premises with the prior written approval of the Landlord,
such approval not to be unreasonably withheld.
Save and except, for the Landlord's Work, the Tenant accepts the
Leased premises in an "as is" condition and acknowledges and agrees the Landlord
has no obligations with respect to the construction of or fixturing in the
Leased Premises.
4. Tenant's Work
-------------
The Tenant shall be responsible, at its expense, for all design,
construction, modifications, finishing work, signage and the installation of
fixtures and equipment necessary to properly complete the Leased Premises ready
for use and occupancy by the Tenant and the proper conduct of the Tenant's
business therein, all such work to be completed in accordance with plans and
specifications approved by the Landlord. The Tenant acknowledges having
received a preliminary space plan from the Landlord.
5. Performance of Tenant's Work
----------------------------
The Tenant shall secure and pay for all approvals and regulatory
permits, in its name, required for the Tenant's Work from the authorities having
jurisdiction and shall submit to the Landlord proof of such approvals and
permits having been obtained prior to commencing any Tenant's Work. The
Tenant's Work shall otherwise be carried out in accordance with the following
provisions:
(a) work shall be done as expeditiously as possible in a good and
workmanlike manner and with first-class new materials;
(b) it shall be done in compliance with such reasonable rules and
regulations as the Landlord or its agents or contractors may make;
(c) it shall be done in such manner as will not interfere unreasonably
with the work being done by the Landlord in respect of the Leased
premises or in any other portion of the Building;
(d) it shall be subject to the reasonable supervision of the Landlord or
its agents or contractors;
(e) it shall be done at the risk of the Tenant;
(f) it shall be done so as not to increase the premiums payable in respect
of insurance or Taxes included in the Lease, provided if such premiums
or Taxes payable are
<PAGE>
-48-
increased, the Tenant shall pay to the Landlord the amount of any
increase that is directly attributable to the Tenant's Work;
(g) the Tenant, its employees, contractors and contractors' employees
shall not enter onto any roof of the Building or make any opening in
the roof or Building envelope.
(h) no load greater than the design load, uniformly distributed shall be
imposed on any concrete floor. No unusual loads my be suspended from
the underside of the ceilings and no holes shall be drilled through
the floor or structural elements without the written approval of the
Landlord and its consultants first obtained. The Landlord will
identify areas for extra file loading and the maximum loads
permissible in the preliminary space plan;
(i) the Tenant shall maintain the Leased Premises in a reasonably clean
and orderly state and shall be responsible for removing from the
Building, at its sole cost and expense all excess material and garbage
resulting from its work;
(j) objectionable odours from the Leased premises shall, at the Tenant's
expense, be exhausted in such a manner satisfactory to the Landlord,
in its sole and absolute discretion so that they do not escape into
the Building or other tenant's premises and so that they do not short
circuit into any fresh air vents.
(k) the Tenant acknowledges that certain Tenant Work requiring
modification and interfacing with Base Building work and system shall
be done only by Landlord designated contractors at the Tenant's
expense to maintain compatibility and warranties.
(l) the Tenant shall engage contractors/subcontractors who are acceptable
to the Landlord and are compatible with the union jurisdictions, if
necessary under normal union contracts, of Base Building contractors,
as appropriate.
(m) the Tenant shall comply with all rules, guidelines and regulations
which may be set forth in a Tenant Design Construction Manual which
the Landlord, at its discretion, may compile and issue to the Tenant
prior to commencement of the Tenant's Work.
Any Tenant's Work that is not in accordance with plans,
specifications, information and revisions delivered to and approved by the
Landlord or that it not otherwise in accordance with the Landlord's requirements
and that has not been removed or corrected forthwith after demand may be removed
or corrected by the Landlord at the expense of the Tenant. The Tenant shall pay
to the Landlord the Landlord's cost of such work performed by the Landlord,
within thirty (30) days of receipt of an invoice form the Landlord.
<PAGE>
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SCHEDULE "F"
------------
SPECIAL PROVISIONS
------------------
FIXTURING PERIOD
- ----------------
The Tenant shall be permitted to occupy the Leased Promises from March 1, 1997
and for a period of forty-five (45) days for the purposes of constructing
leasehold improvements. During the period no Rent shall be paid. All other
terms of this Lease shall be in full force and effect.
EARLY OCCUPANCY
- ---------------
Upon completion of the Fixturing period referred to in this Schedule "F" the
Tenant shall have the right to occupy and commence operation in the Leased
Premises provided that the Tenant complies with all of the terms of this Lease.
The Tenant shall not be responsible for any Minimum Rent or Additional Rent
during its occupancy prior to the Commencement Date.
SPACE PLANNING
- --------------
The Landlord shall provide the Tenant an allowance for the cost for one (1)
space planning service and one (1) revision, such cost shall be up to a maximum
of SEVEN CENTS ($0.07) per square foot of the Leased Premises.
TENANT INDUCEMENT
- -----------------
The Landlord agrees to pay the Tenant TWENTY DOLLARS ($20.00) per rentable
square foot plus goods and services tax. This inducement shall be paid in full
to the Tenant by the Landlord prior to commencement of the Fixturing Period
referred to in this Schedule "F" so long as the Lease has been executed by the
Tenant and so long as the Letter of Credit as described in Paragraph 18.15 of
the Lease has been delivered.
<PAGE>
EXHIBIT 10.20
STOCK PURCHASE AGREEMENT
Agreement entered into on as of April 15, 1998, by and among PRIMETECH CANADA
INC., a Nova Scotia corporation ("Buyer"), and GEORGE SCHWARTZ, an individual,
P.M.T. HOLDINGS INC., an Ontario corporation, and MICHAEL MARKOVITZ, an
individual (collectively "Sellers"). Buyer and Sellers are referred to
collectively herein as the "Parties."
Sellers in the aggregate own all of the outstanding capital stock of PRIMETECH
CORPORATION INC., an Ontario corporation and 1184267 ONTARIO INC., an Ontario
corporation (the "Companies").
This Agreement contemplates a transaction in which Buyer will purchase from
Sellers, and Sellers will sell to Buyer, all of the outstanding capital stock of
the Companies in return for cash and other consideration. It is anticipated
that this Agreement will close only in the event the American Education
Corporation ("AEC",) completes its initial public offering.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1, DEFINITIONS.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in (S)2(c) below.
"Closing Date" has the meaning set forth in (S)2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
"Companies" has the meaning set forth in the prefaces above.
"Companies' Shares" shall refer to all of the common stock of both of the
Companies.
"Confidential Information" means any information concerning the businesses
and affairs of the Companies that is not already generally available to the
public.
"Deferred Intercompany Transaction" has the meaning set forth in Reg. (S)
1. 1502-13.
"Disclosure Schedule" has the meaning set forth in (S)4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program or any similar plan or arrangement authorized under
Canadian law.
Employee Pension Benefit Plan " has the meaning set forth in ERISA (S) 3
(2). "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
(S)3(l). "Employment Agreements" has the meaning set for in (S)2(b)(iii)
below.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, Canadian, provincial and foreign
governments (and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Financial Statement" has the meaning set forth in (S)4(g) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in (S)8(d) below.
<PAGE>
"Indemnifying Party" has the meaning set forth in (S)8(d) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within the Most
Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in (S)4(g) below.
"Most Recent Fiscal Month End' has the meaning set forth in (S)4(g) below.
"Most Recent Fiscal Year End' has the meaning set forth in (S)4(g) below.
"Ordinary Course of Business" means the ordinary course of business consistent
with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Purchase Price" has the meaning set forth in (S)2(b) below.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge, or
other security interest,
<PAGE>
other than (a) mechanic's, materialmen's, and similar liens, (b) liens for Taxes
not yet due and payable, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing of
money.
"Seller" has the meaning set forth in the preface above.
"Stock Payments" has the meaning set forth in (S)2(b)(ii).
"Subsidiary" means any corporation with respect to which a specified Person (or
a Subsidiary thereof) owns a majority of the common stock or has the power to
vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Tax" means any federal, state, local, provincial or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code (S)59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in (S) 8 (d) below.
2. PURCHASE AND SALE OF COMPANIES' SHARES.
(a) Basic Transaction. On and subject to the terms and conditions of this
Agreement, Buyer agrees to purchase from each of Sellers, and each of Sellers
agrees to sell to Buyer, all of his or its Companies' Shares for the
consideration specified below in this (S)2.
(b) Purchase Price.
(i) Cash at Closing. Buyer agrees to pay to Sellers at the Closing
$CD500,000, (the "Purchase Price" payable by wire transfer or delivery of other
immediately available funds. The Purchase Price shall be allocated among
Sellers in proportion to their respective holdings of Companies' Shares, as
reflected in Disclosure Schedule (S)4(b).
(ii) Stock Payments. Within thirty (30) days following each of the
first, second and third anniversary of the Closing Date, as defined herein, and
provided that the common stock of American Education Corporation ("AEC') is
publicly traded as of that anniversary date, Buyer shall cause to be transferred
to Sellers the number of shares of common stock in AEC equal to the Canadian
dollar value of one hundred and two percent (I 02%) of the Companies' net income
before tax for the twelve month period immediately preceding such anniversary
date divided by the equivalent Canadian dollar
<PAGE>
value of the closing price of the AEC stock as of such anniversary date
(hereinafter referred to as the "Stock Payments"). For purposes of this
(S)2(b)(ii), (i) Buyer shall compute the net income before tax using each of the
Companies' internal monthly income statements for the relevant twelve (12) month
period, with relevant year end adjustments to be estimated, and (ii) if the
Closing Date did not occur on the last day of a calendar month, the Closing Date
shall be deemed to have occurred on the last day of the first full calendar
month following the Closing. The Stock Payments shall be allocated among Sellers
in proportion to their respective holdings in each of the Companies as reflected
in Disclosure Schedule (S)4(b).
(iii) Employment Agreements. Buyer shall enter into three year employment
agreements with George Schwartz and Vasco Lopes (the principal of P.M.T.
Holdings, Inc.) in substantially the forms attached hereto as Exhibit A (the
"Employment Agreements"). If George Schwartz breaches and/or terminates his
Employment Agreement, Buyer shall have no further liability to George Schwartz
under this Agreement. If Vasco Lopes breaches or terminates his Employment
Agreement, Buyer shall have no further liability to Vasco Lopes and P.M.T.
Holdings, Inc. under this Agreement.
(iv) Repayment of Shareholder Loans. Within thirty (30) days of the Closing
Date, Buyer will cause the Companies to repay loans due to Sellers in the amount
reflected on the Companies' audited November 30, 1997 financial statement.
(v) Estimated Purchase Price Value. For purposes of purchase price value,
the estimated value of the sum of the Cash at Closing and the Stock Payments is
$2.1 million. Notwithstanding this estimate, there is no guarantee that actual
value received by Sellers will equal or approach the value estimated in this
(S)2(b)(iv), and this estimate shall not be construed to be any representation
of expected value.
(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Primetech Institute
in Willowdale, Ontario, commencing at 9:00 a.m. local time on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself) or such other date as the Buyer and the Sellers may
mutually determine (the "Closing Date"); provided, however, that the Closing
Date shall be no earlier than two (2) business days after the effective date of
AEC's initial public offering.
(d) Deliveries at the Closing. At the Closing, (i) Sellers will
deliver to Buyer the various certificates, instruments, and documents referred
to in (S)7(a) below, (ii) Buyer will deliver to the Sellers the various
certificates, instruments, and documents referred to in (S)7(b) below, (iii)
each of Sellers will deliver to Buyer stock certificates representing all of his
or its Companies' Shares, endorsed in blank or accompanied by duly executed
assignment documents, and (iv) Buyer will deliver to each of Sellers the
consideration specified in (S)2(b) above.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of Sellers. Each of Sellers
represents and warrants
<PAGE>
to Buyer that the statements contained in this (S)3(a) are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this (S)3(a)) with respect
to himself or itself
(i) Organization of Certain Sellers. If Seller is a corporation,
Seller is duly organized, validly existing, and in good standing under the laws
of the jurisdiction of its incorporation.
(ii) Authorization of Transaction. Sellers have full power and
authority (including, if Seller is a corporation, full corporate power and
authority) to execute and deliver this Agreement and to perform his or its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of Sellers, enforceable in accordance with its terms and conditions.
Sellers need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Sellers are subject or, if Sellers are a
corporation, any provision of its charter or bylaws or (B) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which Sellers are a party or by which he or it is bound or
to which any of his or its assets is subject.
(iv) Brokers' Fees. Sellers have no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Buyer could become liable
or obligated.
(v) Investment. Sellers are sophisticated investors with knowledge and
experience in business and financial matters.
(vi) Companies' Shares. Sellers hold of record and own beneficially the
number of Companies' Shares set forth next to his or its name in (S)4(b) of the
Disclosure Schedule, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require the Seller to
sell, transfer, or otherwise dispose of any capital stock of the Companies
(other than this Agreement). Sellers are not a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any capital
stock of the Companies.
(b) Representations and Warranties of Buyer. Buyer represents and
warrants to Sellers that the statements contained in this (S)3(b) are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the
<PAGE>
Closing Date were substituted for the date of this Agreement throughout this
(S)3(b)).
(i) Organization of Buyer. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(ii) Authorization of Transaction. Buyer has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of Buyer, enforceable in accordance
with its terms and conditions. Buyer need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated by
this Agreement.
(iii) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of its
charter or bylaws.
(iv) Brokers' Fees. Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any Seller could become
liable or obligated.
(v) Investment. Buyer is not acquiring the Shares of the Companies
with a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANIES. Sellers represent
and warrant to Buyer that the statements contained in this (S)4 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this (S)4), except as set
forth in the disclosure schedule delivered by Sellers to Buyer on the date
hereof and initialed by the Parties (the "Disclosure Schedule"). The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this (S)4.
(a) Organization, Qualification, and Corporate Power. Each of the
Companies is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each of the
Companies is duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required. Each of the
Companies has full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged and
to own and use the properties owned and used by it. (S)4(a) of the Disclosure
Schedule lists the directors and officers of each of the Companies. Sellers
have delivered to Buyer correct and complete copies of the charter and bylaws of
each of the Companies (as amended to date). The minute books (containing the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors), the stock certificate books, and the
stock record books of each of the Companies are correct and complete. Neither
of the Companies is in default under or in violation of any provision of its
charter
<PAGE>
or bylaws.
(b) Capitalization. The entire authorized capital stock of each of the
Companies consists of three thousand (3000) shares, of which three thousand
(3000) shares are issued and outstanding and no Companies' Shares are held in
treasury. All of the issued and outstanding Companies' Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the respective Sellers as set forth in (S)4(b) of the Disclosure
Schedule. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require either of the Companies to issue,
sell, or otherwise cause to become outstanding any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to either of the Companies. There
are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of either of the Companies.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Companies is subject or any
provision of the charter or bylaws of any of the Companies or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which either of the Companies is a party or
by which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). Neither of the
Companies needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(d) Brokers' Fees. Neither of the Companies has any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(e) Title to Assets. The Companies have good and marketable title to, or a
valid leasehold interest in, the properties and assets used by them, located on
their premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet.
(f) [Intentionally Omitted]
(g) Financial Statements. Attached hereto as Exhibit B are the following
financial statements (collectively the "Financial Statements"): (i) unaudited
consolidating balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended November 30, 1995 and
November 30, 1996, and audited consolidated balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the fiscal
years ended November 30, 1997 (the "Most Recent Fiscal Year End') for each of
the Companies; and (H)
<PAGE>
unaudited consolidated and consolidating balance sheets and statements of
income, changes in stockholders' equity, and cash flow (the "Most Recent
Financial Statements") as of and for the four months ended March 31, 1998 (the
"Most Recent Fiscal Month End') for each of the Companies. The Financial
Statements (including the notes thereto) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby,
present fairly the financial condition of the Companies as of such dates and the
results of operations of the Companies for such periods, are correct and
complete, and are consistent with the books and records of the Companies (which
books and records are correct and complete) ; provided, however, that the Most
Recent Financial Statements are subject to normal year-end adjustments (which
will not be material individually or in the aggregate) and lack footnotes and
other presentation items.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of any of the Companies. Without limiting the generality of the
foregoing, since that date:
(i) neither of the Companies has sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;
(ii) neither of the Companies has entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) outside the Ordinary Course of Business;
(iii) no party (including either of the Companies) has accelerated,
terminated, modified, or cancelled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) involving
more than $10,000 to which either of the Companies is a party or by which any of
them is bound;
(iv) neither of the Companies has imposed any Security Interest upon any
of its assets, tangible or intangible;
(v) neither of the Companies has made any capital expenditure (or series
of related capital expenditures) outside the Ordinary Course of Business;
(vi) neither of the Companies has made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) outside the
Ordinary Course of Business;
(vii) neither of the Companies has issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$10,000 singly or $25,000 in the aggregate; .
(viii) neither of the Companies has delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of Business;
<PAGE>
(ix) neither of the Companies has cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
(x) neither of the Companies has granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the charter or bylaws
of either of the Companies;
(xii) neither of the Companies has issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(xiii) neither of the Companies has declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(xiv) neither of the Companies has experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xv) neither of the Companies has made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xvi) neither of the Companies has entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xvii) neither of the Companies has granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xviii) neither of the Companies has adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees (or
taken any such action with respect to any other Employee Benefit Plan);
(xix) neither of the Companies has made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary Course of
Business;
(xx) neither of the Companies has made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xxi) there has not been any other material occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of Business
involving either of the Companies; and
(xxii) neither of the Companies has committed to any of the foregoing.
<PAGE>
(i) Undisclosed Liabilities. Neither of the Companies has any Liability
(and Sellers have no knowledge of any Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability), except for (i) Liabilities
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (ii) Liabilities which have arisen after the Most Recent Fiscal
Month End in the Ordinary Course of Business (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law).
(j) Legal Compliance. Each of the Companies and their respective predecessors
and Affiliates has complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
(k) Tax Matters.
(i) Each of the Companies has filed all Tax Returns (Canadian, United
States, Provincial, etc.) that it was required to file. All such Tax Returns
were correct and complete in all respects. All Taxes owed by any of the
Companies (whether or not shown on any Tax Return) have been paid. The
Companies are currently not the beneficiaries of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where the Companies do not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Security Interests on
any of the assets of the Companies that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) Each of the Companies has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(iii) No Seller or director or officer of either of the Companies
expects any authority to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no pending dispute or claim concerning any
Tax Liability of either of the Companies.
(iv) Neither of the Companies has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) (S)4(k) of the Disclosure Schedule sets forth the following
information with respect to each of the Companies, as of the most recent
practicable date: (A) the basis of each of the Companies in its assets; (B) the
amount of any net operating loss, net capital loss, unused investment of other
credit, unused foreign tax, or excess charitable contribution allocable to each
of the Companies; and (C) the amount of any deferred gain or loss allocable to
each of the Companies arising out of any Deferred Intercompany Transaction.
<PAGE>
(1) Real Property.
(i) The Companies own no real property.
(ii) (S)4(l)(ii) of the Disclosure Schedule lists and describes briefly all
real property leased or subleased to each of the Companies. Sellers have
delivered to Buyer correct and complete copies of the leases and subleases
listed in (S)4(l)(ii) of the Disclosure Schedule (as amended to date). With
respect to each lease and sublease listed in (S)4(l)(ii) of the Disclosure
Schedule, the lease or sublease is legal, valid, binding, enforceable, and in
full force and effect and will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby.
(m) Intellectual Property.
(i) The Companies own or have the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary or
desirable for the operation of the businesses of the Companies as presently
conducted. Each item of Intellectual Property owned or used by the Companies
immediately prior to the Closing hereunder will be owned or available for use by
the Companies on identical terms and conditions immediately subsequent to the
Closing hereunder.
(ii) Neither of the Companies has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties. To the Knowledge of any of Sellers and the directors
and officers of the Companies, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of either of the Companies.
(iii) To the Knowledge of any of Sellers and the directors and
officers of the Companies, neither of the Companies will interfere with,
infringe upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of the continued
operation of its businesses as presently conducted.
(n) Tangible Assets. The Companies own or lease all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
their businesses as presently conducted. Each such tangible asset is free from
defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently is used.
(o) Inventory. The inventory of the Companies is merchantable and fit
for the purpose for which it was procured.
(p) Contracts. (S)4(p) of the Disclosure Schedule lists the following
contracts and other agreements to which either of the Companies is a party:
(i) any agreement (or group of related agreements) for the lease of
personal property to
<PAGE>
or from any Person providing for lease payments in excess of $10,000 per annum;
(ii) any agreement (or group of related agreements) for the purchase or
sale of supplies, products, or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over a period of more
than one year, result in a material loss to any of the Companies, or involve
consideration in excess of $10,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $10,000 or under
which it has imposed a Security Interest on any of its assets, tangible
or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any profit sharing, stock option, stock purchase, stock appreciation,
deferred compensation, severance, or other material plan or arrangement
for the benefit of its current or former directors, officers, and
employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a full-time, part-
time, consulting, or other basis providing annual compensation in excess of
$30,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any amount to any of
its directors, officers, and employees outside the Ordinary Course of
Business;
(xi) any agreement under which the consequences of a default or termination
could have a material adverse effect on the business, financial condition,
operations, results of operations, or future prospects of any of the Companies;
(xii) any other agreement (or group of related agreements) the performance of
which involves consideration in excess of $25,000.
Sellers have delivered to Buyer a correct and complete copy of each written
agreement listed in (S)4(p) of the Disclosure Schedule (as amended to date).
With respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
<PAGE>
(q) Notes and Accounts Receivable. All notes and accounts receivable of
the Companies are reflected properly on their books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of each of the Companies.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of either of the Companies.
(s) Insurance. (S)4(s) of the Disclosure Schedule sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) to which either of the Companies has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the past 5
years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the name of
each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was on a
claims made, occurrence, or other basis) and amount (including a description of
how deductibles and ceilings are calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or other loss-
sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) neither of the Companies nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. Each of the Companies has been covered
during the past 5 years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. (S)4(s) of the Disclosure Schedule describes any self-insurance
arrangements affecting any of the Companies.
(t) Litigation. (S)4(t) of the Disclosure Schedule sets forth each instance in
which either of the Companies (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or is threatened
to be made a party to any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state,
<PAGE>
local, or foreign jurisdiction or before any arbitrator. None of the actions,
suits, proceedings, hearings, and investigations set forth in (S)4(t) of the
Disclosure Schedule could result in any material adverse change in the business,
financial condition, operations, results of operations, or future prospects of
either of the Companies. None of Sellers and the directors and officers of the
Companies has any reason to believe that any such action, suit, proceeding,
hearing, or investigation may be brought or threatened against either of the
Companies.
(u) Employees. To the Knowledge of any of Sellers and the directors and
officers of the Companies, no executive, key employee, or group of employees has
any plans to terminate employment with any of the Companies. Neither of the
Companies is a party to or bound by any collective bargaining agreement, nor has
any of them experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. Neither of the Companies
has committed any unfair labor practice. None of Sellers and the directors and
officers of the Companies has any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of any of the Companies.
(v) Employee Benefits. The Companies have no Employee Benefit Plans.
(w) Guaranties. Neither of the Companies is a guarantor or otherwise is liable
for any liability or obligation (including indebtedness) of any other
Person.
(x) Environment, Health, and Safely. Each of the Companies and their respective
predecessors and Affiliates has complied with all Environmental, Health, and
Safety Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. Without limiting the generality of the
preceding sentence, each of the Companies, and their respective predecessors and
Affiliates has obtained and been in compliance with all of the terms and
conditions of all permits, licenses, and other authorizations which are required
under, and has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
which are contained in, all Environmental, Health, and Safety Laws.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its reasonable best efforts
to take all action and to do all things necessary in order to consummate and
make effective the transactions contemplated by this Agreement.
(b) Notices and Consents. Sellers will cause each of the Companies to give
any notices to third parties, and will cause each of the Companies to use its
reasonable best efforts to obtain any third party consents, that Buyer
reasonably may request in connection with the matters referred to in (S)4(c)
above. Each of the Parties will (and Sellers will cause each of the Companies
to) give any notices to, make any filings with, and use its reasonable best
efforts to obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection
<PAGE>
with the matters referred to in (S)3(a)(ii), (S)3(b)(iii), and (S)4(c) above.
(c) Operation of Business. Sellers will not cause or permit either of the
Companies to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, Sellers will not cause or permit any of the
Companies to (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or otherwise
acquire any of its capital stock, or (ii) otherwise engage in any practice, take
any action, or enter into any transaction of the sort described in (S)4(h)
above.
(d) Preservation of Business. Sellers will cause each of the Companies to
keep its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(e) Full Access. Each of Sellers will permit, and Sellers will cause each of
the Companies to permit representatives of Buyer to have full access to all
premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to each of the Companies.
(f) Notice of Developments. Sellers will give prompt written notice to Buyer
of any material adverse development causing a breach of any of the
representations and warranties in (S)4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or its own representations and warranties in (S)3 above.
(g) Exclusivity. None of Sellers will (and Sellers will not cause or permit
any of the Companies to) (i) solicit, initiate, or encourage the submission of
any proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the assets of,
any of the Companies (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. None of Sellers will vote their
Companies' Shares in favor of any such acquisition structured as a merger,
consolidation, or share exchange. Sellers will notify Buyer immediately if any
Person makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
6, POST-CLOSING COVENANTS. The Parties agree as follows with respect to the
period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under (S)8 below).
Sellers acknowledge and agree that from and after the Closing Buyer will be
entitled to possession of all
<PAGE>
documents, books, records (including Tax records), agreements, and financial
data of any sort relating to the Companies.
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving either of the Companies, each of the other Parties will cooperate with
him or it and his or its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under (S)8 below).
(c) Transition. None of Sellers will take any action that is designed or
intended to discourage any lessor, licensor, customer, supplier, or other
business associate of any of the Companies from maintaining the same business
relationships with the Companies after the Closing as it maintained with the
Companies prior to the Closing. Each of Sellers will refer all customer
inquiries relating to the businesses of the Companies to Buyer from and after
the Closing.
(d) Confidentiality. Each of Sellers will treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
Buyer or destroy, at the request and option of Buyer, all tangible embodiments
(and all copies) of the Confidential Information which are in his or its
possession. In the event that any of the Sellers is requested or required (by
oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, that Sellers will notify Buyer promptly
of the request or requirement so that Buyer may seek an appropriate protective
order or waive compliance with the provisions of this (S)6(d). If, in the
absence of a protective order or the receipt of a waiver hereunder, any of
Sellers is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, that Sellers may
disclose the Confidential Information to the tribunal; provided, however, that
the disclosing Sellers shall use his or its reasonable best efforts to obtain,
at the reasonable request of Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as Buyer shall designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
(e) Covenant Not to Compete. For a period of three (3) years from and
after the Closing Date, except as an employee of the Companies, none of Sellers
will engage directly or indirectly in any business that either of the Companies
conducts as of the Closing Date in the Province of Ontario and any other
geographic area in which either of the Companies or AEC and its subsidiaries
conducts that business as of the Closing Date; provided, however, that no owner
of less than 2% of the outstanding stock of any publicly traded corporation
shall be deemed to engage solely by reason thereof in any of its businesses. If
the final judgment of a court of
<PAGE>
competent jurisdiction declares that any term or provision of this (S)6(e) is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
7. CONDITIONS TO OBLIGATION TO CLOSE,
(a) Conditions to Obligation of Buyer. The obligation of Buyer to consummate
the transactions to be performed by it in connection with the Closing is subject
to satisfaction of the following conditions:
(i) the representations and warranties set forth in (S)3(a) and (S)4 above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) Sellers shall have performed and complied with all of their covenants
hereunder in all material respects through the Closing;
(iii) the Companies shall have procured all of the third party consents
specified in (S)5(b) above;
(iv) no action, suit, or proceeding shall be pending or threatened before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of Buyer to own the
Companies' Shares and to control the Companies, or (D) affect adversely the
right of any of the Companies to own its assets and to operate its businesses
(and no such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) the completeness of the effective date of the initial public offering of
American Education Corporation;
(vi) Buyer shall have received from counsel to Sellers an opinion in form and
substance as set forth in Exhibit C attached hereto, addressed to Buyer, and
dated as of the Closing Date;
(vii) Buyer shall have received the resignations, effective as of the Closing,
of each director and officer of the Companies other than those whom Buyer shall
have specified in writing at least one (1) business day prior to the Closing;
(viii) Buyer shall have obtained on terms and conditions reasonably satisfactory
to it all of the financing it needs in order to consummate the transactions
contemplated hereby; and
<PAGE>
(ix) all actions to be taken by Sellers in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to Buyer.
Buyer may waive any condition specified in this (S)7(a) if it executes a writing
so stating at or
prior to the Closing.
(b) Conditions to Obligation of Sellers. The obligation of Sellers to
consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in (S)3(b) above shall
be true and correct in all material respects at and as of the Closing Date;
(ii) Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(v) Sellers shall have received from counsel to Buyer an opinion in form
and substance as set forth in Exhibit D attached hereto, addressed to Sellers,
and dated as of the Closing Date; and
(vi) all actions to be taken by Buyer in connection with consummation of
the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Sellers.
Sellers may waive any condition specified in this (S)7(b) if they execute a
writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) Survival of Representations and Warranties. All of the representations and
warranties of the Parties contained in this Agreement shall survive the Closing
hereunder (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of Closing) and
continue in full force and effect forever thereafter (subject to any
<PAGE>
applicable statutes of limitations), for a period of three (3) years.
(b) Indemnification Provisions for Benefit of Buyer.
(i) In the event any of Sellers breaches any of their representations,
warranties, and covenants contained in this Agreement, then Sellers agrees to
indemnify Buyer from and against the entirety of any Adverse Consequences Buyer
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the breach.
(ii) Sellers agree to indemnify Buyer from and against the entirety of any
Adverse Consequences Buyer may suffer resulting from, arising out of, relating
to, in the nature of, or caused by any liability of the Companies arising on or
before the Closing Date, including any claim, litigation or other action of any
nature arising out of any action or inaction of Sellers or the Companies prior
to the Closing Date.
(c) Indemnification Provisions for Benefit of Sellers.
(i) In the event Buyer breaches any of its representations warranties and
covenants contained herein, then Buyer agrees to indemnify Sellers from and
against the entirety of any Adverse Consequences Sellers may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the breach.
(ii) Buyer agrees to indemnify Sellers from and against the entirety of any
Adverse Consequences Sellers may suffer resulting from, arising out of, relating
to, in the nature of, or caused by any liability of the Companies arising after
the Closing Date, provided that the liability is in no way related to action or
inaction of the Companies prior to the Closing Date.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified Party") with
respect to any matter (a "Third Party Claim") which may give rise to a claim for
indemnification against any other Party (the "Indemnifying Party") under this
(S)8, then the Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless and then solely to the
extent the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified
<PAGE>
Party with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (C) the Third
Party Claim involves only money damages and does not seek an injunction or other
equitable relief, (D) settlement of, or an adverse judgment with respect to, the
Third Party Claim is not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with (S)8(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in (S)8(d)(ii) above is or becomes
unsatisfied, however, (A) the Indemnified Party may defend against, and consent
to the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it may reasonably deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including [reasonable] attorneys' fees
and expenses), and (C) the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this (S)8.
(e) Determination of Adverse Consequences. All indemnification payments
under this (S)8 shall be deemed adjustments to the Purchase Price.
(f) Recoupment Against Stock Payment, Buyer shall have the option of
recouping all or any part of any Adverse Consequences it may suffer (in lieu of
seeking any indemnification to which it is entitled under this (S)8) by
notifying any Seller that Buyer is reducing the Stock Payment then due to
Sellers.
(g) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant. Each of Sellers hereby agrees that he or it will not make
any claim for indemnification against any of the Companies by reason of the fact
that he or it was a director, officer, employee, or agent of any such entity or
was serving at the request of any such entity as a partner, trustee, director,
officer, employee, or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such claim is pursuant to any statute,
charter document, bylaw, agreement, or otherwise) with respect to any action,
suit, proceeding,
<PAGE>
complaint, claim, or demand brought by Buyer against such Seller (whether such
action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
9. TAX MATTERS. The following provisions shall govern the allocation of
responsibility as between Buyer and Sellers for certain tax matters following
the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Companies for all periods ending on or prior to the Closing Date which
are filed after the Closing Date. Buyer shall permit the Companies to review
and comment on each such Tax Return described in the preceding sentence prior to
filing. Sellers shall reimburse Buyer for Taxes of the Companies with respect
to such periods within fifteen (I 5) days after payment by Buyer or the
Companies of such Taxes to the extent such Taxes are not reflected in the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the Closing Balance Sheet.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Companies for Tax periods which begin before the Closing Date
and end after the Closing Date. Sellers shall pay to Buyer within fifteen (I 5)
days after the date on which Taxes are paid with respect to such periods an
amount equal to the portion of such Taxes which relates to the portion of such
Taxable period ending on the Closing Date to the extent such Taxes are not
reflected in the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
shown on the face of the Closing Balance Sheet.
(c) Cooperation on Tax Matters.
(i) Buyer, Companies and Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes.
(ii) Buyer and Sellers further agree, upon request, to use their best
efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(d) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Companies shall be terminated as of
the Closing Date and, after the Closing Date, the Companies shall not be bound
thereby or have any liability thereunder.
(e) Certain Taxes. All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest) incurred
in connection with this
<PAGE>
Agreement, shall be paid by Sellers when due, and Sellers will, at their own
expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees, and, if required by applicable law, Buyer will, and will cause its
affiliates to, join in the execution of any such Tax Returns and other
documentation.
10. TERMINATION.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) Buyer and Sellers may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written notice to
Sellers on or before the 120th day following the date of this Agreement if Buyer
is not reasonably satisfied with the results of its continuing business, legal,
and accounting due diligence regarding the Companies;
(iii) Buyer may terminate this Agreement by giving written notice to
Sellers at any time prior to the Closing (A) in the event any of Sellers has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect, Buyer has notified Sellers of the breach, and
the breach has continued without cure for a period of 30 days after the notice
of breach or (B) if the Closing shall not have occurred on or before July 1,
1998, by reason of the failure of any condition precedent under (S)7(a) hereof
unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement; and
(iv) Sellers may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing (A) in the event Buyer has breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, any of Sellers has notified the Buyer of the breach, and
the breach has continued without cure for a period of 30 days after the notice
of breach or (B) if the Closing shall not have occurred on or before July 1,
1998, by reason of the failure of any condition precedent under (S)7(b) hereof
(unless the failure results primarily from any of Sellers themselves breaching
any representation, warranty, or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to (S) I O(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
except for any Liability of any Party then in breach.
11. MISCELLANEOUS.
(a) Nature of Certain Obligations.
The covenants of each of Sellers in (S)2(a) above concerning the sale of
his or its Companies'
<PAGE>
Shares to Buyer and the representations and warranties of each of Sellers in
(S)3(a) above concerning the transaction are several obligations. This means
that the particular Seller making the representation, warranty, or covenant will
be solely responsible to the extent provided in (S)8 above for any Adverse
Consequences Buyer may suffer as a result of any breach thereof.
(ii) The remainder of the representations, warranties, and covenants in
this Agreement are joint and several obligations. This means that each Seller
will be responsible to the extent provided in (S)8 above for the entirety of any
Adverse Consequences Buyer may suffer as a result of any breach thereof.
(b) Press Releases and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of Buyer and
Sellers; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other
Parties prior to making the disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not confer any rights
or remedies upon any Person other than the Parties and their respective heirs,
successors and permitted assigns.
(d) Entire Agreement. This Agreement including the documents referred to
herein constitutes the entire agreement among the Parties and supersedes any
prior understandings, side agreements, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and inure
to the benefit of the Parties named herein and their respective heirs,
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Buyer and Sellers; provided, however, that the Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder in any or all of which cases Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder.
(f) Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together will
constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers: George Schwartz
<PAGE>
4 Mayfair Avenue
Toronto, Ontario M5N2N4
P.M.T. Holdings Inc.
C/O 94 Cumberland St., Ste. 700
Toronto, Ontario M5RIA3
Attn: Vasco Lopes
Michael C. Markovitz
20 South Clark Street
Suite 300
Chicago, Illinois 60603
If to the Buyer
PrimeTech Canada Inc.
C/O 84 Dufferin Street Bridgewater, Nova Scotia B4V 2G3
With a copy to:
PrimeTech Canada, Inc.
20 South Clark Street
Suite 300
Chicago, Illinois 60603
Attn: Harold O'Donnell, Ph.D.
and
Clark A Merritt
Barrister and Soliciter
Cadillac Fairview Tower
20 Queen Street West Suite 3300
Toronto, Ontario M51-1 3R3
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
(i) Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by Buyer and
Sellers. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not,
<PAGE>
shall be deemed to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
j) Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear his or its own costs and expenses
including legal fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby. Sellers agree that the Companies have not
borne or will not bear any of Sellers' costs and expenses (including any of
their legal fees and expenses) in connection with this Agreement or any of the
transactions contemplated hereby.
(1) Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in
breach of the first representation, warranty, or covenant.
(m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(n) Specific Performance. Each of the Parties acknowledges and agrees that the
other Parties would be damaged irreparably in the event that (S)6(d) and (S)6(e)
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Parties shall be entitled to an injunction or injunctions to prevent breaches of
(S)6(d) and (S)6(e) of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter, in addition to any other remedy to which they may be entitled, at law or
in equity. The prevailing party to any such dispute shall be entitled to recover
his or its reasonable attorneys' fees and costs.
(o) Binding Arbitration. Except with respect to a breach of (S)6(d) or
(S)6(e), any dispute,
<PAGE>
controversy or claim relating to this Agreement, including but not limited to
the interpretation thereof, or its breach or existence, which cannot be resolved
amicably by Sellers and Buyer shall be submitted to mandatory and binding
arbitration by a single arbitrator at the election of either party pursuant to
the rules of the American Arbitration Association. The arbitration will be
conducted in Chicago, Illinois, or other such location as may be determined by
mutual agreement of Sellers and Buyer. The prevailing party to any such dispute
shall be entitled to recover his or its reasonable attorneys' fees and costs.
(p) Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Illinois, United States of America.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
PRIMETECH CANADA INC.
By: /s/ Harold J. O'Donnell
-----------------------
Harold O'Donnell, Ph.D.
Title: President
/s/ George Schwartz
- --------------------------
GEORGE SCHWARTZ
P.M.T. HOLDINGS INC.
By: /s/
------------------------------
Title: President
/s/ Michael C. Markovitz
- ------------------------
MlCHAEL MARKOVITZ
<PAGE>
EXHIBIT 10.21
STOCK PURCHASE AGREEMENT
Agreement entered into as of February 3, 1998, by and among Medical
Institutes of America, Inc., an Illinois corporation (the "Buyer"), and Phillip
-----
Miller (the "Seller"). The Buyer and the Seller are referred to collectively
------
herein as the "Parties."
-------
The Seller owns all of the outstanding capital stock of Medical Institute
of Minnesota, Inc., a Minnesota corporation (the "Company").
-------
This Agreement contemplates a transaction in which the Buyer will purchase
from the Seller, and the Seller will sell to the Buyer, all of the outstanding
capital stock of the Company in return for cash and the Buyer Note.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
-----------
"Accredited Investor" has the meaning set forth in Regulation D promulgated
-------------------
under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
--------------------
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
---------
promulgated under the Securities Exchange Act.
"Audited Financial Statements" has the meaning set forth in (S)2(f) below.
----------------------------
"Basis" means any past or present fact, situation, circumstance, status,
-----
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
-----
"Buyer Note" has the meaning set forth in (S)2(b) below.
----------
"Buyer Escrow Note" has the meaning set forth in (S)2(b) below.
-----------------
"Closing" has the meaning set forth in (S)2(c) below.
-------
<PAGE>
"Closing Date" has the meaning set forth in (S)2(c) below.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Company Shares" means 100% of the outstanding capital stock of the
--------------
Company.
"Confidential Information" means any information concerning the businesses
------------------------
and affairs of the Company that is not already generally available to the
public.
"Controlled Group of Corporations" has the meaning set forth in Code
--------------------------------
(S)1563.
"Disclosure Schedule" has the meaning set forth in (S)4 below.
-------------------
"Employment Agreement" has the meaning set forth in (S)2(b).
--------------------
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
---------------------
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA (S)3(2).
-----------------------------
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA (S)3(l).
-----------------------------
"Environmental, Health, and Safety Laws" means the Comprehensive
--------------------------------------
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Escrow Account" has the meaning set forth in (S)7(c) below.
--------------
"Escrow Agent" has the meaning set forth in (S)7(c) below.
------------
"Escrow Delivery Date" has the meaning set forth in (S)7(c) below.
--------------------
<PAGE>
"Excess Loss Account" has the meaning set forth in Reg. (S)1.1502-19.
-------------------
"Extremely Hazardous Substance" has the meaning set forth in (S)302 of the
-----------------------------
Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA (S)3(21).
---------
"Financial Statement" has the meaning set forth in (S)4(g) below.
-------------------
"GAAP" means United States generally accepted accounting principles as in
----
effect from time to time.
"Indemnified Party" has the meaning set forth in (S)8(d) below.
-----------------
"Indemnifying Party" has the meaning set forth in (S)8(d) below.
------------------
"Intellectual Property" means (a) all inventions (whether patentable or
---------------------
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations, thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
---------
"Liability" means any liability (whether known or unknown, whether asserted
---------
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within the
-------------------------
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in (S)4(g)
--------------------------------
below.
"Multiemployer Plan" has the meaning set forth in ERISA (S)3(37).
------------------
<PAGE>
"Ordinary Course of Business" means the ordinary course of business
---------------------------
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
-----
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Person" means an individual, a partnership, a corporation, an association,
------
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Prohibited Transaction" has the meaning set forth in ERISA (S)406 and Code
----------------------
(S)4975.
"Purchase Price" has the meaning set forth in (S)2(b) below.
--------------
"Reportable Event" has the meaning set forth in ERISA (S)4043.
----------------
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
-----------------------
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
-----------------
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable [or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings], (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
------
"Stockholder's Equity" shall mean the total assets of the Company minus the
--------------------
total liabilities of the Company as reflected on the applicable financial
statements, all computed and prepared in accordance with generally accepted
accounting principles, consistently applied and consist with past practices.
"Subsidiary" means any corporation with respect to which a specified Person
----------
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Survey" has the meaning set forth in (S)5(i) below.
------
"Tax" means any federal, state, local, or foreign income, gross receipts,
---
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code (S)59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use,
<PAGE>
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
----------
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in (S)8(d) below.
-----------------
2. PURCHASE AND SALE OF COMPANY SHARES.
-----------------------------------
(a) Basic Transaction. On and subject to the terms and conditions of this
-----------------
Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agree to sell to the Buyer, all the Company Shares for the consideration
specified below in this (S)2.
(b) Purchase Price. The Buyer agrees to pay to the Seller at the Closing
--------------
$2,576,000 (the "Purchase Price) by delivery of (i) its promissory note
--------------
(the "Buyer Note" in the form of EXHIBIT A attached hereto in the aggregate
----------
principal amount of $300,000 (ii) cash in the amount of $2,200,000 payable
by wire transfer or delivery of other immediately available funds, or by
the delivery of its promissory note (the "Buyer Escrow Note") in the form
-----------------
of EXHIBIT A-1 attached hereto in the aggregate principal amount of
$2,200,000 to the Escrow Agent if the Buyer elects to conduct the Closing
in escrow as provided in (S)7(c) herein and (iii) a promissory note in the
form of EXHIBIT A-2 attached hereto in the aggregate principal amount of
$76,000. In addition, the Buyer agrees to enter into, and to cause the
Company to enter into, an employment agreement with the Seller (the
"Employment Agreement"), in the form of EXHIBIT B.
--------------------
(c) The Closing. The closing of the transactions contemplated by this
-----------
Agreement (the "Closing") shall take place at the offices of the LARKIN,
-------
HOFFMAN, DALY & LINDGREN, LTD., IN BLOOMINGTON, MINNESOTA, commencing at
9:00 a.m. local time on the second business day following the satisfaction
or waiver of all conditions to the obligations of the Parties to consummate
the transactions contemplated hereby (other than conditions with respect to
actions the respective Parties will take at the Closing itself) or such
other date as the Buyer and the Seller may mutually determine (the "Closing
-------
Date"); provided, however, that the Closing Date shall be no earlier than
---- -------- -------
JANUARY 23, 1998.
(d) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
-------------------------
to the Buyer the various certificates, instruments, and documents referred
to in (S)7(a) below, (ii) the Buyer will deliver to the Seller the various
certificates, instruments, and documents referred to in (S)7(b) below,
(iii) the Seller will deliver to the Buyer stock certificates representing
all of his Company Shares, endorsed in blank or accompanied by duly
executed assignment documents, and (iv) the Buyer will deliver to the
Seller the consideration specified in (S)2(b) above.
<PAGE>
(e) Closing in Escrow. If the Buyer elects to conduct the Closing in
-----------------
escrow, as provided in (S)7(c) herein, then the Purchase Price, the
Employment Agreement, and the Company Shares shall be delivered to the
Escrow Agent as provided in (S)7(c).
(f) Purchase Price Adjustments.
--------------------------
(i) Post-Closing Delivery of Audited Financial Statements.
-----------------------------------------------------
Within three (3) days of receipt, the Seller shall deliver to the Buyer
a copy of the Company's audited consolidated balance sheets and
statements of income, changes in stockholder equity, and cash flow as
of and for the fiscal years ended December 31, 1997 (the "Audited
-------
Financial Statements"). The Seller represents and warrants that as of
--------------------
the date of such delivery, the Audited Financial Statements (including
the notes thereto) shall be prepared in accordance with GAAP applied on
a consistent basis throughout the periods covered thereby, present
fairly the financial condition of the Company as of such dates and the
results of operations of the Company for such periods, are correct and
complete, and are consistent with the books and records of the Company
(which books and records are correct and complete), subject to normal
year-end adjustments (which will not be material individually or in the
aggregate) consistent with past practices.
(ii) Purchase Price Adjustment. If the Stockholder Equity
-------------------------
reflected in the Audited Financial Statements differs from the
Stockholder Equity reflected in the Most Recent Financial Statements by
more than five percent (5%) (either an increase or a decrease), then
the Purchase Price shall be adjusted to reflect that difference dollar
for dollar. By way of example, if Stockholder Equity on the Audited
Financial Statement is $50,000 less than that which is reflected on the
Most Recent Financial Statement, and this represents more than a 5%
decrease, then the Purchase Price shall be reduced by $50,000. If
Stockholder Equity on the Audited Financial Statement is $50,000
greater than that which is reflected on the Most Recent Financial
Statement, and this represents more than a 5% decrease, the Purchase
Price shall be increased by $50,000. Any adjustment to the Purchase
Price resulting from this (S)2(f) shall be reflected as an increase or
a decrease, as appropriate, in the principal amount of the Buyer Escrow
Note.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
---------------------------------------------------------
(a) Representations and Warranties of the Seller. The Seller represents
--------------------------------------------
and warrants to the Buyer that the statements contained in this (S)3(a) are
correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout
this (S)3(a)).
(i) Authorization of Transaction. The Seller has full power and
----------------------------
authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its
terms and conditions. The Seller need not give any
<PAGE>
notice to, make any filing with, or obtain any authorization, consent,
approval of any government, governmental agency, or court in order to
consummate the transactions contemplated by this Agreement.
(ii) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
the Seller is subject or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a party or by
which he is bound or to which any of his assets are subject.
(iii) Brokers' Fees. The Seller has no Liability or obligation to
-------------
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
(iv) Investment. The Seller (A) understands that the Buyer Note has
----------
not been, and will not be, registered under the Securities Act, or
under any state securities laws, and is being offered and sold in
reliance upon federal and state exemptions for transactions not
involving any public offering, (B) is acquiring the Buyer Note solely
for his own account for investment purposes, and not with a view to the
distribution thereof, (C) is a sophisticated investor with knowledge
and experience in business and financial matters, (D) has received
certain information concerning the Buyer and has had the opportunity to
obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Buyer Note, (E) is able to
bear the economic risk and lack of liquidity inherent in holding the
Buyer Note, and (F) is an Accredited Investor.
(v) Company Shares. The Seller holds of record and owns beneficially
--------------
all of the Company Shares free and clear of any restrictions on
transfer, Taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands. The
Seller is not a party to any option, warrant, purchase right, or other
contract or commitment that could require the Seller to sell, transfer,
or otherwise dispose of any capital stock of the company (other than
this Agreement). The Seller is not a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any
capital stock of the Company.
(b) Representations and Warranties of the Buyer. The Buyer represents and
-------------------------------------------
warrants to the Seller that the statements contained in this (S)3(b) are
correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout
this (S)3(b)).
<PAGE>
(i) Organization of the Buyer. The Buyer is a corporation duly
-------------------------
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has full power and
----------------------------
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions. The
Buyer need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement.
(iii) Noncontravention. Neither the execution and the delivery of
----------------
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
the Buyer is subject or any provision of its charter or bylaws or (B)
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject.
(iv) Brokers' Fees. The Buyer has no Liability or obligation to pay
-------------
any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller
could become liable or obligated.
(v) Investment. The Buyer is not acquiring the Company Shares with a
----------
view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
-----------------------------------------------------
The Seller represents and warrants to the Buyer that the statements
contained in this (S)4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this (S)4), except as set forth in the
disclosure schedule delivered by the Seller to the Buyer on the date hereof
and initialed by the Parties (the "Disclosure Schedule"). Nothing in the
-------------------
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure
Schedule identifies the exception with particularity, identifies each
subsection of this Section 4 to which the exception relates, and describes
the relevant facts in detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other
item shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation or
warranty has to do with the existence of the document or other item
itself). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
(S)4.
<PAGE>
(a) Organization, Qualification, and Corporate Power. The Company is a
------------------------------------------------
corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. The Company is duly
authorized to conduct business and is in good standing under the laws of
Minnesota. The Company has full corporate power and authority and all
accreditations, licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties
owned and used by it. The Seller has delivered to the Buyer correct and
complete copies of the charter and bylaws of the Company (as amended to
date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Company are correct and complete. The Company is not in default under nor
in violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Company
--------------
consists of 10,000,000 Shares authorized of Class A voting stock and
100,000 Shares of Class B nonvoting stock, of which 1,000 Shares of Class A
voting stock are issued and outstanding and no Company Shares are held in
treasury. All of the issued and outstanding Company Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held
of record by the Seller. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Company to
issue, sell, or otherwise cause to become outstanding any of its capital
stock. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to the Company.
There are no voting trusts, proxies, or other agreements or understandings
with respect to the voting of the capital stock of the Company.
(c) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Company is subject
or any provision of the charter or bylaws of any of the Company or (ii)
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which any of
the Company is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest
upon any of its assets); or (iii) result in the loss of the Company's
accreditation with any current federal, state, institutional or
programmatic accrediting body. The Company does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, except the
United States Department of Education, the Minnesota Higher Education
Services Office or its designees, and any other regulatory or accrediting
bodies as may be disclosed in (S)4(C) of the Disclosure Schedule.
(d) Brokers' Fees. The Company does not have any Liability or obligation
-------------
to pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement.
<PAGE>
(e) Title to Assets. The Company has good and marketable title to, or a
---------------
valid leasehold interest in, the properties and assets used by it, located
on its premises, or shown on the Most Recent Balance Sheet or acquired
after the date thereof, free and clear of all Security Interests, except as
defined under the security agreement with Highland Bank as disclosed under
(S)4(p), and except for properties and assets disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance Sheet.
(f) Subsidiaries. The Company has no Subsidiaries or Affiliates.
------------
(g) Financial Statements. Attached hereto as EXHIBIT C are the following
--------------------
financial statements (collectively the "Financial Statements"): (i) audited
--------------------
consolidated and unaudited consolidating balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the
fiscal years ended December 31, 1996, for the Company and its Subsidiaries;
and (ii) unaudited consolidated and consolidating preliminary balance
sheets and statements of income, (the "Most Recent Financial Statements")
--------------------------------
as of December 31, 1997 and any subsequent months ending financials up to
the Closing Date for the Company. The Financial Statements (including the
notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of the Company as of such dates and the results of
operations of the Company for such periods, are correct and complete, and
are consistent with the books and records of the Company (which books and
records are correct and complete); provided, however, that the Most Recent
Financial Statements are subject to normal year-end adjustments (which will
not be material individually or in the aggregate) and lack footnotes and
other presentation items, and are subject to the adjustments and comments
set forth in (S)4(G) of the Disclosure Schedule.
(h) Events Subsequent to Most Recent Financial Statements. Since the Most
-----------------------------------------------------
Recent Financial Statements, and through the Closing Date and the Escrow
Delivery Date, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Company. Without limiting the generality of the foregoing,
since that date:
(i) the Company has not sold, leased, transferred, or assigned any
of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Company has not entered into any agreement, contract, lease,
or license (or series of related agreements, contracts, leases, and
licenses) outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than
$2,500 to which the Company is a party or is bound;
(iv) the Company has not imposed, either voluntarily or
involuntarily, any Security Interest or lien upon any of its assets,
tangible or intangible;
<PAGE>
(v) the Company has not made any capital expenditure (or series of
related capital expenditures) either involving more than $2,500 or
outside the Ordinary Course of Business;
(vi) the Company has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and
acquisitions) either involving more than $1,000 or outside the
Ordinary Course of Business;
(vii) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation either involving
more than $200 singly or $1,000 in the aggregate;
(viii) the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) the Company has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims) outside
the Ordinary Course of Business;
(x) the Company has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the charter or
bylaws of the Company;
(xii) the Company has not issued, sold, or otherwise disposed of any
of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(xiii) the Company has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of
its capital stock;
(xiv) the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to any of its property;
(xv) the Company has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvi) the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
<PAGE>
(xvii) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xviii) the Company has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xix) the Company has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xx) the Company has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving any of the Company; and
(xxii) the Company has not committed to any of the foregoing.
(i) Undisclosed Liabilities. Subject to the Purchase Price Adjustment in
-----------------------
(S)2(f)(ii), the Company does not have any Liability (and there is no Basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Most
Recent Financial Statements (rather than in any notes thereto) and (ii)
Liabilities which have arisen after the Most Recent Financial Statements in
the Ordinary Course of Business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law).
(j) Legal Compliance. The Company and its predecessors have complied with
----------------
all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any
of them alleging any failure so to comply.
(k) Tax Matters.
-----------
(i) The Company has filed all Tax Returns that it was required to
file on or before the date due. All such Tax Returns were correct and
complete in all respects. All Taxes owed by the Company (whether or
not shown on any Tax Return) have been paid on or before the date due.
The Company has not granted and is not subject to any extension of
time within which to file any Tax Return. No claim has ever been made
by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
There are no Security
<PAGE>
Interests on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other
third party.
(iii) No director, officer, or employee responsible for Tax matters
of the Company, including the Seller, expects any authority to assess
any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
the Company either (A) claimed or raised by any authority in writing
or (B) as to which the Seller and the directors and officers (and
employees responsible for Tax matters) of the Company has Knowledge
based upon personal contact with any agent of such authority.
(S)4(K)(III) of the Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect to the
Company for taxable periods ended on or after DECEMBER, 1991,
indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit. The Seller
has delivered to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since
DECEMBER, 1991.
(iv) The Company has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Company is not a party to any Tax allocation or sharing
agreement.
(vi) (S)4(K)(VI) of the Disclosure Schedule sets forth the following
information with respect to the Company as of the end of the calendar
month immediately preceding the execution of this agreement (as well
as on an estimated pro forma basis as of the Closing giving effect to
the consummation of the transactions contemplated hereby): (A) the
basis of the Company's assets; (B) the basis of the stockholder in his
stock; (C) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Company; and (D) the amount
of any deferred gain or loss allocable to the Company.
(vii) The unpaid Taxes of the Company (A) did not, as of the Most
Recent Fiscal Month End, exceed the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (B)
do not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of
the Company in filing their Tax Returns.
<PAGE>
(l) Real Property.
-------------
(i) The Company owns no real property.
(ii) (S)4(1)(II) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to the Company. The
Seller has delivered to the Buyer correct and complete copies of the
leases and subleases listed in (S)4(l)(ii) of the Disclosure Schedule
(as amended to date). With respect to each lease and sublease listed
in (S)4(l)(ii) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
(B) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated
hereby;
(C) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time,
would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the lease or sublease has repudiated any
provision thereof;
(E) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(F) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (E) above are
true and correct with respect to the underlying lease;
(G) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(H) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and
have been operated and maintained in accordance with applicable
laws, rules, and regulations;
(I) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of
said facilities; and
(J) following the transactions contemplated hereby the Company
shall have the continued right to possession and quiet enjoyment
of all real property leased or subleased to the Company free of
restrictions which would impair the use, occupancy or value to
the Company during the remaining term of each lease or sublease.
<PAGE>
(m) Intellectual Property.
---------------------
(i) The Company owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property
necessary or desirable for the operation of the businesses of the
Company as presently conducted and as presently proposed to be
conducted, including all publications and curriculum. Each item of
Intellectual Property owned or used by the Company immediately prior
to the Closing hereunder will be owned or available for use by the
Company on identical terms and conditions immediately subsequent to
the Closing hereunder. The Company has taken all necessary and
desirable action to maintain and protect each item of Intellectual
Property that it owns or uses, including registration of all
copyrighted materials. (S)4(M)(I) of the Disclosure Schedule
identifies all Intellectual Property owned by the Company and the
Company has not granted any sublicense or granted any other right or
permission for such owned Intellectual Property to be used by any
third party.
(ii) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Sellers and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Company has ever received any
charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including
any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of
the Seller and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Company, no
third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
any of the Company.
(iii) (S)4(M)(III) of the Disclosure Schedule identifies each patent,
copyright, trademark or registration which has been issued to the
Company with respect to any of its Intellectual Property, identifies
each pending patent application or application for registration which
the Company has made with respect to any of its Intellectual Property,
and identifies each license, agreement, or other permission which the
Company has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). The Seller has
delivered to the Buyer correct and complete copies of all such
patents, registrations, applications, licenses, agreements, and
permissions (as amended to date) and have made available to the Buyer
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such
item. (S)4(m)(iii) of the Disclosure Schedule also identifies each
trade name or unregistered trademark used by the Company in connection
with any of its businesses. With respect to each item of Intellectual
Property required to be identified in (S)4(m)(iii) of the Disclosure
Schedule:
(A) the Company possess all right, title, and interest in and to
the item, free and clear of any Security Interest, license, or
other restriction;
<PAGE>
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, enforceability, use, or
ownership of the item; and
(D) the Company has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(iv) (S)4(M)(IV) of the Disclosure Schedule identifies each item of
Intellectual Property that any third party owns and that the Company
uses pursuant to license, sublicense, agreement, or permission. The
Sellers have delivered to the Buyer correct and complete copies of all
such licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each item of Intellectual Property required to
be identified in (S)4(m)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force
and effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the assignments
and assumptions referred to in (S)2 above);
(C) no party to the license, sublicense, agreement, or permission
is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or permission
has repudiated any provision thereof,
(E) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are
true and correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling,
or charge;
(G) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and
<PAGE>
(H) the Company has not has granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
(v) To the Knowledge of the Seller and the directors and officers
(and employees with responsibility for Intellectual Property matters)
of the Company, the Company will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual
Property rights of third parties as a result of the continued
operation of its businesses as presently conducted and as presently
proposed to be conducted.
(n) Tangible Assets. The Company owns or leases all buildings, machinery,
---------------
equipment, and other tangible assets necessary for the conduct of its
businesses as presently conducted and as presently proposed to be
conducted. Each such tangible asset is free from defects (patent and
latent), has been maintained in accordance with normal industry practice,
is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used and
presently is proposed to be used.
(o) Inventory. The inventory of the Company consists of books, equipment
---------
and supplies, all of which is merchantable and fit for the purpose for
which it was procured, and none of which is obsolete, damaged, or
defective.
(p) Contracts. (S)4(P) of the Disclosure Schedule lists all contracts and
---------
other agreements to which the Company is a party, whether written or oral,
other than student enrollment agreements. The Seller has delivered to the
Buyer a correct and complete copy of each written agreement listed in
(S)4(P) of the Disclosure Schedule (as amended to date) and a written
summary setting forth the terms and conditions of any oral agreement
referred to in (S)4(p) of the Disclosure Schedule. With respect to each
such written agreement, except as set forth in (S)4(p) of the Disclosure
Schedule: (A) the agreement is legal, valid, binding, enforceable, and in
full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) no
party is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) no
party has repudiated any provision of the agreement. With respect to any
oral agreement described in Section 4(p) of the Disclosure Schedule, (X) no
party is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement and (Y) no
party has repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. Subject to the Purchase Price
-----------------------------
Adjustment in (S)2(f)(ii), all notes and accounts receivable of the Company
are reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, and
will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth as of the Most Recent
Financial Statements (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom
and practice of the Company.
<PAGE>
(r) Powers of Attorney. There are no outstanding powers of attorney
------------------
executed on behalf of the Company.
(s) Insurance. (S)4(S) of the Disclosure Schedule identifies and sets
---------
forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the
Company has been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past five [5] years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and
operate) of coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the policy
will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) neither the Company nor any other
party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred
which, with notice or the lapse of time, would constitute such a breach or
default, or permit termination, modification, or acceleration, under the
policy; and (D) no party to the policy has repudiated any provision
thereof. The Company has been covered during the past 7 years by insurance
in scope and amount customary and reasonable for the businesses in which it
has engaged during the aforementioned period. (S)4(s) of the Disclosure
Schedule describes any self-insurance arrangements affecting the Company.
(t) Litigation. (S)4(T) of the Disclosure Schedule sets forth each
----------
instance in which the Company (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in (S)4(t) of the Disclosure
Schedule could result in any material adverse change in the business,
financial condition, operations, results of operations, or future prospects
of the Company. The Seller and the directors and officers (and employees
with responsibility for litigation matters) of the Company have no reason
to believe that any action, suit, proceeding, hearing, or investigation
other than as disclosed in Section 4(t) may be brought or threatened
against the Company.
<PAGE>
(u) Employees. To the Knowledge of the Seller and the directors and
---------
officers (and employees with responsibility for employment matters) of the
Company, no executive, key employee, or group of employees has any plans to
terminate employment with the Company. The Company is not a party to or
bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Company has not committed any unfair labor
practice. The Sellers and the directors and officers (and employees with
responsibility for employment matters) of the Company have no Knowledge of
any organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees of the Company.
(v) Employee Benefits.
-----------------
(i) (S)4(v) of the Disclosure Schedule lists each Employee Benefit
Plan that the Company maintains or to which the Company contributes.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in
all respects with the applicable requirements of ERISA, the Code,
and other applicable laws.
(B) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-l's, and Summary
Plan Descriptions) have been filed or distributed appropriately
with respect to each such Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title I of ERISA and of
Code (S)4980B have been met with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been
paid to each such Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any period ending
on or before the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Company. All
premiums or other payments for all periods ending on or before
the Closing Date have been paid with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under
Code (S)401(a) and has received, within the last two years, a
favorable determination letter from the Internal Revenue Service.
(E) The market value of assets under each such Employee Benefit
Plan which is an Employee Pension Benefit Plan equals or exceeds
the present value of all vested and nonvested Liabilities
thereunder determined in accordance with PBGC methods, factors,
and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
<PAGE>
(F) The Seller has delivered to the Buyer correct and complete
copies of the plan documents and summary plan descriptions, the
most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report, and
all related trust agreements, insurance contracts, and other
funding agreements which implement each such Employee Benefit
Plan.
(ii) With respect to each Employee Benefit Plan that the Company
maintains or ever has maintained or to which any of them contributes,
ever has contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan has been completely or partially terminated or been
the subject of a Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC to
terminate any such Employee Pension Benefit Plan has been
instituted or threatened.
(B) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability
for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of
the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits)
is pending or threatened. The Seller and the directors and
officers (and employees with responsibility for employee
benefits matters) of the Company have no Knowledge of any Basis
for any such action, suit, proceeding, hearing, or
investigation.
(C) The Company has not incurred, and the Seller and the
directors and officers (and employees with responsibility for
employee benefits matters) of the Company have no reason to
expect that the Company will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV
of ERISA (including any withdrawal Liability) or under the Code
with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(iii) The Company has never been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal
Liability) under any Multiemployer Plan.
(iv) The Company does not maintain nor has it ever maintained, or
ever been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with Code
(S)4980B).
<PAGE>
(w) Guaranties. The Company is not is a guarantor or otherwise is liable
----------
for any Liability or obligation (including indebtedness) of any other Person.
(x) Environment, Health, and Safety.
-------------------------------
(i) The Company and its predecessors have complied with all
Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against any of them alleging any
failure so to comply. Without limiting the generality of the preceding
sentence, the Company, and its predecessors have, obtained and been in
compliance with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and
Safety Laws.
(ii) All properties and equipment used in the business of the Company
and its predecessors have been owned operated and managed in
compliance with all Environmental, Health and Safety Laws and
prevailing standards.
(y) Adverse Regulation or Legislation. Seller knows of no pending or
---------------------------------
proposed legislation, pending or proposed acts of regulatory bodies,
government agencies, quasi-governmental agencies, or boards, or other
pending actions or proposals which may adversely affect the Company.
(z) Seller's Business Relationships with the Company. The Seller has not
------------------------------------------------
been involved in any business arrangement or relationship with the Company
within the past 12 months, and the Seller does not own or have any rights
with respect to any asset, tangible or intangible, which is used in the
business of the Company, except as set forth in (S)4(BB) of the Disclosure
Schedule.
(aa) Department of Education. The Company is not currently involved with
-----------------------
any issues with the U.S. Department of Education which may adversely affect
the Company. (S)4(CC) of the Disclosure Schedule lists the official
published student loan default rates of the Company for the last three
years reported by the U.S. Department of Education and the Seller's best
efforts estimate of the Company's default rate for subsequent years to the
published default rates up to the Closing Date.
(bb) Disclosure. The representations and warranties contained in this (S)4
----------
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this (S)4 not misleading.
<PAGE>
5. PRE-CLOSING COVENANTS.
---------------------
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its best efforts to take
-------
all action and to do all things necessary, in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in (S)7
below).
(b) Notices and Consents. The Seller will cause the Company to give any
--------------------
notices to third parties, and will cause the Company to use its best
efforts to obtain any third party consents, that are required in connection
herewith or that the Buyer reasonably may request in connection with the
matters referred to in (S)4(c) above. Each of the Parties will (and the
Seller will cause the Company) give any such notices to, make any filings
with, and use its best efforts to obtain any such authorizations, consents,
and approvals of governments, governmental agencies, and quasi-governmental
agencies in connection with the matters referred to in (S)3(a)(ii),
(S)3(b)(ii), and (S)4(c) above. Without limiting the generality of the
foregoing, each of the Parties will file (and the Seller will cause the
Company to file) any forms, notification or requests for approval disclosed
in Section 4(c) that may be required by the Department of Education, the
State of Minnesota or any institutional or program accrediting body, or
other institution governing the operation of the Company.
(c) Operation of Business. The Seller will not cause or permit the
---------------------
Company to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business, provided that the
Closing Date (but not necessarily the Escrow Delivery Date) occurs within
twenty-eight (28) business days of the execution and delivery of this
Agreement by both parties. Without limiting the generality of the
foregoing, the Seller will not cause or permit the Company to (i) declare,
set aside, or pay any dividend or make any distribution with respect to its
capital stock or redeem, purchase, or otherwise acquire any of its capital
stock, (ii) otherwise engage in any practice, take any action, or enter
into any transaction of the sort described in (S)4(h) above.
(d) Preservation of Business. The Seller will cause the Company to keep
------------------------
its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(e) Full Access. The Seller will permit, and the Seller will cause the
-----------
Company to permit. representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Company, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Company.
(f) Notice of Developments. The Seller will give prompt written notice to
----------------------
the Buyer of any material adverse development causing a breach of any of
the representations and warranties in (S)4 above. Each Party will give
prompt written notice to the others of any
<PAGE>
material adverse development causing a breach of any of his or its own
representations and warranties in (S)3 above. No disclosure by any Party
pursuant to this (S)5(f), however, shall be deemed to amend or supplement
Annex I, Amex II, any Exhibit hereto, or the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(g) Exclusivity. The Seller will not (and the Seller will not cause or
-----------
permit the Company to) (i) solicit, initiate, continue, hold in abeyance,
or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets of the Company
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or
seek any of the foregoing. Any such discussion or negotiations with any
party other than the Buyer have been terminated. Without limiting the
foregoing, the Seller will not vote his Company Shares in favor of any such
acquisition structured as a merger, consolidation, or share exchange. The
Seller will notify the Buyer immediately if any Person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
6. POST-CLOSING COVENANTS.
----------------------
The Parties agree as follows with respect to the period following the
Closing.
(a) General. In case at any time after the Closing any further action is
-------
necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under (S)8 below). The Seller acknowledges and agrees that from and after
the Closing the Buyer will be entitled to possession of all documents,
books, records (including Tax records), agreements, and financial data of
any sort relating to the Company.
(b) Litigation Support. In the event and for so long as any Party
------------------
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving the Company, each of the other Parties
will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and
access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting
or defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under (S)8 below).
(c) Transition. The Seller will not take any action that is designed or
----------
intended to have the effect of discouraging any lessor, licensor. student,
customer, supplier, or other business associate of the Company from
maintaining the same business relationships with the Company
<PAGE>
after the Closing as it maintained with the Company prior to the Closing.
The Seller will refer all student and potential student inquiries relating
to the businesses of the Company to the Buyer from and after the Closing.
(d) Confidentiality. The Seller will treat and hold as such all of the
---------------
Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly
to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which
are in his possession. In the event that the Seller is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, that Seller will
notify the Buyer promptly of the request or requirement so that the Buyer
may seek an appropriate protective order or waive compliance with the
provisions of this (S)6(d). If, in the absence of a protective order or the
receipt of a waiver hereunder, the Sellers is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else
stand liable for contempt, that Seller may disclose the Confidential
Information to the tribunal; provided, however, that the disclosing Seller
-----------------
shall use his best efforts to obtain, at the request of the Buyer, an order
or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the
Buyer shall designate. The foregoing provisions shall not apply to any
Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
(e) Restrictive Covenants.
---------------------
(i) Covenant Not to Compete. For a period of five (5) years from and
-----------------------
after the Closing Date, the Seller shall not, directly or indirectly,
within the State of Minnesota or within any state or foreign country
in which the Buyer or the Company maintains a branch office, enter
into or engage in any business that the Company conducts as of the
Closing Date, except as an employee of the Company pursuant to the
Employment Agreement. The business of the Company includes any post-
secondary institution of higher learning that is authorized by
applicable state authorities to award certificates, diplomas and/or
degrees in the subject areas of the allied health professions,
including, but not limited to the areas of health assessment and
treating occupations, health technicians and technologist professions.
The restrictions of this (S)6(e) shall extend to any and all
activities of the Seller, whether as an independent contractor,
partner or joint venturer, or as an officer, director, stockholder,
agent, employee or salesman for any person, firm, partnership,
corporation or other entity, or otherwise. The restrictions of this
(S)6(e) shall not be violated by the ownership of no more than 2% of
the outstanding securities of any company whose stock is traded on a
national securities exchange or is quoted in the Automated Quotation
System of the National Association of Securities Dealers (NASDAQ).
(ii) Except as an employee of the Buyer or the Company, pursuant to
the Employment Agreement, for a period of five (5) years from and
after the Closing Date, the Seller agrees he will refrain from and
will not, directly or indirectly, as independent contractor, employee,
consultant, agent, partner, student, joint venturer,
<PAGE>
or otherwise solicit any of the employees of the Employer to terminate
their employment.
(iii) The period of time during which the Seller is prohibited from
engaging in certain business practices pursuant to this (S)6(e) shall
be extended by any length of time during which the Seller is in breach
of such covenants.
(iv) It is understood by and between the parties hereto that the
foregoing restrictive covenants set forth in (S)6(e) are essential
elements of this Agreement, and that, but for the agreement of the
Seller to comply with such covenants, the Buyer would not have agreed
to enter into this Agreement. Such covenants by the Seller shall be
construed as agreements independent of any other provision in this
Agreement. The existence of any claim or cause of action of the
Seller against the Buyer or the Company, whether predicated on this
Agreement, or otherwise, shall not constitute a defense to the
enforcement by the Buyer or the Company of such covenants.
(v) It is agreed by the Buyer and the Seller that if any portion of
the covenants set forth in this (S)6(e) are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of
such covenants shall be considered divisible both as to time and
geographical area. The Buyer and the Seller agree that, if any court
of competent jurisdiction determines the specified time period or the
specified geographical area applicable to this (S)6(e) to be invalid,
unreasonable, arbitrary or against public policy, a lesser time period
or geographical area which is determined to be reasonable, non-
arbitrary and not against public policy may be enforced against the
Seller. The Buyer and the Seller agree that the foregoing covenants
are appropriate and reasonable when considered in light of the nature
and extent of the business conducted by the Buyer and the Company.
(vi) A dispute, controversy or claim under this (S)6(e) shall be
submitted to a court of competent jurisdiction for adjudication, and
the prevailing party shall be entitled to an award of reasonable
attorneys fees and costs.
(vii) The Buyer and the Seller acknowledge that it would be
impractical or extremely difficult to determine the Buyer's damages in
the event of a breach of this (S)6(e), and taking into account all
existing circumstances as of the date of this Agreement, the sum of
$500,000 is a reasonable estimate of the Buyer's actual damages in
such event. Consequently, in the event of a breach of this (S)6(e),
the Buyer shall be entitled to liquidated damages in the amount of
$500000. The Buyer shall also be entitled to seek specific
performance and injunctive relief to prevent further breach by the
Seller of this (S)6(e). Notwithstanding the foregoing, nothing herein
shall limit or exclude the exercise of any other rights or remedies
that the Buyer may have under applicable law or the Employment
Agreement.
(f) Buyer Note. The Buyer Note shall be imprinted with a legend
----------
substantially in the following form:
<PAGE>
The payment of principal and interest on this Note is subject to certain
recoupment provisions set forth in a Stock Purchase Agreement dated as of
_____, 19__ (the "Purchase Agreement") among the issuer of this Note, the
------------------
person to whom this Note originally was issued, and certain other persons.
This Note was originally issued on ______, 19__, and has not been
registered under the Securities Act of 1933, as amended. The transfer of
this Note is subject to certain restrictions set forth in the Purchase
Agreement. The issuer of this Note will furnish a copy of these provisions
to the holder hereof without charge upon written request.
If the Seller desires to transfer the Buyer Note he first must furnish the Buyer
with (i) a written opinion satisfactory to the Buyer in form and substance from
counsel satisfactory to the Buyer by reason of experience to the effect that the
holder may transfer the Buyer Note as desired without registration under the
Securities Act and (ii) a written undertaking executed by the desired transferee
satisfactory to the Buyer in form and substance agreeing to be bound by the
recoupment provisions and the restrictions on transfer contained herein.
7. CONDITIONS TO OBLIGATION TO CLOSE.
---------------------------------
(a) Conditions to Obligation of the Buyer, The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in (S)3(a) and (S)4
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Seller shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing;
(iii) the Company shall have procured all of the third party consents
specified in (S)5(b) above, including approval of the transfer of
ownership by the United States Department of Education, the State of
Minnesota and all appropriate institutional and program accrediting
bodies, except that such consents may be obtained after the Closing
Date, as provided in (S)7(c) herein;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Buyer to own the
Company Shares and to control the Company, or (D) affect adversely the
right of any of the Company to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in (S)7(a)(i)-
(iv) is satisfied in all respects;
<PAGE>
(vi) the Company and the Parties shall have shall have received all
other authorizations, consents, and approvals of governments and
governmental agencies referred to in (S)3(a)(ii), (S)3(b)(ii), and
(S)4(c) above;
(vii) the Seller shall have obtained an approval, acceptable to the
Buyer of the Buyer's purchase of the Company Shares by (A) the United
States Department of Education, including an acceptable assurance of
the Company's ability to continue to qualify for Title IV loans after
Closing, (B) the State of Minnesota, and (C) all applicable
institutional and programmatic accrediting bodies, including the
Accrediting Bureau of Health Education Schools ("AABHES"), except that
such approvals may be obtained after the Closing Date, as provided in
(S)7(c) herein;
(viii) the Buyer shall have received from counsel to the Seller an
opinion in form and substance as set forth in EXHIBIT D attached
hereto, addressed to the Buyer, and dated as of the Closing Date;
(ix) the Buyer shall have received the resignations, effective as of
the Closing, of each director and officer of the Company other than
those whom the Buyer shall have specified in writing at least five
business days prior to the Closing;
(x) the Buyer shall have obtained on terms and conditions
satisfactory to it all of the financing it needs in order to
consummate the transactions contemplated hereby and fund the working
capital requirements of the Company; and
(xi) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments. and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this (S)7(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in (S)3(b) above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
<PAGE>
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(iv) the Buyer shall have delivered to the Seller a certificate to
the effect that each of the conditions specified above in (S)7(b)(i)-
(iii) is satisfied in all respects;
(v) the Company shall have received all other authorizations,
consents, and approvals of governments and governmental agencies
referred to in (S)3(a)(ii), (S)3(b)(ii), and (S)4(c) above];
(vi) the Sellers shall have received from counsel to the Buyer an
opinion in form and substance as set forth in EXHIBIT E attached
hereto, addressed to the Sellers, and dated as of the Closing Date;
and
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this (S)7(b) if they execute a
writing so stating at or prior to the Closing.
(c) Optional Closing in Escrow: If the only unsatisfied condition to
Closing is approval of this transaction by the United States Department of
Education, as referenced in (S)7(a)(vii)(A), then, at the election of the
Buyer, the Closing may proceed in escrow on the Closing Date. In such
event, the escrow shall be governed as follows:
(i) The Purchase Price referenced in (S)2(b) herein shall be
delivered by the Buyer to Larkin, Hoffman, Daly & Lindgren, Ltd. (the
"Escrow Agent") on the Closing Date. The Buyer may elect to satisfy
the cash portion of the Purchase Price by the delivery of $2,200,000
by wire transfer or other immediately available funds or by the
delivery of Buyer Escrow Note. If the Buyer delivers funds, such funds
shall be deposited into a segregated interest-bearing account (the
"Escrow Account"). All interest accrued on amounts held in the Escrow
Account shall be deemed to be earned by and taxable to the Seller. In
furtherance thereof, the Escrow Agent shall issue to the Seller a Form
1099-IN for the applicable escrow period and the amount of interest.
(ii) The effective date of the Employment Contract shall be the
Escrow Delivery Date referenced in (S)7(c)(iv) herein, and two
executed original copies of the Employment Contract shall be delivered
to the Escrow Agent on the Closing Date;
(iii) The endorsed Company Shares referenced in (S)2(d) herein shall
be delivered to the Escrow Agent by the Seller on the Closing Date;
<PAGE>
(iv) If acceptable to the Buyer, the Buyer shall notify Escrow Agent
of the Buyer's acceptance of the form of the transaction approval
granted by United States Department of Education ("Buyer's Acceptance
Notice"). Within three (3) business days following the delivery of
Buyer's Acceptance Notice to Escrow Agent, Escrow Agent shall deliver
(1) the Purchase Price and all other sums held in the Escrow Account
or the Buyer Escrow Note, as the case may be, and one original
Employment Contract to the Seller, and (2) the endorsed Company Shares
and one original Employment Contract to the Buyer. As used in this
Agreement, "Escrow Delivery Date" shall mean the day that all of the
foregoing items have been delivered in accordance with this
subsection.
(v) All Pre-Closing Covenants referenced in (S)5 herein shall
continue in full force and effect through and including the Escrow
Delivery Date, and all Representations and Warranties Concerning the
Company referenced in (S)4 herein shall be considered remade by the
Seller on the Escrow Delivery Date.
(vi) In the event that satisfactory approval of the transaction by
the United States Department of Education is not obtained within one
hundred twenty (120) days of the Closing Date, or in the event of a
breach of this Agreement by the Seller on or before the Escrow
Delivery Date, the Buyer may terminate this Agreement by providing
written notification to the Escrow Agent and instructing the Escrow
Agent to return the Purchase Price and both original copies of the
Employment Contract to the Buyer and to return the endorsed Company
Shares to the Seller. The Buyer shall have the sole discretion to
extend the date for approval by the United States Department of
Education by an additional ninety (90) days.
(vii) All costs and expenses of the Escrow Account and the Escrow
Agent shall be borne and paid solely by the Seller. The Seller shall
indemnify the Escrow Agent and hold the Escrow Agent harmless from all
costs and expenses incurred by the Escrow Agent in furtherance of its
duties and obligations hereunder, except for the Escrow Agent's fraud,
willful neglect or gross negligence.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
---------------------------------------
(a) Survival of Representations and Warranties.
------------------------------------------
All of the representations and warranties of the Parties contained in this
Agreement shall survive the Closing hereunder (even if the damaged Party knew or
had reason to know of any misrepresentation or breach of warranty or covenant at
the time of Closing) and continue in full force and effect forever thereafter
(subject to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of the Buyer.
---------------------------------------------------
(i) Subject to the Purchase Price Adjustment in (S)2(f)(ii), in the
event the Seller breaches any of his representations, warranties, and
covenants contained herein, then the Seller agrees to indemnify the
Buyer from and against the entirety of any Adverse
<PAGE>
Consequences the Buyer suffers resulting from, arising out of,
relating to, in the nature of, or caused by the breach.
(ii) The Seller agrees to indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer suffers resulting from,
arising out of, relating to, in the nature of, or caused by any Tax or
Lease Liability of the Company arising on or before the Closing Date,
and including any claim, litigation or other action of any nature
arising out of any action or inaction of the Seller or the Company or
obligation to the U.S. Department of Education prior to the Closing
Date.
(iii) The Seller agrees to the Buyer and/or the Company from and
against the entirety of any Adverse Consequences the Buyer or the
Company suffers resulting from, arising out of, relating to, in the
nature of, or caused by the violation of any Environmental, Health,
and Safety Law based upon acts or conduct arising prior to the Closing
Date.
(c) Indemnification Provisions for Benefit of the Seller.
----------------------------------------------------
(i) In the event the Buyer breaches any of its representations
warranties and covenants contained herein, then the Buyer agrees to
indemnify the Seller from and against the entirety of any Adverse
Consequences the Seller suffers resulting from, arising out of,
relating to, in the nature of, or caused by the breach.
(ii) The Buyer agrees to indemnify the Seller from and against the
entirety of any Adverse Consequences the Seller suffers resulting
from, arising out of, relating to, in the nature of, or caused by any
Liability of the Company arising after the Closing Date (that is in no
way related to action or inaction of the Company prior to the Closing
Date) , including any claim, litigation or other action of any nature
arising out of any action or inaction of the Seller or the Company
after the Closing Date (that is in no way related to action or
inaction of the Company prior to the Closing Date).
(d) Matters Involving Third Parties.
-------------------------------
(i) If any third party shall notify any Party (the "Indemnified
-----------
Party") with respect to any matter (a "Third Party Claim") which may
-----------------
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this (S)8, then the Indemnified Party
------------------
shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party
-----------------
in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing
within 30 days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and
<PAGE>
against the entirety of any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim, (B) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to
the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (C) the Third Party
Claim involves only money damages and does not seek an injunction or
other equitable relief, (D) settlement of, or an adverse judgment with
respect to, the Third Party Claim is not, in the good faith judgment
of the Indemnified Party, likely to establish a precedential custom or
practice materially adverse to the continuing business interests of
the Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with (S)8(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B)
the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to be
withheld unreason ably), and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in (S)8(d)(ii) above is or
becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (C) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim to the fullest extent provided in
this (S)8.
(e) Recoupment Under Buyer Note. The Buyer shall have the option of
---------------------------
recouping all or any part of any Adverse Consequences it may suffer (in
lieu of seeking any indemnification to which it is entitled under this
(S)8) by notifying any Seller that the Buyer is reducing the principal
amount outstanding under his Buyer Note. This shall affect the timing and
amount of payments required under the Buyer Note in the same manner as if
the Buyer had made a permitted prepayment (without premium or penalty)
thereunder.
(f) Other Indemnification Provisions. The foregoing indemnification
--------------------------------
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant. The Seller hereby agrees
<PAGE>
that he will not make any claim for indemnification against any of the
Company by reason of the fact that, prior to Closing, he was a director,
officer, employee, or agent of the Company.
(g) Notice and Opportunity to Cure Non-Material Breaches. In the event of
----------------------------------------------------
any non material breach of a covenant which is capable of being cured, the
non-breaching Party shall give the breaching Party notice of the breach
pursuant to (S)11(g) herein. Thereafter, the breaching Party shall have
fifteen (15) days from the date of the notice to cure the breach.
9. TAX MATTERS.
-----------
The following provisions shall govern the allocation of responsibility as
between Buyer and Seller for certain tax matters following the Closing
Date:
(a) Section 338(h)(10) Election. The Seller agrees, if so directed by the
---------------------------
Buyer, to join with Buyer in making an election under Section 338(h)(10) of
the Code (and any corresponding elections under state, local, or foreign
tax law) (collectively, a "Section 338(h)(10) Election") with respect to
the purchase and sale of the stock of the Company. Seller will pay any Tax,
including any liability of Company for Tax resulting from the application
to it of Treasury Regulation (S)1338(h)(10)-l(f)(5), attributable to the
making of the Section 338(h)(10) Election and will indemnify the Buyer and
the Company against any Adverse Consequences arising out of any failure to
pay such Tax. Sellers will also pay any state, local, or foreign Tax (and
indemnify the Buyer, and Company against any Adverse Consequences arising
out of any failure to pay such Tax) attributable to an election under
state, local or foreign law similar to the election available under Section
338(g) of the Code (or which results from the making of an election under
Section 338(g) of the Code) with respect to the purchase and sale of the
stock of the Company hereunder. To the extent that the Seller suffers and
actually pays any incremental increase in his individual tax liability
solely and directly as a result of the Section 338(h)(10) election, the
Seller shall give notice to the Buyer and shall submit evidence of such an
incremental increase to the Buyer, along with all related documentation.
Thereafter, within sixty (60) business days of the Seller's notice, the
Company shall reimburse the Seller for the demonstrated increase in the
Seller's state or federal income tax that is solely and directly
attributable to the Section 338(h)(10) Election.
(b) Tax Periods Ending On or Before the Closing Date. Buyer shall prepare
------------------------------------------------
or cause to be prepared and file or cause to be filed all Tax Returns for
the Company for all periods ending on or prior to the Closing Date which
are filed after the Closing Date. Sellers shall reimburse Company for
Taxes of the Company with respect to such periods within fifteen (15) days
after payment by Buyer or the Company of such Taxes to the extent such
Taxes are not reflected in the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the Closing Balance
Sheet.
(c) Tax Periods Beginning Before and Ending After the Closing Date. Buyer
--------------------------------------------------------------
shall prepare or cause to be prepared and file or cause to be filed any Tax
Returns of the Company for Tax periods which begin before the Closing Date
and end after the Closing Date. Seller shall pay to Buyer within fifteen
(15) days after the date on which Taxes are paid with respect
<PAGE>
to such periods an amount equal to the portion of such Taxes which relates
to the portion of such Taxable period ending on the Closing Date.
(d) Cooperation on Tax Matters.
--------------------------
(i) Buyer, the Company and Seller shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to
any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
(ii) Buyer and Seller further agree, upon request, to use their best
efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
(iii) Buyer and Seller further agree, upon request, to provide the
other party with all information that either party may be required to
report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
-------------
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any
Minnesota State Taxes, and any similar tax imposed in other states or
subdivisions), shall be paid by Sellers when due, and Sellers will, at
their own expense, file all necessary Tax Returns and other documentation
with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law,
Buyer will, and will cause its affiliates to, join in the execution of any
such Tax Returns and other documentation.
10. TERMINATION.
-----------
(a) Termination of Agreement. The Parties may terminate this Agreement as
------------------------
provided below:
(i) the Buyer and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice
to the Seller on or before the 60/th/ day following the date of this
Agreement if the Buyer is not satisfied for any reason in its sole
discretion with the results of its continuing business, legal, and
accounting due diligence regarding the Company;
<PAGE>
(iii) the Buyer may terminate this Agreement by giving written notice
to the Sellers at any time prior to the Closing (A) in the event any
of the Sellers has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Buyer has notified the Sellers of the breach, and the breach has
continued without cure for a period of 15 days after the notice of
breach or (B) if the Closing shall not have occurred on or before
FEBRUARY 28, 1998, by reason of the failure of any condition precedent
under (S)7(a) hereof (unless the failure results primarily from the
Buyer itself breaching any representation, warranty, or covenant
contained in this Agreement); and
(iv) the Seller may terminate this Agreement by giving written notice
to the Buyer at any time prior to the Closing (A) in the event the
Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, any of the
Sellers has notified the Buyer of the breach, and the breach has
continued without cure for a period of 15 days after the notice of
breach or (B) if the Closing shall not have occurred on or before
FEBRUARY 28, 1998, by reason of the failure of any condition precedent
under (S)7(b) hereof (unless the failure results primarily from any of
the Sellers themselves breaching any representation, warranty, or
covenant contained in this Agreement).
(v) this Agreement may be terminated as provided in (S)7(c)(vi).
(b) Effect of Termination. If any Party terminates this Agreement
---------------------
pursuant to (S)10(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party.
11. MISCELLANEOUS.
-------------
(a) Press Releases and Public Announcements. No Party shall issue any
---------------------------------------
press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of the Buyer and the Seller; provided, however, that any Party may
-----------------
make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its publicly-
traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Parties prior to making the
disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred to
----------------
herein) constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements, or representations by or among the
Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No
<PAGE>
Party may assign either this Agreement or any of his or its rights,
interests, or obligations hereunder without the prior written approval of
the Buyer and the Sellers; provided, however, that the Buyer may (i) assign
-----------------
any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
(e) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
-------
communications here under will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Seller:
----------------
Phillip Miller
With a copy to: Gene N. Fuller, Esquire
Larkin Hoffman Law Firm
1500 Norwest Financial Center
7900 Xerxes Avenue South
Bloomington, MN 55431
If to the Buyer:
---------------
Medical Institutes of America, Inc.
American Education Corporation
Two First National Plaza
20 South Clark Street
Chicago, IL 60603
Attn: Michael C. Markovitz, Chairman
<PAGE>
With a copy to:
Roberta A. Colton, Esq.
Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, P.A.
101 East Kennedy Blvd.
Suite 2700
Tampa, Florida 3360601-1102
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication
shall be deemed to have been duty given unless and until it actually is
received by the intended recipient. Any Party may change the address to
which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice in the
manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law provision or rule (whether of the
State of Minnesota or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Illinois.
(i) Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
(j) Severability. Any term or provision of this Agreement that is invalid
------------
or unenforceable in any situation in any Jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear his or its own costs and
--------
expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. The Seller agree
that the Company has not borne or will bear any of the Sellers' costs and
expenses (including legal fees and costs) in connection with this Agreement
or any of the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation.
<PAGE>
The Parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative
levels of specificity) which the Party has not breached shall not detract
from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(m) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
-------------------------------------------------
Annexes, and Schedules identified in this Agreement are incorporated herein
by reference and made a part hereof.
(n) Pre-Litigation Dispute Mediation. Except as provided in (S)6(e), any
--------------------------------
dispute controversy or claim relating to this Agreement, including but not
limited to the interpretation thereof, or its breach or existence, which
cannot be resolved amicably, shall be referred to mediation, prior to suit
being filed. If the parties cannot agree to a neutral mediator, the
mediation shall be administered by the American Arbitration Association
under its Commercial Mediation Rules. The mediation shall be conducted in
Chicago, Illinois, or such other location as may be determined by mutual
agreement of Parties.
(o) JURY TRIAL WAIVER. EACH PARTY HERETO HEREBY VOLUNTARILY AND KNOWINGLY
-----------------
WAIVES ANY RIGHT ANY OF THEM MAY HAVE TO SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION PROCEEDING BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT.
(p) Attorneys Fees and Costs. In any litigation involving this Agreement,
------------------------
the prevailing party shall be entitled to recover its or his reasonable
attorneys fees and costs, including the fees and costs associated with any
Pre-Litigation Dispute Mediation and appellate fees and costs.
****
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
MEDICAL INSTITUTES OF AMERICA, INC.
ATTEST: /s/ Jamie Wyse
--------------
By: __/s/_________________________________
_____________________ Title: ____________
_______________
WITNESS /s/ Gene N. Fuller
<PAGE>
WITNESSES As To Miller: PHILLIP MILLER
/s/ Gene N. Fuller /s/ Phillip Miller
- ------------------------- ---------------------------------------
Phillip Miller
Gene N. Fuller
- -------------------------
(Print Name)
_________________________
_________________________
(Print Name)
<PAGE>
The undersigned executes and joins, in this Agreement in capacity as the Escrow
Agent pursuant to (S)7(c) and solely for purposes of such (S)7(c) and for
purposes of agreeing to abide by the obligations of the Escrow Agent set forth
in such (S)7(c).
Larkin, Hoffman, Daly & Lindgren, Ltd.
By: /s/ Gene N. Fuller
----------------------------------------
Its: Agent
----------------------------------------
<PAGE>
EXHIBIT 10.22
AGREEMENT TO PURCHASE AND REDEEM STOCK
--------------------------------------
This Agreement to Purchase and Redeem Stock (the "Agreement") is made and
entered into on August 26, 1997, by and among ARGOSY INTERNATIONAL, INC. an
Illinois corporation, ("Purchaser"), STEVEN H. SANTINI ("Seller") and
ASSOCIATION FOR ADVANCED TRAINING IN THE BEHAVIORAL SCIENCES, a California
corporation ("AATBS"), with respect to the following facts:
A. AATBS is engaged in the business (the "Business") of creating,
producing and delivering instructional courses, materials and products designed
to assist individuals in preparing for and passing a variety of professional and
other practice examinations administered nationally, regionally, or by
individual states or local jurisdictions.
B. In addition to the Business, AATBS has commenced and owns and
operates a separate and distinct business that will create, produce and deliver
instructional courses, materials and products designed to enhance the knowledge
and education of individuals who have already obtained a professional license or
passed a professional examination in the fields in which the Business
specializes (the "Continuing Education Division"). The Continuing Education
Division operates under and uses the name "Association For Continuing
Education."
C. AATBS currently delivers its products to its customers in the form of
classroom instruction, printed materials, audio cassettes, computer media, or
some combination thereof.
D. Seller is the sole shareholder of AATBS, owning One Hundred (100)
shares of AATBS's issued and outstanding common stock (the "Shares").
E. AATBS is an S corporation as of the date of this Agreement.
F. Purchaser desires to acquire AATBS and all the operating assets
necessary to conduct the Business. Seller desires to retain the Continuing
Education Division and certain assets specifically identified herein currently
owned by AATBS.
G. Subject to the terms and conditions contained herein, and subject to
the completion of Purchaser's due diligence, Seller wishes to obtain the
Continuing Education Division and the other retained assets by selling a portion
of his Shares to AATBS in exchange for such assets, and Purchaser wishes to
acquire the Business and all the operating assets necessary to conduct the
Business by purchasing the remaining Shares from Seller.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Redemption. Seller hereby agrees to sell Thirteen (13) of the Shares
----------
(the "Redeemed Shares") to AATBS, and AATBS hereby agrees to purchase the
Redeemed Shares from Seller. As
<PAGE>
consideration for the Redeemed Shares, AATBS shall assign and transfer to Seller
the Excluded Assets (defined in Section 5 below), subject to the Excluded
Liabilities, which shall be assumed by Seller (defined in Section 6 below), on
an as is, where is basis with no representations or warranties whatsoever. The
sale and purchase of the Redeemed Shares hereunder shall be pursuant and subject
to all the terms and conditions of this Agreement.
2. Sale and Purchase. Seller hereby agrees to sell Eighty-Seven (87) of
-----------------
the Shares (the "Purchased Shares") to Purchaser, and Purchaser hereby agrees to
purchase the Purchased Shares from Seller, for the purchase price set forth in
Section 7 below, on the payment terms set forth in Section 8 below, pursuant and
subject to all the terms and conditions of this Agreement.
3. Date of Redemption and Sale. The sale and purchase of the Redeemed
---------------------------
Shares as set forth in Section 1 above, and the sale and purchase of the
Purchased Shares as set forth in Section 2 above, shall occur simultaneously and
shall take place and shall be effective after the close of business on August
26, 1997, or on such other date as may be determined by unanimous agreement of
the parties. The day after such date shall be referred to as the "Closing
Date."
4. Included Assets. The parties acknowledge and agree that Purchaser is
---------------
purchasing the Purchased Shares from Seller hereunder in order to acquire the
Business. In furtherance thereof, Seller represents and warrants that, on the
Closing Date, AATBS shall own and operate the Business, and AATBS shall own all
properties and assets used in and necessary to conduct the Business as a going
concern in the normal course in its present form, whether or not specifically
listed herein and whether or not reflected on AATBS's balance sheet. These
assets and properties shall include, but shall not be limited to:
4.1. Exclusive right and title to the name and service mark
"Association For Advanced Training in the Behavioral Sciences."
4.2. All copyrights, any pending applications for copyrights, and
copyrighted materials published under the name "Association For Advanced
Training in the Behavioral Sciences."
4.3. All non-copyrighted materials which have been prepared by or
on behalf of AATBS, or have been or may be utilized in the conduct of the
Business (such as advertising text, brochures, flyers, etc.).
4.4. All equipment, inventory, patents and patent applications,
trademarks, trade names, assumed names, and other intellectual property.
4.5. All books, records, ledgers, moveable leasehold improvements,
transferable licenses and. permits, supplies, contract rights, leasehold
interests and the like.
4.6. All research materials prepared for or on behalf of, or in
the possession of AATBS, including without limitation materials which may be
necessary to maintain, upgrade and improve the products of the Business.
2
<PAGE>
4.7. All products produced for or on behalf of AATBS, and all
products currently under development.
4.8. Employment agreements with current employees of the Business,
and/or contracts with professional consultants, including without limitation
agreements or contracts to maintain, update or deliver the Business's products
to its customers, except as are specifically excluded on Schedule 5 hereto.
----------
4.9. All physical inventories.
4.10. All printing, binding, and pre-press equipment and other
manufacturing machinery (excluding the specifically identified commercial
printing equipment described in Schedule 5 attached) used in the preparation and
----------
manufacture of the Business's products.
4.11. All office furniture, supplies, computer equipment, and such
other equipment as have been or may be utilized in the conduct of the Business.
4.12. All lead, prospect, mailing lists, customer files, and similar
items, both current and historic.
4.13. All vendor files and contracts.
4.14. Covenants not to compete or non-competition agreements owned
by the Business.
4.15. Seller's agreement not to compete, as set forth in Section 15
herein.
4.16. AATBS's past and current records as may exist on the Closing
Date, including without limitation, those related to the operation of the
Business, but excluding any records which may relate to the Excluded Assets and
Excluded Liabilities.
4.17. AATBS's goodwill and goodwill of the Business.
4.18. Subject to Section 10.5 below, all accounts receivable.
4.19. All other assets and properties of AATBS as a going business
of every kind, nature and description whatsoever, tangible and intangible, real
and personal, whether or not reflected in AATBS's balance sheets or other
financial statements required to be furnished hereunder or on any exhibits
attached to this Agreement, except as specifically excluded herein.
5. Excluded Assets. Notwithstanding anything to the contrary in this
---------------
Agreement, the assets, properties, interests and/or rights of AATBS specifically
identified
[PAGE 4 OF ORIGINAL DOCUMENT MISSING (SOME TEXT BETWEEN SECTIONS 5. AND 7.
MISSING)]
3
<PAGE>
7. Purchase Price. Subject to Section 10 below, the purchase price (the
--------------
"Purchase Price") for the Purchased Shares shall be the amount of One Million
Seven Hundred Fifty Thousand Four Hundred Eighty-Four and 23/100 Dollars
($1,750,484.23).
8. Terms of Purchase. The Purchase Price shall be paid as follows:
-----------------
8.1. Down Payment. The amount of One Hundred Thousand and 00/100
------------
Dollars ($100,000.00) shall be paid by Purchaser to Seller in immediately
available funds on the Closing Date.
8.2. Promissory Note. The remainder of the Purchase Price shall be
---------------
evidenced by and shall be paid pursuant to the terms of that certain promissory
note (the "Note") executed by Purchaser in favor of Seller, dated as of the
Closing Date in the face principal amount of One Million Six Hundred Fifty
Thousand Four Hundred Eighty-Four and 23/100 Dollars ($1,650,484.23). The Note
shall provide for interest from the Closing Date on unpaid principal at the rate
of six and one-fourth percent (6-1/4%) per annum. The Note shall provide for
the following payments of principal and interest:
<TABLE>
<CAPTION>
<S> <C>
January 1, 1998 $ 400,000
April 1, 1998 75,000
July 1, 1998 75,000
October 1, 1998 75,000
January 1, 1999 75,000
April 1, 1999 75,000
July 1, 1999 75,000
October 1, 1999 75,000
January 1, 2000 75,000
April 1, 2000 75,000
July 1, 2000 75,000
October 1, 2000 75,000
January 1, 2001 75,000
April 1, 2001 75,000
July 1, 2001 75,000
October 1, 2001 75,000
January 1, 2002 375,000
----------
$1,900,000
</TABLE>
The form of the Note to be executed by Purchaser is attached hereto as Exhibit
-------
A.
9. Security Agreement. Purchaser's obligations under this Agreement and
------------------
under the Note shall be secured by a pledge of the assets and properties
included in the Business as set forth in and pursuant to the terms and
conditions of that certain Security Agreement (the "Security Agreement") dated
even date herewith by and among Purchaser, Seller and AATBS. The form of the
Security Agreement to be executed by the foregoing parties is attached hereto as
Exhibit B.
- ---------
4
<PAGE>
10. Adjustments.
-----------
10.1. Adjustments Generally. Within thirty (30) days after Closing,
---------------------
AATBS and Seller each shall prepare and deliver to each other an accounting
showing any proposed adjustments to the items described in this Section 10.
Within thirty (30) days of such delivery, AATBS and Seller shall agree upon the
adjustments to be made pursuant to such accountings. In the event AATBS and
Seller do not agree by the end of that period, the provisions of Section 31 of
this Agreement regarding mediation and arbitration shall be implemented.
10.2. Payment. Except as provided in Sections 10.3, 10.4 and 10.5
-------
below, the amount of any adjustment shall be paid in cash by Purchaser to
Seller, or by Seller to Purchaser, as the case may, within thirty (30) days
after AATBS and Seller agree on the amount of the adjustment.
10.3. Future Courses. The adjustments shall include agreement
--------------
regarding the amount of (a) all prepayments received by AATBS prior to the
Closing Date for or on account of courses, workshops, seminars, products or
materials to be presented or provided on or after the Closing Date, and (b) the
amount of all costs and expenses paid by AATBS prior to the Closing Date for or
on account of such courses, workshops, seminars, products and materials. For
the purpose of this Section 10.3, all workshop deposits shall be treated as
payment in full for the written materials provided with such workshop, and this
Section 10.3 shall not apply to any workshop deposit received before the Closing
Date if the written materials provided with such workshop are shipped before the
Closing Date. Any excess of costs and expenses paid over prepayments received
shall increase the amount of the last payment due under the Note by a like
amount. Any excess of prepayments received over costs and expenses paid shall
reduce the last payment due under the Note by a like amount.
10.4. Employment Payments. The adjustments shall include agreement
-------------------
upon the amount of the accrued vacation and sick pay with respect to all
employees of AATBS as of the day before the Closing Date. Such amount shall
reduce the last payment due under the Note by a like amount.
10.5. Accounts Receivable. Any payments on accounts receivable
-------------------
(including purchase or other orders received before the Closing Date for
products, materials or services if the products or materials were shipped or the
services were performed fully before the Closing Date, but such purchase or
other orders were not paid before the Closing Date) received by AATBS within one
year after the Closing Date, if retained by AATBS, shall increase the last
payment due under the Note by a like amount. In applying payments received to
accounts receivable generated as of varying dates, if the customer specifies the
particular invoice or bill to which a payment relates, the payment will be
applied to such invoice or bill. In the absence of any specification, the
payments will be applied first to the invoice or bill outstanding for the longer
period of time.
11. Title to and Possession of Excluded Assets.
-------------------------------------------
11.1. Transfer of Title. Title to the Excluded Assets shall be
-----------------
transferred by AATBS to Seller on the day before the Closing Date, effective
after the close of business on the day before the Closing Date. AATBS shall
execute and deliver to Seller a bill of sale and such duly executed
5
<PAGE>
endorsements, assignments and other instruments (collectively, the "Transfer
Documents") as are necessary to vest in Seller title to the Excluded Assets on
an as is, where is basis with no representations and warranties whatsoever. The
form of the bill of sale to be executed by AATBS is attached hereto as Exhibit C
---------
and incorporated by reference.
11.2. "As Is" and "Where Is" Seller shall acquire the Excluded Assets
----- --------
"as is" and "where is," and all representation and warranties respecting the
Excluded Assets, whether express or implied, are hereby disclaimed. including
any representations or warranties as to merchantability or fitness for any
particular purpose.
11.3. Release by Seller. Seller hereby releases and fully discharges
-----------------
AATBS, its stockholders, agents, employees, successors and assigns, jointly and
severally, from any and all obligations, benefits or claims of whatever kind
which may accrue, or have accrued to him personally, or may accrue in the future
in his capacity as an employee, officer and director of AATBS or any other
relationship between Seller and AATBS or by reason of any matter, cause,
happening or thing, occurring prior to, on, and after the Closing Date, except
as specifically set forth herein. This release shall be effective as of the
Closing Date and shall survive closing.
11.4. Possession. Seller is entitled to and shall take possession of
----------
the Excluded Assets on the Closing Date at Seller's expense. All risk of loss
with respect to the Excluded Assets shall be on Seller as of the Closing Date.
12. Premises Lease.
--------------
12.1. Existing Lease. AATBS currently occupies premises (the
--------------
"Premises") located at 5126 Ralston Street, Ventura, California 93003, pursuant
to that certain Standard Industrial/Commercial Multi-Tenant Lease--Modified Net
dated November 3, 1995, together with all Addenda thereto, by and between the
Gordon Family Trust ("Landlord") and AATBS and guaranteed by Seller, as amended
by that certain First Amendment to the Standard Industrial/Commercial Multi-
Tenant Lease--Modified Net dated on or about December 13, 1995, by and between
Landlord and AATBS (collectively, the "Premises Lease").
12.2. Assignment to Seller. Seller and AATBS shall obtain an
--------------------
assignment of the Premises Lease to Seller to be effective not later than the
Closing Date. Seller, AATBS and Landlord shall prepare and execute all
documents necessary to effectuate such assignment.
12.3. Sublease. Seller and Purchaser shall enter into that certain
--------
Standard Sublease agreement (the "Sublease") attached hereto as Exhibit D. The
---------
Sublease shall provide for, among other things, Purchaser's sublease from Seller
of that portion of the Premises identified on the diagram attached to the
Sublease, rent not to exceed 50 cents per square foot per month, and a term
beginning on the Closing Date and ending on January 31, 1999. Seller shall
obtain Landlord's consent to the Sublease.
13. Other Agreements. Reference is hereby made to the following
----------------
agreements and documents:
6
<PAGE>
13.1. Illinois UCC-1. That certain Financing Statement on Form UCC-1
--------------
(the "Illinois UCC-1") by AATBS as debtor in favor of Seller as secured party,
to be filed with the Illinois Secretary of State, perfecting In Illinois the
pledge by AATBS to Seller of all the AATBS assets identified thereon as security
for Purchaser's and AATBS's obligations under this Agreement and the Note.
13.2. California UCC-1. That certain Financing Statement on Form
----------------
UCC-1 (the "California UCC-1) by AATBS as debtor in favor of Seller as secured
party, to be filed with the California Secretary of State, perfecting in
California the pledge by AATBS to Seller of all the AATBS assets identified
thereon as security for Purchaser's and AATBS's obligations under this Agreement
and the Note.
13.3. Abandonment Statement. That certain Statement of Abandonment
---------------------
of Use of Fictitious Business Name (the "Abandonment Statement") to be executed
by AATBS abandoning the name "Association For Continuing Education."
14. Bank Accounts. The AATBS checking and other bank accounts
-------------
specifically identified on Schedule 5.1 attached shall be assigned and
------------
transferred by AATBS to Seller pursuant to Sections 1 and 11 above, effective
after the close of business on the day before the Closing Date. As transferred
to Seller hereunder, such accounts shall contain and include all amounts
deposited into such accounts prior to the Closing Date. No deposits of AATBS
funds shall be made into any such account on or after the Closing Date, and any
such deposits shall be immediately returned to AATBS, except as otherwise agreed
by all the parties. Seller shall specifically be permitted to write checks on
or otherwise withdraw funds from such accounts on and after the Closing Date.
Seller shall not be required to change the name on or identification number of
any such account. Seller shall close all such accounts on the Closing Date or
as soon as possible thereafter. From and after the Closing Date, neither
Purchaser nor AATBS shall have any right or power to write checks on or withdraw
funds from any such account. AATBS shall open one or more new accounts on or
after the Closing Date for the conduct of its business.
15. Agreement Not to Compete.
------------------------
15.1. Agreement. In recognition of the irreparable harm which will
---------
be done to the value of the Business should Seller re-engage in a business
similar to the Business, and for the consideration, as herein granted, Seller
hereby agrees to not engage in any business, directly or indirectly, in
competition with the Business as an owner, shareholder, investor, advisor,
employee, consultant or any other manner, on a full-time or part-time basis, for
compensation or not, or for any other consideration, for so long as Purchaser,
or any person deriving tide to the goodwill of the Business from Purchaser, or
ten (10) years from the Closing Date, whichever occurs first, in each county of
California as specified in Schedule 15.1(a) attached hereto and incorporated by
----------------
reference, and in each county of the United States, as specified in Schedule
--------
15.1(b) attached hereto and incorporated by reference. The area within which
- -------
Seller shall be subject to this agreement not to compete shall include any area
in which AATBS has conducted its business in the United States up to the Closing
Date, and any area designated by Purchaser on Schedule 15.1(c) attached hereto
----------------
and incorporated by reference as an area in which Purchaser intends to initiate
AATBS's business.
7
<PAGE>
15.2 Family Members. Seller further agrees that any person related,
--------------
on or after the Closing Date (by blood or marriage), to Seller, or to any
officer or shareholder of AATBS, including present or future spouses and
children (natural, by marriage or adoption), shall likewise be bound by the
agreement not to compete set forth in Section 15.1 above. Should a person
described in the preceding sentence violate this Agreement, Seller agrees that
it will he construed as if Seller violated the agreement not to compete.
15.3. Exclusion of Software Development Business. Purchaser, AATBS
------------------------------------------
and Seller agree that any activities of Seller in the software development
business, whether commercial or retail, excluding any test preparation software
development, shall not be considered a violation of the agreement not to compete
set forth in this Section 15. Any such software shall be unrelated to the
Business, as the Business exists on the Closing Date.
15.4. Exclusion of Continuing Education Business. Purchaser, AATBS
------------------------------------------
and Seller agree that Seller and/or any entity controlled by Seller shall be
permitted to conduct the business conducted by the Continuing Education
Division, as such business is defined herein, and such activities shall not be
considered a violation of the agreement not to compete set forth in this Section
15. In connection with the Continuing Education Division, Seller and/or any
entity controlled by Seller shall be permitted to use the name "Association For
Continuing Education."
15.5. Consideration. As consideration for the agreement not to
-------------
compete set forth in this Section 15, Purchaser shall pay the amount of Fifty
Thousand and 00/100 Dollars ($50,000.00) to Seller in immediately available
funds on the Closing Date.
15.6. Liquidated Damages. Purchaser and Seller acknowledge and agree
------------------
that it would be impractical or extremely difficult to determine Purchaser's or
its assignees' actual damages in the event of a breach by Seller of this
agreement not to compete and, taking into account all the circumstances existing
on the date of this Agreement, the sum of One Million and 00/100 Dollars
($1,000,000.00) is a reasonable estimate of Purchaser's actual damages in such
event. Consequently, in the event of a breach by Seller of this agreement not
to compete, Purchaser shall be entitled to liquidated damages in the sum of One
Million and 00/100 Dollars ($1,000,000.00).
15.7. Equitable Remedies. Purchaser, or its assigns, shall also be
------------------
entitled to seek specific performance and injunctive relief to prevent further
breach by Seller of this agreement not to compete.
15.8. Default. In the event of a final foreclosure, a decision
-------
(after the expiration of any appeal period) of a court, binding arbitration or
voluntary transfer permitting Seller to foreclose on, repossess or otherwise
acquire the assets pledged by AATBS as collateral under the Security Agreement,
the agreement not to compete set forth in Sections 15.1 and 15.2 above shall
immediately thereupon become null and void and of no further force or effect.
16. Closing.
-------
16.1. Time and Place. The closing (the "Closing") of the
--------------
transactions contemplated by this Agreement shall take place on the Closing Date
at the offices of American Schools of
8
<PAGE>
Professional Psychology, 20 South Clark Street, Chicago, Illinois, or at such
other place or time as may be determined by mutual agreement of the parties but
in no event later than October 1, 1997.
16.2. Deliveries By Seller. At the Closing, Seller shall deliver to
--------------------
Purchaser:
16.2.1. If not previous executed and delivered by Seller, this
Agreement and the Security Agreement, duly executed by Seller.
161.2. The certificate evidencing the Shares, duly endorsed by
Seller for assignment and transfer to AATBS as to Thirteen (13) shares and to
Purchaser as to Eighty-Seven (87) shares, free and clear of all encumbrance,
liens and claims.
16.2.3. The Sublease, duly executed by Seller.
16.2.4. All other previously undelivered documents required to
be delivered by Seller to Purchaser on or prior to the Closing Date pursuant to
this Agreement, and all documents reasonably deemed necessary by Purchaser's
counsel to effectuate the transactions contemplated herein.
16.2.5. A Certificate of Good Standing for AATBS.
16.2.6. Seller's resignation as an officer and director of
AATBS, and the resignations of such other officers and directors as specified by
Purchaser, to be effective immediately after the execution of this Agreement.
16.3. Deliveries By AATBS.
-------------------
16.3.1. If not previously executed and delivered by AATBS, this
Agreement and the Security Agreement, duly executed by AATBS.
16.3.2. The Transfer Documents, duly executed by AATBS.
16.3.3. The Abandonment Statement, duly executed by AATBS.
16.3.4. The Illinois UCC-1, duly executed by AATBS.
16.3.5. The California UCC-1, duly executed by AATBS.
16.3.6. All other previously undelivered documents required to
be delivered by AATBS on or prior to the Closing Date pursuant to this
Agreement.
16.4. Deliveries By Purchaser.
-----------------------
16.4.1. If not previously executed and delivered by Purchaser,
this Agreement and the Security Agreement, duly executed by Purchaser.
9
<PAGE>
16.4.2. The Sublease, duly executed by Purchaser.
l6.4.3. The Note, duly executed hy Purchaser.
16.4.4. The amount of One Hundred Fifty Thousand and 00/100
Dollars ($150,000.00), (allocated as $100,000 per Section 8.1 and $50,000 per
section 15.5) payable to Seller in immediately available funds.
16.4.5. All previously undelivered documents required to be
delivered by Purchaser to Seller on or prior to the Closing Date pursuant to
this Agreement.
17. Release of Liability For Personal Injury. Notwithstanding anything
----------------------------------------
to the contrary in this Agreement, Seller shall not have any liability on or
after the Closing Date for any personal injury to any employee of the Business
as conducted by AATBS on or after the Closing Date resulting from the operation
of any equipment or other assets owned by AATBS on the Closing Date.
18. Due Diligence Investigation.
---------------------------
18.1. Right of Review and Access. During the period beginning on
--------------------------
April 1, 1997 and ending on the day before the Closing Date, American Education
Corporation, an Illinois corporation ("AEC"), Purchaser, and their authorized
officers, employees, agents and representatives shall have the right to review
and inspect all of AATBS's financial and other records relating to the Business.
AEC and Purchaser shall have the right to inspect the Premises and interview
employees of the Business with respect to matters reasonably relating to the
Business and the performance of the employees in the Business. Seller and AATBS
shall afford AEC and Purchaser access to the Premises for the purpose of the
foregoing review and inspection on reasonable notice during regular business
hours. Seller acknowledges that any such investigations shall be independent of
and in addition to his representations and warranties set forth herein and that
AEC and Purchaser may continue to rely upon the accuracy and completeness of
such representations and warranties at the Closing of the transactions herein
contemplated and thereafter.
18.2. Nondisclosure Agreement. AEC's and Purchaser's review and
-----------------------
inspection pursuant to Section 18.1 above shall be governed by and subject to
that certain Nondisclosure Agreement (the "Nondisclosure Agreement") dated
February 3, 1997, by and between, among others, AEC and AATBS. A copy of the
Nondisclosure Agreement is attached hereto as Exhibit E and incorporated by
---------
reference.
19. Obligations of Seller and AATBS Before Closing Date. During the
---------------------------------------------------
period beginning on the date of this Agreement and ending on the Closing Date,
Seller and AATBS covenant as follows:
19.1. Conduct of Business. Seller and AATBS shall conduct the
-------------------
Business diligently and substantially in the same manner as heretofore
conducted. Except as set forth on Schedule 19.1 attached hereto and
-------------
incorporated by reference, Seller shall not cause AATBS to acquire, and AATBS
shall not acquire, any capital assets having an aggregate value of more than Ten
Thousand and 00/100 Dollars ($10,000.00) or any capital stock or equity of any
corporation or other entity. Seller shall
10
<PAGE>
not cause AATBS to, and AATBS shall not, engage in any other material activities
or transactions without the written consent of Purchaser, or substitute or
exchange any assets used in the Business except in the ordinary course of
business. AATBS shall diligently preserve its existing licenses, permits,
franchises, rights and privileges pertinent to the Business and credit
arrangements with banks and other financial institutions, shall diligently
preserve intact its business organization and retain its present employees,
shall diligently preserve its goodwill and relationships with suppliers,
customers, vendors and others with whom it deals, and shall use its best efforts
to continue to develop the Business.
19.2. Compensation. Except as set forth on Schedule 19.2 attached
------------ -------------
hereto and incorporated by reference, AATBS shall not grant any increases in
wage or salary rates, or authorize the payment of bonuses, to its employees,
officers or directors.
19.3. Notice. Seller and AATBS shall give Purchaser prompt written
------
notice of any fact which, if existing or known on the date of this Agreement,
would have been required to be set forth or disclosed in this Agreement, which
does or with the passage of time will render materially inaccurate any
representation, warranty, covenant or agreement of Seller or AATBS made in or
pursuant to this Agreement.
20. Representations and Warranties of Seller and AATBS. Seller and
--------------------------------------------------
AATBS, jointly and severally, represent and warrant to Purchaser that, as of the
Closing Date:
20.1. Corporate Organization; Power; Good Standing. AATBS is a
--------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the state of its incorporation and has the corporate power to carry on
its business as it is being conducted. AATBS has the corporate power to enter
into and perform its obligations under this Agreement. Seller has the power to
enter into and perform his obligations under this Agreement.
20.2. Capitalization.
--------------
20.2.1. The authorized capital stock of the Company consists of
One Thousand (1,000) shares of common stock, no par value (the "Common Stock"),
and no other class of stock is authorized. On the date hereof, One Hundred
(100) shares of Common Stock are issued and outstanding and are owned
beneficially and of record by Seller. Nine Hundred (900) shares of Common Stock
are authorized but unissued. All outstanding shares have been duly authorized
and validly issued and are fully paid and nonassessable. The Purchased Shares
are free and clear of any liabilities, obligations, claims, liens or
encumbrances.
20.2.2. On the date hereof, there are no outstanding rights,
options, warrants, conversion privileges or agreements of any kind for the
purchase or acquisition from, or the sale or issuance by, AATBS of any shares of
its stock, no authorization therefor has been given, and no shares have been
reserved by Board of Director action for issuance.
20.2.3. Seller has been the only stockholder of AATBS since its
inception, and no other person or entity has or had at any time any right,
option, warrant, conversion privilege or agreement of any other kind related to
stock of AATBS.
11
<PAGE>
20.2.4. None of AATBS's securities have at any time been
offered, issued or sold in violation of any applicable federal, state or other
securities law, rule or regulation.
20.3. Authorization. The execution, delivery and performance of this
-------------
Agreement by AATBS and the consummation of the transactions contemplated hereby
have been duly authorized and approved by all requisite action on the part of
AATBS and no other proceedings by AATBS are necessary to authorize and approve
this Agreement and the consummation of the transactions contemplated hereby and
to make this Agreement valid and binding upon and enforceable against AATBS in
accordance with the terms hereof or to carry out the transactions contemplated
hereby. AATBS shall deliver to Purchaser on or before the Closing Date certified
copies of directors and shareholders resolutions authorizing and approving the
transactions contemplated hereby.
20.4. Execution; Delivery; Binding Effect. This Agreement has been
-----------------------------------
duly executed and delivered by Seller and AATBS and constitutes the legal, valid
and binding obligation of Seller and AATBS, enforceable against Seller and AATBS
in accordance with its terms.
20.5. Financial Information. Financial information relating to the
---------------------
Business, in the form of, but not limited to income statements and balance
sheets for prior and current periods, notes, bank statements and
representations, have been provided by AATBS previously and during Purchaser's
due diligence investigation period prior to the Closing Date (collectively, the
"Financial Statements"). The most recent annual balance sheet dated December
31, 1996 and the income statement for the period then ended, and the most recent
interim balance sheet dated June 30, 1997 and the income statement for the
period then ended (collectively, the "Recent Financial Statements") are attached
hereto as Schedule 20.5. The Financial Statements are in accordance with the
-------------
books and records of AATBS and present fairly on the cash method of accounting
and in accordance with generally accepted accounting principles, consistently
applied throughout the periods involved, the financial condition and results of
operations of AATBS as of the respective dates thereof and for the respective
periods covered thereby. The books, records, and accounts of AATBS maintained
with respect to its business are maintained on the cash method of accounting,
are complete in all material respects and present fairly and accurately the
transactions, assets and liabilities of AATBS with respect to its business.
20.6. Absence of Undisclosed. Liabilities. Except as and to the
-----------------------------------
extent reflected or reserved against in the Recent Financial Statements, or
otherwise described in Schedule 20.6 hereto, and except for liabilities
-------------
occurring in the ordinary course of business subsequent to June 30, 1997, AATBS
has no liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise and whether due or to become due, including, without
limitation, any liabilities for federal or state taxes in respect of or measured
by income or for a federal, state or local environmental law or ordinance
violation.
20.7. No Changes. Since June 30, 1997, except as described in
----------
Schedule 20.7 hereto:
- -------------
20.7.1. there have been no changes in the assets, liabilities,
financial condition, business, operations, affairs or prospects of AATBS from
those reflected in the Recent
12
<PAGE>
Financial Statements, except changes occurring in the ordinary course of
business, which have, either in any case or in the aggregate, a Materially
Adverse Effect, as defined herein;
20.7.2. neither the business, operations, affairs or prospects
of AATBS, nor any of its properties or assets, has been materially adversely
affected by any occurrence or development, whether or not insured against;
20.7.3. there have been no declarations or payments of any
dividends or other distributions in respect of, or any direct or indirect
retirement, redemption, purchase or other acquisition of, any shares of Common
Stock by AATBS except for the purchase of the Redeemed Shares authorized in this
Agreement; and
20.7.4. AATBS has not obligated itself in any way with respect
to the payment of employee bonuses or increased compensation or the providing of
any other compensatory arrangement, whether current or deferred, and whether
payable in cash or other consideration; nor obligated itself to make further
additions to its business properties or further purchases of additional
equipment, except in the ordinary course of business or under existing
contractual commitments the terms of which have been disclosed to the Purchaser
in a schedule appended hereto; nor made any loans or other advances (other than
in exchange for consideration having an equivalent value) to any of its
officers, directors or shareholders, as applicable; nor incurred or canceled,
any indebtedness, encumbered any of its properties or assets, or engaged in any
material transaction not in the ordinary course of its business.
20.8. No Conflicts. The execution, delivery and performance by
------------
Seller and AATBS of this Agreement and the consummation of the transactions
contemplated hereby will not:
20.8.1. violate any provision of law, rule, regulation, order,
judgment or decree of any governmental, administrative or judicial authority
applicable to Seller or AATBS that would, individually or in the aggregate, have
a material adverse effect on the financial condition, results of operations or
reasonable business prospects of the Business (referred to hereinafter as a
"Material Adverse Effect");
20.8.2. require any consent or approval of, filing of notice
to, any governmental or regulatory authority under any provision of law
applicable to Seller;
20.8.3. violate any provision of the Articles of
Incorporation or Bylaws of AATBS: or
20.8.4. require any consent (other than consents that have
already been obtained), approval or notice under, or conflict with, or result in
the breach or termination of, or constitute a default under, or result in the
acceleration of the performance by AATBS under, any indenture, mortgage, deed of
trust, lease, license, franchise, contract, agreement, or other instrument to
which AATBS is a party or by which it or any of its properties or assets is
bound or encumbered that would have, individually or in the aggregate, a
Material Adverse Effect.
13
<PAGE>
20.9. Absence of Changes Other Than In Ordinary Course. For the past
------------------------------------------------
four years, the Business has been operated only in the usual and ordinary course
of business consistent with prior practice.
20.10. Title to Assets. AATBS has good, valid and marketable title
---------------
to all of its assets and such assets are held free and clear of all material
title defects, liens, encumbrances and restrictions, except liens for current
taxes and assessments not yet due and payable.
20.11. Title to and Transfer of Shares. Seller has good, valid and
-------------------------------
marketable title to the Shares and the Shares are fully paid, nonassessable and
validly issued. Seller holds the Shares free and clear of all title defects,
liens, encumbrances and restrictions. Seller's transfers of the Shares hereunder
will not violate any provision of the California securities laws or any order,
agreement or other instrument by which the Seller is bound.
20.12. Leases. Schedule 20.12 attached hereto and incorporated by
------ --------------
reference contains a list of all leases by AATBS of any real or personal
property pertaining to the Business other than the Premises Lease (collectively,
the "Leases") and a description of such real or personal property. Copies of all
Leases have been or will be provided to Purchaser or AEC in connection with the
due diligence investigation by AEC and Purchaser pursuant to Section 18 above.
To the best knowledge of Seller and AATBS, all of the Leases are valid and are
in full force and effect, subject to applicable bankruptcy, insolvency,
moratorium, fraudulent conveyance and similar laws affecting the rights and
remedies of creditors generally and the application of general principles of
equity. Except as set forth in Schedule 20.12 attached, there are no existing
--------------
defaults by AATBS under any Lease nor, to the best knowledge of Seller and
AATBS, by any other party to any Lease, that would have a Material Adverse
Effect.
20.13. Intellectual Property Matters. Schedule 20.13 attached hereto
----------------------------- --------------
and incorporated by reference lists all trademarks, service marks, trade names
and copyrights used in the Business. AATBS owns or, as specified on Schedule
--------
20.13, has the right to use all trademarks, service marks, trade names and
- -----
copyrights used in or necessary in operating the Business in the ordinary course
of business and, to the best knowledge of Seller and AATBS, the consummation of
the transactions contemplated hereby will not impair the exploitation or use of
any such rights by Purchaser, Schedule 20.13 includes a copy of any license or
--------------
other document granting AATBS the right to use any such trademark, service mark,
trade name or copyright used by it. To the best knowledge of Seller and AATBS,
all trademarks, service marks, trade names and copyrights owned by AATBS, all
applications or registrations thereof, all licenses and other agreements
relating thereto, and all agreements relating to the use of technology, know-how
or processes do not violate or infringe any patent, trademark, trade name,
copyright, technology, know-how or process, or other proprietary or trade rights
of any third party. To the best knowledge of Seller and AATBS, there is no
material infringement by any third party of any trademark, service mark, trade
name or copyright owned or licensed by the Seller or AATBS.
20.14. Litigation. Except as set forth on Schedule 20.14 attached
---------- --------------
hereto and incorporated by reference, there are no suits, actions, claims,
proceedings or investigations, investigations pending or, to the best knowledge
of Seller and AATBS, threatened, against Seller before any court, arbitrator or
administrative or governmental body, United States or foreign, which,
14
<PAGE>
if finally determined adversely, is likely, individually or in the aggregate, to
have a Material Adverse Effect.
20.15. Condition of Assets. All the assets owned by AATBS are in
-------------------
good operating condition, order and repair, ordinary wear and tear excepted and,
to the best knowledge of Seller and AATBS, are operated in conformity with all
applicable laws and regulations.
20.16. Adequacy of Assets. Other than bookkeeping, management,
------------------
administrative and other services provided by AATBS and services of certified
public accountants and attorneys contracted for by AATBS, the assets owned by
AATBS (excluding the Excluded Assets) constitute all the assets necessary to
operate the Business in the ordinary course of business from and after the
Closing Date.
20.17. Insolvency. AATBS is not insolvent, its liabilities do not
----------
exceed its assets, it is paying its debts as they come due and the transactions
contemplated by this Agreement will not cause insolvency of the Business.
Seller is not insolvent, his liabilities do not exceed his assets, he is paying
his debts as they come due and the transactions contemplated by this Agreement
will not cause him to become insolvent.
20.18. Licenses. AATBS and its employees have all governmental
--------
licenses and permits (federal, state and local) necessary for the conduct of the
business as now carried on by AATBS and such licenses are in full force and
effect. No violations are or have been recorded in respect of any such licenses
or permits and no proceeding is pending or threatened concerning the revocation
or limitation of any such license or permit.
20.19. Compliance With Applicable Laws. To the best knowledge of
-------------------------------
Seller and AATBS, AATBS has complied with all federal, state and local laws,
statutes, rules, regulations, ordinances, licenses and orders presently in
effect, applicable to the operation of the Business conducted by AATBS. Seller
and AATBS have not taken any action, or failed to take any action, which action
or failure will or would, in any way, preclude or prevent Purchaser from
operating the Business after the Closing in the same general manner as
theretofore operated by AATBS.
20.20. Brokers and Finders. Neither Seller, AATBS, or any person
-------------------
acting on behalf of Seller or AATBS, has employed any broker, agent or finder or
incurred any liability for any broker's fees, agent's commissions, finder's fees
or similar payments in connection with the transactions contemplated hereby.
20.21. Employee Benefits.
-----------------
(i) Schedule 20.21 hereto lists each Employee Benefit Plan
--------------
that AATBS maintains or to which it contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in operation
in all respects with the applicable requirements of ERISA, the
Internal Revenue Code of 1986, as amended (the "Code"), and other
applicable laws.
15
<PAGE>
(B) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-ls, and Summary Plan
Descriptions, as those forms and reports are established under ERISA) have
been filed or distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA
and of Code Section 4980B have been met with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to
each such Employee Benefit Plan which is an Employee Pension Benefit Plan
(as defined below) and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each such Employee
Pension Benefit Plan or accrued in accordance with the past custom and
practice of AATBS. All premiums or other payments for all periods ending on
or before the Closing Date have been paid with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code
Section 401(a) and has received all required favorable determination
letters from the Internal Revenue Service.
(E) The market value of assets under each such Employee Benefit
Plan which is an Employee Pension Benefit Plan equals or exceeds the
present value of all vested and nonvested liabilities thereunder determined
in accordance with PBGC methods, factors, and assumptions applicable to an
Employee Pension Benefit Plan terminating on the date for determination.
(F) The Seller has attached to Schedule 20.21 hereto correct
and complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the
Internal Revenue Service, the most recent Form 5500 Annual Report, and
all related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that AATBS maintains
or ever has maintained or to which it contributes, ever has contributed, or ever
has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan has been the subject of any event as to which notices would be
required to be filed with the PBGC (each, a "Reportable Event"). No
proceeding by the PBGC to terminate any such Employee Pension Benefit Plan
has been instituted or, to the knowledge of any of the Seller and the
directors and officers (and employees with responsibility for employee
benefits matters) of AATBS threatened.
16
<PAGE>
(B) There have been no Prohibited Transactions with respect
to any such Employee Benefit Plan. No fiduciary has any liability for
breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any
such Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of
the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the knowledge of any of Seller
and the directors and officers (and employees with responsibility for
employee benefits matters) of AATBS threatened. None of the Sellers
and the directors and officers (and employees with responsibility for
employee benefits matters) of AATBS has any knowledge of any basis for
any such action, suit, proceeding, hearing, or investigation.
(C) AATBS has not incurred, and none of the Seller and the
directors and officers (arid employees with responsibility for
employee benefits matters) of AATBS has any reason to expect that
AATBS will incur, any liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any
withdrawal liability) or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
(iii) AATBS does not contribute to, never has contributed to, or
never has been required to contribute to any Multiemployer Plan or has any
liability (including withdrawal liability) under any Multiemployer Plan.
(iv) AATBS never has maintained, never has contributed to, or
never has been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type benefits
for current or future retired or terminated employees, their spouses, or
their dependents (other than in accordance with Code Section 4980B).
(v) For purposes of this Section 20, the following definitions
shall apply.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
---------------------
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
-----------------------------
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
-----------------------------
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Prohibited Transactions" shall mean any transaction or event treated as a
-----------------------
prohibited transaction under or as defined in Code Section 4975 or ERISA Section
406.
17
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
----
thereto.
"Multiemployer Plan" shall have the meaning set forth in ERISA Section
------------------
3(37).
20.22. Guaranties. AATBS is not a guarantor of and is not otherwise
----------
liable for any liability or obligation (including indebtedness) of any other
person or entity.
20.23. Environment, Health, and Safety.
-------------------------------
(i) To the best knowledge of Seller and AATBS, AATBS has
complied with all Environmental, Health, and Safety Laws, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against AATBS alleging any failure so
to comply. Without limiting the generality of the preceding sentence, to
the best knowledge of Seller and AATBS, AATBS has obtained and been in
compliance with all of the terms and conditions of all permits, licenses,
and other authorizations which are required under, and has complied with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all Environmental, Health, and Safety Laws.
(ii) To the best knowledge of Seller and AATBS after due
diligence and investigation. AATBS has not handled or disposed of any
substance, arranged for the disposal of any substance, exposed any employee
or other individual to any substance or condition, or owned or operated any
property or facility in any manner that could form the basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against AATBS giving rise to any liability for
damage to any site, location, or body of water (surface or subsurface), for
any illness of or personal injury to any employee or other individual, or
for any reason under any Environmental, Health, and Safety Law.
(iii) To the best knowledge of Seller and AATBS, no
predecessor or affiliate of AATBS has handled or disposed of any substance,
arranged for the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated any property
or facility in any manner that could form the basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against AATBS giving rise to any liability for damage to
any site, location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other individual, or for
any reason under any Environmental, Health, and Safety Law.
(iv) Except as set forth on Schedule 20.23 hereto, all
--------------
properties and equipment used in the business of AATBS, its predecessors
and affiliates, have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans, and
other hazardous substances or wastes regulated under any Environmental,
Health, and Safety Laws.
(v) For purposes of this Agreement, the term
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, and the
18
<PAGE>
Occupational Safety and Health Act of 1970, each as amended, together with
all other laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal,
state, local, and foreign governments (and all agencies thereof) concerning
pollution or protection of the environment, public health and safety, or
employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or wastes into
ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
20.24. Certain Business Relationships with AATBS. Seller has not
-----------------------------------------
been involved in any business arrangement or relationship with AATBS within the
past 12 months, and Seller does not own any asset, tangible or intangible, which
is used in the business of AATBS.
20.25. Disclosure. Neither this Agreement nor any other document,
----------
certificate or statement furnished to Purchaser by or on behalf of Seller or
AATBS in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading; and
there is no fact which materially adversely affects, or in the future may (so
far as Seller can now reasonably foresee) materially adversely affect the
assets, business, operations or prospects of AATBS which has not been set forth
herein or in a schedule furnished to Purchaser.
21. Representations and Warranties of Purchaser. Purchaser represents
-------------------------------------------
and warrants to Seller that, as of the Closing Date:
21.1. Corporate Organization; Power; Good Standing. Purchaser is a
--------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of Illinois. Purchaser is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where it is required to be so
qualified. Purchaser has the corporate power to enter into and perform its
obligations under this Agreement.
21.2. Ownership. All of Purchaser's issued and outstanding stock is
---------
owned by AEC. All of AEC's issued and outstanding stock is owned by Michael C.
Markovitz, Ph.D.
21.3. Authorization. The execution, delivery and performance of this
-------------
Agreement by Purchaser and the consummation of the transactions contemplated
hereby have been duly authorized and approved by all requisite corporate action
on the part of Purchaser and no other corporate action on the part of Purchaser
and no other corporate proceedings are necessary to authorize and approve this
Agreement and the transactions contemplated hereby and to make this Agreement
valid and binding upon and enforceable against Purchaser in accordance with the
terms hereof or to carry out the transactions contemplated hereby. Purchaser
shall deliver to Seller on or before the Closing Date certified copies of
directors and shareholders resolutions authorizing and approving the
transactions contemplated hereby.
19
<PAGE>
21.4. Execution; Delivery; Binding Effect. This Agreement has been
-----------------------------------
duly executed and delivered by Purchaser and constitutes the legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.
21.5. No Conflicts. The execution, delivery and performance by
------------
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby will not:
21.5.1. violate any provision of law, rule, regulation,
order, judgment or decree of any governmental, administrative or judicial
authorities applicable to Purchaser;
21.5.2. require any consent or approval of, filing of
notice to, any governmental or regulatory authority under any provision of law
applicable to Purchaser;
21.5.3. violate any provision of the Articles of
Incorporation or Bylaws of Purchaser; or
21.5.4. require any consent (other than consents that
have been obtained), approval or notice under, or conflict with, or result in
the breach or termination of, or constitute a default under any indenture,
mortgage, deed of trust, lease, license, franchise, contract, agreement, or
other instrument to which Purchaser is a party or by which it or any of its
assets are bound or encumbered.
21.6. Brokers and Finders. Neither Purchaser, AEC, or any person
-------------------
acting on behalf of Purchaser or AEC, has employed any broker, agent or finder
or incurred any liability for any broker's fees, agent's commissions, finder's
fees or similar payments in connection with the transactions contemplated
hereby.
21.7. Disclosure. Neither this Agreement nor any other document,
----------
certificate or statement furnished to Seller by or on behalf of Purchaser in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
22. Contingencies to Closing. The Closing of the transactions
------------------------
contemplated by this Agreement is subject to and conditioned on the satisfaction
of all the following conditions on or before the Closing Date, unless waived by
the appropriate party:
22.1. Other Agreements and Documents. The execution and delivery of
------------------------------
this Agreement, the Security Agreement, the Note, the Illinois UCC-1 and the
California UCC-1.
22.2. Abandonment Statement. The execution and delivery of the
---------------------
Abandonment Statement.
22.3. Sublease Agreement. The execution and delivery of the
------------------
Sublease Agreement.
22.4. Landlord Consent. The Landlord's consent to assignment of the
----------------
Premises Lease by AATBS to Seller and to the Sublease.
20
<PAGE>
22.5. Corporate Resolutions. The delivery by AATBS to Purchaser, and
---------------------
by Purchaser to Seller, of certified copies of directors and shareholders
resolutions of AATBS and Purchaser authorizing and approving the transactions
contemplated hereby.
22.6. Deliveries At Closing. The delivery of all the items required
---------------------
to be delivered at or before the Closing.
22.7. No Litigation. There shall not be any litigation or proceeding
-------------
to restrain or invalidate the consummation of the transactions contemplated
hereby the defense of which involves either expense or lapse of time that would
be materially adverse to the interests of any party.
22.8. Additional Conditions Precedent to Purchaser's Obligation to
------------------------------------------------------------
Close. Without limiting the foregoing, the obligations of Purchaser under this
- -----
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (the fulfillment of any of which may be waived in
writing by Purchaser):
22.8.1. The representations, warranties and covenants of
Seller and AATBS contained in this Agreement shall not only have been true and
complete in all material respects as of the date of this Agreement and when
made, but shall also be true and complete in all material respects as though
again made on the Closing Date, except to the extent that they are incorrect as
of the Closing Date by reason of events occurring after the date of this
Agreement in compliance with the terms hereof which have been disclosed in
writing to Purchaser and written consent to which has been given by Purchaser.
22.8.2. Each of AATBS and Seller shall have performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by each of them at or prior to the
Closing.
22.8.3. Purchaser shall have received a certificate executed
by the Secretary of State of the State of California dated as of a recent date
certifying that AATBS is a corporation in good standing under the laws of the
State of California.
22.8.4. Since the date of execution of this Agreement, there
shall have been no change resulting in a Material Adverse Effect on the
financial condition, business, properties, operations or prospects of AATBS.
22.8.5. All actions, proceedings, instruments, agreements and
documents required to carry out the transactions contemplated by this Agreement
or incidental thereto and all other related legal matters shall have been
reasonably satisfactory to Purchaser, which shall have been furnished with such
copies (certified if requested) of all such actions, proceedings, instruments,
agreements and documents as it shall have reasonably requested.
22.8.6. Purchaser's having completed its due diligence
investigation, with the results being satisfactory to Purchaser, in its sole and
absolute discretion.
23. AATBS Pension Plan.
------------------
21
<PAGE>
23.1. Plan Terminated. The parties acknowledge and agree that
---------------
the AATBS Employees Pension Plan (the "Pension Plan") is, as of the date of this
Agreement, in the process of being terminated. The termination will be effective
as of April 30, 1997. Seller shall indemnify Purchaser and AATBS, after the
Closing Date, against all liabilities or costs associated with the Pension Plan.
23.2. Termination Costs. All costs and expenses of terminating the
-----------------
Pension Plan that are incurred prior to the Closing Date shall be paid by AATBS
prior to the Closing Date, or by Seller pursuant to Section 6.2 above. All
costs and expenses of terminating the Pension Plan that are incurred on or after
the Closing Date shall be the sole responsibility of and shall he paid by
Seller.
23.3. 1996 and 1997 Contributions. Seller represents and warrants
---------------------------
that no contributions to the Pension Plan are required with respect to any
periods beginning on or after January 1, 1996.
23.4. Administration of Termination. Prior to the Closing Date, the
-----------------------------
termination of the Pension Plan shall be administered and supervised by AATBS
and Seller. From and after the Closing Date, the termination of the Pension
Plan shall be administered and supervised solely by Seller. On and after the
Closing Date, AATBS shall cooperate with Seller and shall execute all documents
reasonably requested by Seller with respect to termination of the Pension Plan.
Except as set forth in and as necessary to carry out the preceding sentence, on
and after the Closing Date, neither Purchaser nor AATBS shall have any right,
power or authority to take any action or execute any documents with respect to,
or be in any way involved with, the termination of the Pension Plan.
23.5. Termination Distributions. Any distributions to be made under
-------------------------
the Pension Plan shall be the sole responsibility and liability of Seller. In
the event that, for any reason whatsoever, any portion of the Pension Plan's
assets revert to AATBS, or are distributed or paid to AATBS or Purchaser, on or
after the Closing Date, AATBS and/or Purchaser, as the case may be, shall
immediately thereupon pay such portion to Seller as additional Purchase Price
unless prohibited from doing so by applicable law, in which event AATBS and/or
Purchaser shall pay the funds into an escrow account or the court registry
pending determination of the disposition of those funds.
24. 1997 Tax Items and Tax Returns.
------------------------------
24.1. Agreement to Terminate Year. Purchaser, Seller and AATBS
---------------------------
hereby agree to the application of Internal Revenue Code ("IRC") Section
1377(a)(2)(A), and corresponding provisions of applicable state income tax laws,
in lieu of IRC Section 1377(a)(1) and corresponding provisions of applicable
state income tax laws, with respect to the allocation of AATBS's items for 1997
between Seller and Purchaser. As a consequence, IRC Section 1377(a)(1) shall be
applied as if AATBS's 1997 taxable year consisted of two (2) taxable years, one
ending on the day before the Closing Date, and the other ending on December 31,
1997.
24.2. Elections and Statements. In furtherance of Section 24.1
------------------------
above, AATBS shall attach a statement to its timely-filed 1997 federal and state
income tax returns. The statement shall be signed by an authorized officer of
AATBS under penalties of perjury. The statement shall comply with all the
requirements of Treasury Regulation Section 1.1377-1(b)(5) and other applicable
federal
22
<PAGE>
and state statutes, rules and regulations. Purchaser, Seller and AATBS hereby
consent to AATBS making the election provided for by IRC Section 1377(a)(2)(A)
and corresponding provisions of applicable state income tax laws, and to filing
the statement described above.
24.3. Tax Returns. AATBS and Seller shall be responsible for and
-----------
shall prepare all accounting and tax computations with respect to the period
beginning on January 1, 1997 and ending on the day before the Closing Date and
Seller shall be responsible for all fees and expenses associated therewith.
AATBS and Purchaser shall be responsible for and shall prepare all accounting
and tax computations with respect to the period beginning on the Closing Date
and ending on December 31, 1997 and Purchaser shall be responsible for all fees
and expenses associated therewith. For the purpose of this Section 24, any
deductible Excluded Liabilities shall be treated as paid and deducted by AATBS
on the day before the Closing Date, to the extent permitted under any applicable
income tax laws. The parties shall coordinate and cooperate to eliminate any
duplications, omissions or inconsistencies. The parties jointly shall prepare
the federal and state tax returns for the taxable year of AATBS ending on
December 31, 1997, and the elections and statements required by Section 24.2
above.
24.4. California Franchise Tax. The principles set forth above in
------------------------
this Section 24 shall also apply to the computation of, and responsibility and
liability for, California franchise tax with respect to 1997.
25. Employees.
---------
25.1. Employees of Business. Schedule 25.1(a) attached hereto and
--------------------- ----------------
incorporated by reference is a true and accurate list of the employees of the
Business as of July 24, 1997. Prior to the Closing Date, Seller and AATBS shall
use commercially reasonable efforts to retain the employees listed on Schedule
--------
25.1(a) attached as employees of the Business and shall not terminate any such
- --------
employee except for cause. Schedule 25.1(b) to be prepared on or immediately
----------------
after the Closing Date and to be attached hereto and incorporated here by
reference shall be a true and accurate list of the employees (the "Employees")
of the Business as of the Closing Date.
25.2. Discretionary Employment by Purchaser. In its sole judgment
-------------------------------------
and discretion, Purchaser and AATBS may continue, after the Closing Date, the
employment of any or all of the Employees. Purchaser shall have no duty or
obligation to retain any Employee as an employee of the Business after the
Closing Date.
25.3. Nonsolicitation. In recognition of the irreparable harm that
---------------
may or will be caused to the Business, Seller agrees that neither he nor any
business, partnership, corporation, joint venture or other entity with which the
Seller is indirectly or indirectly involved, employed by, or a beneficial owner
of or participant in, will hire or attempt to hire, or engage or attempt to
engage, directly or indirectly, any Employee, or otherwise cause or encourage
any Employee to leave the Business, on or after the Closing Date, except Robin
Lerner, Richard Santini, Kenneth Santini, Douglas Dewar and Van Tran. The
agreement set forth in this Section 25.3 shall expire ten (10) years after the
Closing Date.
23
<PAGE>
25.4. Liquidated Damages. The parties acknowledge and agree that: (a)
------------------
it would be impractical or extremely difficult to determine AATBS's and
Purchaser's damages in the event of a breach by Seller of Section 25.3 above;
and (b) taking into account all the circumstances existing on the date of this
Agreement, the sum of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) per occurrence is a reasonable estimate of AATBS's and Purchaser's
actual damages in such event. Consequently, in the event of a breach by Seller
of Section 25.3 above, AATBS and Purchaser shall be entitled to liquidated
damages in the sum of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) per occurrence. AATBS, Purchaser and their successors and
permitted assigns shall also be entitled to seek specific performance and
injunctive relief to prevent further breaches of Section 25.3 above by Seller.
26. Non-Solicitation of Other Offers. During the period beginning April
--------------------------------
1, 1997 and ending on the Closing Date, Seller and AATBS agree to not conduct
any other sale negotiations, accept any letters of intent negotiating a sale, or
conduct their affairs in a way to indicate their interest in negotiating a sale,
merger, exchange or other transaction involving the Shares or the Business with
or to any other potential buyer or entity. AATBS and Seller agree to promptly
notify Purchaser of any unsolicited offer.
27. Records. Notwithstanding anything to the contrary in this Agreement,
-------
Seller shall be permitted to retain copies of any and all records and documents
deemed reasonably necessary by Seller to prepare tax returns, financial
statements, and respond to governmental authorities or other third parties so
long as Seller maintains the confidentiality of all such items. Seller shall
have the right of access to and the right to copy, at Seller's expense, any
records copies of which are not retained by Seller, for the sole purpose of
responding to inquiries, audits, examinations or litigation initiated by tax
authorities, other governmental authorities or other third parties.
28. Indemnifications.
----------------
28.1. Indemnification By Seller. Seller shall save, defend and
-------------------------
indemnify Purchaser and AATBS and Purchaser's and AATBS's officers, directors,
employees, agents and representatives against, and hold Purchaser and AATBS and
Purchaser's and AATBS's officers, directors, employees, agents and
representatives harmless from, any and all claims, demands, damages, debts,
liabilities, obligations, actions, costs and expenses (including without
limitation, attorneys' fees and costs, court costs and costs of appeal), of
every kind, nature and description whatsoever, absolute, fixed or contingent,
relating or attributable to, which arise out of or result from:
28.1.1. Any failure of Seller to pay, discharge, satisfy or
comply with an Excluded Liability pursuant to the terms thereof;
28.1.2. The Premises Lease or the lease of the Heidelberg
press;
28.1.3. The Pension Plan;
28.1.4. Any inaccuracy in, or breach of, any representation,
warranty, covenant or agreement made by Seller or AATBS in this Agreement, the
Exhibits hereto or any executed document or paper prepared by Seller or AATBS or
delivered in connection with the
24
<PAGE>
transactions contemplated hereby, except agreements and actions by AATBS
relating to periods beginning or occurring on or after the Closing Date;
28.1.5. Any failure of Seller or AATBS duly to perform or
observe any term, provision, covenant, agreement or condition hereunder on the
part of Seller to be performed or observed, except agreements or actions by
AATBS relating to periods beginning or occurring on or after the Closing Date;
28.1.6. Any claim, litigation or other action of any nature
arising out of any action or inaction of Seller or AATBS prior to the Closing
Date;
28.1.7. Any claim of any employee of AATBS, or of any other
person, arising out of or relating to the employment of such employee, any
employee stock option, bonus, retirement, medical, profit sharing, pension or
other similar plan of Seller or the operation or termination of such plan, to
the extent relating or attributable to periods ending before the Closing Date;
and
28.1.8. Any action, suit, proceeding, assessment or judgment
arising out of or incident to any of the matters indemnified against by Seller
under this Agreement.
28.2. Indemnification By Purchaser. Purchaser shall save, defend and
----------------------------
indemnify Seller and Seller's agents and representatives against, and hold
Seller and Seller's agents and representatives harmless from, any and all
claims, demands, damages, debts, liabilities, obligations, actions, costs and
expenses (including without limitation, attorneys' fees and costs, court costs
and costs of appeal), of every kind, nature and description whatsoever,
absolute, fixed or contingent, relating or attributable to, which arise out of
or result from:
28.2.1. Any failure of Purchaser or AATBS to timely pay,
discharge, satisfy or comply with any liability of Purchaser or AATBS according
to such liability's terms, except for an Excluded Liability and except for
liabilities attributable to Seller's asserted breach of a representation,
warranty, covenant or obligation of Seller;
28.2.2. Any inaccuracy in, or breach of, any representation,
warranty, covenant or agreement made by Purchaser in this Agreement, the
Exhibits hereto or any executed document or paper prepared by Purchaser and
delivered in connection with the transactions contemplated hereby;
28.2.3. Any failure of Purchaser to make when due any payment
required under this Agreement or the Note, except with respect to any asserted
offset rights, or duly to perform or observe any term, provision, covenant,
agreement or condition hereunder on the part of AATBS or Purchaser to be
performed or observed;
28.2.4. Any claim, litigation or other action of any nature
arising out of any action or inaction of Purchaser or Purchaser's officers,
directors, employees, agents, or representatives before, on or after the Closing
Date and any claim, litigation or other action of any
25
<PAGE>
nature arising out of any action or inaction of AATBS or AATBS's officers,
directors, employees, agents, or representatives on or after the Closing Date;
28.2.5. Purchaser's and AATBS's operation and after the
Closing Date; and
28.2.6. Any action, suit. proceeding, assessment or judgment
arising out of or incident to any of the matters indemnified against by
Purchaser under this Agreement.
28.3. Claims For Indemnification. Whenever any claim shall arise for
--------------------------
indemnification under this Section 28, the party or parties entitled to
indemnification (individually and collectively, the "Indemnified Party") shall
notify the party or parties against whom indemnification is sought (individually
and collectively, the "Indemnifying Party") in writing of the claim. Such
written notice shall specify all material facts known to the Indemnified Party
giving rise to the indemnification right and the amount, or an estimate thereof,
of the expense or liability incurred or expected to be incurred by the
Indemnified Party. The right to indemnification hereunder and the amount
thereof (but not an estimate of the amount thereof) as set forth in the written
notice shall be deemed agreed to by the Indemnifying Party unless, within thirty
(30) days after the receipt of such notice, the Indemnified Party is notified in
writing that the Indemnifying Party disputes the right to indemnification and/or
the amount thereof.
28.4. Right to Defend Third-Party Claims. If the claim for
----------------------------------
indemnification involves any actual, threatened or potential claim or demand by
any third party against the Indemnified Party (a "Third-Party Claim"), the
Indemnifying Party may, at its option, elect to undertake full responsibility
for the defense of the Third-Party Claim and may contest or settle the Third-
Party Claim on such terms as the Indemnifying Party may determine in its sole
discretion. If the Indemnifying Party elects to undertake full responsibility
for the defense of the Third-Party Claim, the Indemnifying Party shall be
responsible and liable for all costs and expenses of such defense and
settlement, and shall be responsible and liable for any judgment rendered by the
court in favor of the Third Party against the Indemnified Party. If the
Indemnifying Party does not elect to undertake full responsibility for the
defense of the Third-Party Claim, the Indemnifying Party at its own expense may
nevertheless participate with the Indemnified Party in the defense of the Third-
Party Claim and in any and all settlement negotiations relating thereto. The
Indemnified Party and the Indemnifying Party shall cooperate with respect to the
defense and negotiation of any settlement of the Third-Party Claim, and the
Indemnified Party shall not settle the Third-Party Claim without the concurrence
of the Indemnifying Party. Any such participation shall not relieve the
Indemnifying Party of its indemnification obligations under this Section 28.
28.5. Cooperation. The parties shall execute and deliver such powers
-----------
of attorney and other documents as may be reasonably necessary or appropriate to
permit participation of counsel selected by any party in any and all relevant
proceedings. Each party shall provide access to the other party or parties and
their respective counsel, accountants and other representatives and advisors
during regular business hours to all books, records, documents, papers,
materials, personnel, agreements, contracts and any and all relevant business
records as may reasonably be necessary to defend and/or settle any claims under
this Section 28.
26
<PAGE>
28.6. Duration. The representations and warranties set forth herein
--------
shall survive Closing. The indemnification rights of the parties hereunder
shall survive the Closing Date for a period of eleven (11) years; provided,
however, that any indemnification right related to federal, state or local taxes
shall survive the Closing Date for a period of one hundred twenty (120) days
after the last date on which such tax claim may be asserted by the relevant
taxing authority. The expiration of the indemnification rights as herein
provided shall not affect claims for indemnification pending on the date of such
expiration. Such pending claims shall remain valid and enforceable.
28.7. Payment. Except as provided in Section 33 below regarding
-------
"Offset", the Indemnifying Party shall promptly pay to the Indemnified Party the
amount of the indemnification required by this Section 28.
29. Liquid Assets to Be Available.
-----------------------------
29.1. Amount Required. As Security for Seller's representations and
---------------
warranties in this Agreement, Seller covenants and agrees that he will maintain
cash or liquid assets readily available in an account or accounts at Union Bank,
or at any other bank or institution selected by Seller in Seller's sole
discretion, in an amount not less than:
29.1.1. Two Million and 00/100 Dollars ($2,000,000.00) during
the period beginning on the Closing Date and ending six (6) months after the
Closing Date.
29.1.2. One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00) during the period beginning six (6) months after the Closing
Date and ending twelve (12) months after the Closing Date.
29.1.3. One Million and 00/100 Dollars ($1,000,000.00) during
the period beginning twelve (12) months after the Closing Date and ending
eighteen (18) months after the Closing Date.
29.1.4. Five Hundred Thousand and 00/100 Dollars ($500,000.00)
during the period beginning eighteen (18) months after the Closing Date and
ending twenty-four (24) months after the Closing Date.
29.2. Covenant. Seller covenants to take all actions necessary to
--------
carry out the express intent of the parties that these funds be available to
satisfy any contingent or outstanding liabilities or obligations of Seller
hereunder, including without limitation, Seller's indemnification obligations.
29.3. Monthly Statements. Seller shall provide to Purchaser copies
------------------
of monthly statements issued by Union Bank (or other bank or institution)
regarding the assets in the accounts described in Section 29.1 above.
30. Termination. This Agreement shall terminate on the first to occur
-----------
of:
27
<PAGE>
30.1. If the transactions contemplated by this Agreement are not
consummated on or before October 1, 1997.
30.2. If any condition to Closing set forth in Section 22 above is
not satisfied or waived on or before the Closing Date.
30.3. Mutual agreement of the parties.
30.4. If, before the Closing Date, Purchaser determines in its sole
discretion, that Purchaser's and AEC's due diligence investigation pursuant to
Section 18 above is not satisfactory to Purchaser.
31. Pre-Litigation Mediation and Non-Binding Arbitration of Disputes.
----------------------------------------------------------------
31.1. Mediation. Except as provided in Section 31.3 below, any
---------
dispute, controversy or claim relating to this Agreement, including but not
limited to the interpretation thereof, or its breach or existence, which cannot
be resolved amicably by Seller and Purchaser shall first be referred to
mediation administered by the American Arbitration Association under its
Commercial Mediation Rules, before resorting to arbitration or litigation. The
mediation shall be conducted in Ventura County, California, or such other
location as may be determined by mutual agreement of Seller and Purchaser. The
mediation referral required hereunder shall occur as soon as it becomes clear
that Seller and Purchaser cannot resolve the matter in dispute and the mediation
shall be conducted as swiftly as is reasonably possible under the circumstances.
31.2. Non-Binding Arbitration. Within ten (10) days or as soon as
-----------------------
reasonably feasible after mediation is completed, any unresolved controversy or
claim arising out of or relating to this Agreement, or breach thereof, shall be
referred to nonbinding arbitration administered by the American Arbitration
Association in accordance with its Commercial Arbitration Rules. The
arbitration shall be conducted as swiftly as is reasonably possible under the
circumstances. The arbitration shall be conducted before one neutral arbitrator
to be selected in accordance with the Commercial Rules of the American
Arbitration Association and shall proceed under the Expedited Procedures of said
Rules, irrespective of the amount in dispute. The arbitration shall be held in
Ventura County, California, unless Seller and Purchaser mutually agree upon
another place. In its award, the arbitral authority shall fix and apportion the
costs of arbitration. Except as provided in Section 31.3 below, no lawsuit
shall be filed prior to the entry of a written award by the arbitral authority.
The award of the arbitral authority shall be non-binding upon Seller and
Purchaser. However, if after forty-five (45) days from the date of the award, no
party files a separate lawsuit in a court of competent jurisdiction to resolve
the dispute, controversy or claim, the award will become final and non-
appealable and the award may be enforced by any court having jurisdiction over
the party against which the award has been rendered or where assets of the party
against which the award has been rendered can be located.
31.3. Exceptions to Mediation/Arbitration. Notwithstanding Sections
-----------------------------------
31.1 and 31.2 above: (a) Purchaser shall be permitted to seek specific
performance or injunctive relief in a court of competent jurisdiction for any
breach of Section 15 (regarding agreement not to compete) or Section 25.3
(dealing with Nonsolicitation) without submitting the dispute to mediation and
28
<PAGE>
arbitration, (b) neither Section 31.1 nor 31.2 above shall apply to Seller's
exercise of his rights and remedies under the Security Agreement; and (c)
Purchaser shall be free to raise any defenses or counterclaims to any action
brought to enforce the Security Agreement.
32. Venue. Subject to Section 31 above, the parties hereby stipulate and
-----
agree that venue for any litigation involving this Agreement shall be in Ventura
County, California. The parties hereby stipulate and consent to the
jurisdiction of the Ventura County, Superior Court with respect to any such
litigation. Purchaser hereby waives its right to assert diversity jurisdiction
and its right to file any lawsuit in or have a lawsuit removed to federal court.
33. Offset. Purchaser shall have the offset rights set forth in this
------
Section 33.
33.1. Offset Rights. Purchaser shall have the right to offset any
-------------
amount owed to Purchaser or AATBS by Seller against any amount owed by Purchaser
to Seller under Section 28 above or under the Note (the "Offset Rights").
33.2. Adjustments. Any disputes regarding the adjustments required
-----------
by Section 10 above shall be resolved by the procedures set forth in Section 31
above and, if necessary, court proceedings. As set forth in Section 10 above,
the amount of such adjustments, as finally determined and resolved, shall be an
increase or decrease, as the case may be, to the last payment due under the
Note. As so adjusted, the last payment due under the Note shall be subject to
Purchaser's Offset Rights set forth in this Section 33.
33.3. Order of Offset. Any asserted offset shall be taken first from
---------------
any mutually agreed upon but unpaid indemnification obligations of Purchaser to
Seller, and thereafter against the first payments next due under the Note.
33.4. Offset Notice. Purchaser shall give Seller written notice by
-------------
certified or registered mail (the "Offset Notice") of Purchaser's exercise of
its Offset Rights. The Offset Notice shall be given in accordance with the
notice provisions herein and shall state the amount of the offset and the
payment or payments against which the offset will be taken.
33.5. Objection Notice. If Seller objects to all or any portion of
----------------
the asserted offset, Seller shall give to Purchaser written notice by certified
or registered mail (the "Objection Notice") thereof within fourteen (14) days
after the Offset Notice is given. The Objection Notice shall be given in
accordance with the notice provisions herein. If given, the Objection Notice
shall state the portion (or all, as the case may be) of the asserted offset to
which Seller objects and the reasons for such objection. If Seller fails to
give the Objection Notice within the fourteen (14) day period after the Offset
Notice is given, Seller shall be deemed to have agreed to the asserted offset.
33.6. Deposit of Disputed Amount. If Seller timely gives the
--------------------------
Objection Notice to Purchaser pursuant to Section 33.5 above, Purchaser shall
pay any mutually agreed upon but unpaid indemnification obligations of Purchaser
to Seller, plus the first payments next due under the Note, into an escrow
account pursuant to Section 34 below, until the aggregate of such payments
equals the amount of the disputed offset. Any failure of Purchaser to make the
payment(s) into the escrow
29
<PAGE>
account required by this Section 33.6 shall not preclude, or act as a condition
precedent to, any claim by or defense of Purchaser in any arbitration or
litigation.
33.7. Binding Arbitration. Within ten (10) days or as soon as
-------------------
reasonably feasible after Seller gives the Objection Notice, the dispute
regarding the proper amount of the offset shall be referred to arbitration. The
arbitration shall be conducted before a single arbitrator pursuant to the
provisions of Section 31.2 above, except that the decision of the arbitrator
shall be conclusive and binding on, and non-appealable by, Purchaser and Seller.
34. Escrow. The escrow (the "Escrow") required by Section 33 above shall
------
be governed by this Section 34.
34.1. Escrow Agent. The escrowholder (the "Escrow Agent") shall be
------------
Frederick P. Muller, Inc., a California professional law corporation.
34.2. Deposit. Immediately after Seller gives the Objection Notice
-------
to Purchaser, Purchaser shall pay to the Escrow Agent any mutually agreed upon
but unpaid indemnification obligations of Purchaser to Seller, plus any payment
under the Note then due and payable, up to the amount in dispute. If the amount
in dispute exceeds the payment(s) made pursuant to the preceding sentence,
Purchaser shall pay to the Escrow Agent all subsequent mutually agreed upon
indemnification obligations of Purchaser to Seller, and all subsequent payments
due under the Note, at the time such payments would be required to be paid to
Seller hereunder, until the aggregate of all amounts paid to the Escrow Agent
equals the amount in dispute. Upon receipt, the Escrow Agent shall deposit such
amount(s) in an interest-bearing account subject to the terms of this Section
34.
34.3. Release of Funds. The Escrow Agent shall not pay to any person
----------------
any amount held by the Escrow Agent hereunder or release any funds from this
Escrow except (a) upon the joint agreement and written direction of Purchaser
and Seller, or (b) as directed in writing by the arbitrator in furtherance of
the arbitrator's determination with respect to the amount in dispute pursuant to
Section 33.7 above.
34.4. Interest On Escrowed Funds. All interest earned during any
--------------------------
calendar year on amounts held in this Escrow shall be deemed to be earned by and
taxable to Purchaser. In furtherance thereof, the Escrow Agent shall issue to
Purchaser a Form 1099-INT with respect to such calendar year in the amount of
such interest. Notwithstanding the foregoing, any such interest on amounts that
are paid out of this Escrow to Seller during such year pursuant to the
provisions of Section 34.3 above shall be deemed to be earned by and taxable to
Seller and the Escrow Agent shall issue to Seller a Form 1099-INT in the amount
of such interest. The Escrow Agent shall fairly and properly allocate interest
earned on the escrowed funds between Purchaser and Seller.
34.5. Costs and Expenses. All costs and expenses of the Escrow and
------------------
the Escrow Agent shall be borne and paid solely by Seller.
34.6. Successor Escrow Agent. In the event the Escrow Agent resigns
----------------------
as escrow agent, or the Escrow Agent is, for whatever reason, unable to serve as
escrow agent hereunder, Purchaser and Seller shall mutually agree on and appoint
a new Escrow Agent. Such new Escrow
30
<PAGE>
Agent shall succeed to any funds then held in Escrow and shall agree to be bound
by the terms of this Section 34.
34.7. Indemnification. Seller shall indemnify the Escrow Agent and
---------------
the Escrow Agent's officers, directors and employees against, and hold the
Escrow Agent and the Escrow Agent's officers, directors and employees harmless
from, all costs and expenses incurred by the Escrow Agent in furtherance of its
duties and obligations hereunder, except for the Escrow Agent's fraud, willful
neglect or gross negligence.
35. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY VOLUNTARILY AND
--------------------
KNOWINGLY WAIVES ANY RIGHT ANY OF THEM MAY HAVE TO SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT.
36. Miscellaneous.
-------------
36.1. Modification, Amendment or Waiver. This Agreement may not be
---------------------------------
amended, supplemented or otherwise modified, and none of its terms may be
waived, unless such amendment, supplement, modification or waiver is in writing
and executed by the party or parties to be bound thereby. The failure of any
party at any time or times to require performance of any provision hereof shall
not affect the right of such party at a later time to enforce the same, and no
waiver of any term or provision hereof on any one occasion shall be deemed to be
a waiver of the same or any other provision hereof at any subsequent time or
times.
36.2. Notices. Any notices or other communication required or
-------
permitted hereunder must be in writing and shall be deemed given on the date
that the same shall have been cabled or telegraphed, sent by telecopier or other
facsimile equipment, delivered personally via messenger or overnight carrier, or
48 hours after deposit in the United States mail, mailed by certified or
registered mail, postage prepaid, return receipt requested, and duly addressed
to the party to be notified:
Purchaser: Argosy International, Inc.
Two First National Plaza
20 South Clark Street
Chicago, IL 60603
Attn: Michael C. Markovitz, Chairman
with a copy to:
Roberta Colton, Esq.
Trenam, Kemker, et al.
101 E. Kennedy Boulevard
Suite 2700
Tampa, FL 33602
Seller: Steven H. Santini
------
31
<PAGE>
and AATBS with 242 Lincoln Drive
respect to Ventura, CA 93001
pre-Closing
matters
AATBS: Association For Advanced Training in the
(post Closing matters) Behavioral Sciences
5126 Ralston Street
Ventura, CA 93003
Attn: Michael C. Markovitz, Chairman
with a copy to:
Roberta Colton, Esq.
Trenam, Kemker, et al.
101 E. Kennedy Boulevard
Suite 2700
Tampa, FL 33602
Any party may change the person or address to which any notice or other
communication is to be sent by giving written notice thereof in the manner
provided herein.
36.3. Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon, and shall inure to the benefit of and be enforceable by, the parties
hereto, and their respective heirs, successors, assigns and legal
representatives; provided, however that no assignment of any rights or
delegation of any obligations provided for herein may be made by any party
hereto without the prior written consent of the other parties, which consent
shall not be unreasonably withheld.
36.4. Entire Agreement. This Agreement (together with all Exhibits,
----------------
certificates, documents, agreements and instruments executed or furnished in
connection herewith) contains the entire agreement among the parties with
respect to the subject matter hereof, and supersedes any and all prior or
contemporaneous written or oral negotiations, agreements, discussions and
representations of the parties with respect to such subject matter.
36.5. Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of Illinois.
36.6. Severability. If any provision or covenant of this Agreement,
------------
or any portion of any provision or covenant. shall be deemed invalid,
unreasonable, arbitrary or against public policy, then such portion of such
provision or covenant shall be considered divisible both as to time,
geographical area and amount and a lesser period, geographical area or amount
may be enforced. The parties agree that this Agreement shall be interpreted in
such a manner as to give effect, as far as possible, to the intent of the
parties as set forth herein. Any such invalid or unenforceable provision or
covenant shall not affect the enforceability and validity of the remaining
provisions and covenants hereof.
32
<PAGE>
36.7. Attorneys' Fees. If any legal action or other proceeding is
---------------
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
36.8. Headings. The headings in this Agreement are intended solely
--------
for convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
36.9. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which shall constitute the
same agreement.
36.10. Facsimile Signatures. A signature that is transmitted by
--------------------
telecopier or other facsimile equipment shall be deemed an original signature.
36.11. Gender, Number, Etc. As used herein, the masculine, feminine
--------------------
or neuter gender and the singular and plural number or tense each shall be
deemed to include the others whenever the context so indicates.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date or
dates set forth below.
ARGOSY INTERNATIONAL, INC., an Illinois
Corporation
Date: 8/26 , 1997 By /s/ Michael C. Markovitz
-------------------- ----------------------------------------
MICHAEL C. MARKOVITZ, Ph.D.
President and Chairman
Date: 8/26 , 1997 By /s/ Steven H. Santini
-------------------- ---------------------------------------
STEVEN H. SANTINI
ASSOCIATION FOR ADVANCED TRAINING IN THE
BEHAVIORAL SCIENCES, a California corporation
Date: 8/26 , 1997 By /s/ Michael C. Markovitz
-------------------- -----------------------------------------
MICHAEL C. MARKOVITZ, President
Date: 8/26 , 1997 By /s/ Steven H. Santini
-------------------- -----------------------------------------
STEVEN H. SANTINI
The undersigned executed and joins in this Agreement in its capacity as Escrow
Agent pursuant to Section 34 hereof solely for purposes of that Section 34.
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FREDERICK P. MULLER, INC.
BY: /s/ Frederick P. Muller
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ITS: President
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34
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EXHIBIT 10.23
AGREEMENT TO PURCHASE ASSETS
----------------------------
This Agreement to Purchase Assets (the "Agreement") is made and entered
into on August 26, 1997, by and among ACADEMIC REVIEW, INC., an Illinois
corporation ("Purchaser"), ACADEMIC REVIEW, INC., a California corporation
("Seller"), and STEVEN H. SANTINI ("Santini"), with respect to the following
facts:
A. Seller is engaged in the business (the "Business") of creating,
producing and delivering instructional courses, materials and products designed
to assist individuals in preparing for and passing a variety of professional and
other practice examinations administered nationally, regionally, or by
individual states or local jurisdictions.
B. Santini is the sole shareholder of Seller, and Santini is responsible
for and the beneficiary of this Agreement as the sole shareholder and owner of
Seller and the Business.
C. Seller currently delivers its products to its customers in the form
of classroom instruction, printed materials, audio cassettes, computer media, or
some combination thereof.
D. Subject to the terms and conditions contained herein, and subject to
the completion of Purchaser's due diligence, Purchaser wishes to purchase from
Seller, and Seller wishes to sell to Purchaser, substantially all the operating
assets of the Business.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Sale and Purchase. Seller hereby agrees to sell to Purchaser, and
-----------------
Purchaser hereby agrees to purchase from Seller, the assets described in Section
3 below, for the purchase price set forth in Section 6 below, on the payment
terms set forth in Section 7 below, pursuant and subject to all the terms and
conditions of this Agreement, free and clear of all security interests, claims,
liens, encumbrances, equities, liabilities and other charges and interest of
others of any nature whatsoever, except for the Assumed Liabilities (as defined
in Section 5.2 below).
2. Date of Sale and Purchase. The sale and purchase hereunder shall
-------------------------
take place and shall be effective before the opening of business on August 27,
1997, or on such other date as may be determined by unanimous agreement of the
parties (the "Closing Date").
3. Assets Sold and Purchased. The assets sold and purchased hereunder
-------------------------
(the "Assets") shall consist of all of Seller's interest to and in all the
properties and assets of the, Seller as a going business of every kind, nature,
and description whatsoever, tangible and intangible, real and personal,
specifically including (without limitation) all properties and assets used in
and necessary to conduct the Business in the normal course in its present form,
whether or not specifically listed herein and whether or not reflected on
Seller's balance sheet or other financial statements required to be
<PAGE>
furnished hereunder or on any exhibits attached to this Agreement. Without
limiting the foregoing, the Assets shall include, but shall not be limited to:
3.1 Exclusive right and title to the name, trademark and service
mark "Academic Review," "Academic Review, Inc." and any other trademarks, trade
names, service marks. assumed names and other intellectual property.
3.2. All copyrights, any pending applications for copyrights and
copyrighted materials published under the name "Academic Review" or "Academic
Review, Inc."
3.3. All non-copyrighted materials which have been or may be
utilized in the conduct of the Business (such as advertising text, brochures,
flyers, etc.) or which have been prepared by or on behalf of Seller.
3.4. All research materials prepared by or on behalf of, or in the
possession of Seller including without limitation materials which may be
necessary to maintain, upgrade and improve the products of the Business.
3.5. All products produced for or on behalf of Seller, and all
products currently under development.
3.6. All rights under any employment agreements with current
employees of the Business, and/or contracts with such professional consultants
as may be used to maintain, update or deliver the Business's products to its
customers, except as may be specifically excluded; all contract rights of Seller
except as may be specifically excluded.
3.7. All physical inventories.
3.8. All printing, binding, and pre-press equipment and other
manufacturing machinery (excluding the specifically identified commercial
printing equipment described in Schedule 4 attached) used in the preparation and
----------
manufacture of the Business's products.
3.9. All office furniture, supplies, computer equipment, and such
other equipment as have been or may be utilized in the conduct of the Business.
3.10. All lead, prospect, mailing lists, customer files, and similar
items, both current and historic.
3.11. All vendor files and contracts.
3.12. Covenants not to compete or non-competition agreements owned
by the Business.
3.13. Seller's and Santini's agreements not to compete, as set forth
in Section 12 herein.
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3.14. Copies of Seller's past and current records as may exist on
the Closing Date, including without limitation, those related to the operation
of the Business, but excluding any records which may relate to the Excluded
Assets (defined below) and Excluded Liabilities (defined below).
3.15. Seller's goodwill and goodwill of the Business.
3.16. Subject to Section 8.4 below, all accounts receivable.
4. Excluded Assets. Notwithstanding anything to the contrary in this
---------------
Agreement, Seller shall not sell to Purchaser and Purchaser shall not purchase
from Seller, the assets, properties, interests and/or rights of Seller
specifically identified on Schedule 4 and Schedule 4.1 attached hereto and
---------- ------------
incorporated by reference (the "Excluded Assets").
5. Liabilities.
-----------
5.1. Excluded Liabilities. Except as set forth in Section 5.2
--------------------
below, Purchaser is not assuming and shall not be responsible or liable for any
liabilities, debts, obligations, contracts or agreements of Seller of any kind
or nature whatsoever, whether fixed or contingent, and whether known or unknown
(the "Excluded Liabilities"). The Excluded Liabilities shall include, without
limitation, the following:
5.1.1. Seller's accounts payable as of the day before the
Closing Date actually existing as of the day before the Closing Date and that
arise at any time as a result of actions occurring prior to the Closing Date.
5.1.2. Any and all tax liabilities arising for whatever
reason which may exist as of the day before the Closing Date, or which may occur
on or after the Closing Date, but as a result of activities of the Business
prior to the Closing Date.
5.1.3. Liabilities arising on account of any and all
claims, disputes, lawsuits, or liabilities arising from the administrative
actions of governmental units, as such liabilities may exist on the day before
the Closing Date, or which may occur on or after the Closing Date, but as a
result of activities of the Business prior to the Closing Date.
5.1.4. Obligations on notes to banks, equipment leases,
employee obligations, obligations to vendors, and any other obligations which
are not specifically assumed.
5.1.5. Any leases of real or personal property.
5.1.6. Accrued pension plan contributions, vacation pay,
sick pay, other employee benefits and retiree medical expenses.
5.1.7. All obligations on the lease or purchase of the
Heidelberg press and any other Excluded Assets.
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5.2. Assumed Liabilities. Notwithstanding anything to the contrary
-------------------
in Section 5.1 above, as partial consideration for the transactions described
herein. Purchaser shall specifically assume and be responsible and liable for
the liabilities, debts, obligations, contracts and agreements specifically
identified on Schedule 5.2 attached hereto and incorporated by reference in each
------------
case only as to the total dollar amount set forth with respect to each liability
on Schedule 5.2 in the event a dollar amount is specified for such liability
------------
(the "Assumed Liabilities"), including without limitation, Seller's obligations
under executory contracts existing as of the Closing Date and listed on Schedule
--------
5.2 to provide services in workshops, seminars and courses, and to provide study
- ---
materials and other products and materials pursuant to the terms of each such
executory contract. A true and complete copy of each such written executory
contract shall be attached to Schedule 5.2.
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5.3. Discharge of Assumed Liabilities. Purchaser shall timely pay
--------------------------------
or otherwise timely and properly discharge or satisfy any and all Assumed
Liabilities according to the terms of such Assumed Liabilities.
5.4. Discharge of Excluded Liabilities. Santini and/or Seller shall
---------------------------------
timely pay or otherwise timely and properly discharge or satisfy any and all
Excluded Liabilities according to the terms of such Excluded Liabilities.
6. Purchase Price. Subject to Section 8 below, the purchase price (the
--------------
"Purchase Price") for the Assets sold and purchased hereunder shall be the sum
of:
6.1. Two Million Three Hundred Thousand and 00/100 Dollars
($2,300,000.00); plus
6.2. The amount of the Assumed Liabilities that were incurred and
relate or are attributable to periods ending prior to the Closing Date.
7. Terms of Purchase. The Purchase Price shall be paid as follows:
-----------------
7.1. Assumed Liabilities. The Assumed Liabilities shall be assumed
-------------------
by Purchaser as of the Closing Date.
7.2. Payment at Closing. The amount of Two Million Two Hundred
------------------
Seventy-Five Thousand and 00/100 Dollars ($2,275,000.00) shall be paid by
Purchaser to Seller in immediately available funds on the Closing Date.
7.3. Payment into Escrow; Terms of Escrow.
------------------------------------
7.3.1. The remaining Twenty-Five Thousand and 00/100 Dollars
($25,000.00) of the Purchase Price shall be paid by Purchaser in immediately
available funds to Frederick P. Muller, Inc., a California professional law
corporation (the "Escrow Agent") for deposit into a segregated interest-bearing
account (the "Escrow Account") to be governed by the terms of this Section 7.3
pending resolution by the parties of the adjustments required by Section 8 of
this Agreement.
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7.3.2. The Escrow Agent shall not pay to any person any amount held
by the Escrow Agent hereunder or release any funds from the Escrow Account
except upon the joint agreement and written direction of Seller and Purchaser.
7.3.3. All interest earned during any calendar year on amounts held
in the Escrow Account shall be deemed to be earned by and taxable to Seller. In
furtherance thereof, the Escrow Agent shall issue to Seller a Form 1099-INT with
respect to such calendar year in the amount of such interest.
7.3.4. All costs and expenses of the Escrow Account and the Escrow
Agent shall be borne and paid solely by Seller and Santini.
7.3.5. In the event the Escrow Agent resigns as escrow agent, or
the Escrow Agent is, for whatever reason, unable to serve as escrow agent
hereunder, Purchaser and Seller shall mutually agree on and appoint a new Escrow
Agent. Such new Escrow Agent shall succeed to any funds then held in the Escrow
Account and shall agree to be bound by the terms of this Section 7.3.
7.3.6. Seller and Santini shall indemnify the Escrow Agent and the
Escrow Agent's officers, directors and employees against, and hold the Escrow
Agent and the Escrow Agent's officers, directors and employees harmless from,
all costs and expenses incurred by the Escrow Agent in furtherance of its duties
and obligations hereunder, except for the Escrow Agent's fraud, willful neglect
or gross negligence.
8. Adjustments.
-----------
8.1. Adjustment Items. Within thirty (30) days after Closing,
----------------
Purchaser and Seller each shall prepare and deliver to each other an accounting
showing, any proposed adjustments to the items described in this Section 8.
Within thirty (30) days of such delivery, Purchaser and Seller shall agree upon
the adjustments to be made pursuant to such accountings. In the event Purchaser
and Seller do not agree by the end of that period, the provisions of Section 26
of this Agreement regarding mediation and arbitration shall be implemented.
8.2. Payment. Except as provided in Sections 8.3 and 8.4 below, the
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amount of any adjustment shall be paid in cash by Purchaser to Seller, or by
Seller to Purchaser, as the case may, within thirty (30) days after Purchaser
and Seller agree on the amount of the adjustment.
8.3. Future Courses. The adjustments shall include the amount of
--------------
(a) all prepayments received by Seller prior to the Closing Date for or on
account of courses, workshops, seminars, products or materials to be presented
or provided on or after the Closing Date, and (b) the amount of all costs and
expenses paid by Seller prior to the Closing Date for or on account of such
courses, workshops, seminars, products and materials. For the purpose of this
Section 8.3, all workshop deposits shall be treated as payment in full for the
written materials provided with such workshop, and this Section 8.3 shall not
apply to any workshop deposit received before the Closing Date if the written
materials provided with such workshop are shipped before the Closing Date. Any
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excess of costs and expenses paid over prepayments received, or excess of
prepayments received over costs and expenses paid, as the case may be, shall be
paid pursuant to Section 8.5 below.
8.4. Accounts Receivable. The aggregate of any payments on
-------------------
accounts receivable (including purchase or other orders received before the
Closing Date for products, materials or services if the products or materials
were shipped or such services were fully performed fully before the Closing
Date, but such purchase or other orders were not paid before the Closing Date)
received by Purchaser within one year after the Closing Date shall, if retained
by Purchaser, be paid pursuant to Section 8.5 below. In applying payments
received to accounts receivable generated as of varying dates, if the customer
specifies the particular invoice or bill to which a payment relates, the payment
will be applied to such invoice or bill. In the absence of any specification,
the payments will be applied first to the invoice or bill outstanding for the
longer period of time.
8.5. Payment of Future Course and Accounts Receivable Adjustments.
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Purchaser and Seller shall compute the net amount of the adjustments required by
Sections 8.3 and 8.4 above, and the net amount owed by Seller to Purchaser, or
by Purchaser to Seller, as the case may be.
8.5.1. If, as a result of such computation, Seller owes to
Purchaser an amount in excess of the amount then in the Escrow Account
(including interest), (a) Purchaser and Seller shall jointly direct the Escrow
Agent in writing to pay all funds in the Escrow Account to Purchaser, and (b)
Seller shall forthwith pay to Purchaser in cash the difference between the
amount owed by Seller to Purchaser and the amount paid to Purchaser from the
Escrow Account.
8.5.2. If, as a result of such computation, Seller owes to
Purchaser an amount that is less than the amount then in the Escrow Account
(including interest), Purchaser and Seller shall jointly direct the Escrow Agent
in writing to pay to Purchaser an amount equal to the amount owed by Seller to
Purchaser, and to pay the remaining funds in the Escrow Account to Seller.
8.5.3. If, as a result of such computation, Purchaser owes
any amount to Seller, (a) Purchaser and Seller shall jointly direct the Escrow
Agent in writing to pay all funds in the Escrow Account to Seller, and (b)
Purchaser shall forthwith pay to Seller in cash the amount owed by Purchaser to
Seller.
9. Allocation of Purchase Price. The Purchase Price shall be allocated
----------------------------
among the Assets as set forth in Schedule 9 attached hereto and incorporated by
----------
reference, to be completed prior to the Closing Date, and this allocation shall
be binding on the parties for all purposes, including the determination and
reporting of any federal or state income tax liability of the parties.
10. [Reserved]
11. Title and Possession. Title to the Assets shall be transferred from
--------------------
Seller to Purchaser on the Closing Date. Seller shall execute and deliver to
Purchaser a bill of sale and such duly executed endorsements, assignments and
other instruments (collectively, the "Transfer Documents") as are necessary to
vest in Purchaser good and marketable title to the Assets, free and clear of all
security interests, claims, liens, encumbrances, equities, liabilities and other
charges and interest of others of any nature whatsoever. The form of the bill
of sale to be executed by Seller is attached
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hereto as Exhibit A and incorporated by reference. Purchaser shall be entitled
---------
to possession of the Assets on the Closing Date.
12. Agreement Not to Compete.
------------------------
12.1. Agreement. In recognition of the irreparable harm which will
---------
be done to the value of the Business should Seller or Santini re-engage in a
business similar to the Business, and for the consideration, as herein granted,
Santini and Seller hereby agree, and Santini hereby agrees to cause Seller, to
not engage in any business, directly or indirectly, in competition with the
Business as an owner, shareholder, investor, advisor, employee, consultant or
any other manner, on a full-time or part-time basis, for compensation or not, or
for any other consideration, for so long as Purchaser, or any person deriving
tide to the goodwill of the Business from Purchaser, or ten (10) years from the
Closing Date, whichever occurs first, in each county of California as specified
in Schedule 12.1 (a) attached hereto and incorporated by reference, and in each
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county of the United States, as specified in Schedule 12.1(b) attached hereto
----------------
and incorporated by reference. The area within which Seller and Santini shall be
subject to this agreement not to compete shall include any area in which Seller
has conducted its business in the United States up to the Closing Date, and any
area designated by Purchaser on Schedule 12.1(c) attached hereto and
----------------
incorporated by reference as an area in which Purchaser intends to initiate
Seller's business.
12.2. Family Members. Seller and Santini further agree that any
--------------
person related, on or after the Closing Date (by blood or marriage), to Santini,
or to any officer or shareholder of Seller, including present or future spouses
and children (natural, by marriage or adoption), shall likewise be bound by the
agreement not to compete set forth in Section 12.1 above. Should a person
described in the preceding sentence violate this Agreement, Seller and Santini
agree that it will be construed as if Seller and Santini jointly and severally
violated the agreement not to compete and the liquidated damages provided for in
Section 12.6 below shall become due and payable.
12.3. Exclusion of Software Development Business. Purchaser, Seller
------------------------------------------
and Santini agree that any activities of Seller and/or Santini in the software
development business, whether commercial or retail, excluding any test
preparation software development, shall not be considered a violation of the
agreement not to compete set forth in this Section 12. Any such software shall
be unrelated to the Business, as the Business exists on the Closing Date.
12.4. Exclusion of Continuing Education Business. Purchaser, Seller
------------------------------------------
and Santini agree that Seller and/or Santini and/or any entity controlled by
Seller or Santini shall be permitted to develop and provide continuing education
courses, workshops, seminars, tapes, products and materials in any and all
fields whatsoever, including fields that are competitive with the Business, and
such activities shall not be considered a violation of the agreement not to
compete set forth in this Section 12. For this purpose, the term "continuing
education" means and includes courses, workshops, seminars, tapes, products and
materials intended to further the education of individuals who have already
obtained a license or passed a professional examination and to prepare them for
license renewals, but does not include preparation for licensure or professional
examinations. In connection with any such continuing education activity,
Purchaser acknowledges that Seller and/or Santini and/or any entity controlled
by Seller or Santini may use the name "Association for Continuing Education."
7
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12.5. Consideration. As consideration for the agreement not to
-------------
compete set forth in this Section 12, Purchaser shall pay the amount of Fifty
Thousand and 00/100 Dollars ($50,000.00) to Santini in immediately available
funds on the Closing Date.
12.6. Liquidated Damages. Purchaser, Seller and Santini acknowledge
------------------
and agree that it would be impractical or extremely difficult to determine
Purchaser's or its assignees' actual damages in the event of a breach by Seller
and/or Santini of this agreement not to compete and, taking into account all the
circumstances existing on the date of this Agreement, the sum of One Million and
00/100 Dollars ($1,000,000.00) is a reasonable estimate of Purchaser's actual
damages in such event. Consequently, in the event of a breach by Seller and/or
Santini of this agreement not to compete, Purchaser shall be entitled to
liquidated damages in the sum of One Million and 00/100 Dollars ($1,000,000.00).
12.7. Equitable Remedies. Purchaser, or its assigns, shall also be
------------------
entitled to seek specific performance and injunctive relief to prevent further
breach by Seller and/or Santini of this agreement not to compete.
12.8. Exception For AATBS Business. Notwithstanding anything to the
----------------------------
contrary in this Section 12, Santini's conduct of the business of Association
For Advanced Training in the Behavioral Sciences ("AATBS") subsequent to and as
a consequence of Santini's foreclosure on, repossession of, or other acquisition
of the business of AATBS after the Closing Date, shall not be considered a
violation of the agreement not to compete set forth in this Section 12.
13. Closing.
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13.1. Time and Place. The closing (the "Closing") of the
--------------
transactions contemplated by this Agreement shall take place on the Closing Date
at the offices of American Schools of Professional Psychology, 20 South Clark
Street, Chicago, Illinois, or at such other place or time as may be determined
by mutual agreement of the parties but in no event later than October 1, 1997.
13.2. Deliveries By Seller. At the Closing, Seller shall deliver to
--------------------
Purchaser:
13.2.1. If not previously executed and delivered by Seller,
this Agreement, duly executed by Seller.
13.2.2. The Transfer Documents, duly executed by Seller.
13.2.3. All other previously undelivered documents required
to be delivered by Seller to Purchaser on or prior to the Closing Date pursuant
to this Agreement, and all documents reasonably deemed necessary by Purchaser's
counsel to effectuate the transactions contemplated herein, including
assignments of contract rights.
13.2.4. A Certificate of Good Standing for Seller, certifying
that Seller is a corporation in good standing under the laws of the State of
California.
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13.2.5. Duly executed and authorized Certificates of
Amendment to the Articles of Incorporation of Seller changing Seller's corporate
name to "Advanced Commercial Graphics," in form acceptable for filing with the
California Secretary of State; and forms abandoning or assigning the right to
the name "Academic Review" wherever used by Seller.
13.3. Deliveries By Santini.
---------------------
13.3.1. If not previously executed and delivered by Santini,
this Agreement, duly executed by Santini.
13.3.2. All other previously undelivered documents required
to be delivered by Santini to Purchaser on or prior to the Closing Date pursuant
to this Agreement, and all documents reasonably deemed necessary by Purchaser's
counsel to effectuate the transactions contemplated herein.
13.4. Deliveries By Purchaser.
-----------------------
13.4.1. If not previously executed and delivered by
Purchaser, this Agreement, duly executed by Purchaser.
13.4.2. The amount of Two Million Two Hundred Seventy-Five
Thousand and 00/100 Dollars ($2,275,000.00), payable to Seller in immediately
available funds and the amount of Twenty-Five Thousand and 00/100 Dollars
($25,000) payable to the Escrow Agent in immediately available funds.
13.4.3. The amount of Fifty Thousand and 00/100 Dollars
($50,000.00), payable to Santini in immediately available funds.
13.4.4. All previously undelivered documents required to be
delivered by Purchaser to Seller and/or Santini on or prior to the Closing Date
pursuant to this Agreement.
14. Release of Liability For Personal Injury. Notwithstanding anything
----------------------------------------
to the contrary in this Agreement, Seller shall not have any liability on or
after the Closing Date for any personal injury to any employee of the Business
as conducted by Purchaser on or after the Closing Date resulting from the
operation of any equipment or other assets conveyed by Seller to Purchaser
hereunder.
15. Due Diligence Investigation.
---------------------------
15.1. Right of Review and Access. During the period beginning on
--------------------------
April 1, 1997 and ending on the day before the Closing Date, American Education
Corporation, an Illinois corporation ("AEC"), Purchaser, and their authorized
officers, employees, agents and representatives shall have the right to review
and inspect all of Seller's financial and other records relating to the
Business. AEC and Purchaser shall have the right to inspect the premises where
the Business is conducted and interview employees of the Business with respect
to matters reasonably relating to the Business and the performance of the
employees in the Business. Seller shall afford AEC and Purchaser access to the
Premises for the purpose of the foregoing review and inspection on
9
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reasonable notice during regular business hours. Seller and Santini acknowledge
that any such investigations shall be independent of and in addition to their
representations and warranties set forth herein and that Purchaser may continue
to rely upon the accuracy and completeness of such representations and
warranties at the Closing of the transactions herein contemplated and
thereafter.
15.2. Nondisclosure Agreement. AECs and Purchaser's review and
-----------------------
inspection pursuant to Section 15.1 above shall be governed by and subject to
that certain Nondisclosure Agreement (the "Nondisclosure Agreement") dated
February 3, 1997, by and between, among others, Seller and AEC. A copy of the
Nondisclosure Agreement is attached hereto as Exhibit B and incorporated by
---------
reference.
16. Obligations of Seller Before Closing Date. During the period
-----------------------------------------
beginning on the date of this Agreement and ending on the Closing Date, Santini
and Seller covenant as follows:
16.1. Conduct of Business. Seller shall conduct the Business
-------------------
diligently and substantially in the same manner as heretofore conducted. Except
as set forth on Schedule 16.1 attached hereto and incorporated by reference,
-------------
Seller shall not acquire any capital assets having an aggregate value of more
than Ten Thousand and 00/100 Dollars ($10,000.00) or acquire any capital stock
or equity of any corporation or other entity, or enter into any other material
activities or transactions without the written consent of Purchaser, shall not
substitute or exchange any assets used in the Business except in the ordinary
course of business, shall diligently preserve its existing licenses, permits,
franchises, rights and privileges pertinent to the Business and credit
arrangements with banks and other financial institutions, shall diligently
preserve intact its business organization and retain its present employees,
shall diligently preserve its goodwill and relationships with suppliers,
customers, vendors and others with whom it deals, and shall use best efforts to
continue to develop the Business.
16.2. Compensation. Except as set forth on Schedule 16.2 attached
------------ -------------
hereto and incorporated by reference, Seller shall not grant any increases in
wage or salary rates, or authorize the payment of bonuses, to its employees,
officers or directors.
16.3. Notice. Seller shall give Purchaser prompt written notice of
------
any fact which, if existing or known on the date of this Agreement, would have
been required to be set forth or disclosed in this Agreement, which does or with
the passage of time will render materially inaccurate any representation,
warranty, covenant or agreement of Seller made in or pursuant to this Agreement.
17. Representations and Warranties of Seller and Santini. Seller and
----------------------------------------------------
Santini, jointly and severally, represent and warrant to Purchaser that, as of
the Closing Date:
17.1. Corporate Organization; Power, Good Standing. Seller is a
--------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the state of its incorporation and has the corporate power to carry on
its business as it is being conducted. Seller has the corporate power to enter
into and perform its obligations under this Agreement.
17.2. Authorization. The execution, delivery and performance of
--------------
this Agreement by Seller and the consummation of the transactions contemplated
hereby have been duly authorized and approved by all requisite action on the
part of Seller and no other proceedings by Seller are
10
<PAGE>
necessary to authorize and approve this Agreement and the consummation of the
transactions contemplated hereby, and to make this Agreement valid and binding
upon and enforceable against Seller in accordance with the terms hereof or to
carry out the transactions contemplated hereby. Seller shall deliver to
Purchaser on or before the Closing Date certified copies of directors and
shareholders resolutions authorizing and approving the transactions contemplated
hereby.
17.3. Execution; Delivery; Binding Effect. This Agreement has been
-----------------------------------
duly executed and delivered by Seller and Santini and constitutes the legal,
valid and binding obligation of Seller and Santini enforceable against Seller
and Santini in accordance with its terms.
17.4. Financial Information. Financial information relating to the
---------------------
Business, in the form of, but not limited to income statements and balance
sheets for prior and current periods, notes, bank statements and
representations, have been provided by Seller previously and during Purchaser's
due diligence investigation period prior to the Closing Date (collectively, the
"Financial Statements"). The most recent annual balance sheet dated December
31, 1996 and the income statement for the period then ended, and the most recent
interim balance sheet dated June 30, 1997 and the income statement for the
period then ended (collectively, the "Recent Financial Statements") are attached
hereto as Schedule 17.4. The Financial Statements are in accordance with the
-------------
books and records of Seller and present fairly on the cash method of accounting
and in accordance with generally accepted accounting principles, consistently
applied throughout the periods involved. the financial condition and results of
operations of Seller as of the respective dates thereof and for the respective
periods covered thereby. The books, records, and accounts of Seller maintained
with respect to its business maintained on the cash method of accounting, are
complete in all material respects and present fairly and accurately
transactions, assets and liabilities of Seller with respect to its business.
17.5. Absence of Undisclosed Liabilities. Except as and to the
----------------------------------
extent reflected or reserved against in the Recent Financial Statements, or
otherwise described in Schedule 17.5 hereto, and except for liabilities
-------------
occurring in the ordinary course of business subsequent to June 30, 1997, Seller
has no liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise and whether due or to become due, including, without
limitation, any liabilities for federal or state taxes in respect of or measured
by income or for a federal, state or local environmental law or ordinance
violation.
17.6. No Changes. Since June 30, 1997, except as described in
----------
Schedule 17.6 hereto.
- -------------
17.6.1. there have been no changes in the assets, liabilities,
financial condition, business, operations, affairs or prospects of Seller from
those reflected in the Recent Financial Statements, except changes reflected in
such statements or occurring in the ordinary course of business, which have,
either in any case or in the aggregate, a Material Adverse Effect, as defined
herein;
17.6.2. neither the business, operations, affairs or prospects
of Seller, nor any of its properties or assets, has been materially adversely
affected by any occurrence or development, whether or not insured against;
11
<PAGE>
17.6.3. there have been no declarations or payments of any
dividends or other distributions in respect of, or any direct or indirect
retirement, redemption, purchase or other acquisition of, any shares of its
common stock by Seller; and
17.6.4. Seller has not obligated itself in any way with respect
to the payment of employee bonuses or increased compensation or the providing of
any other compensatory arrangement, whether current or deferred, and whether
payable in cash or other consideration; nor obligated itself to make further
additions to its business properties or further purchases of additional
equipment, except in the ordinary course of business or under existing
contractual commitments the terms of which have been disclosed to Purchaser in a
schedule appended hereto; nor made any loans or other advances (other than in
exchange for consideration having an equivalent value) to any of its officers,
directors or shareholders, as applicable; nor incurred or canceled any
indebtedness, encumbered any of its properties or assets, or engaged in any
material transaction not in the ordinary course of its business.
17.7. No Conflicts. The execution, delivery and performance by Seller
------------
of this Agreement and the consummation of the transactions contemplated hereby
will not:
17.7.1. violate any provision of law, rule, regulation, order,
judgment or decree of any governmental, administrative or judicial authority
applicable to Seller that would, individually or in the aggregate, have a
material adverse effect on the financial condition, results of operations or
reasonable business prospects of the Business (referred to hereinafter as a
"Material Adverse Effect");
17.7.2. require any consent or approval of, filing of notice
to, any governmental or regulatory authority under any provision of law
applicable to Seller;
17.7.3. violate any provision of the Articles of
Incorporation or Bylaws of Seller; or
17.7.4. require any consent (other thari consents that have
already been obtained), approval or notice under, or conflict with, or result in
the breach or termination of, or constitute a default under, or result in the
acceleration of the performance by Seller under, any indenture, mortgage, deed
of trust, lease, license, franchise, contract, agreement, or other instrument to
which Seller is a party or by which it or any of its properties or assets is
bound or encumbered that would have, individually or in the aggregate, a
Material Adverse Effect.
17.8. Absence of Changes Other Than In Ordinary Course. For the past
------------------------------------------------
four years, the Business has been operated only in the usual and ordinary course
of business consistent with prior practice.
17.9. Title to Assets. Seller has good, valid and marketable title to
---------------
all the Assets and the Assets are held free and clear of all material title
defects, liens, encumbrances and restrictions, except liens for current taxes
and assessments not yet due and payable.
12
<PAGE>
17.10. Leases. Except for the Premises Lease, Seller is not a party
------
to any leases of real or personal property.
17.11. Intellectual Property Matters. Schedule 17.11 attached hereto
----------------------------- --------------
and incorporated by reference lists all trademarks, service marks, trade names
and copyrights used in the Business. Seller owns or, as specified on Schedule
--------
17.11, has the right to use all trademarks, service marks, trade names and
- -----
copyrights used in or necessary in operating the Business in the ordinary course
of business and, to the best knowledge of Seller, the consummation of the
transactions contemplated hereby will not impair the exploitation or use of any
such rights by Purchaser. Schedule 17.11 includes a copy of any license or other
--------------
document granting Purchaser the right to use any such trademark, service mark,
trade name or copyright used by it, and each such license or document has been
assigned to Purchaser. To the best knowledge of Seller, all trademarks, service
marks. trade names and copyrights owned by Seller, all applications or
registrations thereof, all licenses and other agreements relating thereto, and
all agreements relating to the use of technology, know-how or processes do not
violate or infringe any patent, trademark, trade name, copyright, technology,
know-how or process, or other proprietary or trade rights of any third party. To
the best knowledge of Seller and Santini, there is no material infringement by
any third party of any trademark, service mark, trade name or copyright owned or
licensed by Seller.
17.12. Litigation. Except as set forth on Schedule 17.12 attached
---------- --------------
hereto and incorporated by reference, there are no suits, actions, claims,
proceedings or investigations, investigations pending or, to the best knowledge
of Seller, threatened, against Seller before any court, arbitrator or
administrative or governmental body, United States or foreign, which, if finally
determined adversely, is likely, individually or in the aggregate, to have a
Material Adverse Effect on the Assets.
17.13. Condition of Assets. All the Assets are in good operating
-------------------
condition, order and repair, ordinary wear and tear excepted and, to the best
knowledge of Seller, are operated in conformity with all applicable laws and
regulations.
17.14. Adequacy of Assets. Other than bookkeeping, management,
------------------
administrative and other services provided by Seller and services of certified
public accountants and attorneys contracted for by Seller, the Assets constitute
all the assets necessary to operate the Business in the ordinary course of
business from and after the Closing Date.
17.15. Insolvency. Seller is not insolvent, its liabilities do not
----------
exceed its assets, it is paying its debts as they come due and the transactions
contemplated by this Agreement will not cause insolvency of the Business.
17.16. Licenses. Seller and its employees have all governmental
--------
licenses and permits (federal, state and local) necessary for the conduct of the
business as now carried on by Seller and such licenses are in full force and
effect. No violations are or have been recorded in respect of any such licenses
or permits and no proceeding is pending or threatened concerning the revocation
or limitation of any such license or permit.
13
<PAGE>
17.17. Compliance With Applicable Laws. To the best of Seller's
-------------------------------
knowledge, Seller and Santini have complied with all federal, state and local
laws, statutes, rules, regulations, ordinances, licenses and orders presently in
effect, applicable to the operation of the Business conducted by Seller. Seller
has not taken any action, or failed to take any action, which action or failure
will or would, in any way, preclude or prevent Purchaser from operating the
Business after the Closing in the same general manner as theretofore operated by
Seller.
17.18. Broker and Finders. Neither Seller, Santini, or any person
------------------
acting on behalf of Seller or Santini, has employed any broker, agent or finder
or incurred any liability for any broker's fees, agent's commissions, finder's
fees or sirrilar payments in connection with the transactions contemplated
hereby.
17.19. Employee Benefits.
-----------------
(i) Schedule 17.19 hereto lists each Employee that Seller
--------------
maintains or to which it contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in operation
in all respects with the applicable requirements of ERISA, the
Internal Revenue Code of 1986, as amended (the "Code"), and other
applicable laws.
(B) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1s, and Summary Plan
Descriptions as those forms and reports are established under ERISA)
have been filed or distributed appropriately with respect to each such
Employee Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Section 4980B have been met with respect
to each such Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions) which are
due have been paid to each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of Seller. All premiums
or other payments for all periods ending on or before the Closing Date
have been paid with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code Section 401(a) and has received all required favorable
determination letters from the Internal Revenue Service.
14
<PAGE>
(E) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan equals or
exceeds the present value of all vested and nonvested liabilities
thereunder determined in accordance with PBGC methods, factors, and
assumptions applicable to an Employee Pension Benefit Plan terminating
on the date for determination.
(F) Seller has attached to Schedule 17.19 hereto correct
--------------
and complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the
Internal Revenue Service, the most recent Form 5500 Annual Report, and
all related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that Seller
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan has been the subject of any event as to which
notices would be required to be filed with the PBGC (each, a
"Reportable Event"). No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan has been instituted or, to the knowledge
of any of Seller and the directors and officers (and employees with
responsibility for employee benefits matters) of Seller, threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No fiduciary has any
liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of the
assets of any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect, to the administration or the
investment of the assets of any such Employee Benefit Plan (other than
routine claims for benefits) is pending or, to the knowledge of any of
Seller and the directors and officers (and employees with
responsibility for employee benefits matters) of Seller, threatened.
None of the Seller and the directors and officers (and employees with
responsibility for employee benefits matters) of Seller has any
knowledge of any basis for any such action, suit, proceeding, hearing,
or investigation.
(C) Seller has not incurred, and none of Seller and the
directors and officers (and employees with responsibility for employee
benefits matters) of Seller has any reason to expect that Seller will
incur, any liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal Liability)
or under the Code with respect to any such Employee Benefit Plan which
is an Employee Pension Benefit Plan.
(iii) Seller does not contribute to, never has contributed to,
or never has been required to contribute to any Multiemployer Plan or has
any liability (including withdrawal liability) under any Multiemployer
Plan.
15
<PAGE>
(iv) Seller never has maintained, never has contributed to, or
never has been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type benefits
for current or future retired or terminated employees, their spouses, or
their dependents (other than in accordance with Code Section 4980B).
(v) For purposes of this Section 17, the following definitions
shall apply:
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
---------------------
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
-----------------------------
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
-----------------------------
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Prohibited Transactions" shall mean any transaction or event treated as a
-----------------------
prohibited transaction under or as defined in Code Section 4975 or ERISA Section
406.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
----
thereto.
"Multiemployer Plan" shall have the meaning set forth in ERISA Section
------------------
3(37).
17.20. Guaranties. Seller is not a guarantor of and is not otherwise
----------
liable for any Liability or obligation (including indebtedness) of any other
person or entity.
17.21. Environment, Health, and Safety.
-------------------------------
(i) To the best knowledge of Seller and Santini, Seller has
complied with all Environmental, Health, and Safety Laws, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against Seller alleging any failure
so to comply. Without limiting the generality of the preceding sentence, to
the best knowledge of Seller and Santini, Seller has obtained and been in
compliance with all of the terms and conditions of all permits, licenses,
and other authorizations which are required under, and has complied with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all Environmental, Health, and Safety Laws.
(ii) To the best knowledge of Seller and Santini after due
diligence and investigation, Seller has not handled or disposed of any
substance, arranged for the disposal of any substance, exposed any employee
or other individual to any substance or condition,
16
<PAGE>
or owned or operated any property or facility in any manner that could form
the basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Seller giving
rise to any liability) for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any Environmental,
Health, and Safety Law.
(iii) To the best knowledge of Seller and Santini, no predecessor or
affiliate of Seller has handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other individual to
any substance or condition, or owned or operated any property or facility
in any manner that could form the basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against Seller giving rise to any liability) for damage to any site,
location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
(iv) Except as set forth on Schedule 17.21 hereto, all properties
and equipment used in the business of Seller, its predecessors and
affiliates, have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins dibenzofurans, and
other hazardous substances or wastes regulated under any Environmental,
Health and Safety Laws.
(v) For purposes of this Agreement, the term "Environmental,
Health and Safety Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, and the Occupational Safety and Health Act of 1970,
each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection
of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes.
17.22. Certain Business Relationships with Santini. Seller has not
-------------------------------------------
been involved in any business arrangement or relationship with Santini within
the past 12 months, and Santini does not own any asset, tangible or intangible,
which is used in the business of Seller.
17.23. Disclosure. Neither this Agreement nor any other document,
----------
certificate or statement furnished to Purchaser by or on behalf of Seller or
Santini in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading; and
there is no fact which materially adversely affects, or in the future may (so
far as Seller or Santini can now reasonably foresee) materially adversely affect
the assets, business, operations or prospects of Seller which has not been set
forth herein or in a schedule or statement furnished to Purchaser.
17
<PAGE>
18. Representations and Warranties of Purchaser. Purchaser represents
-------------------------------------------
and warrants to Seller and Santini that, as of the Closing Date:
18.1. Corporate Organization, Power, Good Standing. Purchaser is a
--------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of Illinois. Purchaser is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where it is required to be so
qualified. Purchaser has the corporate power to enter into and perform its
obligations under this Agreement.
18.2. Ownership. All of Purchaser's issued and outstanding stock is
---------
owned by Argosy International, Inc., an Illinois corporation ("Argosy"). All of
Argosy's issued and outstanding stock is owned by AEC. All of AECs issued and
outstanding stock is owned by Michael C. Markovitz, Ph.D.
18.3. Authorization. The execution, delivery and performance of
-------------
this Agreement by Purchaser and the consummation of the transactions
contemplated hereby have been duly authorized and approved by all requisite
corporate action on the part of Purchaser and no other corporate action on the
part of Purchaser and no other corporate proceedings are necessary to authorize
and approve this Agreement and the transactions contemplated hereby, and to make
this Agreement valid and binding upon and enforceable against Purchaser in
accordance with the terms hereof or to carry out the transactions contemplated
hereby. Purchaser shall deliver to Seller on or before the Closing Date
certified copies of directors and shareholders resolutions authorizing and
approving the transactions contemplated hereby.
18.4. Execution; Delivery; Binding Effect. This Agreement has been
-----------------------------------
duly executed and delivered by Purchaser and constitutes the legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.
18.5. No Conflicts. The execution, delivery and performance by
------------
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby will not:
18.5.1. violate any provision of law, rule, regulation,
order, judgment or decree of any governmental, administrative or judicial
authorities applicable to Purchaser;
18.5.2. require any consent or approval of, filing of notice
to, any governmental or regulatory authority under any provision of law
applicable to Purchaser;
18.5.3. violate any provision of the Articles of
Incorporation or Bylaws of Purchaser; or
18.5.4. require any consent (other than consents that have
been obtained), approval or notice under, or conflict with, or result in the
breach or termination of, or constitute a default under any indenture, mortgage,
deed of trust, lease, license, franchise, contract, agreement, or other
instrument to which Purchaser is a party or by which it or any of its assets are
bound or encumbered.
18
<PAGE>
18.6. Brokers and Finders. Neither Purchaser, AEC, or any person
-------------------
acting on behalf of Purchaser or AEC, has employed any broker, agent or finder
or incurred any liability for any broker's fees, agent's commissions, finder's
fees or similar payments in connection with the transactions contemplated
hereby.
18.7. Disclosure. Neither this Agreement nor any other document,
----------
certificate or statement furnished to Seller by or on behalf of Purchaser in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
19. Contingencies to Closing. The Closing of the transactions
------------------------
contemplated by this Agreement is subject to and conditioned on the satisfaction
of all the following conditions on or before the Closing Date, unless waived by
the appropriate party:
19.1. Other Agreements and Documents. The execution and delivery of
------------------------------
this Agreement.
19.2. Corporate Resolutions. The delivery by Seller to Purchaser,
---------------------
and by Purchaser to Seller, of certified copies of directors and shareholders
resolutions of Seller and Purchaser authorizing and approving the transactions
contemplated hereby.
19.3. Deliveries At Closing. The delivery of all the items required
---------------------
to be delivered at or before the Closing.
19.4. No Litigation. There shall not be any litigation or
-------------
proceeding to restrain or invalidate the consummation of the transactions
contemplated hereby the defense of such involves either expense or lapse or time
that would be materially adverse to the interests of any party.
19.5. Additional Conditions Precedent to Purchaser's Obligation to
------------------------------------------------------------
Close. Without limiting the foregoing, the obligations of Purchaser under this
- -----
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (the fulfillment of any of which may be waived in
writing by Purchaser):
19.5.1. The representations, warranties and covenants of
Seller and Santini contained in this Agreement shall not only have been true and
complete in all material respects as of the date of this Agreement and when
made, but shall also be true and complete in all material respects as though
again made on the Closing Date, except to the extent that they are incorrect as
of the Closing Date by reason of events occurring after the date of this
Agreement in compliance with the terms hereof which have been disclosed in
writing to Purchaser and written consent to which has been given by Purchaser.
19.5.2. Each of Santini and Seller shall have performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by each of them at or prior to the
Closing.
19
<PAGE>
19.5.3. Purchaser shall have received a certificate
executed by the Secretary of State of the State of California dated as of a
recent date certifying that Seller is a corporation in good standing under the
laws of the State of California.
19.5.4. Since the date of execution of this Agreement, there
shall have been no change having a Material Adverse Effect on the financial
condition, business, properties, operations or prospects of Seller.
19.5.5. All actions, proceedings, instruments, agreements and
documents required to carry out the transactions contemplated by this Agreement
or incidental thereto and all other related legal matters shall have been
reasonably satisfactory to Purchaser, which shall have been furnished with such
copies (certified if requested) of all such actions, proceedings, instruments,
agreements and documents as it shall have reasonably requested.
19.5.6. Purchaser's having completed its due diligence
investigation, with the results being satisfactory to Purchaser, in its sole and
absolute discretion.
20. Name Change. Seller agrees that, immediately after the Closing, it
-----------
will formally and officially change its name to "Advanced Commercial Graphics."
In furtherance thereof, Seller will prepare, execute and provide copies to
Purchaser at the Closing, all documents necessary to implement the name change,
including all documents required to be filed with the California Secretary of
State to effectuate the name change. Seller will immediately file with the
California Secretary of State all of such documents as may be necessary to
change Seller's name to "Advanced Commercial Graphics," and thereafter, provide
certified copies of documents evidencing the name change to Purchaser.
21. Employees.
---------
21.1. Employees of Business. Schedule 21.1(a) attached hereto and
--------------------- ----------------
incorporated by reference is a true and accurate list of the employees of the
Business as of July 24. 1997. Seller and Santini shall use commercially
reasonable efforts to retain the employees listed on Schedule 21.1(a) attached
----------------
as employees of the Business and shall not terminate any such employee except
for cause. Schedule 21.1(b) to be prepared on or immediately after the Closing
---------------- -------
Date and to be attached hereto and incorporated herein by reference shall be a
- ----
true and accurate list of the employees (the "Employees") of the Business as of
the Closing Date.
21.2. Discretionary Employment by Purchaser. In its sole judgment
-------------------------------------
and discretion, Purchaser may offer employment to and may hire any or all of the
Employees. Purchaser shall have no duty or obligation to hire any Employee.
21.3. Nonsolicitation. In recognition of the irreparable harm that
---------------
may or will be caused to the Business, Seller and Santini agree that neither
they, individually or collectively, nor any business, partnership, corporation,
joint venture or other entity with which either is indirectly or indirectly
involved, employed by, or a beneficial owner of or participant in, will hire or
attempt to hire or engage or attempt to engage or lure away, directly or
indirectly, from Purchaser any of the Employees, or otherwise cause or encourage
any Employee to leave the Business on or after the
20
<PAGE>
Closing Date, except Robin Lerner, Richard Santini, Kenneth Santini, Douglas
Dewar and Van Tran. The agreement set forth in this Section 21.3 shall expire
ten (10) years after the Closing Date.
21.4. Liquidated Damages. The parties acknowledge and agree that:
------------------
(a) it would be impractical or extremely difficult to determine Purchaser's
damages in the event of a breach by Seller and/or Santini of Section 21.3 above;
and (b) taking into account all the circumstances existing on the date of this
Agreement, the sum of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) per occurrence is a reasonable estimate of Purchaser's actual
damages in such event. Consequently, in the event of a breach by Seller and/or
Santini of Section 21.3 above, Purchaser shall be entitled to liquidated damages
in the sum of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) per
occurrence. Purchaser and its successors and permitted assigns shall also be
entitled to seek specific performance and injunctive relief to prevent further
breaches of Section 21.3 above by Seller and/or Santini.
22. Non-Solicitation of Other Offers. During the period beginning April
--------------------------------
1, 1997 and ending on the Closing Date, Seller and Santini each agree to not
conduct any other sale negotiations, accept any letters of intent negotiating a
sale, merger, exchange or other transaction involving the Seller or Santini's
interest in the Seller, or conduct their affairs in a way to indicate their
interest in negotiating a sale of the Business to any other potential buyer or
entity. Seller and Santini agree to promptly notify Purchaser of any
unsolicited offer.
23. Records. Notwithstanding anything to the contrary in this Agreement,
-------
Seller shall retain any and all records and documents deemed reasonably
necessary by Seller to prepare tax returns, financial statements, respond to
governmental authorities or other third parties, and wind up all matters related
to the Business so long as Seller maintains the confidentiality of all such
items. Seller shall provide copies of or access to such records and documents to
Purchaser, as determined by mutual agreement of Seller and Purchaser. Seller
shall have the right of access to and the right to copy, at Seller's expense,
any records not retained by Seller, for the sole purpose of responding to
inquiries, audits, examinations or litigation initiated by tax authorities,
other governmental authorities or other third parties.
24. Indemnifications.
-----------------
24.1. Indemnification By Seller and Santini. Seller and Santini,
-------------------------------------
jointly and severally, shall save, defend and indemnify Purchaser and
Purchaser's officers, directors, employees, agents and representatives against,
and hold Purchaser and Purchaser's officers, directors, employees, agents and
representatives harmless from, any and all claims, demands, damages, debts,
liabilities, obligations, actions, costs and expenses (including without
limitation, attorneys' fees and costs, court costs and costs of appeal), of
every kind nature and description whatsoever, absolute, fixed or contingent,
relating or attributable to, which arise out of or result from:
24.1.1. Any failure of Seller to pay, discharge or
comply with any debt, obligation, liability or commitment other than an Assumed
Liability pursuant to the terms thereof;
24.1.2. Any inaccuracy in, or breach of, any
representation, warranty, covenant or agreement made by Seller or Santini in
this Agreement, the Exhibits hereto or any
21
<PAGE>
executed document or paper prepared by Seller or Santini or delivered in
connection with the transactions contemplated hereby;
24.1.3. Any failure of Seller duly to perform or observe
any term, provision, covenant, agreement or condition hereunder on the part of
Seller to be performed or observed;
24.1.4. Any claim, litigation or other action of any
nature arising out of any action or inaction of Seller prior to the Closing
Date;
24.1.5. Any claim of any employee of Seller, or of any
other person, arising out of or relating to any employee stock option, bonus,
retirement, medical, profit sharing, pension or other similar plan of Seller or
the operation or termination of such plan, to the extent relating or
attributable to periods ending before the Closing Date; and
24.1.6. Any action, suit, proceeding, assessment or
judgment arising out of or incident to any of the matters indemnified against by
Seller or Santini under this Agreement.
24.2. Indemnification By Purchase. Purchaser shall save, defend and
---------------------------
indemnify Seller and Santini and Seller's officers, directors, employees, agents
and representatives against, and hold Seller and Santini and Seller's officers,
directors, employees, agents and representatives harmless from, any and all
claims, demands, damages, debts, liabilities, obligations, actions, costs and
expenses (including without limitation, attorneys' fees and costs, court costs
and costs of appeal), of every kind, nature and description whatsoever,
absolute. fixed or contingent, relating or attributable to, which arise out of
or result from:
24.2.1. Any failure of Purchaser to timely pay, discharge,
satisfy or comply with an Assurned Liability assumed by Purchaser according to
such liability's terms, except for liabilities attributable to Seller's asserted
breach of a representation, warranty, covenant or obligation of Seller;
24.2.2. Any inaccuracy in, or breach of, any
representation, warranty, covenant or agreement made by Purchaser in this
Agreement, the Exhibits hereto or any executed document or paper prepared by
Purchaser and delivered in connection with the transactions contemplated hereby;
24.2.3. Any failure of Purchaser to timely pay, discharge
or comply with any liability, debt or obligation incurred by Purchaser on or
after the Closing Date;
24.2.4. Any failure of Purchaser to make when due any
payment required under this Agreement, except with respect to any asserted
offset rights, or duly to perform or observe any term, provision, covenant,
agreement or condition hereunder on the part of Purchaser to be performed or
observed;
24.2.5. Any claim, litigation or other action of any
nature arising out of any action or inaction of Purchaser or Purchaser's
officers, directors, employees, agents, or representatives before, on or after
the Closing Date;
22
<PAGE>
24.2.6. Purchaser's operation of the Business on and after
the Closing Date; and
24.2.7. Any action, suit, proceeding, assessment or
judgment arising out of or incident to any of the matters indemnified against by
Purchaser, under this Agreement.
24.3. Claims For Indemnification. Whenever any claim shall arise
--------------------------
for indemnification under this Section 24, the party or parties entitled to
indemnification (individually and collectively, the "Indemnified Party") shall
notify the party or parties against whom indemnification is sought (individually
and collectively, the "Indemnifying Party") in writing of the claim. Such
written notice shall specify all material facts known to the Indemnified Party
giving rise to the indemnification right and the amount, or an estimate thereof,
of the expense or liability incurred or expected to be incurred by the
Indemnified Party. The right to indemnification hereunder and the amount
thereof (but not an estimate of the amount thereof) as set forth in the written
notice shall be deemed agreed to by the Indemnifying Party unless, within thirty
(30) days after the receipt of such notice, the Indemnified Party is notified in
writing that the Indemnifying Party disputes the right to indemnification and/or
the amount thereof.
24.4. Right to Defend Third-Party Claims. If the claim for
----------------------------------
indemnification involves any actual, threatened or potential claim or demand by
any third party against the Indemnified Party (a "Third-Party Claim"), the
Indemnifying Party may, at its option, elect to undertake full responsibility
for the defense of the Third-Party Claim and may contest or settle the Third-
Party Claim on such terms as the Indemnifying Party may determine in its sole
discretion. If the Indemnifying Party elects to undertake full responsibility
for the defense of the Third-Party Claim, the Indemnifying Party shall be
responsible and liable for all costs and expenses of such defense and
settlement, and shall be responsible and liable for any judgment rendered by the
court in favor of the Third Party against the Indemnified Party. If the
Indemnifying Party does not elect to undertake full responsibility for the
defense of the Third-Party Claim, the Indemnifying Party at its own expense may
nevertheless participate with the Indemnified Party in the defense of the Third-
Party Claim and in any and all settlement negotiations relating thereto. The
Indemnified Party and the Indemnifying Party shall cooperate with respect to the
defense and negotiation of any settlement of the Third-Party Claim, and the
Indemnified Party shall not settle the Third-Party Claim without the concurrence
of the Indemnifying Party. Any such participation shall not relieve the
Indemnifying Party of its indemnification obligations under this Section 24.
24.5. Cooperation. The parties shall execute and deliver such
-----------
powers of attorney and other documents as may be reasonably necessary or
appropriate to permit participation of counsel selected by any party in any and
all relevant proceedings. Each party shall provide access to the other party or
parties and their respective counsel, accountants and other representatives and
advisors during regular business hours to all books, records, documents, papers,
materials, personnel, agreements, contracts and any and all relevant business
records as may reasonably be necessary to defend and/or settle any claims under
this Section 24.
24.6. Duration. The indemnification rights of the parties hereunder
--------
shall survive the Closing Date for a period of eleven (11) years; provided,
however, that any indemnification right related to federal, state or local taxes
shall survive the Closing Date for a period of one hundred
23
<PAGE>
twenty (120) days after the last date on which such tax claim may be asserted by
the relevant taxing authority. The expiration of the indemnification rights as
herein provided shall not affect claims for indemnification pending on the date
of such expiration. Such pending claims shall remain valid and enforceable.
24.7. Payment. Except as provided in Section 24.8 below, the
-------
Indemnifying Party shall promptly pay to the Indemnified Party the amount of the
indemnification required by this Section 24.
24.8. Offset. The Indemnifying Party shall have the right to offset
------
any amounts payable to the Indemnifying Party by the Indemnified Party under
this Section 24 against any amounts payable by the Indemnifying Party to the
Indemnified Party under this Section 24. Such right of offset shall be exercised
by written notice sent by certified or registered mail to the Indemnified Party.
The notice shall be given in accordance with the notice provisions of this
Agreement and shall state the amount of the offset and the payment or payments
that are being offset. If not disputed in writing sent by certified or
registered mail by the Indemnified Party within fourteen (14) days of the
effective date of such notice, the offset shall be final and deemed agreed to by
both Parties. If the Indemnified Party disputes such offset within such fourteen
(14) day period then, within ten 10) days after the Indemnified Party gives
notice that it disputes the offset, the dispute shall be referred to binding
arbitration. The arbitration shall be conducted before a single arbitrator
pursuant to the provisions of Section 26.2 below except that the decision of the
arbitrator shall be conclusive and binding on, and non-appealable by, the
Parties. During the pendency of such dispute, the Indemnifying Party shall pay
the disputed amount into an escrow account governed by the provisions of
Section 28 below. Notwithstanding the foregoing, any failure by the Indemnifying
Party to make any such payment into the escrow account shall not preclude, or
act as a condition precedent to, any arbitration or litigation between the
Parties.
25. Termination. This Agreement shall terminate on the first to occur
-----------
of:
25.1. If the transactions contemplated by this Agreement are not
consummated on or before October 1, 1997.
25.2. If any condition to Closing set forth in Section 19 above is
not satisfied or waived on or before the Closing Date.
25.3. Mutual agreement of the parties.
25.4. If, before the Closing Date, Purchaser determines in its sole
discretion, that Purchaser's and AEC's due diligence investigation pursuant to
Section 15 above is not satisfactory to Purchaser.
26. Pre-Litigation Mediation and Non-Binding Arbitration of Disputes.
----------------------------------------------------------------
26.1. Mediation. Except as provided in Section 26.3 below, any
---------
dispute, controversy or claim relating to this Agreement, including but not
limited to the interpretation thereof, or its breach or existence, which cannot
be resolved amicably by Seller and Purchaser shall first be
24
<PAGE>
referred to mediation administered by the American Arbitration Association
under its Commercial Mediation Rules, before resorting to arbitration or
litigation. The mediation shall be conducted in Ventura County, California, or
such other location as may be determined by mutual agreement of Seller and
Purchaser. The mediation referral required hereunder shall occur as soon as it
becomes clear that Seller and Purchaser cannot resolve the matter in dispute and
the mediation shall be conducted as swiftly as is reasonably possible under the
circumstances.
26.2. Non-Binding Arbitration. Within ten (10) days or as soon as
-----------------------
reasonably feasible after mediation is completed, any unresolved controversy or
claim arising out of or relating to this Agreement, or breach thereof, shall be
referred to non-binding arbitration administered by the American Arbitration
Association in accordance with its Commercial Arbitration Rules. The
arbitration shall be conducted as swiftly as is reasonably possible under the
circumstances. The arbitration shall be conducted before one neutral arbitrator
to be selected in accordance with the Commercial Rules of the American
Arbitration Association and shall proceed under the Expedited Procedures of said
Rules, irrespective of the amount in dispute. The arbitration shall be held in
Ventura County, California, unless Seller and Purchaser mutually agree upon
another place. In its award, the arbitral authority shall fix and apportion the
costs of arbitration. Except as provided in Section 26.3 below, no lawsuit
shall be filed prior to the entry of a written award by the arbitral authority.
The award of the arbitral authority shall be non-binding upon Seller and
Purchaser. However, if after forty-five (45) days from the date of the award, no
party files a separate lawsuit in a court of competent jurisdiction to resolve
the dispute, controversy or claim, the award will become final and non-
appealable and the award may be enforced by any court having jurisdiction over
the party against which the award has been rendered or where assets of the party
against which the award has been rendered can be located.
26.3. Exceptions to Mediation/Arbitration. Notwithstanding Sections
-----------------------------------
26.1 and 26.2 above, Purchaser shall be permitted to seek specific performance
or injunctive relief in a court of competent jurisdiction for any breach of
Section 12 (regarding agreement not to compete) or Section 21.3 (dealing with
Nonsolicitation) without submitting the dispute to mediation and arbitration.
27. Venue. Subject to Section 26 above, the parties hereby stipulate and
-----
agree that venue for any litigation involving this Agreement shall be in Ventura
County, California. The parties hereby stipulate and consent to the
jurisdiction of the Ventura County Superior Court with respect to any such
litigation. Purchaser hereby waives its right to assert diversity jurisdiction
and its right to file any lawsuit in or have a lawsuit removed to federal court.
28. Escrow. The escrow account required by Section 24 above shall be
------
governed by this Section 28.
28.1 Escrow Agent. The escrowholder (the "Escrow Agent") shall be
------------
Frederick P. Muller, Inc., a California professional law corporation.
28.2. Deposit. Immediately after the Indemnified Party gives
-------
written notice to the Indemnifying Party disputing the asserted offset, the
Indemnifying Party shall pay to the Escrow Agent an amount of money equal to the
disputed offset. The Escrow Agent shall thereupon deposit
25
<PAGE>
such amount into an interest-bearing account (the "Escrow Account") subject to
the terms of this Section 28.
28.3. Interest On Escrowed Funds. All interest earned during any
--------------------------
calendar year on funds held in the Escrow Account shall be deemed for tax
purposes to be earned by and taxable to the Indemnifying Party. In furtherance
thereof, the Escrow Agent shall issue to the Indemnifying Party a Form 1099-INT
with respect to such calendar year in the amount of such interest.
Notwithstanding the foregoing, any such interest on funds that are paid out of
the Escrow Account to the Indemnified Party during such year pursuant to the
provisions of Section 28.4 below shall be deemed to be earned by and taxable to
the Indemnified Party and the Escrow Agent shall issue to the Indemnified Party
a Form 1099-INT in the amount of such interest.
28.4. Release of Funds. The Escrow Agent shall not pay to any
----------------
person any amount held by the Escrow Agent hereunder or release any funds from
the Escrow Account except (a) upon the joint agreement and written direction of
the Indemnified Party and the Indemnifying Party, or (b) as directed in writing
by the arbitrator in furtherance of the arbitrator's decision with respect to
the disputed offset pursuant to the binding arbitration required by Section 24.8
above. Interest shall be paid out of the Escrow Account in proportion to
principal.
28.5. Costs and Expenses. All costs and expenses of the Escrow
------------------
Agent and the Escrow Account shall be borne and paid solely by Seller and
Santini.
28.6. Successor Escrow Agent. In the event the Escrow Agent resigns
----------------------
as escrow agent, or the Escrow Agent is, for whatever reason, unable to serve as
escrow agent hereunder, the Indemnifying Party and the Indemnified Party shall
mutually agree on and appoint a new Escrow Agent. Such new Escrow Agent shall
succeed to any funds then held in the Escrow Account and shall agree to be bound
by the terms of this Section 28.
28.7. Indemnification. Seller and Santini shall indemnify the
---------------
Escrow Agent and the Escrow Agent's officers, directors and employees against,
and hold the Escrow Agent and the Escrow Agent's officers, directors and
employees harmless from, all costs and expenses incurred by the Escrow Agent in
furtherance of its duties and obligations hereunder, except for the Escrow
Agent's fraud, willful neglect or gross negligence.
29. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY VOLUNTARILY AND
--------------------
KNOWINGLY WAIVES ANY RIGHT ANY OF THEM MAY HAVE TO SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT.
30. Miscellaneous.
-------------
30.1. Modification, Amendment or Waiver. This Agreement may not be
---------------------------------
amended, supplemented or otherwise modified, and none of its terms may be
waived, unless such amendment, supplement, modification or waiver is in writing
and executed by the party or parties to be bound thereby. The failure of any
party at any time or times to require performance of any provision hereof
26
<PAGE>
shall not affect the right of such party at a later time to enforce the same,
and no waiver of any term or provision hereof on any one occasion shall be
deemed to be a waiver of the same or any other provision hereof at any
subsequent time or times.
30.2. Notices. Any notices or other communication required or
-------
permitted hereunder must be in writing and shall be deemed given on the date
that the same shall have been cabled or telegraphed, sent by telecopier or other
facsimile equipment, delivered personally via messenger or overnight carrier, or
48 hours after deposit in the United States mail, mailed by certified or
registered mail, postage prepaid, return receipt requested. and duly addressed
to the party to be notified:
Purchaser: Academic Review, Inc.
---------
Two First National Plaza
20 South Clark Street
Chicago, IL 60603
Attn: Michael C. Markovitz, Chairman
with a copy to:
Roberta Colton, Esq.
Trenam, Kemker, et al.
101 E. Kennedy Boulevard
Suite 2700
Tampa, FL 33602
Seller: Academic Review, Inc.
------
5126 Ralston Street
Ventura, CA 93003
Attn: Steven H. Santini, President
Santini: Steven H. Santini
-------
242 Lincoln Drive
Ventura, CA 93001
Any party may change tile person or address to which any notice or other
communication is to be sent by giving written notice thereof in the manner
provided herein.
30.3. Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon, and shall inure to the benefit of and be enforceable by, the parties
hereto, and their respective heirs, successors, assigns and legal
representatives; provided, however, that no assignment of any rights or
delegation of any obligations provided for herein may be made by any party
hereto without the prior written consent of the other parties, which consent
shall not be unreasonably withheld.
30.4. Entire Agreement. This Agreement (together with all Exhibits,
----------------
certificates, documents, agreements and instruments executed or furnished in
connection herewith) contains the entire agreement among the parties with
respect to the subject matter hereof, and supersedes any and all prior or
contemporaneous written or oral negotiations, agreements, discussions and
27
<PAGE>
representations of the parties with respect to such subject matter. More
specifically, but not in limitation of the foregoing, this Agreement revokes and
supersedes that certain Agreement to Purchase Assets dated as of April 29, 1997,
by and among the parties.
30.5. Governing Law. This Aereement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of Illinois.
30.6. Severability. If any provision or covenant of this Agreement,
------------
or any portion of any provision or covenant, shall be deemed invalid,
unreasonable, arbitrary or against public policy, then such portion of such
provision or covenant shall be considered divisible both as to time,
geographical area and amount and a lesser period, geographical area or amount
may be enforced. The parties agree that this Agreement shall be interpreted in
such a manner as to give effect, as far as possible, to the intent of the
parties as set forth herein. Any such invalid or unenforceable provision or
covenant shall not affect the enforceability and validity of the remaining
provisions and covenants hereof.
30.7. Attorneys' Fees. If any legal action or other proceeding is
---------------
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
30.8. Headings. The headings in this Agreement are intended solely
--------
for convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
30.9. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which shall constitute the
same agreement.
30.10. Facsimile Signatures. A signature that is transmitted by
--------------------
telecopier or other facsimile equipment shall be deemed an original signature.
30.11. Gender, Number, Etc. As used herein, the masculine, feminine
--------------------
or neuter gender and the singular and plural number or tense each shall be
deemed to include the others whenever the context so indicates.
28
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date or
dates set forth below.
ACADEMIC REVIEW, INC., an Illinois
Corporation
Date:___________________________, 1997 By_________________________________
MICHAEL C. MARKOVITZ, Ph.D.
President and Chairman
ACADEMIC REVIEW, INC., a California
corporation
Date: 8/26 , 1997 By /s/ Steven H. Santini
-------------------------- ---------------------------------
STEVEN H.. SANTINI, President
Date: 8/26 , 1997 By /s/ Steven H. Santini
-------------------------- ---------------------------------
STEVEN H. SANTINI
The undersigned executed and joins in this Agreement in its capacity as Escrow
Agent pursuant to Sections 7.3 and 28 hereof solely for purposes of such
Sections 7.3 and 28.
FREDERICK P. MULLER, INC.
BY:_________________________________
ITS: President
-------------------------------
29
<PAGE>
EXHIBIT 10.25
SCT
SOFTWARE LICENSE &
SERVICES AGREEMENT
SCT SOFTWARE & RESOURCE
MANAGEMENT CORPORATION
4 Country View Road
Malvern, Pennsylvania 19355
FAX Number (610) 640-5181
("SCT")
and
AMERICAN EDUCATION CORPORATION
20 South Clark Street
Chicago, Illinois 60603
FAX Number (312) 201-1907
("Licensee" ), for and on behalf of itself and the Institutions
THIS AGREEMENT is made between SCT and Licensee as of the Effective Date. The
parties agree as follows:
1. DEFINITIONS.
------------
"Baseline" means the general release version of a Component System as updated
----------
to the particular time in question through both SCT's warranty services and
SCT's Technical Currency Program, but without any other modification whatsoever.
"Committed Services" means that quantity (if any) of services identified in
-------------------
the Committed Services matrix in Exhibit I that Licensee is committing to obtain
from SCT.
"Component System" means any one of the computer software programs which is
------------------
identified in Exhibit I as a Component System, including all copies of Source
Code (if provided), Object Code and all related specifications, documentation,
technical information, and all corrections, modifications, additions,
improvements and enhancements to and all Intellectual Property Rights for such
Component System.
"Confidential Information" means non-public information of a party to this
-------------------------
Agreement. Confidential Information of SCT includes the Licensed Software, all
software provided with the Licensed Software, and algorithms, methods,
techniques and processes revealed by the Source Code of the Licensed Software
and any software provided with the Licensed Software. Confidential Information
does not include information that: (i) is or becomes known to the public without
fault or breach of the Recipient; (ii) the Discloser regularly discloses to
third parties without restriction on disclosure; or (iii) the Recipient obtains
from a third party without restriction on disclosure and without breach of a
non-disclosure obligation.
"Delivery Address" means the Licensee shipping address set forth in Exhibit I
------------------
as the Delivery Address.
<PAGE>
"Delivery Date" means, for each Component System, the date Licensee first
---------------
receives that Component System at the Delivery Address.
"Discloser" means the party providing its Confidential Information to the
-----------
Recipient.
Documented Defect" means a material deviation between the Baseline Component
-----------------
System and its documentation, for which Documented Defect SCT has confirmed that
Licensee has given SCT enough information for SCT to replicate the deviation on
a computer configuration which is both comparable to the Equipment and is under
SCT's control.
"Effective Date" means the date identified on the signature page of this
----------------
Agreement as the Effective Date.
"Equipment" means the hardware and systems software configuration identified
-----------
in Exhibit I as the Equipment.
"Exhibit I" means, collectively: (i) The schedule attached to this Agreement
-----------
which is marked as "Exhibit I," including all attached Software Supplements; and
(ii) any schedule also marked as "Exhibit I" (also including any attached
Software Supplements) that is attached to any amendment to this agreement.
"Institutions" means each institution of higher educational institution that
--------------
is controlled by, controlling and/or under common control with Licensee..
"Intellectual Property Rights" means all patents, patent rights, patent
------------------------------
applications, copyrights, copyright registrations, trade secrets, trademarks and
service marks and Confidential Information.
"Licensed Software" means the Component Systems listed in Exhibit 1.
-------------------
"Licensee Employees" means: (i) Employees of Licensee and/or employees of any
--------------------
Institution, in each instance, with a need to know; and (ii) third party
consultants engaged by Licensee and/or any Institution who have a need to know,
who have been pre-approved by SCT, and who, prior to obtaining access to the
Licensed Software, have executed an SCT-approved non-disclosure agreement.
"Object Code" means computer programs assembled, compiled, or converted to
-------------
magnetic or electronic binary form on software media, which are readable and
usable by computer equipment.
"Recipient" means the party receiving Confidential Information of the
-----------
Discloser.
"Software Supplement" means, with respect to a Component System, the addendum
---------------------
provided as part of Exhibit I that contains additional terms, conditions,
limitations and/or other information pertaining to that Component System. If any
terms of a Software Supplement conflicts with any other terms of this Agreement,
the terms of the Software Supplement will control.
"Source Code" means computer programs written in higher-level programming
-------------
languages, sometimes accompanied by English language comments and other
programmer documentation.
2. RIGHT TO GRANT LICENSE AND OWNERSHIP. SCT has the right to grant Licensee
------------------------------------
this license to use the Licensed Software. Except as otherwise indicated in a
Software Supplement, SCT owns the Licensed Software.
3. LICENSE. Subject to the terms and conditions of this Agreement, SCT grants
-------
Licensee a perpetual, non-exclusive, non-transferable license to use and copy
for use the Licensed Software on the Equipment within the United States of
America and Canada for the non-commercial computing operations of Licensee and
the Institutions. The computer readable media containing Source Code and Object
Code for the Licensed Software may also contain Source Code and Object Code for
Component Systems for which Licensee is not granted a license for use. Licensee
may not make any use of any Source Code and/or Object Code for any such
Component Systems for which Licensee is not expressly obtaining a license for
use under this Agreement. Any rights no expressly granted in this Agreement are
expressly reserved.
<PAGE>
(a) Source Code. If Exhibit I to this Agreement does not otherwise provide
-----------
that Licensee has a license to use Source Code for a particular Component
System, then Licensee has no rights in or to the Source Code for that Component
System. Only with respect to the Component Systems for which the Source Code is
so licensed, Licensee has the right to compile, modify, improve and enhance the
Licensed Software. Licensee will not disclose all or any part of the Source Code
for the Licensed Software to any person except Licensee Employees who, before
obtaining access to the Source Code, have been informed by Licensee in writing
of the non-disclosure obligations imposed on both Licensee and such Licensee
Employees under this Agreement.
(b) Object Code. Licensee has right to use the Licensed Software in Object
-----------
Code form. Licensee also has the right to use the Licensed Software in Object
Code form temporarily on another SCT-supported configuration, for disaster
recovery of Licensee's computer operations.
(c) Documentation. Except as otherwise provided for in the applicable
-------------
Software Supplement, Licensee can make a reasonable number of copies of the
documentation for each Component System for its use in accordance with the terms
of this Agreement.
(d) Restrictions on Use of the Licensed Software. Licensee is prohibited
-----------------------------------
from causing or permitting the reverse engineering, disassembly or decompilation
of the Licensed Software. Licensee is prohibited from using the Licensed
Software to provide service bureau data processing services or to otherwise
provide data processing services to third parties. Licensee will not allow the
Licensed Software to be used by, or disclose all or any part of the Licensed
Software to, any person except Licensee Employees. Without limiting the
foregoing, Licensee is permitted to allow use of the input and/or output sensory
displays of or from the Licensed Software by third parties on a strict "need to
know" basis, and such use shall not be deemed a non-permitted disclosure of the
Licensed Software. Licensee will not allow the Licensed Software, in whole or
in part, to be exported outside of the United States of America and Canada, in
any manner or by any means, without in each instance obtaining SCT's prior
written consent (such consent which SCT will not unreasonably withhold or delay)
and, if required, a validated export license from the Office of Export
Administration within the U.S. Department of Commerce and such other appropriate
United States Governmental authorities. Subject to and without limiting the
foregoing, Licensee is permitted to use the Licensed Software for the benefit of
any Institution located in Canada so long as Licensee has acquired, if required,
a validated export license from the Office of Export Administration within the
U.S. Department of Commerce and such other appropriate United States
governmental authorities.
(e) Intellectual Property Rights Notices. Licensee is prohibited from
------------------------------------
removing or altering any of the Intellectual Property Rights notice(s) embedded
in or that SCT otherwise provides with the Licensed Software. Licensee must
reproduce the unaltered Intellectual Property Rights notice(s) in any full or
partial copies that Licensee makes of the Licensed Software. License must
reproduce the unaltered Intellectual Property Rights notice(s) in any full or
partial copies that Licensee makes of the Licensed Software.
4. AVAILABLE SERVICES.
------------------
(a) Implementation/Support/Training Services. SCT will provide Licensee with
----------------------------------------
implementation services for the Licensed Software at the fees provided in
Exhibit 1.
(b) Consulting and Modification Services. SCT can also provide Licensee with
------------------------------------
consulting and modification services for the Licensed Software. Fees for
consulting and modification services are provided in Exhibit 1.
(c) Committed Services. SCT will provide Licensee with Committed Services
------------------
within the time period specified and for the fees set forth in Exhibit 1.
Licensee must provide SCT with enough advanced notice to enable SCT to provide
all Committed Services within the time period specified in Exhibit 1.
(d) Workmanlike Skills. SCT will render all services under this Agreement in
------------------
a professional and workmanlike manner. SCT will promptly replace any SCT
personnel that are rendering services on-site at a Licensee
<PAGE>
facility if Licensee reasonably considers the personnel to be unacceptable and
provides SCT with notice to that effect, provided that such replacement does not
violate any law or governmental regulation applicable to such personnel
replacement.
(e) Conditions On Providing Services. In each instance in which SCT is
--------------------------------
providing Licensee with services, SCT and Licensee will develop a project plan
that identifies each party's responsibilities for such services. The project
plan will describe in detail the tentative schedule and the scope of services
that SCT will provide. Licensee will establish the overall project direction,
including assigning and managing the Licensee's project personnel team.
Licensee must assign a project manager who will assume responsibility for
management of the project. Licensee must ensure that the Equipment is
operational, accessible and supported at the times agreed to by the parties in
the project plan. While SCT is providing such services, Licensee must provide
SCT with such facilities, equipment and support as are reasonably necessary for
SCT to perform its obligations, including remote access to the Equipment. If
the parties do not develop a project plan in any instance, SCT will nonetheless
provide Licensee with services on an as-directed basis. In no such event,
however, will SCT be required to provide Licensee with more than eighty (80)
person-hours of services in any single calendar week.
(f) Cancellation of Scheduled Services. The parties agree that once Licensee
----------------------------------
and SCT have scheduled a specific time during which SCT will provide services
under the terms of this Agreement, Licensee will be obligated to pay SCT for
such services as if SCT had performed such services on the date scheduled,
unless Licensee has notified SCT that Licensee would like to reschedule or
cancel the provision of such services at least thirty (30) days prior to the
date which SCT is scheduled to perform such services. Without limiting the
foregoing, nothing in this Section 4(f) will act in any way to reduce Licensee's
obligation to SCT in connection with any Committed Services.
5. DELIVERY. Except as otherwise provide in Exhibit 1, SCT will deliver all
--------
Component Systems to Licensee at the Delivery Address within thirty (30) days
after the Effective Date.
6. PAYMENT AND TAXES.
-----------------
(a) Payment. Licensee will pay SCT as provided for in Exhibit 1. Licensee
-------
will also reimburse SCT for actual travel and living expenses that SCT incurs in
providing Licensee with services under this Agreement, with reimbursement to be
on an as incurred basis. SCT will use reasonable efforts to limit travel and
living expenses by using coach air fare, booked in advance when available,
staying at hotels identified in advance by Licensee as offering Licensee's
contractors a discounted rate, and sharing rental cars. Licensee will also
reimburse SCT for all charges incurred in connection with accessing Equipment.
Reimbursement is subject to any statutory reimbursement limitations imposed on
Licensee contractors, and Licensee will provide SCT with a copy of such
limitations before SCT incurs expenses. Licensee will pay each SCT invoice by
no later than thirty (30) days after receipt. Late payments are subject to a
late charge equal to the lesser of: (i) the prime lending rate established from
time to time by Mellon Bank, N.A., Philadelphia, Pennsylvania plus three percent
(3%); and (ii) the highest rate permitted by applicable law.
Notwithstanding the foregoing, however, and without limitation thereon, if in
any Contract Year (that is, the period running from the Effective Date or any
anniversary thereof to the date one year thereafter), the aggregate full-time
enrollment equivalent ("FTE") of all Institutions (the "Aggregate FTE") should
increase by more than ten percent (10%) above the Aggregate FTE over the
preceding year ("Annual FTE Increase"), then, in such instance, Licensee shall
pay SCT additional, incremental license fee(s) for the Licensed Software (and in
connection with the Technical Currency Agreement [entered into between the
parties on or about the Effective Date], additional Technical Currency fees for
the Licensed Software, with such additional license fees and Technical Currency
Fees being hereinafter referred to as "Incremental Licensed Software Fees") For
such Annual FTE Increase Such Incremental Licensed Software Fees will be based
upon SCT's then-current published list price license fees and Technical Currency
fees for the Licensed Software, will be calculated by taking: (a) The SCT then-
current Licensed Software license fee(s) for higher educational institutions
comparable in enrollment size to the Aggregate FTE; and crediting against such
amount (b) the Licensed Software license fee (s) (and in connection with the
Technical Currency Agreement, Technical Currency fees) actually paid by Licensee
to SCT under this Agreement. However, Licensee will not be required to remit
any such Incremental Licensed Software Fees until and unless the Aggregate FTE
exceeds 4,000 (the " FTE Threshold")
<PAGE>
By way of examples and not limitation, if, for a given Contract Year, the
Aggregate FTE were 3,000, and in the immediately following Contract Year, the
Aggregate FTE increased by 33.3%, then notwithstanding such Annual FTE Increase,
Licensee would not be required to remit any Incremental Licensed Software Fees
to SCT, since the Aggregate FTE resulting from such Annual FTE Increase (i.e.,
3,999) would be less than the FTE Threshold. However, if the Aggregate FTE had
instead increased by 50%, meaning that the Aggregate FTE were instead 4,500,
then, in such instance, Licensee would be required to pay Incremental Licensed
Software Fees to SCT for 500 FTE. If in the following Contract Year, the
Aggregate FTE increased to 4,949, Licensee would not be required to remit any
Incremental Licensed Software Fees to SCT for such 449 Annual Increase, since
such FTE increase would be less than 10% of the Aggregate FTE (4,500) from the
preceding Contract Year.
(b) Taxes. Licensee is responsible for paying all taxes (except for taxes
-----
based on SCT's net income or capital stock) relating to this Agreement, the
Licensed Software, any services provided or payments made under this Agreement.
Applicable tax amounts (if any) are NOT included in the fees set forth in this
Agreement. If Licensee is exempt from the payment of any such taxes, Licensee
must provide SCT with a valid tax exemption certificate; otherwise, absent proof
of Licensee's direct payment of such tax amounts to the applicable taxing
authority, SCT will invoice Licensee for and Licensee will pay to SCT all such
tax amounts.
7. LIMITED WARRANTY, DISCLAIMER OF WARRANTY AND ELECTION OF REMEDIES.
------------------------------------------------------------------
(a) Limited Software Warranty by SCT and Remedy For Breach. For each
------------------------------------------------------
Component System, SCT warrants to Licensee that, for period of twelve (12)
months after the Delivery Date, the Baseline Component System, as used by
Licensee on the Equipment for the non-commercial computing operations of
Licensee and the Institutions, will operatewithout Documented Defects. For each
Documented Defect, SCT, as soon as reasonably practible and in any event, in a
manner considered timely in the information technology industry, based on the
nature and severity of the Documented Defect) and at its own expense, will
provide Licensee with an avoidance procedure for or a correction of the
Documented Defect. If, despite its reasonable efforts, SCT is unable to provide
Licensee with an avoidance procedure for or a correction of a Documented Defect,
then, subject to the limitations set forth in Section 16 of this Agreement,
Licensee, at its election: (i) may pursue its remedy at law to recover direct
damages resulting from the breach of this limited warranty; or (ii) may return
the nonconforming Component System and receive a refund from SCT of the license
fee paid to SCT by Licensee for the returned Component System. These remedies
are exclusive and are in lieu of all other remedies, and SCT's sole obligations
for breach of this limited warranty are contained in this Section 7(a).
(b) Disclaimer of Warranty. The limited warranty in Section 7(a) is made to
----------------------
Licensee exclusively and is in lieu of all other warranties. SCT MAKES NO OTHER
WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, WITH REGARD TO ANY SERVICES PROVIDED
UNDER THIS AGREEMENT AND/OR THE LICENSED SOFTWARE, IN WHOLE OR IN PART. SCT
EXPLICITLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A
PARTICULAR PURPOSE. SCT EXPRESSLY DOES NOT WARRANT THAT THE LICENSED SOFTWARE,
IN WHOLE OR IN PART, WILL BE ERROR FREE, WILL OPERATE WITHOUT INTERRUPTION OR
WILL BE COMPATIBLE WITH ANY HARDWARE OR SOFTWARE OTHER THAN THE EQUIPMENT.
LICENSEE WAIVES ANY CLAIM THAT THE LIMITED WARRANTY SET FORTH IN SECTION 7(A) OR
THE REMEDY FOR BREACH OF SUCH LIMITED WARRANTY FAILS OF ITS ESSENTIAL PURPOSE.
(c) Abrogation of Limited Warranty. The limited warranty in Section 7(a)
------------------------------
will be null and void if: (i) anyone (including Licensee) other than SCT
modifies the Baseline Component System; or (ii) Licensee does not implement
changes that SCT provides to correct or improve the Baseline Component System.
If despite any modification of the Component System, SCT can replicate the
reported problem in the Baseline Component System as if the problem were a
Documented Defect, then SCT will nonetheless provide Licensee with an avoidance
procedure for or A correction of that reported problem for use in the Baseline
Component System as though the reported problem were a Documented Defect.
(D) FAILURE OF ESSENTIAL PURPOSE. THE PARTIES HAVE AGREED THAT THE
----------------------------
LIMITATIONS SPECIFIED IN SECTIONS 7 AND 16 WILL SURVIVE AND APPLY EVEN IF ANY
<PAGE>
LIMITED REMEDY SPECIFIED IN THIS AGREEMENT IS FOUND TO HAVE FAILED OF ITS
ESSENTIAL PURPOSE, AND REGARDLESS OF WHETHER LICENSEE HAS ACCEPTED ANY LICENSED
SOFTWARE OR SERVICE UNDER THIS AGREEMENT.
8. CONFIDENTIAL INFORMATION. Except as otherwise permitted under this
------------------------
Agreement, the Recipient will not knowingly disclose to any third party, or make
any use of the Discloser's Confidential Information. The Recipient will use at
least the same standard of care to maintain the confidentiality of the
Discloser's Confidential Information that it uses to maintain the
confidentiality of its own Confidential Information of equal importance. Except
in connection with the Licensed Software and any software provided with the
Licensed Software, the non-disclosure and non-use obligations of this Agreement
will remain in full force with respect to each item of Confidential Information
for a period of ten (10) years after Recipient's receipt of that item. However,
Licensee's obligations to maintain both the Licensed Software and any software
provided with the Licensed Software as confidential will survive in perpetuity.
9. INDEMNITY BY SCT. SCT will defend, indemnify and hold Licensee harmless
----------------
from and against any loss, cost and expense that Licensee incurs because of a
claim that use of a Baseline Component System infringes any United States
copyright of others. SCT's obligations under this indemnification are expressly
conditioned on the following: (i) Licensee must promptly notify SCT of any such
claim; (ii) Licensee must in writing grant SCT sole control of the defense of
any such claim and of all negotiations for its settlement or compromise (if
Licensee chooses to represent its own interests in any such action, Licensee may
do so at its own expense, but such representation must not prejudice SCT's right
to control the defense of the claim and negotiate its settlement or compromise);
(iii) Licensee must cooperate with SCT to facilitate the settlement or defense
of the claim; (iv) the claim must not arise from modifications or (with the
express exception of the other Component Systems and third party hardware and
software specified by SCT in writing as necessary for use with the Licensed
Software) from the use or combination of products provided by SCT with items
provided by Licensee or others. If any Component System is, or in SCT's opinion
is likely to become, the subject of a United States copyright infringement
claim, then SCT, at its sole option and expense, will either: (A) obtain for
Licensee the right to continue using the Component System under the terms of
this Agreement; (B) replace the Component System with products that are
substantially equivalent in function, or modify the Component System so that it
becomes non-infringing and substantially equivalent in function; or (C) refund
to Licensee the portion of the license fee paid to SCT for the Component
System(s) giving rise to the infringement claim, less a charge for use by
Licensee based on straight line depreciation assuring a useful life of five (5)
years. THE FOREGOING IS SCT'S EXCLUSIVE OBLIGATION WITH RESPECT TO INFRINGEMENT
OF INTELLECTUAL PROPERTY RIGHTS.
10. TERM AND TERMINATION.
--------------------
(a) Right of Termination. A party has the right to terminate this
--------------------
Agreement if the other party breaches a material provision of this Agreement.
Either party has the right to terminate this Agreement at any time while an
event or condition giving rise to the right of termination exists. To terminate
this Agreement, the party seeking termination must give the other party notice
that describes the event or condition of termination in reasonable detail. From
the date of its receipt of that notice, the other party will have thirty (30)
days to cure the breach to the reasonable satisfaction of the party desiring
termination. If the event or condition giving rise to the right of termination
is not cured within that period, this Agreement will automatically be deemed
terminated at the end of that period. However, notice to SCT of a suspected
Documented Defect will not constitute a notice of termination of this Agreement.
(b) Effect of Termination. Upon termination of this Agreement by either
---------------------
party, Licensee will promptly return to SCT or (at SCT's request) will destroy
all copies of the Licensed Software, and will certify to SCT in writing, over
the signature of a duly authorized representative of Licensee, that it has done
so.
(c) Survival of Obligations. All obligations relating to non-use and non-
-----------------------
disclosure of Confidential Information and indemnity will survive termination of
this Agreement.
(d) Termination Without Prejudice to Other Rights and Remedies.
-------------------------------------- -------------------
Termination of this Agreement will be without prejudice to the terminating
party's other rights and remedies pursuant to this Agreement.
11. NOTICES. All notices and other communications required or permitted under
-------
this Agreement must be in writing and will be deemed given when: Delivered
personally; sent by United States registered or certified mail, return receipt
requested; transmitted by facsimile confirmed by United States first class mail;
or sent by overnight courier. Notices must be sent to a party at its address
shown on the first page of this Agreement, or to such other place as the party
may subsequently designate for its receipt of notices. Licensee must promptly
send copies of any notice of material breach and/or termination of the Agreement
to SCT's General Counsel at 4 Country View Road, Malvern, PA 19355, FAX number
(610) 725-7457, or to such other place as SCT may subsequently designate for its
receipt of notices.
<PAGE>
12. FORCE MAJEURE. Neither party will be liable to the other for any failure
-------------
or delay in performance under this Agreement due to circumstances beyond its
reasonable control, including Acts of God, acts of war, accident, labor
disruption, acts, omissions and defaults of third parties and official,
governmental and judicial action not the fault of the party failing or delaying
in performance.
13. ASSIGNMENT. Neither party may assign any of its rights or obligations
----------
under this Agreement, and any attempt at such assignment will be void without
the prior written consent of the other party. For purposes of this Agreement,
"assignment" shall include use of the Licensed Software for benefit of any third
party to a merger, acquisition and/or other consolidation by, with or of
Licensee, including any new or surviving entity that results from such merger,
acquisition and/or other consolidation. Notwithstanding the growth provisions
allowed Licensee as per paragraph 6(a). However, the following shall not be
considered "assignments" for purposes of this Agreement SCT's assignment of this
Agreement or of any SCT rights under this Agreement to SCT's successor by merger
or consolidation or to any person or entity that acquires all or substantially
all of its capital stock or assets; and SCT's assignment of this Agreement to
any person or entity to which SCT transfers any of its rights in the Licensed
Software.
14. NO WAIVER. A party's failure to enforce its rights with respect to any
---------
single or continuing breach of this Agreement will not act as a waiver of the
right of that party to later enforce any such rights or to enforce any other or
any subsequent breach.
15. CHOICE OF LAW; SEVERABILITY. This Agreement will be governed by and
---------------------------
construed under the laws of the U.S. state or U.S. territory in which the
Delivery Address is physically situated, as applicable to agreements executed
and wholly performed therein, but without regard to the choice of law provisions
thereof. If any provision of this Agreement is illegal or unenforce-able, it
will be deemed stricken from the Agreement and the remaining provisions of the
Agreement will remain in full force and effect.
15A. For as long as Licensee shall utilize the component system in the conduct
of its business, SCT shall maintain at its own expense, minimally between the
hours of 9:00 a.m. to 7:00 p.m. Central Standard Time, Monday through Friday, a
competently staffed help desk with telephone or Internet access to timely
respond to reasonable requests of Licensee for assistance.
16. LIMITATIONS OF LIABILITY.
------------------------
(A) LIMITED LIABILITY OF SCT. SCT'S LIABILITY IN CONNECTION WITH THE
------------------------
LICENSED SOFTWARE, ANY SERVICES, THIS LICENSE OR ANY OTHER MATTER RELATING TO
THIS AGREEMENT WILL NOT EXCEED THE FEE THAT LICENSEE ACTUALLY PAID TO SCT (OR,
IF NO DISCRETE FEE IS IDENTIFIED IN EXHIBIT 1, THE FEE REASONABLY ASCRIBED BY
SCT) FOR THE COMPONENT SYSTEM OR SERVICES GIVING RISE TO THE LIABILITY.
(B) EXCLUSION OF DAMAGES. REGARDLESS WHETHER ANY REMEDY SET FORTH HEREIN
--------------------
FAILS OF ITS ESSENTIAL PURPOSE OR OTHERWISE, IN NO EVENT WILL SCT BE LIABLE TO
LICENSEE FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON
BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY, OR
OTHERWISE, AND WHETHER OR NOT SCT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE.
(C) BASIS OF THE BARGAIN. LICENSEE ACKNOWLEDGES THAT SCT HAS SET ITS FEES
--------------------
AND ENTERED INTO THIS AGREEMENT IN RELIANCE UPON THE LIMITATIONS OF LIABILITY
AND THE DISCLAIMERS OF WARRANTIES AND DAMAGES SET FORTH IN THIS AGREEMENT, AND
THAT THE SAME FORM AN ESSENTIAL BASIS OF THE BARGAIN BETWEEN THE PARTIES.
17. ENTIRE AGREEMENT. This Agreement contains the entire understanding of the
----------------
parties with respect to its subject matter, and supersedes and extinguishes all
prior oral and written communications between the parties about its subject
matter. Any purchase order or similar document which may be issued by Licensee
in connection with this Agreement does not modify this Agreement. No
modification of this Agreement will be effective unless it is in writing, is
signed by each party, and expressly provides that it amends this Agreement.
THE PARTIES have executed this Agreement through the signatures of their
respective authorized representatives.
Effective Date: March 31, 1998
SCT LICENSEE
<PAGE>
By:__________________________________ By: /s/ Michael L. Markovitz
------------------------------------
Michael L. Markovitz
_____________________________________ ---------------------------------------
(Printed Name and Title of Signatory) (Printed Name and Title of Signatory)
SCT EDUCATION SYSTEMS
4 COUNTY VIEW ROAD, MALVERN, PA
<PAGE>
SCT
EXHIBIT 1
(PAGE 1 OF 3)
Licensee: American Education Corporation, for and on behalf of itself
-----------------------------------------------------------
and the Institutions
--------------------
Delivery Address: 20 South Clark Street, Chicago, IL 60603
----------------------------------------
EQUIPMENT: Host(s) or client server configuration(s) and/or combinations of
- ---------
host(s) and client server configuration(s) within the United States of America
for which SCT supports the Licensed Software. Licensee acknowledges that certain
Component Systems of the Licensed Software may require specific host or client
configurations. Licensee, as soon as reasonably practicable, shall provide a
detailed written description of the Equipment so that SCT can confirm that it is
a configuration on which SCT supports use of the Licensed Software. SCT will
then advise Licensee whether SCT supports or does not support use of the
Licensed Software on the proposed configuration. If SCT does not support use of
the Licensed Software on the proposed configuration, Licensee must propose a new
configuration until SCT does confirm that it supports use of the Licensed
Software on the proposed configuration. Without limiting the foregoing, as of
the Effective Date, SCT approves for use as the Equipment" the configuration
described in Attachment A to this Exhibit 1.
NOTICE: To use any of the Licensed Software, Licensee must also obtain,
- -------
install on the Equipment and maintain SCT-supported versions of certain Oracle
Corporation database software products and certain software/hardware
peripherals. By this notice, SCT is advising Licensee that Licensee should
consult with its SCT Professional Services representative to obtain a written
listing of such necessary Oracle Corporation database software products and
software/hardware peripherals.
<TABLE>
<CAPTION>
TABLE 1: LICENSED SOFTWARE:
- ------------------------------------------------------------------------------------------------
Component System Source Code Software Suppl't Fee
Licensed?
(yes/no)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Banner2000 Student Yes None $117,700
- ------------------------------------------------------------------------------------------------
EDI.Smart (one (1) licensed copy) No EDI.Smart Software Supplement Included
- ------------------------------------------------------------------------------------------------
Database Software - Limited Use (See No Oracle Software Supplement - $ 47,273
the Database Software detail Table Limited Use
below) Operating System: OPENVMS
- ------------------------------------------------------------------------------------------------
Database Software, consisting of Oracle No Oracle Web Application Server Included
Web Application Server - Advanced Advanced Edition Software
Edition - Full Use* (See the database Supplement - Full Use
Software Detail Table below)
- ------------------------------------------------------------------------------------------------
TOTAL FEE: $164,973
- ------------------------------------------------------------------------------------------------
</TABLE>
* Use of this product is limited to use on two (2) processors of the equipment
which is operating under either a UNIX or Windows NT operating system for
which SCT supports the product
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
*PAYMENT TERMS
- --------------
PAYMENT OF $164,973 DUE AS FOLLOWS: 50% DOWN PAYMENT UPON RECEIPT OF INVOICE.
50% UPON RECEIPT OF INVOICE DATED JUNE 30, 1998.
<PAGE>
SCT
EXHIBIT I
(PAGE 2 OF 3)
Licensee: American Education Corporation, for and on behalf of itself and
---------------------------------------------------------------
the Institutions
----------------
<TABLE>
<CAPTION>
TABLE 2: DATABASE SOFTWARE DETAIL TABLE
- -----------------------------------------------------------------------------------------------------
ORACLE SOFTWARE
CLIENT/SERVER CONFIGURATION
- -----------------------------------------------------------------------------------------------------
REQUIRED ORACLE PRODUCTS LICENSED FOR LICENSED FOR NOTES
(INCLUDED IN ORACLE SOFTWARE PRICING) HOST HOST
CONFIGURATION CONFIGURATION
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oracle7 Server (including Networking Kit, X The license is for 42
Distributed Option, Advanced Replication concurrent users.
Option, Parallel Query Option,
MultiProtocol Interchange, Oracle Call
Interface, ODBC Driver, Web Listener,
Web Agent, Objects for OLE, Bitmap
Indexing, Enterprise Manager, Enterprise
Backup Utility and SQL*Net with all
Protocol Drivers.)
- -----------------------------------------------------------------------------------------------------
Developer/200 (Including Oracle Forms, X The license is for 2
Oracle Reports, Oracle Graphics, named developers and 40
SQL*Plus, Procedure Builder, concurrent deployment
Discoverer/2000 and SQL*Net with users.
Protocol Driver)
SQL*Plus, Procedure
Builder, and Discoverer/
2000 are licensed for
developers only
- -----------------------------------------------------------------------------------------------------
Programmer/2000 (Including Oracle X The license is for 2
Precompilers, Oracle Objects for OLE, and named developers and 40
Oracle Call Interface) concurrent deployment
users
- -----------------------------------------------------------------------------------------------------
ORACLE SOFTWARE
BROWSER/WEBSERVER CONFIGURATION
- -----------------------------------------------------------------------------------------------------
REQUIRED ORACLE PRODUCTS LICENSED FOR LICENSED FOR NOTES
INCLUDED IN ORACLE SOFTWARE PRICING) HOST HOST
CONFIGURATION CONFIGURATION
- -----------------------------------------------------------------------------------------------------
Developer/2000 with Developer/2000 X The license is for 1
Server (including Web Cartridge named developer and 40
concurrent deployment
users connected by the
browser to a webserver
with 2 to 5 processors.
- -----------------------------------------------------------------------------------------------------
Oracle Web Application Server - Advanced X The license is for 2
Edition processors.
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCT
EXHIBIT I
(PAGE 2 OF 3)
Licensee: American Education Corporation, for and on behalf of itself and the
-------------------------------------------------------------------
Institutions
------------
<TABLE>
<CAPTION>
TABLE 3: IMPLEMENTATION/SUPPORT/TRAINING SERVICES:
- -------------------------------------------------------------------------------------------
DESCRIPTION SERVICE PERIOD (36 RATE (REMAINS IN EFFECT FEE
MONTHS FOLLOWING THROUGHOUT
EFFECTIVE DATE "SERVICE PERIOD"
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Banner200 1,120 person-hours $140/person-hour $156,800
implementation/support/
training services
- -------------------------------------------------------------------------------------------
Database Software Twenty-one (21) session- $400/person/ $ 8,400
days at SCT's Education session/day
Center (one Licensee
attendee may attend
session day)
- -------------------------------------------------------------------------------------------
TOTAL: $165,200
- -------------------------------------------------------------------------------------------
</TABLE>
*PAYMENT: For the Component Systems set forth in this Exhibit 1, Licensee will
- --------
pay SCT the "TOTAL FEE" provided for in Table 1. SCT will invoice Licensee for
all services and applicable charges on a monthly basis, as SCT renders the
services or Licensee incurs the charges, as applicable.
DELIVERY: Each of the Component Systems identified above shall be delivered
within thirty (30) days following the Effective Date.
NUMBER OF SOFTWARE SUPPLEMENTS ATTACHED: 3
-
SCT LICENSEE
By: By: /s/ Michael L. Markovitz
______________________________ -----------------------------------
Michael L. Markovitz
-----------------------------------
(Printed Name of Signatory) (Printed Name of Signatory)
Title: Title: Chairman
___________________________ ---------------------------------
SCT EDUCATION SYSTEMS
4 COUNTY VIEW ROAD
MALVERN, PA
<PAGE>
SCT
ATTACHMENT A TO EXHIBIT I
BANNER 2000 SUPPORTED HARDWARE PLATFORMS
A complete list of currently supported hardware environments is shown below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Banner20000-Supported Platforms
- -------------------------------------------------------------------------------
<S> <C>
Hardware Operating System(s)
- -------------------------------------------------------------------------------
Data General (Intel) DG-UX
- -------------------------------------------------------------------------------
DEC Alpha OPEN-VMS and DEC UNIX
- -------------------------------------------------------------------------------
HP HP-UX
- -------------------------------------------------------------------------------
IBM AIX
- -------------------------------------------------------------------------------
Intel-Based NT
- -------------------------------------------------------------------------------
Sequent DYNIX/ptx
- -------------------------------------------------------------------------------
Sun Solaris
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
Banner2OOO also supports multiple client environments in a client/server
configuration, including Microsoft Windows, Windows NT, Windows 95, and
Macintosh.
MicroFocus COBOL is required on UNIX platforms where it is available (DG-UX, HP-
UX, IBM-AIX, ULTRIX, DYNIX/ptx, UNIX V Release 4). In addition, vendor-supplied
COBOL is required for DE/VMS, SUN, and AIX. A " C" compiler is required.
<PAGE>
SCT
EDI.SMART SOFTWARE SUPPLEMENT
1. Additional Definitions.
----------------------
(a) " EDI.Smart Software" means the Component System consisting of the
--------------------
software identified below:
. Document Management Software (includes trading partner management
and recipient database);
. Transaction Set Modules;
. Transaction Sets for Transcript Management, consisting of TS 130
Transcript, TS 131 Transcript Acknowledgment, TS 997 - Functional
Acknowledgment and TS 190 - Enrollment Verification; together
with certain other tangible and intangible components.
2. Ownership. Certain segments of the EDI.Smart Software are owned by
---------
third parties that have authorized SCT to grant Licensee a right of use
therefor.
3. Restrictions on Use of EDI.Smart Software. Licensee's use of the
-----------------------------------------
EDI.Smart Software is subject to the following additional terms and conditions:
(a) Each licensed copy of the EDI.Smart System shall not be used on more
than one (1) Windows-based personal computer.
<PAGE>
SCT
ORACLE SOFTWARE SUPPLEMENT
LIMITED USE
1. Additional Definitions. "Database Software" means those Component Systems
----------
of Oracle Corporation ("Oracle") identified in Exhibit I of the Agreement under
the heading " Database Software."
2. Ownership. Oracle owns the Database Software.
---------
3. Restrictions on Use of Database Software. Licensee's use of the Database
----------------------------------------
Software is subject to the following additional terms and conditions:
(a) Licensee has the right to use the Database Software only in Object Code
form, only on the designated Equipment at the Location, and only for Licensee's
internal data processing;
(b) Licensee is prohibited from transfer or duplicating the Database
Software except and for temporary transfer in the event of Equipment malfunction
and in order to make a single backup or archival copy of the Database Software;
(c) Licensee is prohibited from assigning its license to use the Database
Software in whole or in part and is prohibited from making the Database Software
available in any timesharing or rental arrangement, in whole or in part;
(d) Licensee agrees not to use the Database Software for any purpose except
within the scope of the Licensed Software owned by SCT, in accordance with the
restrictions set forth in the Agreement. Licensee may use the Database Software
to customize the Licensed Software owned by SCT as required, including changing
forms through the use of SQL*Forms and creating and altering tables that the
Licensed Software uses. Licensee shall not use the Database Software to expand
the Licensed Software beyond the scope provided and supported by SCT;
(e) Licensee is prohibited from causing or permitting the reverse
engineering, disassembly or decompilation of the Database Software, in whole or
in part;
(f) Licensee acknowledges that the Database Software is proprietary to
Oracle and is supplied by SCT under license from Oracle. Title to the Database
Software shall at all times remain vested in Oracle or its designated successor.
Except for the right of use that is expressly provided to Licensee under the
Agreement, no right, title or interest in or to the Database Software is granted
to Licensee;
(g) Licensee agrees that Oracle shall not be liable for any damages, whether
direct, indirect, incidental, special, or consequential, arising from the
Licensee's use of the Database Software or related materials;
(h) At the termination of the Agreement for any cause whatsoever, Licensee
shall discontinue its use of the Database Software and shall deliver the
Database Software, including all archival or other copies of the Database
Software, to SCT in accordance with the applicable provisions of the Agreement
and shall forfeit all rights to use the Database Software in any way;
(i) Licensee is prohibited from publishing any result of any benchmark tests
which compare the Database Software to other database software programs;
(j) Except as provided for in Section 3(d) of the Agreement, Licensee is
prohibited from exporting or permitting the export of all or any part of the
Database Software outside the United States of America, in any manner or by any
means;
(k) Licensee acknowledges and agrees that Oracle is a third party
beneficiary of this Agreement;
<PAGE>
(l) Licensee acknowledges and understands that the Database Software is
not specifically developed or licensed for use in any nuclear, aviation, mass
transit or medical application or in any other inherently dangerous application.
<PAGE>
SCT
ORACLE WEB APPLICATION SERVER ADVANCED EDITION
SOFTWARE SUPPLEMENT
FULL USE
1. Additional Definitions. " Database Software" means those Component
----------------------
Systems of Oracle Corporation ("Oracle") identified in Exhibit 1 of the
Agreement under the heading "Database Software."
2. Ownership. Oracle owns the Database Software.
---------
3. Restrictions on Use of Database Software. Licensee's use of the
----------------------------------------
Database Software is subject to the following additional terms and conditions:
(a) Licensee has the right to use the Database Software only in Object
Code form, only on the designated Equipment at the Location, and only for
Licensee's internal data processing;
(b) Licensee is prohibited from transfer or duplicating the Database
Software except and for temporary transfer in the event of Equipment malfunction
and in order to make a single backup or archival copy of the Database Software;
(c) Licensee is prohibited from assigning its license to use the
Database Software in whole or in part and is prohibited from making the Database
Software available in any timesharing or rental arrangement, in whole or in
part;
(d) Licensee is prohibited from causing or permitting the reverse
engineering, disassembly or decompilation of the Database Software, in whole or
in part;
(e) Licensee acknowledges that the Database Software is proprietary to
Oracle and is supplied by SCT under license from Oracle. Title to the Database
Software shall at all times remain vested in Oracle or its designated successor.
Except for the right of use that is expressly provided to Licensee under the
Agreement, no right, title or interest in or to the Database Software is granted
to Licensee;
(f) Licensee agrees that Oracle shall not be liable for any damages,
whether direct, indirect, incidental, special, or consequential, arising from
the Licensee's use of the Database Software or related materials;
(g) At the termination of the Agreement for any cause whatsoever,
Licensee shall discontinue its use of the Database Software and shall deliver
the Database Software, including all archival or other copies of the Database
Software, to SCT in accordance with the applicable provisions of the Agreement
and shall forfeit all rights to use the Database Software in any way;
(h) Licensee is prohibited from publishing any result of any benchmark
tests which compare the Database Software to other database software programs;
(i) Except as provided for in Section 3(d) of the Agreement, Licensee is
prohibited from exporting or permitting the export of all or any part of the
Database Software outside the United States of America, in any manner or by any
means;
(j) Licensee acknowledges and agrees that Oracle is a third party
beneficiary of this Agreement;
(k) Licensee acknowledges and understands that the Database Software is
not specifically developed or licensed for use in any nuclear, aviation, mass
transit or medical application or in any other inherently dangerous application.
<PAGE>
(l) Notwithstanding any other provision, Licensee may allow third parties
to access the Oracle Web Application Server Advanced Edition only through remote
telecommunications by client computers using Internet networking protocols,
provided that: (i) Licensee does not charge such third parties for such access;
(ii) such third parties may only access Oracle Web Application Server Advanced
Edition for the sole purpose of viewing, querying or adding data to Licensee's
database, so long as such access is in accordance with the other terms of the
Agreement; and (iii) Licensee shall indemnify SCT and Oracle for any damages
from any such third party's access to Oracle Web Application Server.
(m) Licensee may only access the Oracle Web Application Server Advanced
Edition through remote telecommunications by client computers via Internet
networking protocols.
<PAGE>
SCT
TECHNICAL CURRENCY AGREEMENT
SCT SOFTWARE & RESOURCE
MANAGEMENT CORPORATION
4 Country View Road
Malvern, Pennsylvania 19355
FAX Number (610) 640-5181
("SCT")
and
AMERICAN EDUCATION CORPORATION
20 South Clark Street
Chicago, Illinois 60603
FAX Number (312) 201-1907
("Licensee" ), for and on behalf of itself and the Institutions
THIS AGREEMENT is made between SCT and Licensee on the Commencement Date of
March 31, 1998.
SCT and Licensee have entered into a Software License and Services Agreement
with an Effective Date of March 31, 1998 (the "License Agreement") for the
Licensed Software. Licensee desires that SCT provide Maintenance and
Enhancements for and new releases of the Baseline Licensed Software identified
in Exhibit I on the terms a conditions contained in this Agreement.
Accordingly, the parties agree as follows:
1. Incorporation By Reference. Sections I (Definitions), 8 (Confidential
-------------------------- ------------- -------------
information) and 11 through 15, inclusive (Notices, Force Majeure, Assignment,
- ----------- -------- ------------- ----------
No Waiver and Choice of Law; Severability, respectively) of the License
- --------- ------------- ------------
Agreement are incorporated into this Agreement by this reference as fully as if
written out below. If any provision incorporated by reference from the License
Agreement conflicts with any provision of this Agreement, the provision of this
Agreement will control.
2. Additional Definitions.
----------------------
(a) "Commencement Date" means the date identified above in this Agreement
-------------
as the Commencement Date.
(b) "Contract Year" means, with respect to each Baseline Component System,
---------------
each one (1) year period beginning and ending on the dates provided for in
Exhibit I for such Baseline Component System.
(c) "Enhancements" means general release (as opposed to custom) changes to
--------------
a Baseline Component System which increase the functionality of the Baseline
Component System.
(d) "Expiration Date" means, with respect to each Baseline Component
-----------------
System, the date upon which the initial term of this Agreement ends for such
Baseline Component System as provided for in Exhibit 1.
(e) "Improvements" means, collectively, Maintenance, Enhancements and New
--------------
Releases provided under this Agreement.
(f) "Maintenance" means using reasonable effort to provide Licensee with
-------------
avoidance procedures for corrections of Documented Defects.
<PAGE>
(g) "New Releases" means new editions of Baseline Component System.
--------------
(h) "Partial Year" means, for each Baseline Component System, the period
-------------
between the Commencement Date and the first day of the initial Contract Year for
that Baseline Component System.
3. Services.
--------
(a) Types of Services. During the term of this Agreement, SCT will provide
-----------------
Licensee with Maintenance for, Enhancements of, and New Releases of each
Baseline Component System identified in Exhibit 1. Without limiting the
foregoing, as part of Maintenance, SCT will provide Licensee with telephone hot-
line support during regular SCT (US Eastern Time) business hours (as of
Commencement Date, 8:00 AM to 8:00 PM Monday through Friday, inclusive,
excluding US-observed holiday and subject to revision) and Licensee will be
entitled place calls to SCT for and to receive telephone assistance from SCT on
functional and technical issues and/or report support issues.
(b) Limitations. All Improvements will be part of the applicable Baseline
-----------
Component System and will be subject to all of the terms and conditions of the
License Agreement and this Agreement. SCT's obligation to provide Licensee With
Improvements for Baseline Component Systems owned by parties other than SCT is
limited to providing Licensee with the Improvements that the applicable third
party owner provides to SCT for that Baseline Component System. Licensee must
provide SCT with such facilities, equipment and support as are reasonably
necessary for SCT to perform its obligations under this Agreement, including
remote access to the Equipment.
4. Payment and Taxes.
------------------
(a) Technical Currency Fees. For the Improvements for each Baseline
-----------------------
Component System, Licensee will pay SCT: (i) the amount provided for in Exhibit
I as the Partial Year payment (if applicable) on the payment date provided for
in Exhibit 1; and (ii) the amount provided for in Exhibit I as the "Payment
Amount" for the first Contract Year; and (iii) for each Contract Year subsequent
to the initial Contract Year, an amount invoiced by SCT, which amount will not
increase by more than the "Annual Escalation Not to Exceed Percentage" provided
for in Exhibit I the fee that Licensee was obligated to pay to SCT for
Improvements for the applicable Baseline Component System in the immediately
preceding Contract Year for that Baseline Component System. Fees for
Improvements for a Baseline Component System are due on the first day of last
month of the Contract Year for that Baseline Component System.
(b) Additional Costs. Licensee will also reimburse SCT for actual travel
----------------
and living expenses that SCT incurs in providing Licensee with Improvements
under this Agreement, with reimbursement to be on an as-incurred basis. SCT
will use reasonable efforts to limit travel and living expenses by using coach
air fare, booked in advance when available, staying at hotels identified in
advance by Licensee as offering Licensee's contractors a discounted rate, and
sharing rental cars. Licensee will also reimburse SCT for all charges incurred
in connection with accessing Equipment. Reimbursement is subject to any
statutory reimbursement limitations imposed on Licensee contractors, and
Licensee will provide SCT with a copy of such limitations before SCT incurs
expenses:,
(c) Taxes. Licensee is responsible for paying all taxes (except for taxes
-----
based on SCT's net income or capital stock) relating to this Agreement, the
Improvements, any services provided or payments made under this Agreement.
Applicable tax amounts (if any) are NOT included in the fees set forth in this
Agreement. If Licensee exempt from the payment of any such taxes, Licensee must
provide SCT with a valid tax exemption certification otherwise, absent proof of
Licensee's direct payment such tax amounts to the applicable taxing authority,
SCT will invoice Licensee for and Licensee will pay to SCT such tax amounts.
(d) Late Charges. Licensee will pay each SCT invoice by no later than
------------
thirty (30) days after receipt. Late payments are subject to a late charge equal
to the lesser of: (i) the prime lending rate established from time to time
Mellon Bank, N.A., Philadelphia, Pennsylvania, plus three percent (31%); or (ii)
the highest rate permitted applicable law.
5. Term. As it applies to each Baseline Component System, the term of this
----
Agreement is for the period beginning on the Commencement Date and continuing
until the Expiration Date for that Baseline Component
<PAGE>
System or the Agreement has otherwise expired or terminated as it relates to a
particular Baseline Component System under the terms of this Agreement.
6. Disclaimer of Warranties. Licensee agrees a understands that SCT MAKES NO
------------------------
WARRANTIES WHATSOEVER, EXPRESSED OR IMPLIED, WITH REGARD TO ANY IMPROVEMENTS
AND/OR AN OTHER MATTER RELATING TO THIS AGREEMENT, AND THAT SCT EXPLICITLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. FURTHER, SCT EXPRESSLY DOES NOT WARRANT THAT A COMPONENT SYSTEM OR ANY
IMPROVEMENTS WILL BE USABLE BY LICENSEE IF THE COMPONENT SYSTEM HAS BEEN
MODIFIED BY ANYONE OTHER THAN SCT, OR WILL BE ERROR FREE, WILL OPERATE WITHOUT
INTERRUPTION OR WILL BE COMPATIBLE WITH ANY HARDWARE OR SOFTWARE OTHER THAN THE
EQUIPMENT.
7. Termination. A party has the right to terminate this Agreement if the other
-----------
party breaches a material provision of this Agreement. Either party has the
right to terminate this Agreement at any time while an event or condition giving
rise to the right of termination exists. To terminate this Agreement, the party
seeking termination must give the other party notice that describes the event or
condition termination in reasonable detail. From the date of its receipt of that
notice, the other party will have thirty (30) days to cure the breach to the
reasonable satisfaction of the party desiring termination. If the event or
condition giving rise to the right of termination is not cured within that
period, this Agreement will automatically be deemed terminated at the end of
that period. However, notice to SCT of a suspected Documented Defect will not
constitute a notice of termination of this Agreement. Termination of this
Agreement will be without prejudice to the terminating party's other rights and
remedies pursuant to this Agreement.
8. LIMITATIONS OF LIABILITY.
------------------------
(A) LIMITED LIABILITY OF SCT. SCT'S LIABILITY IN CONNECTION WITH THE
------------------------
IMPROVEMENTS OR ANY OTHER MATTER RELATING TO THIS AGREEMENT WILL NOT EXCEED THE
FEES THAT LICENSEE ACTUALLY PAID TO SCT FOR THE IMPROVEMENTS FOR THE YEAR THAT
SUCH LIABILITY ARISES.
(B) EXCLUSION OF DAMAGES. REGARDLESS OF WHETHER ANY REMEDY SET FORTH
--------------------
HEREIN FAILS OF ITS ESSENTIAL PURPOSE OR OTHERWISE, IN NO EVENT WILL SCT BE
LIABLE TO LICENSEE FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES,
WHETHER BASED ON BREACH 0F CONTRACT, TORT (INCLUDING NEGLIGENCE PRODUCT
LIABILITY, OR OTHERWISE, AND WHETHER OR NOT SCT HAS BEEN ADVISED 0F THE
POSSIBILITY OF SUCH DAMAGE.
(C) BASIS OF THE BARGAIN. LICENSEE ACKNOWLEDGES THAT SCT HAS SET ITS FEE
--------------------
AND ENTERED INTO THIS AGREEMENT IN RELIANCE UPON THE LIMITATIONS 0F LIABILITY
AND THE DISCLAIMERS 0F WARRANTIES AND DAMAGES SET FORTH IN THIS AGREEMENT, AND
THAT THE SAME FORM AN ESSENTIAL BASIS OF THE BARGAIN BETWEEN THE PARTIES.
9. Entire Agreement. This Agreement contains the entire understanding of the
----------------
parties with respect to its subject matter, and supersedes and extinguishes all
prior oral and written communications between the parties about it subject
matter. Any purchase order or similar document which may be issued by Licensee
in connection with this Agreement does not modify this Agreement. No
modification of this Agreement will be effective unless it is in writing, is
signed by each party, and expressly provide that it amends this Agreement.
<PAGE>
THE PARTIES have executed this Agreement through the signatures of their
respective authorized representatives.
SCT LICENSEE
By: By: /s/ Michael L. Markovitz
_____________________________ ---------------------------------
Michael L. Markovitz
---------------------------------
(Printed Name of Signatory) (Printed Name of Signatory)
Title: Title: Chairman
__________________________ ------------------------------
SCT EDUCATION SYSTEMS
4 COUNTY VIEW ROAD
MALVERN, PA 19355
<PAGE>
SCT
EXHIBIT 1
Licensee: American Education Corporation, for and on behalf of itself and the
-------------------------------------------------------------------
Institutions
-----------
PARTIAL YEAR PAYMENT DUE DATE: (N/A)
-----
(Indicate "N/A if not applicable)
FIRST ANNUAL CONTRACT YEAR PAYMENT: April 1, 1999
Annual Escalation Not To Increase By More than: 10% Of Prior Full-Year Annual
- -----------------------------------------------------------------------------
Payment.
- -------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
COMPONENT SYSTEM CONTRACT YEAR EXPIRATION DATE INITIAL PAYMENT
BEGINS/ENDS AMOUNT
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Banner2000 Student May 1/April 30 April 30, 2001 $17,655
- -------------------------------------------------------------------------------------------
EDI.Smart (one (1) licensed copy) May 1/April 30 April 30, 2001* Included
- -------------------------------------------------------------------------------------------
Database Software - Limited Use May 1/April 30 April 30, 2001* $ 7,091
- -------------------------------------------------------------------------------------------
Database Software - Full Use May 1/April 30 April 30, 2001* Included
- -------------------------------------------------------------------------------------------
TOTAL: $24,746
- -------------------------------------------------------------------------------------------
</TABLE>
*Notwithstanding any other provision of this Agreement, either party may change
the Expiration Date relating to this Component System by providing the other
party with at least ninety (90) days prior written notice that it desires to
change the Expiration Date relating to this Component System (the "Notice of
Expiration"), in which case the new Expiration Date relating to this Component
System will be the later of. (i) ninety (90) days after the other party receives
the Notice of Expiration and (ii the date identified in the Notice of Expiration
as the new Expiration Date (the "Amended Expiration Date"). If the Amended
Expiration Date is a date other than the last day of a Contract Year, Licensee
will pay SCT, by no later than thirty (30) day after the Amended Expiration
Date, a prorated portion of the technical currency fee which would have been
otherwise due in connection with this Component System for the current Contract
Year. The fee will be prorated for the period from the beginning of the current
Contract Year through the Amended Expiration Date.
SCT LICENSEE
By: By: /s/ Michael L. Markovitz
____________________________ ------------------------------------
Michael L. Markovitz, Chairman
------------------------------------
(Printed Name of Signatory) (Printed Name of Signatory)
SCT EDUCATION SYSTEMS
4 COUNTY VIEW ROAD
MALVERN, PA 19355
<PAGE>
EXHIBIT 10.26
PURCHASE OF SERVICES AGREEMENT
This Purchase of Services Agreement (this "Agreement") is made effective as
of January 1, 1998 by and between I A Acquisition Corporation, an Illinois
corporation that was incorporated on November 5, 1997 ("IA") and the American
Schools of Professional Psychology, Inc., an Illinois corporation ("ASPP").
WITNESSETH:
WHEREAS, IA is a contractor with the Illinois Department of Children and
Family Services ("DCFS") to provide care management for DCFS wards;
WHEREAS, IA desires to meet its contractual responsibilities to DCFS by
entering into an affiliation agreement with an academic institution;
AND, WHEREAS, ASPP has practicuum students, and has through its faculty
significant expertise in child and adolescent psychopathology and treatment;
AND, WHEREAS, ASPP has financial and accounting services needed by IA;
NOW, THEREFORE, in light of IA's need and the services available from ASPP,
in consideration of the promises and other good and valuable considerations and
of the covenants and provisions set forth below, the parties agree as follows:
1. Term and Termination.
(a.) Subject only to the provisions for early termination hereinafter
set forth, the terms of this Agreement shall commence January 1, 1998 and shall
continue until June 30, 1999.
(b.) Notwithstanding anything to the contrary herein, IA may terminate
this Agreement upon written notice effective immediately, in the event of any of
the following: (i) IA's contract with DCFS is not renewed, canceled or its terms
substantially changed, or (ii) for "cause" (as defined below) by delivery by IA
to ASPP of notice specifying such cause. For the purposes of this Agreement,
"cause" shall be deemed to have occurred upon a breach by one party of the terms
or provisions of this Agreement, after the other party has provided written
notice to the breaching party of the breach, and such breach has not been cured
within fifteen (15) days after the date such noticed is received by the
breaching party.
(c.) Upon termination of this Agreement, as provided above, neither
party shall have any further obligation hereunder except for obligations
accruing prior to the date of termination.
<PAGE>
2. Compensation.
(a.) For all services rendered by ASPP under this Agreement, IA shall
compensate ASPP $12,000 per month on the last day of each month falling within
the Term.
3. Clinical Services Provided. ASPP shall provide the following:
(a.) Practicuum Students: ASPP agrees to provide practicuum students
to IA in such numbers as is necessary to meet the needs of IA.
(b.) ASPP will supplement clinical supervision provided by IA staff
for the assigned practicuum students.
(c.) ASPP will be responsible for reasonable training and continuing
education for IA staff as negotiated between IA and ASPP staff. This will
include assessing the training and continuing education needs of IA staff and
provide monthly seminars to meet identified needs.
(d.) ASPP through an identified faculty member will provide case
consultation to IA clients as requested by IA.
(e.) ASPP shall design and implement a system to measure case outcome
for IA clients if requested by IA, such services to be provided at an additional
fee mutually agreeable to IA and ASPP. ASPP shall also provide case outcome
results to IA.
(f.) ASPP will make its faculty and practicuum students available at
times and places required by IA to perform all services described above. ASPP
agrees to perform such services in a professional, competent and timely manner.
4. Financial Services Provided. ASPP shall provide the following:
(a.) The services of chief financial officer.
(b.) All financial reports required by DCFS
(c.) Processing of payroll, accounts receivable, and accounts payable
(d.) Preparation of monthly financial statements.
-2-
<PAGE>
5. Indemnification.
(a.) ASPP agrees to and does hereby indemnify and hold IA, its
directors, officers, agents, affiliates, and employees free and harmless from
and against all claims, demands, and liabilities for any negligent, intentional
or wrongful act or omission of ASPP.
(b.) IA agrees and does hereby indemnify and hold ASPP, and its
employees free and harmless from and against all claims, demands, and
liabilities for any negligent, intentional or wrongful acts or omissions of IA
employees.
6. Status of ASPP. ASPP's relationship to IA shall be that of an
independent contractor. ASPP and ASPP employees and contractors shall not have
any claim against IA for vacation pay, sick leave, retirement benefits, social
security, workmen's compensation, disability or unemployment insurance benefits
or employee benefits of any kind. In connection with the performance by ASPP of
services hereunder, the IA shall not have or exercise any control or direction
over the services performed by ASPP, and will not in any way supervise or
control its activities. ASPP shall perform all of the services herein provided
for relying on its own experience, knowledge, judgment and techniques. ASPP
shall not, in the performance of its duties, be managed or advised concerning
the same by IA. ASPP will not be acting as the employee, agent, partner,
servant or representative of IA, and ASPP will not have any authority to bind IA
or any subsidiary of IA in any manner
7. Notice. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent certified or registered
mail, return receipt requested, or via overnight with signature required upon
receipt, as follows:
If to IA: Gerald O'Keefe, Ph.D.
President
Illinois Alternatives
20 South Clark St.
Suite 410
Chicago, IL 60603
If to ASPP: Michael Markovitz
President
American School of Professional Psychology
20 South Clark St.
Suite 300
Chicago, IL 60603
or at any other address as may be given by any party to the other party by
notice in writing, pursuant to the provisions of this paragraph.
-3-
<PAGE>
8. Governing Law. This Agreement shall be subject to and governed by the
laws of the State of Illinois.
9. Entire Agreement. This instrument constitutes the entire Agreement of
the parties. It may not be changed orally, but only by an Agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
10. Enforcement.
(a.) In the event of a breach or a threatened breach by either party
of this Agreement, the other party shall be entitled to an injunction
restraining such threatened breach. Nothing herein shall be construed as
prohibiting either party from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of damages from the
other party.
(b.) If either party shall commit a breach of any provision or term of
this Agreement and legal action is necessary to enforce any such provision or
term, then the breaching party shall be liable to and reimburse the non-
breaching party for the costs and expenses incurred in enforcing any such
provision or term, including court costs and reasonable attorneys' fees.
11. Assignment. ASPP may not assign, without the prior written consent of
IA, its rights or obligations hereunder. IA shall have the right to assign this
Agreement to any subsidiary, affiliate or successor of IA and all covenants and
agreements hereunder shall inure to the benefit of and be enforceable by or
against said assigns.
12. Waiver or Breach. The waiver of either party, or a breach of any
provision of this Agreement, shall not operate or be construed as a waiver of
any subsequent breach by the same party.
13. Confidential Information. ASPP agrees that, during the term of this
Agreement and at all times after the termination of this Agreement for whatever
reason, it will treat as confidential and maintain in confidence all information
relating to the business of IA, including without limitation the identity of the
patients and contractors of IA, IA's arrangements with such patients and
contractors, IA's medical and financial records, patient and referral lists,
patient charts, treatment programs, and credentialing and pricing information,
and technical data relating to IA's services. In addition, ASPP agrees that,
without the prior written approval of IA, it will not disclose any such
information at any time to any person, corporation, association or other entity
except authorized personnel of IA. Upon the termination of this Agreement for
any reason, ASPP will not take or retain from the premises of IA any records,
files or other documents, or copies thereof, relating in any way to the patient,
contractors or business operations of IA, and will return all such materials
immediately to IA's President. It is expressly agreed that the
-4-
<PAGE>
remedy at law for breach of the agreements set forth in this Section 12 is
inadequate and that IA shall, in addition to any other available remedies
(including, without limitation, the right of offset), be entitled to injunctive
relief to prevent the breach or threatened breach thereof.
14. Work Product. ASPP agrees that all methods, analyses, reports, plans,
credentialing and pricing information, patient charts, treatment programs,
patient and referral lists and all similar or related information which (i)
relate to IA and which (ii) (a) are conceived, developed or made by ASPP or its
agents, contractors or employees in the course of its work for IA or (b) are the
patient and referral lists or any lists developed as a result of leads arising
directly or indirectly from such lists (all of the above being collectively
referred to as "Work Product"), belong to IA. ASPP will perform all actions
reasonably requested by IA to establish and confirm such ownership by IA.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year herein above written.
By: /s/ Gerald O'Keefe
Gerald O'Keefe, Ph.D.
President
Illinois Alternatives, Inc.
By: /s/ Michael Markovitz
Michael Markovitz Ph.D.
Chairman of the Board
ASPP
-5-
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
registration statement.
Arthur Andersen LLP
Chicago, Illinois
December 11, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's consolidated financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> AUG-31-1997 AUG-31-1998
<PERIOD-START> SEP-01-1996 SEP-01-1997
<PERIOD-END> AUG-31-1997 AUG-31-1998
<CASH> 4,209 2,712
<SECURITIES> 3,970 2,204
<RECEIVABLES> 251 681
<ALLOWANCES> 30 230
<INVENTORY> 108 94
<CURRENT-ASSETS> 7,805 11,366
<PP&E> 4,508 5,651
<DEPRECIATION> 1,320 1,781
<TOTAL-ASSETS> 17,580 23,475
<CURRENT-LIABILITIES> 3,393 8,907
<BONDS> 6,618 8,527
0 0
0 0
<COMMON> 505 6,505
<OTHER-SE> 6,943 2,417
<TOTAL-LIABILITY-AND-EQUITY> 17,580 23,475
<SALES> 0 0
<TOTAL-REVENUES> 20,460 29,352
<CGS> 0 0
<TOTAL-COSTS> 17,602 27,552
<OTHER-EXPENSES> 48 (12)
<LOSS-PROVISION> 0 177
<INTEREST-EXPENSE> 107 601
<INCOME-PRETAX> 3,200 1,544
<INCOME-TAX> 37 29
<INCOME-CONTINUING> 3,163 1,515
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,163 1,515
<EPS-PRIMARY> 1,898.559 909.364
<EPS-DILUTED> 1,898.559 909.364
</TABLE>
