<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996 COMMISSION FILE NUMBER 1-8260
PRIMARK CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MICHIGAN 38-2383282
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1000 WINTER STREET, SUITE 4300N, WALTHAM, MA 02154
(Address of principal executive offices) (Zip Code)
</TABLE>
617-466-6611
(Registrant's telephone number, including area code)
NO CHANGES
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
Number of shares outstanding of each of the registrant's classes of common
stock, as of July 26, 1996:
Common Stock, without par value: 24,809,541
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<PAGE> 2
PRIMARK CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
COVER............................................................................... i
INDEX............................................................................... ii
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements..................................................... 1
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition...................................................... 6
PART II -- OTHER INFORMATION
Item 4. Results of Votes of Security Holders..................................... 8
Item 6. Exhibits and Reports on Form 8-K......................................... 8
SIGNATURE........................................................................... 9
</TABLE>
ii
<PAGE> 3
PART I -- FINANCIAL INFORMATION
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost (which approximates market value)................... $ 56,024 $ 62,332
Receivables:
Billed receivables less allowance for doubtful accounts of $4,814,000 and $4,371,000,
respectively........................................................................ 115,795 107,636
Unbilled and other receivables....................................................... 45,234 33,255
Other current assets................................................................... 22,240 17,146
-------- --------
239,293 220,369
-------- --------
DEFERRED CHARGES AND OTHER ASSETS
Goodwill, less accumulated amortization of $33,931,000 and $27,330,000, respectively... 446,476 436,203
Other intangible assets, less accumulated amortization of $11,363,000 and $9,308,000,
respectively......................................................................... 28,271 29,074
Capitalized software, less accumulated amortization of $8,283,000 and $5,015,000,
respectively......................................................................... 24,284 20,676
Net long-term investment in financing leases........................................... 10,457 11,871
Other.................................................................................. 11,007 12,396
-------- --------
520,495 510,220
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment..................................................................... 63,041 56,765
Leasehold improvements................................................................. 24,773 23,928
Property leased to others.............................................................. 16,020 16,020
Other.................................................................................. 17,849 16,806
-------- --------
121,683 113,519
Less-Accumulated depreciation.......................................................... 49,369 41,709
-------- --------
72,314 71,810
-------- --------
$832,102 $802,399
======== ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable....................................................................... $ 19,616 $ 21,184
Accrued employee payroll and benefits.................................................. 31,531 30,233
Federal income, property and other taxes payable....................................... 11,524 9,582
Deferred income........................................................................ 47,518 41,940
Current portion of long-term debt, including capital lease obligations................. 4,872 5,105
Other.................................................................................. 36,996 30,675
-------- --------
152,057 138,719
-------- --------
LONG-TERM DEBT AND OTHER LIABILITIES
Long-term debt, including capital lease obligations.................................... 263,533 265,863
Deferred income taxes.................................................................. 11,990 13,189
Other.................................................................................. 14,127 13,625
-------- --------
289,650 292,677
-------- --------
Total liabilities................................................................ 441,707 431,396
-------- --------
CONTINGENCIES (NOTE 3)
REDEEMABLE PREFERRED STOCK............................................................... -- 16,874
-------- --------
COMMON SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital............................................ 234,272 226,494
Retained earnings...................................................................... 155,886 141,846
-------- --------
390,158 368,340
Less -- Treasury stock, at average cost................................................ -- 14,814
Less -- Unearned compensation.......................................................... 226 709
Less -- Cumulative foreign currency translation adjustment............................. (463) (1,312)
-------- --------
Total common shareholders' equity................................................ 390,395 354,129
-------- --------
$832,102 $802,399
======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
1
<PAGE> 4
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATING REVENUES.............................. $187,658 $143,041 $368,387 $278,902
-------- -------- -------- --------
OPERATING EXPENSES
Cost of services.............................. 107,865 85,431 213,693 167,125
Selling, general and administrative........... 52,363 37,077 100,884 71,863
Depreciation.................................. 4,494 2,926 8,632 6,137
Amortization of goodwill...................... 3,100 1,777 6,087 3,539
Amortization of other intangible assets....... 2,517 2,717 5,183 5,308
-------- -------- -------- --------
Total operating expenses.............. 170,339 129,928 334,479 253,972
-------- -------- -------- --------
Operating income...................... 17,319 13,113 33,908 24,930
-------- -------- -------- --------
OTHER INCOME AND (DEDUCTIONS)
Investment income............................. 602 344 1,469 646
Interest expense.............................. (5,343) (3,508) (10,958) (6,955)
Foreign currency gain (loss).................. 827 (1,464) 1,043 (2,107)
Other......................................... 1 (220) (44) (312)
-------- -------- -------- --------
Total other income and (deductions)... (3,913) (4,848) (8,490) (8,728)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY
ITEM.......................................... 13,406 8,265 25,418 16,202
INCOME TAX EXPENSE.............................. 5,889 3,689 11,501 7,172
-------- -------- -------- --------
Income before extraordinary item................ 7,517 4,576 13,917 9,030
Extraordinary item-loss on early extinguishment
of debt, net of income tax benefit of
$288,000...................................... -- (534) -- (534)
-------- -------- -------- --------
NET INCOME...................................... 7,517 4,042 13,917 8,496
DIVIDENDS ON PREFERRED STOCK.................... -- (359) (359) (717)
-------- -------- -------- --------
NET INCOME APPLICABLE TO COMMON STOCK........... $ 7,517 $ 3,683 $ 13,558 $ 7,779
======== ======== ======== ========
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Income before extraordinary item.............. $ 0.29 $ 0.21 $ 0.53 $ 0.42
Extraordinary item............................ -- (0.03) -- (0.03)
-------- -------- -------- --------
Total earnings per share................... $ 0.29 $ 0.18 $ 0.53 $ 0.39
-------- -------- -------- --------
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING............................ 26,252 20,033 25,807 19,822
======== ======== ======== ========
</TABLE>
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Balance -- Beginning of period................... $148,369 $129,060 $141,846 $124,964
Add -- Net Income............................ 7,517 4,042 13,917 8,496
-- Change in year-end of Subsidiaries
(Note 1).............................. -- -- 482 --
Deduct -- Dividends on Preferred Stock.......... -- (359) (359) (717)
-------- -------- -------- --------
Balance -- End of period......................... $155,886 $132,743 $155,886 $132,743
======== ======== ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
2
<PAGE> 5
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1996 1995
-------- --------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................................... $ 13,917 $ 8,496
Adjustments to reconcile net income to net cash flows from operating
activities:
Change in year-end of subsidiary.................................. 2,518 --
Extraordinary loss on early extinguishment of debt................ -- 534
Depreciation and amortization..................................... 19,902 14,986
Foreign currency (gain) loss -- net............................... (1,043) 2,107
Other............................................................. 116 (2,158)
Changes in assets and liabilities which provided (used) cash,
exclusive of changes shown separately............................ (18,492) (3,499)
-------- --------
Net cash provided from operating activities.................. 16,918 20,466
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term notes payable................................. 708 60,009
Repayment of short-term notes payable................................ (708) (6,009)
Issuance of long-term debt........................................... -- 125,000
Repayment of long-term debt.......................................... (1,876) (1,902)
Debt issue costs..................................................... -- (4,027)
Common stock issuance and other...................................... 4,582 2,015
-------- --------
Net cash provided from financing activities.................. 2,706 175,086
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................................................. (10,634) (8,672)
Capitalized software................................................. (4,674) (1,775)
Purchase of subsidiaries -- net of acquired cash..................... (9,000) (199,687)
Principal payments received under financing leases................... 1,420 1,554
Other -- net......................................................... (2,765) 1,830
-------- --------
Net cash used for investing activities....................... (25,653) (206,750)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH................................ (279) 494
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS.............................. (6,308) (10,704)
CASH AND CASH EQUIVALENTS, JANUARY 1................................... 62,332 20,059
-------- --------
CASH AND CASH EQUIVALENTS, JUNE 30..................................... $ 56,024 $ 9,355
======== ========
CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED (USED) CASH, EXCLUSIVE
OF CHANGES SHOWN SEPARATELY
Billed, unbilled and other receivables -- net........................ $(20,131) $ (9,518)
Accounts payable..................................................... (4,974) (3,481)
Federal income, property and other taxes payable -- net.............. 3,148 462
Other current assets and liabilities................................. 4,819 5,294
Other noncurrent assets and liabilities.............................. (1,354) 3,744
-------- --------
$(18,492) $ (3,499)
======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
3
<PAGE> 6
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ACCOUNTING CHANGE -- PRINCIPLES OF CONSOLIDATION AND BASIS OF
PRESENTATION
Effective January 1, 1996, the foreign and domestic accounts of Datastream
International Limited and affiliates ("Datastream") and Vestek, wholly-owned
subsidiaries of Primark Corporation (the "Company"), changed their reporting
period from a fiscal year ending November 30 to a calendar year ending December
31. The change was made to provide more timely information and enhance
comparability. In accordance with guidelines of the Securities and Exchange
Commission, only six months of income and expense were included in the
Consolidated Statements of Income. The subsidiaries' results of operations for
December 1995 were credited directly to retained earnings. Cash flow activity
for this same period has been reflected as a single line item in the operating
activities section of the Consolidated Statements of Cash Flows.
B. NEWLY ISSUED ACCOUNTING STANDARDS
In October 1995, Financial Accounting Standards (SFAS) No. 123 "Accounting
for Stock-Based Compensation," was issued. This statement, which is effective
beginning January 1, 1996, requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the equity
instrument awarded. Companies are permitted, however, to continue to apply APB
Opinion No. 25, which recognizes compensation cost based on the intrinsic value
of the equity instrument awarded. The Company will continue to apply APB Opinion
No. 25 to its stock-based compensation awards to employees and will disclose the
required pro forma effect on net income and earnings per share.
2. SHORT-TERM AND LONG-TERM DEBT
On March 12, 1996, the Company, together with its commercial banks, amended
the Revolving Credit Agreement and Term Loan agreement dated June 29, 1995. The
amendment, among other matters, relaxed the performance pricing criteria and
established lower interest rates based upon meeting these thresholds. The effect
of the amendment was to lower Primark's effective rate 25 to 50 basis points
when performance pricing is achieved.
3. CONTINGENCIES
On June 24, 1994, a jury in a civil case in the Massachusetts Superior
Court (the "Court") returned an unfavorable verdict against the two founders of
TASC, and against TASC itself. The suit was brought by a former employee
regarding a TASC stock transaction which took place in 1976, prior to the
Company's acquisition of TASC in 1991. On June 28, 1994, the Court ordered that
judgment be entered on the verdict requiring the two founders (but not TASC
itself) to disgorge $19,800,000. Such amount accrues post-judgment interest at a
statutory rate. As an alternative course of action, the plaintiff may pursue the
two founders and TASC, jointly and severally for $48,600. Based on the
adjudication, the Company has denied requests of the two founders for
indemnification. Certain post-verdict motions (including a motion for judgment
notwithstanding the verdict, and in the alternative, a motion for a new trial)
are pending. While the outcome of these motions cannot be predicted with
certainty, the Company believes it will not be required to pay any portion of
this judgment.
The Company has received notifications from the Michigan Department of
Natural Resources of environmental contamination in the vicinity of natural gas
storage fields in Michigan which the Company leases to an interstate pipeline
company. The Company conducts no operations of its own on these properties.
While the ultimate resolution of these matters cannot be predicted at this time,
the Company believes that its existing reserves of approximately $250,000 are
adequate for the resolution of such matters.
4
<PAGE> 7
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company and its subsidiaries are involved in certain other
administrative proceedings and matters concerning issues arising in the ordinary
course of business. Management cannot predict the final disposition of such
issues, but believes that adequate provision has been made for the probable
losses and the ultimate resolution of these proceedings will not have a material
adverse effect on the accompanying consolidated financial statements.
4. REDEEMABLE PREFERRED STOCK
On May 2, 1996, the Company received notification to convert the total
outstanding shares of Primark Series A Cumulative Convertible Preferred Stock
into shares of Primark common stock. The 674,943 preferred shares plus accrued
and unpaid dividends, were converted into 1,164,276 shares of Primark common
stock based upon the stated conversion rate of $14.49. The preferred shares were
held entirely by the Profit Sharing and Stock Ownership Plan (PSSOP) of TASC, a
wholly-owned subsidiary of the Company.
5. GENERAL
Other than as described in Note 1 there have been no significant changes in
the Company's principal accounting policies that were set forth in the Company's
1995 Annual Report and Form 10-K. Certain reclassifications have been made to
the prior year's statements to conform with the 1996 presentation.
The unaudited information furnished herein, in the opinion of management,
reflects all adjustments necessary for a fair statement of the results of
operations during the interim periods.
The revenues, expenses, net income and earnings per share for the interim
periods should not be construed as representative of revenues, expenses, net
income and earnings per share for all or any part of the balance of the current
year or succeeding periods.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Primark reported net income of $7.5 million ($0.29 per share) and $13.6
million ($0.53 per share) for the three and six months ended June 30, 1996,
respectively. These results reflect increases over 1995 net income before
extraordinary items of $2.9 million (64.3%) and $4.9 million (54.1%) for the
three and six month periods. Earnings per share before the 1995 extraordinary
item, increased 38.1% and 26.2% for the three and six months, including the
impact of an increase of over 30% in shares outstanding. The increase in common
shares outstanding was the result of Primark's December, 1995 equity offering of
4.1 million shares and the May, 1996 conversion of 1.2 million shares associated
with Primark's $16.9 million of convertible Preferred stock. The improvement in
earnings reflect increases in revenue of 31.2% and 32.1% for the three and six
months ended June 30, 1996. Earnings were further enhanced by a $2.3 million and
a $3.2 million increase over 1995 for gains on foreign currency transactions for
the quarter and year to date periods, respectively. Somewhat offsetting these
improvements was a $1.8 million and a $4.0 million increase in interest expense,
for the three and six month periods, respectively.
The revenue improvements reflect the purchase of Disclosure and IBES in
June of 1995, whose first six months of revenues were not reflected in the 1995
comparative results. Excluding the effects of the acquisition, Primark's other
operations grew 11.5% and 12.8% for the quarter and year-to-date periods.
Applied technology revenues, comprising the TASC and WSI business units, grew
10.3% for the quarter and 9.0% year-to-date. TASC's government services revenues
increased 10.9% for the quarter, which is a continuation of the first quarter
performance and resulted in a year-to-date improvement of 10.4%. The WSI weather
division posted a 14.5% increase over 1995 second quarter revenue, marking an
improvement from relatively flat first quarter results.
The financial information businesses accounted for $30.0 million of the
Company's $44.6 million of second quarter growth in revenues. Year-to-date the
financial information businesses improved $58.8 million over 1995 while the
Company as a whole improved $89.5 million. Within the financial information
business mix Datastream grew 9.1% and 9.0% during the three and six month
periods ended June 30, 1996, excluding the effects of currency. Datastream
exhibited growth in all geographic regions, with the strongest quarterly
performances in the Pacific basin at 22.1% and the Americas at 24.5%. The
slowest growth was noted in the United Kingdom at 3.3% for the quarter, due to
continued flat fund management sales and a heavily penetrated market for the
existing Datastream research product. Although IBES's 1995 results were not
included in Primark's 1995 reported results, revenues for IBES increased 17.7%
over the second quarter of 1995 and 16.5% for the year-to-date period. IBES's
growth reflects the success of the "IBES Express" product. Disclosure's year
over year results continued to demonstrate the low growth patterns noted in the
first quarter of 1996 with a 2.6% growth in the second quarter and a 3.3% growth
rate for the year-to-date period. Disclosure's slow sales in 1996 resulted from
some product delays as well as turnover in its domestic sales force.
Primark's aircraft maintenance business, TIMCO grew revenues 27.1% for the
second quarter and 39.3% year-to-date. The solid growth at TIMCO is a result of
building added hanger space in the fourth quarter of 1995, coupled with TIMCO's
ability to sell the added capacity in a growing market place for outsourced
services.
Capital Resources and Liquidity
During the six months ended June 30, 1996, cash and cash equivalents
decreased $6.3 million. Operating activities generated $16.9 million in cash of
which $9.0 million was used to purchase Groupe DAFSA ("DAFSA") and $15.3 million
to fund capital expenditures. During the second quarter, the trustees of the
TASC PSSOP converted $16.9 million of its Series A Cumulative Convertible
Preferred stock into 1,164,276 shares of Primark Common stock.
During the first quarter of 1996, Primark changed the fiscal year end of
Datastream and Vestek from November 30, to December 31. Pursuant to this change,
the net income of these subsidiaries for December of
6
<PAGE> 9
1995 was recorded to retained earnings. The impact of adjusting cash and
intercompany accounts to comply with the new period was $2.5 million and is
reflected as a cash inflow from operations in the Consolidated Statements of
Cash Flows.
Cash flows from operating activities provided $16.9 million of cash during
the six months ended June 30, 1996, $3.5 million less than the prior year. The
current year was impacted by working capital requirements which increased $15.0
million, partially offset by the increase in operations previously discussed.
Increased receivables accounted for $20.1 million of working capital uses.
TIMCO's receivable balance increased $8.4 million due to continued revenue
growth. TASC's unbilled receivables increased $10.5 million due to the timing of
billing government contracts.
Financing activities for the first six months of 1996 provided $2.7
million, a decrease from the $175.1 million provided for the same period in
1995, most of which was used to fund the acquisition of Disclosure. Proceeds
from option activity generated approximately $4.6 million of cash for the first
half of 1996, during which the Company repaid $1.9 million of long-term debt.
Investing activities used $25.7 million of cash during the six months ended
June 30, 1996, compared to uses of $206.8 million during the first six months of
1995. The 1996 uses reflect the purchase of DAFSA for $9.0 million. DAFSA
supplies company account information on all listed companies in France and
ownership information on French companies through print and CD-ROM. The 1995
uses reflect the purchase of Disclosure for approximately $200.0 million in
cash. Capital expenditures used $10.6 million through the first six months of
1996, an increase of $2.0 million over the first six months of 1995.
Approximately $8.3 million of the capital expenditures were for computer
equipment primarily at Datastream and Disclosure. Capitalized software
expenditures increased $2.9 million over 1995 to $4.7 million for the six months
ended June 30, 1996. The 1996 software expenditures include $4.1 million for
development of new products at Datastream and Disclosure.
Primark's revolving credit agreement of $75.0 million remains undrawn and
together with invested cash, and the continued strong cash flows from
operations, provides good liquidity for internal and external investment
opportunities.
7
<PAGE> 10
PART II -- OTHER INFORMATION
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on May 22, 1996 for
the purpose of electing a board of directors, approving a long-term incentive
agreement, and approving the appointment of independent auditors. Proxies for
the meeting were solicited pursuant to Section 14(a) of the Securities Exchange
Act of 1934. There was no solicitation in opposition to management's
solicitations.
All of management's nominees for directors listed in the proxy statement
were elected with the following vote:
<TABLE>
<CAPTION>
SHARES
VOTED SHARES
"FOR" % "WITHHELD" %
---------- ---- --------- ---
<S> <C> <C> <C> <C>
Kevin J. Bradley................................ 21,007,188 99.1% 199,336 0.9%
John C. Holt.................................... 21,116,808 99.6% 89,716 0.4%
Joseph E. Kasputys.............................. 20,969,568 98.9% 236,956 1.1%
Steven Lazarus.................................. 21,116,684 99.6% 89,840 0.4%
Patricia G. McGinnis............................ 21,135,813 99.7% 70,711 0.3%
Robert W. Stewart............................... 20,963,107 98.9% 243,417 1.1%
Constance K. Weaver............................. 21,153,165 99.7% 53,359 0.3%
</TABLE>
The long-term incentive agreement was approved by the following vote:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED SHARES SHARES
"FOR" % "AGAINST" % "ABSTAINING" % NOT VOTED
- ----------- ---- --------- --- ------------ --- ---------
<S> <C> <C> <C> <C> <C> <C>
20,659,765 97.4% 401,202 1.9% 145,557 0.7% 0
</TABLE>
The appointment of Deloitte & Touche as independent auditors was approved
by the following vote:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED SHARES SHARES
"FOR" % "AGAINST" % "ABSTAINING" % NOT VOTED
- ----------- ---- --------- --- ------------ --- ---------
<S> <C> <C> <C> <C> <C> <C>
21,096,760 99.5% 56,663 0.3% 53,101 0.3% 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ------------------------------------------------------------------------- ----
<C> <S> <C>
2-1 Purchase Agreement dated June 18, 1996 between Datastream International
(France) SA and Talisman Management LTD..................................
10-1 Lease Agreement by and between Parcel 33B Associates Limited Partnership
and TASC, Inc............................................................
10-2 Amendement to the Employment Agreement among John C. Holt, TASC, Inc.
and the Company dated February 29, 1996, approved by shareholders on
May 22, 1996.............................................................
27 Financial Data Schedule..................................................
</TABLE>
(b) No reports on Form 8-K were filed during the quarter ended June 30, 1996.
8
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
PRIMARK CORPORATION
Date: August 1, 1996 By: /s/ STEPHEN H. CURRAN
----------------------------------------------
Stephen H. Curran
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
</TABLE>
9
<PAGE> 1
Exhibit 2-1
DATED June 18, 1996
TALISMAN MANAGEMENT LTD
AND
DATASTREAM INTERNATIONAL (FRANCE) SA
------------------------------------
PURCHASE AGREEMENT
------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
SECTION I - DEFINITIONS ............................................. (2)
SECTION II - PURCHASE AND SALE OF SHARES ............................. (6)
2.1 Transfer of Shares ......................................... (6)
2.2 Purchase Price ............................................. (6)
2.3 Closing .................................................... (9)
2.4 Consolidated Financial Statements and Closing Statement .... (12)
2.5 Disputes Regarding Consolidated Financial Statements
and Closing Statement ..................................... (12)
2.6 Determination of any Post-Closing Adjustment Amount ........ (14)
2.7 Merger ..................................................... (14)
SECTION III - CONDITIONS OF THE PURCHASE BY THE BUYER OF THE SHARES ... (15)
3.1 Representations and Warranties ............................. (15)
3.2 Certificate of the Sellers ................................. (15)
3.3 Consents, Authorizations ................................... (15)
3.4 Corporate Action ........................................... (15)
3.5 No Action or Proceeding .................................... (15)
3.6 Performance of the Terms of this Agreement ................. (16)
3.7 Material Change ............................................ (16)
3.8 Guarantee .................................................. (16)
3.9 Loans ...................................................... (16)
3.10 Annual Meetings ............................................ (16)
SECTION IV - CONDITIONS OF THE SALE BY THE SELLER OF THE SHARES ...... (16)
4.1 Representations and Warranties ............................. (17)
4.2 Certificate of the Buyer ................................... (17)
4.3 Consents, Authorizations ................................... (17)
4.4 Corporate Action ........................................... (17)
4.5 No Action or Proceeding .................................... (17)
SECTION V - REPRESENTATIONS AND WARRANTIES OF THE SELLER ............ (18)
5.1 Incorporation and Corporate Capital of Talisman ............ (18)
5.2 Incorporation and Corporate Capital of Groupe DAFSA ........ (19)
5.3 Subsidiaries ............................................... (19)
5.4 Compliance with Laws and Obligations ....................... (20)
5.5 Corporate and Business Records ............................. (21)
5.6 Authorization; Valid and Binding Agreement ................. (21)
5.7 Government Authorizations .................................. (21)
5.8 Other Agreements - Laws .................................... (22)
5.9 No Finders ................................................. (22)
5.10 Financial Statements ....................................... (22)
5.11 Absence of Significant Changes ............................. (23)
(i)
<PAGE> 3
5.12 No Undisclosed Liabilities ................................. (24)
5.13 Taxes - Labor Contributions ................................ (25)
5.14 Litigation ................................................. (26)
5.15 Inventories ................................................ (27)
5.16 Assets ..................................................... (27)
5.17 Material Contracts ......................................... (28)
5.18 Leases ..................................................... (29)
5.19 Insurance .................................................. (30)
5.20 Labor matters .............................................. (31)
5.21 Benefit Plans .............................................. (32)
5.22 Proxies - Bank Accounts .................................... (33)
5.23 No Bankruptcy .............................................. (33)
5.24 Patents, Marks, Commercial Names and Copyrights ............ (33)
5.25 No Security Interests ...................................... (36)
5.26 Receivables ................................................ (36)
5.27 Customer Relations ......................................... (36)
5.28 Subsidy, Aid and Tax Benefits .............................. (36)
5.29 Environmental Matters ...................................... (37)
5.30 No Claim by the Seller ..................................... (37)
5.31 Contingent Liabilities ..................................... (37)
5.32 Loans ...................................................... (37)
5.33 Extel ...................................................... (38)
5.34 SAFE Litigations - restructuring costs ..................... (38)
5.35 No Material Misstatements .................................. (39)
SECTION VI - REPRESENTATIONS AND WARRANTIES OF THE BUYER ............. (39)
6.1 Incorporation and share capital of the Buyer ............... (39)
6.2 Authorization - Competence ................................. (40)
6.3 Government Authorizations .................................. (40)
6.4 Other Agreements ........................................... (40)
6.5 No Finders ................................................. (40)
SECTION VII - ACTIVITIES PRIOR TO THE CLOSING ......................... (41)
7.1 Access ..................................................... (41)
7.2 Government Filings ......................................... (41)
7.3 Conduct of the Business of Talisman and the Subsidiaries ... (41)
7.4 Other Actions .............................................. (43)
7.5 Intergroup Agreements ...................................... (43)
7.6 Waiver of Call Options ..................................... (44)
7.7 Loans ...................................................... (44)
7.8 Employment Agreement ....................................... (45)
7.9 Employees .................................................. (45)
7.10 Bank Mandate ............................................... (45)
7.11 Certificate of no C1aim .................................... (45)
7.12 Guarantee .................................................. (45)
SECTION VIII - INDEMNIFICATION ......................................... (46)
8.1 Survival of Representations and Covenants .................. (46)
8.2 Obligation to Indemnify .................................... (46)
SECTION IX - ADDITIONAL COVENANTS .................................... (51)
9.1 Non-Competition ............................................ (51)
9.2 Post-Closing Cooperation ................................... (51)
9.3 Bridge Loan ................................................ (52)
(ii)
<PAGE> 4
Republic National Bank of New York ................................. (52)
9.5 Talisman ................................................... (52)
SECTION X - TERMINATION ............................................. (53)
10.1 Termination ................................................ (53)
10.2 Effect of Termination ...................................... (53)
SECTION XI - MISCELLANEOUS PROVISIONS ................................ (53)
11.1 Notices .................................................... (53)
11.2 Further Acts ............................................... (54)
11.3 Entire Agreement ........................................... (54)
11.4 Waiver ..................................................... (55)
11.5 Counterparts ............................................... (55)
11 6 Third Party Rights ......................................... (55)
11.7 Governing Law .............................................. (55)
11.8 Parties Bound by Agreement - Successors and Assigns ........ (55)
11.9 Expenses ................................................... (55)
11.10 Headings .............................................. (56)
11.11 Invalidity of a Provision ............................. (56)
11.12 Transfer Taxes ........................................ (56)
11.13 Jurisdiction .......................................... (56)
11.14 Communications ........................................ (56)
(iii)
<PAGE> 5
STOCK PURCHASE AGREEMENT
Dated June 18, 1996
BETWEEN THE UNDERSIGNED:
Talisman Management Limited, a limited liability company, incorporated
in England and Wales, with an issued and paid in share capital of [pound
sterling]3,000, whose registered office is at 37 Ixworth Place, London SW3 3QH,
England, registered with the Companies Registrar under number 210 82 78,
represented by Mr. Francois Chaillou, its director,
(hereinafter the "SELLER"),
ON THE FIRST PART,
AND
Datastream International (France) S.A., a limited liability company,
incorporated in France with an issued and paid in share capital of FRF
2,250,000, whose registered office is at 25 avenue Marceau, 75116 Paris,
registered with the Registry of Commerce and Companies of Paris under number B
388 549 800, represented by Mr. Richard Anderson, its director,
(hereinafter the "BUYER"),
ON THE SECOND PART.
WITNESSETH:
WHEREAS, Talisman is a French "societe anonyme" with a capital of FRF
250,000, whose registered office is at 11 rue Robert de Flers, 75015 Paris,
registered with the Registry of Commerce and Companies of Paris under number B
352 936 876 (hereinafter referred to as "TALISMAN");
WHEREAS, Talisman is the parent company of Groupe DAFSA, a French
"societe anonyme" with a capital of FRF 2,810,000, whose registered office is at
11 rue Robert de Flers, 75015 Paris, registered with the Registry of Commerce
and Companies of Paris
<PAGE> 6
- 2 -
under the number B 388 299 893 (hereinafter referred to as "GROUPE DAFSA");
WHEREAS, on or prior to the Transfer Date (as such term is defined
hereunder), the Seller shall own all the shares of Talisman;
WHEREAS, the Buyer desires to purchase all of the issued shares of
capital stock of Talisman, and the Seller agrees to sell all such shares to the
Buyer upon the conditions hereinafter set forth;
WHEREAS, as soon as practicable after the Transfer Date (as defined
hereinafter) the Buyer will be merged with Talisman.
NOW, THEREFORE, IN CONSIDERATION OF THE REPRESENTATIONS AND WARRANTIES,
COVENANTS AND AGREEMENTS HEREINAFTER SET FORTH, IT IS HEREBY AGREED AS FOLLOWS:
SECTION I - DEFINITIONS
- --------- -----------
As used in this Agreement, the following terms shall have the meaning
indicated below:
"ACCOUNTING PRINCIPLES" shall have the meaning defined in Section 2.4 of this
Agreement.
"AFFILIATE" shall mean, with respect to any Person (i) any other Person 10% or
more of the voting or equity interest of which is directly or indirectly, under
the control of such Person (ii) any other Person which is directly or
indirectly, under the control of such Person, and (iii) any other Person which,
directly or indirectly has the control over or is under common control with such
Person.
"AGREEMENT" shall mean this agreement and all annexes, exhibits, schedules and
documents attached hereto.
"APRIL 30 NET EQUITY" shall have the meaning set forth in Section 2.6 (a) of
this Agreement.
"BANQUE PARIBAS AGREEMENT" shall have the meaning defined in Section 5.34 of
this Agreement.
"BANQUE PARIBAS COMMITMENTS" shall mean (i) Banque Paribas' commitments set
forth in Section III.2 of the agreement entered into on September 4, 1995 among
Banque Paribas, Credit du Nord, Groupe DAFSA and Associes en Finance, as amended
on September 22,
<PAGE> 7
- 3 -
1995 and on April 16, 1996 to compensate Groupe DAFSA and any Affiliate thereof
in connection with any costs relating to a redundancy plan and a restructuring
of Societe d'Analyse Financiere Europeenne ("SAFE") and any litigation arising
in connection therewith, including any SAFE Litigations and (ii) Banque Paribas'
commitments set forth in a letter dated October 9, 1995 to Groupe DAFSA relating
to the termination of an agreement entered into between SAFE and Greer Global
Investor Services and a tax audit of SAFE.
"BENEFIT PLAN" shall have the meaning defined in Section 5.21 of this Agreement.
"BRIDGE LOAN" shall mean the loan extended by the Seller to Talisman on June 3,
1996, in a principal amount of FRF 1,000,000.
"BUSINESS DAY" shall mean any day except Saturday, Sunday and any day in France
which is a legal holiday or a day on which banking institutions are authorized
or required by law or other government action to close.
"BUYER" shall have the meaning defined at the beginning of this Agreement.
"CLOSING" shall mean the closing contemplated at Section 2.3 of this Agreement.
"CLOSING AMOUNT" shall mean the Purchase Price less (i) the Retention Amount,
(ii) the Retention Amount for Contingent Liabilities and less (iii) the Hold
Back Amount.
"CLOSING STATEMENT" shall have the meaning defined in Section 2.4 of this
Agreement.
"CONSOLIDATED FINANCIAL STATEMENTS" shall mean the balance sheet and income
statement for Talisman and the Subsidiaries (excluding Globe Online) on a
consolidated basis established in accordance with the Accounting Principles.
"CONTINGENT LIABILITIES" shall mean the liabilities for exceptional and
non-recurring costs of Talisman and of the Subsidiaries as set forth in ANNEX A.
"DAMAGE" shall have the meaning defined in Section 8.2(a) of this Agreement.
"ENCUMBRANCES" shall mean any mortgage, option, lien, charge, claim, assessment,
security interest and third party right and other encumbrance of any kind
whatsoever.
"EXCHANGE RATE" shall mean one U.S. Dollar (USD 1) equals 5.19 Francs (FRF
5.19).
<PAGE> 8
- 4 -
"FINAL CONSOLIDATED FINANCIAL STATEMENTS" shall have the meaning defined in
Section 2.5(b) of this Agreement.
"FINAL CLOSING STATEMENT" shall have the meaning defined in Section 2.5(b) of
this Agreement.
"FINANCIAL STATEMENTS" shall have the meaning defined in Section 5.10 of this
Agreement.
"FRANC or "FRF" shall mean the lawful currency of the Republic of France.
"GLOBE ONLINE S.A." shall mean Globe Online S.A., a limited liability company,
incorporated in France, with an issued and paid in share capital of FRF
1,165,000, whose registered office is at 46 rue Notre Dame des Victoires, 75002
Paris, registered with the Registry of Commerce of Paris under number B
400.541.066.
"GROUPE DAFSA" shall have the meaning defined in the second "Whereas" clause of
this Agreement.
"GROUPE DAFSA 1996 Turnover" shall have the meaning defined in Section 2.2 of
this Agreement.
"GUARANTEE" shall mean the agreement ("CAUTION SOLIDAIRE") in the form of ANNEX
B hereto to be executed by Mr. Francois Chaillou.
"HOLD BACK AMOUNT" shall mean an amount equal to seven hundred fifty thousand
U.S. Dollars (USD 750,000) times the Exchange Rate.
"INDEPENDENT ACCOUNTING FIRM" shall have the meaning defined in Section 2.5 of
this Agreement.
"INTELLECTUAL PROPERTY" shall have the meaning defined in Section 5.24 of this
Agreement.
"LOAN AMOUNT" shall mean FRF 29,681,705, which represent the aggregate principal
amount of financing to be granted on the Transfer Date by Buyer to Talisman and
Groupe DAFSA for the purpose of repaying the Loans, as more detailed in ANNEX C
hereto.
"LOANS" shall mean the loans granted to Groupe DAFSA and Talisman referred to in
ANNEX D hereto.
"MATERIAL CONTRACTS" shall have the meaning defined in Section 5.17 of this
Agreement.
"NET EQUITY" shall mean the net book value of Talisman and the Subsidiaries
(excluding Globe Online) on a consolidated basis, as defined in Article D 13.1
of Decree n[degree symbol] 83-1020 of November 29, 1983, as modified.
<PAGE> 9
- 5 -
"PERSON" shall mean an individual, a corporation, a partnership, an association,
a trust or any other entity or organization (whether or not incorporated),
including a government or political subdivision or an agency, department or
instrumentality thereof.
"POST-CLOSING ADJUSTMENT AMOUNT" shall have the meaning defined in Section
2.6(b) of this Agreement.
"PRIMARK LETTER" shall mean the letter in the form of ANNEX H.
"PURCHASE PRICE" shall be equal to (a) nine million U.S. dollars (USD 9,000,000)
times the Exchange Rate less (b) the Loan Amount, as such amount may be modified
pursuant to Section II of this Agreement.
"RETENTION AMOUNT" shall mean an amount equal to five hundred thousand US
Dollars (USD 500,000) times the Exchange Rate.
"RETENTION AMOUNT FOR CONTINGENT LIABILITIES" shall mean an amount equal to five
million eight hundred and sixty nine thousand Francs (FRF 5,869,000).
"SAFE LITIGATIONS" shall mean the litigations set forth in ANNEX
E hereto.
"SELLER" shall have the meaning defined at the beginning of this Agreement.
"SHARES" shall mean one hundred percent (100%) of the shares of Talisman.
"SUBSCRIPTION RIGHTS" shall mean 42,150 subscription rights ("Bons de
Souscription") to Groupe DAFSA shares the issuance of which in favor of Talisman
was decided pursuant to a decision of the ordinary and extraordinary
shareholders' meeting of Groupe DAFSA held on October 30, 1995;
"SUBSIDIARY" and collectively "SUBSIDIARIES" shall mean any company or entity in
which Talisman owns, directly or indirectly twenty percent or more of the shares
or voting rights and any "societe en participation" in which Talisman or any of
its Affiliates participates, directly or indirectly, it being specified that for
the purpose of the representations and warranties set forth in Section V, the
term, "Subsidiaries" shall include the "societe en participation" only with
respect to Sections 5.3, 5.4, 5.5, 5.8, 5.9, 5.11, 5.12, 5.13, 5.23, 5.27, 5.30,
5.31 and 5.35 of this Agreement.
"TALISMAN" shall have the meaning defined in the first "Whereas" clause of this
Agreement.
"TANGUY SETTLEMENT AGREEMENT" shall mean the settlement agreement entered into
between Talisman and Mr. Tanguy on June 13, 1996.
<PAGE> 10
- 6 -
"TMI" shall mean Talisman Management International, a company incorporated in
Bermuda, with an issued and paid in capital of USD 14,033, whose registered
office is at Conyers Dill & Pearman, Barristers & Attorneys, Clarendon House,
Third Floor, 1 church Street, Hamilton HMll, Bermuda, registered with the
Registrar of Companies under number 13325.
"TMI GUARANTEE" shall mean the agreement ("caution solidaire") in the form of
ANNEX I hereto.
"TAX RETURNS" shall have the meaning defined in Section 5.13 of this Agreement.
"THRESHOLD AMOUNT" shall have the meaning set forth in Section 8.2 (b).
"TRANSFER" shall mean the transfer of the Shares pursuant to Section 2.1 of this
Agreement.
"TRANSFER DATE" shall mean the date on which the Closing occurs.
"TRANSFER DATE NET EQUITY" shall have the meaning set forth in Section 2.6 (b)
of this Agreement.
SECTION II - PURCHASE AND SALE OF SHARES
- ---------- ---------------------------
2.1 Transfer of Shares
------------------
Subject to the terms and conditions of this Agreement, on the Transfer
Date, Seller shall sell and transfer to the Buyer, and the Buyer shall acquire
from Seller, the Shares free from all Encumbrances with all rights now or
hereafter attaching thereto.
2.2 Purchase Price
--------------
The Purchase Price for the sale of the Shares shall be paid as follows:
- the Closing Amount shall be paid by the Buyer at the Closing as
follows:
- an amount of one million nine hundred seventy one thousand
seven hundred ninety five Francs (FRF 1,971,795) shall be
paid by the Buyer to the Seller by official bank check;
- the Seller hereby instructs the Buyer to pay for the
account and on behalf of the Seller the remaining portion
of the Closing Amount as follows:
<PAGE> 11
- 7 -
- an amount of one million eight hundred thousand
Francs (FRF 1,800,000) to Banque Paribas (RCS Paris
B 662 047 885);
- an amount of nine hundred thousand Francs (FRF
900,000) to Associes en Finance S.A. (RCS Paris B
394 630 867);
- the Retention Amount shall be paid by the Buyer to the Seller as
follows:
- on March 31, 1997, 150,000 U.S. Dollars times the Exchange
Rate,
- on March 31, 1998, 350,000 U.S. Dollars times the Exchange
Rate,
PROVIDED that the Buyer has not made, prior to either of such
dates, any claim for payment of a Post Closing Adjustment Amount
or under Section VIII of this Agreement. If the Buyer has made any
such claims prior to such dates, the Retention Amount, or the
portion thereof not paid to the Seller prior to the making of any
such claims, shall become due and payable only upon final
determination of all amounts due and payable to the Buyer under
all such claims. The Buyer shall have the right to set off, at any
time, against the Retention Amount any amount payable to the Buyer
by the Seller under this Agreement, including any Post Closing
Adjustment Amount, and any amount payable under Section VIII
hereunder; and
- Retention Amount for Contingent Liabilities:
Upon full and final payment and discharge by Talisman and/or any
Subsidiary of all Contingent Liabilities, the Buyer shall pay to
the Seller an amount equal to the difference (the "AMOUNT"), if
positive, between (i) the Retention Amount for Contingent
Liabilities and (ii) all amounts paid by Talisman and/or any
Subsidiary in connection with the payment and discharge of all
Contingent Liabilities.
The Buyer shall calculate and notify to the Seller such Amount
along with copies of all documents supporting such determination.
In the event the Seller disputes such determination and such
dispute is not resolved by mutual agreement of the Seller and the
Buyer within 15 days from the Buyer's notification to the Seller
of the Amount, then such dispute shall be submitted for resolution
to Arthur Andersen, Paris Office, or if Arthur Andersen, Paris
office shall not accept such appointment, to an independent
accounting firm appointed by the President of the Paris
<PAGE> 12
- 8 -
Commercial Court upon an ex-parte request of the most diligent
party. The resolution of such dispute by such accounting firm
(either appointed by the parties or by the President of the Paris
Commercial Court) shall be final, conclusive and binding upon
Seller and Buyer. Fees and expenses of such accounting firm shall
be shared equally between the Seller and the Buyer.
The Amount shall be due and payable upon final determination
thereof, either by mutual agreement of the Seller and the Buyer or
by the accounting firm.
- The Hold Back Amount shall be paid by the Buyer to the Seller as
follows :
- On March 31, 1997, if Groupe DAFSA's financial statements
for the year ending December 31, 1996 have been approved
without reserve as to Groupe DAFSA turnover by the
statutory auditor of Groupe DAFSA or within fifteen days
from the approval by the statutory auditor of Groupe DAFSA
of such 1996 financial statements without reserve as to
Groupe DAFSA turnover (whichever is earlier), PROVIDED THAT
the Buyer has not made, prior to such dates, any claim for
payment of a Post Closing Adjustment Amount or under
Section VIII of this Agreement. If the Buyer has made any
such claim prior to such payment dates, the Hold Back
Amount shall only become due and payable upon final
determination of all amounts due and payable to the Buyer
under all such claims. The Buyer shall have the right to
set off, at any time, against the Hold Back Amount any
amount payable to the Buyer by the Seller under this
Agreement, including any Post-Closing Adjustment Amount and
any amount payable under Section VIII hereunder;
- Notwithstanding the provisions of the preceding paragraph, the
amount payable by the Buyer to the Seller pursuant to the Hold
Back Amount will be adjusted on the basis of Groupe DAFSA's
turnover ("chiffre d'affaires") as reported in Groupe DAFSA
financial statements for the year ending December 31, 1996,
approved without reserve as to Groupe DAFSA turnover by the
statutory auditors of Groupe DAFSA (hereafter "GROUPE DAFSA 1996
TURNOVER"), as follows:
- If Groupe DAFSA 1996 Turnover equals or exceeds sixty-one
million one hundred and thirty thousand Francs (FRF
61,130,000), the Hold Back Amount will be payable by the
Buyer to the Seller.
<PAGE> 13
- 9 -
- If Groupe DAFSA 1996 Turnover is between fifty eight
million Francs (FRF 58,000,000) and sixty- one million one
hundred and thirty thousand Francs (FRF 61,130,000), the
amount payable by the Buyer to the Seller on account of the
Hold Back Amount will be equal to the product of the Hold
Back Amount times a fraction, the numerator of which is
Groupe DAFSA 1996 Turnover less fifty-eight million Francs
(FRF 58,000,000) and the denominator of which is three
million one hundred and thirty thousand Francs (FRF
3,130,000).
- If Groupe DAFSA 1996 Turnover is below fifty-eight million
Francs (FRF 58,000,000), the Hold Back Amount shall be
retained by the Buyer and no amount shall be due and
payable to the Seller on account of the Hold Back Amount.
2.3 Closing
-------
Subject to the terms and conditions hereof, the Closing of the
transaction contemplated by this Agreement will take place at the offices of
White & Case, 11 boulevard de la Madeleine, 75001 Paris, or at such other place
as shall be agreed upon by the parties hereto. The Closing shall be on a date
agreed upon by the parties, which date shall not be more than 10 days after the
satisfaction or waiver of the conditions set forth in Sections III and IV
hereof.
At the Closing, the Seller shall satisfy each of the following
obligations, each of which is material to the Buyer's agreement:
- deliver to the Buyer orders of transfer ("ordres de mouvements"),
in respect of all the Shares and share registers and shareholders'
accounts of Talisman and of the Subsidiaries;
- cause Talisman and the Subsidiaries to hold shareholders' meetings
or boards of directors' meetings, as the case may be, at which the
written resignation of all directors or statutory managers
("dirigeants sociaux"), except such directors or statutory
managers ("dirigeants sociaux") designated by the Buyer in
writing, shall be accepted and directors and statutory managers
("dirigeants sociaux") proposed by the Buyer shall be appointed;
- deliver to the Buyer the deed of transfer duly executed, whereby
Mr. Chaillou transfers to Talisman for consideration of one Franc
(FRF 1) his claim against Groupe DAFSA for a principal amount of
FRF
<PAGE> 14
- 10 -
600,000 resulting from a loan extended by Mr. Chaillou to Groupe
DAFSA;
- deliver to the Buyer the Guarantee, duly executed by Mr. Francois
Chaillou;
- deliver to the Buyer the TMI Guarantee, executed by a duly
authorized representative of Talisman Management International;
- deliver to the Buyer a written irrevocable waiver from TMI to be
repaid a portion of TMI's Loan to Talisman in an amount equal to
two million five hundred ninety five thousand (FRF 2,595,000),
reducing the remaining amount outstanding under such Loan to
eighteen million six hundred sixty six thousand one hundred and
fifty Francs (FRF 18,666,150);
- deliver to the Buyer written, irrevocable and unconditional
acknowledgement, executed by duly authorized representatives of
all creditors of Talisman and Groupe DAFSA under the Loans, except
La Compagnie Financiere Edmond de Rothschild Banque, whereby each
such creditor acknowledges that (subject to actual receipt of the
funds) all its claims under the relevant Loans, have been repaid
in full and that such creditor has no further right, claim or
action of any nature whatsoever, against Talisman and Groupe DAFSA
arising out or in connection with any such Loans;
- deliver to the Buyer a written, irrevocable waiver from Mr.
Olivier ROUX to be repaid a portion of the principal amount of his
Loan to Groupe DAFSA equal to one million two hundred ninety seven
thousand five hundred Francs (FRF 1,297,500), reducing the
remaining amount outstanding under such Loan to two hundred eighty
nine thousand five hundred and fifty Francs (FRF 289,550);
- deliver to the Buyer all originals of all promissory notes
executed in connection with the Loans;
- deliver to the Buyer a certificate from La Compagnie Financiere
Edmond de Rothschild Banque indicating the amount owed to it by
Groupe Dafsa as at June 17, 1996, such amount not to exceed the
amount indicated in ANNEX C as owing to La Compagnie Financiere
Edmond de Rothschild Banque ;
- deliver to the Buyer a legal opinion by Conyers, Dill & Pearman,
in form and substance satisfactory to the Buyer, confirming the
capacity, authority and power of (i) Mr. Malcom C. Furbert to
execute in the name and
<PAGE> 15
- 11 -
on behalf of TMI, the acknowledgement whereby TMI acknowledges
that all its claims under the relevant Loans have been repaid in
full and that it has no further rights, claim or action of any
nature whatsoever, against Talisman and Groupe DAFSA arising in
connection with any such Loans, and of (ii) Mr. Francois Chaillou
to execute in the name and on behalf of TMI the TMI Guarantee; and
confirming that the TMI Guarantee is valid and binding upon TMI.
- deliver to the Buyer any document or certificate of a notary
evidencing that Mr. Chaillou is married under the French legal
regime of "separation de biens";
- deliver to the Buyer the Tanguy Settlement Agreement; and
- sign and cause to be signed all such other documents, and take or
cause to be taken all such other action as the Buyer shall
reasonably require in order to transfer to the Buyer all right,
title and interest of the Seller in all the Shares.
At the Closing, the Buyer shall satisfy each of the following
obligations, each of which is material to the Seller's agreement:
- pay the Closing Amount by bank checks;
- extend to Talisman and to Groupe DAFSA financings of an aggregate
principal amount equal to the Loan Amount and cause Talisman and
Groupe DAFSA to repay at Closing the Loans in accordance with the
provisions of ANNEX D hereto including the footnotes thereto and
the Seller's instructions;
- extend to Talisman the necessary financing to repay at Closing an
amount equal to seventy five percent (75%) of the principal amount
of the Bridge Loan; and
- deliver to Groupe DAFSA the Primark Letter.
At the Closing, the Buyer and the Seller shall also deliver any
documents or instruments of assignment, conveyance and transfer, and any other
documents which are necessary to satisfy the obligations of the Buyer or the
Seller, as the case may be pursuant to this Agreement. At the Closing, the
Seller and the Buyer shall take any additional action which is necessary to
satisfy their respective obligations hereunder.
<PAGE> 16
- 12 -
2.4 Consolidated Financial Statements and Closing Statement
-------------------------------------------------------
As soon as practical and, in any event, not later than sixty (60) days
after the Transfer Date, the Buyer and/or its auditors shall prepare and deliver
to the Seller (i) the Consolidated Financial Statements as at April 30, 1996 and
as at the Transfer Date, respectively, and (ii) a statement ("CLOSING
STATEMENT") setting forth (A) the amount of the Net Equity as at April 30, 1996
and as at the Transfer Date, respectively, and (B) the resulting Post-Closing
Adjustment Amount, if any, determined in accordance with Section 2.6(b) hereof,
together with any appropriate supporting documentation and related work papers.
During such sixty-(60-) day period, the Buyer will give reasonable access or
will cause to be given reasonable access to the Seller's auditors, to the
accounting documents of Talisman and the Subsidiaries relating to the
preparation of the Consolidated Financial Statements. The Consolidated Financial
Statements and the Closing Statement shall be prepared on a basis consistent
with the accounting policies and practices in force in France, applied on a
consistent basis with those used for the years ended December 31, 1994 and
December 31, 1995 and the periods ending on April 30, 1996 and on the Transfer
Date; in addition, the consolidation principles will be in accordance with the
law of January 3, 1985 on consolidated financial statements and with the related
decrees of application (hereafter together the "ACCOUNTING PRINCIPLES"). For the
avoidance of doubt, it is expressly understood that (i) the Consolidated
Financial Statements and Closing Statement (A) will be prepared on the sole
basis of the Accounting Principles without any interpretation thereof by
reference to any other past accounting policies or practices of Talisman or the
Subsidiaries, and (B) shall neither reflect nor take into consideration any
action to occur on the Transfer Date, including any repayment of the Loans to
occur on the Transfer Date, as set forth in Section 2.3 above and any waiver of
any amount of principal or interest under any Loan or portion thereof or under
any financing granted by the Seller, TMI or any Affiliate thereof to Talisman or
the Subsidiaries occurring on or after April 30, 1996 and that (ii) provisions
or reserves to be made therein with respect to any matters shall remain
unaffected by the fact that any such matter is covered by any indemnification
(including specific indemnification) under Section 8.2 hereof.
2.5 Disputes Regarding Consolidated Financial Statements and Closing
----------------------------------------------------------------
Statement.
---------
(a) The Seller shall have thirty (30) days after the delivery to the
Seller of the Consolidated Financial Statements and the Closing Statement in
which to review such documents. Unless the Seller notifies the Buyer in writing
within such thirty (30) day period of any good faith objection to the
Consolidated Financial Statements and the Closing Statement, specifying in
reasonable detail the items and amounts subject to such objection, the
Consolidated Financial Statements and the
<PAGE> 17
- 13 -
Closing Statement (including the Post-Closing Adjustment Amount(s), if any,
shown thereon) shall be conclusive and binding on the Seller. If within such
thirty-day period the Seller notifies the Buyer in writing of any such
objection, then the Buyer and the Seller shall use reasonable efforts for
forty-five (45) days after the delivery to the Buyer of the notice of the Seller
setting forth such objections to resolve in good faith their differences and
agree upon any adjustments to the Consolidated Financial Statements and the
Closing Statement (including any Post-Closing Adjustment Amount shown thereon).
Any disputes which are not resolved by mutual agreement of the Buyer and the
Seller within such 45-day period shall be submitted for resolution to Arthur
Andersen, Paris Office, or, if Arthur Andersen, Paris Office shall not accept
such appointment, to another internationally recognized independent accounting
firm mutually acceptable to the Seller and the Buyer. In the event the Seller
and the Buyer shall not agree on such other internationally recognized
independent accounting firm within ten (10) days from Arthur Andersen, Paris
Office's refusal, then such independent accounting firm will be finally
appointed by the President of the Paris Commercial Court upon an ex-parte
request of the most diligent party (any such internationally recognized
independent accounting firm, whether appointed by the parties to this Agreement
or by the President of the Paris Commercial Court being hereinafter referred to
as the "INDEPENDENT ACCOUNTING FIRM").
The Seller and the Buyer shall instruct the Independent Accounting Firm
to limit its examination to the remaining items in dispute, to the exclusion of
all other matters, on the sole basis of the Accounting Principles and to use its
best efforts to make its determination thereon within thirty (30) days after its
appointment. The resolution of any such items by the Independent Accounting Firm
shall be made in writing and delivered by the Independent Accounting Firm to the
Buyer and the Seller as promptly as practicable and shall be final, conclusive
and binding upon the Seller and the Buyer. Fees and expenses of the Independent
Accounting Firm shall be shared equally between the Seller, on the one hand, and
the Buyer, on the other hand.
(b) The Consolidated Financial Statements and the Closing Statement
(i) to which the Seller does not object as provided in Section 2.5(a) hereof,
(ii) to which the Seller and the Buyer agree, or (iii) which is otherwise
conclusively determined pursuant to Section 2.5(a) hereof (such final form of
the Consolidated Financial Statements and the Closing Statement being referred
to herein as the "FINAL CONSOLIDATED FINANCIAL STATEMENTS" and the "FINAL
CLOSING STATEMENT", respectively) shall determine the Post-Closing Adjustment
Amount.
<PAGE> 18
- 14 -
2.6 Determination of any Post-Closing Adjustment Amount.
---------------------------------------------------
(a) The Net Equity, as at April 30, 1996, shall be determined from the
Final Consolidated Financial Statements as at April 30, 1996 and the Final
Closing Statement (hereafter the "APRIL 30 NET EQUITY");
(b) The Net Equity, as at the Transfer Date, shall be determined from
the Final Consolidated Financial Statements as at the Transfer Date and the
Final Closing Statement (hereafter the "TRANSFER DATE NET EQUITY");
(c) The Purchase Price shall be adjusted downwards or upwards, on a
Franc for Franc basis, by an amount equal to the difference between the April 30
Net Equity and the Transfer Date Net Equity (the "POST-CLOSING ADJUSTMENT
AMOUNT").
- If the Transfer Date Net Equity is below the April 30 Net Equity,
the Post Closing Adjustment Amount shall be paid in Francs by the
Seller to the Buyer, within five (5) days after agreement or
determination (pursuant to Section 2.5 of this Agreement) of the
Final Consolidated Financial Statements. Such payment shall be set
off first against the Retention Amount and second against the Hold
Back Amount. Any remaining amount due under the Post Closing
Adjustment Amount shall be paid directly by the Seller to the
Buyer by official bank check at the registered office of the
Buyer.
- If the Transfer Date Net Equity is above the April 30 Net Equity,
the Post Closing Adjustment Amount shall be paid in Francs by the
Buyer to the Seller within five (5) days after agreement (or
determined pursuant to Section 2.5 of this Agreement) of the Final
Consolidated Financial Statements.
Notwithstanding the foregoing, no payment shall be made by the
Seller to the Buyer or by the Buyer to the Seller under this Section 2.6 if the
Post Closing Adjustment Amount is less than twenty five thousand U.S. Dollars
(USD 25,000) times the Exchange Rate.
2.7 Merger
------
As soon as practicable following the Transfer Date, the Buyer will be
merged under its sole responsibility into Talisman with Talisman as the
surviving company. The Seller agrees to assist the Buyer, until the Transfer
Date, to do whatever is necessary to achieve the merger.
<PAGE> 19
- 15 -
SECTION III - CONDITIONS OF THE PURCHASE BY THE BUYER OF THE SHARES
- ----------- -----------------------------------------------------
The Parties agree that the Buyer's obligation to acquire the
Shares shall be subject to the satisfaction, or waiver by the Buyer, of the
following conditions on or before the Transfer Date, the satisfaction of such
conditions having no retroactive effect:
3.1 Representations and Warranties
------------------------------
The representations and warranties made herein by the Seller in
Section V hereof shall have been true and correct as of the date hereof, and
shall be true and correct as of the Transfer Date (except as to such
representations and warranties which by their terms apply to an earlier date).
There shall not be, as of the Transfer Date, any event or fact which might alter
or modify such representations and warranties.
3.2 Certificate of the Sellers
--------------------------
The Sellers shall have delivered to the Buyer a certificate, dated
the Transfer Date and signed by the Seller, certifying the fulfillment of the
conditions specified in Sections 3.1 and 3.3 to 3.10 hereof.
3.3 Consents, Authorizations
------------------------
All filings, orders, consents, permits, authorizations, approvals
and waivers of governmental and regulatory authorities required for the
consummation by the parties of the transactions contemplated hereby and by any
other agreement contemplated hereunder and all filings, registrations and
notifications to or with all Persons, required with respect to the consummation
by the parties hereto of such transactions, shall have been obtained or given.
It is agreed by both parties that the filing with the French Ministry of Finance
will be effected by the Buyer upon the signing of this Agreement by the Buyer
and does not constitute a condition precedent to the purchase by the Buyer of
the Shares.
3.4 Corporate Action
----------------
All corporate action, if any, necessary to authorize the execution
of this Agreement by the Seller and the performance of its obligations hereunder
(including the approval of the Buyer as shareholder of Talisman by the Board of
Directors of Talisman) shall have been duly and validly taken by the Seller,
Talisman and the Subsidiaries.
3.5 No Action or Proceeding
-----------------------
There shall be no action or proceeding commenced or, to the
knowledge of the parties, threatened before any legal or administrative tribunal
or by any administrative organization,
<PAGE> 20
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and no judgement, order or injunction shall have been rendered by any such
tribunal or organization for the purpose of restraining or prohibiting the
transactions contemplated in this Agreement.
3.6 Performance of the Terms of this Agreement
------------------------------------------
The Seller shall have complied with all its covenants required to
be performed before or on the Transfer Date under this Agreement, including but
not limited to the Seller's covenant set forth in Section VII.
3.7 Material Change
---------------
As of the Transfer Date, no material adverse change shall have
occurred in the operating results, financial condition, business, properties,
assets or liabilities of any of the Companies or Subsidiaries since the date of
the Financial Statements.
3.8 Guarantee
---------
The Seller shall have caused Mr. Francois Chaillou to execute the
Guarantee, TMI to execute the TMI Guarantee and shall have delivered the
Guarantee and the TMI Guarantee to the Buyer.
3.9 Loans
-----
The Seller shall have delivered to the Buyer certificates delivered by
the statutory auditors of Talisman and Groupe DAFSA confirming that ANNEX D
listing all the Loans, as at the date hereof, constitutes an accurate and
complete listing of all the liabilities for borrowed money of Talisman, Groupe
DAFSA and the Subsidiaries except for (i) the Bridge Loan, (ii) any financing
granted by Societe Generale to Groupe Dafsa pursuant to a general Dailly law
assignment of receivables dated as of April 20, 1994 and (iii) any financing
granted by Societe Generale to Dafsa Edition pursuant to a factoring agreement
dated as of December 11, 1995.
3.10 Annual Meetings
---------------
The audited balance sheets, statements of income and annexes thereto of
Talisman and each of the Subsidiaries shall have been approved without
reservations or qualifications by their shareholders or partners at duly
convened ordinary shareholders or partners meetings.
SECTION IV - CONDITIONS OF THE SALE BY THE SELLER OF THE SHARES
- ---------- --------------------------------------------------
The Parties agree that the Seller's obligation to sell the Shares
to the Buyer shall be subject to the satisfaction, or
<PAGE> 21
- 17 -
waiver by the Seller, of the following conditions on or before the Transfer
Date, the satisfaction of such conditions having no retroactive effect:
4.1 Representations and Warranties
------------------------------
The representations and warranties made herein by the Buyer in
Section VI of this Agreement shall have been true and correct as of the date
hereof, and shall be true and correct as of the Transfer Date (except as to such
representations and warranties which by their terms apply to an earlier date).
There shall not be, as of the Transfer Date, any event or fact which might alter
or modify in any respect such representations and warranties.
4.2 Certificate of the Buyer
------------------------
The Buyer shall have delivered to the Seller a certificate, dated
as of the Transfer Date and signed by the Buyer, certifying the fulfillment of
the conditions specified in Section 4.1 hereof.
4.3 Consents, Authorizations
------------------------
All filings, orders, consents, permits, authorizations, approvals
and waivers of governmental and regulatory authorities required for the
consummation of the transactions contemplated hereby or any other agreements
contemplated hereunder and all filings, registrations and notifications to or
with all Persons required with respect to the consummation by the parties hereto
of the transactions contemplated hereby, shall have been obtained or given. It
is agreed by both parties that the filing with the French Ministry of Finance
will be effected by the Buyer upon the signing of this Agreement by the Buyer
and does not constitute a condition precedent to the sale by the Seller of the
Shares.
4.4 Corporate Action
----------------
All corporate action, if any, necessary to authorize the execution
and delivery by the Buyer of this Agreement and the performance by the Buyer of
its obligations hereunder shall have been duly and validly taken by the Buyer.
4.5 No Action or Proceeding
-----------------------
There shall be no action or proceeding commenced or, to the
knowledge of the parties, threatened before any legal or administrative tribunal
or by any administrative organization, and no judgement, order or injunction
shall have been rendered by any such tribunal or organization for the purpose of
restraining or prohibiting the transactions contemplated in this Agreement.
<PAGE> 22
- 18 -
SECTION V - REPRESENTATIONS AND WARRANTIES OF THE SELLER
- --------- --------------------------------------------
Subject to the exceptions and disclosures made in the Schedules
hereto, the Seller hereby represents and warrants to the Buyer on the date
hereof and, unless otherwise specifically provided for, on the Transfer Date, as
follows: Each such representation and warranty is subject to the disclosures set
forth in the Schedule or portion thereof, if any, specifically referenced in
such representation and warranty, such schedule being attached to this Agreement
and established as at the date of signature of this Agreement and shall not be
modified in any manner whatsoever after the date of signature of this Agreement.
Unless otherwise specifically indicated, the representations and warranties made
by the Seller hereunder are not subject to any knowledge qualification.
5.1 Incorporation and Corporate Capital of Talisman
-----------------------------------------------
(a) Talisman is a "societe anonyme" whose registered office is located
at 11 rue Robert de Flers, 75015 Paris, registered with the Registry of Commerce
and Companies of Paris, under number B 352 936 876. Talisman is duly
incorporated and validly existing under the laws of France and has the full
power and authority to own its assets and conduct its business as now being
conducted.
(b) Talisman has a capital of FRF 250,000 consisting of 2,500 shares
with a par value of FRF 100 each. The Shares are fully paid up, validly issued
and not subject to any calls, or assessments and may be transferred to the Buyer
free from any preemptive rights, or rights of first refusal or Encumbrances.
Talisman has not issued, and has not made any commitment providing for
the issuance of, any shares (with or without voting rights), any securities
convertible into, exchangeable for, or giving rights to shares of capital stock
or any other securities of Talisman. On the Transfer Date, the Seller will own
all the Shares free and clear from any Encumbrances. The Shares have all the
same rights and there are no voting agreement or any other agreements or
understandings of any kind relating to shareholders' rights to the Shares except
for the provisions of the by-laws of Talisman and the provisions of this
Agreement and its annexes. The right to receive dividends on any of the Shares
has not been transferred, assigned or sold and is not subject to any
Encumbrance.
(c) On the Transfer Date, Talisman will own one hundred percent of the
shares of Groupe DAFSA, all such shares being fully paid up, validly issued and
not subject to any calls, assessments, or any Encumbrance.
<PAGE> 23
- 19 -
5.2 Incorporation and Corporate Capital of Groupe DAFSA
---------------------------------------------------
(a) Groupe DAFSA is a "societe anonyme" whose registered office is
located at 11 rue Robert de Flers, 75015 Paris, registered with the Registry of
Commerce and Companies of Paris, under the number B 388 299 893. Groupe DAFSA is
duly incorporated and validly existing under the laws of France and has the full
power and authority to own its assets and conduct its business as now being
conducted.
(b) Groupe DAFSA has a capital of FRF 2,810,000, consisting of 281,000
shares with a par value of FRF 10 each, all such shares being fully paid up,
validly issued and not subject to any calls or assessments or Encumbrances.
(c) Groupe DAFSA has voted the issuance of the Subscription Rights in
favor of Talisman. Talisman has never paid the purchase price for any such
Subscription Rights and on the Transfer Date, no Subscription Right has been
purchased and no person has any rights thereto, or any claim against Talisman
and/or its Subsidiaries in connection therewith. All such Subscription Rights
are on the Transfer Date null and void. Except for the Subscription Rights,
Groupe DAFSA has not issued, and has not made any commitments providing for the
issuance of, any shares (with or without voting rights), any securities
convertible into, exchangeable for, or giving rights to shares of capital stock
or any other securities of Groupe DAFSA or of Talisman. The shares of Groupe
DAFSA all have the same rights and there are no voting agreements or any other
agreements or understandings of any kind relating to shareholders' rights to
such shares except for the provisions of the By-laws of Groupe DAFSA and the
provisions of this Agreement and its annexes. The right to receive dividends non
any shares of Groupe DAFSA has not been transferred, assigned, mortgaged or sold
in any manner.
5.3 Subsidiaries
------------
(a) SCHEDULE 5.3(a) indicates the names, jurisdictions of
incorporation and corporate capital and managers of each of the Subsidiaries as
well as the identity and percentages held by all of its shareholders or
partners. All the shares and equity interests in each of the Subsidiaries are
held free and clear of any Encumbrances. Talisman is not involved in any manner
in the management, including on a DE FACTO basis, of any Person other than the
Subsidiaries, and does not have any liability, contingent or otherwise in
connection with any past or current interest in any Person other than the
Subsidiaries.
(b) All the shares or equity interests of each of the Subsidiaries are
fully paid up and validly issued and are not subject to any calls, assessments
or Encumbrances. Except as set forth in this Agreement, none of the Subsidiaries
has issued, or has made any commitment providing for the issuance of any new
shares (with or without voting rights), any securities
<PAGE> 24
- 20 -
convertible into, exchangeable for, or giving rights to shares of capital stock
or any other securities. SCHEDULE 5.3(b) lists all commitments of Talisman or
the Subsidiaries to acquire shares or equity interests in the Subsidiaries.
(c) Each of the Subsidiaries:
(i) is duly organized and validly existing under the laws of its
jurisdiction of incorporation;
(ii) has the full power and authority to own its assets and
conduct its business as presently conducted;
(iii) except as set forth in SCHEDULE 5.3(c), does not own any
share of or equity interest in any other Person, and does not have
any liability, contingent or otherwise in connection with any past
or current interest in any Person; and
(iv) has neither taken part in the management of any other
Person, including, on a DE FACTO basis, nor, except as set forth
in SCHEDULE 5.12(b) granted any warranties, guarantees, comfort
letters or other commitments in favor of any third party.
(d) With respect to any Subsidiary having the form of a "societe en
participation", the Seller represents and warrants that (i) all commitments of
any such Subsidiary, whether actual or contingent, are listed in SCHEDULE
5.3(d), (ii) neither Talisman nor any of its Subsidiaries has disclosed to any
third parties its participation in any such "societes en participation", or has
acted as manager of any such "societes en participation" and (iii) the existence
of any such "societes en participation" has not been disclosed to any third
parties, except to the French tax administration.
5.4 Compliance with Laws and Obligations
------------------------------------
The business of Talisman and of each of the Subsidiaries is being
conducted in compliance with its by-laws and other governing documents and in
compliance with all applicable laws, orders, rules, and decrees and all
judgments, injunctions or other orders of any court, any arbitral tribunal or
government authority or subdivision thereof. Talisman and each of the
Subsidiaries has all licenses, permits or authorizations which are required to
conduct their business as it is presently conducted. Each such licenses, permits
and authorizations is in full force and effect and Talisman and each of the
Subsidiaries conducts its business in compliance with all such licenses, permits
and authorizations.
Talisman and each of the Subsidiaries has performed all of its
obligations under all of the contracts, agreements,
<PAGE> 25
-21 -
permits, or undertakings by which it is bound without any material default.
5.5 Corporate and Business Records
------------------------------
The copies of the by-laws and other governing documents, minute
books and shareholders' records of Talisman and of each of the Subsidiaries
previously delivered to the Buyer and listed in SCHEDULE 5.5 constitute true and
complete copies of such by-laws, governing documents, minute books and
shareholder records and include all amendments to such by-laws and governing
documents and all minutes of all meetings of the shareholders and directors
and/or managers of Talisman and each of the Subsidiaries from the date of
incorporation of the relevant entity up to and including the date hereof. On the
Transfer Date, except as expressly provided in this Agreement, no change in such
by-laws or other governing document will have occurred. Talisman and the
Subsidiaries hold all statutory books required by applicable laws and
regulations. All statutory books including all accounting ledgers, financial
documents and tax returns are held in an organized fashion, and in accordance
with applicable laws and regulations, at the respective registered office of
Talisman and the Subsidiaries. All customer records or lists, market
information, marketing or business plans or any other similar business records,
documents or material are held in organized fashion at the respective registered
office of Talisman and the Subsidiaries.
5.6 Authorization; Valid and Binding Agreement
------------------------------------------
The execution and performance of this Agreement and all other
agreements, documents and instruments to be executed in accordance with this
Agreement has been duly authorized by all necessary and proper corporate actions
of the Seller. Subject to the provisions of Section 5.7 hereof, no further
proceeding, action or consent on the part of the Seller, Talisman or the
Subsidiaries or any other Person, is necessary to authorize this Agreement or
the other agreements, documents or instruments executed by the Seller pursuant
to this Agreement or in order to consummate the transactions contemplated hereby
or thereby. This Agreement and all other agreements, documents and instruments
to be executed in accordance with this Agreement constitute, or once executed
will constitute, legal, valid and binding obligations of the Seller enforceable
in accordance with their terms.
5.7 Government Authorizations
-------------------------
Except for the filing with the French Treasury Department of the
French Ministry of Economy and Finance, no consent, approval or authorization of
any governmental or regulatory authority, whether national or local, or any
filing with any such authority, is required in connection with the execution and
performance by the Seller of this Agreement or any other agreement contemplated
hereunder.
<PAGE> 26
- 22 -
5.8 Other Agreements - Laws
-----------------------
Neither the execution of this Agreement nor the performance nor
the consummation of the transactions contemplated by this Agreement shall cause
any violation of, default under, (i) any provision of the by-laws or other
governing document of the Seller, Talisman or any of the Subsidiaries, (ii) any
decision, orders, judgment or arbitration award binding the Seller, Talisman or
any of the Subsidiaries, (iii) any contract, agreement or instrument to which
the Seller, Talisman or any of the Subsidiaries is a party, or (iv) any law,
statute, ordinance, rule or order.
5.9 No Finders
----------
The Seller has not used the services of, or entered into any
agreement with, a broker, agent or finder in connection with this Agreement or
the transactions contemplated hereby which could result in a payment obligation
on the part of Talisman, any of the Subsidiaries or the Buyer.
FINANCIAL REPRESENTATIONS AND WARRANTIES
5.10 Financial Statements
--------------------
The Seller has delivered to the Buyer (i) the audited balance
sheets, statements of income and annexes thereto of Talisman and each of the
Subsidiaries as of December 31, 1995, accompanied by the statutory auditors and
directors reports, and (ii) the unaudited balance sheets, statements of income
and annexes thereto of Talisman and each of the Subsidiaries for the first four
months of 1996 (all of the statements referred to in this paragraph to be
collectively referred to as the "FINANCIAL STATEMENTS"). The Financial
Statements, together with the notes thereto, and the description of the
accounting principles applied by Talisman and the Subsidiaries which are
attached hereto as SCHEDULE 5-10, are correct and complete and fairly represent
the financial position of Talisman and the Subsidiaries as of such dates and the
results of their operations for such periods then ended. The Financial
Statements have been prepared in accordance with the generally accepted
accounting principles in force in France applied on a consistent basis during
the periods covered by the Financial Statements, except as otherwise indicated
therein. Since the Financial Statements, no change or commitments to such
effect, in any method of accounting or accounting practice and no reevaluation
of any fixed asset or goodwill has occurred or been made.
<PAGE> 27
- 23 -
5.11 Absence of Significant Changes
------------------------------
Except as set forth in SCHEDULE 5-11 or otherwise explicitly set
forth herein or in the Annexes or Schedules hereto, since December 31, 1995
until the date hereof:
(a) there has been no issuance of shares of stock of or equity
interest in Talisman or in any Subsidiary and no contribution to the capital of
Talisman or of any Subsidiary;
(b) there has not been (i) any declaration or payment of dividend or
other distribution of capital or income to shareholders in respect of shares of,
or equity interest in, Talisman or any Subsidiary or (ii) any commitment to
issue or sell any shares or equity interest in Talisman or any Subsidiary or
(iii) any commitment to grant any stock options or to redeem, purchase or
otherwise acquire any shares of, or equity interest in, Talisman or any
Subsidiary;
(c) neither Talisman nor any of the Subsidiaries has engaged in any
activity which has had or might reasonably be expected to have a material
adverse effect on its financial condition, results of operations, business,
property or assets;
(d) there has not been any sale or disposition of any property or
assets of Talisman or of any of the Subsidiaries; any cancellation of
receivables, debts or claims of Talisman or of any Subsidiary; any sale,
transfer or license of know-how, trade secrets, intellectual property rights or
any other intangible assets; any lease of property by Talisman or any
Subsidiary; in each case other than in the ordinary course of business, or any
mortgage, pledge or encumbrance of any property or assets of Talisman or any of
the Subsidiaries;
(e) there has not been any amendment of any Material Contract;
(f) neither Talisman nor any of the Subsidiaries has (i) issued any
guarantee relating to any indebtedness for borrowed money or (ii) incurred,
other than in the ordinary course of business, any other indebtedness;
(g) there has not been any damage, destruction or loss (whether or not
covered by insurance) adversely affecting the assets, properties or business of
Talisman or of any Subsidiary other than normal wear and tear;
(h) there has not been any labor dispute adversely affecting Talisman
or any of the Subsidiaries;
(i) neither Talisman nor any of the Subsidiaries has paid or committed
itself to pay to, or for the benefit of, any of its directors, managers,
officers or employees any salary, wages or
<PAGE> 28
- 24 -
other compensation, other than at rates in effect on December 31, 1995;
(j) there has not been any payment or contribution or obligation
incurred by Talisman or any Subsidiary pursuant to any plan or contract
providing for bonuses, pensions, deferred compensation, retirement payment,
profit sharing or the like except for any payment or contribution incurred
pursuant to any such plan or contract specified in Section 5.21;
(k) neither Talisman nor any of the Subsidiaries has canceled or
waived any claims or rights of substantial value;
(1) neither Talisman nor any of the Subsidiaries has otherwise
conducted its business or entered into any transaction, except in the usual and
ordinary manner and in the ordinary course of business;
(m) there has been no material increase in the lease rates paid by
either Talisman or any of the Subsidiaries in respect of any real property
leased by Talisman or any such Subsidiary otherwise than in accordance with the
terms of the relevant lease;
(n) neither Talisman nor any of the Subsidiaries has been the subject
of any judicial or liquidation proceeding except with respect to the "societe en
participation" Dafsa-Quest which is being amicably liquidated by its partners;
and
(o) there has been no material adverse change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations of Talisman or any of the Subsidiaries.
5.12 No Undisclosed Liabilities
--------------------------
(a) There is no material liability of Talisman or any Subsidiary with
the exception of the liabilities (i) shown in the Financial Statements as of
December 31, 1995, (ii) arising in the ordinary course of business since
December 31, 1995, or (iii) disclosed in this Agreement or in any Annex or
Schedule thereto.
(b) Except as set forth in SCHEDULE 5.12(b), there are no off-balance
sheet liabilities ("engagements hors bilan"), as such term is defined under
French generally accepted accounting principles and which pursuant thereto
should be reflected in the notes and annexes to the notes to the financial
statements of Talisman or of the Subsidiaries.
(c) Neither Talisman nor any of the Subsidiaries is a party to any
"fronting transaction" ("operation de portage"), swap agreement, option
agreement, any other financial forward agreement or has purchased or held any
derivative or future instrument.
<PAGE> 29
- 25 -
5.13 Taxes - Labor Contributions
---------------------------
(a) Talisman and each of the Subsidiaries has (i) timely filed or
caused to be filed (either independently or on a consolidated or groupe basis)
all tax returns, reports, schedules, declarations, and tax-related documents
(including any income tax returns of any group of which it is or was a member)
and any return, report, declaration or other document to be filed in connection
with social security, labor regulations, social regulations of any nature
whatsoever, and any return to be filed in connection with exchange control
regulations (collectively, "TAX RETURNS") required to be filed until the
Transfer Date with any jurisdiction to which it is or has been subject, and has
timely paid or caused to be paid in full or has established adequate reserves
for the payments of all taxes which are due and payable to any authorities for
such periods, (ii) fully paid or accrued on its respective books an amount
sufficient to pay all taxes in respect of the period from December 31, 1995 up
to and including the Transfer Date which are not yet due and payable, (iii) made
or caused to be made all withholdings of taxes required to be made, and such
withholdings have either been paid to the appropriate government agency or set
aside in accounts for such purpose, and (iv) otherwise satisfied, all legal
requirements applicable with respect to all aforementioned obligations to all
jurisdictions. All Tax Returns filed or caused to be filed by or in respect of
Talisman or any Subsidiary either individually or on a consolidated or group
basis correctly reflect in all material respects the income, expenses,
deductions, allowances, credits, loss carryovers, and taxes due in respect of
Talisman and each Subsidiary, and are otherwise accurate and complete in all
material respects. Neither Talisman nor any of the Subsidiaries has any
liability whether directly, as a transferee, or as a member of a group having
another company as its parent for taxes for any period up to and including the
Transfer Date in excess of the amounts paid, accrued or reserved on the books
and records of Talisman or of the relevant Subsidiary.
(b) Talisman is a party to a tax group, set up on December 22, 1993 as
set forth in SCHEDULE 5.13 (b).
(c) Except as set forth in SCHEDULE 5.13 (c), there is no actual or
proposed material additional tax assessment, reduction in tax loss carry forward
or disallowance of any exemption, deduction or recovery made with respect to
Talisman or any Subsidiary for any fiscal year for which there has not been an
accrual in the Financial Statements of Talisman or any such Subsidiary.
(d) Except as set forth in SCHEDULE 5.13(d), Talisman and the
Subsidiaries have not executed or filed with any domestic or foreign taxing or
social security or labor authority any agreement extending the period of
assessment or collection of any taxes.
<PAGE> 30
- 26 -
(e) Talisman or any of the Subsidiaries has not recovered taxes to
which it was not entitled.
(f) A tax group has been validly set up on December 22, 1992, among
Talisman and Groupe DAFSA; such tax group is in effect as at the Transfer Date.
SCHEDULE 5.13(f) sets forth all the tax losses of Talisman, as holding company
of the tax group, and the periods during which any such tax losses may be
carried forward under currently applicable laws and regulations.
(g) For purposes of this Section 5.13, "tax" and "taxes" shall include
all income, gross receipts, franchise, excise, transfer, severance, value added,
sales, use, wage, payroll, workmen's compensation, employment, occupation, and
real and personal property taxes and social security, unemployment and other
social contribution of any nature whatsoever; taxes measured by or imposed on
capital or turnover; levies, imposts, duties, custom duties, licenses, and
legislation fees; other taxes imposed by any state, municipal, local or other
governmental authority or agency, including assessments in the nature of taxes;
and including, without limitation, interest, penalties, fines, assessments and
deficiencies relating to any tax or taxes.
(h) It is expressly agreed by the parties to this Agreement that no
disclosure made by the Seller in this Agreement, including in SCHEDULES 5.13
(b), (c), (d) and (f) attached hereto, shall in any way release the Seller of
its obligations to indemnify the Buyer under Section VIII hereof in connection
with any fact, action, omission, any tax assessment, reduction in tax loss carry
forward (to the extent that, with respect to tax loss carry forward of Talisman,
the aggregate amount of the remaining tax loss carry forward is below USD
5,500,000 times the Exchange Rate), and any disallowance of any exemption
referred to in this Section 5.13.
5.14 Litigation
----------
SCHEDULE 5-14 sets forth a complete list of all suits,
arbitrations or proceedings (Court proceedings or other proceedings, including
administrative proceedings or governmental investigations) pending or, to the
best knowledge of the Seller, after having completed all due inquiry, threatened
against (i) the Seller with respect to the transactions contemplated hereunder
or (ii) Talisman or any Subsidiary. To the best knowledge of the Seller after
having completed all due inquiry, no event has occurred or exists which could
give rise to any such action, proceeding or investigation. It is expressly
agreed by the parties to this Agreement that no disclosure made by the Seller in
this Agreement, including in SCHEDULE 5.14 attached hereto, shall in any way
release the Seller from its obligation to indemnify the Buyer under Section VIII
hereunder in connection with any suit, arbitration or proceedings referred to in
this Section 5.14.
<PAGE> 31
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5.15 Inventories
-----------
All inventories, raw materials, work in process, parts and
finished goods (hereinafter referred to as "INVENTORIES") of Talisman and the
Subsidiaries shown on their balance sheet at December 31, 1995 and on the books
of Talisman and the Subsidiaries at the date hereof and on the Transfer Date,
consist of usable items which, subject to the provisions of the following
sentence, as to quality and quantity, are saleable in the ordinary course of
business and represent all of the inventories of Talisman and the Subsidiaries
on such dates. The value of obsolete materials and materials below standard
quality has been written down to realizable market value or adequate reserves
have been provided therefore, in accordance [with the accounting principles
described in SCHEDULE 5.10]. Inventories are in a normal and adequate quantity
with regard to the business of Talisman and Subsidiaries and to past levels of
inventories of Talisman and Subsidiaries for a similar level of activity, as
such levels of inventories are set forth in the Financial Statements and
financial statements of such companies for fiscal years prior to 1995.
BUSINESS REPRESENTATIONS AND WARRANTIES
5.16 Assets
------
(a) Owned Land and Buildings
Talisman and each Subsidiary does not own any real property,
building or other structure or fixture permanently attached thereon or thereto,
except the computer network in so far as it can be characterized as such fixture
permanently attached thereon.
(b) Machinery and Equipment
Talisman and each Subsidiary has good and marketable title to or
leases all machinery, equipments, vehicles, furniture and tools and any related
capitalized items and all tangible property material to the business of Talisman
and each such Subsidiary (all of the foregoing being hereinafter sometimes
collectively referred to as "TANGIBLE PROPERTY") necessary for the conduct of
its business. All such Tangible Property has been maintained in good repair,
subject to normal wear and tear, and is in satisfactory operating condition
without present need for repair or replacement outside the ordinary course of
business and is operated in conformity with all material applicable laws and
regulations. There is no default under any lease relating to any such leased
equipment.
<PAGE> 32
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5.17 Material Contracts
------------------
SCHEDULE 5-17 hereto includes a complete list as of the date
hereof of all Material Contracts pertaining to any of the Section 5.17 (a)
through (m), identifying:
(a) Any partnership, joint venture, shareholders' agreement or similar
agreement to which Talisman or any of the Subsidiaries is a party;
(b) Any contract or agreement under which Talisman or any of the
Subsidiaries makes or receives payments in excess of 100,000 Francs (or the
countervalue thereof in the relevant currency) during the current fiscal year;
(c) Any other contract or agreement entered into between Talisman or
any Subsidiary, on the one hand, and the Seller or any Affiliate of the Seller,
on the other hand;
(d) Any loan by or to Talisman or any of the Subsidiaries, credit or
overdraft facility, guarantee or other agreement with respect to indebtedness or
money borrowed for an amount in excess of ten thousand French Francs (FF 10,000)
or the countervalue thereof in the relevant currency or commitment relating to
the making of any loan, credit, overdraft facility or guarantee (other than
standard terms of payment of trade indebtedness incurred in the ordinary course
of business of Talisman or the Subsidiaries);
(e) Any written agreement to which Talisman or any of the Subsidiaries
is a party and which, as a direct result of the performance or consummation of
the transactions contemplated by this Agreement, may be terminated, accelerated
or subject to any other changes to the rights and obligations of Talisman or any
Subsidiary in accordance with its specific terms;
(f) Any contract or agreement containing a covenant by Talisman or any
of the Subsidiaries not to compete in any line of business or with any Person or
otherwise restricting the type of business which may be conducted by Talisman or
the Subsidiaries;
(g) Any secrecy, trade secrets, confidentiality or similar agreement
to which Talisman or any of the Subsidiaries is a party;
(h) Any collective bargaining or trade union agreement to which
Talisman or any of the Subsidiaries is a party or by which any of them is bound;
(i) Any material management service, consulting or any other similar
type contract to which Talisman or any Subsidiary is a party;
<PAGE> 33
- 29 -
(j) Any lease pursuant to which Talisman or any of the Subsidiaries
leases either real, personal property or intangible assets from or to third
parties and which involves annual rental payment in excess of FRF 100,000 or the
countervalue thereof in the relevant currency;
(k) Any financial lease, any sale/lease back transaction;
(1) Any agreement, contract or commitment not entered into in the
ordinary course of business to which Talisman or any Subsidiary is a party; and
(m) any contract or agreement with a customer or a supplier of
Talisman and/or the Subsidiaries.
(Such agreements, contracts, or understandings shall be
collectively referred to hereafter as the "MATERIAL CONTRACTS").
Except as otherwise provided for in SCHEDULE 5.17, each Material
Contract is in full force and effect and there is no default or event of default
or event, occurrence, condition or act (including the execution and consummation
of this Agreement) which, with the giving of notice, the lapse of time or the
happening of any other event or condition would become a default or event of
default thereunder or allow termination thereof. Neither Talisman nor any of the
Subsidiaries has violated any of the terms or conditions of any Material
Contract and to the best knowledge, information and belief of the Seller, after
having completed all due inquiry, all the covenants to be performed by any other
party thereto has been fully performed.
5.18 Leases
------
SCHEDULE 5-18 sets forth an accurate list (specifying the date,
duration and rental payments of the lease agreement, the nature of the assets or
premises leased and the name of the lessor and lessee) of:
(a) all leases under which Talisman or any of the Subsidiaries is a
lessee or a lessor of premises,
(b) all leases pursuant to which Talisman or any of the Subsidiaries
leases personal property, or intangible assets, from or to third parties and
which involve annual rental payments in excess of FRF 20,000 or the countervalue
thereof in the relevant currency.
All rents due pursuant to the leases mentioned in SCHEDULE 5-18
have been paid, except where being contested in good faith as set forth in
SCHEDULE 5-18. Neither Talisman nor any of the Subsidiaries (i) has violated any
of the material terms or conditions under any such lease, (ii) has taken any
action which could result, directly or indirectly, in an increase
<PAGE> 34
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of the applicable rent, and all the material covenants to be performed by any
other party under any such lease have been fully performed. In each case, the
lessee has been in peaceable possession of the rented property since the
commencement of the original term of such lease and is not in default
thereunder. In each case the premises and the use thereof comply in all material
respects with all laws and regulations applicable to the type of activity
carried on therein, including but not limited to, zoning, environment and
security.
All of the leases mentioned in (a) and (b) above are valid,
binding and enforceable against the parties thereto in accordance with their
terms, and are in full force and effect.
Talisman and each of the Subsidiaries has complied with all its
obligations as lessor or lessee under any lease which is terminated as of the
date hereof and has no liability, contingent or otherwise, in connection
therewith.
Except as set forth in Schedule 5.18, any deposit made by Talisman and
the Subsidiaries, as lessee, under any lease which is terminated as of the date
hereof has been fully repaid to Talisman and the Subsidiaries, or shall be fully
repaid to Talisman and the Subsidiaries within the time period set forth in the
relevant agreement between the lessee and the lessor, and no third party has any
right to any such deposit.
5.19 Insurance
---------
SCHEDULE 5-19 contains the list of material insurance policies
maintained by Talisman and each of the Subsidiaries with respect to their
businesses, properties, assets and employees, indicating their renewal dates.
Such policies are valid and will be in effect without further payment of any
premium until a date not earlier than December 31, 1996.
There has been no lapse or cancellation of coverage as a result of
any default of payment of any premium or otherwise with respect to such policies
covering the period extending up to the date mentioned in SCHEDULE 5-19 and no
notice of cancellation or termination has been received with respect to any such
policy.
Such policies, with respect to their amount and types of coverage,
are adequate to insure fully against risks to which Talisman and the
Subsidiaries and their properties and assets are exposed in the operation of
their respective business.
Since December 31, 1995, there has not been any material adverse
change in Talisman or any of the Subsidiaries relationships with its insurers or
in the premiums payable pursuant to such policies. None of the transactions
contemplated in this Agreement would permit the insurers to deny or avoid
coverage under such policies. The Seller, after having completed
<PAGE> 35
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due and careful inquiry, has no knowledge of any state of facts or of the
occurrence of any event that is reasonably likely to form the basis for any
material claim not fully covered by the policies referred to in SCHEDULE 5-19.
5.20 Labor matters
-------------
Except as set forth in SCHEDULE 5-20, there are no agreements or
arrangements with any present or former directors, managers (including any
"gerant", whether or not such gerant is an employee ("salarie")), employees,
salesmen, consultants or agents that are not in the ordinary course of business
of Talisman or any of the Subsidiaries. Except as set forth in Schedule 5-20,
there is no such director, manager, employee, salesman, consultant or agent:
(i) whose termination would require payment by Talisman or any
Subsidiary of an amount exceeding that provided by law or
by the applicable collective bargaining agreement;
(ii) who has an employment contract or other agreement entitling
him to an annual salary or other compensation in excess of
two hundred thousand French francs (FRF 200,000), or the
countervalue thereof in the relevant currency or whose
compensation or other benefits are based on the results of
Talisman or any Subsidiary;
(iii) who has the right to employment benefits or rights or
pension or other retirement benefits exceeding those
provided by law or the applicable collective bargaining
agreement; or
(iv) who owes Talisman or any Subsidiary any amount with regard
to outstanding loans or advances extended to such person.
Talisman and each of the Subsidiaries:
(w) is in compliance with all applicable laws, rules and
regulations relating to wages, hours, labor regulations
(including work conditions and safety regulations) and
collective bargaining agreements;
(x) has complied in all respects with its payment obligations
under any applicable program of workmen's compensation,
unemployment, redundancy, termination or social security or
indemnity insurance required by any law, the applicable
collective bargaining agreement, or any agreement set forth
in SCHEDULE 5-21;
<PAGE> 36
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(Y) has complied with the payment of and has withheld all
amounts required by applicable law or agreement to be
withheld from the wages or salaries of its employees,
managers or directors and is not liable for any arrears of
wages or any penalties for failure to comply with any of
the foregoing; and
(z) except as set forth in Schedule 5.14, has made proper
provisions in its accounts against any and all obligations
in relation to the past or present services or benefits of
any present or former director, manager, employee,
salesman, consultant or agent, and the aggregate of all
such provisions are indicated in the Financial Statements.
SCHEDULE 5-20 sets forth a list of the directors, managers,
employees, salesman, consultant or agent, employed by Talisman and each
Subsidiary and the employment agreement together with any other agreement
providing for any additional compensation of the three principal managers of
Talisman and each Subsidiary. Except as set forth in SCHEDULE 5-20, Talisman and
each Subsidiary has not at any time since January 1, 1993 had, nor, to the
knowledge of the Seller, is there now threatened, a strike, work stoppage, work
slowdown, or other labor trouble that had or may have a material adverse effect
on the assets, properties, business, operations or condition (financial or
otherwise) of Talisman or any Subsidiary. SCHEDULE 5-20 lists all collective
bargaining agreements applicable to Talisman and each Subsidiary enforceable
between or adopted by, Talisman or any Subsidiary and any trade union or other
body representing its employees.
5.21 Benefit Plans
-------------
Except for the pension arrangements described in SCHEDULE 5-21,
for the compulsory provisions of the social security regime and for the
compulsory profit sharing, pensions or benefits resulting from applicable labor
laws or collective bargaining agreements, neither Talisman nor any of the
Subsidiaries has any bonus, retirement, supplementary insurance, profit sharing,
growth sharing, company savings plan, retirement bonus, stock purchase or stock
option, bonus share or employee funds (FONDS SALARIAUX) for the benefit of its
employees (hereinafter collectively the "BENEFIT PLANS"). Except as set forth in
SCHEDULE 5.21, all Benefit Plans are fully paid up or fully funded, or adequate
provisions for all liabilities or obligations of Talisman and of any of the
Subsidiaries thereunder in respect of or relating to any period or portion
thereof ending on or before December 31, 1995, have been made in the Financial
Statements.
<PAGE> 37
- 33 -
5.22 Proxies - Bank Accounts
-----------------------
SCHEDULE 5-22 contains an accurate and complete list of all
individuals who received from Talisman or any of the Subsidiaries a general or
specific proxy and of all individuals having bank signing powers for the
accounts of Talisman or any of the Subsidiaries along with, in the latter case,
the name of the bank or financial institution with which such proxy or mandate
was filed. A description of the bank accounts of Talisman and each of
Subsidiaries is set forth in SCHEDULE 5-22.
5.23 No Bankruptcy
-------------
Neither Talisman nor any of the Subsidiaries is in a state of not
meeting payments when they become due ("cessation de paiements") or the subject
of any judicial or amicable procedure of bankruptcy, insolvency, receiverships,
reorganization, winding up or liquidation proceedings, or is subject to any
judicial or administrative proceedings to such effect[, except as indicated in
Section 5.11 (n) hereof.]
5.24 Patents, Marks, Commercial Names and Copyrights
-----------------------------------------------
(a) SCHEDULE 5.24 (a) sets forth a complete and accurate list of (i)
all patents, including all reissues, reexaminations, continuations,
continuations-in-part and divisions thereof, all trademarks, service marks, and
designs, and all copyrights that, in the case of each of the foregoing items
described in this Clause (i), have been issued to or registered by Talisman or
any of the Subsidiaries; (ii) all pending patent applications and all pending
trademark, service mark and design applications and all pending applications for
the registration of copyrights in each case filed by or on behalf of the Company
or any Subsidiary; and (iii) all material unregistered trademarks, service
marks, trade names, service names, design rights, topography rights, logos and
assumed names which are owned by Talisman or any of the Subsidiaries. SCHEDULE
5.24 (a) also identifies each material license or similar material agreement
entered into by Talisman or any of the Subsidiaries, with respect to any
Intellectual Property (as hereinafter defined).
(b) Except as disclosed in SCHEDULE 5.24 (b), Talisman or any of the
Subsidiaries (i) is the sole and exclusive owner of the Intellectual Property
described in Sub-Clause 5.24 (a) and listed in SCHEDULE 5.24 (a); and (ii) is
listed in the records of the appropriate agency as the sole and exclusive owner
of record for each registration and grant listed in SCHEDULE 5.24 (a). All
registration and maintenance fees that have become due and payable to any
governmental agency in respect of any Intellectual Property owned by Talisman or
any of the Subsidiaries and for which a patent or registration has been issued,
have been paid, and no act has been done or omitted to be done by Talisman or
any of the Subsidiaries or, to the knowledge of Seller, any licensee,
distributor, sublicensee, or
<PAGE> 38
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sub-distributor thereof, to impair or dedicate to the public or entitle any
governmental authority to cancel, forfeit, modify or hold abandoned any of such
Intellectual Property so owned by Talisman or any of the Subsidiaries and listed
in SCHEDULE 5.24 (a) and to the knowledge of Seller, all such Intellectual
Property so owned and listed is valid and enforceable.
(c) Except as set forth in SCHEDULE 5.24 (c): (i) there are no pending
or, to Seller's knowledge, threatened suits, claims, oppositions or other
challenges by any person against the ownership by Talisman or any of the
Subsidiaries or the use or prospective use by Talisman and the Subsidiaries of
any of the Intellectual Property owned or used by it; (ii) Talisman and the
Subsidiaries are in material compliance with the terms of all licenses, leases
or other agreements under which the right to use any of the Intellectual
Property listed in SCHEDULES 5.24 (a) AND 5.24 (e) arose or pursuant to which
Talisman or any of the Subsidiaries licenses or otherwise distributes such
Intellectual Property to any third party; and (iii) the use of any Intellectual
Property by Talisman or any of the Subsidiaries in connection with the conduct
of the business of Talisman or any of the Subsidiaries as currently conducted
does not infringe upon or otherwise violate any right of any third party.
(d) Talisman and each of the Subsidiaries owns or is licensed or
otherwise has the right to use, all Intellectual Property used by it in, or
necessary for it to conduct, its businesses as currently conducted, free and
clear of all Encumbrances, including without limitation (i) any computer
programs, and (ii) any user manuals, technical manuals, or other documentation,
or any advertisements or other materials, related to such Intellectual Property,
which are offered or made available to Talisman's or any of the Subsidiaries'
customers by Talisman or any of the Subsidiaries, and any such licenses or
rights will remain unaffected by the execution and performance of this
Agreement.
(e) SCHEDULE 5.24 (e): (i) lists all of the material computer programs
(except off-the-shelf software programs and computer programs, but not
databases, of Talisman or any of the Subsidiaries, and databases which are
owned, licensed, leased or otherwise used by Talisman or any of the
Subsidiaries, in connection with the operation of their businesses as currently
or planned to be conducted; (ii) identifies which is owned, licensed, leased or
otherwise used, as the case may be, and by which of Talisman or any of the
Subsidiaries; and (iii) identifies all material agreements relating to such
licensing or leasing, the parties thereto and the date thereof.
(f) Except as disclosed in SCHEDULE 5.24 (f), the computer programs
used in or necessary for the conduct of the business of Talisman and the
Subsidiaries as currently conducted (including without limitation the data,
articles and other content included therein) are (i) currently in the public
domain or otherwise
<PAGE> 39
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available to Talisman and the Subsidiaries without the approval or consent of
any third party, or (iii) included in such database or computer program or
system pursuant to rights granted to Talisman or any of the Subsidiaries so
including the same pursuant to a written license or lease or other consent from
a third party.
(g) Except as disclosed in SCHEDULE 5.24 (g), Talisman and each
Subsidiary, with respect to all computer programs owned by it, has taken or
caused to be taken reasonable steps to obtain and retain valid and enforceable
Intellectual Property rights therein. Except as disclosed in SCHEDULE 5.24 (g),
Talisman and each of the Subsidiaries have taken all security measures necessary
to protect the secrecy and confidentiality of all trade secrets, know-how and
other confidential information material to the conduct of the business of
Talisman and the Subsidiaries.
(h) The material computer programs listed in SCHEDULE 5.24
(e) as owned by Talisman or a Subsidiary (i) function in all material respects
reasonably in accordance with the specifications therefor published by Talisman
or any Subsidiary; (ii) provide in all material respects all of the
functionality, features and content described in any user manuals, technical
manuals, and any other documentation related thereto published by Talisman or
any Subsidiary or in any advertisements or other materials therefor made
available to Talisman's or any Subsidiary's customers by Talisman or any
Subsidiary, subject, in the case of Clause (i) and (ii) of this Section 5.24
(h), to errors and bugs that arise and are corrected in the normal course of
Talisman's or any Subsidiary's business; and (iii) to Seller's knowledge, do not
contain any Subsidiary or employees thereof that are intended to cause harm,
disable or permit unauthorized access, to software, hardware, or date.
(i) To the best of Seller's knowledge, the material computer programs
listed in SCHEDULE 5.24 (e) which are not owned by Talisman or a Subsidiary but
which are used in the conduct of the business of Talisman or any Subsidiary as
currently conducted do not contain any software routines introduced by Talisman
or any Subsidiary or any employees thereof that are intended to cause harm,
disable, or permit unauthorized access, to software, hardware, or data, and
Talisman and the Subsidiaries have taken reasonable procedures to identify any
such software routines introduced before the initial use by Talisman or any
Subsidiary.
(j) No agreement referred to in SCHEDULES 5.24 (a) AND 5.24 (e)
pursuant to which Talisman or any of the Subsidiaries has granted any right to
use any Intellectual Property conveys to any party other than Talisman or any of
the Subsidiaries any property or ownership right in or over any of such right,
interest, title in Intellectual Property, and each such party thereunder (other
than Talisman or any of the Subsidiaries) has under any such agreement only the
right to use such right, interest, title in Intellectual Property under normal
commercial terms.
<PAGE> 40
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(k) "Intellectual Property" means domestic and foreign patents, patent
applications, registered and unregistered trade marks and service marks,
registered and unregistered copyrights, computer programs, data bases, trade
secrets and proprietary information.
5.25 No Security Interests
---------------------
Except as set forth in SCHEDULE 5-25, neither Talisman nor any
Subsidiary has granted to any third parties any pledge, lien, mortgage,
assignment, other security interest or Encumbrance in any of its assets (whether
tangible or intangible) or businesses.
5.26 Receivables
-----------
(a) Except as set forth in SCHEDULE 5-26, all receivables reflected on
the Financial Statements are adequately reserved against for bad debts and have
been collected in full as of the date of signature of this Agreement, to the
extent their face value exceeds the accruals for doubtful account with respect
thereto in the Financial Statements.
(b) All receivables owing to Talisman and any of the Subsidiaries
since December 31, 1995 have arisen in the ordinary course of business of
Talisman and the Subsidiaries, are (to the best of Seller's knowledge) legal,
valid and binding obligations, collectible in full in the ordinary course of
business of Talisman and the Subsidiaries to the extent that the face value of
the aggregate of such receivables exceeds the reserves for doubtful accounts
with respect thereto provided for in the books and records of Talisman and the
Subsidiaries, which reserves do not exceed in the aggregate the reserves for
doubtful accounts shown in the Financial Statements as at December 31, 1995.
5.27 Customer Relations
------------------
No single supplier or customer is materially important to the
business of Talisman or any Subsidiary. As of the date thereof, the Seller has
no knowledge or reason to believe, after having completed all due inquiry, that
any current substantial customer, supplier, licensor or agent of Talisman or any
Subsidiary would substantially reduce trade or materially change its
relationship with Talisman or any Subsidiary.
5.28 Subsidy, Aid and Tax Benefits
-----------------------------
Talisman and each Subsidiary is in full compliance with, and has
not breached nor violated, any representation, condition or undertaking made by
it in regard to any subsidy, aid, tax benefit, grant program, loan at
preferential rate, special contract or lease and the like made available to
Talisman or each such Subsidiary by a governmental agency, administration or
local or regional development authority. Neither this
<PAGE> 41
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Agreement nor any transaction contemplated herein will result in any
cancellation, limitation or reduction of any such benefit or advantage or
require any accelerated repayment of, any reapplication for or reissuance of, or
any posting of additional security for the maintenance of, any such benefit or
advantage for Talisman or any Subsidiary.
5.29 Environmental Matters
---------------------
Talisman and each of the Subsidiaries is conducting and has been
conducting its business in compliance with all applicable environmental laws and
regulations.
5.30 No Claim by the Seller
----------------------
On the Transfer Date, neither the Seller nor any Affiliate,
officer, director or shareholder of the Seller will have any claim, contingent
or otherwise, against Talisman or any Subsidiary or any officer or director
thereof, including in connection with the transactions contemplated in this
Agreement.
No executive employee or manager whether employed by Talisman or
by any of the Subsidiaries or seconded to it has any claim against Talisman or
the Subsidiaries.
5.31 Contingent Liabilities
----------------------
The list of Contingent Liabilities set forth in ANNEX A is
complete and accurate and each amount set forth in such list in respect of a
Contingent Liability is sufficient to fully cover such Contingent Liability.
5.32 Loans
-----
(a) The list of Loans set forth in ANNEX D is complete and
accurate and sets forth all the liabilities for borrowed
money of Talisman, Groupe DAFSA and the Subsidiaries, to
the exception of (i) the Bridge Loan, (ii) any financing
granted by Societe Generale to Groupe Dafsa pursuant to a
general Dailly law assignment of receivables dated as of
April 20, 1994, and (iii) any financing granted by societe
Generale to Dafsa Edition pursuant to a factoring agreement
dated as of December 11, 1995;
(b) To the exception of the Bridge Loan, Talisman, Groupe DAFSA
and the Subsidiaries have no liability towards the Seller
or any Affiliate of the Seller (other than Talisman, Groupe
DAFSA and the Subsidiary) which are not completely and
accurately set forth in ANNEX D;
(c) TMI has validly waived all its rights to be repaid a
portion of its Loan to Talisman in the principal amount of
two million five hundred ninety five
<PAGE> 42
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thousand Francs (FRF 2,595,000), reducing the remaining
amount outstanding under such Loan to eighteen million six
hundred sixty six thousand one hundred and fifty Francs
(FRF 18,666,150);
(d) Mr. Olivier ROUX has validly waived all his rights to be
repaid a portion of his Loan to Groupe DAFSA in the
principal amount of one million two hundred ninety seven
thousand five hundred Francs (FRF 1,297,500), reducing the
remaining amount outstanding under such Loan to two hundred
eighty nine thousand five hundred and fifty Francs (FRF
289,550);
(e) The Bridge Loan has been used by Talisman and the
Subsidiaries for day to day cashflow requirements, and no
penalty applies to the early repayment thereof; and
(f) All promissory notes executed by Talisman and Groupe Dafsa
in connection with the Loans are held by the Seller and the
Affiliate thereof and have not been transmitted, in any
manner whatsoever to any third party, and will be delivered
by the Seller to the Buyer on the Transfer Date, and
Talisman and its Subsidiaries have not issued any
promissory note in favor of the Seller or any Affiliate
thereof which is not delivered by the Seller to the Buyer
on the Transfer Date.
5.33 Extel
-----
Talisman and the Subsidiaries have no liability to Extel Financial
Limited or any Affiliate thereof, whether existing, potential, contingent, or
otherwise resulting from the agreements entered into on July 1, 1993 and in 1993
between Dafsa Entreprise S.A.and Extel Financial Limited other than a fee
payment in the aggregate amount of up to FRF 935,000 (excluding VAT). Subject to
the payment to Extel Financial Limited by Groupe DAFSA of an amount not to
exceed FRF 935,000, (i) Talisman and the Subsidiaries are not bound to Extel
Financial Limited, or any Affiliate thereof, by any non-competition commitment
of whatever nature and duration, and (ii) there is no agreement in effect
between Talisman or any of the Subsidiaries on the one hand and Extel Financial
Limited or any Affiliate thereof on the other hand.
5.34 SAFE Litigations - restructuring costs
a) All liabilities of Talisman and the Subsidiaries,
contingent or otherwise arising out or in connection with
any of the SAFE Litigations or any restructuring costs
referred to in Section III.2 of the Agreement entered into
on September 4, 1995 among Banque Paribas, Credit du Nord,
Groupe Dafsa and Associes en
<PAGE> 43
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Finance, (hereafter the "BANQUE PARIBAS AGREEMENT") are and will
continue after the Transfer Date to be finally fully supported by
Banque Paribas, and Talisman and the Subsidiaries will incur no
cost, expense, damage and prejudice in connection with any of the
SAFE Litigations and the restructuring costs referred to
hereinabove. Groupe Dafsa has complied with all its obligations
under the Banque Paribas Agreement, and in particular with all its
obligations, as set forth in Section III.2 thereof.
b) The special account referred to in article I.l.1 of the Banque
Paribas Agreement has been settled by agreement dated April 16,
1996 entered into between Banque Paribas and Groupe DAFSA and
there is no liability of Groupe Dafsa to Banque Paribas in
connection with such special account. All the proceeds of such
special account have been used in compliance with the provisions
of the Banque Paribas Agreement. The settlement of such special
account does not operate as a discharge of Banque Paribas to fully
support any costs and expenses related to the SAFE Litigations and
restructuring costs referred to in Paragraph 5.34 (a) above.
5.35 No Material Misstatements
-------------------------
No statement, representation or warranty by the Seller made in
this Agreement or in any Annex, Schedule or other agreements entered into in
connection herewith is misleading or omits to state any material fact necessary
to make such statement, representation or warranty not misleading. Except as
otherwise expressly stated in this Section 5 or in any representation or
warranty by reference to a Schedule hereto, no representation or warranty set
forth herein is or shall be deemed to be qualified or otherwise limited in any
respect by any document or other writing or by any information delivered or
otherwise furnished to the Buyer or to any person, whether by or on behalf of
the Seller or their accountants or otherwise, whether orally or in writing, or
of which the Buyer may, does or should have notice or knowledge.
SECTION VI - REPRESENTATIONS AND WARRANTIES OF THE BUYER
- ---------- -------------------------------------------
The Buyer represents and warrants to the Seller as follows:
6.1 Incorporation and share capital of the Buyer
--------------------------------------------
The Buyer is a Limited liability company incorporated in France,
whose registered office is located at 25 avenue Marceau, registered with the
Registry of Commerce and Companies of Paris under number B 388 549 800. The
Buyer is duly
<PAGE> 44
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incorporated and validly existing under the laws of the State of France and has
the full power and authority to own its assets and conduct its business as now
being conducted. The Buyer has full power and authority to enter into this
Agreement and the other agreements, documents and instruments to be executed
pursuant to this Agreement and to carry out the transactions contemplated hereby
and thereby.
6.2 Authorization - Competence
--------------------------
The Board of Directors of the Buyer has duly authorized the
execution by the Buyer of this Agreement and of all agreements, documents and
instruments referred to in this Agreement, as well as the performance by the
Buyer of all transactions contemplated hereby or thereby. Subject to the
provisions of Section 6.3 hereof, no further proceeding, action or consent on
the part of the Buyer, or any other corporate body of the Buyer is necessary to
authorize this Agreement or the other agreements, documents or instruments
executed by the Buyer pursuant hereto or to consummate the transactions
contemplated hereby or thereby.
6.3 Government Authorizations
-------------------------
Except for the filing with the Treasury Department of the French
Ministry of Economy and Finance, the execution and performance by the Buyer of
this Agreement or any other agreement contemplated hereby shall not require any
consent, approval or authorization of a government or regulatory authority to be
obtained by the Buyer, nor any filing with any such authority to be made by the
Buyer, except for any filing with the tax authorities for the purposes of the
registration of such agreements.
6.4 Other Agreements
----------------
Neither the execution of this Agreement, nor the performance nor
the consummation of the transactions contemplated by this Agreement shall cause
any violation or default in the performance of any of the provisions of the
by-laws or Articles of Incorporation of the Buyer of any contract or agreement,
any decision, judgment or arbitration sentence binding the Buyer.
6.5 No Finders
----------
The Buyer has not used the services of, or entered into any
agreement with, any broker, agent or finder in connection with this Agreement or
the transactions contemplated hereby which could result in a payment obligation
on the part of the Seller.
<PAGE> 45
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SECTION VII - ACTIVITIES PRIOR TO THE CLOSING
- ----------- -------------------------------
7.1 Access
------
Between the date hereof and the Closing, the Seller shall cause
Talisman and the Subsidiaries and executives of Talisman and the Subsidiaries to
give to the Buyer and their counsels, accountants and other representatives full
and free access, during normal business hours, to review and photocopy all of
the properties, books, files, contracts, tax returns, commitments and records
and documents of Talisman and of the Subsidiaries and to furnish the Buyer with
all such information concerning the affairs of Talisman and the Subsidiaries as
the Buyer may reasonably request.
7.2 Government Filings
------------------
(a) The Buyer shall file upon the signing of this Agreement
with to the Treasury Department of the French Ministry of Economy and Finance a
statement with respect to the transaction contemplated by this Agreement in
accordance with Law n[degree symbol] 66-1008 of December 28, 1966, as modified.
(b) The parties to this Agreement shall cooperate in connection with
all actions to be taken to make such filing.
7.3 Conduct of the Business of Talisman and the Subsidiaries
--------------------------------------------------------
Unless the Seller obtains the prior written consent of the Buyer,
or except as specifically provided otherwise herein, from the date hereof and
until the Transfer Date, the Seller shall cause Talisman and each of the
Subsidiaries:
(a) not to take or permit to be taken any action which would cause any
of the representations or warranties set forth herein to be untrue in any
material respect;
(b) to proceed with its management in the ordinary course of business
and not to take or permit to be taken any action which would be contrary to or
in breach of any of the terms of this Agreement, to preserve its present
business intact, keep available the services of its present executive personnel,
preserve its relationships with customers, merchants, suppliers and all other
persons having business dealings with Talisman or any of the Subsidiaries, and
to cooperate with and assist the Buyer in preparing for the transfer of
ownership of Talisman and the Subsidiaries to the Buyer;
(c) to refrain from granting any Encumbrance or servitude, on its
material assets;
(d) to refrain from making any increase in the remuneration of its
officers, directors, or salaried employees (except as
<PAGE> 46
- 42 -
required by law or by any applicable company agreement in effect as at the date
hereof or collective bargaining agreement) or any increase in any contribution
to any Benefit Plans, or creating new Benefit Plans, made available to them;
(e) to refrain from purchasing, selling or transferring any material
assets, tangible or intangible, or releasing any claim;
(f) to maintain its books, accounts and records in the usual and
ordinary manner, consistent with past practices;
(g) to comply in all material respects with all national, regional,
departmental, local and other governmental (domestic or foreign) laws, statutes,
ordinances, rules, regulations, orders, writs, injunctions, decrees, awards or
other requirements of any court or other governmental or other authority or body
applicable to Talisman or any of the Subsidiaries, their property and assets or
to the conduct of their business, and to perform their obligations under all
material contracts, agreements, franchises, licenses, permits, instruments or
undertakings or otherwise without any material default;
(h) not to amend its by-laws or other applicable documents and not to
merge or consolidate with, or sell or otherwise transfer, or grant any option to
purchase, any material assets to, any other Person or change the character of
its business.
(i) not to modify the number of shares of Talisman and the
Subsidiaries issued and outstanding (whether by purchase, redemption, issuance
of additional shares or otherwise), nor encumber, transfer to any party any
shares of Talisman or of any of the Subsidiaries, nor grant any option, warrant
or any other right to purchase or to convert any obligation into such shares,
nor make any loan or advance to any Person (other than in the ordinary course of
business) or pay dividend or other distribution or payment in respect of its
capital stock, or enter into any voting trust or other arrangement with respect
to the voting rights attached to the shares of Talisman or any of the
Subsidiaries;
(j) not to solicit offers from third parties with respect to the
acquisition, assignment, transfer, encumbrance or other disposition of any
shares of Talisman or any of the Subsidiaries;
(k) not to enter into any written employment agreement or agreement
with any salesman or sales agent or franchise agreement, distributorship
agreement or other contract or arrangement with respect to the performance of
services (i) the termination of which is prohibited or limited by any law, rule
or regulation or (ii) which cannot be terminated by its terms by Talisman or any
of the Subsidiaries at any time on not more than ninety (90) days' prior notice
and without monetary penalty;
<PAGE> 47
- 43 -
(1) not to incur or assume any debt, obligation or liability (except a
debt, obligation or liability arising in the ordinary course of business) and
not use or apply cash presently in banks or on hand or on deposit or otherwise
available for the repayment of outstanding loans, except as required by any
existing credit arrangement or by the ordinary course of dealing with such banks
or as provided herein;
(m) not to modify or change any existing right, franchise, concession,
license, patent, patent application, trademark, service marks, trademark
application, tradename, copyright, or copyright application, or any other
proprietary right except for modifications or changes in the ordinary course of
business or as otherwise provided herein;
(n) not to enter into any contract, commitment or understanding, the
existence of which would be required to be referred to in any Annex or Schedule
hereto if such contract, commitment or understanding were in existence on the
date hereof, or enter into any material modification to any contract, commitment
or understanding referred to in any Annex or Schedule hereto, or commit to any
investment program involving major expenditures;
(o) to maintain all of its material property in customary repair,
order and condition, reasonable wear and tear excepted; and
(p) to make no payment to, nor advance or lend any money to, nor
otherwise permit the creation of any indebtedness from, the Seller, any
Affiliate of the Seller, except for trade receivables incurred in the ordinary
course of business.
7.4 Other Actions
-------------
The Seller shall take all actions necessary to satisfy all the
conditions set forth in Section III hereunder.
The Buyer shall take all actions necessary to satisfy all the
conditions set forth in Section IV hereunder.
7.5 Intergroup Agreements
---------------------
The Seller shall cause all of the contracts and agreements
currently in force between the Seller or Affiliates thereof (other than Talisman
and the Subsidiaries) on the one hand and Talisman or any of the Subsidiaries,
on the other hand (other than contracts listed in ANNEX F), to be terminated
effective on the Transfer Date without any penalty or termination indemnity to
be paid by Talisman or any of the Subsidiaries. All amounts due pursuant to
these contracts and agreements (including any outstanding amount due under any
loan or cash facility) by Talisman or the Subsidiaries to the Seller or by the
Seller or Affiliate thereof to Talisman and the Subsidiaries shall, on the
<PAGE> 48
- 44 -
Transfer Date, become immediately due and payable and shall be paid. All such
amounts are listed on ANNEX F hereto.
7.6 Waiver of Call Options
----------------------
The Seller covenants that on or prior to the Transfer Date, the
Seller shall have caused Groupe DAFSA to obtain and deliver to the Buyer written
irrevocable waivers executed by a duly authorized representatives of Banque
Paribas (a company registered with the Registry of Commerce and Companies of
Paris under number B 662 047 885) and Associes en Finance (a company registered
with the Registry of Commerce and Companies of Paris under number B 394 630 867)
pursuant to which each such company irrevocably waives and cancels its rights to
purchase or be transferred any Subscription Right and more generally, any other
right, to be transferred by exchange, conversion, subscription, or otherwise any
shares, securities or other rights in the capital of Groupe DAFSA or of any
other Affiliate of Talisman.
7.7 Loans
-----
(a) The Seller covenants to cause the statutory auditors of Talisman
and Groupe DAFSA to establish on or prior the Transfer Date a certificate
confirming that ANNEX D, listing all the Loans, constitutes as at the date
hereof an accurate and complete listing of all the liabilities for borrowed
money of Talisman, Groupe DAFSA and the Subsidiaries other than (i) the Bridge
Loan, (ii) any financing granted by Societe Generale to Groupe Dafsa pursuant to
a general Dailly law assignment of receivables dated as of April 20, 1994, and
(iii) any financing granted by societe Generale pursuant to a factoring
agreement dated as of December 11, 1995. On the Transfer Date, the Seller will
deliver to the Buyer all the promissory notes executed by Talisman and the
Subsidiaries in connection with the Loans.
(b) The Seller shall have caused TMI to waive, on or prior to the
Transfer Date, all its rights to be repaid a portion of the principal amount of
TMI's Loan to Talisman in the principal amount of two million five hundred
ninety five thousand Francs (FRF 2,595,000), reducing the remaining amount
outstanding under such Loan to eighteen million six hundred sixty six thousand
one hundred and fifty Francs (FRF 18,666,150).
(c) The Seller shall have caused Mr. Olivier ROUX to waive, on or
prior to the Transfer Date, all his rights to be repaid a portion of the Loan
extended by Mr. Olivier ROUX to Groupe DAFSA in the principal amount of one
million two hundred ninety seven thousand five hundred Francs (FRF 1,297,500),
reducing the remaining amount outstanding under such Loan to two hundred eighty
nine thousand five hundred and fifty Francs (FRF 289,550).
<PAGE> 49
- 45 -
7.8 Employment Agreement
--------------------
The Seller shall remit to the Buyer on or prior to the Transfer
Date, employment agreements of Messrs. Francois Chaillou et Patrick Tanguy,
respectively, in the form of ANNEX G, duly executed by such individuals and
Groupe DAFSA, together with the Tanguy Settlement Agreement.
7.9 Employees
---------
The Seller shall comply and cause Talisman and the Subsidiary to
comply with applicable rules relating to the information of employees'
representative bodies in connection with the transactions contemplated in this
Agreement.
7.10 Bank Mandate
------------
On or prior to the Closing, the Seller shall effectuate all
changes of authorized signatures and bank mandates as instructed by the Buyer in
respect of all accounts operated by Talisman and the Subsidiaries.
7.11 Certificate of no Claim
-----------------------
On or prior to the Closing, the Seller shall procure that each of
the statutory managers ("mandataires sociaux", "gerants") and directors, as the
case may be, of Talisman and the Subsidiaries, whether or not such statutory
managers and directors are required to submit their resignations pursuant to
Section 2.3 hereabove, deliver to the Buyer a written acknowledgement that such
manager or director has no claim whatsoever against Talisman or any of the
Subsidiaries; if any such written acknowledgement is not obtained, and
notwithstanding any provision of this Agreement to the contrary, the Seller
shall jointly and severally indemnify and hold Talisman and the Subsidiaries
harmless from and against, and shall pay to Talisman and the Subsidiaries the
amount of, any loss, liability, damage or deficiency resulting from any claim
made against Talisman or any of the Subsidiaries by any such manager,
ex-manager, director or ex-director who shall not have delivered to the Buyer a
written acknowledgement pursuant to this Section 7.14.
7.12 Guarantee
---------
The Seller covenants to cause Mr. Francois Chaillou to execute the
Guarantee, TMI to execute the TMI Guarantee and shall deliver to the Buyer a
legal opinion from Conyers, Dill & Pearman confirming that Mr. Francois Chaillou
has the powers, capacity and authority to execute the TMI Guarantee, and that
the TMI Guarantee is valid and binding upon TMI.
<PAGE> 50
- 46 -
SECTION VIII - INDEMNIFICATION
- ------------ ---------------
8.1 Survival of Representations and Covenants
-----------------------------------------
The representations and warranties of the Seller contained in this
Agreement or in any Schedule, Annex or document attached thereto shall survive
the consummation of the transactions contemplated hereby; the time period during
which the Buyer may bring a claim in respect of such representations and
warranties being set forth in Section 8.2.
The covenants of the Seller contained in Sections VII and IX of
this Agreement, and the Seller's obligations thereunder shall survive the
Closing and the consummation of the transactions contemplated hereby.
8.2 Obligation to Indemnify
-----------------------
(a) Indemnification
---------------
The Seller agrees to indemnify and hold the Buyer harmless from
and against, and shall pay to the Buyer the amount of, any of the following
(each a "DAMAGE" and collectively the "DAMAGES"):
(i) any liability or deficiency in assets of Talisman and any
Subsidiary related to transactions or facts occurring prior
to or on December 31, 1995 or prior to or on April 30, 1996
and not reflected in the Financial Statements as of
December 31, 1995 or as of April 30, 1996, respectively, or
if so reflected, not the subject of a provision or, if
subject to a provision, to the extent such liability or
deficiency exceeds such provision;
(ii) any liability of Talisman and any Subsidiary (whether or
not reflected in the Financial Statements) resulting from
the performance of off-balance sheet obligations existing
on or prior to the Transfer Date, including guarantees or
comfort letters given by Talisman or any Subsidiary but
excluding any guarantee or comfort letter granted to secure
obligations of Talisman or any Subsidiary;
(iii) any loss, liability, damage or deficiency, cost or expense
suffered or incurred by the Buyer, Talisman or any
Subsidiary, resulting from or related to any breach of any
representation, warrantee or covenant of the Seller as set
forth in this Agreement;
<PAGE> 51
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(iv) any loss, liability, damage or deficiency, cost or expense
suffered or incurred by the Buyer, Talisman or any
Subsidiary, resulting from or related to any breach by
Banque Paribas of any of Banque Paribas Commitments;
(v) any loss, liability, damage or deficiency, cost or expenses
suffered or incurred by the Buyer, Talisman or any
Subsidiary resulting from or related to:
(x) any suit, arbitration or proceedings initiated on or
prior to the Transfer Date to which either Talisman
or any of the Subsidiaries is, on or prior to the
Transfer Date, a party or to which Talisman or any
of the Subsidiary becomes a party after the Transfer
Date;
(y) any suit, arbitration or proceedings initiated after
the Transfer Date, based on events or circumstance
occurring or existing prior to the Transfer Date and
to which Talisman or any of the Subsidiaries becomes
a party;
(z) any tax assessment, reduction in tax loss carry
forward (to the extent that, with respect to tax
loss carry forward of Talisman, the aggregate amount
of the remaining tax loss carry forward is below USD
5,500,000 times the Exchange Rate) or disallowance
of any exemption, deduction or recovery made with
respect to Talisman or any Subsidiary to the extent
they relate to periods of time prior to the Transfer
Date or events having occurred prior to the Transfer
Date; for the purpose of this foregoing, "tax" shall
have the meaning defined in Sub-Section 5.13 (g);
(vi) any loss, liability, damage or deficiency, cost or expense
suffered or incurred by the Buyer, Talisman or any
Subsidiary resulting from or related to the Tanguy
Settlement, excluding the payment of the indemnity
thereunder.
(b) Seller's liability
------------------
With respect to the determination of the amount which shall be
payable by the Seller in case of a claim for indemnification under this Section,
it is agreed that:
<PAGE> 52
- 48 -
(I) the Seller shall have no obligation to indemnify the Buyer
pursuant to Section 8.2 (a) until and unless the aggregate
amount of Damages exceeds a threshold equal to U.S.$ 25,000
times the Exchange Rate (the "THRESHOLD AMOUNT") or the
countervalue thereof in the relevant currency. In the event
such aggregate amount exceeds such Threshold Amount, the
Seller shall indemnify the Buyer for the aggregate amount
of Damages, including the initial Threshold Amount;
(ii) notwithstanding any provision herein, the Seller's
aggregate liability shall not be subject to any cap in
connection with any claim for indemnification made by the
Buyer under Section 8.2 (a)(v) hereabove;
(iii) the Seller's global liability under this Section 8.2 for
indemnification (with the exception of any Seller's
liability pursuant to claims for indemnification made by
the Buyer under Section 8.2 (a)(v)) shall be limited to a
maximum amount equal to US $ 6,000,000 times the Exchange
Rate for any claim made by the Buyer to the Seller pursuant
to this Section VIII (except Section 8.2(a)(v)) on or
prior March 31, 1997 (the "FIRST PERIOD" and any such claim
made during the First Period being referred to as a "FIRST
PERIOD CLAIM");
(iv) for any claim for indemnification made by the Buyer to the
Seller pursuant to this Section VIII (except Section 8.2(a)
(v)) after the expiration of the First Period (the "SECOND
PERIOD" and any such claim made during the Second Period
being referred to as a "SECOND PERIOD CLAIM", it being
understood that the Second Period may have a different
duration depending on the nature of the claim as provided
in paragraph (d) of this Section 8.2) the Seller's global
liability under this Section 8.2 for indemnification (with
the exception of any Seller's liability pursuant to claims
for indemnification made by the Buyer under Section 8.2(a)
(v)) shall be limited to a maximum amount equal to US $
3,000,000 times the Exchange Rate, subject to the aggregate
limit on liability set forth in Section 8.2 (b)(v);
(v) the Seller's aggregate global liability under this Section
8.2 (except Section 8.2(a)(v)), for all First Period
Claims and all Second Period Claims shall be limited to a
maximum aggregate amount of US $ 6,000,000 times the
Exchange Rate.
<PAGE> 53
- 49 -
(C) Damages
-------
Any Damage shall include, with respect to any claim, all costs and
expenses including legal fees, reasonably incurred in connection therewith.
(d) Claims
------
No claim for Damages arising pursuant to this Section 8.2 or
otherwise by reason of the transactions contemplated in this Agreement shall be
entitled to indemnification pursuant to the terms hereof if the claim is
presented after March 31, 1998, except for Damages resulting from or related to
(A) a breach of any representation or warranty contained in Sections 5.13, 5.20
or 5.21 for which claims may be presented until sixty (60) days after the
expiration of the applicable statute of limitations, (B) a breach of any
representation or warranty contained in Section 5.29 of this Agreement for which
claims may be presented until December 31, 2006 , (c) a breach of any covenant
contained in Section 9.1, for which claims may be presented until sixty (60)
days after the expiration of the term of any such covenant and (D) a criminal
action (including a "constitution de partie civile", or an action as "civilement
responsable", for which claims may be presented until sixty (60) days after the
expiration of the applicable statute of limitation and (E) Section 8.2(a) (vi)
hereabove for which claims may be presented until the fourth anniversary of the
Transfer Date.
(e) Claims for Contingent Damage
----------------------------
Where any claim for indemnification made by the Buyer relates to a
Damage the existence or quantum of which is subject to a contingent event (a
"CONTINGENT DAMAGE"), the Seller shall have no obligation to indemnify the Buyer
until such Damage is actually suffered or incurred. The foregoing shall not
prevent the Buyer from making a claim for indemnification pursuant to this
Agreement for a Contingent Damage.
(f) Notification
------------
The Buyer shall promptly notify the Seller in writing of any
Damage which may give rise to a claim for indemnification pursuant to this
Agreement. Such notification shall be accompanied by any documents and
information which would assist in determining the amount and the basis for the
Damages and the request for indemnification resulting therefrom. Upon receipt of
such notice, the Seller shall have sixty (60) days within which to notify the
Buyer in writing of any good faith objections to such claim and/or the amount
thereof. To the extent that the Seller fails to raise a specific objection in
such manner and period to any claim so notified by the Buyer or the amount
thereof, the uncontested claim shall be deemed to be accepted and agreed upon by
the Seller, and the Seller shall immediately pay
<PAGE> 54
- 50 -
to the Buyer an indemnity in the amount of all such claims or parts of claims
not so contested.
To the extent that the Seller shall have notified the Buyer of any
good faith objection to any such claim or claims or the amount(s) thereof within
sixty (60) days of receipt of such notice, the parties shall promptly meet in an
attempt to quantify and agree upon the existence and the amount of the
indemnification obligation arising as a result of such claim.
To the extent that the Seller shall have in good faith contested
its liability for any such claim, payment of any amounts so contested shall be
due immediately upon agreement in writing among the parties as to the amount of
indemnification due with respect to such claim or upon issuance of a court
decision to that effect pursuant to Section 11.13 below.
(g) Third-party claims
------------------
With regard to claims brought by third parties against either
Talisman or any Subsidiary which may give rise to an obligation on the part of
the Seller to indemnify the Buyer under this Section VIII ("THIRD PARTY
CLAIMS"), the Seller shall have the right to direct the defense of any such
third-party claim, through counsel of Seller's choice and at Seller's own
expense, on behalf of Talisman or the relevant Subsidiary.
Promptly after Seller's receipt of notice from the Buyer relating
to any such Third-Party Claim and in any case within fifteen (15) days of such
notice (or such shorter period as may be reasonable in the circumstances), the
Seller shall inform the Buyer whether it will direct the defense of such claim.
If the Seller does not so inform the Buyer, the Buyer, Talisman and the relevant
Subsidiary shall have the right to direct the defense of and settle such
Third-Party Claim. In such case, the Seller hereby waives any right to contest
action or omission of Buyer, Talisman and the relevant Subsidiary in connection
with the defense or settlement of such Third-Party Claim.
If the Seller exercises its right to conduct the defense of any
such Third-Party Claim, then the Seller shall be deemed to acknowledge
irrevocably its liability pursuant to this Section VIII for any Damage related
to such Third-Party Claim. The Buyer shall cause Talisman or the relevant
Subsidiary to procure for the Seller (at the expense of the Seller) all
reasonable facilities and opportunities to investigate the matter (including
access to records relating to the third party claim), and the Seller shall keep
confidential the information so obtained, save as it may be disclosed for the
purposes of any court proceedings pursuant to Section 11.13 hereunder or with
the Buyer's prior written approval for the purpose of the litigation related to
the Third-Party Claim.
<PAGE> 55
- 51 -
In the event that the Seller shall choose to direct the defense of
a Third-Party Claim pursuant to the foregoing paragraph, the Seller may conduct
(but not conclude) settlement discussions with the relevant third party for the
purpose of settling such Third-Party Claim. Should the Buyer reject any
settlement proposed by the Seller, (x) the Seller's liability under this Section
VIII for any Damage related to the Third-Party Claim specifically covered by the
proposed settlement shall be limited to the amount that Seller would have paid
had the proposed settlement been approved and (y) the Buyer, Talisman and the
relevant Subsidiary shall have the right to appear, defend and settle such
Third-Party Claim.
SECTION IX - ADDITIONAL COVENANTS
- ---------- --------------------
9.1 Non-Competition
---------------
(a) The Seller shall not (and shall cause its Affiliates - other than
Talisman and the Subsidiaries - not to) engage, nor, directly or indirectly,
through any vehicle, own, be shareholder or partner in, manage, operate, control
or participate (as adviser or otherwise) in the ownership, management or
operation of any Person engaged in a business that is competitive with the
business of Talisman and/or any of the Subsidiaries in Europe. This undertaking
shall continue for a period of three years after the Closing. In addition, for a
period of three years after the Closing, the Seller shall maintain in strict
confidence, and shall use its best efforts to cause third parties (including,
but not limited to, all individuals that are directors or employees of any
Affiliate of the Seller (other than Talisman and the Subsidiaries)), to maintain
in strict confidence, all information relating to the businesses of Talisman and
the Subsidiaries (including, but not limited to, trade secrets) that is not
obtainable from a public source on the date of this Agreement.
(b) During a period of two years after the Closing, the Seller and its
Affiliates (other than Talisman and the Subsidiaries) shall not, without the
prior written consent of the Buyer directly or indirectly, and whether alone or
jointly with or through any other Person, solicit or endeavor to entice away,
offer employment to or contract for the services of any Person who is or will be
after the Transfer Date an employee of Talisman or any Subsidiary in a skilled
or managerial position.
9.2 Post-Closing Cooperation
------------------------
(a) For a period of one year after the Closing, without further
consideration, (i) the Seller shall use its best efforts to take, and cause to
be taken, all such further actions and execute, acknowledge and deliver, and
cause to be executed, acknowledged and delivered, all such further consents and
other documents as the Buyer may reasonably request to facilitate or effectuate
the transactions contemplated by this Agreement and
<PAGE> 56
- 52 -
(ii) the Buyer shall use its best efforts, and shall use its best efforts to
cause Talisman and the Subsidiaries to take, all such further actions and
execute, acknowledge and deliver all such further consents and other documents
as the Seller may reasonably request in order to facilitate or effectuate the
transactions contemplated by this Agreement.
(b) The Seller and the Buyer shall use their best efforts to cause
Talisman and the Subsidiaries to pay and discharge as soon as practicable all
the Contingent Liabilities, it being understood that Talisman's and the
Subsidiaries' interest shall be preserved when negotiating any payment or
discharge of any such Contingent Liabilities.
9.3 Bridge Loan
-----------
An amount equal to seventy five percent (75%) of the principal amount
of the Bridge Loan (FRF 750,000) will be repaid at the Transfer Date to the
Seller by Talisman. Subject to the condition that the Groupe DAFSA 1996 Turnover
is below fifty eight million Francs (FRF 58,000,000), the Seller hereby
irrevocably agrees to waive its claim against Talisman for the remaining
outstanding principal amount under the Bridge Loan (equal to FRF 250,000) and
any accrued interest.
Subject to the condition that the Groupe DAFSA 1996 Turnover is equal
or above fifty eight million Francs (FRF 58,000,000), the Buyer hereby
irrevocably agrees to take all necessary steps so that Talisman repays the
remaining outstanding principal amount under the Bridge Loan equal to FRF
250,000.
9.4 Republic National Bank of New York
----------------------------------
The Buyer agrees to take all necessary steps so that the Republic
National Bank of New York release within ninety days following the Transfer Date
the deposit of an amount of FRF 1,050,000 made by Talisman Management
International in its books in connection with Republic National Bank of New
York's Guarantee in favor of Sophia as security for payment of the rents under
the lease agreement entered into between Sophia and Groupe DAFSA dated January
23, 1996.
9.5 Talisman
--------
The Buyer undertakes, at the Seller's request and cost, to transfer to
the Seller within one hundred and twenty days from the Transfer Date, all rights
into the corporate name "Talisman".
<PAGE> 57
- 53 -
SECTION X - TERMINATION
- --------- -----------
10.1 Termination
-----------
This Agreement may be terminated at any time prior to the Transfer
Date:
(a) by the mutual consent of the Buyer and the Seller;
(b) by the Buyer or the Seller upon written notice to the other if (i)
any of the orders, consents, permits, authorizations, approvals and waivers of
governmental and regulatory authorities required to consummate the transactions
contemplated hereby shall have been denied, or (ii) any court of competent
jurisdiction shall have issued a final nonappealable order enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby;
(c) by the Buyer or the Seller if the Transfer shall not have been
consummated on or before August 31, 1996, unless the failure of the Transfer to
occur by such date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe the agreements set forth herein required to
be performed by such party prior to the Transfer Date; or
(d) by the Buyer, on the one hand, or the Seller, on the other hand,
if there shall have been a material breach of any of the covenants or agreements
set forth in this Agreement on the part of the other party(ies), which breach
shall not have been cured within thirty (30) days following receipt by the
breaching party(ies) of written notice of such breach from the other party(ies)
hereto.
10.2 Effect of Termination
---------------------
In the event of termination of this Agreement by the Buyer or the
Seller as provided in Section 10.1, this Agreement shall forthwith become void
and have no effect. No party shall be entitled to damages as a result of such
termination, except in the event such termination occurs pursuant to Section
10.1(d). For the avoidance of doubt, in the event that termination of this
Agreement occurs pursuant to Section 10.1(d), the non-breaching party shall be
entitled to damages, including, without limitation, its costs and attorneys'
fees incurred in the preparation and negotiation of this Agreement and defense
of its interest thereunder.
SECTION XI - MISCELLANEOUS PROVISIONS
- ---------- ------------------------
11.1 Notices
-------
All notices, requests, claims or other communications relating to
this Agreement shall be made in writing and addressed
<PAGE> 58
- 54 -
to the other party (and shall be deemed to have been duly given upon receipt by
the other party) by delivery in person, registered mail or express air courier
(DHL or similar) addressed as follows:
- Notices to the Seller:
Talisman Management Limited
37 Ixworth Place
London SW3 3QH England
Attention: Mr. Francois Chaillou
with a copy addressed on the same day to:
Mr. Francois Chaillou
14 rue Raynouard
75016 Paris
- Notices to the Buyer:
Richard Anderson
c/o Datastream International Limited
58-64 City Road
London EC1Y 2AL England
with a copy addressed on the same day to:
Michael Kargula
Primark Corporation
1000 Winter Street
Suite 4300 N
Waltham, M.A. 02154
USA
The Seller and the Buyer may from time to time change their
respective addresses (and the Seller may change their designated representative)
for the purpose of notification by giving a notice to the other Party indicating
a new address (or a new designated representative).
11.2 Further Acts
------------
Subject to the terms and conditions herein provided, each of the
parties agrees to use its best efforts to take or cause to be taken all
necessary action in accordance with applicable law to ensure that the conditions
set forth herein are satisfied and to perform in the most expeditious manner
possible the transactions contemplated in this Agreement.
11.3 Entire Agreement
----------------
This Agreement supersedes all prior exchanges of documents,
discussions and agreements between the parties with
<PAGE> 59
- 55 -
respect to the subject matter of this Agreement, and this Agreement, including
its Annexes and Schedules, and any document attached thereto, which are deemed
to be part of this Agreement, contains the entire agreement between the parties
hereto with respect to the subject matter hereof.
11.4 Waiver
------
Any term or condition of this Agreement may be waived at any time
by the party which is entitled to the benefit thereof; such waiver shall be in
writing and shall be executed by such party. A waiver on one occasion shall not
be deemed to be a waiver of the same or any other breach on a future occasion.
All remedies, provided either under this Agreement or by law, in the event of
breach by one or the other party in the performance of this Agreement, shall be
cumulative and not alternative.
11.5 Counterparts
------------
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
11.6 Third Party Rights
------------------
The provisions of this Agreement are intended solely for the
benefit of the parties hereto and do not confer third-party beneficiary rights
upon any other Person.
11.7 Governing Law
-------------
This Agreement shall be governed by the laws of France.
11.8 Parties Bound by Agreement - Successors and Assigns
---------------------------------------------------
This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns. Without the
prior written consent of the Buyer, the Seller may not assign its rights and/or
obligations hereunder or any part thereof to any other Person. The Buyer may,
before the Closing, designate one or more of its Affiliates to perform its
obligations and/or exercise its rights hereunder, in whole or in part, PROVIDED
that the Buyer shall be jointly and severally liable for the performance of such
obligations by such Affiliate(s).
11.9 Expenses
--------
Except as otherwise provided herein, the Seller and the Buyer
shall each pay all costs and expenses incurred by it or its behalf in connection
with this Agreement and the transactions contemplated hereby, including fees and
expenses of their or its own financial consultants, accountants and counsels.
<PAGE> 60
- 56 -
11.10 Headings
--------
The headings used in this Agreement have been inserted for the
convenience of the parties only and the parties represent that such headings are
not part of this Agreement and do not affect the meaning or interpretation
thereof.
11.11 Invalidity of a Provision
-------------------------
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect unless such
invalidity shall deprive a party to this Agreement of the material benefits to
which it is entitled or expected to receive hereunder. The parties shall amend
any invalid or unenforceable provision to the extent reasonably required to make
such provision valid or enforceable.
11.12 Transfer Taxes
--------------
The Buyer shall pay the transfer levy in an amount of FRF 20,000
(plus stamp taxes) in connection with the transfer of the Shares by the Seller
to the Buyer.
11.13 Jurisdiction
------------
All disputes arising in connection with this Agreement shall be
subject to the exclusive jurisdiction of the Paris Commercial Court.
11.14 Communications
--------------
The Buyer will agree with the Seller with respect to the contents
and timing of internal or external announcements or communications by the Buyer,
the Seller and their Affiliates relating to the operations contemplated in this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement in four originals as of the date first set forth above.
THE BUYER THE SELLER
By /S/ Richard Anderson By /S/ Francois Chaillou
------------------------------- ---------------------------------
Name: Mr. Richard Anderson Name: Mr. Francois Chaillou
Title: Director Title, Director
<PAGE> 1
EXHIBIT 10.1
LEASE AGREEMENT
BY AND BETWEEN
PARCEL 33B ASSOCIATES LIMITED PARTNERSHIP
AND
TASC, INC.
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS ..........................................1
ARTICLE II
PREMISES .............................................3
ARTICLE III
TERM .................................................3
ARTICLE IV
BASE RENT ............................................6
ARTICLE V
OPERATING CHARGES AND REAL ESTATE TAXES ..............7
ARTICLE VI
USE OF PREMISES .....................................10
ARTICLE VII
ASSIGNMENT AND SUBLETTING ...........................12
ARTICLE VIII
MAINTENANCE AND REPAIRS .............................15
ARTICLE IX
ALTERATIONS .........................................16
ARTICLE X
SIGNS ...............................................19
ARTICLE XI
RESERVED ............................................20
ARTICLE XII
HOLDING OVER ........................................20
ARTICLE XIII
INSURANCE ...........................................21
ARTICLE XIV
SERVICES AND UTILITIES ..............................22
ARTICLE XV
LIABILITY OF LANDLORD ...............................23
ARTICLE XVI
RULES ...............................................25
ARTICLE XVII
DAMAGE OR DESTRUCTION ...............................25
ARTICLE XVIII
CONDEMNATION ........................................26
ARTICLE XIX
DEFAULT .............................................26
ARTICLE XX
BANKRUPTCY ..........................................29
ARTICLE XXI
SUBORDINATION .......................................30
ARTICLE XXII
COVENANTS OF LANDLORD ...............................31
ARTICLE XXIII
GENERAL PROVISIONS ..................................32
ARTICLE XXIV
PARKING .............................................35
ARTICLE XXV
RENEWAL .............................................36
ARTICLE XXVI
EXPANSION ...........................................38
ARTICLE XXVII
CONTINGENCIES .......................................41
ARTICLE XXVIII
TENANT'S ONE-TIME TERMINATION OPTION ..................42
-i-
<PAGE> 3
EXHIBITS:
- ---------
EXHIBIT A-1 Plan Showing Premises I (Including Satellite Area)
EXHIBIT A-2 Plan Showing Premises II (Including Satellite Area)
EXHIBIT A-3 Visitor Parking Spaces Layout
EXHIBIT A-4 Illustrative Layout of Option Building
EXHIBIT B Work Agreement
EXHIBIT C Form of Certificate Affirming Dates
EXHIBIT D Rules
EXHIBIT E Measurement of Rentable Area
-ii-
<PAGE> 4
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT (this "Lease") is dated as of Apri1 29, 1996, by and
between PARCEL 33B ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited
partnership ("Landlord"), and TASC, INC., a Massachusetts corporation
("Tenant").
ARTICLE I
DEFINITIONS
-----------
1.1 Building: collectively, (a) a three (3) story office building
containing for all purposes hereunder one hundred fifty-three thousand
eighty-eight (153,088) square feet of rentable area with two (2) separate wings
of approximately seventy-six thousand five hundred forty-four (76,544) square
feet of rentable area each ("Phase I"), and (b) a three (3) story, one (1) wing
office building containing for all purposes hereunder eighty-eight thousand one
hundred ninety-five (88,195) square feet of rentable area ("Phase II"), to be
constructed by Landlord on the Land and to be located on Stonecroft Boulevard,
Chantilly, Fairfax County, Virginia, together with related parking areas and
facilities, roadways and driveways, and other amenities. For purposes of this
Lease, each of the aforesaid wings shall be referred to as a "Wing."
1.2 Premises: two hundred sixteen thousand six hundred seventy-four
(216,674) square feet of rentable area consisting of (a) one hundred
twenty-eight thousand four hundred seventy-nine (128,479) square feet of
rentable area constituting the entire rentable area of Phase I (exclusive of the
premises (the "Welkin Space") leased to Welkin Associates Ltd. ("Welkin")
pursuant to the lease between Landlord and Welkin dated of even date herewith
(the "Welkin Lease")) and outlined on Exhibit A-1 attached hereto ("Premises
I"), and (b) eighty-eight thousand one hundred ninety-five (88,195) square feet
of rentable area constituting the entire rentable area of Phase II and outlined
on Exhibit A-2 attached hereto ("Premises II"). The foregoing numbers as to
rentable area have been determined and certified by Davis Carter Scott, P.C.,
the Building architect, to the mutual satisfaction of Landlord and Tenant. Such
rentable square footage amounts shall be binding for all purposes under this
Lease and shall not be subject to reexamination for any reason whatsoever.
1.3 Tenant's Proportionate Share:
(a) If the Lease Commencement Date occurs before the date on which
Welkin takes occupancy of the Welkin Space (the "Welkin Occupancy Date") and
commences making payments on account of Operating Charges pursuant to the Welkin
Lease, then, during the period commencing on the first day of the Phase I
Move-In Period and continuing through the earlier to occur of (i) the day before
the Welkin Occupancy Date, or (ii) ninety (90) days after the Lease Commencement
Date, Tenant's Proportionate Share shall be 100%;
(b) During the period commencing on earlier of (i) the Welkin
Occupancy Date or (ii) ninety (90) days after the Lease Commencement Date, and
continuing through the day before the Phase II Commencement Date, Tenant's
Proportionate Share shall be 84.12%; and
(c) From and after the first day of the Phase II Move-In Period,
Tenant's Proportionate Share shall be 89.81%.
1.4 Initial Period Expiration Date: the last day of the one hundred
eightieth (180th) consecutive full calendar month from and after the Phase I
Commencement Date.
1.5 Anticipated Occupancy Date: (a) the "Anticipated Occupancy Date for
Phase I" is June 1, 1997; and (b) the "Anticipated Occupancy Date for Phase II"
is no earlier than July 1, 1998. Landlord and Tenant shall, to the extent
reasonably practicable, work together and make good faith efforts to attempt to
accelerate the permitting, planning and construction process in an effort to
complete Phase I prior to the Anticipated Occupancy Date for Phase I. Once
construction of the applicable Phase is commenced, Landlord shall diligently
pursue completion of construction of Premises I and Premises II, respectively,
in accordance with the schedule to be developed pursuant to Exhibit B.
1.6 Base Rent and Base Rent Rate:
(a) "Base Rent" shall be the sum of the Premises I Base Rent plus the
Premises II Base Rent. The initial "Premises I Base Rent" shall be One Million
Six Hundred Twelve
1
<PAGE> 5
Thousand Four Hundred Eleven Dollars ($1,612,411) for the first Lease Year
(which amount is the product of the Base Rent Rate for Premises I multiplied by
the number of square feet of rentable area in Premises I), divided into twelve
(12) equal monthly installments of One Hundred Thirty-Four Thousand Three
Hundred Sixty-Eight Dollars ($134,368) each for the first Lease Year.
(i) The initial "Premises II Base Rent" shall be One Million
One Hundred Forty Thousand Three Hundred Sixty-One Dollars ($1,140,361) for the
first Lease Year (which amount is the product of the Base Rent Rate for Premises
II multiplied by the number of square feet of rentable area in Premises II),
divided into twelve (12) equal monthly installments of Ninety-Five Thousand
Thirty Dollars ($95,030) each for the first Lease Year.
(ii) The Base Rent set forth above shall be adjusted annually
in accordance with Section 4.2.
(b) "Base Rent Rate" shall be the Base Rent Rate for Premises I or
the Base Rent Rate for Premises II, as applicable.
(i) The initial "Base Rent Rate for Premises I" shall be
twelve dollars and fifty-five cents ($12.55) per square foot of rentable area
in Premises I..
(ii) The initial "Base Rent Rate for Premises II" shall be
twelve dollars and ninety-three cents ($12.93) per square foot of rentable area
in Premises II.
(iii) The Base Rent Rates set forth above shall be adjusted
annually in accordance with Section 4.2.
(c) "Additional Rate I" and "Additional Rate II" - Pursuant to
Exhibit B, Tenant is entitled, under certain circumstances, to the Additional
Allowance I and the Additional Allowance II (each as defined in Exhibit B). If
Tenant elects to use all or any portion of the Additional Allowance I or the
Additional Allowance II, respectively, then, within one hundred twenty (120)
days after the Phase I Commencement Date or Phase II Commencement Date, as
applicable, Landlord shall (A) include in and add to the Base Rent Rate for
Premises I or the Base Rent Rate for Premises II, as applicable, an amount (the
"Additional Rate I" or "Additional Rate II," as applicable) equal to fifteen
and 25/100 cents ($.1525) for every dollar ($1.00), or portion thereof, of the
applicable Additional Allowance elected, and (B) deliver to Tenant a statement
setting forth in reasonable detail the adjustment made and the calculations
used in deriving same. (For example, if the Additional Allowance I is equal to
$1.63 per rentable square foot, then the Additional Rate I would be, and the
Base Rent Rate for Premises I would be increased by, $.25 per rentable square
foot.) Said increase to the applicable Base Rent Rate shall be made retroactive
to the applicable Commencement Date and shall be in addition to any and all
other adjustments to be made pursuant to Section 4.2 of the Lease. Tenant shall
pay any amount due on account of such retroactive adjustment within thirty (30)
days after receipt of such statement.
1.7 Base Rent Annual Escalation Percentage: three percent (3%) for lease
years two (2) through twelve (12) and two and one-half percent (2-1/2%) for
lease years thirteen (13) through fifteen (15).
1.8 [Reserved]
1.9 Brokers: (a) The Mark Winkler Company; (b) Stephen G. Kasnet; and (c)
Cushman & Wakefield.
1.10 Tenant Address for Notices: (a) 55 Walkers Brook Drive, Reading,
Massachusetts 02167 (Attn: Corporate Facilities Manager), until Tenant has
commenced business operations in Premises I; and (b) at Premises I (Attn:
Corporate Facilities Manager) after Tenant has commenced business operations in
Premises I.
1.11 Complex: that complex of land and buildings (of which the Land and
the Building are to be a part) known as Parcel 33B of Westfields Corporate
Center, including all easements, rights and appurtenances thereto (including
private streets, storm detention facilities and any other service facilities now
or hereafter constructed), and located on approximately twenty-five and 75/100
(25.75) acres of land within the Westfields Corporate Center (the "Park"). The
"Land" is approximately twelve and eighty nine hundredths (12.89) acres of land
within the Complex upon which the Building is to be built, and includes all
parking areas, equipment areas and access roads relating to the Building. That
buildable portion of the Complex that is not comprised of the Land is sometimes
referred to herein as the "Remainder Parcel."
2
<PAGE> 6
1.12 [Reserved]
1.13 Landlord Address for Notices: c/o The Mark Winkler Company, 4900
Seminary Road, Suite 900, Alexandria, Virginia 22311 (Attn: President), with a
copy to c/o The Mark Winkler Company, 4900 Seminary Road, Suite 900, Alexandria,
Virginia 22311 (Attn: General Counsel).
1.14 Parking Spaces that number of parking spaces equal to the product of
(a) .0035 (I.E., the quotient of three and one-half (3 1/2) divided by one
thousand (1,000)), multiplied by (b) the number of rentable square feet of
rentable area in the Premises from time to time. (For example, based on the
square footage specified in Section 1.2, the number of Parking Spaces as of the
Phase I Commencement Date (as defined in Section 3.2) will be 437, and the total
number of Parking Spaces as of the Phase II Commencement Date (as defined in
Section 3.2) will be 752 for both Phase I and Phase II, all subject to the
provisions of Article XXIV).
ARTICLE II
PREMISES
--------
2.1 Tenant leases the Premises from Landlord upon the terms stated
herein. Tenant will have the non-exclusive right to use for their intended
purpose the areas of the Building designated by Landlord from time to time as
common and public space, subject to all of the terms and conditions of this
Lease and the rules and regulations promulgated by Landlord hereunder. So long
as Tenant is leasing at least the number of square feet of rentable area of the
initial Premises set forth in Section 1.2 pursuant to the terms of this Lease,
then such common and public space shall be deemed to consist of only (a) the
first floor main lobby, entrances and entrance corridors, (b) the two (2) first
floor corridors of the East Wing of Premises I (leading to the Cafeteria and the
loading area), and (c) any areas on or outside the Building (excluding the
Satellite Area). If at any time Tenant is leasing less than the number of square
feet of rentable area of the initial Premises set forth in Section 1.2 pursuant
to the terms of this Lease, then the definition of such common and public space
shall be revised as determined by the Building architect, subject to Tenant's
prior approval (which approval shall not be unreasonably withheld, conditioned
or delayed), taking into account the security requirements imposed upon Tenant
by the U.S. Government. Tenant will have the exclusive right to access and use
the Satellite Area (as defined in Section 9.4), subject to all applicable terms
and conditions of this Lease (including, without limitation, Section 9.4).
Except as provided in this Section 2.1, Section 9.4 (concerning roof rights),
Section 10.2 (concerning exterior signage), and Article XXIV (concerning
parking), the lease of the Premises does not include the right to use any
exterior or structural element of the Building, or the Land, and includes no
other rights not specifically set forth in this Lease.
2.2 The standard of measurement set forth on Exhibit E attached hereto
governs and controls all calculations in this Lease relating to the rentable
area of the Premises.
ARTICLE III
TERM
----
3.1 (a) The terms and conditions of this Lease shall be effective from
and after the date of execution of this Lease by Landlord and Tenant. The "Lease
Term" shall be the period commencing on that date (the "Lease Commencement
Date") which is the Phase I Commencement Date (as defined in Section 3.2), and,
unless otherwise terminated sooner in accordance with the terms of this Lease,
continuing thereafter through and including the Initial Period Expiration Date
set forth in Section 1.4. The Lease Term shall also include any properly
exercised renewal or extension of the term of this Lease. The initial Lease Term
with respect to both Premises I and Premises II are scheduled to expire on the
same date.
(b) Provided no default by Tenant has occurred hereunder, Tenant and
its contractors shall have a thirty (30) day period prior to the Phase I
Commencement Date in which to move furniture, equipment, or trade fixtures into
Phase I (the "Phase I Move-In Period"), subject to the terms and conditions of
this subsection, all other applicable provisions of this Lease (including
Article IX), and Landlord's reasonable rules and regulations. The "Phase I
Move-In Period" shall commence on the earlier to occur of (i) the date that
Landlord obtains, with respect to the work in Phase I that Landlord is required
to perform pursuant to Exhibit B, a certificate of
3
<PAGE> 7
substantial completion from the Building's architect; or (ii) the date that
Tenant, with the consent of Landlord, commences its Phase I Move-In
notwithstanding that the foregoing certificate has not been issued, and such
move in period shall end on the thirtieth (30th) day thereafter, which shall be
the Phase I Commencement Date. Notwithstanding the foregoing, no access shall be
permitted pursuant to this subsection unless Tenant shall first deliver written
evidence to Landlord that all insurance required by Article XIII is in full
force and effect, and the failure to provide such evidence of insurance or to
commence Tenant's move in shall not delay the Phase I Commencement Date. At
Tenant's request from time to time, Landlord will use reasonable efforts to
inform Tenant of Landlord's good faith determination of the date on which the
Phase I Move-In Period will commence. In any event, Landlord shall provide
Tenant with at least thirty (30) days' prior written notice of the date on which
the Phase I Move-In Period is projected to commence. Any and all activity by
Tenant or any Invitee during the Phase I Move-In Period shall be coordinated
with Landlord and its general contractor to ensure that Tenant's activities in
Premises I during the Phase I Move-In Period do not interfere with any punch
list or other work being performed by Landlord and its contractors. If Landlord
reasonably determines that Tenant or any Invitee is interfering with Landlord's
work in Premises I, then Landlord shall have the right to require the offending
party to leave Premises I, and, in any such event, Tenant shall have no right to
assert that the Phase I Commencement Date or Tenant's other obligations under
the Lease are affected thereby. During the Phase I Move-In Period, neither
Tenant nor any Invitee shall unreasonably delay or otherwise inhibit the work
being performed by Landlord or Landlord's agents, contractors or employees.
Landlord shall not be responsible for, nor shall the Phase I Commencement Date
be delayed as a result of, any delay in the issuance of any permit for the
Premises caused by or related to Tenant's activities during the Phase I Move-In
Period. Landlord shall provide all services required hereunder and necessary for
Tenant's occupancy during the Phase I Move-In Period, and Tenant shall be
responsible for the payment of all Operating Charges during the Phase I Move-In
Period. In addition, all of the provisions of this Lease (including, without
limitation, all insurance, indemnity and lien removal provisions) shall apply to
Premises I during the Phase I Move-In Period, except that during the Phase I
Move-In Period, Tenant shall not be obligated to pay Premises I Base Rent.
(c) Provided no default by Tenant has occurred hereunder, Tenant and
its contractors shall have a thirty (30) day period prior to the Phase II
Commencement Date in which to move furniture, equipment, or trade fixtures
into Phase II (the "Phase II Move-In Period"), subject to the terms and
conditions of this subsection, all other applicable provisions of this Lease
(including Article IX), and Landlord's reasonable rules and regulations. The
Phase II Move-In Period shall commence on the earlier to occur of (i) the date
that Landlord obtains, with respect to the work in Phase II that Landlord is
required to perform pursuant to Exhibit B, a certificate of substantial
completion from the Building's architect; or (ii) the date that Tenant, with
the consent of Landlord, commences its Phase II Move-In notwithstanding that
the foregoing certificate has not been issued, and such move in period shall
end on the thirtieth (30th) day thereafter, which shall be the Phase II
Commencement Date Notwithstanding the foregoing, no access shall be permitted
pursuant to this subsection unless Tenant shall first deliver written evidence
to Landlord that all insurance required by Article XIII is in full force and
effect, and the failure to provide such evidence or to commence Tenant's move
in shall not delay the Phase II Commencement Date. At Tenant's request from
time to time, Landlord will use reasonable efforts to inform Tenant of
Landlord's good faith determination of the date on which the Phase II Move-In
Period will commence. In any event, Landlord shall provide Tenant with at least
thirty (30) days' prior written notice of the date on which the Phase II
Move-In Period is projected to commence. Any and all activity by Tenant or any
Invitee during the Phase II Move-In Period shall be coordinated with Landlord
and its general contractor to ensure that Tenant's activities in and to
Premises II during the Phase II Move-In Period do not interfere with any punch
list or other work being performed by Landlord and its contractors. If Landlord
reasonably determines that Tenant or any Invitee is interfering with Landlord's
work in Premises II, then Landlord shall have the right to require the
offending party to leave Premises II, and, in any such event, Tenant shall have
no right to assert that the Phase II Commencement Date or Tenant's other
obligations under the Lease are affected thereby. During the Phase II Move-In
Period, neither Tenant nor any Invitee shall unreasonably delay or otherwise
inhibit the work being performed by Landlord or Landlord's contractors, agents
or employees. Landlord shall not be responsible for, nor shall the Phase II
Commencement Date be delayed as a result of, any delay in the issuance of any
permit for the Premises caused by or related to Tenant's activities during the
Phase II Move-In Period. Landlord shall provide all services required hereunder
and necessary for Tenant's occupancy during the Phase II Move-In Period, and
Tenant shall be responsible for the payment of all utility
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costs and expenses of any kind, as well as Tenant's Proportionate Share of all
other Operating Charges, during the Phase II Move-In Period. In addition, all of
the provisions of this Lease (including, without limitation, all insurance,
indemnity and lien removal provisions) shall apply to Premises II during the
Phase II Move-In Period, except that during Tenant shall not be obligated to pay
Premises II Base Rent.
3.2 (a) The "Phase I Commencement Date" shall be that date which is thirty
(30) days after the Phase I Move-In Date. For purposes of determining the Phase
I Move-In Date, Premises I shall be deemed to be substantially complete when the
work and materials for Phase I to be provided therein by Landlord pursuant to
Exhibit B attached hereto (except for items of work and adjustment of equipment
and fixtures that can be completed during the Phase I Move-In Period or after
Premises I is occupied without causing substantial interference with Tenant's
use of Premises I (i.e., the "punch list" items)) have been completed, as
determined by the Building's architect. Tenant shall not have the right to
commence occupancy for business operations in, or begin to move furniture,
furnishings, inventory, equipment or trade fixtures into, Premises I or any
portion thereof until Premises I is substantially completed; provided, however,
that if Premises I is constructed in such a manner that one or more full floors
are substantially completed before the entire Premises I is substantially
completed (Landlord having no obligation to do so, however), and if Tenant
desires to occupy such full floor(s) earlier than originally contemplated, then
Landlord and Tenant shall agree on a commencement date for both occupancy and
rent with respect to such full floor(s) (consistent with the terms of this
Lease), and, prior to any such occupancy, enter into a mutually acceptable
amendment to this Lease in connection therewith. Notwithstanding the foregoing,
if Landlord shall be delayed in completing the work and materials to be provided
to Premises I pursuant to Exhibit B or in obtaining the necessary approvals or
certificates as a result of (1) Tenant's failure to comply with any of its
duties and obligations under this Lease or with any deadlines specified in
Exhibit B, (2) Tenant's request for modifications to plans or working drawings
subsequent to the date such plans or working drawings are approved by Tenant,
(3) Tenant's failure to pay when due any amount required pursuant to Exhibit B,
unless such payment is disputed by Tenant in good faith and the failure to pay
does not result in any liens on the Premises, (4) Tenant's request for
materials, finishes or installations identified by Landlord at the time ordered
by Tenant to be long-lead type items, (5) the performance or timing of any work
prior to substantial completion, or the entry into the Premises prior to
substantial completion, by Tenant or any person or firm employed or retained by
Tenant, or (6) any other action or inaction of Tenant or any Invitee which has a
demonstrable impact on the Landlord's ability to pursue the work required for
Phase I pursuant to Exhibit B (each, a "Tenant Delay"), then the Phase I
Commencement Date shall be that date that the Building's architect determines in
its sole judgment on which the certificate of substantial completion would have
been issued had such Tenant Delay(s) not occurred. Landlord shall provide Tenant
with notice of any such Tenant Delays periodically or as the same shall occur,
and shall provide Tenant with notice whenever Landlord believes that Tenant's
failure to respond to a request for information or a requested decision is
resulting in Tenant Delay. Pursuant to the terms of Exhibit B, Landlord and
Tenant shall arrive at a mutually agreeable schedule detailing tasks, deadlines
and response times with respect to the preparation and approval of programming,
space plans and working drawings for Phase I.
(b) The "Phase II Commencement Date" shall be that date which is thirty
(30) days after the Phase II Move-In Date. For purposes of determining the Phase
II Move-In Date, Premises II shall be deemed to be substantially complete when
the work and materials for Phase II to be provided therein by Landlord pursuant
to Exhibit B attached hereto (except for items of work and adjustment of
equipment and fixtures that can be completed during the Phase II Move-In Period
or after Premises II is occupied without causing substantial interference with
Tenant's use of Premises II (i.e., the "punch list" items)) have been completed,
as determined by the Building's architect. Tenant shall not have the right to
commence occupancy for business operations in, or begin to move furniture,
furnishings, inventory, equipment or trade fixtures into, Premises II or any
portion thereof until Premises II is substantially completed; provided, however,
that if Premises II is constructed in such a manner that one or more full floors
are substantially completed before the entire Premises II is substantially
completed (Landlord having no obligation to do so, however), and if Tenant
desires to occupy such full floor(s) earlier than originally contemplated, then
Landlord and Tenant shall agree on a commencement date for both occupancy and
rent with respect to such full floor(s) (consistent with the terms of this
Lease), and, prior to such occupancy, enter into a mutually acceptable amendment
to this Lease in connection therewith. Notwithstanding the foregoing, if
Landlord shall be delayed in completing the work
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and materials to be provided to Premises II pursuant to Exhibit B or in
obtaining the necessary approvals or certificates as a result of any Tenant
Delay, then the Phase II Commencement Date shall be the date that the Building's
architect determines in its sole judgment on which the certificate of
substantial completion would have been issued had such Tenant Delay(s) not
occurred. Landlord shall provide Tenant with notice of any such Tenant Delays
periodically or as the same shall occur, and shall provide Tenant with notice
whenever Landlord believes that Tenant's failure to respond to a request for
information or a requested decision is resulting in Tenant Delay. Pursuant to
the terms of Exhibit B, Landlord and Tenant shall arrive at a mutually agreeable
schedule detailing tasks, deadlines and response times with respect to the
preparation and approval of programming, space plans and working drawings for
Phase II.
(c) Promptly after each of the Lease Commencement Date/Phase I
Commencement Date and the Phase II Commencement Date (each, a "Commencement
Date") is ascertained, Landlord may provide Tenant with a certificate
(substantially in the form of Exhibit C attached hereto) confirming such date.
3.3 It is presently anticipated that Premises I will be delivered to
Tenant on or about the Phase I Anticipated Occupancy Date and that Premises II
will be delivered to Tenant on or about the Phase II Anticipated Occupancy Date.
If Landlord does not complete construction and deliver possession of Premises I
or Premises II by the applicable date, then Landlord shall not have any
liability whatsoever, and this Lease shall not be rendered void or voidable on
account thereof (except as may otherwise be provided in Article 27).
3.4 "Lease Year" shall mean a period of twelve (12) consecutive months
commencing on the Lease Commencement Date and each successive twelve (12) month
period thereafter; provided, however, that if the Lease Commencement Date is not
the first day of a month, then the second Lease Year shall commence on the first
day of the month in which the first anniversary of the Lease Commencement Date
occurs.
ARTICLE IV
BASE RENT
---------
4.1 During the Lease Term, Tenant shall pay to Landlord as annual base
rent for the Premises, without set-off, deduction or demand, the Base Rent (as
the same may be adjusted pursuant to Section 1.6 (c)), which amount is subject
to upward adjustment from time to time as provided in Section 4.2 below. Tenant
shall begin paying Premises I Base Rent on the Phase I Commencement Date and
Premises II Base Rent on the Phase II Commencement Date. The Base Rent shall be
divided into twelve (12) equal monthly installments (as appropriate) and each
such monthly installment shall be due and payable in advance on the first day of
each month during each Lease Year. Concurrently with Tenant's execution of this
Lease, Tenant shall pay an amount equal to one (1) monthly installment of
Premises I Base Rent payable with respect to the first full calendar month of
the Lease Term from and after the Phase I Commencement Date (the "Deposit"),
which amount shall be held by Landlord as a short-term security deposit to
secure Tenant's full and faithful performance of all of its obligations under
this Lease. If any sum payable by Tenant to Landlord shall be due and unpaid, or
if Landlord makes any payment on behalf of Tenant, or if Landlord suffers any
loss, cost or expense as a result of Tenant's non-performance of any obligation
or covenant herein, then Landlord, at its option and without limiting any other
remedy, may use and apply any part of the Deposit to compensate Landlord for the
payments not made or the loss, cost or expense suffered by Landlord. The Deposit
(less such portion thereof as Landlord may have then used or reserved to satisfy
Tenant's obligations under this Lease) shall be credited toward the monthly
installment of the Premises I Base Rent due and payable for the first full
calendar month after the Phase I Commencement Date. If any Commencement Date is
not the first day of a month, then the applicable portion of Base Rent from the
applicable Commencement Date until the first day of the following month shall be
prorated on a per diem basis at the rate of one-thirtieth (1/30th) of the
monthly installment of the applicable portion of Base Rent then payable, and
Tenant shall pay such prorated installment in advance on the applicable
Commencement Date.
4.2 Commencing on the first (1st) day of the second (2nd) Lease Year and
on the first (1st) day of every Lease Year thereafter during the Lease Term, the
Base Rent (or Base Rent Rate, as applicable) in effect shall be increased by the
product of (i) the then-applicable Base
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Rent Annual Escalation Percentage and (ii) the Base Rent (or Base Rent Rate, as
applicable) in effect immediately before the increase.
4.3 All sums payable by Tenant under this Lease shall be paid to Landlord
in legal tender of the United States, without setoff, deduction or demand, at
the address to which notices to Landlord are to be given or to such other party
or such other address as Landlord may designate in writing. Landlord's
acceptance of any payment after it shall have become due and payable shall not
excuse a delay upon subsequent occasions nor constitute a waiver of rights,
notwithstanding any endorsement or restriction that Tenant may include with such
payment. If Tenant shall have been in default hereunder, Landlord may at any
time thereafter require that Base Rent and additional rent due hereunder be paid
by certified check.
4.4 Except for those structural repair obligations expressly assumed by
Landlord as set forth in Section 8.2, Tenant shall pay, and the Base Rent and
additional rent payable during the Lease Term shall be net of all Operating
Charges, Real Estate Taxes, or insurance costs, and free of, all expenses,
charges, diminution or other offsets or deductions whatsoever, and all costs and
obligations of every kind and nature relating to the Premises and the Building
shall be paid by Tenant.
ARTICLE V
OPERATING CHARGES AND REAL ESTATE TAXES
---------------------------------------
5.1 For purposes of this Article V, the term "Building" shall be deemed to
include the Land.
5.2 (a) Tenant shall pay as additional rent to Landlord Tenant's
Proportionate Share of all Operating Charges (as defined in Section 5.2(b)) for
each calendar year falling entirely or partly within the Lease Term. Tenant's
Proportionate Share with respect to Operating Charges is that percentage which
is equal to a fraction, the numerator of which is the number of square feet of
rentable area in the Premises, and the denominator of which is the number of
square feet of rentable area in the Building (excluding the number of square
feet of rentable area of any storage, roof or garage space).
(b) "Operating Charges" shall mean all costs and expenses incurred in
connection with the ownership, operation, maintenance, repair, management, and
administration of the Building, including, but not limited to: (1) electricity,
gas, water, sewer, power, natural gas, fuel oil and other utility charges
(including surcharges and connection fees) of every type and nature; (2) without
limitation of Tenant's right to approve insurance deductibles and coverage to
the extent provided in Article XIII hereof, the cost of insurance premiums,
insurance deductibles and other charges with respect to all insurance relating
to the Building, the operation and maintenance thereof, and the equipment used
in connection therewith, including, without limitation, all insurance of any
kind which Landlord is required or permitted to obtain under this Lease) and the
cost of health and short term disability insurance, which risks Landlord has
previously elected to self-insure; (3) management fees payable to Landlord's
managing agent for the Building ("Managing Agent") (who, as of the Lease
Commencement Date, shall be The Mark Winkler Company), which management fees
shall be deemed to be an annual fee of forty-five cents ($.45) per square foot
of rentable area of the Building, as such fee shall be increased on the first
and each succeeding anniversary of the Phase I Commencement Date by the product
of three percent (3%) multiplied by the fee in effect immediately before the
increase (the "Management Fee"); (4) Building operating personnel costs and
related overhead; (5) Real Estate Taxes (as defined in Section 5.3); (6) costs
of service, access control, and maintenance contracts; (7) maintenance, re-
decoration and repair expenses; (8) the cost of capital expenditures reasonably
necessary to keep the Building in first class condition and working order, or to
comply with any legal requirements (other than any notice of violation that
results from Landlord's failure to construct the Building in accordance with the
approved plans and specifications); (9) charges for janitorial, cleaning, ac-
cess control, window cleaning, pest and termite control, and snow and trash
removal services; (10) dues, assessments, and other fees imposed by the owners
association for Westfields, or pursuant to those certain covenants recorded as
an encumbrance on title to the Land relating to Oakhill Park, including
assessments imposed to finance capital improvements in common areas; (11) any
business, professional and occupational license tax payable with respect to the
Building or the operation thereof; (12) reasonable reserves for replacements,
repairs and contingencies established pursuant to an annual budget or required
by Landlord's mortgagee; (13) any cost or
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expense incurred by Landlord in administering any transportation management
program required by any governmental agency or instrumentality after the
execution of this Lease; (14) reasonable auditing and accounting fees; (15)
reasonable legal and other professional fees; (16) all miscellaneous taxes and
assessments (special and general) (including, without limitation, all sales and
excise taxes on the expenditures enumerated in this Section 5.2(b) and the taxes
set forth in Section 6.2); and (17) any other necessary expense incurred in
connection with or as a result of the ownership, management, maintenance,
repair, operation or administration of the Building.
(c) Operating Charges shall not include: principal or interest payments on
any mortgage, deed of trust or ground lease; leasing commissions payable by
Landlord; depreciation of the Building (except as specified above);
out-of-pocket costs and legal fees related solely to the financing of the
Building by Landlord; and the cost of any item for which Landlord is
specifically responsible pursuant to Section 8.2. Tenant shall make estimated
monthly payments to Landlord on account of the Operating Charges that are
expected to be incurred during each calendar year. The amount of such monthly
payments shall be determined as follows. At the beginning of the Lease Term and
at the beginning of each calendar year thereafter, Landlord shall submit to
Tenant a budget (which shall include a maintenance plan for all Building
operating equipment) setting forth the amount of Operating Charges reasonably
expected to be incurred during the relevant calendar year (or portion thereof)
and a statement reflecting the calculation of Tenant's Proportionate Share
thereof. So long as Tenant occupies at least seventy-five percent (75%) of the
rentable area of the Building, Landlord shall consult with Tenant in the
preparation of said budget. Tenant shall be entitled to recommend changes in
said budget, provided the same do not adversely affect the ownership, operation
or maintenance of the Building as a first-class office building and are
consistent with the standards imposed upon Landlord by its lenders. Tenant shall
pay to Landlord, monthly in advance, on the first day of each month following
receipt of such budget during such calendar year, an amount equal to Tenant's
Proportionate Share of the anticipated Operating Charges multiplied by a
fraction, the numerator of which is 1, and the denominator of which is the
number of months during such calendar year which fall within the Lease Term. If,
however, Landlord shall submit such budget for a calendar year subsequent to the
commencement thereof, then: (1) until the first day of the month following the
month in which such budget is furnished to Tenant, Tenant shall pay to Landlord
on the first day of each month an amount equal to the monthly sum which was
payable by Tenant to Landlord under this Section for the last month of the
preceding calendar year; (2) promptly after such budget is furnished to Tenant,
or together therewith, Landlord shall give notice to Tenant stating whether the
monthly installments previously made for such calendar year were greater or less
than the monthly installments to be made for such calendar year in accordance
with such budget, and (A) if there shall be a deficiency, Tenant shall pay the
amount thereof as additional rent due hereunder, (B) if there shall have been an
overpayment, Landlord shall credit the amount thereof against the next
payment(s) payable by Tenant under this Section, and (c) on the first day of the
month following the month in which such budget is furnished to Tenant, and
monthly thereafter through the remainder of such calendar year, Tenant shall pay
to Landlord the appropriate amount based on such budget. If changes to the
previously approved budget are necessitated by expenses or circumstances allowed
as Operating Charges and not anticipated by such budget, Landlord may at any
time or from time to time furnish to Tenant a revised budget for such calendar
year, and in such case, Tenant's payments of anticipated Operating Charges for
such calendar year shall be adjusted in the same manner as is provided in the
immediately preceding sentence. After the end of each calendar year, Landlord
shall submit to Tenant a statement showing in reasonable detail (1) the amount
of Operating Charges incurred during the preceding calendar year (and Tenant's
Proportionate Share thereof), and (2) the aggregate amount of estimated payments
made by Tenant on account of Operating Charges during such year. If such
statement indicates that the aggregate amount of such estimated payments exceeds
Tenant's actual liability, then the excess shall be credited to Tenant against
its next estimated payment(s) due under this Article V. If such statement
indicates that Tenant's actual liability exceeds the aggregate amount of such
estimated payments, then Tenant shall pay the amount of such excess within
thirty (30) days after receipt of such statement. If Tenant does not notify
Landlord in writing of any objection to such statement within thirty (30) days
after receipt, then Tenant shall be deemed to have waived such objection. If
Tenant objects to anything contained in such statement, Tenant may, after paying
the amount set forth in such statement, notify Landlord in writing of its
objections. Landlord shall review such objections and furnish to Tenant
reasonable documentation of the specific items of expense to which Tenant has
objected in writing. In addition, if Tenant timely objects to such statement and
provided that Tenant has timely paid the amount set forth in such statement,
then, for a period of ninety (90) days after Tenant's receipt of such statement,
Tenant, or an independent,
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certified public accountant (who is hired by Tenant on a non-contingent fee
basis and who offers a full range of accounting services) designated by Tenant
and reasonably acceptable to Landlord, shall have the right, during regular
business hours and after giving at least ten (10) days' advance written notice
to Landlord, to inspect and expeditiously and diligently complete an audit of
the Building's books and records relating to Operating Charges for which such
statement was rendered; or, at Landlord's sole discretion and in lieu of such
audit, or Landlord will provide Tenant with an audited statement. If either
Landlord or Tenant disagrees with the audit provided by the other, then Landlord
and Tenant's auditor shall together select a neutral auditor of similar
qualifications to conduct an audit of such books and records, and the
determination reached by such neutral auditor shall be final and conclusive. If
the determinative audit or audited statement shows that the amount paid by
Tenant on account of Operating Charges is less than the actual amount owed,
Tenant shall pay the shortfall to Landlord within thirty (30) days after receipt
of the determinative audit or audited statement. If such audit or audited
statement shows that the amounts paid by Tenant to Landlord on account of
Operating Charges exceed the actual amount owed, Tenant shall receive a credit
in the amount of such excess toward the next monthly payment(s) of Operating
Charges due hereunder. All costs and expenses of any audit or audited statement
shall be paid by Tenant; provided, however, that if the determinative audit or
audited statement shows that the aggregate amount of Operating Charges set forth
in the applicable Operating Charges statement was overstated by more than ten
percent (10%), then Tenant shall be reimbursed for the reasonable,
out-of-pocket costs and expenses incurred by Tenant in connection therewith.
5.3 "Real Estate Taxes" shall mean (1) all real estate taxes,
including general and special assessments (including, without limitation, those
due as a result of the Land being in the Route 28 taxing district), ordinary
and extraordinary, foreseen and unforeseen, which are imposed or levied upon
Landlord or assessed against the Building and/or the Land or Landlord's
personal property used in connection therewith, (2) any other present or future
taxes or governmental charges that are imposed upon Landlord or assessed
against the Building or the Land which are in the nature of or in substitution
for real estate taxes, including any tax levied on or measured by the rents
payable by tenants of the Building, and (3) all penalties, late fees, charges
and other expenses (including attorneys' fees) associated with the foregoing or
incurred in reviewing or seeking a reduction of any real estate taxes;
provided, that Tenant shall not be responsible for the payment of any penalties
or late fees or charges resulting from the late payment of Real Estate Taxes if
Tenant has timely paid to Landlord Tenant's Proportionate Share of Real Estate
Taxes and Landlord nonetheless is late in paying the Real Estate Taxes and
consequently incurs a penalty or interest liability for late payment. Real
Estate Taxes shall not include income taxes or estate or inheritance taxes.
(a) Landlord shall deliver to Tenant copies of all tax assessment
notices and bills promptly after receipt thereof. If Landlord fails or otherwise
elects not to appeal the Real Estate Tax assessment for any year, then Tenant
shall have the right, by giving Landlord written notice thereof, to compel
Landlord to do so; provided, however, that Tenant shall pay, or reimburse
Landlord for, all costs and expenses (including, without limitation, appraisal
fees, court costs, reasonable attorneys' and accountants' fees, and additional
fees to and expense of Managing Agent) incurred in connection with any such
appeal (whether same relate to the year initially appealed or to some prior
year).
5.4 For so long as the Building is operated as part of a complex of
buildings or in conjunction with other buildings, whether under the protective
covenants or agreements for Westfields or for Oakhill Park or otherwise, Tenant
shall be responsible for its pro rata share of the common expenses and costs
with respect to each such building in such manner as shall be provided in such
covenants and agreements or otherwise as Landlord, in its sole but not arbitrary
judgment, shall determine. All payments required to be made by Tenant pursuant
to this Article, whether to Landlord or any other person or entity, shall be
deemed to be additional rent payable pursuant to this Lease and shall be paid by
Tenant no later than thirty (30) days after the date Tenant is notified of the
amount thereof.
5.5 If the average occupancy rate for the Building during any calendar
year is less than ninety five percent (95%), or if any tenant is separately
paying for electricity or janitorial services furnished to its premises, or if
any tenant does not desire or require electricity or janitorial services
available to its premises, then Operating Charges for such calendar year shall
be deemed to include all additional costs and expenses, as reasonably estimated
by Landlord, which would have been incurred during such calendar year if such
average occupancy rate had been
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ninety five percent (95%) and if electricity and janitorial services had been
furnished to all of such premises and paid for by Landlord. For example, if the
average occupancy rate for the Building during a calendar year is eighty percent
(80%), and if the janitorial contractor charges are $1.00 per square foot of
occupied rentable area per year, and if the Building contains one hundred
thousand (100,000) square feet of rentable area, then it would be reasonable for
Landlord to estimate that if the Building had been ninety five percent (95%)
occupied during such year, then janitorial charges for such year would have been
ninety five thousand dollars ($95,000).
ARTICLE VI
USE OF PREMISES
---------------
6.1 (a) Tenant shall use and occupy the Premises solely for general
office purposes, and for no other use or purpose. Notwithstanding the foregoing,
Tenant shall have the right to use approximately nine thousand (9,000) square
feet of Premises I (as designated on Exhibit A-1) for ancillary use as an
in-house dining room/cafeteria, which cafeteria (the "Cafeteria") shall be used
primarily by Tenant's employees, but which may also be used by Tenant's
prospective employees, prospective contractors, clients, and permitted assignees
and subtenants. Use of the Cafeteria shall be governed by all of the applicable
terms and conditions of this Lease, including the following provisions:
(i) The Cafeteria shall contain (A) individual hair interceptors
on all sinks, basins and special sanitary units which may in any way receive
human or animal hair, and (B) adequately sized and ventilated grease
interceptors (and oil splitters and acid neutralizers) for scullery sinks,
pre-wash sinks, dishwashers and any other kitchen unit. Landlord shall have the
right to approve the location inside the Cafeteria for installation of such
grease interceptors. Such devices shall bear the seal of the Plumbing Drainage
Institute (PDI). Tenant, at Tenant's sole expense, shall inspect, maintain and
repair all filtration devices (including grease traps, oil splitters and acid
neutralizers) serving the Cafeteria. Tenant, at Tenant's sole expense, shall
provide all janitorial (including trash removal) and cleaning services, and pest
and termite control services, for the Cafeteria. At least once per month, Tenant
shall clean any grease interceptors (and related equipment) located within or
serving the Cafeteria. All such services shall be provided in accordance with
standards customary for first class cafeterias and dining rooms. Tenant shall
ensure that the operator of the cafeteria takes reasonable measures to ensure
that no odors therefrom are disseminated into the Building. If odors are
disseminated from the cafeteria to the Building and Landlord has constructed the
Building HVAC systems in accordance with the plans and specifications and
engineering drawings developed by E.K. Fox & Associates and approved by Fairfax
County (as conclusively evidenced by the Building architect's issuance of a
certificate of substantial completion) Tenant shall install and maintain, at its
sole expense, all necessary supplemental HVAC systems and equipment to reduce
such odors to an acceptable level. Tenant, at its sole expense, shall install
and maintain fire extinguishers and other fire protection devices as may be
required from time to time by any agency having jurisdiction and/or the
underwriters insuring the Building. If any bureau, department or official of the
federal, state or county government requires the installation of any changes,
modifications or alterations in the sprinkler system or additional sprinkler
heads or other equipment (hereinafter collectively "sprinkler changes") as a
result of the use of the Premises for other than general office purposes, or if
any such sprinkler changes become necessary as a result of the use of the
Premises for other than general office purposes to prevent the imposition of a
penalty or charge against the full allowance for a sprinkler system in the fire
insurance rates set by a fire insurance company, then Landlord shall have the
right to make (at Tenant's sole expense) such changes as required.
(ii) Tenant, at its sole expense, shall provide for the neat and
sanitary storage of trash, garbage and other debris in enclosed rat-proof
containers inside of the Cafeteria and shall, at least once per day and in a
reasonable manner, remove said trash, garbage and debris to the areas outside of
the Building designated for same by Landlord. Tenant shall bear the cost of any
and all special facilities for the disposal, storage and compacting of such
trash, garbage and debris in any way associated with the Cafeteria. Tenant, at
its sole expense, shall maintain Tenant's trash compactor(s) or dumpster(s) with
a contractor reasonably approved by Landlord. Such maintenance shall include,
without limitation, requiring (A) such trash compactor(s) or dumpster(s) to be
emptied at least daily, (B) emergency trash services to be available at all
times on an "as call" basis, and (c) such trash compactor(s) or dumpster(s) to
be steam cleaned as
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reasonably necessary as determined by Landlord. Tenant shall provide at Tenant's
sole expense complete exterminating service to the Premises (and at Landlord's
option the immediate area around Tenant's trash compactor(s) or dumpster(s)) at
least once every four (4) weeks, or more often as reasonably determined by
Landlord.
(iii) All food, beverage and other items delivered at the
Building shall be received and unloaded only in the service area designated by
Landlord. Tenant shall require all trucks and other vehicles serving Tenant to
use such service areas. Tenant shall cause all such vehicles to be promptly
unloaded and removed from such area. Immediately after using such area, Tenant
shall remove any debris and clean such area to its prior condition. Tenant's use
of such area shall not unreasonably impede the use thereof by others or traffic
or parking near such loading area or the Building.
(b) Tenant shall not use the Premises, the Building or any part of the
Complex for any unlawful purpose or in any manner that in Landlord's reasonable
opinion will constitute waste, nuisance or unreasonable annoyance to Landlord or
any tenant of the Building or Complex, nor in any manner that would cause the
Premises (including, without limitation, the Cafeteria) to be deemed a "place of
public accommodation" under the Americans With Disabilities Act, as same may be
amended (the "ADA"). Tenant shall comply at its expense with all present and
future laws, ordinances (including zoning ordinances and land use requirements),
regulations and orders (other than any notice of violation that results from
Landlord's failure to construct the Building in accordance with the approved
plans and specifications and then-applicable laws and ordinances as set forth in
Exhibit B) of the United States of America, the Commonwealth of Virginia, the
County of Fairfax, and any other public or quasi public authority having
jurisdiction over the Premises, concerning the use, occupancy and condition of
the Premises and all machinery, equipment and furnishings therein. If any such
law, ordinance, regulation or order requires an occupancy or use permit for the
Premises (including, without limitation, the Cafeteria), then Tenant shall
obtain and keep current such permit at Tenant's expense and promptly deliver a
copy thereof to Landlord. Notwithstanding the foregoing, Landlord shall, at
Tenant's sole cost and expense (subject to application of the Allowances, as
applicable), (i) obtain the initial permanent or temporary certificate of
occupancy for the work to be performed by Landlord in the Premises (or portion
thereof, as applicable) pursuant to Exhibit B, provided Tenant fully cooperates
with Landlord in connection therewith (it being understood that if Landlord is
unable to obtain such certificate due in whole or in part to any Tenant Delay or
to any force majeure delay or to any item installed or to be installed in the
Premises as part of Tenant's work therein, then Landlord's obligation with
respect to obtaining such certificate shall be deemed satisfied in full
immediately upon Landlord's submission to the applicable governmental authority
of an application therefor), and (ii) undertake to remedy those building code
violations (if any) resulting from Landlord's initial construction of the
Building of which Landlord receives written notice from Tenant or any
governmental authority; provided, that if any notice of violation is the result
of Landlord's failure to construct the Building in substantial conformity with
the approved plans and specifications therefore and then-applicable laws and
ordinances as set forth in Exhibit B, Landlord shall bear the expense of
correcting such violation. Tenant hereby constitutes, designates and appoints
Landlord as its agent and attorney-in-fact coupled with an interest to sign, in
Tenant's name and on Tenant's behalf, all applications and submissions required
in connection with the foregoing, but Landlord shall only be entitled to
exercise such power of attorney if Tenant has failed to respond (whether
affirmatively or negatively) within ten (10) business days to Landlord's request
for a signature on any such application or submission. Tenant acknowledges and
agrees that all rights to use and occupy the Premises and the Building, and all
rights, terms and conditions of this Lease, are in all respects subject to all
covenants, conditions and restrictions of record (and any amendments thereto),
including, without limitation, all applicable zoning and land use restrictions
and all restrictions recorded against all or any portion of the Land, the
Building, the Complex or the Park.
6.2 Tenant shall pay before delinquency any business, rent or other tax
or fee that is now or hereafter assessed or imposed upon Tenant's use or
occupancy of the Premises, the conduct of Tenant's business in the Premises or
Tenant's equipment, fixtures, furnishings, inventory or personal property. If
Tenant fails to timely pay any such tax or fee, then Tenant also shall pay any
penalty, interest, late fee and similar charges associated therewith. If any
such tax or fee is enacted or altered so that such tax or fee is imposed upon
Landlord or so that Landlord is responsible for collection or payment thereof,
then Tenant shall pay the amount of such tax or fee within ten (10) days after
Landlord's demand therefor.
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6.3 Tenant shall not (either with or without negligence) generate, use,
store, or cause or permit the escape, disposal or release of any Hazardous
Materials in or about the Building, or the Land or the Complex, except that
Tenant may bring such materials or substances into the Premises only to use in
the ordinary course of Tenant's business and then only after written notice is
given to Landlord of the identity of such materials or substances and Landlord
has approved in writing such materials or substances. "Hazardous Materials"
shall mean (a) "hazardous wastes," as defined by the Resource Conservation and
Recovery Act of 1976, as amended from time to time, (b) "hazardous substances,"
as defined by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time, (c) "toxic substances," as
defined by the Toxic Substances Control Act, as amended from time to time, (d)
"hazardous materials," as defined by the Hazardous Materials Transportation Act,
as amended from time to time, (e) any substance, material or other item
designated as hazardous or toxic under any applicable federal, state or local
laws and the regulations adopted thereunder and under the aforesaid or any
similar acts, as amended from time to time ("Environmental Laws"), (f) oil or
other petroleum products, (g) any highly combustible substance, (h) any
biologically or chemically active substance, and (i) any substance whose
presence in Landlord's reasonable judgment could be detrimental to the Building
or the Land or the Complex or hazardous to health or the environment. An
"Environmental Default" means any of the following by Tenant or any Invitee: a
violation of an Environmental Law; a release, spill or discharge of a Hazardous
Material on or from the Premises, the Land, the Building or the Complex; an
environmental condition requiring responsive action; or an emergency
environmental condition. Upon any Environmental Default, in addition to all
other rights available to Landlord under this Lease, at law or in equity,
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, and, if Tenant fails to immediately address same to
Landlord's satisfaction, to perform, at Tenant's sole cost and expense, any
lawful action necessary to address same. In addition, Tenant shall give Landlord
immediate verbal and follow-up written notice of any actual or threatened
Environmental Default, which Environmental Default Tenant shall cure in
accordance with all Environmental Laws and to the satisfaction of Landlord and
only after Tenant has obtained Landlord's prior written consent, which may be
granted or withheld in Landlord's sole and absolute discretion. If any lender or
governmental agency shall ever require testing to ascertain whether or not there
has been any release of Hazardous Materials, then the reasonable costs thereof
shall be reimbursed by Tenant to Landlord upon demand as additional charges if
such requirement applies to the Premises. In addition, Tenant shall execute
affidavits, representations and the like from time to time at Landlord's request
concerning Tenant's best knowledge and belief regarding the presence of
Hazardous Materials in the Premises. In all events, Tenant shall indemnify
Landlord in the manner elsewhere provided in this Lease from any release of
Hazardous Materials in the Premises occurring while Tenant is in possession, or
elsewhere if caused by Tenant or persons acting under Tenant. Notwithstanding
the foregoing, Tenant shall not be responsible for (i) environmental conditions
existing on the Land prior to the date of this Lease or for any testing or
remediation costs that may be incurred by Landlord due to any such preexisting
conditions; or (ii) releases caused by willful acts or gross negligence of
Landlord's manager or such manager's employees or contractors. The within
covenants shall survive the expiration or earlier termination of the Lease Term.
6.4 Except for reasonable quantities of Hazardous Materials used in
connection with the construction, operation, maintenance or repair of the
Building whose use is not in violation of applicable Environmental Laws: (a)
Landlord shall not incorporate into the Premises any Hazardous Materials in
connection with Landlord's initial construction of the Building; and (b) neither
Landlord nor Managing Agent shall generate, use, store, or cause the escape,
disposal or release of any Hazardous Materials in or about the Building, except
those customary to the normal operation and maintenance of office buildings.
ARTICLE VII
ASSIGNMENT AND SUBLETTING
-------------------------
7.1 (a) Except as otherwise provided in Section 7.1(b), Tenant shall not
assign, transfer, mortgage or otherwise encumber this Lease or all or any of
Tenant's rights or obligations hereunder or interest herein, or sublet, rent or
permit anyone to occupy the Premises, or any part thereof, without obtaining the
prior written consent of Landlord, which consent may be granted or withheld in
Landlord's sole and absolute discretion. No assignment or transfer of this
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Lease or the right of occupancy hereunder may be effected by operation of law
or otherwise without Landlord's prior written consent. Any assignment,
subletting or occupancy, Landlord's consent thereto or Landlord's collection or
acceptance of rent from any assignee, subtenant or occupant, shall not be
construed as a waiver or release of Tenant from liability hereunder (it being
understood that Tenant shall at all times remain primarily liable as a
principal and not as a guarantor or a surety) and shall not be construed as
relieving Tenant or any assignee, subtenant or occupant from the obligation of
obtaining Landlord's prior written consent to any subsequent assignment,
subletting or occupancy. For any period during which an Event of Default shall
have occurred hereunder and be continuing, Tenant hereby assigns to Landlord
the rent due from any assignee, subtenant or occupant of Tenant and hereby
authorizes each such assignee, subtenant or occupant to pay such rent directly
to Landlord. Landlord's collection of such rent shall not be construed as an
acceptance of such assignee, subtenant or occupant as a tenant nor a waiver of
any default hereunder by Tenant. All restrictions and obligations imposed
pursuant to this Lease on Tenant or the use and occupancy of the Premises 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.
(b) (1) Notwithstanding anything in Section 7.1(a) to the contrary,
Tenant shall have the right from time to time to sublease the Premises or any
portion thereof, subject to Landlord's rights and Tenant's obligations pursuant
to Sections 7.3, 7.4, 7.5, 7.6 and 7.7, and subject to Landlord's prior written
approval, which approval shall not be unreasonably withheld, conditioned or
delayed. Such approval may be withheld if (among other reasons) any of the
following conditions are not satisfied: (i) the sublessee must take the
subleased portion of the Premises for its own use; (ii) Tenant must not be in
default under this Lease; (iii) the sublessee must use the subleased space in
substantially its then current configuration, without undue alteration thereto,
unless any alterations are performed without cost to Landlord in accordance
with the terms of this Lease; and (iv) the proposed use by and identity of the
sublessee must be, in the reasonable opinion of Landlord, compatible with other
tenants in the Building and the Complex.
(2) Notwithstanding anything in Section 7.1(a) to the contrary,
Landlord agrees that Tenant may permit the occupancy or use of portions of the
Premises without Landlord's consent by persons or entities who are "clients" of
Tenant. "Clients" shall mean persons or entities who are occupying space on a
contractual basis with Tenant, and are either performing services for Tenant as
subcontractors under Tenant's contracts or are personnel employed by persons or
entities for whom Tenant is performing services on a contractual basis;
provided, however, that no person or entity shall be deemed to be a client if
such person or entity enters into or purports to have a sublease with Tenant or
to have any leasehold interest in the Premises or any portion thereof. Tenant
also shall have the right without Landlord's consent to sublease or otherwise
contract to the United States Government, its agencies, associated contractors
and associated subcontractors, if necessary or required under Tenant's
contracts or primary business. Tenant agrees to notify Landlord semi-annually
as to the amount of space used or occupied by clients or other above-referenced
parties during the immediately preceding six (6) months and to certify to
Landlord that such use or occupancy is by a "client" or other above-referenced
party and does not constitute a sublease, assignment or other leasehold
interest. Tenant's rights pursuant to this Section 7.1(b)(2) are not subject to
Landlord's rights pursuant to Section 7.4.
7.2 (a) If Tenant is a partnership, then any dissolution of Tenant or a
withdrawal or change, whether voluntary, involuntary or by operation of law, of
partners owning a controlling interest in Tenant shall be deemed a voluntary
assignment of this Lease and subject to the provisions of Section 7.1. If Tenant
is a corporation, then any dissolution, merger, consolidation or other
reorganization of Tenant, or any sale or transfer of a controlling interest of
its capital stock to a non-affiliate, shall be deemed a voluntary assignment of
this Lease and subject to the provisions of Section 7.1. However, the
immediately preceding sentence shall not apply to a corporation the stock of
which is traded through a recognized national or regional exchange or over-
the-counter, or to any sale or transfer of a controlling interest of Tenant's
capital stock, if no Event of Default shall have occurred hereunder and the
following requirements are satisfied: (A) notwithstanding such transfer of a
controlling interest in Tenant, Tenant shall have either (i) a net worth and
liquidity not less than the amount of Tenant's net worth and liquidity as of
the Lease Commencement Date; or (ii) an S&P Rating of BBB or better, (B)
Tenant shall reaffirm, or the acquiring corporation shall assume in writing, all
of the obligations and liabilities of Tenant under this Lease, and (C)
notwithstanding such change in control of Tenant, the Premises will
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be used in a manner, that is consistent with the primary use set forth in
Section 6.1 and the first-class image of the Building and Complex. For purposes
of this Section 7.2(a), a "controlling interest" shall be deemed to be the
ownership of more than fifty percent (50%) of the stock or other voting interest
of Tenant.
(b) Notwithstanding the foregoing, provided Tenant is not in default
under this Lease and upon prior written notice to Landlord but without
Landlord's prior written consent and without being subject to Landlord's rights
and Tenant's obligations set forth in Sections 7.3, 7.4, 7.5, and 7.7, Tenant
shall have the right to assign or transfer its entire interest in this Lease or
sublease the entire Premises to a corporation or other business entity (herein
sometimes referred to as a "successor corporation") into or with which Tenant
shall be merged or consolidated, or to which substantially all of the assets of
Tenant may be transferred, provided that the successor corporation shall assume
in writing all of the obligations and liabilities of Tenant under this Lease. A
successor corporation that meets the requirements of this subsection shall
sometimes be referred to in this Lease as an "Affiliate."
7.3 If, at any time during the Lease Term, Tenant desires to sublet all or
any part of the Premises, in connection with Tenant's request to Landlord for
Landlord's consent thereto, Tenant shall give notice to Landlord in writing
("Tenant's Request Notice") of the identity of the proposed subtenant and its
business, the terms of the proposed subletting, the commencement date of the
proposed subletting (the "Proposed Sublease Commencement Date"), and the area
proposed to be sublet (the "Proposed Sublet Space"). Tenant shall also transmit
therewith the most recent financial statement or other evidence of financial
responsibility of such subtenant and a certification executed by Tenant and such
proposed subtenant stating whether or not any premium or other consideration is
being paid for the proposed sublease.
7.4 If a proposed subtenancy is for a term of more than five (5) years and
would result in sublease(s) in excess of fifteen percent (15%) of the rentable
area of the Premises in the aggregate, upon receipt of a Tenant's Request
Notice, Landlord shall have the right in its sole and absolute discretion to
terminate this Lease with respect to such Proposed Sublet Space by sending
Tenant written notice of such termination within forty-five (45) days after
Landlord's receipt of Tenant's Request Notice.
(a) If Landlord exercises its option to terminate this Lease with
respect to such Proposed Sublet Space, then (i) Tenant shall tender the Proposed
Sublet Space to Landlord on the Proposed Sublease Commencement Date, and (ii) as
to that portion of the Premises which is not part of the Proposed Sublet Space,
this Lease shall remain in full force and effect except that the Base Rent
payable pursuant to Article IV and additional rent payable pursuant to Article V
shall be reduced by the amount each bears to a fraction, the numerator of which
shall be the number of square feet of rentable area in the Proposed Sublet Space
and the denominator of which shall be the total rentable area of the Premises.
The cost of any construction required to permit the operation of the Proposed
Sublet Space separate from the balance of the Premises shall be paid by Tenant
to Landlord as additional rent hereunder.
(b) If the Proposed Sublet Space constitutes the entire Premises and
Landlord elects to terminate this Lease, then (i) Tenant shall tender the
Proposed Sublet Space to Landlord on the Proposed Sublease Commencement Date,
and (ii) this Lease shall terminate on such date.
Notwithstanding anything above to the contrary, if Landlord sends Tenant notice
exercising Landlord's right to terminate this Lease with respect to the Proposed
Sublet Space, then Tenant shall have the right to withdraw Tenant's Request
Notice with respect to such sublease. Tenant may exercise such withdrawal right
only by written notice to Landlord not later than ten (10) days after Landlord's
termination notice. If Tenant exercises such withdrawal right, then Tenant's
Request Notice and Landlord's termination notice shall both be null and void and
of no further force or effect.
7.5 Landlord acknowledges that Tenant, in the ordinary course of its
business, will allow occupancy of portions of the Premises by Clients. Such
occupancy by Clients shall not result in any sharing of revenues between
Landlord and Tenant as provided in this Section 7.5. If any other sublease,
assignment or transfer (i.e., not provided for in the preceding sentence),
whether by operation of law or otherwise, provides that the subtenant or other
transferee thereunder is to pay any amount in excess of the rental and other
charges due under this Lease, whether such excess be in the form of an increased
monthly or annual rental, a lump sum payment, payment for the sale, transfer or
lease of Tenant's fixtures, leasehold improvements, furniture and other personal
property, or any other form, Landlord shall be paid fifty percent (50%) of any
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such excess or other premium applicable to the sublease or other transfer after
deducting the reasonable out-of-pocket expenses incurred by Tenant in connection
with obtaining a subtenant for such subleased space (it being understood,
however, that such expenses shall be allocated ratably over the term of the
sublease or other transfer as opposed to all such expenses being recouped by
Tenant at one time at the beginning of said term). Such expenses may include but
shall not be limited to the amount of rental paid by Tenant to Landlord with
respect to the space to be subleased from and after the date Tenant ceased to
occupy or use such space and commenced marketing efforts for the subletting of
such space, costs of refitting the subleased space, and leasing commissions. Any
such premium shall be paid by Tenant to Landlord as additional rent upon such
terms as shall be specified by Landlord and in no event later than ten (10) days
after any receipt thereof by Tenant. The foregoing is not intended to prevent
Tenant from selling its furniture or other property (excluding any Allowance
Item (as defined in Section 9.3)) which Tenant is permitted to remove from the
Premises, and Tenant shall be entitled to retain all proceeds therefrom except
if and to the extent such proceeds constitute a disguised premium for a
sublease. Landlord shall have the right to inspect and audit Tenant's books and
records relating to any sublease or other transfer. Any sublease shall, at
Landlord's option, be effected on reasonable forms supplied or reasonably
approved by Landlord.
7.6 Tenant agrees to pay to Landlord as additional rent hereunder the
costs (including reasonable attorneys' fees) incurred by Landlord in connection
with any request by Tenant for Landlord to give its consent to any assignment,
transfer, mortgage, encumbrance, or subletting by Tenant.
7.7 In connection with all subletting of space in the Building, Tenant
agrees to engage Landlord or its affiliate as Tenant's exclusive real estate
broker, and to pay Landlord or its affiliate the usual and customary commission
charged by realtors in similar transactions, provided Landlord or its affiliates
agrees to use reasonable efforts to find suitable subtenants for Tenant. Such
services shall be performed pursuant to The Mark Winkler Company's standard form
of listing agreement, modified as necessary to be reasonably acceptable to
Tenant. The listing agreement shall provide that Tenant shall have the right to
terminate the listing agreement if the Mark Winkler Company's leasing and
marketing efforts, over a reasonable period of time, are unsatisfactory to
Tenant.
ARTICLE VIII
MAINTENANCE AND REPAIRS
-----------------------
8.1 Except as explicitly set forth in Section 8.2, Tenant shall pay all
costs and expenses of keeping and maintaining, and of making all repairs and
replacements to, the Premises, the Satellite Area, the Building (including,
without limitation, the roof) and the Land, and all fixtures and equipment
located therein or related thereto. Tenant shall take good care of all of the
foregoing, shall suffer no waste or injury thereto, and at the expiration or
earlier termination of the Lease Term, shall surrender the same in at least the
order and condition in which they were on the Phase I or Phase II Commencement
Date (as applicable) (ordinary wear and tear consistent with the permitted use
hereunder excepted). Landlord shall have no liability or obligation with respect
to any costs for maintenance, repairs or replacements, except as explicitly set
forth in Section 8.2. All injury, breakage and damage to the Premises and to any
other part of the Building or the Land caused by any act or omission of any
invitee, agent, employee, subtenant, assignee, contractor, client (including,
without limitation, any Client), family member, licensee, customer or guest of
Tenant (collectively "Invitee") or Tenant, or by any other cause, shall be
repaired or replaced (as applicable) by and at Tenant's expense, except that
Landlord shall have the right at Landlord's option to make any such repair or
replacement and to charge Tenant for all costs and expenses incurred in
connection therewith.
8.2 Landlord shall, at Tenant's sole cost and expense, perform normal and
customary routine maintenance and repairs to the Base Building Items and the
Leasehold Improvements (collectively, the "Initial Installations"), except to
the extent that Tenant elects to perform its own janitorial services as provided
in Section 14.1. In addition, except as otherwise provided in Article XVII,
Article XVIII, the last sentence of Section 8.1 and other applicable provisions
of this Lease, Landlord shall, at Landlord's expense, make necessary structural
repairs to the exterior walls, load bearing elements, foundations and roof that
form a part of the Building (except for the Satellite Area), and the base
building electrical system (from the street up to the meters within the main
electric rooms), water system (from the street into the Building and up to the
meters)
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and sewer system (from the street to within five (5) feet of the Building) that
are provided by Landlord in the initial construction of the Building.
Notwithstanding any of the foregoing to the contrary, Landlord shall not be
obligated to provide any work or service to or on account of any Secured Access
Area (as defined in Section 23.10) or to any other areas deemed inaccessible as
a result of Tenant's installation of security equipment or serviceable only by
personnel with U.S. Government security clearance, unless Tenant provides
reasonable access to such areas and pays all additional costs incurred in
connection therewith (including, without limitation, any overtime or additional
charges for work not performed at the customary times or in the customary
manner). Landlord shall have the right, at Tenant's sole expense, to enter into
maintenance contracts with duly qualified contractors satisfactory to Landlord
in all respects providing for good, workmanlike, first-class and prompt,
preventative and corrective maintenance and repair as may be designated by
Landlord in its sole and absolute discretion. If any such contractors are
affiliates of Landlord, such contracts shall be entered into and performed on an
arms-length basis, at prices or rates comparable to those offered by
unaffiliated contractors for similar services in the Washington, D.C.
metropolitan area. It is expressly understood and agreed that neither Landlord
nor Managing Agent shall have any responsibility or obligation to provide any
services or other operation, maintenance or repair of, in or to the Cafeteria or
the equipment relating thereto.
ARTICLE IX
ALTERATIONS
-----------
9.1 The initial base building construction and the initial improvement of
the Premises shall be accomplished by Landlord in accordance with Exhibit B.
Landlord expressly agrees that the Premises delivered to Tenant shall
substantially conform to the approved site plan, the approved building plans,
and the standards set forth in Exhibit B, Schedule I (Base Building Items) and
Exhibit B, Schedule II (Leasehold Improvements). Landlord is not obligated to
provide any improvements in excess of the Base Building Items or Leasehold
Improvements, and Landlord is under no obligation to make any structural or
other alterations, decorations, additions, improvements, demolition or other
changes (collectively "Alterations") in or to the Premises or the Building
except for the Initial Installations as set forth in Exhibit B.
9.2 So long as Tenant is in occupancy of at least seventy percent (70%)
of the rentable square footage of the initial Premises set forth in Section 1.2,
Tenant shall have the right, without obtaining Landlord's prior consent, to make
interior non-structural Alterations to the Premises which are not visible from
the exterior of the Premises and do not cost in excess of fifty thousand dollars
($50,000) with respect to any one such Alteration project or series of related
such Alteration projects ("Minor Alterations"). Tenant shall not make or permit
anyone to make any Alteration (other than a Minor Alteration) in or to the
Premises or the Building without Landlord's prior written consent, which consent
may be granted or withheld in Landlord's sole and absolute discretion with
respect to all structural Alterations and those non-structural Alterations which
are visible from the exterior of the Premises or which adversely affect the
marketability of the Premises, and which consent shall not be unreasonably
withheld with respect to all other non-structural Alterations. For these
purposes, structural alterations shall be deemed to include without limitation
any Alteration that will or may necessitate any changes, replacements or
additions to exterior or demising walls, load bearing elements, floor slabs,
columns, core areas (including but not limited to bathrooms, stairwells,
elevator lobbies, and mechanical rooms) or floors provided by Landlord as Base
Building Items pursuant to Exhibit B, or which would exceed the capacity of or
interfere with, the water, electrical, mechanical, plumbing or HVAC systems of
the Premises or Building provided by Landlord in connection with the
construction of the Base Building Items. Any Alteration (whether or not consent
is required therefor as provided for herein) shall be made: (a) in a good,
workmanlike, first-class and prompt manner; (b) using new materials only; (c) by
a contractor, and (except with respect to Minor Alterations) in accordance with
plans and specifications, approved in writing by Landlord; (d) in accordance
with legal requirements (including, without limitation, the obtaining of all
necessary permits and licenses) and requirements of any insurance company
insuring the Building; (e) after obtaining any required consent of the holder(s)
of the Mortgage (Landlord shall endeavor to the extent commercially reasonable
to minimize the scope of lender consents); (f) after obtaining or arranging for
appropriate worker's compensation insurance coverage; (g) after delivering to
Landlord written, unconditional waivers of mechanics' and materialmen's liens
against the Premises, the Building and the Land from all proposed contractors,
subcontractors, laborers and material suppliers for all work and materials in
connection with such Alteration; and (h) in compliance with such other
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requirements as Landlord might impose. If any lien (or a petition to establish a
lien) is filed in connection with any Alteration, then such lien (or petition)
shall be discharged by Tenant at Tenant's expense within ten (10) days
thereafter by the payment thereof or filing of a bond acceptable to Landlord. If
Tenant shall fail to discharge timely any such mechanics' or materialmen's lien,
then (i) Landlord may, at its option, discharge such lien without inquiry into
the validity thereof and treat the cost thereof (including attorneys' fees
incurred in connection therewith) as additional rent due hereunder, it being
expressly agreed that such discharge by Landlord shall not be deemed to waive or
release the default of Tenant in not discharging such lien, and (ii) Tenant's
right to install Minor Alterations without Landlord's consent as described above
shall automatically, immediately and forever lapse and be of no further force or
effect. It is understood and agreed that any Alterations (other than the Initial
Installations made by Landlord pursuant to Exhibit B) shall be conducted on
behalf of Tenant in accordance with this Article IX. Landlord's consent to the
making of an Alteration shall not be deemed to constitute Landlord's consent to
subject its interest in the Premises or the Building or the Land to liens which
may be filed in connection therewith. Upon completion of any Alteration, Tenant
shall prepare a complete set of as-built plans and promptly provide a copy of
same to Landlord.
9.3 If any Alteration (other than a Minor Alteration) is made without
Landlord's prior written consent, then Landlord shall have the right, in
addition to exercising all other available remedies, at Tenant's expense to
remove and correct such Alteration and restore the Premises and the Building to
their condition immediately prior thereto or to require Tenant to do the same.
Unless Landlord elects otherwise pursuant to this Section 9.3, all Alterations
to the Premises or the Building made by either party shall immediately become
Landlord's property (provided, however, that during the Lease Term Tenant shall
retain an insurable interest in such Alterations) and shall remain upon and be
surrendered with the Premises at the expiration or earlier termination of the
Lease Term; provided, however, that if Tenant is not in default under this
Lease, then Tenant shall have the right to remove, prior to the expiration or
earlier termination of the Lease Term, all movable furniture, furnishings and
trade fixtures installed in the Premises solely at Tenant's expense; provided
further, however, that in no event shall Tenant have the right to remove movable
furniture, furnishings or trade fixtures to the extent such items were paid for
as a part of any allowance provided to Tenant under this Lease (collectively,
the "Allowance Items") (except that Tenant shall have the right to replace
Allowance Items (as the same may become worn or obsolete) with reasonably
comparable (in terms of value, quality, quantity and manner) items, so long as
the same is done in the normal and ordinary course of Tenant's business, and
such replacement items shall be deemed to be Allowance Items subject to the
restrictions set forth above). Notwithstanding anything to the contrary in this
Section 9.3, Tenant shall also be required to remove all Alterations to the
Premises or the Building and all non-trade fixtures and equipment which Landlord
designates in writing for removal (which designation shall be made at the time
of Landlord approval of such Alterations and installation of non-trade fixtures
and equipment, if Landlord approval is required). Tenant shall not be required
to remove security system, telephone and data wiring and cabling installed by or
on behalf of Tenant in cable trays or from such cable trays into individual
offices pursuant to the approved plans and specifications for the Leasehold
Improvements (collectively, "Cabling") during the Initial Installation;
provided, that Tenant shall be required to remove any such wiring and cabling
installed outside such cable trays or installed after the Initial Installation.
Tenant shall not be required to remove any of the Initial Installations or any
Minor Alterations. Notwithstanding the foregoing, Landlord shall have the right
at its sole option to determine whether Tenant shall be required to either
remove or leave any Alterations, Minor Alterations, or Allowance Items (but not
Initial Installations) that Landlord determines are not customary in office
buildings of similar quality (including, without limitation, vaults or secured
rooms specially constructed for Tenant's use, safes, laboratories, raised
flooring for computer rooms, special heating and cooling systems, and similar
systems or equipment). Promptly after Landlord's receipt of a written request by
Tenant which specifically requests Landlord to indicate to Tenant whether
Landlord will require the removal of such Alterations, and provided such request
is given to Landlord together with Tenant's request for Landlord's approval of
such Alterations, Landlord will indicate to Tenant whether Landlord will require
the removal of any such Alterations. Movable furniture, furnishings and trade
fixtures shall be deemed to exclude any item which would normally be removed or
detached from the Premises with the assistance of any tool or machinery other
than a dolly. Landlord shall have the right to repair or replace at Tenant's
expense all damage to the Premises or the Building caused by any such removal or
to require Tenant to do the same. If any furniture, furnishing or trade fixture
required to be removed is not removed by Tenant prior to the expiration or
earlier termination of the Lease Term, then the same shall, at Landlord's
option, be deemed abandoned or become
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Landlord's property to be surrendered with the Premises as a part thereof;
provided, however, that Landlord shall have the right to remove from the
Premises at Tenant's expense such furniture, furnishing or trade fixture and any
Alteration, non-trade fixture or equipment (which Landlord designates in writing
for removal) and any Cabling.
9.4 (a) Subject to satisfaction of all applicable provisions of this
Lease and the following conditions in this Section 9.4, throughout the initial
Lease Term (and, so long as Tenant renews the Lease Term for and continues to
occupy more than fifty percent (50%) of the Premises, during any Renewal Term),
Tenant shall have the right, at Tenant's sole risk, cost and expense, to install
and maintain, in a limited area on the roof of the Building depicted as a part
of Exhibits A-1 and A-2 (the "Satellite Area"), satellite dish and microwave
antennae, together with the cables extending from such antennae to the Premises
(collectively, the "Antenna"), in accordance with plans and specifications to be
developed in accordance with Exhibit B. Landlord shall retain the right to use
other areas on the roof of the Building outside the Satellite Area, or to allow
such areas to be used by other tenants or occupants of the Building, including
Welkin, for satellite dish, cellular, or microwave antenna, or other
telecommunications uses so long as any such use by a tenant or occupant other
than Welkin would not adversely affect any security clearance held by Tenant
relating to the Premises or the functionality of any equipment installed by
Tenant within the Satellite Area. The location, size, weight, height, screening
and all other features and specifications of the Antenna, and the manner of the
initial installation of the same, shall be subject to Landlord's prior written
approval, which approval shall not be unreasonably withheld, conditioned, or
delayed. Notwithstanding the foregoing, Tenant shall not be entitled to install
any Antenna or other item: (i) if such installation would adversely affect (or
in a manner that could adversely affect) any warranty with respect to the roof
and/or the Building; (ii) if such installation would adversely affect (or in a
manner that could adversely affect) the structure or any of the building systems
of the Building, or if such installation would require (or in a manner that
could require) any structural Alteration to the Building, unless Landlord in its
sole and absolute discretion approves in writing such structural alteration at
Tenant's cost; (iii) if such installation would violate (or in a manner that
could violate) any covenant, condition, or restriction of record affecting the
Building, the Complex or the Park or any applicable federal, state or local law,
rule or regulation; (iv) unless Landlord obtains all required approvals and
consents of all holders of Mortgages encumbering the Building or the Land; (v)
unless Tenant has obtained and maintains at Tenant's expense, and has submitted
to Landlord copies of, all permits, licenses and approvals relating to such item
and such installation and maintenance as may be required by any governmental,
quasi-governmental or Park authorities, and pays all taxes and related fees
thereto; (vi) unless such Antenna is white or of a beige or lighter color (or
otherwise appropriately screened); (vii) unless such Antenna is installed at
Tenant's sole cost and expense, by a qualified contractor chosen by Tenant and
approved in advance by Landlord, which approval shall not be unreasonably
withheld; (viii) unless Tenant obtains Landlord's prior consent to the manner
and time in which such installation work is to be done; and (ix) unless screened
from view and public access in a manner and with materials acceptable to
Landlord in its sole discretion. All plans and specifications concerning such
Antenna and its installation shall be subject to Landlord's prior written
approval and Tenant shall reimburse Landlord's expenses incurred in connection
with such review. All repairs and installation required after the initial
installation of the Antenna also shall be subject to Landlord's prior written
approval (to be granted or withheld in Landlord's sole and absolute discretion),
which approval shall be at Tenant's sole cost and expense. Landlord shall use
reasonable efforts to assist Tenant in obtaining from applicable governmental
and Park authorities all required approvals and permits for the installation of
the Antenna.
(b) Tenant shall have unlimited access to the Satellite Area. Any such
access by Tenant shall be subject to reasonable rules and regulations relating
thereto established from time to time by Landlord. Landlord acknowledges that
the Satellite Area is a Secured Access Area (as defined in Section 23.10(b)) and
shall be subject to the restrictions on Landlord access specified therein.
(c) At all times during the Lease Term, Tenant shall (i) maintain the
Antenna and the Satellite Area in clean, good and safe condition and in a manner
that avoids interference with or disruption to Landlord and other tenants of the
Building or the Complex, and (ii) shall comply with all requirements of laws,
ordinances, orders, rules and regulations of all public and Park authorities and
insurance companies which shall impose any order or duty upon Landlord or Tenant
with respect to or affecting the Antenna or the Satellite Area or arising out of
Tenant's use or manner of use thereof. Tenant shall pay and discharge all costs
and expenses (if any) incurred by Landlord in connection with the furnishing,
installation, maintenance, operation or removal of
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the Antenna within ten (10) days after written demand. All repairs to the
Building made necessary by reason of the furnishing, installation, maintenance,
operation or removal of the Antenna or any replacements thereof (including,
without limitation, any invalidation of any warranty due to the Antenna or
Tenant's actions) shall be at Tenant's sole cost. At the expiration or earlier
termination of the Lease Term, Tenant shall remove the Antenna and related
equipment from the Building and surrender the Satellite Area in good condition,
ordinary wear and tear and unavoidable damage by the elements excepted. In the
event Tenant fails to remove the Antenna and related equipment, Landlord may
remove and dispose of same and charge Tenant the entire cost thereof.
(d) Upon ten (10) business days' prior written notice to Tenant,
Landlord shall have the right to require Tenant to relocate the Antenna to an
alternative location acceptable to Tenant in its reasonable discretion, if in
Landlord's reasonable opinion such relocation is necessary. Any such relocation
shall be performed by Tenant at Landlord's expense and in accordance with all of
the requirements of this Section. Nothing in this Section shall be construed as
granting Tenant any line of sight easement with respect to any antenna. It is
expressly understood that by granting Tenant the right hereunder, Landlord makes
no representation as to the legality of such Antenna or its installation. In the
event that any federal, state, county, regulatory or other authority requires
the removal or relocation of such Antenna, Tenant shall promptly remove or
relocate such Antenna at Tenant's sole cost and expense, and Landlord shall
under no circumstances be liable to Tenant therefor.
(e) Tenant shall pay for all amounts incurred in connection with the
electricity consumed by the Antenna, including not only the cost of the
electricity consumed, but also the cost of the measurement of such consumption.
(f) Tenant shall maintain such insurance as is appropriate with
respect to the installation, operation and maintenance of the Antenna, and
Landlord reserves the right from time to time to require Tenant to obtain higher
amounts or different types of insurance with respect to the Antenna. Landlord
shall have no liability on account of any damage to or interference with the
operation of the Antenna except to the extent of any physical damage caused by
Landlord's gross negligence or willful misconduct. Landlord expressly makes no
representations or warranties with respect to the capacity for any antenna
placed on the roof of or ground adjacent to the Building to receive or transmit
signals. The operation of the Antenna shall be at Tenant's sole and absolute
risk. Tenant shall in no event interfere with the use of any other
communications equipment located in, on or about the Building.
(g) The Antenna may be used by Tenant only in the conduct of Tenant's
customary business. No assignee or subtenant (other than an Affiliate to whom
this Lease is assigned or the entire Premises is sublet pursuant to Article vII)
shall have any rights pursuant to this Section.
(h) Tenant shall indemnify and hold Landlord harmless from and
against all costs, damages, claims, liabilities and expenses (including
attorneys' fees) suffered by or claimed against Landlord, directly or
indirectly, based on, arising out of or resulting from or with respect to the
installation, use, operation, maintenance, repair or disassembly of the Antenna
and related equipment or the use by Tenant of the Satellite Area; provided,
that Tenant shall have no obligation to indemnify Landlord against the
foregoing matters to the extent caused in whole or in material part by the
gross negligence or willful misconduct of Landlord or its agents or employees.
(i) Tenant's use of the Satellite Area shall be subject to all of the
terms and conditions of this Lease; provided, however, in no event shall Tenant
be required to pay rent in connection with the Antenna and Tenant's use of the
Satellite Area.
ARTICLE X
SIGNS
-----
10.1 No sign, advertisement or notice referring to Tenant or its business
shall be inscribed, painted, affixed or otherwise displayed on any part of the
exterior or interior of the Building (or any part of the Premises which is
visible from outside the Premises) except on the suite entry doors of the
Premises and such other areas as are designated by Landlord, and then only in
such place, number, size, color and style as are approved in writing by
Landlord. All of Tenant's signs that are approved by Landlord shall be installed
by Landlord at Tenant's cost and
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expense. If any sign, advertisement, or notice that has not been approved by
Landlord is exhibited or installed by Tenant, Landlord shall have the right to
immediately remove the same at Tenant's expense without any notice or grace
period being required in connection therewith. Except by United States mail,
Tenant shall not distribute any advertisements or notices within the Complex.
Landlord reserves the right to prohibit any advertisement which in Landlord's
opinion tends to impair the reputation or desirability of the Building or the
Complex.
10.2 Notwithstanding anything in Section 10.1 to the contrary, but subject
to the terms of this Section, in connection with the initial construction of the
Premises, Landlord shall affix not more than two (2) signs to the exterior of
the Building (the "Signs"); provided, however, that (a) the installation and
operation of such Signs shall be subject to Landlord's ability to obtain, using
its reasonable efforts, all necessary governmental, quasi-governmental,
community, Park and other permits, approvals and consents (and Tenant shall bear
all risk of not obtaining same), (b) the size, shape, materials, design, weight,
color, location, lettering, name or logo, lighting if any, and all other aspects
of such Signs shall be acceptable to Landlord in its sole discretion, (c) such
Signs and their installation shall be in accordance with all legal and Park
requirements and Landlord's rules and regulations, and (d) all costs related to
such Signs and their installation (including the cost of obtaining permits and
approvals) shall be paid by Tenant to Landlord in advance to the extent such
costs exceed the Signage Allowance. The "Signage Allowance" shall be in addition
to all other Allowances (as defined in Exhibit B) and is an allowance equal the
amount of all reasonable costs and expenses incurred in connection with the
permitting, consent, approval, purchase and installation of the initial Signs
specified above (up to a maximum amount of ten thousand dollars ($10,000) in the
aggregate). The Signs shall be the only manner of identifying Tenant on the
Building. Throughout the Lease Term, such Signs shall be maintained in first
class condition and repair at Tenant's sole expense. If Tenant is prohibited
from installing the Signs for any reason whatsoever, Tenant's other obligations
under this Lease shall not be affected thereby. If an Event of Default occurs,
at Landlord's option, Landlord at Tenant's sole expense, may remove the Signs
and restore the area in which such Signs were installed to its condition
immediately prior to the installation of such signs, at which time Tenant's
signage rights pursuant to this Section 10.2 shall lapse and be of no further
force or effect. At the expiration or earlier termination of the Lease Term, or
at such time, if any, that fifty percent (50%) or more of the rentable area of
the Premises has been terminated pursuant to Section 7.4, subleased or assigned,
or Tenant is not in occupancy of such fifty percent (50%) portion, then Landlord
shall have the right to immediately remove, at Tenant's expense, the Signs on
the Building and to restore the area on which the Signs were installed to its
condition immediately prior to the installation thereof. In addition, (i) if at
any time Tenant's lease or occupancy of fifty percent (50%) or more of the
rentable area of a Wing has been terminated pursuant to Section 7.4, subleased
or assigned, or Tenant is not in occupancy of such fifty percent (50%) portion,
then Landlord shall have the right to immediately remove, at Tenant's expense,
the Signs on such Wing and to restore the area on which such Signs were
installed to its condition immediately prior to the installation thereof, and
(ii) if at any time Tenant's lease or occupancy of the Building has been
terminated pursuant to Section 7.4, or subleased or assigned to such an extent
that a tenant other than Tenant occupies more than twenty five thousand (25,000)
square feet of rentable area in the Building, Landlord shall have the right to
provide exterior building signage, comparable to the signage allowed to Tenant,
to such tenant.
ARTICLE XI
[RESERVED]
ARTICLE XII
HOLDING OVER
------------
12.1 Tenant acknowledges that it is extremely important that Landlord have
substantial advance notice of the date on which Tenant will vacate the Premises,
because Landlord will (a) require an extensive period to locate replacement
tenants, and (b) plan its entire leasing and renovation program for the Building
in reliance on its lease expiration dates. Tenant also acknowledges that if
Tenant fails to surrender the Premises at the expiration or earlier termination
of the Lease Term, then it will be conclusively presumed that the value to
Tenant of remaining in possession, and the loss that will be suffered by
Landlord as a result thereof, far exceed the Base
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Rent and additional rent that would have been payable had the Lease Term
continued during such holdover period. Therefore, if Tenant (or anyone claiming
through Tenant) does not immediately surrender the Premises or any portion
thereof upon the expiration or earlier termination of the Lease Term, then the
rent shall be increased to equal double the then-prevailing Base Rent,
additional rent and other sums that would have been payable pursuant to the
provisions of this Lease if the Lease Term had continued during such holdover
period. Such rent shall be computed by Landlord on a monthly basis and shall be
payable on the first day of such holdover period and the first day of each
calendar month thereafter during such holdover period until the Premises have
been vacated. Notwithstanding any other provision of this Lease, Landlord's
acceptance of such rent shall not in any manner adversely affect Landlord's
other rights and remedies, including Landlord's right to evict Tenant and to
recover all damages. Any holdover shall be deemed to be a tenancy-at-sufferance
and not a tenancy-at-will or tenancy from month-to-month; provided, however that
Landlord may, in addition to its other remedies, elect, in its sole discretion,
to treat such holdover as the creation of a month-to-month tenancy with Tenant.
In no event shall any holdover be deemed a permitted extension or renewal of the
Lease Term, and nothing contained herein shall be construed to constitute
Landlord's consent to any holdover or to give Tenant any right with respect
thereto. Except as otherwise specifically provided in this Article, all terms of
this Lease shall remain in full force and effect during any holdover period.
ARTICLE XIII
INSURANCE
---------
13.1 Tenant shall not conduct or permit to be conducted any activity or
place any item in or about the Building which may increase the rate of any
insurance on the Building. If any increase in the rate of such insurance is due
to any such activity or item, then (whether or not Landlord has consented to
such activity or item and without waiving Landlord's right to require such
activities to cease) Tenant shall pay the amount of such increase. The statement
of any insurance company or insurance rating organization (or other organization
exercising similar functions in connection with the prevention of fires or the
correction of hazardous conditions) that such an increase is due to any such
activity or item shall be conclusive evidence thereof.
13.2 (a) Tenant shall maintain throughout the Lease Term (1) broad form
comprehensive general liability insurance (written on an occurrence basis and
including contractual liability coverage insuring the obligations assumed by
Tenant pursuant to Sections 6.3 and 15.2, premises and operations coverage,
broad form property damage coverage and independent contractors coverage, and
containing an endorsement for personal injury), (2) special form property
insurance, (3) comprehensive automobile liability insurance (covering
automobiles owned by Tenant, if any), (4) worker's compensation insurance, (5)
employer's liability insurance, and (6) such other insurance as may be required
from time to time by the holder of a Mortgage encumbering the Premises. Such
liability insurance shall be in minimum amounts typically carried by prudent
tenants engaged in similar operations, but in no event shall be in an amount
less than five million dollars ($5,000,000) combined single limit per
occurrence. Such property insurance shall be in an amount not less than that
required to replace all Alterations and all other contents of the Premises,
excluding only the work and materials considered to be building standard
finishes. Such automobile liability insurance shall be in an amount not less
than one million dollars ($1,000,000) combined single limit per occurrence and
two million dollars ($2,000,000) in the aggregate. Such worker's compensation
insurance shall carry minimum limits as defined by the law of the jurisdiction
in which the Building is located (as the same may be amended from time to time).
Such employer's liability insurance shall be in an amount not less than One
Million Dollars ($1,000,000) for each accident, One Million Dollars ($1,000,000)
disease-policy limit, and One Million Dollars ($1,000,000) disease-each
employee.
(b) All such insurance shall: (1) be issued by a company that is
licensed to do business in the jurisdiction in which the Building is located,
that has been approved in advance by Landlord and that has a rating equal to or
exceeding A:XI from Best's Insurance Guide; (2) name Landlord, its managing
agent (or its successor) and the holder of any Mortgage as additional insureds
and/or loss payees as applicable (as their interests may appear), except that
the liability insurance shall not name Landlord's Mortgage holder as an
additional insured; (3) contain an endorsement that such insurance shall remain
in full force and effect notwithstanding that the insured may have waived its
right of action against any person or entity prior to the occurrence of a loss
(Tenant hereby waiving its right of action and recovery against and releasing
Landlord and
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its employees, affiliates, partners and agents from any and all liabilities,
claims and losses for which they may otherwise be liable to the extent Tenant is
covered by insurance carried or required to be carried under this Lease); (4)
provide that the insurer waives all right of recovery by way of subrogation
against Landlord, its partners, affiliates, agents and employees, (5) be
acceptable in form and content to Landlord and to Landlord's first mortgagee;
(6) be primary and noncontributory; and (7) contain an endorsement prohibiting
cancellation, failure to renew, reduction in amount of insurance or change of
coverage (A) as to the interests of Landlord or the holder of the Mortgage by
reason of any act or omission of Tenant, and (B) without the insurer's giving
Landlord thirty (30) days' prior written notice of such action. Such policy or
policies may contain or provide for such reasonable deductibles as Landlord may
approve from time to time, which approval shall not be unreasonably withheld.
Landlord reserves the right from time to time to require Tenant to obtain higher
minimum amounts or different types of insurance (including, but not limited to,
with respect to the Antenna). Tenant shall deliver a certificate of all such
insurance and receipts evidencing payment of the premium for such insurance
(and, upon request, copies of all required insurance policies, including
endorsements and declarations) to Landlord concurrently with Tenant's execution
of this Lease and at least annually thereafter.
13.3 Landlord shall maintain, at Tenant's sole cost and expense, fire and
hazard insurance with extended coverage insuring the base Building (but not any
Alterations or any personal property or other property of any tenant, including
Tenant) in an amount not less than the full replacement cost of the Building and
the Premises, including all improvements installed in or benefiting the Premises
pursuant to Exhibit B. Such hazard insurance policy may include coverage to
insure Landlord against loss of rents for a period of up to one (1) year in the
event of damage or destruction of the Premises or the Building. Landlord hereby
waives its right of recovery against Tenant if the damage, loss or destruction
was not caused by the gross negligence or willful act or omission of Tenant or
any Invitee, but only to the extent that Landlord receives insurance proceeds
with respect to such damage, loss or destruction. Landlord shall secure a waiver
of subrogation endorsement from its insurance carrier. Tenant shall have the
right of reasonable approval over the deductibles contained in the foregoing
policies of insurance to be obtained by Landlord, subject to the rights and
requirements of any mortgagee of Landlord.
ARTICLE XIV
SERVICES AND UTILITIES
----------------------
14.1 Landlord will furnish to the Premises heating, ventilation and
air-conditioning ("HVAC") during the seasons they are required in Landlord's
reasonable judgment. Landlord shall not be liable for any failure to maintain
comfortable atmosphere conditions in all or any portion of the Premises due to
excessive heat generated by any equipment or machinery installed by Tenant (with
or without Landlord's consent) or due to any impact that Tenant's furniture,
equipment, machinery or millwork may have upon the delivery of HVAC to the
Premises. For purposes of this Section 14.1, excessive heat shall be deemed to
result from (a) the installation of machinery or equipment, other than normal
office machinery and equipment, in an area not engineered for such office
machinery and equipment, or (b) the installation and concurrent operation of a
number of normal office machines or pieces of equipment in an area not
engineered for such a concentration. For example, a typical office will provide
comfortable temperatures for its occupant when a normal personal computer is
installed and operated in that office, but it may not do so if an unusually
large computer or a number of smaller computers are installed and operated in
that office. Landlord shall not be liable for its failure to maintain
comfortable atmosphere conditions due to an occupancy load of more than one
person per two hundred and fifty (250) square feet. Landlord also will provide
standard janitorial service on Monday through Friday only (excluding legal
public holidays celebrated by the Tenant as specified in a schedule to be
provided by Tenant to Landlord at least thirty (30) days prior to the
commencement of each calendar year)); provided, however, that Tenant shall have
the right, upon reasonable advance written notice to Landlord and at Tenant's
sole cost and expense, to perform its own janitorial services within the
Premises, provided that the specifications therefor shall be subject to
Landlord's reasonable approval (it being understood that if Tenant assumes such
duties, then Landlord shall have no obligation or liability with respect thereto
or on account thereof and neither the Base Rent nor the Management Fee shall be
affected thereby). Landlord also will provide water, electricity (subject to
Tenant's responsibilities under Section 14.2 below) elevator service, and
exterior window-cleaning service. Tenant acknowledges that Landlord shall have
the right to remove elevators from service as may be required for moving freight
or for servicing or maintaining the
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elevators or the Building. Notwithstanding any of the foregoing to the contrary,
other than making utilities available to the Building as provided elsewhere in
this Lease, Landlord shall not be obligated to provide any services to or on
account of any Secured Access Area (as defined in Section 23.10) or to any other
areas deemed inaccessible as a result of Tenant's installation of security
equipment or serviceable only by personnel with U.S. Government security
clearance, unless Tenant provides Landlord with reasonable access to such areas
and pays all additional costs incurred in connection therewith (including,
without limitation, any overtime or additional charges for work not performed at
the customary times or in the customary manner). Tenant shall have access to the
Premises and the Building twenty-four (24) hours per day each day of the year
(except in the event of an emergency or other out of the ordinary circumstance).
The normal hours of operation of the Building will be 8:00 a.m. to 6:00 p.m. on
Monday through Friday (except such holidays) and such other hours, if any, as
Landlord reasonably determines. Tenant shall not permit anyone, except for
Tenant's employees and authorized guests, to enter the Building at times other
than the normal hours of operation of the Building without following Landlord's
reasonable rules and regulations therefor. The HVAC systems serving the Premises
shall be designed and constructed so that if Tenant wishes to operate such
systems after normal hours of Building operation, Tenant may do so at Tenant's
sole cost and expense. If Tenant requires of Landlord any other service beyond
the normal hours of operation, then Landlord will furnish the same, provided
Tenant gives Landlord sufficient advance notice of such requirement. Tenant
shall pay for all labor and other related costs and charges incurred by Landlord
in connection with providing such after hour services.
14.2 Landlord shall install in the Building, at Tenant's sole cost and
expense, separate meters to measure electricity and gas consumption with respect
to the Premises and the Satellite Area. Tenant shall arrange with the
appropriate utility company for the provision of such utilities, and Tenant
shall pay timely to the appropriate utility all charges and fees relating to
such utilities. If any other utility serving all or any portion of the Premises
is not separately metered, then Tenant shall pay to Landlord as additional rent
Tenant's Proportionate Share of same pursuant to Article V. Landlord shall have
the right, at any time during the Lease Term, to install separate meters for any
such utilities at Tenant's sole cost and expense, and from and after the date of
such installation Tenant shall pay timely to the appropriate utility company all
charges and fees relating to such utility.
14.3 For those utilities not separately metered, Tenant shall promptly
reimburse Landlord on demand for the cost of any excess or disproportionate
utility usage in or in connection with the Premises (including, but not limited
to, water and sewer usage). Excess and/or disproportionate usage shall be
determined by Landlord (in consultation with its mechanical engineer) and
pursuant to measurement of such usage by Landlord's energy management system.
14.4 Landlord reserves the right to curtail or suspend any utility,
service or Building system when necessary or desirable in the reasonable
judgment of Landlord, by reason of accident, emergency, repairs, alterations,
replacements or improvements or any other reason whatsoever, until such cause
has been removed or remedied. In the event of any failure or inability to
furnish any of the utilities or services for the Building, whether resulting
from breakdown, removal from service for maintenance or repairs, strikes,
scarcity of labor or materials, acts of God, governmental requirements, action
or inaction, or other cause whatsoever, Landlord shall not have any liability
to Tenant. Landlord shall endeavor to provide Tenant with reasonable advance
notice of any such curtailment or suspension either planned by Landlord or of
which Landlord has received notice.
14.5 If any public utility or governmental body requires Landlord or
Tenant to restrict the consumption of any utility or reduce any service to the
Premises or the Building, Tenant shall comply with such requirements whether or
not the utilities and services referred to in this Article XIV are thereby
reduced or otherwise affected, without any abatement, deduction, set-off, rebate
or adjustment to the Base Rent or additional rent payable hereunder and shall
not be considered an eviction, actual or constructive, of Tenant from the
Premises.
ARTICLE XV
LIABILITY OF LANDLORD
---------------------
15.1 Landlord, its employees and agents shall not be liable to Tenant, any
Invitee or any other person or entity for any damage (including indirect and
consequential damage), injury,
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loss or claim (including claims for the interruption of or loss to business)
based on or arising out of any cause whatsoever (except as otherwise provided in
this Section), including without limitation the following: repair to any portion
of the Premises or the Building; interruption in the use of the Premises or any
equipment therein; any accident or damage resulting from any use or operation
(by Landlord, Tenant or any other person or entity) of elevators or heating,
cooling, electrical, sewerage, or plumbing or mechanical equipment or apparatus;
termination of this Lease by reason of damage to the Premises or the Building;
fire, robbery, theft, vandalism, mysterious disappearance or any other casualty;
actions of any other tenant of the Building or of any other person or entity;
failure or inability to furnish any service specified in this Lease; and leakage
in any part of the Premises or the Building from water, rain, ice, snow or other
cause that may leak into, or flow from, any part of the Premises or the Building
or the Land, or from drains, pipes or plumbing fixtures in the Premises or the
Building or the Land. If any condition exists which may be the basis of a claim
of constructive eviction, then Tenant shall give Landlord written notice thereof
and a reasonable opportunity to correct such condition, and in the interim
Tenant shall not claim that it has been constructively evicted or is entitled to
a rent abatement. Any property placed by Tenant or Invitees in or about the
Premises, the Building or the Land shall be at the sole risk of Tenant, and
Landlord shall not in any manner be responsible therefor. If any employee of
Landlord receives any package or article delivered for Tenant, then such
employee shall be acting as Tenant's agent for such purpose and not as
Landlord's agent. Notwithstanding the foregoing provisions of this Section,
Landlord shall not be released from liability to Tenant for any physical injury
to any natural person caused by Landlord's willful misconduct or gross
negligence to the extent such injury is not covered by insurance (a) carried by
Tenant or such person, or (b) required by this Lease to be carried by Tenant.
15.2 Tenant shall reimburse Landlord for, and shall indemnify, defend upon
request and hold Landlord, its employees and agents harmless from and against,
all costs, damages, claims, liabilities, expenses (including attorneys' fees),
losses and court costs suffered by or claimed against Landlord, directly or
indirectly, based on or arising out of, in whole or in part, (a) use and/or
occupancy of the Premises or the business conducted therein by Tenant or
Tenant's Invitees, (b) any act or omission of Tenant or any Invitee, (c) any
breach of Tenant's obligations under this Lease, including failure to surrender
the Premises upon the expiration or earlier termination of the Lease Term, or
(d) any entry by Tenant or any Invitee upon the Land prior to the Lease
Commencement Date.
15.3 If any landlord hereunder transfers the Building or such landlord's
interest therein, then such landlord shall not be liable for any obligation or
liability based on or arising out of any event or condition occurring after such
transfer. Tenant shall attorn to such transferee and, within five (5) business
days after request, shall execute, acknowledge and deliver any commercially
reasonable document submitted to Tenant confirming such attornment.
15.4 If Tenant believes that Landlord is in default of Landlord's
obligations under this Lease, Tenant shall have the right to give written notice
of such default to Landlord, and Landlord shall have the right, for a period of
thirty (30) days after receipt of written notice from Tenant, to cure such
alleged default. Such thirty (30) day cure period shall be extended, if
necessary, if the matter or event complained of by Tenant is not amenable to
cure in thirty (30) days despite diligent effort, and if Landlord is diligently
endeavoring to cure such alleged default. However, if Tenant believes that
Landlord has not cured such alleged default in a timely manner, then Tenant's
remedy for such Landlord default shall be to seek damages from Landlord
(including Tenant's reasonable attorneys' fees and court costs if Tenant is
successful and damages are awarded against Landlord) or, if available at law or
in equity, specific performance by Landlord of its obligations, and Tenant shall
under no circumstances, except as expressly set forth in this Lease, have any
right to terminate this Lease. In addition, Tenant shall not have the right to
offset or deduct any amount allegedly owed to Tenant pursuant to any claim
against Landlord from any rent or other sum payable to Landlord. Tenant's sole
remedy for recovering upon such claim shall be to institute an independent
action against Landlord.
15.5 If Tenant or any Invitee is awarded a money judgment against
Landlord, then recourse for satisfaction of such judgment shall be limited to
execution against Landlord's estate and interest in the Building and the Land.
No other asset of Landlord, any partner, director or officer of Landlord
(collectively, "Officer") or any other person or entity shall be available to
satisfy or subject to such judgment, nor shall any Officer or other person or
entity have personal liability for satisfaction of any claim or judgment against
Landlord or any Officer.
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ARTICLE XVI
RULES
-----
16.1 Tenant and Invitees shall observe the rules specified in Exhibit D
attached hereto. Tenant and Invitees shall also observe any other rule that
Landlord may promulgate for the operation or maintenance of the Building,
provided that notice thereof is given and such rule is not inconsistent with the
provisions of this Lease. Landlord shall have no duty to enforce such rules or
any provision of any other lease against any other tenant. Landlord will use
reasonable efforts not to enforce any rule or regulation in a manner which
unreasonably and adversely discriminates among tenants of the Building. If there
is any inconsistency between the terms of this Lease and the rules specified in
Exhibit D, the terms of this Lease shall govern.
ARTICLE XVII
DAMAGE OR DESTRUCTION
----------------------
17.1 If the Premises or the Building are totally or partially damaged or
destroyed from any cause, thereby rendering the Premises totally or partially
inaccessible or unusable, then Landlord shall (taking into account the time
needed for effecting a satisfactory settlement with any insurance company
involved) diligently repair and restore the Premises and the Building to
substantially the same condition in which they were in prior to such damage or
destruction; provided, however, that if in Landlord's reasonable judgment such
repair and restoration cannot be completed by the earlier of (i) the expiration
date of the then-current term of this Lease or (ii) one year after the
occurrence of such damage or destruction (taking into account the time needed
for removal of debris, preparation of plans and issuance of all required
governmental permits), then Landlord or Tenant shall have the right, at its sole
option, to terminate this Lease as of the sixtieth (60th) day after such
damage or destruction by giving written notice of termination within forty-five
(45) days after the occurrence of such damage or destruction. If this Lease is
terminated pursuant to the immediately preceding sentence, then all rent
payable hereunder shall be apportioned and paid to the date of termination. If
this Lease is not terminated as a result of such damage or destruction, then
until such repair and restoration of the Premises are substantially complete,
Tenant shall be required to pay the Base Rent and additional rent only for the
portion of the Premises that Tenant is able to use while such repair and
restoration are being made. Except as otherwise specified in Section 17.2,
Landlord shall bear the costs and expenses of such repair and restoration of the
Premises and the Building; provided, however, that if such damage or destruction
was not caused by the gross negligence or willful misconduct of Landlord or its
agents, then Tenant shall pay the amount by which such expenses (including any
deductibles) exceed the insurance proceeds, if any, actually received by
Landlord on account of such damage or destruction. Notwithstanding anything
herein to the contrary, Landlord shall have the right to terminate this Lease
if (a) Landlord's insurance is insufficient to pay the full cost of such repair
and restoration and Tenant does not pay the amount by which the cost of repair
and restoration exceeds the insurance proceeds, (b) the holder of any Mortgage
fails or refuses to make such insurance proceeds available for such repair and
restoration, or (c) zoning or other applicable laws or regulations do not permit
such repair and restoration. Notwithstanding anything to the contrary set
forth in this Section 17.1, Tenant shall not have the right to terminate this
Lease because of damage or destruction if Landlord is able to identify space in
other buildings owned by Landlord or its affiliates within a three (3) mile
radius of the Building which would be available for lease on a temporary basis
by Tenant at rents comparable to those then in effect with respect to the
Premises and which is space comparable to the Premises and would satisfy
Tenant's security and space requirements.
17.2 Notwithstanding anything above to the contrary, if Landlord repairs
and restores the Premises as provided in Section 17.1, Landlord's obligation
shall be to repair and restore the Premises in accordance with the plans and
specifications developed and approved as set forth in Exhibit B, and Landlord
shall not be required to repair, restore or replace any decorations,
Alterations or improvements to the Premises made by Tenant, any trade fixtures,
furnishings, equipment or personal property belonging to Tenant, or any other
item not part of the Initial Installations. It shall be Tenant's sole
responsibility to insure, repair and restore all such items owned or installed
by Tenant.
17.3 Notwithstanding anything to the contrary contained herein, if there
is damage to or a destruction of the Building that exceeds twenty-five percent
(25%) of the replacement value
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of the Building and if Tenant is occupying fifty percent (50%) or less of the
rentable area of the Building, then Landlord shall have the right to terminate
this Lease by written notice to Tenant.
ARTICLE XVIII
CONDEMNATION
------------
18.1 If the whole or a substantial part (as hereinafter defined) of the
Premises, or the use or occupancy thereof, shall be taken or condemned by any
governmental or quasi-governmental authority for any public or quasi-public use
or purpose or sold under threat of such a taking or condemnation (collectively,
"condemned"), then this Lease shall terminate on the date title vests in such
authority and all rent payable hereunder shall be apportioned as of such date.
If less than a substantial part of the Premises, or if the use or occupancy of
less than a substantial part thereof, is condemned, then this Lease shall
continue in full force and effect, except that as of the date title vests in
such authority Tenant shall not be required to pay the Base Rent and additional
rent with respect to the part of the Premises condemned. For purposes of this
Section 18.1, a substantial part of the Premises shall be considered to have
been taken if more than one-third (1/3) of the rentable area of the Premises is
rendered unusable as a result of such condemnation, or if more than one-third
(1/3) of parking spaces adjacent to the Building are condemned and Landlord is
unable to provide alternative parking arrangements reasonably satisfactory to
Tenant.
18.2 All awards, damages and other compensation paid by the condemning
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,
leasehold improvements or severance damages. Nothing contained herein, however,
shall prevent Tenant from pursuing a separate claim against the authority for
the value of furnishings, equipment and trade fixtures installed in the Premises
at Tenant's expense and for relocation expenses, provided that such claim shall
in no way diminish the award, damages or compensation otherwise payable to or
recoverable by Landlord in connection with such condemnation.
ARTICLE XIX
DEFAULT
-------
19.1 An "Event of Default" is any one or more of the following: (a)
Tenant's failure to make when due any payment of the Base Rent, additional rent
or other sum due hereunder, which failure shall continue for a period of six (6)
business days after Landlord gives Tenant written notice thereof; (b) Tenant's
failure to perform or observe any term, covenant or condition of this Lease not
otherwise specifically described in this Section 19.1, which failure shall
continue for a period of ten (10) days after Landlord gives Tenant written
notice thereof (provided, however, that if such cure cannot be effected within
such ten (10) day period and Tenant begins such cure and is pursuing such cure
in good faith and with diligence and continuity during such ten (10) day period,
then Tenant shall have such additional time (up to an additional thirty (30)
days) as is reasonably necessary to effect such cure); (c) an Event of
Bankruptcy as specified in Article XX; (d) Tenant's dissolution or liquidation;
(e) any subletting, assignment, transfer, mortgage or other encumbrance of the
Premises or this Lease not permitted by Article VII; (f) Tenant's (or its
affiliate's) default under or breach of any other lease or other agreement
between Tenant (or such affiliate) and Landlord (or its affiliate); or (g) any
Environmental Default as specified in Section 6.3.
19.2 If there shall be an Event of Default, including an Event of Default
prior to the Lease Commencement Date, then all of the provisions of this Section
shall apply. 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 Article shall operate as a notice to quit, any
other notice to quit or of Landlord's intention to re-enter the Premises being
expressly waived. If necessary, Landlord may proceed to recover possession of
the Premises under applicable laws, 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 in
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this Lease to be done by Landlord shall cease, without prejudice, however, to
Tenant's liability for all rent and other sums due under this Lease as provided
for in this Section. Landlord may relet the Premises or any part thereof, alone
or together with other premises, for such term(s) (which may be greater or less
than the period which otherwise would have constituted the balance of the Lease
Term) and on such terms and conditions (which may include concessions or free
rent and 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 due upon such reletting. Whether or not this Lease is terminated,
Tenant nevertheless shall remain liable for the Base Rent, additional rent and
damages which may be due or sustained prior to such default, and for all costs,
fees and expenses (including, without limitation, reasonable attorneys' fees,
brokerage fees, expenses incurred in placing the Premises in first-class
rentable condition, and other costs and expenses) incurred by Landlord in
pursuit of its remedies hereunder, or in renting the Premises to others from
time to time) (all such Base Rent, additional rent, damages, costs, fees and
expenses hereinafter being referred to as "Termination Damages"). Tenant shall
also be liable for additional damages ("Liquidated Damages") which at Landlord's
election shall be either: (a) an amount equal to the Base 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
received by Landlord as a result of any failure of such other person to perform
any of its obligations to Landlord), in which case such Liquidated 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; provided,
however, that separate suits or actions may be brought to collect any such
Liquidated Damages for any month(s), and such suits or actions shall not in any
manner prejudice Landlord's right to collect any Liquidated Damages for any
subsequent month(s) by similar proceedings, or Landlord may defer any such suit
or action until after the expiration of the Lease Term, in which event such suit
or action shall be deemed not to have accrued until the expiration of the Lease
Term); or (b) an amount equal to the present value (as of the date of Tenant's
default) of all Base Rent, additional rent and other sums which would have
become due through the date on which the Lease Term would have expired but for
Tenant's default, which Liquidated Damages shall be payable to Landlord in one
lump sum on demand. For purposes of this Section 19.2(b), "present value" shall
be computed by discounting at a rate equal to one (1) whole percentage point
above the discount rate in effect on the date of payment at the Federal Reserve
Bank nearest the Building. Landlord may bring suit to collect any such
Liquidated Damages at any time after an Event of Default shall have occurred.
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. The
provisions outlined in this Section shall be in addition to, and shall not
prevent the enforcement of, any claim Landlord may have against Tenant for
anticipatory breach of this Lease.
19.3 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.
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. Any such
waiver shall not be construed as a waiver of any covenant or condition except as
to the specific circumstances described in such waiver.
19.4 If Landlord shall make demand or institute proceedings against Tenant
and a compromise or settlement thereof shall be made, the same shall not
constitute a waiver of any other covenant, condition or agreement set forth
herein, nor of any of Landlord's rights hereunder. Neither Tenant's payment of
an amount less than a sum due nor Tenant's endorsement or statement on any check
or letter accompanying such payment shall be deemed an accord and satisfaction.
Landlord may accept the same without prejudice to Landlord's right to recover
the balance of such sum or to pursue other remedies. Re-entry and acceptance of
keys shall not be considered an acceptance of a surrender of this Lease.
19.5 If Tenant fails to make any payment to any third party or to do any
act herein required to be made or done by Tenant, then Landlord may, but shall
not be required to, make such payment or do such act. Landlord's taking such
action shall not be considered a cure of such failure by Tenant nor prevent
Landlord from pursuing any remedy it is otherwise entitled to in
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connection with such failure. If Landlord elects to make such payment or do such
act, then all expenses incurred, plus interest thereon at the Default Rate (as
hereinafter defined) from the date incurred to the date of payment thereof by
Tenant, shall constitute additional rent. The Default Rate shall equal the rate
per annum which is five (5) whole percentage points above the prime rate
published from time to time in the Money Rates section of the Wall Street
Journal; provided, however, that nothing contained herein shall be construed as
permitting Landlord to charge or receive interest in excess of the maximum rate
then allowed by law. If the Wall Street Journal ceases to publish a prime rate
or announces more than one prime rate, then, for purposes of determining the
Default Rate, Landlord shall have the right to designate a substitute rate which
Landlord deems comparable.
19.6 If Tenant twice in any twelve (12) month period fails to make any
payment of the Base Rent, additional rent or any other sum payable under this
Lease on or before the date such payment is due and payable (without regard to
any grace period specified in Section 19.1), then Tenant shall pay to Landlord a
late charge equal to five percent (5%) of the amount of such payment. Such
payment and such late fee shall bear interest at the Default Rate from the date
such payment or late fee, respectively, became due to the date of payment;
provided however, that nothing contained herein shall be construed as permitting
Landlord to charge or receive interest in excess of the maximum rate then
allowed by law. If Tenant is in default of this Lease for the same or
substantially the same reason more than three times during the Lease Term, then,
at Landlord's election, Tenant shall not have the right to cure such repeated
default. In the event of Landlord's election not to allow a cure of a repeated
default, Landlord shall have all the rights and remedies provided herein and by
law. In addition, if two (2) consecutive monthly installments of rent remain
unpaid for longer than ten (10) days beyond the date on which each is due and
payable, then the aforesaid waiver of the late fee shall be of no further force
or effect, and Landlord may, in addition to all other rights and remedies
provided herein and by law, require that (i) Tenant establish a security deposit
with Landlord equal to two (2) months' rent, and/or (ii) thereafter, Tenant pay
all rent in the form of a certified check, cashier's check or wire transfer of
immediately available funds. If Tenant shall deliver to Landlord a check that is
returned unpaid for any reason, such payment shall be deemed never to have been
made and, additionally, Tenant shall pay Landlord One Hundred Dollars ($100.00)
for Landlord's expense in connection therewith (plus any out-of-pocket expenses
incurred in connection therewith) and said charge shall be payable to Landlord
on the first day of the next succeeding month as additional rent. The aforesaid
late charge and interest shall constitute additional rent due hereunder.
Notwithstanding anything above to the contrary, if Landlord receives timely from
Tenant any payment by means of a check drawn on a bank in the metropolitan
Washington, D.C. or Boston area, which check may be cashed or honored promptly
in due course, then Landlord shall be deemed to have received timely such
payment.
19.7 As security for the performance of Tenant's obligations, Tenant
grants to Landlord a lien upon and a security interest in Tenant's existing or
hereafter acquired personal property, inventory, furniture, fixtures, equipment
(including, without limitation, all Cafeteria equipment and Allowance Items),
licenses and permits located on or in, or pertaining to, the Premises, and all
additions, modifications, products and proceeds thereof, including, without
limitation, such tangible property which has been used at the Premises,
purchased for use at the Premises, located at any time in the Premises or used
or to be used in connection with the business conducted or to be conducted in
the Premises, whether or not the same may thereafter be removed from the
Premises. Such lien shall be in addition to all rights of distraint available
under applicable law. Tenant shall from time to time and promptly upon request
from Landlord, provide Landlord with a detailed inventory of all such property.
Within five (5) days after request from time to time, Tenant shall execute,
acknowledge and deliver to Landlord a financing statement and any other
document evidencing or establishing such lien and security interest which may
be requested by Landlord. Tenant appoints Landlord as Tenant's attorney-in-fact
to execute any such document for Tenant, but Landlord shall only be entitled to
exercise such power of attorney if Tenant has failed to respond (whether
affirmatively or negatively) within ten (10) business days to Landlord's
request for a signature on any such financing statement or document. In
addition, Landlord shall have the right, at Landlord's sole option, to file in
any jurisdiction a copy of this Lease (as executed by Tenant) as a financing
statement. During any period that Tenant is in default under this Lease, Tenant
shall not sell, transfer or remove from the Premises any of the aforementioned
tangible property without Landlord's prior written consent, unless the same
shall be promptly replaced with similar items of comparable value. In order to
further assure Tenant's performance of its obligations under this Lease, Tenant
covenants that during the Lease Term, it will not
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convey or otherwise transfer its assets or permit its assets to be encumbered to
the extent that any such conveyance, transfer or encumbrance is not done in the
ordinary course of Tenant's business or would materially and adversely affect
the net worth of Tenant.
ARTICLE XX
BANKRUPTCY
----------
20.1 An Event of Bankruptcy is: (a) Tenant, any guarantor of this Lease,
or any general partner of Tenant (a "General Partner") becoming insolvent, as
that term is defined in Title 11 of the United States Code (the "Bankruptcy
Code") or under the insolvency laws of any state (the "Insolvency Laws"); (b)
appointment of a receiver or custodian for any property of Tenant, a guarantor
or a General Partner, or the institution of a foreclosure or attachment action
upon any property of Tenant, a guarantor or a General Partner; (c) filing of a
voluntary petition by Tenant, a guarantor or a General Partner under the
provisions of the Bankruptcy Code or Insolvency Laws; (d) filing of an
involuntary petition against Tenant, a guarantor or a General Partner as the
subject debtor under the Bankruptcy Code or Insolvency Laws, which either (1) is
not dismissed within thirty (30) days after filing, or (2) results in the
issuance of an order for relief against the debtor; (e) Tenant's, a guarantor's
or a General Partner's making or consenting to an assignment for the benefit of
creditors or a composition of creditors; (f) a material and adverse change in
the financial condition or status of Tenant, a General Partner or a guarantor;
or (g) an admission by Tenant or a guarantor of its inability to pay debts as
they become due. At any time upon not less than five (5) days' prior written
notice, Tenant shall submit such information as Landlord may request concerning
the financial condition of Tenant, any guarantor or any General Partner. Tenant
warrants that all such information heretofore and hereafter submitted is and
shall be correct and complete.
20.2 Upon occurrence of an Event of Bankruptcy, Landlord shall have all
rights and remedies available pursuant to Article XIX; provided, however, that
while a case (the "Case") in which Tenant is the subject debtor under the
Bankruptcy Code is pending, Landlord's right to terminate this Lease shall be
subject, to the extent required by the Bankruptcy Code, to any rights of Tenant
or its trustee in bankruptcy (collectively, "Trustee") to assume or assign this
Lease pursuant to the Bankruptcy Code. Trustee shall not have the right to
assume or assign this Lease unless Trustee promptly (a) cures all defaults under
this Lease, (b) compensates Landlord for all damages incurred as a result of
such defaults, (c) provides adequate assurance of future performance on the part
of Tenant as debtor in possession or Tenant's assignee, and (d) complies with
all other requirements of the Bankruptcy Code. If Trustee fails to assume or
assign this Lease in accordance with the requirements of the Bankruptcy Code
within sixty (60) days after the initiation of the Case, then Trustee shall be
deemed to have rejected this Lease. Adequate assurance of future performance
shall require that, at a minimum, all of the following minimum criteria be met:
(1) Tenant's gross income (as defined by generally accepted accounting
principles) during the thirty (30) days preceding the filing of the Case must be
greater than ten (10) times the next monthly installment of the Base Rent and
additional rent; (2) Both the average and median of Tenant's monthly gross
income (as defined by generally accepted accounting principles) during the seven
(7) months preceding the filing of the Case must be greater than ten (10) times
the next monthly installment of the Base Rent and additional rent; (3) Trustee
must pay its estimated pro rata share of the cost of all services performed or
provided by Landlord (whether directly or through agents or contractors and
whether or not previously included as part of the Base Rent) in advance of the
performance or provision of such services; (4) Trustee must agree that Tenant's
business shall be conducted in a first-class manner, and that no liquidating
sale, auction or other non-first-class business operation shall be conducted in
the Premises; (5) Trustee must agree that the use of the Premises as stated in
this Lease shall remain unchanged and that no prohibited use shall be permitted;
(6) Trustee must agree that the assumption or assignment of this Lease shall not
violate or affect the rights of other tenants in the Building and the Complex;
(7) Trustee must pay at the time the next monthly installment of the Base Rent
is due, in addition to such installment, an amount equal to the monthly
installments of the Base Rent and additional rent due for the next six (6)
months thereafter, such amount to be held as a security deposit; (8) Trustee
must agree to pay, at any time Landlord draws on such security deposit, the
amount necessary to restore such security deposit to its original amount; and
(9) All assurances of future performance specified in the Bankruptcy Code must
be provided.
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ARTICLE XXI
SUBORDINATION
-------------
21.1 This Lease is subject and subordinate to the lien, provisions,
operation and effect of any mortgage, deed of trust, or other security
instrument which may now or hereafter encumber the Building or the Land (the
"Mortgage"), to all funds and indebtedness intended to be secured thereby, and
to all renewals, extensions, modifications, recastings or refinancings thereof.
The holder of any Mortgage to which this Lease is subordinate shall have the
right at any time to declare this Lease to be superior to the lien, provisions,
operation and effect of such Mortgage and Tenant shall execute, acknowledge and
deliver all confirming documents required by such holder.
21.2 In confirmation of the foregoing subordination, Tenant shall at
Landlord's request promptly execute any requisite or appropriate document
reasonably necessary to confirm such subordination and any nondisturbance and
attornment rights granted pursuant to the requirements of this Article XXI.
Tenant appoints Landlord as Tenant's attorney-in-fact to execute any such
document, but Landlord shall only be entitled to exercise such power of attorney
if Tenant has failed to respond (whether affirmatively or negatively) within ten
(10) business days to Landlord's request for a signature on any such document.
Tenant waives the provisions of any statute or rule of law now or hereafter in
effect which may give or purport to give Tenant any right to terminate or
otherwise adversely affect this Lease or Tenant's obligations in the event any
such foreclosure proceeding is prosecuted or completed or in the event the Land,
the Building or Landlord's interest therein is sold at a foreclosure sale or by
deed in lieu of foreclosure. If this Lease is not extinguished upon such sale or
by the purchaser following such sale, then, at the request of such purchaser,
Tenant shall attorn to such purchaser and shall recognize such purchaser as the
landlord under this Lease. Upon such attornment such purchaser shall not be (a)
bound by any payment of the Base Rent or additional rent more than one (1) month
in advance, (b) bound by any amendment of this Lease made without the consent of
the holder of the Mortgage existing as of the date of such amendment, (c) liable
for damages for any breach, act or omission of any prior landlord, or (d)
subject to any offsets or defenses which Tenant might have against any prior
landlord. Within five (5) days after receipt, Tenant shall execute, acknowledge
and deliver any requisite or appropriate document submitted to Tenant confirming
such attornment.
21.3 If any lender providing any type of financing secured by the Building
or the Land 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 and other sums to be paid by
Tenant, then Landlord may submit to Tenant an amendment to this Lease
incorporating such modifications. Tenant shall execute, acknowledge and deliver
such amendment to Landlord within fifteen (15) business days after receipt.
21.4 Landlord shall obtain for Tenant a subordination, non-disturbance and
attornment agreement (recognizing Tenant's rights under this Lease) from the
holder of any first Mortgage now or hereafter encumbering the Building and/or
the Land, on such holder's standard form (without modification, except for
commercially reasonable changes if and to the extent such changes are necessary
to ensure that Tenant's rights or obligations hereunder are not materially and
adversely affected). Any such nondisturbance agreement shall provide, in
substance, that the purchaser at a foreclosure (or trustees sale under a deed of
trust) of the Premises shall not disturb Tenant's occupancy of the Premises for
so long as Tenant is timely paying all Base Rent and additional rent and charges
due from Tenant and is otherwise performing all of Tenant's obligations
hereunder.
ARTICLE XXII
COVENANTS OF LANDLORD
---------------------
22.1 Landlord covenants that if Tenant shall perform timely all of its
obligations, then, subject to the provisions of this Lease, Tenant shall during
the Lease Term peaceably and quietly occupy and enjoy possession of the
Premises without hindrance by Landlord or anyone claiming through Landlord.
Tenant acknowledges that construction of Phase II may cause noise, disruption
and disturbance to Tenant's possession of Phase I. Landlord shall use
reasonable efforts to minimize such noise, disruption, and disturbance;
provided, however, that any additional costs
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incurred by Landlord in response to Tenant concerns or complaints, and after
consultation with Tenant as to the measures proposed and the anticipated costs,
in connection with efforts to mitigate noise, disruption, and disturbance
(including, without limitation, overtime charges) shall be paid by Tenant.
Landlord shall utilize reasonable efforts to schedule any work requiring
interruption of utilities on weekends.
22.2 Landlord reserves the right to: (a) change the street address and
name of the Building or the Complex; (b) change the arrangement and location of
entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets
or other public parts of the Building and the Complex, and, in connection with
such work, to temporarily close door entry ways, common or public spaces and
corridors of the Building or the Complex so long as the Premises remain
reasonably accessible and Tenant can maintain reasonable security requirements;
(c) erect, use and maintain pipes and conduits in and through the Premises; (d)
resubdivide the Land or combine the Land with other lands; (e) relocate or
change roads, driveways and parking areas and to alter the means of access to
all or any portion of the Building or Complex; (f) subject to Tenant's prior
approval as to signage in or on the Building, which shall not be unreasonably
withheld, conditioned, or delayed, install and display marketing, directional,
or other reasonable signage or notices on any part of the exterior or interior
of the Building or within the Complex; (g) install such access control systems
and devices as Landlord deems appropriate and not inconsistent with Tenant's
security arrangements; (h) create easements and other rights concerning the
Premises, the Building, the Land and the entrances, aisles and stairways of any
parking areas for utilities, telephone lines, sanitary sewer, storm sewer, water
lines, pipes, conduits, drainage ditches, sidewalks, pathways, emergency
vehicles, and ingress and egress for the use and benefit of others, without
Tenant joining in the execution thereof and the Lease shall automatically be
subject and subordinate thereto; (i) alter the site plan, landscaping, walkways
and common areas outside the Building within the context of general site
improvements, repairs and maintenance; and (j) subject the Building or the Land
to covenants, conditions and restrictions which are intended to address the
development and use of the Complex or the Park and to provide for the
maintenance and upkeep of common areas within the Complex or the Park, and this
Lease shall be subject and subordinate to all such covenants, conditions and
restrictions now or hereafter imposed. Exercise of any such right shall not be
considered a constructive eviction or a disturbance of Tenant's business or
occupancy. Notwithstanding anything above to the contrary, under no
circumstances shall Landlord's exercise of any of the aforesaid rights
materially adversely affect Tenant's use of or access to the Premises or the
Satellite Area, or breach the security requirements imposed upon Tenant by the
U.S. Government without Tenant's prior approval (which shall not be unreasonably
withheld, conditioned or delayed).
ARTICLE XXIII
GENERAL PROVISIONS
------------------
23.1 Tenant acknowledges that neither Landlord nor any broker, agent or
employee of Landlord has made any representation or promise with respect to the
Premises or the Building or the Land except as expressly set forth herein, and
no rights, privileges, easements or licenses are being acquired by Tenant except
as expressly set forth herein.
23.2 Nothing contained in this Lease shall be construed as creating any
relationship between Landlord and Tenant other than that of landlord and
tenant.
23.3 Landlord and Tenant each warrants that in connection with this Lease
it has not employed or dealt with any broker, agent or finder other than the
Brokers. The commissions of the Brokers shall be paid by Landlord pursuant to
separate agreements. Tenant shall indemnify and hold Landlord harmless from and
against any claim for brokerage or other commissions asserted by any other
broker, agent or finder employed by Tenant or with whom Tenant has dealt.
Landlord shall indemnify and hold Tenant harmless from and against any claim for
brokerage or other commissions asserted by any of the Brokers or by any other
broker, agent or finder employed by Landlord or with whom Landlord has dealt.
23.4 From time to time upon ten (10) days' prior written notice, Tenant
and each subtenant, assignee or occupant of Tenant shall execute, acknowledge
and deliver to Landlord and any designee of Landlord a written statement
certifying: (a) that this Lease is unmodified and in full force and effect (or
that this Lease is in full force and effect as modified and stating the
modifications); (b) the dates to which rent and any other charges have been
paid; (c) that
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Landlord is not in default in the performance of any obligation (or specifying
the nature of any default); (d) the address to which notices are to be sent; (e)
that this Lease is subject and subordinate to all Mortgages; (f) that Tenant has
accepted the Premises and all work thereto has been completed (or specifying the
incomplete work); and (g) such other matters as Landlord or any lender may
request. Any such statement may be relied upon by any owner of the Building or
the Land, any prospective purchaser of the Building or the Land, the holder or
prospective holder of a Mortgage or any other person or entity. Tenant
acknowledges that time is of the essence to the delivery of such statements and
Tenant's failure to deliver timely such statements may cause substantial damages
resulting from, for example, delays in obtaining financing secured by the
Building.
23.5 LANDLORD, TENANT, GUARANTORS AND GENERAL PARTNERS WAIVE TRIAL BY JURY
IN ANY ACTION, CLAIM OR COUNTERCLAIM BROUGHT IN CONNECTION WITH ANY MATTER
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE LANDLORD-TENANT
RELATIONSHIP, TENANT'S USE OR OCCUPANCY OF THE PREMISES OR ANY CLAIM OF INJURY
OR DAMAGE. Tenant consents to service of process and any pleading relating to
any such action at the Premises; provided, however, that nothing herein shall be
construed as requiring such service at the Premises. Landlord, Tenant, all
Guarantors and all General Partners waive any objection to the venue of any
action filed in any court situated in the jurisdiction in which the Building is
located and waive any right under the doctrine of forum non conveniens or
otherwise to transfer any such action filed in any such court to any other
court.
23.6 All notices or other required communications shall be in writing and
shall be deemed duly given only when delivered in person (with receipt
therefor), or when sent by certified or registered mail, return receipt
requested, postage prepaid, to the following addresses: (a) if to Landlord, at
the Landlord Address for Notices, with a copy to Shaw, Pittman, Potts &
Trowbridge, 201 Liberty Street, S.W., Leesburg, VA 22075, Attention: Robert M.
Gordon, Esq. (b) if to Tenant, at the Tenant Address for Notices. Either party
may change its address for the giving of notices by notice given in accordance
with this Section. If Landlord or the holder of the Mortgage notifies Tenant
that a copy of each notice to Landlord shall be sent to such holder at a
specified address, then Tenant shall send (in the manner specified in this
Section and at the same time such notice is sent to Landlord) a copy of each
such notice to such holder, and no such notice shall be considered duly sent
unless such copy is so sent to such holder. If Tenant claims that Landlord has
breached any obligation, then Tenant shall send such holder notice specifying
the breach and permit such holder a reasonable opportunity to cure the breach.
23.7 Each provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law. If any provision or its application to any
person or circumstance shall to any extent be invalid or unenforceable, then
such provision shall be deemed to be replaced by the valid and enforceable
provision most substantively similar thereto, and the remainder of this Lease
and the application of such provision to other persons or circumstances shall
not be affected.
23.8 Feminine, masculine or neuter pronouns shall be substituted for those
of another form, and the plural or singular shall be substituted for the other
number, in any place in which the context may require.
23.9 The provisions of this Lease shall be binding upon and inure to the
benefit of the parties and their respective representatives, successors and
assigns, subject to the provisions herein restricting assignment or subletting
by Tenant.
23.10 (a) Tenant shall permit Landlord, its agents, mortgagees and
representatives, and federal, state, county and municipal officers or
representatives, and prospective lenders or purchasers of interests in the
Building or Landlord, (i) without notice, to enter the public and common areas
of the Building (as defined in Section 2.1), (ii) without notice, to enter the
Premises and the Satellite Area during emergencies, and (iii) to enter the
Premises and the Satellite Area at all reasonable times during Tenant's normal
business hours upon not less than forty-eight (48) hours' prior written notice,
without charge therefor and without diminution of the rent payable by Tenant, in
order: to examine, inspect or protect the Premises and the Building; to make
such alterations, improvements or repairs to the Building or Building systems as
in the sole judgment of Landlord may be deemed necessary; to exhibit the
Premises and the Building, during the last twelve (12) months of the
then-current Lease Term, to any prospective tenant; and/or for any other
reasonable purpose relating to the operation or maintenance of the Premises or
the
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Building. In connection with any such entry, Landlord shall endeavor to minimize
disruption to Tenant's use of the Premises (it being understood that same shall
not be deemed to prohibit Landlord from performing maintenance and repairs
during business hours). Tenant shall have the right to escort any person
entering the Premises or the Satellite Area pursuant to this Section 23.10.
During the course of any alteration, improvement or repair by Landlord in the
Premises, and during its operation and management of the Building, Landlord may
store within the Premises all necessary materials, tools, supplies and
equipment, provided that such storage shall not interfere with Tenant's use of
the Premises. Nothing in this Section shall be construed as imposing any
obligation on Landlord to make any alterations, improvements or repairs. The
Building engineer and other maintenance personnel shall have access to the
public and common areas of the Building and to the Building's central heating
and air conditioning, and other Building systems, without notice and as
necessary to permit the proper maintenance and operation thereof.
(b) Tenant shall have the right to designate certain areas located
entirely within the Premises and the Satellite Area as secured access areas
(each a "Secured Access Area") upon giving Landlord at least thirty (30) days'
prior written notice, provided (i) such written notice includes a copy of the
floor plan clearly designating the Secured Access Area, (ii) the area so
designated is clearly and fully marked "Secured Access Area" by signs posted in
appropriate places, and (iii) at the time of such written notice Tenant provides
Landlord with the names and all contact information of those persons designated
by Tenant to enable Landlord to access the Secured Access Areas in the event of
an emergency or other out of the ordinary circumstance (each, an "Access
Representative"). At least one (1) Access Representative shall be immediately
available to Landlord twenty-four (24) hours a day, seven (7) days a week, each
day of the year. Tenant shall provide Landlord with current information
concerning each such Access Representative as the same may change from time to
time. Any Alterations within or on account of any Secured Access Area shall be
subject to Article IX and the other applicable provisions of this Lease. Except
in the event of an emergency or other out of the ordinary circumstance, no agent
or employee of Landlord (except for one who has received the requisite security
clearance) shall enter any Secured Access Area (other than public and common
areas and areas housing the Building's systems which are not subject to security
requirements imposed by the U.S. Government) after normal business hours without
(1) reasonable advance oral or written notice to Tenant and unless accompanied
by an Access Representative (who Tenant shall make available immediately upon
request) or (2) some other mutually satisfactory arrangement with Tenant having
been made. Tenant shall pay, within ten (10) days after request therefor, all
costs incurred by Landlord in connection with Landlord's compliance with this
section, including, without limitation, any overtime or additional charges for
services or repair work not performed at the customary times or in the customary
manner. In addition, Tenant shall indemnify and hold harmless Landlord from and
against any cost or liability resulting from Landlord's inability to gain access
to or use of the Premises arising out of the limitation on Landlord's access set
forth in this subsection. All expenses associated with any security escorts or
special security requirements also shall be at Tenant's sole cost.
(c) Landlord shall use its best efforts to obtain proper security
clearance for all employees necessary to perform Landlord's property management
obligations under this Lease, and to present for clearance persons of
appropriate qualifications in order to expedite such process. Tenant shall
cooperate fully at all times with Landlord and Managing Agent to assist Landlord
and Managing Agent in obtaining proper security clearance for all building
personnel as appropriate. Tenant acknowledges that Landlord shall not be
responsible to provide any services, repairs or maintenance whatsoever in the
event Landlord fails to obtain security clearance for such personnel.
23.11 This Lease shall be governed by the laws of the jurisdiction in
which the Building is located.
23.12 Headings are used for convenience and shall not be considered when
construing this Lease.
23.13 The submission of a copy of this document to Tenant shall not
constitute an offer or option to lease. This Lease shall become effective and
binding only upon execution and delivery by both Landlord and Tenant.
23.14 Time is of the essence with respect to each obligation of Tenant and
Landlord hereunder.
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23.15 This Lease may be executed in multiple counterparts, each of which
is deemed an original and all of which constitute one and the same document.
23.16 Neither this Lease nor a memorandum thereof shall be recorded.
23.17 Landlord reserves the right to make reasonable changes to the plans
and specifications for the Building without Tenant's consent, provided such
changes do not alter the character of the Building as a first-class office
building. Landlord agrees to consult with Tenant regarding such changes as
provided in Exhibit B.
23.18 Except as otherwise provided in this Lease, any additional rent or
other sum owed by Tenant to Landlord, and any cost, expense, damage or liability
incurred by Landlord for which Tenant is liable, shall be considered additional
rent payable pursuant to this Lease and paid by Tenant no later than thirty (30)
days after the date Landlord notifies Tenant of the amount thereof.
23.19 Tenant's liabilities existing as of the expiration or earlier
termination of the Lease Term shall survive such expiration or earlier
termination.
23.20 If Landlord is in any way delayed or prevented from performing any
obligation due to fire, act of God, governmental act or failure to act, strike,
labor dispute, inability to procure materials or any cause beyond Landlord's
reasonable control (whether similar or dissimilar to the foregoing events) (a
"force majeure delay"), then the time for performance of such obligation shall
be excused for the period of such delay or prevention and extended for the time
necessary to compensate for the period of such delay or prevention.
23.21 The deletion of any printed, typed or other portion of this Lease
shall not evidence an intention to contradict such deleted portion. Such deleted
portion shall be deemed not to have been inserted in this Lease.
23.22 The Tenant covenants and agrees to maintain at all times during the
Lease Term an amount of "total shareholder's equity" (as defined by generally
accepted accounting principles) of at least One Hundred Twenty-Five Million
Dollars ($125,000,000). Within sixty (60) days after the end of each calendar
quarter upon a written request by Landlord to Tenant, Tenant shall provide to
Landlord Tenant's current financial statement (income statement and balance
sheet) for said quarter. Additionally, on an annual basis, Tenant shall provide
to Landlord, no later than April 30 of each year, a current financial statement
for the prior calendar year (which statement shall include a complete income
statement, balance sheet and statement of changes in net cash flow of Tenant)
and a three year forecast of the revenues, expenses and net operating income of
Tenant on a consolidated basis, which shall be prepared in accordance with
generally accepted accounting principles, consistently applied, and which shall
be certified as true, correct and complete by the Tenant's Chief Financial
Officer, to the best of his knowledge. Landlord shall treat said financial
information as strictly confidential; provided, however, that Landlord may
release such information to its Managing Agent and to its lender and financial
and legal advisors who shall each be informed of its confidential nature.
Landlord shall not use any confidential information contained in such reports as
the basis for a decision by Landlord to invest or divest in Primark Corporation
stock. If Tenant should fail at any time to maintain said shareholder's equity
of at least $125,000,000 Tenant shall within thirty (30) days after written
notice from Landlord:
(a) Restore said shareholder's equity in Tenant to at least
$125,000,000 and certify such restoration to Landlord, providing reasonable
evidence thereof: OR
(b) (i) Certify to Landlord that said shareholder's equity in Tenant
is, as of the date thereof, equal to at least Seventy-Five Million Dollars
($75,000,000) (and provide reasonable evidence thereof) and undertake to
maintain such level of shareholder's equity for the balance of the Lease Term
and provide the annual statements referenced above with regard thereto, AND
(ii)provide to Landlord a security deposit in an amount equal to
one year's base rent (as then escalated), which security deposit shall be in the
form of cash, or if Tenant in its sole discretion chooses, in the form of a
commercial, irrevocable letter of credit (which shall be in a form, and from a
financial institution, reasonably acceptable to Landlord). Landlord shall hold
(or apply upon an Event of Default) said deposit until Landlord has been fully
released from the guaranty imposed as part of The Northwestern Mutual Life loan,
which release Landlord anticipates obtaining in about the ninth (9th) Lease
Year, at which time,
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provided that there is then no Event of Default under the Lease, Landlord shall
return said deposit (less any amount applied) to Tenant; OR
(c) Provide to Landlord evidence that Tenant has assigned this Lease
to Primark Corporation and that Primark Corporation has assumed all of Tenant's
obligations hereunder, which assignment shall be in form reasonably acceptable
to Landlord.
Notwithstanding anything to the contrary in this Paragraph 23.22, Tenant's
failure to maintain shareholder's equity of at least $125,000,000 shall not in
itself constitute an Event of Default hereunder unless and until Tenant does not
timely exercise one of the three options specified immediately above, and
Landlord agrees that it shall not terminate Tenant's right of possession nor
take any other remedy solely on account of such failure to maintain $125,000,000
of shareholder's equity provided Tenant timely exercises one of the three
options specified immediately above.
23.23 The person executing this Lease on Tenant's behalf warrants that
such person is duly authorized to so act.
23.24
23.25 If any Base Rent or additional rent is collected by or through an
attorney or if Landlord requires the services of an attorney to cause Tenant to
cure any default, to evict Tenant or to pursue any other remedies to which
Landlord is entitled hereunder, Tenant shall pay the reasonable fees of such
attorney (including in-house attorneys) together with all reasonable costs and
expenses incurred by Landlord in connection with such matters, whether or not
any legal proceedings have been commenced.
23.26 Tenant represents that the financial statement(s) previously
delivered to Landlord is (are) a true, complete and accurate presentation as of
the date hereof of all of the assets, liabilities and net worth of Tenant or any
guarantor of this Lease. Tenant acknowledges that as a material inducement for
entering into this Lease, Landlord is relying on the accuracy of this
information.
23.27 For purposes of Section 55-2, Code of Virginia (1950), as amended,
this Lease is and shall be deemed to be a deed of lease. For purposes of Section
55-218.1, Code of Virginia (1950), as amended, Landlord's resident agent is
Michael D. Lynch, c/o The Mark Winkler Company, 4900 Seminary Road, Alexandria,
Virginia 22311.
23.28 This Lease contains and embodies the entire agreement of the parties
hereto and supersedes all prior agreements, negotiations and discussions between
the parties hereto. Any representation, inducement or agreement that is not
contained in this Lease shall not be of any force or effect (except for any
letter agreement signed by Landlord (or its affiliate) and Tenant as described
in Section 27.2). This Lease may not be modified or changed in whole or in part
in any manner other than by an instrument in writing duly signed by both parties
hereto.
ARTICLE XXIV
PARKING
-------
24.1 During the Lease Term, Tenant shall have the right to use (on a
non-exclusive first-come, first-served basis) the Parking Spaces (as defined in
Section 1.14 hereinabove) for the unreserved parking by Tenant and its Invitees
of passenger automobiles in the parking areas designated from time to time by
Landlord. The Parking Spaces shall be provided to Tenant at no cost during the
Lease Term. Tenant shall have access to the parking facility twenty-four (24)
hours per day each day of the year (except in the event of an emergency). Of the
total number of Parking Spaces to be provided pursuant to Section 1.14, Landlord
and Tenant agree that a total of twenty five (25) of such spaces, in the
location specified on Exhibit A-3 shall be identified and reserved as "Visitor
Parking Spaces".
24.2 Landlord reserves the right to establish and modify or amend
reasonable rules and regulations governing the use of such parking areas.
Landlord shall have the right to revoke a user's parking privileges in the event
such user fails to abide by the rules and regulations governing the use of such
parking areas. Tenant shall be prohibited from using such parking areas for
purposes other than for parking registered vehicles. The storage or repair of
vehicles in such parking areas shall be prohibited. Tenant's employees shall not
park in the spaces designated as "Visitor Parking Spaces" pursuant to Section
24.1 and as shown on Exhibit A-3. Tenant and its
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Invitees shall have no parking rights other than with respect to the Parking
Spaces as specified herein.
24.3 Except in connection with assignments and subleases permitted under
Article VII of this Lease, Tenant shall not assign or sublet any parking rights
granted to Tenant herein. Any attempted assignment or sublease shall be null and
void.
24.4 If at any time Tenant relinquishes portions of the Premises to
Landlord as provided herein or for any other reason is occupying (directly or
through Clients or permitted subtenants) less than the Premises initially
occupied by Tenant hereunder, Landlord reserves the right to institute a
magnetic card access system or any other parking or permit system it deems
appropriate. Landlord's right to install such a card access or parking or permit
system shall not, however, be construed to allow Landlord to commence charging
Tenant (or its subtenants or Clients) for parking.
24.5 Landlord shall not be liable for any damage or loss to any automobile
(or property therein) parked in, on or about such parking areas, or for any
injury sustained by any person in, on or about such areas. If Landlord, in its
sole and absolute discretion, deems it necessary to undertake extensive repairs
or maintenance of such parking areas, Landlord shall have the right to
substitute use of other parking areas.
ARTICLE XXV
RENEWAL
-------
25.1 Landlord hereby grants to Tenant the conditional right, exercisable
at Tenant's option, to renew the term of this Lease, with respect to the
entire Premises or the Reduced Premises (as defined in Section 25.8) only, for
two (2) successive periods of five (5) years each (each, a "Renewal Term"). If
exercised, and if the conditions applicable thereto have been satisfied, the
first such Renewal Term (the "First Renewal Term") shall commence immediately
following the end of the initial Lease Term provided in Section 3.1 of this
Lease, and the second Renewal Term (the "Second Renewal Term") shall commence
immediately following the end of the First Renewal Term. The rights of renewal
herein granted to Tenant shall be subject to, and shall be exercised in
accordance with, the following terms and conditions of this Article XXV.
25.2 Tenant shall exercise its right of renewal with respect to a Renewal
Term by giving Landlord written notice thereof ("Tenant's Renewal Notice") not
earlier than eighteen (18) months nor later than fifteen (15) months prior to
the expiration of the then-current term of this Lease (such fifteen (15) month
date being referred to herein as the "Renewal Deadline"). If Tenant desires to
renew the term of this Lease with respect to a premises that contains less than
the entire square footage of the then-existing Premises (which premises shall
meet all of the specifications of Section 25.8) (the "Reduced Premises"), then
Tenant's Renewal Notice shall state Tenant's desired square footage and location
of the Reduced Premises. Within fifteen (15) days after Landlord's timely
receipt of Tenant's Renewal Notice, Landlord shall provide Tenant with
Landlord's determination of the triple-net annual base rent which shall be
payable during the first year of such Renewal Term with respect to the Premises
(or, if applicable, the Reduced Premises), and, if applicable, the square
footage and location of the Reduced Premises. The parties shall have thirty (30)
days after Tenant's receipt of Landlord's determination in which to agree on the
annual base rent payable during the first year of such Renewal Term, and if
applicable, the square footage and location of the Reduced Premises. The parties
shall attempt to agree upon a triple-net annual base rent payable during the
first year of such Renewal Term which would equal ninety-five percent (95%) of
the applicable market rent. Among the factors to be considered by the parties
during such negotiations shall be the general office rental market for
comparable first-class office buildings in western Fairfax County, Virginia, the
rental rates then being quoted by Landlord to comparable tenants for comparable
space in western Fairfax County, Virginia, the rents being charged similar
tenants for similar office space in first-class office buildings in western
Fairfax County, Virginia, and any additional costs necessitated by a renewal for
less than the entire Premises (if applicable). In no event, however, shall
Landlord be under any obligation to agree to an annual base rent for the first
year of such Renewal Term which is less than the annual base rent in effect
under this Lease during the Lease Year immediately preceding the commencement of
such Renewal Term. If during such thirty (30) day period the parties agree on
the square footage and location of the Reduced Premises (if applicable) and such
annual base rent, then they shall promptly execute an amendment to this Lease
which shall state the rent
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so agreed upon and modify any of the other terms of this Lease as may be
necessary to reflect the terms of such renewal (including, without limitation,
any provisions necessary to convert this Lease to a lease for space in a
multi-tenanted building). If during such thirty (30) day period the parties are
unable, for any reason whatsoever, to agree on the triple net annual base rent
for the Renewal Term, then within ten (10) days after the expiration of such
thirty (30) day period, the parties shall each appoint an MAI appraiser who
shall be licensed in the Commonwealth of Virginia and who specializes in the
valuation of commercial real estate and office rents in the Northern Virginia
market, has at least ten (10) years of experience and is recognized within the
field as being reputable and ethical. Such two MAI appraisers shall each
determine, within twenty (20) days after their appointment, the amount of the
triple net annual base rent in effect during the first year of the Renewal Term,
taking into consideration the factors required to be considered as set forth
above in this paragraph. If the two MAI appraisers chosen by the parties are
unable to agree on such triple net annual base rent, then the two MAI appraisers
shall, within five (5) days after the conclusion of the twenty (20) day period
in which they were to have reached agreement, render separate written reports of
their determinations and together appoint a third similarly qualified MAI
appraiser. The third MAI appraiser shall within ten (10) days after his or her
appointment, review the reports prepared by the first two MAI appraisers,
conduct such additional analysis as may be appropriate, and make a determination
of such third MAI appraiser's opinion of such triple net annual base rent. The
triple net annual base rent applicable during the first year of such Renewal
Term shall equal the average of the two determinations that are closer together,
and such triple net annual base rent determined in accordance with the foregoing
procedure shall be final and conclusive on the parties hereto. However,
regardless of the market rent determined by the MAI appraisers pursuant to the
foregoing procedure, in no event shall the triple net annual base rent to be in
effect during the first year of the Renewal Term be less than the triple net
annual base rent in effect under this Lease during the Lease Year immediately
preceding the commencement of such Renewal Term. If the market rent determined
by the MAI appraisers is less than the triple net annual base rent in effect
under this Lease during the Lease year immediately preceding the commencement of
such Renewal Term, and by operation of the preceding sentence the triple net
annual base rent during the first year of the Renewal Term would be in excess of
the market rent determined by the MAI appraisers, the Tenant may, by written
notice to Landlord given within ten (10) days after the final determination by
the MAI appraisers of the base rent for the Renewal Term, rescind Tenant's
Renewal Notice. Landlord and Tenant shall each bear the cost of its MAI
appraiser and shall share equally the cost of the third MAI appraiser, and the
parties shall each execute such hold harmless agreements or indemnification
agreements as the appraisers may reasonably require. Any lease amendment
concerning the renewal of the Lease Term pursuant to this Article XXV shall
provide that, commencing on the first (1st) day of the second (2nd) and each
successive lease year thereafter during the applicable Renewal Term, the annual
base rent then in effect shall be increased by the product of(a) two and
one-half percent (21/2%) and (b) the annual base rent in effect immediately
before the increase.
25.3 If any renewal notice is not given timely by Tenant, then Tenant's
right of renewal with respect to the applicable Renewal Term shall lapse and be
of no further force or effect.
25.4 If Tenant is in default under this Lease, or if a material adverse
change in Tenant's financial condition has occurred, on the date Tenant sends a
renewal notice or any time thereafter until a Renewal Term is to commence, then,
at Landlord's election, such Renewal Term shall not commence and the term of
this Lease shall expire at the expiration of the then-current term of this
Lease.
25.5 If Tenant's right of renewal with respect to the First Renewal Term
lapses for any reason, then Tenant's right of renewal with respect to the Second
Renewal Term shall similarly lapse and be of no further force or effect.
25.6 If at any time sixty-five percent (65%) or more of the square feet of
rentable area of the Premises has been terminated pursuant to Section 7.4,
subleased or assigned (other than an assignment of the Lease to an Affiliate
pursuant to Article VII), then Tenant's rights pursuant to this Section shall
lapse and be of no further force or effect.
25.7 Tenant's rights of renewal under this Section may be exercised only
by Tenant and may not be exercised by any Other transferee, sublessee or
assignee (other than an Affiliate to whom the Lease is assigned pursuant to
Article VII).
37
<PAGE> 41
25.8 Notwithstanding anything herein to the contrary, the Reduced Premises
shall satisfy the following requirements at a minimum: (i) the space contains at
least seventy-five thousand (75,000) square feet of contiguous rentable area in
total; (ii) the space is in contiguous, full floor components within a Wing
(before expanding into the next contiguous Wing); (iii) the space moves
vertically from bottom to top within a Wing; and (iv) the balance of the
Premises not renewed (and every portion thereof) is of a size, configuration,
location and type, and has appropriate amenities, such that it is marketable to
third party users, as determined by Landlord in its sole and absolute
discretion. Immediately upon any renewal for less than the entire Premises,
Tenant's rights of renewal with respect to the remainder of the Premises shall
lapse and be of no further force and effect. The determination of the annual
base rent payable for the first year of the Renewal Term pursuant to Section
25.2 shall specifically reflect the cost of all work, materials and services
necessary to convert the Building or any portion thereof from a single-occupancy
building to a multi-tenant building.
ARTICLE XXVI
EXPANSION
---------
26.1 OPTION SPACE. Tenant shall have the conditional right to lease the
Option Space (as defined below), pursuant to a lease for such space which shall
be executed by Tenant on or before the last day of the seventh (7th) Lease Year
(or, pursuant to 26.1(d) below, on or before the last day of the tenth (10th)
Lease Year), subject to and in accordance with the following terms and
conditions:
(a) The "Option Space" shall be one (1) additional premises of office
space consisting of NOT LESS than fifty thousand (50,000) square feet of
contiguous rentable area and NOT MORE than the total number of square feet of
office rentable area that can be constructed on the Remainder Parcel (taking
into account the maximum additional FAR allowed and all other requirements and
limitations as may be applicable with respect to the Complex, which maximum
additional FAR for the Remainder Parcel Landlord currently believes to be
approximately 320,000 square feet of rentable area) in an office building that
may be constructed (the "Option Building") on all or any portion of the
Remainder Parcel. An illustrative conceptual layout of the Option Building and
related improvements, including stormwater management areas and interior roads,
is set forth on Exhibit A-4 attached hereto and made a part hereof; but the
parties agree that this layout is for illustrative purposes only and is not
binding on either party.
(b) Tenant shall exercise its right with respect to the Option Space
by giving Landlord written notice thereof (the "Option Notice") at any time on
or before the last day of the seventy-eighth (78th) month falling partly or
entirely within the initial Lease Term, (or, pursuant to 26.1 (d) below, on or
before the last day of the one hundred fourteenth (114th) month falling partly
or entirely within the initial Lease Term) (the "Option Period"). The Option
Notice shall state the total number of rentable square feet of office space that
Tenant elects to lease (subject to the minimum set forth above), or, in the
event that Tenant elects to lease the maximum additional FAR allowed for the
Remainder Parcel, the Option Notice shall specifically notify Landlord of such
intention. Any Option Space shall be (i) a typical, first-class office space for
a typical office user (i.e., not a special user), (ii) readily marketable to
secondary users and generally acceptable in the commercial rental market as
being desirable space; and (iii) not different in form, function or nature from
the Premises.
(c) Within two (2) months after Landlord's receipt of the Option
Notice, Landlord shall provide Tenant with Landlord's determination of all of
the economic terms of the lease for the Option Space (including, without
limitation, terms concerning the length of the term of the lease (which shall be
consistent with financing expectations, but shall in no event be less than ten
(10) years); delivery/lease commencement; base rent, rent escalation factor and
additional rent; allowances and concessions; lease security; renewal, expansion
and other options; parking rights; fees and costs; and other related items that
Landlord believes to impact the economics of the transaction, the financing
assumptions or the financibility of the Option Space and Option Building)
(collectively, the "Economic Terms"). For a period of thirty (30) days after
Tenant's receipt of Landlord's determination, Tenant shall negotiate with
Landlord regarding the Economic Terms. Both parties shall negotiate in good
faith to arrive at and agree upon commercially reasonable Economic Terms, taking
into consideration then-prevailing economic rents and terms for similar first
class office properties in the general vicinity of the Complex. If during such
thirty (30) day period the parties agree on the Economic Terms, then the parties
shall
38
<PAGE> 42
execute a lease with respect to the Option Space, which lease shall contain the
Economic Terms so agreed upon and the same terms and conditions of this Lease
(except as otherwise specified in this Section 26.1). If the parties fail to
agree upon the Economic Terms within the timeframe set forth above, or if they
fail to execute a lease with respect to the Option Space within six (6) months
after Landlord's receipt of a timely Option Notice, then Tenant's rights with
respect to the Option Space shall forever lapse and be of no further force or
effect. If, prior to Tenant's timely exercise of its rights pursuant to this
Section, the land upon which the Option Building is to be constructed is
transferred to a new entity to be formed or a third party (the "Option Building
Partnership"), then the transfer shall be made subject and subordinate to
Tenant's rights under this Section (which shall remain in effect only through
the remainder of the Option Period), and the Option Building Partnership shall
assume in writing all of Landlord's obligations pursuant to this Section and
Landlord shall be relieved of same. Notwithstanding anything in this Section to
the contrary, the lease for the Option Space shall be contingent upon Landlord
obtaining (i) acceptable financing for the Option Building and Option Space and
(ii) all governmental, quasi-governmental, lender and Park approvals (including,
without limitation, site plan approval, building permit issuance, zoning
approval and the approval by the Park's Architectural Review Committee) that may
be necessary in connection with the construction of the Option Building and
Option Space.
(d) If the Option Notice is not given timely by Tenant, then Tenant's
rights with respect to the Option Space shall forever lapse and be of no further
force or effect. However, if Tenant shall, as of the last day of the seventh (7)
Lease Year, have validly exercised Tenant's option on at least One Hundred
Ninety Thousand (190,000) rentable square feet of Option Space, and further
provided that Tenant shall have performed all of its obligations hereunder after
exercising such option and no Event of Default shall have occurred and be
continuing, the Option Period shall be extended from the last day of the seventh
(7th) Lease Year to the last day of the tenth (10th) Lease Year.
(e) After the expiration of the Option Period, if the Option Space
leased by Tenant and constructed by Landlord in accordance with the foregoing
procedure is less than the maximum allowable FAR permitted on the Remainder
Parcel, Landlord may construct improvements on the Remainder Parcel in addition
to the improvements required for the Option Space, up to the maximum F.A.R.
allowed under applicable zoning requirements, and Landlord may lease such
improvements to third parties on such terms and conditions as Landlord may deem
appropriate in Landlord's sole discretion. Tenant shall have no liability to
Landlord for any loss of available density or for Landlord's inability to
utilize the maximum development potential and FAR of the Remainder Parcel so
long as Tenant exercises its option and occupies the Option Space as a full
building use, and so long as Landlord determines, based on reasonable and
customary development standards, which determination shall be conclusive, that
Landlord is able to develop the Remainder Parcel to its full available FAR
utilizing surface parking; however, if Tenant utilizes the Option Space in a
configuration and layout which precludes Landlord from developing the Remainder
Parcel to its full FAR using surface parking and reasonable and customary
development standards, then the negotiation and determination of the Economic
Terms for such Option Space shall include, if applicable, compensation to
Landlord for any diminution or loss of development potential or FAR on the
Remainder Parcel.
(f) If Tenant is in default under this Lease, or if a material
adverse change in Tenant's financial condition has occurred, on the date
Tenant sends the Option Notice or at any time thereafter prior to the
commencement date of the lease with respect to the Option Space, then, at
Landlord's election, Tenant's rights with respect to the Option Space shall
forever lapse and be of no further force or effect.
(g) If at any time fifty percent (50%) or more of the square feet of
rentable area of the Premises has been terminated pursuant to Section 7.4,
subleased or assigned (other than an assignment of the Lease to an Affiliate
pursuant to Article VII), then Tenant's rights pursuant to this Section shall
forever lapse and be of no further force or effect.
(h) Tenant's rights under this Section may be exercised only by
Tenant and may not be exercised by any other transferee, sublessee or assignee
of Tenant (other than an Affiliate to whom the Lease is assigned pursuant to
Article VII).
(i) If at any time Tenant's rights pursuant to this Section lapse or
are terminated, Tenant will promptly acknowledge same in writing upon request.
39
<PAGE> 43
26.2 EXPANSION SPACE. During the period commencing on the Phase I
Commencement Date and expiring on the earlier to occur of (i) the date Tenant
exercises its right of renewal with respect to a Renewal Term for less than the
entire square footage of the Premises, or (ii) the Renewal Deadline applicable
to the initial Lease Term expires (or, if Tenant exercises its renewal option
with respect to the First Renewal Term for the entire square footage of the
Premises, the Renewal Deadline applicable to the Second Renewal Term expires),
Tenant shall have a first right to negotiate to lease from Landlord Expansion
Space (as hereinafter defined), subject to and in accordance with the following
terms and conditions:
(a) The term "Expansion Space" shall mean: (i) any office space on
the Remainder Parcel that does not constitute Option Space and which Landlord
determines to be available for leasing; and (ii) subject to subsection (c)
below, any office space in any such building that has been leased by Landlord
to and vacated by an initial tenant or tenants other than Tenant (or an
affiliate) and which Landlord determines is again available for leasing. It is
expressly understood and agreed that except for its obligations concerning the
Option Space during the Option Period as set forth in Section 26.1, Landlord is
not obligated to build any improvement whatsoever on the Remainder Parcel or
hold any portion of the Remainder Parcel available for leasing or development
whatsoever.
(b) At such time as Landlord elects, Landlord shall notify Tenant in
writing (a "Landlord Expansion Notice") of the availability of any Expansion
Space and the base rent, additional rent, and other terms and conditions upon
which such space is to be offered to the general public. For a period of fifteen
(15) business days after Tenant's receipt of the Landlord Expansion Notice,
Tenant shall have the right to negotiate with Landlord regarding the base rent,
additional rent, lease term (but in no event shall the lease term with respect
to such Expansion Space be less than five (5) years), and all other terms and
conditions of a lease for such space. If during such fifteen (15) business day
period the parties are unable, for any reason whatsoever, to agree upon the base
rent, additional rent, lease term (subject to such minimum) and all such other
terms and conditions of a lease for such space, then Tenant's right to lease
such space shall lapse and be of no further force or effect. If during such
fifteen (15) business day period the parties agree on the base rent, additional
rent, lease term (subject to such minimum) and all such other terms and
conditions of a lease for such space, then they shall execute, within ten (10)
days after the end of such fifteen (15) business day period, a lease with
respect to such space which contains the terms so agreed upon.
(c) Tenant's rights under this Section are subject and subordinate to
(i) expansion and other rights of all then current and future tenants of any
building constructed on the Remainder Parcel (including the Option Building),
and (ii) Landlord's right to renew expiring leases in any such building pursuant
to rights contained in such expiring leases or pursuant to the mutual agreement
of Landlord and tenants under such leases.
(d) If any Expansion Space is offered to Tenant and Tenant fails to
lease such Expansion Space, then the rights granted to Tenant under this Section
with respect to such Expansion Space shall immediately lapse and expire, and
Tenant shall thereafter have no rights with respect to such Expansion Space
unless and until such Expansion Space has been leased by Landlord to and vacated
by an initial tenant or tenants other than Tenant (or an affiliate) and again
becomes available for leasing.
(e) If Tenant is in default under this Lease, or if a material
adverse change in the financial condition of Tenant has occurred, on the date
a Landlord Expansion Notice is given to Tenant or at any time thereafter prior
to the date the applicable Expansion Space is occupied by Tenant then, at
Landlord's election, Tenant's rights with respect to all Expansion Space
pursuant to this Section shall forever lapse and be of no further force or
effect.
(f) If at any time fifty percent (50%) or more of the square feet of
rentable area of the Premises has been terminated pursuant to Section 7.4,
subleased or assigned (other than an assignment of the Lease to an Affiliate
pursuant to Article VII), then Tenant's rights with respect to all Expansion
Space pursuant to this Section shall lapse and be of no further force or effect.
(g) Tenant's rights under this Section may be exercised only by
Tenant and may not be exercised by any other transferee, sublessee or assignee
of Tenant (other than an Affiliate to whom the Lease is assigned pursuant to
Article VII).
40
<PAGE> 44
(h) If Tenant fails to timely exercise its renewal rights pursuant
to Section 25.1, or if Tenant timely exercises such right but with respect to
less than the entire square footage of the Premises, then Tenant's rights with
respect to all Expansion Space pursuant to this Section shall lapse and be of
no further force or effect.
(i) If at any time Tenant's rights pursuant to this Section lapse or
are terminated, Tenant will promptly acknowledge same in writing upon request.
ARTICLE XXVII
CONTIGENCIES
------------
27.1
(a) FINANCING. If Landlord has not received by July 1, 1996, a
binding written commitment for its financing for the construction and permanent
loan on the building on terms and conditions satisfactory to Landlord, then
either Landlord or Tenant shall have the right to terminate this Lease, at any
time after July 1, 1996 and prior to the completion of such financing by giving
written notice of such termination to the other. In the event of such
termination, Landlord and Tenant shall share equally (50/50) all fees, costs and
expenses incurred by Landlord and its affiliates and agents in connection with
the design, development, construction, lease preparation, and permitting for the
Building, provided that Tenant's share of such expenses shall not exceed Seventy
Five Thousand Dollars ($75,000) or such greater amount as Tenant may agree to in
writing from time to time.' Tenant shall cooperate fully with Landlord and any
proposed lender in connection with Landlord's pursuit of such Loan.
(b) APPROVALS. Landlord and Tenant shall cooperate fully with one
another to approve all plans and specifications for the Building described in
Exhibit B and to submit applications for all necessary permits, licenses,
authorizations and approvals (collectively, "approvals") and carry on all of the
proceedings pertaining to the procurement of same. If all governmental,
quasi-governmental, lender and Park approvals (including, without limitation,
site plan approval, building permit issuance, zoning approvals (if necessary)
and the approval by the Park's Architectural Review Committee) for the Base
Building Items (as defined in Exhibit B) are not obtained on or before July 1,
1996, then Landlord shall have the right to terminate this Lease, at any time
thereafter prior to Landlord's receipt of same, by giving written notice thereof
to Tenant. In the event of such termination, Landlord and Tenant shall share
equally (50/50) all fees, costs and expenses incurred by Landlord and its
affiliates and agents in connection with the design, development, construction,
lease preparation, and permitting for the Building, provided that Tenant's share
of such expenses shall not exceed Seventy Five Thousand Dollars ($75,000) or
such greater amount as Tenant may agree to in writing from time to time.
(c) CONSTRUCTION.
(i) If, through no default of Tenant or breach of its
obligations under this Lease, Landlord has failed to file an application for a
building permit for the Base Building Items for Phase I on or before April 30,
1996 (the "Building Permit Deadline"), and if Landlord fails to remedy such
failure on or before the fifteenth (15th) day after its receipt of written
notice thereof from Tenant (the "Building Permit Cure Date"), then, provided
Tenant is not in default under this Lease and except as provided below, Tenant
shall have the right to terminate this Lease by delivering written notice of the
exercise of such right to Landlord during the period commencing on the Building
Permit Cure Date and continuing through the fifth (5th) business day thereafter.
If such right is not timely exercised by Tenant, then such right shall
thereafter lapse and be of no further force or effect. Notwithstanding any of
the foregoing to the contrary, the Building Permit Deadline shall be extended by
the number of days of delay attributable to any Tenant Delay or any force
majeure delay. For example, if Landlord was delayed for ten (10) days in filing
the application for a building permit due to Tenant Delay, the Building Permit
Deadline would be extended to May 10, 1996, and the Building Permit Cure Date
would be May 25, 1996.
(ii) If the Phase I Commencement Date does not occur on or
before August 1, 1997, then, provided Tenant is not in default under this Lease
and except as provided below, 'Landlord shall grant to Tenant a rent abatement
equal to the per diem Premises I Base Rent payable during the first Lease Year
for each day during the period commencing on August 2, 1997 and continuing
through the day before the Phase I Commencement Date.
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<PAGE> 45
Notwithstanding any of the foregoing to the contrary, Tenant shall not be
entitled to a rent abatement with respect to any delays in the Phase I
Commencement Date attributable to any Tenant Delay or any force majeure delay.
27.2 If this Lease is terminated in accordance with any of the provisions
of Section 27.1, then each of Landlord and Tenant shall automatically be
released from any and all liability in connection with this Lease to the full
extent as though it had neither been negotiated nor executed, except for any
payment or other obligations of Tenant that accrue through the effective date of
such termination and except as otherwise set forth in this Article. It is
expressly understood and agreed that Landlord may use that portion of the
Up-Front Deposit that is required to satisfy Tenant's obligations set forth in
this Article.
ARTICLE XXVIII
TENANT'S ONE TIME
-----------------
TERMINATION RIGHT
-----------------
Tenant shall have the right to terminate this Lease as of the last day of
the one hundred and fifty-fourth (154th) month of the Lease Term (the
"Termination Date") by timely notifying Landlord in writing of its intention to
exercise such right no less than eighteen (18) months and no more than
twenty-one (21) months prior to the Termination Date (the "Termination Notice"),
provided that no default has occurred hereunder as of the date Tenant provides
the Termination Notice or at any time thereafter prior to the applicable
Termination Date. If Tenant timely exercises such termination right, then Tenant
shall pay Landlord a termination payment equal the sum of six (6) monthly
installments of the then-prevailing Base Rent in effect as of the Termination
Date. One half of Tenant's termination payment shall be due and payable
concurrently with Tenant's delivery of the Termination Notice, and the other
half shall be due and payable ninety (90) days prior to the Termination Date. If
Tenant does not timely deliver the Termination Notice and timely make the
termination payment in accordance with the terms of this Article XXVIII (time
being of the essence), then Tenant's right to terminate this Lease pursuant to
this Article XXVIII shall immediately lapse and be of no further force or
effect. If Tenant both provides the Termination Notice and makes the termination
payment to Landlord but fails to vacate the Premises completely and in the
condition required by this Lease on or before the Termination Date, then Tenant
shall be treated as a holdover tenant subject to the terms of Article XII
hereof, and Tenant shall be liable for any costs and expenses incurred by
Landlord to third parties by virtue of Tenant's failure to vacate the Premises.
The right to terminate this Lease pursuant to this Article XXVIII is personal to
TASC (including a corporate successor to TASC resulting from the transfer of a
controlling interest in TASC pursuant to Section 7.2(a) hereof) and may not be
exercised by any transferee or assignee of TASC.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
date first above written.
WITNESS: LANDLORD:
PARCEL 33B ASSOCIATES LIMITED
PARTNERSHIP
By: Parcel 33B Inc., its general partner
By: /s/ Randal B. Kell
---------------------------------
Name: Randal B. Kell
-------------------------------
Title: President
------------------------------
Date: May 1, 1996
------------------------------
42
<PAGE> 46
WITNESS: TENANT:
TASC, INC., a Massachusetts Corporation
Ronald C. R????? By: /s/ John W. Putney
- ----------------------------- ---------------------------------
Name: John W. Putney
-------------------------------
Title: Chief Financial Officer
------------------------------
Date: April 29, 1996
------------------------------
Recommended for Landlord's consideration:
THE MARK WINKLER COMPANY
By:/s/ Michael D. Lynch
--------------------------------
Michael D. Lynch, President
43
<PAGE> 1
EXHIBIT 10.2
LONG-TERM INCENTIVE AGREEMENT
-----------------------------
This Long-Term Incentive Agreement (the "Agreement") is dated as of
February 29, 1996 between TASC, Inc., a Massachusetts corporation ("TASC") and
John C. Holt (the "Executive").
WHEREAS, TASC, the Executive and Primark Corporation ("Primark" or the
"Company") are parties to a certain Employment Agreement dated as of February
28, 1994 (the "Employment Agreement") pursuant to which the Executive would be
entitled to receive a cash payment (the "EVA Agreement") if TASC achieved a
certain amount of economic value-added ("EVA"); and
WHEREAS, since entering into the Employment Agreement, the Company and
TASC have determined that using the full 5-year performance period and EVA
criteria contained in the Employment Agreement would penalize the Executive for
operations and strategic decisions made prior to his becoming President and
Chief Executive Officer of TASC; and
WHEREAS, in order to correct the unintentional results described above and
provide the Executive with an effective incentive, the Employment Agreement was
amended in the summer of 1995 to commence a new performance period on January 1,
1995 (the "1995 Amendment"); and
WHEREAS, subsequently the Company and TASC sought, but were unable to
obtain from the Internal Revenue Service, a change in the requirements of the
performance-based compensation exception contained in Section 162(m) of the
Internal Revenue Code ("Code") that would have allowed the use of an EVA
performance period commencing on January 1, 1995; and
WHEREAS, the final regulations relating to Section 162(m) of the Code were
promulgated on December 19, 1995; and
<PAGE> 2
WHEREAS, the parties now desire to terminate the EVA provision of the
Employment Agreement and the entire 1995 Amendment and establish a new long-term
incentive compensation plan for the Executive that would commence on January 1,
1996 and otherwise comply with the requirements of Section 162(m) of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual promises
set forth in the Employment Agreement, the parties hereto agree as follows:
1. In consideration of the payment to the Executive of $516,316, the
parties hereto agree that Paragraphs 3(b), 3(c), and 3(d) of the Employment
Agreement and the 1995 Amendment are hereby cancelled and superceded by the
terms and provisions of this Agreement, and the Executive hereby releases TASC
and Primark and their respective officers, directors and employees from any and
all claims, debts, obligations and liabilities arising from or in connection
with the aforementioned paragraphs and the 1995 Amendment.
2. (a). The Executive shall be entitled to receive from TASC, subject to
the payment limitations and forfeiture provisions described below, a cash
payment in the event TASC achieves a certain cumulative amount of "economic
value-added" ("EVA") from calendar year 1996 through each calendar year up
to and including 1998. Notwithstanding anything herein to the contrary and
subject to the provisions of Paragraph 3 hereof, any such cash payment
shall be made in accordance with Paragraph (b) hereof. "Economic
value-added" is defined as operating income before goodwill and other
acquisition costs arising from acquisitions made prior to 1995 minus
interest expense incurred by TASC (plus any interest income accrued by
TASC) and minus a capital charge. Interest includes interest expense
associated with external debt, inter-company loans and capital leases. The
capital charge shall be calculated annually as 10% of the average of the
net book value of TASC at the opening and close of the year. All figures
shall be determined in accordance with generally accepted accounting
principles and in a manner consistent with past practices. For purposes of
this Paragraph (a), Executive understands and agrees that he shall forfeit
his entitlement to any amounts that he may have earned under this Paragraph
(a) if (i) he terminates his employment with TASC prior to December 31,
1998 or his employment with
2
<PAGE> 3
TASC is terminated for "cause" as that term is defined in Paragraph 9(a)
of the Employment Agreement prior to December 31, 1998; or (ii) TASC
does not achieve an annual compound growth rate of EVA on a cumulative
basis of greater than 10% for the three full years ended December 31,
1998. No payment shall be made before the Compensation Committee of the
Board of Directors of Primark (the "Committee") shall have certified in
writing that the relevant standard for EVA growth (determined under the
table below) shall have been attained and that other material terms shall
have been satisfied.
The impact of the settlement of any items shall be excluded from the
computation of EVA, but only to the extent of the amount of the reserve
that. may have been established prior to 1996 to cover any such settlement.
The expenses incurred by TASC to satisfy a judgment in, or to settle, a
lawsuit or proceeding in which TASC was involved as of February 28, 1994,
the date Mr. Holt entered into the Employment Agreement, shall be added to
EVA.
The release of any portion of a general reserve of $350,000
established in 1995 will be deducted from the EVA calculation in any year
in which any portion of this reserve may be released.
Additionally, with respect to other reserves, it is the intention of
this Agreement that EVA be calculated throughout the Agreement using
consistently applied methodologies in arriving at such reserves recorded
both directly and indirectly (indirect methods include such means as
estimates to complete on long-term contracts or overhead rates).
<TABLE>
The amount of cash payment shall be determined at the end of each
calendar year from the following table (all amounts shall be interpolated):
<CAPTION>
==================================================================================================
($) (II)($000S) ($) (III)($000S) ($)
(i)($000S) CUMULATIVE EVA AS DETERMINED CUMULATIVE 32.57%CUMULATIVE CUMULATIVE
YEAR 10%CUMULATIVE EVA PAYMENT FROM 1995 PLAN PAYMENT EVA PAYMENT
- --------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
1996 14,779 0 15,702 289,000 21,373 1,056,000
- --------------------------------------------------------------------------------------------------
1997 31,036 0 34,303 632,000 49,706 2,474,000
- --------------------------------------------------------------------------------------------------
1998 48,919 0 57,193 1,053,000 87,267 4,379,000
==================================================================================================
<FN>
Notes: EVA and cumulative EVA figures are reduced for expenses incurred
and/or accrued under this Agreement.
References in column (ii) hereinabove to "Plan" shall mean the
1995-1999 Plan.
References in column (iii) hereinabove to "32.57% Cumulative EVA" shall
mean 32.57% compounded annual growth of EVA from the 1995 EVA originally
anticipated in the 1995-1999 Plan.
</TABLE>
3
<PAGE> 4
TASC agrees to provide Executive with an annual statement, starting
in 1997, showing the EVA for the previous year and the calculations used
in deriving the EVA. The Executive shall have the opportunity to review
such calculations with the Board of Directors of TASC or its designee. The
failure to provide such a statement shall not in any way inure to the
benefit of the Executive or to the detriment of TASC.
In no event shall the cash payment exceed $4.379 million.
(b). As an example, if cumulative EVA from 1996 through 1998 was
$82,000,000, the entitlement for payment from TASC would be $3,796,502.
This is calculated by $1,053,000 + [($82,000,000 - $57,193,000) /
($87,267,000 - $57,193,000)] x ($4,379,000 - $1,053,000).
(c). The parties hereto agree that if the payment hereunder is
greater than $2 million, TASC may make such payment over a 3-year period
in three equal annual installments with interest at the rate of one
percent above the prime rate (defined as the base rate on corporate loans
at large U.S. money center commercial banks as published by the Wall
Street Joumal). The first such installment shall be paid not later than
March 31, 1999, the second installment shall be paid not later than March
31, 2000 and the third installment shall be paid not later than March 31,
2001. If the payment hereunder is less than $2 million, such payment shall
be made not later than March 31, 1999.
3. Notwithstanding anything to the contrary in the Employment Agreement
and in lieu of the EVA amount payable under Section 9(b) of the Employment
Agreement, if the Executive's employment with TASC is terminated without cause
in 1997 or 1998, TASC shall be obligated, concurrently with such termination, to
make a cash payment to the Executive (in addition to any other severance amount
payable under the Employment Agreement), the amount of which shall be calculated
as follows:
(a). Commencing with calendar year 1996, determine the sum of the EVA
for each full year ended December 31st in which the Executive was actually
employed by TASC;
4
<PAGE> 5
(b). Using the table in Paragraph 2(a) above, determine the dollar
amount of payment, interpolating if necessary;
(c). The amount derived in (b) above minus applicable taxes shall be
the amount of the cash payment.
Thus, for purposes of illustration only, if the Executive was
terminated on January 1, 1998 and assuming that EVA for 1996 and 1997 was
$20 million and $25 million, respectively, the cumulative EVA would be $45
million. Interpolating in the 1997 row of the table in Paragraph 2(a)
above, the cash payment would be $1,911,223, i.e. $632,000 + [($45,000,000
- $34,303,000)/($49,706,000 - $34,303,000)] x ($2,474,000 - $632,000).
Such amount shall constitute the sole obligation of TASC with respect to
the payment of any amount calculated on the basis of EVA. Upon payment of such
amount, the Executive shall have no further rights or claims with respect
thereto and expressly waives all liabilities and cause of actions that he may
have against TASC with respect to any payment calculated on the basis of EVA. No
amount referred to in this Paragraph 3 shall be made unless and until the
Committee shall have certified the extent to which the relevant standard for EVA
growth shall have been obtained for the relevant periods.
4. This Agreement shall be administered by the Committee.
5. This Agreement is in no way intended to guarantee continued
employment for the Executive with TASC or any affiliated company or entity.
6. This Agreement shall be governed by the laws of the United States to
the extent applicable and otherwise by the Commonwealth of Massachusetts.
7. Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration in accordance
with the laws of the Commonwealth of Massachusetts by three arbitrators, one of
whom shall be appointed by TASC, one by the Executive and the third by the first
two arbitrators. TASC and the Executive agree to appoint their arbitrator
5
<PAGE> 6
within 90 days of receipt of a notice delivered in accordance with Paragraph 8
hereunder from the other party setting forth a description of the controversy or
claim and requesting that the arbitrators be appointed. If either party fails to
select an arbitrator within such 90 day period the non-failing party may appoint
a second arbitrator and the failing party shall be deemed to have waived its or
his rights to appoint an arbitrator. If the first two arbitrators cannot agree
on the appointment of a third arbitrator, then the third arbitrator shall be
appointed by the American Arbitration Association. Such arbitration shall be
conducted in accordance with the rules of the American Arbitration Association,
except with respect to the selection of arbitrators which shall be as provided
in this Paragraph 7. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. In the event that it shall be
necessary or desirable for the Executive to retain legal counsel and/or incur
other costs and expenses in connection with the enforcement of any or all of the
Executive's rights under this Agreement and assuming that the Executive is more
successful in such enforcement than TASC, TASC shall pay or the Executive shall
be entitled to recover from TASC, as the case may be, the Executive's reasonable
attorneys' fees and other reasonable costs and expenses in connection with the
enforcement of said rights (including the enforcement of any arbitration award
in court).
8. For purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States Registered mail,
return receipt requested, postage prepaid, as follows:
If to TASC:
TASC
55 Walkers Brook Drive
Reading, Massachusetts 01867
Attention: General Counsel
If to the Executive:
Mr. John C. Holt
313 Ocean Avenue
Marblehead, MA 01945
6
<PAGE> 7
Exhibit 10.2
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
9. This Agreement shall be subject to the approval of the shareholders
of Primark at the 1996 Annual Meeting of Shareholders and shall be of no further
force or effect unless such approval is obtained in a separate vote by the
affirmative vote of a majority of the voting shares present or represented and
entitled to vote at such meeting.
ATTEST: TASC, INC.
Michael Kargula By: Joseph E. Kasputys
- --------------------------- --------------------------------
Chairman
WITNESS: EXECUTIVE
Maryanne Madore /s/ John C. Holt
- -------------------------- --------------------------------
John C. Holt
ACKNOWLEDGED:
PRIMARK CORPORATION
By: /s/ Joseph E. Kasputys
------------------------------
Title: Chairman, President & CEO
-----------------------------
7
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<CIK> 0000356064
<NAME> PRIMARK
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
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<TOTAL-ASSETS> 832,102
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<BONDS> 263,533
<COMMON> 496
0
0
<OTHER-SE> 389,899
<TOTAL-LIABILITY-AND-EQUITY> 832,102
<SALES> 0
<TOTAL-REVENUES> 368,387
<CGS> 0
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<INCOME-PRETAX> 25,418
<INCOME-TAX> 11,501
<INCOME-CONTINUING> 13,917
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