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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 0-13833
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GEORGE MASON BANKSHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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VIRGINIA 54-1303470
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
11185 MAIN STREET, FAIRFAX, VIRGINIA 22030
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (703) 352-1100
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
$1.11 PAR VALUE COMMON CAPITAL STOCK
(TITLE OF CLASS)
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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 _
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K [X].
At March 14, 1997, the aggregate market value of the voting stock of the
registrant held by non-affiliates of the registrant was approximately $91.9
million computed at $21.00 per share. The number of shares outstanding of the
registrant's Common Stock ($1.11 Par Value) was 5.06 million shares at March 14,
1997.
DOCUMENTS INCORPORATED BY REFERENCE
1. Annual Report to Shareholders for the year ended December 31, 1996 - Part I,
II, IV.
2. Proxy Statement furnished to shareholders in connection with the Annual
Meeting of Shareholders scheduled for May 16, 1997 -- Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
George Mason Bankshares, Inc., ("GMBS") is a multi-bank holding company
established as a Virginia Corporation in 1984. The Company's headquarters are
located in Fairfax, Virginia. GMBS owns all of the outstanding stock of George
Mason Bank, which was incorporated in 1977 and opened for business in 1979.
GMBS, also owns all of the outstanding stock of Mason Holding Corporation which
merged with Palmer National Bancorp. Inc., on May 17, 1996. As a result of the
merger, Mason Holding Corporation owns all of the outstanding stock of George
Mason Bank, N.A. ("GMBNA") which was formerly known as Palmer National Bank.
George Mason Bank and George Mason Bank N.A., collectively referred to as
("GMB"), provide a wide range of financial services principally to individuals
and to small and medium-sized businesses, are community-oriented and offer
services customarily provided by full-service banks, including individual and
commercial checking, savings and time deposit accounts, commercial loans, real
estate and consumer loans, travelers' checks, and safe deposit facilities. GMB
operates 21 offices throughout the Washington Metropolitan area. All but two of
GMB's offices offer 24-hour automated teller machines ("ATMs") which are linked
with other automated teller machines regionally through MOST(R) and nationally
through PLUS(R) and EXCHANGE(R). In addition, GMB has five off-site ATMs.
The business strategy of GMBS is to provide its customers with the
financial sophistication and range of products offered by regional banks while
maintaining the quick response and services of a community bank.
During 1991, in contrast to many regional and community banks which were
cutting expenses and employees, GMBS began a major expansion of its branch
system, operations area, and personnel. This expansion followed a policy
decision in early 1991 to hire experienced banking officers, who were available
from merged institutions or from regional banks which had been subject to
governmental enforcement actions. Total full-time equivalent employees have
increased from approximately 90 at December 31, 1991 to 324 at December 31,
1996. Since November 1991, the Company, through its subsidiaries, has (i)
established a new office in Vienna through the purchase of certain assets from
the Federal Deposit Insurance Corporation (the "FDIC"); (ii) opened an office in
McLean that was acquired from the Resolution Trust Corporation; (iii) acquired a
10,000 square foot building in Tysons Corner; (iv) purchased the insured
deposits of another financial institution, including additional branch offices
in Reston and Tysons Corner; (v) bought a five-story, 28,000 square foot office
building in Chantilly to house a branch office and an operations/customer
service center; (vi) opened four branch offices in Arlington County; (vii)
opened two offices in Loudoun County; (viii) opened its first office serving
Prince William County; (ix) consummated its first merger resulting in the
Company's first offices in Washington, D.C.; and (x) opened its first office in
Maryland.
George Mason Mortgage Company ("GMMC"), a wholly owned subsidiary of George
Mason Bank, is engaged in the operation of a general mortgage and agency
business. GMMC currently operates five offices, three of which were opened in
1995 and one which was opened in 1996. The main office of GMMC is located in
Fairfax, with two offices in Prince William County, one in Virginia Beach and
one in Rockville, Maryland. At December 31, 1996, GMMC employed 96 persons. GMMC
primarily originates permanent residential mortgage loans (including VA, FHA,
conforming and nonconforming loans) to be sold in the secondary market. These
loans are for single family, owner-occupied residences. Its loans have either
adjustable or fixed rate terms, with a variety of maturities tailored to
effectively serve its market. GMMC is also active in sponsoring Community
Homebuyers Programs for low-to-moderate income families. Over the last two
years, GMMC has steadily increased its market share.
COMPETITION
The Company operates in a competitive environment, competing for deposits
and loans with commercial banks, thrift institutions and other financial
institutions. Numerous mergers and consolidations involving Maryland, Virginia
and Washington, D.C. banks have occurred recently, resulting in an
intensification of competition in the banking industry in the Company's
geographical market. The Company also competes with
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money market mutual funds for funds from depositors. Many of the Company's
competitors possess greater financial resources or have substantially higher
lending limits than does the Company.
Recent changes in Federal banking laws are expected to facilitate
interstate branching and merger activity among banks. Since September 1995, with
exceptions, certain bank holding companies are authorized to acquire banks
throughout the United States. In addition, on and after July 1, 1997, certain
banks will be permitted to merge with banks organized under the laws of
different states. Such changes may result in an even greater degree of
competition in the banking industry and the Company may be brought into
competition with institutions with which it does not presently compete. There
can be no assurance that the profitability of the Company will not be adversely
affected by the increased competition which may characterize the banking
industry in the future.
SUPERVISION AND REGULATION
The Company and GMB are subject to state and federal banking laws and
regulations which impose specific requirements or restrictions on and provide
for general regulatory oversight with respect to virtually all aspects of
operations. These laws and regulations are generally intended for the protection
of depositors.
Beginning with the enactment of the Financial Institutions Reform Recovery
and Enforcement Act of 1989 ("FIRREA") and following with the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), numerous additional
regulatory requirements have been placed on the banking industry in the past
five years, and additional changes have been proposed. The operations of the
Company and the Bank may be affected by legislative changes and the policies of
various regulatory authorities. The Company is unable to predict the nature or
the extent of the effect on its business and earnings that fiscal or monetary
policies, economic control, or new federal or state legislation may have in the
future.
The following is a brief summary of certain statutes, rules and regulations
affecting the Company and GMB. To the extent that the following describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statutory and regulatory provisions.
GMBS. The Company is a bank holding company within the meaning of the BHC
Act and Chapter 13 of the Virginia Banking Act (the "Virginia Act").
The BHC Act. Under the BHC Act, the Company is subject to periodic
examination by the Board of Governors of the Federal Reserve System (the
"Federal Reserve") and is required to file periodic reports of its operations
and such additional information as the Federal Reserve may require. The
Company's and GMB's activities are limited to banking, managing or controlling
banks, furnishing services to or performing services for its subsidiaries, or
engaging in any other activity that the Federal Reserve determines to be so
closely related to banking or managing or controlling banks as to be a proper
incident thereto.
With certain limited exceptions, the BHC Act requires every bank holding
company to obtain the prior approval of the Federal Reserve before (i) acquiring
substantially all the assets of any bank, (ii) acquiring direct or indirect
ownership or control of any voting shares of any bank if after such acquisition
it would own or control more than 5% of the voting shares of such bank (unless
it already owns or controls the majority of such shares), or (iii) merging or
consolidating with another bank holding company.
In addition, and subject to certain exceptions, the BHC Act and the Federal
Change in Bank Control Act, together with regulations thereunder, require
Federal Reserve approval (or, depending on the circumstances, no notice of
disapproval) prior to any person or company acquiring "control" of a bank
holding company, such as the Company. Control is conclusively presumed to exist
if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. With respect to corporations with
securities registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), under Federal Reserve regulations control will be rebuttably
presumed to exist if a person acquires at least 10% of any class of voting
securities of the corporation. The regulations provide a procedure for challenge
of the rebuttable control presumption.
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Under the BHC Act, the Company is generally prohibited from engaging in, or
acquiring direct or indirect control of more than 5% of the voting shares of any
company engaged in, non-banking activities, unless the Federal Reserve, by order
or regulation, has found those activities to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. Some of the
activities that the Federal Reserve has determined by regulation to be proper
incidents to the business of banking include operating a mortgage, finance,
credit card or factoring company, making or servicing loans and certain types of
leases, engaging in certain insurance and discount brokerage activities,
performing certain data processing services, acting in certain circumstances as
a fiduciary or investment or financial advisor, owning savings associations, and
making investments in certain corporations or projects designed primarily to
promote community welfare.
In accordance with Federal Reserve policy, the Company is expected to act
as a source of financial strength and commit resources to support its banks.
Under the BHC Act, the Federal Reserve may require a bank holding company to
terminate any activity or relinquish control of a non-bank subsidiary (other
than a non-bank subsidiary of a bank) upon the Federal Reserve Board's
determination that such activity or control constitutes a serious risk to the
financial soundness or stability of any subsidiary depository institution of the
bank holding company. Further, federal bank regulatory authorities have
additional discretion to require a bank holding company to divest itself of any
bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.
In the liquidation or other resolution by any receiver of a bank insured by
the FDIC, the claims of depositors have priority over the general claims of
other creditors. Hence, in the event of the liquidation or other resolution of a
banking subsidiary of the Company (such as GMB), the general claims of the
Company as creditor of such banking subsidiary would be subordinate to the
claims of the depositors of such banking subsidiary, even if the claims of the
Company were not by their terms so subordinated.
The Virginia Act. All Virginia bank holding companies must register with
the Virginia State Corporation Commission (the "Virginia Commission") under the
Virginia Act. A registered bank holding company must provide the Virginia
Commission with information regarding the financial condition, operations,
management, and intercompany relationships of the holding company and its
subsidiaries. The Virginia Commission may also require additional information it
deems necessary to keep itself informed about whether the provisions of Virginia
law and the regulations and orders issued thereunder by the Virginia Commission
have been complied with, and may make examinations of any bank holding company
and its subsidiaries.
Under the Virginia Act, it is unlawful without the prior approval of the
Virginia Commission for any Virginia bank holding company to acquire direct or
indirect ownership or control of more than 5% of the voting securities of any
bank or other bank holding company. In addition, Chapter 15 of the Virginia Act
allows regional interstate banking by permitting banking organizations in
certain Southeastern states to acquire Virginia banking organizations if
Virginia banking associations are allowed to acquire banking organizations in
their states and the Virginia banking organization to be acquired has been in
existence and continuously operated as a bank for a period of two years. As a
result of this reciprocal banking provision, banking organizations in other
states have entered the Virginia market through acquisitions of Virginia
institutions. Under federal legislation recently passed in Congress, effective
September 29, 1995, bank holding companies will be permitted to acquire banks in
any state.
REGULATION OF GEORGE MASON BANK AND GMBNA. George Mason Bank is a
state-chartered institution organized under Virginia law and, as such, is
subject to examination and regulation by the Virginia Commission. GMBNA is a
national banking association and is subject to examination and regulations by
the Office of the Comptroller of the Currency ("OCC"). Both banks are also
members of the Federal Reserve System and, therefore, are supervised and
examined by the Federal Reserve. The Federal Reserve is George Mason Bank's
primary federal regulator while the OCC is GMBNA's primary regulator.
George Mason Bank has filed applications with the applicable regulators
seeking approval of a merger of GMBNA with and into George Mason Bank, which
would result in a single, state-chartered bank and the removal of the OCC's
jurisdiction. GMB expects, assuming that the applications are approved, that the
merger will become effective in June, 1997.
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General. Deposits in the banks are insured by the Federal Deposit
Insurance Corporation (the "FDIC") up to a maximum amount (generally $100,000
per depositor, subject to aggregation rules). George Mason Bank's and GMBNA's
state and federal regulators regulate or monitor all areas of the banks'
operations, including security devices and procedures, adequacy of
capitalization and loss reserves, loans, investments, borrowings, deposits,
mergers, issuances of securities, payment of dividends, interest rate risk
management, establishment of branches, corporate reorganizations, maintenance of
books and records, and adequacy of staff training to carry on safe lending and
deposit gathering practices. The Federal Reserve and the OCC require the banks
to maintain certain capital ratios and impose limitations on the banks'
aggregate investment in real estate, bank premises, and furniture and fixtures.
The banks are currently required by the Federal Reserve and the OCC to prepare
quarterly reports on their financial condition and to conduct an annual audit of
their financial affairs in compliance with minimum standards and procedures
prescribed by the Federal Reserve and the OCC.
Under FDICIA, all insured institutions must undergo regular on-site
examination by their appropriate banking regulator. The cost of examinations of
insured depository institutions and any affiliates may be assessed by the
appropriate agency against each institution or affiliate as it deems necessary
or appropriate. Insured institutions are required to submit annual reports to
the FDIC and the appropriate agency or agencies. FDICIA also directs the FDIC to
develop with other agencies a method for insured depository institutions to
provide supplemental disclosure of the estimated fair market value of assets and
liabilities, to the extent feasible and practicable, in any balance sheet,
financial statement, report of condition or any other report of any insured
depository institution. FDICIA, as amended by the Riegle Community Development
and Regulatory Improvement Act of 1994, also requires the federal banking
regulatory agencies to prescribe, by regulation or guideline, standards for all
insured depository institutions relating, among other things, to: (i) internal
controls, information systems, and audit systems; (ii) loan documentation; (iii)
credit underwriting; (iv) interest rate risk exposure; and (v) asset quality.
The regulatory agencies adopted joint guidelines for all areas except asset
quality in July 1995 and joint guidelines setting qualitative standards on asset
quality and earnings standards in August 1996.
Transactions With Affiliates and Insiders. George Mason Bank and GMBNA are
subject to the provisions of Section 23A of the Federal Reserve Act, which
places limits on the amount of loans or extensions of credit to, or investments
in, or certain other transactions with, affiliates including the Company. In
addition, limits are placed on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. Most of these
loans and certain other transactions must be secured in prescribed amounts.
George Mason Bank and GMBNA are also subject to the provisions of Section 23B of
the Federal Reserve Act that, among other things, prohibits institutions from
engaging in transactions with certain affiliates unless the transactions are on
terms substantially the same, or at least as favorable to such institution or
subsidiaries, as those prevailing at the time for comparable transactions with
non-affiliated companies. The banks are subject to restrictions on extensions of
credit to executive officers, directors, certain principal shareholders, and
their related interests. Such extensions of credit (i) must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with third parties and (ii)
must not involve more than the normal risk of repayment of present other
unfavorable features.
Branching. Under current Virginia law, George Mason Bank may open branch
offices throughout Virginia with prior regulatory approval. In addition, with
prior regulatory approval as appropriate under the circumstances, George Mason
Bank will be able to acquire existing banking operations in Virginia. National
banks are required by the National Bank Act to adhere to branch banking laws
applicable to state banks in the states in which they are located. Thus, with
prior approval of its regulators, GMBNA may also branch throughout Maryland and
the District of Columbia.
Under the recently passed federal legislation discussed above, effective
June 1, 1997, banks may merge or consolidate across state lines, unless both of
the states involved either authorize such merger or consolidation at an earlier
date or either of the states involved elects to prohibit such merger or
consolidation prior to May 31, 1997. Under the federal legislation, states may
authorize banks from other states to engage in branching across state lines. The
Virginia General Assembly passed the "opt-in" law which adopts the general
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legislation before it automatically takes effect on June 1, 1997. The "opt-in"
law became effective on July 1, 1995.
Community Reinvestment Act. The Federal Community Reinvestment Act
requires that, in connection with examinations of financial institutions within
their jurisdiction, the Federal Reserve, the FDIC, the OCC, or the Office of
Thrift Supervision (the "OTS") shall evaluate the record of the financial
institutions in meeting the credit needs of their local communities, including
low and moderate income neighborhoods, consistent with the safe and sound
operation of those institutions. These factors are also considered in evaluating
mergers, acquisitions, and applications to open a branch or facility. George
Mason Bank and GMBNA have always had "satisfactory" ratings with respect to
compliance with CRA.
Other Regulations. Interest and certain other charges collected or
contracted for by the banks are subject to state usury laws and certain federal
laws concerning interest rates. The banks' loan operations are also subject to
certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act governing disclosures of credit terms to consumer
borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial
institutions to provide information to enable the public and public officials to
determine whether a financial institution is fulfilling its obligation to help
meet the housing needs of the community it serves, the Equal Credit Opportunity
Act prohibiting discrimination on the basis of race, creed or other prohibited
factors in extending credit, the Fair Credit Reporting Act of 1978 governing the
use and provision of information to credit reporting agencies, the Fair Debt
Collection Act governing the manner in which consumer debts may be collected by
collection agencies, and the rules and regulations of the various federal
agencies charged with the responsibility of implementing such federal laws. The
deposit operations of the banks also are subject to the Right to Financial
Privacy Act, which imposes a duty to maintain confidentiality of consumer
financial records and prescribes procedures for complying with administrative
subpoenas of financial records, the Electronic Funds Transfer Act and Regulation
E issued by the Federal Reserve Board to implement that act, which govern
automatic deposits to and withdrawals from deposit accounts and customers'
rights and liabilities arising from the use of automated teller machines and
other electronic banking services, and the Truth-in-Savings Act, which requires
accurate disclosures of certain items related to deposit accounts such as annual
percentage yield ("APY"), duration of APY, minimum balance requirements and
information about fees and penalties. The banks' brokered deposit activities are
subject to an FDIC rule that permits only "well capitalized" institutions to
obtain brokered deposits. "Adequately capitalized" institutions may obtain
brokered deposits if they receive a waiver from the FDIC. This rule also
prohibits institutions that are not "well capitalized" from soliciting deposits
at rates significantly higher than prevailing rates.
DEPOSIT INSURANCE. The deposits of the banks are currently insured to a
maximum of $100,000 per depositor, subject to certain aggregation rules. The
FDIC has implemented a risk-related assessment system for deposit insurance
premiums. All depository institutions have been assigned to one of nine risk
assessment classifications based upon certain capital and supervisory measures.
The deposits of the banks are subject to the rates of the Bank Insurance Fund
("BIF") of the FDIC. On August 8, 1995, in view of the success in recapitalizing
the BIF, the FDIC reduced the lowest assessment rate for the BIF from $0.23 per
$100 of domestic deposits to $0.04, so that the revised schedule of BIF
assessment rates now ranges from $0.04 per $100 of domestic deposits to $0.31
(the highest rate remaining unchanged). This reduction in the lowest BIF
assessment rate was effective retroactive to June 1, 1995 (the FDIC having
determined that the BIF achieved the statutory required reserve ratio of 1.25%
on May 31, 1995). These base assessment rates were reaffirmed by the FDIC
December 24, 1996. For the second semiannual period of 1996 and the first
semiannual period of 1997, however, the FDIC has used an adjusted assessment
schedule lowering the applicable rates, so that BIF assessment rates would range
from $0.00 per $100 of domestic deposits to $0.27 per $100 of domestic deposits.
These lower adjusted rates will terminate at the end of June, 1997.
In addition, pursuant to the Deposit Insurance Funds Act of 1996 (the
"Funds Act") beginning January 1, 1997, banks are now required to make payments
to the FDIC to service the interest payments on bonds issued by the Financing
Corporation ("FICO"). Previously, such payments were made by savings
associations only. Banks with BIF deposits will be assessed at a rate of 20% of
the assessment rate applicable to Savings Association Insurance Fund ("SAIF")
assessable deposits (or 1.30 basis points) until December 31, 1999 or the date
the last savings association ceases to exist. Full pro-rata sharing of FICO
assessments
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will occur after that time. These rates may be adjusted quarterly to reflect
changes in assessment bases for BIF and SAIF. The Funds Act also requires the
merger of BIF and SAIF by 1999, if there are no savings associations in
existence at that time. A merger of the deposit insurance funds could
potentially occur prior to 1999 if certain conditions are met.
DIVIDENDS. A source of the Company's cash revenues comes from dividends
received from the banks. The amount of dividends that may be paid by the banks
to the Company depend on the banks' earnings and capital position and is limited
by federal law, regulations, and policies. In addition, the Federal Reserve has
stated that bank holding companies should refrain from or limit dividend
increases or reduce or eliminate dividends under circumstances in which the bank
holding company fails to meet minimum capital requirements or in which its
earnings are impaired.
The banks may not pay dividends from their paid-in-capital. All dividends
must be paid out of undivided profits then on hand, after deducting expenses,
including reserves for losses and bad debts. The approval of the Federal Reserve
or the OCC is required if the total of all dividends declared by either bank in
any calendar year exceeds the total of its net profits for that year combined
with its retained net profits for the preceding two years, less any required
transfers to surplus. Under FDICIA, the banks may not pay a dividend if, after
paying the dividend, the banks would be undercapitalized. See "Capital
Regulations" below.
CAPITAL REGULATIONS. The federal bank regulatory authorities have adopted
risk-based capital guidelines for banks and bank holding companies that are
designed to make regulatory capital requirements more sensitive to differences
in risk profile among banks and bank holding companies, account for off-balance
sheet exposure, and minimize disincentives for holding liquid assets. The
resulting capital ratios represent qualifying capital as a percentage of total
risk-weighted assets and off-balance sheet items. The guidelines are minimums,
and the federal regulators have noted that banks and bank holding companies
contemplating significant expansion programs should not allow expansion to
diminish their capital ratios and should maintain ratios well in excess of the
minimums. The current guidelines require all bank holding companies and
federally-regulated banks to maintain a minimum risk-based total capital ratio
equal to 8%, of which at least 4% must be Tier 1 capital. Tier 1 capital
includes common shareholders' equity, qualifying perpetual preferred stock, and
minority interests in equity accounts of consolidated subsidiaries, but excludes
goodwill and most other intangibles and excludes the allowance for loan and
lease losses. Tier 2 capital includes the excess of any preferred stock not
included in Tier 1 capital, mandatory convertible securities, hybrid capital
instruments, certain qualifying subordinated debt and intermediate
term-preferred stock, and general reserves for loan and lease losses up to 1.25%
of risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50%, and 100%. In addition, certain off-balance sheet
items are given credit conversion factors to convert them to asset equivalent
amounts to which an appropriate risk-weight will apply. These computations
result in the total risk-weighted assets. Most loans are assigned to the 100%
risk category, except for first mortgage loans fully secured by residential
property and, under certain circumstances, residential construction loans, both
of which carry a 50% rating. Most investment securities are assigned to the 20%
category, except for municipal or state revenue bonds, which have a 50% rating,
and direct obligations of or obligations guaranteed by the United States
Treasury or United States Government agencies, which have a 0% rating. On
September 6, 1996, the Federal Reserve and the OCC revised their risked-based
capital rules to supplement and adjust their risk-based capital ratios for
certain banks whose trading activity (on a worldwide consolidated basis) equals
10 percent or more of total assets or $1 billion or more. These new rules became
effective January 1, 1997 but compliance is not required until January 1, 1998.
The federal bank regulatory authorities have also implemented a leverage
ratio, which is Tier 1 capital as a percentage of average total assets less
intangibles, to be used as a supplement to the risk-based guidelines. The
principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity capital
base. The minimum required leverage ratio for top-rated institutions is 3%, but
most institutions are required to maintain an additional cushion of at least 100
to 200 basis points.
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FDICIA established a new capital-based regulatory scheme designed to
promote early intervention for troubled banks and requires the FDIC to choose
the least expensive resolution of bank failures. The new capital-based
regulatory framework contains five categories of compliance with regulatory
capital requirements, including "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." To qualify as a "well capitalized" institution, a bank or
bank holding company must have a leverage ratio of no less than 5%, a Tier 1
risk-based ratio of no less than 6%, and a total risk-based capital ratio of no
less than 10%, and the bank must not be under any order or directive from the
appropriate regulatory agency to meet and maintain a specific capital level.
Under the FDICIA regulations, the applicable agency can treat an
institution as if it were in the next lower category if the agency determines
(after notice and an opportunity for hearing) that the institution is in a
unsafe or unsound condition or is engaging in an unsafe or unsound practice. The
degree of regulatory scrutiny of a financial institution will increase, and the
permissible activities of the institution will decrease, as it moves downward
through the capital categories. Institutions that fall into one of the three
undercapitalized categories may be required to (i) submit a capital restoration
plan; (ii) raise additional capital; (iii) restrict their growth, interest rates
on deposits, and other activities; (iv) improve their management; (v) eliminate
management fees; or (vi) divest themselves of all or part of their operations.
Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institution's
performance under their capital restoration plans.
In August of 1995, the federal bank regulatory agencies revised their
capital adequacy guidelines to provide explicitly for consideration of interest
rate risk in the overall determination of a bank's minimum capital requirement.
The intended effect is to ensure that banking institutions effectively measure
and monitor their interest rate risk and that they maintain adequate capital for
the risk. A banking institution deemed to have excessive interest rate risk
exposure may be required to maintain additional capital.
UNIFORM FINANCIAL INSTITUTIONS RATING SYSTEM (UFIRS)
UFIRS is a supervisory rating system used by the Federal Reserve and the
OCC and the other federal regulators to evaluate the soundness of depository
institutions on a uniform basis. The agencies have implemented this system
through CAMEL ratings that evaluate banks according to five factors: capital
adequacy, asset quality, management, earnings, and liquidity. The federal
regulators have added a sixth factor, sensitivity to market risk, effective
January 1, 1997. The rating system is now referred to as CAMELS.
GOVERNMENT MONETARY POLICIES AND ECONOMIC CONTROLS
The Company is affected by monetary policies of regulatory agencies,
including the Federal Reserve, which regulates the national money supply in
order to mitigate recessionary and inflationary pressures. Among the techniques
available to the Federal Reserve are engaging in open market transactions in
United States Government securities, changing the discount rate on bank
borrowings, changing reserve requirements against bank deposits and limiting
interest rates that banks may pay on time and savings deposits. These techniques
are used in varying combinations to influence the overall growth of bank loans,
investments and deposits. Their use may also affect interest rates charged on
loans or paid on deposits. The effect of governmental policies on the earnings
of the Company cannot be predicted.
RECENT LEGISLATIVE DEVELOPMENTS
From time to time, various bills are introduced in the United States
Congress with respect to the regulation of financial institutions, including
proposals to consolidate the federal bank regulatory agencies. Certain of these
proposals, if adopted could significantly change the regulation of banks and the
financial services industry. In particular, during 1996 Congress considered
financial services legislation that would, among other things, substantially
amend the Glass-Steagall Act and the Bank Holding Company Act, statutes that
restrict the ability of banks and bank holding companies to engage in certain
activities, including the underwriting of and dealing in various securities, and
to affiliate with entities not engaged in activities related to the business of
banking. Already in 1997, there have been at least three comparable legislative
proposals
8
<PAGE> 9
made in Congress that would permit affiliation of banks, securities firms and
insurance companies and possibly permit affiliations between banks and any
commercial entity. These proposals also provide for the abolition of separate
and distinct charters for banks and savings associations. If such statutory
reform is enacted, it could cause a significant change in the financial services
industry and expand the ability of the Bank and the Company to offer a broader
range of financial products. The Company cannot predict whether any of these
proposals will be adopted or, if adopted, how these proposals would affect the
Company.
ITEM 2. PROPERTIES
The principal office of GMBS and George Mason Bank is located at 11185 Main
Street, Fairfax, Virginia. All of George Mason Bank's offices are located in
Northern Virginia. The addresses of these branch offices are: 4221 Walney Road,
Chantilly; George Mason University, University Center, Fairfax; 1320 Old Chain
Bridge Road, McLean; 1801 Reston Parkway, Reston; 7787 Leesburg Pike, Falls
Church; 226 Maple Avenue West, Vienna; 3289 Woodburn Road, Annandale; 6402
Williamsburg Boulevard, Arlington; 4005 Wilson Boulevard, Arlington; 4501 Daly
Drive, Chantilly; 13060 Fair Lakes Boulevard, Fairfax; 5335 Lee Highway,
Arlington; 21036 Tripleseven Road, Sterling; 9872 Liberia Avenue, Manassas; 2300
Ninth Street, Arlington; and 531-A East Market Street, Leesburg.
George Mason Bank owns the building which contains the Chantilly office.
This five-story building is used as the operations and customer service center
for George Mason Bank. George Mason Bank also owns the three-story building in
which the Falls Church branch is located and the building in which the Fair
Lakes branch is located. The other offices of George Mason Bank are leased. See
Note 10 to GMBS' consolidated financial statements for additional information
concerning George Mason Bank's obligations under these lease agreements.
GMMC's corporate headquarters is located at 4035 Ridge Top Road, Suite 100,
Fairfax, VA. The other four offices of GMMC are located at 2750 Killarney Drive,
Lakepoint One, Suite 105, Woodbridge, VA; 7900 Sudley Road, Manassas, VA; 448
Viking Drive, Suite 250, Virginia Beach, VA and 6110 Executive Boulevard,
Rockville, MD.
GMBNA's principal office is located at 7626 Old Georgetown Road, Bethesda,
MD. GMBNA has three additional offices all located in Washington, D.C. The
addresses of these branches are: 1667 K Street, NW; 4900 Massachusetts Avenue,
NW; and 1225 Eye Street, NW.
ITEM 3. LEGAL PROCEEDINGS
In the course of its operations, GMBS, GMBNA, GMMC, and George Mason Bank
are parties to various legal proceedings. Based upon information currently
available, and after consultation with legal counsel, management believes that
such legal proceedings, in the aggregate, will not have a material adverse
effect on GMBS' business, financial position, or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to shareholders during the last
quarter of fiscal 1996.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There were approximately 794 shareholders of record of the Company's common
stock (the "Company Common Stock") at March 14, 1997. There were approximately
1,796 beneficial shareholders at March 14, 1997. The Company Common Stock closed
at a price of $21.00 per share on March 14, 1997. Additional information
required under Item 5 is hereby incorporated herein by reference to the stock
price and selected financial data on page 30 of the Company's 1996 Annual Report
to Shareholders.
9
<PAGE> 10
ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(DOLLAR IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.......................... $ 53,727 $ 44,119 $ 33,659 $ 28,734 $ 27,215
Interest expense......................... 26,264 19,949 11,627 9,840 11,143
-------- -------- -------- -------- --------
Net interest income...................... 27,463 24,170 22,032 18,894 16,072
Provision for loan losses................ 181 18 167 620 5,050
Net interest income after provision...... 27,282 24,152 21,865 18,274 11,022
Noninterest income....................... 14,852 10,359 5,390 3,611 3,578
Noninterest expense...................... 32,179 26,124 20,453 16,600 12,635
-------- -------- -------- -------- --------
Income before taxes...................... 9,955 8,387 6,802 5,285 1,965
Income taxes............................. 3,072 2,095 1,830 1,279 966
-------- -------- -------- -------- --------
Income before cumulative effect.......... 6,883 6,292 4,972 4,006 999
Cumulative effect of change in accounting
principle.............................. 217
-------- -------- -------- -------- --------
Net Income............................... $ 6,883 $ 6,292 $ 4,972 $ 4,223 $ 999
======== ======== ======== ======== ========
PER SHARE DATA(1):
Net income (Primary)..................... $ 1.34 $ 1.28 $ 1.04 $ 0.99 $ 0.26
Cash dividends........................... 0.46 0.38 0.29 0.23 0.15
Book value at period end................. 12.80 12.18 10.18 10.21 9.03
Dividend payout ratio.................... 34.3% 29.7% 27.9% 23.2% 57.7%
BALANCE SHEET DATA(2):
Total assets............................. $872,470 $679,596 $550,799 $461,184 $406,781
Loans, net............................... 367,954 294,029 240,651 215,313 186,614
Mortgage loans held for resale........... 72,983 55,482 18,506 21,831 2,598
Securities............................... 345,433 261,934 222,914 180,353 146,138
Deposits................................. 693,594 554,464 460,802 372,889 346,898
Shareholders' equity..................... 64,344 57,927 46,776 46,833 33,305
Actual shares outstanding (000s)(1)...... 5,028 4,755 4,594 4,553 3,688
PERFORMANCE RATIOS:
Return on average assets................. 0.92% 1.05% 1.02% 0.99% 0.27%
Return on average equity................. 11.21% 11.75% 10.21% 10.62% 2.98%
Net interest margin(3)................... 3.95% 4.43% 4.93% 4.68% 4.68%
ASSET QUALITY RATIOS(2):
Allowance for loan losses to period end
loans.................................. 1.51% 1.85% 2.36% 2.55% 3.17%
Allowance for loan losses to
nonperforming loans.................... 3.58x 1.47x 1.76x 1.45x 0.92x
Nonperforming assets to period end loans
and other real estate(4)............... 0.53% 1.29% 1.44% 2.00% 4.95%
Net charge-offs to average loans......... 0.02% 0.11% 0.00% 0.53% 2.19%
CAPITAL AND LIQUIDITY RATIOS(2):
Leverage................................. 7.6% 8.8% 9.6% 10.3% 8.2%
Risk-based:
Tier 1 capital......................... 12.3% 13.7% 14.1% 14.8% 15.2%
Total capital.......................... 13.4% 14.9% 15.3% 16.1% 16.4%
</TABLE>
- ---------------
(1) All per share figures in this table have been adjusted to reflect the
Company's three-for-two stock split effected in January 1996.
(2) Other than net charge-offs to average loans and average loans to average
deposits, represents figures at end of period.
(3) Net interest margin is calculated as tax-equivalent net interest income
divided by average earning assets and represents the Company's net yield on
its earning assets.
(4) Nonperforming assets consist of nonaccrual loans, restructured loans, and
other real estate. As of December 31, 1996, the Company had total
nonperforming assets of $1.98 million.
10
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is intended to assist readers in understanding and
evaluating the financial condition and results of operations of GMBS. This
discussion should be read in conjunction with GMBS' consolidated financial
statements and accompanying notes included herein. This analysis provides an
overview of the significant changes that occurred during the periods presented.
Effective May 17, 1996, Palmer National Bancorp, Inc., the holding company for
GMBNA, merged into Mason Holding Corporation, a subsidiary of GMBS. The merger
was accounted for as a pooling of interests. Accordingly, all financial data for
the current and prior periods has been restated to reflect the financial
position and results of operations on a combined basis from the earliest period
presented.
FINANCIAL SUMMARY
Net income totalled $6.88 million for 1996, compared to $6.29 million for
1995, representing an increase of 9.4%, despite over $550 thousand in
non-recurring merger expenses. Net income for 1994 totalled $4.97 million.
Earnings per share for 1996 were $1.34, compared to $1.28 for 1995 and $1.04 for
1994. Return on average assets and equity for 1996 were .92% and 11.21%
respectively, compared to 1.05% and 11.75% for 1995 and 1.02% and 10.21% for
1994.
The Company's income before taxes for 1996 was $9.96 million compared to
$8.39 million for 1995, an increase of 18.7%. Income before taxes for 1994
totalled $6.80 million. The effective tax rate for 1996 was 30.9% compared to
25.0% for 1995 and 26.9% for 1994. The lower tax rates in 1995 and 1994 resulted
from tax benefits recognized by GMBNA related to the reversal of the valuation
allowance against deferred tax assets.
The improvement in earnings for 1996 was primarily attributable to higher
net interest income and growth in non-interest income. Supporting the growth in
net interest income was a higher level of average earning assets, which was
partially offset by a decline in the net interest margin percentage. Noninterest
income provided a significant boost to 1996 net income led by a substantial
increase in gains on mortgage loans held for resale, a result of the activities
of GMMC. The improvement in earnings was partially offset by increases in the
loan loss provision, noninterest expenses and income taxes.
Total assets increased to $872.5 million at December 31, 1996, compared to
$679.6 million at December 31, 1995 and $550.8 million at December 31, 1994. The
growth in assets for 1996 represented an increase of $192.9 million, or 28.4%
over total assets at year end 1995, while growth in assets between 1995 and 1994
totalled $128.8 million, or 23.4%.
Loans, net of unearned income, increased by $74.1 million, or 24.7%, to
$373.6 million at December 31, 1996, compared to $299.6 million at December 31,
1995. Loans, net of unearned income at December 31, 1994, totalled $246.5
million. Mortgage loans held for resale totalled $73.0 million at year end 1996,
compared to $55.5 million at the close of 1995 and $18.5 million at December 31,
1994.
Total deposits were $693.6 million at December 31, 1996, compared to $554.5
million at December 31, 1995, and $460.8 million at year end 1994. These deposit
totals reflect increases of 25.1% between 1996 and 1995 and 20.3% between 1995
and 1994. Securities sold under agreements to repurchase and other borrowed
funds increased to $105.9 million at December 31, 1996 compared to $60.7 million
at December 31, 1995, an increase of 74.3%. The increase was primarily
attributable to short term repurchase agreements.
Shareholders' equity at December 31, 1996 was $64.3 million, compared to
$57.9 million at December 31, 1995, and $46.8 million at December 31, 1994. The
primary sources of growth in shareholders' equity during 1996 were net income
and additional equity of $3.3 million from the issuance of new shares through
various stock option and dividend reinvestment plans reduced by cash dividends
of $2.2 million, and a decrease in unrealized holding gains and losses on
securities available-for-sale of $1.6 million. The growth in shareholders'
equity in 1995 was primarily attributable to the retention of net income and an
increase in the unrealized holding gains and losses in the securities
available-for-sale portfolio of $4.7 million. Book value per share of GMBS
Common Stock at December 31, 1996 was $12.80, compared to $12.18 at December 31,
1995 and $10.18 at December 31, 1994.
11
<PAGE> 12
EARNINGS ANALYSIS
NET INTEREST INCOME. Net interest income is GMBS' primary source of
earnings and represents the difference between interest and fees earned on
earning assets and the interest expense paid on interest bearing liabilities.
Net interest income on a fully taxable equivalent basis totalled $28.1 million
for 1996, compared to $24.9 million for 1995 and $22.4 million for 1994,
representing an increase of 12.8% from 1995 to 1996 and of 11.1% from 1994 to
1995. The improvements in net interest income for 1996 and 1995 were
attributable to a higher volume of earning assets, which was partially offset by
a narrowing of the spread between interest rates earned on loans, securities,
federal funds sold and other investments and the rates paid on deposits and
other borrowed funds (net interest spread). TABLE 1 presents an analysis of
average earning assets, interest bearing liabilities and demand deposits with
the related components of net interest income on a fully taxable equivalent
basis. TABLE 2 presents GMBS' analysis of changes in interest income and
interest expense relating to rate and volume.
TABLE 1. AVERAGE BALANCES AND INTEREST RATES (TAX EQUIVALENT BASIS)
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------- ----------------------------- -----------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------- -------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets
Securities:
U.S. Treasury................... $ 23,123 $ 1,331 5.76% $ 41,313 $ 2,235 5.41% $ 39,622 $ 2,005 5.06%
Federal Agency.................. 26,997 1,691 6.26% 46,091 3,574 7.75% 61,167 3,583 5.86%
Mortgage-Backed................. 233,689 14,899 6.38% 134,315 8,104 6.03% 62,548 3,582 5.73%
State and Political
Subdivision(1)................ 21,519 1,628 7.57% 19,029 1,495 7.86% 13,428 1,102 8.21%
Other........................... 2,994 201 6.71% 3,191 242 7.58% 5,297 356 6.72%
-------- -------- ------- -------- -------- ------- -------- -------- -------
Total Securities.......... 308,322 19,750 6.41% 243,939 15,650 6.42% 182,062 10,628 5.84%
Loans:(3)
Commercial(1)................... 100,882 10,056 9.97% 108,917 10,699 9.82% 110,557 9,799 8.86%
Real Estate -- Construction..... 31,014 2,910 9.38% 34,823 4,155 11.93% 46,053 5,177 11.24%
Real Estate -- Mortgage(2)...... 227,977 18,616 8.17% 146,745 12,429 8.47% 89,057 7,020 7.88%
Consumer........................ 25,228 2,139 8.48% 7,031 715 10.17% 6,846 645 9.42%
-------- -------- ------- -------- -------- ------- -------- -------- -------
Total Loans............... 385,101 33,721 8.76% 297,516 27,998 9.41% 252,513 22,641 8.97%
Total Money Market Investments.... 16,370 863 5.27% 16,110 1,006 6.24% 15,485 626 4.04%
Trading Account................... 2,069 66 3.19% 5,479 230 4.20% 5,207 179 3.44%
-------- -------- ------- -------- -------- ------- -------- -------- -------
Total Interest-Earning Assets..... 711,862 54,400 7.64% 563,044 44,884 7.97% 455,267 34,074 7.48%
Noninterest-Earning Assets
Cash and Due from Banks......... 25,655 22,829 23,850
Other Assets.................... 19,203 16,262 12,328
Allowance for Loan Losses....... (5,662) (5,821) (5,814)
Unearned Discount and Loan
Fees.......................... (975) (1,223) (1,510)
-------- -------- --------
Total Noninterest-Earning
Assets.................. 38,221 32,047 28,854
-------- -------- --------
Total Average Assets.............. $750,083 $595,091 $484,121
======== ======== ========
</TABLE>
- ---------------
(1) Interest income from tax-exempt securities and tax-exempt loans is included
on a taxable-equivalent basis using a 34% tax rate.
(2) Includes Mortgage Loans Held for Resale and Home Equity Lines of Credit.
(3) For the purpose of these computations, nonaccruing loans are included in the
daily average loan amounts outstanding.
12
<PAGE> 13
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------- ----------------------------- -----------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------- -------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-Bearing Liabilities
Interest Checking Deposits...... 45,953 945 2.06% 43,974 1,086 2.47% 41,193 1,068 2.59%
Money Market Deposits........... 102,817 3,101 3.02% 115,730 3,662 3.16% 133,214 3,723 2.79%
Savings Deposits................ 57,235 2,465 4.31% 23,748 945 3.98% 19,357 518 2.68%
Certificates of Deposit......... 221,034 12,158 5.50% 168,145 9,522 5.66% 94,887 4,314 4.55%
Certificates of
Deposit>$100,000.............. 70,561 3,827 5.42% 46,853 2,656 5.67% 27,047 1,150 4.25%
-------- -------- ------- -------- -------- ------- -------- -------- -------
Total Interest-Bearing
Deposits................ 497,600 22,496 4.52% 398,450 17,871 4.49% 315,698 10,773 3.41%
Total Borrowed Funds.............. 79,458 3,768 4.74% 44,980 2,079 4.62% 33,254 854 2.57%
Total Interest-Bearing
Liabilities............. 577,058 26,264 4.55% 443,430 19,950 4.50% 348,952 11,627 3.33%
Noninterest-Bearing Liabilities
Total Demand Deposits........... 105,376 94,449 85,256
Other Liabilities............... 7,649 5,008 2,838
-------- -------- --------
Total Noninterest-Bearing
Liabilities............. 113,025 99,457 88,094
-------- -------- --------
Total Liabilities................. 690,083 542,887 437,046
-------- -------- --------
Shareholders' Equity.............. 60,000 52,204 47,075
-------- -------- --------
Total Liabilities and
Shareholders' Equity............ $750,083 $595,091 $484,121
======== ======== ========
Interest Spread................... 3.09% 3.47% 4.15%
======= ======= =======
Net Interest Margin............... $ 28,136 3.95% $ 24,934 4.43% $ 22,447 4.93%
======= ======= ======= ======= ======= =======
Cost to Fund Earning Assets....... 3.69% 3.54% 2.55%
======= ======= =======
</TABLE>
- ---------------
Note: Average balances are calculated on a daily average basis. Allowance for
loan losses is excluded from calculation of average balances and average rates,
as appropriate. Nonaccruing loans are included in the average loan balance.
13
<PAGE> 14
TABLE 2. RATE AND VOLUME ANALYSIS (TAX EQUIVALENT BASIS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1996 COMPARED TO 1995 COMPARED TO
1995 1994
TOTAL CHANGE DUE TO: TOTAL CHANGE DUE TO:
INCREASE ---------------- INCREASE ----------------
(DECREASE) RATE VOLUME (DECREASE) RATE VOLUME
---------- ------ ------ ---------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Securities:
U.S. Treasury...................... $ (904) $ 80 $ (984) $ 230 $ 144 $ 86
Federal Agency..................... (1,883) (402) (1,481) (9) 874 (883)
Mortgage-Backed.................... 6,795 799 5,996 4,522 412 4,110
State and Political
Subdivision(1).................. 133 (63) 196 393 (67) 460
Other.............................. (41) (26) (15) (114) 28 (142)
------ ------
Total Securities................ 4,100 (31) 4,131 5,022 1,410 3,612
Loans(3):
Commercial(1)...................... (643) 146 (789) 900 1,045 (145)
Real Estate -- Construction........ (1,245) (791) (454) (1,022) 240 (1,262)
Real Estate -- Mortgage(2)......... 6,187 (693) 6,880 5,409 862 4,547
Consumer........................... 1,424 (426) 1,850 70 53 17
------ ------
Total Loans..................... 5,723 (2,519) 8,242 5,357 1,322 4,035
Total Money Market Investments....... (143) (159) 16 380 355 25
Trading Account...................... (164) (21) (143) 51 42 9
TOTAL INTEREST INCOME................ 9,516 (2,347) 11,863 10,810 2,744 8,066
INTEREST EXPENSE:
Interest Checking Deposits......... (141) (190) 49 18 (54) 72
Money Market Deposits.............. (561) (152) (409) (61) 428 (489)
Savings Deposits................... 1,520 187 1,333 427 309 118
Certificates of Deposit............ 2,636 (359) 2,995 5,208 1,877 3,331
Certificates of Deposit greater
than $100,000.................... 1,171 (173) 1,344 1,506 664 842
------ ------
Total Interest-Bearing
Deposits...................... 4,625 178 4,447 7,098 4,274 2,824
Total Borrowed Funds............ 1,689 95 1,594 1,225 924 301
------ ------
TOTAL INTEREST EXPENSE............... 6,314 302 6,012 8,323 5,175 3,148
------ ------
NET INTEREST INCOME.................. $ 3,202 (3,388) 6,590 $ 2,487 (2,827) 5,314
====== ======
</TABLE>
- ---------------
Variances are computed on a line-by-line basis and are non-additive. The
increase or decrease due to a change in average volume has been determined by
multiplying the change in average volume by the average rate during the
preceding period, and the increase or decrease due to a change in average rate
has been determined by multiplying the current average volume by the change in
average rate.
(1) Interest income from tax-exempt securities and tax-exempt loans is included
on a taxable-equivalent basis using a 34% tax rate.
(2) Includes Mortgage Loans Held for Resale and Home Equity Lines of Credit.
(3) For the purpose of these computations, nonaccruing loans are included in the
daily average loan amounts outstanding.
In 1996, average earning assets increased by $148.8 million, or 26.4%, to
$711.9 million, compared to $563.0 million for 1995. Average earning assets for
1994 totalled $455.3 million. Average total loans (including mortgage loans held
for resale), the largest component of earning assets, grew to $385.1 million in
1996, compared to $297.5 million in 1995 and $252.5 million in 1994. Average
total loans represented 54.1% of average earning assets for 1996, compared to
52.8% for 1995 and 55.5% for 1994. In 1996, the securities portfolio, which
included securities available-for-sale and securities held-to-maturity averaged
$308.3 million and comprised 43.3% of earning assets. The securities portfolio
comprised 43.3% and 40.0% of average earning assets for 1995 and 1994,
respectively.
The growth in earning assets for 1996 and 1995 was primarily funded by an
increase in average interest bearing liabilities. Average interest bearing
deposits increased to $497.6 million in 1996 from $398.5 million in
14
<PAGE> 15
1995 and $315.7 million in 1994, representing increases of 24.9% from 1995 to
1996 and 26.2% from 1994 to 1995. The largest increase in interest bearing
deposits was in certificates of deposit which accounted for 57.3% and 98.5% of
the total increase in interest bearing liabilities for 1996 and 1995,
respectively. Average certificates of deposit, including certificates of deposit
over $100 thousand, for 1996 was $291.6 million, compared to $215.0 million for
1995, an increase of 35.6%. Average certificates of deposit for 1994 was $121.9
million. The significant increase in certificates of deposit is a result of
GMBS' expansion strategy of offering attractive rates when entering into new
markets, combined with the customers' desire to take advantage of the higher
interest rates offered by certificates of deposit when compared to the rates on
money market accounts and similar instruments. Average savings deposits
increased to $57.2 million in 1996 from $23.7 million in 1995, an increase of
$33.5 million or 141.0%. The increase in savings accounts was the result of a
pricing strategy to offer a savings product with the highest rate in the local
market that would provide significant cross selling opportunities, but still had
a lower cost of funds than most certificates of deposit. Average borrowed funds,
primarily consisting of overnight repurchase agreements and short and long term
advances from the Federal Home Loan Bank of Atlanta, increased by $34.5 million
in 1996 and $11.7 million in 1995. Average demand deposits for 1996 rose 11.6%,
to $105.4 million. Average demand deposits for 1995 increased by 10.8%, to $94.4
million from $85.3 million in 1994.
GMBS' net interest margin for 1996 decreased to 3.95%, from 4.43% for 1995.
The 48 basis point decrease in the net interest margin was attributable to a 33
basis point decline in the yield on earning assets combined with a 15 basis
point increase in the cost to fund earning assets. The decrease in the yield on
earning assets was primarily attributable to a decrease in loan yields as the
yield on the securities portfolio remained stable. GMBS' rate paid on interest
bearing liabilities for 1996 was 4.55%, compared to 4.50% for 1995.
GMBS' net interest margin for 1995 decreased to 4.43%, from 4.93% for 1995.
The decrease in the net interest margin was attributable to GMBS' cost of funds
increasing at a faster pace than the increase in the yield on earning assets.
GMBS' yield on earning assets for 1995 was 7.97%, representing a 49 basis point
increase over 1994. The increase in the yield on earning assets was attributable
to increases in yields in both the loan and securities portfolios as a result of
the rising rate environment. The steady increase in the cost of funds in 1995
was primarily attributable to a rising interest rate environment which began in
February 1994. As a result of the rising interest rate environment, a
substantial amount of GMBS' money market accounts, which were paying a lower
rate of interest, were transferred to certificates of deposit, which were paying
substantially higher rates. In addition, the majority of new deposit accounts
opened in 1995 were in higher cost certificates of deposit. GMBS' rate paid on
interest bearing liabilities for 1995 was 4.50%, a 117 basis point increase over
1994.
PROVISION FOR LOAN LOSSES. It is management's policy to maintain an
allowance for loan losses at a level sufficient to absorb all potential losses
inherent in the loan portfolio. The provision for loan losses represents the
charge to earnings to cover these potential future losses. The amount of the
provision charged to expense each year is dependent upon an assessment of the
loan portfolio quality, current economic conditions and trends, financial
condition of specific borrowers, past loan loss experience and net charge-offs
during the year.
The provision for loan losses for 1996 was $181 thousand, compared to $18
thousand for 1995 and $167 thousand for 1994. For a more detailed discussion of
nonperforming assets and the allowance for loan losses, see "-- Asset Quality."
GAIN ON SALES OF SECURITIES AVAILABLE-FOR-SALE. The gain on the sales of
securities available-for-sale totalled $560 thousand in 1996, compared to $653
thousand in 1995 and $59 thousand in 1994. The securities sold in 1996, 1995,
and 1994 were the result of liquidity needs, changes in market interest rates,
changes in prepayment and extension risk and other general asset/liability
management considerations.
GAIN ON SALE OF MORTGAGE LOANS HELD FOR RESALE. Due to the strategic
expansion of GMMC, the gain on sales of mortgage loans held for resale for 1996
increased to $9.8 million, compared to $6.4 million for 1995 and $2.7 million
for 1994. GMMC, which opened its first office in Maryland in 1996 and three new
offices during 1995, has steadily increased its market share in the Washington
Metropolitan area with loan closings totalling $616 million in 1996, $393
million in 1995, and $145 million in 1994.
15
<PAGE> 16
SERVICE CHARGES AND OTHER INCOME. Service charges and other income
increased by 38.9%, to $4.4 million, for 1996, compared to $3.2 million for
1995. Service charges and other income for 1994 totalled $2.7 million. GMBS
derives most of its service charges from checking, money market and NOW
accounts. Other income consists primarily of letter of credit fees and other
origination income from GMMC associated with the production of mortgage loans.
NONINTEREST EXPENSES. During 1996, GMBS consummated its first acquisition
and opened three new banking centers including its first branch office in
Maryland. During 1995, GMBS opened two new banking centers and three off-site
ATMs and in 1994, the Company opened four new banking centers and its first off-
site ATM. In support of this strategic growth, total noninterest expenses,
consisting of employee related costs, occupancy expenses, nonrecurring merger
expenses and other overhead, totalled $32.2 million for 1996, $26.1 million for
1995 and $20.5 million for 1994, representing increases of $6.1 million, or
23.2%, between 1996 and 1995 and $5.7 million, or 27.7%, between 1995 and 1994.
The increase in expenses for 1996 and 1995 was primarily attributable to the
strategic expansion of the Company's retail network, the continued growth of
GMMC and the nonrecurring merger related costs associated with the purchase of
Palmer National Bancorp, Inc.
The single largest increase in noninterest expenses for 1996 was
attributable to commissions and salaries expense at GMMC. GMMC's employee
related expenses totalled $8.0 million for 1996 compared to $4.9 million for
1995, an increase of 63.1%. This $3.1 million increase accounted for 51.2% of
the total increase in noninterest expenses.
Salaries and employee benefits, the single largest category of noninterest
expense, totalled $18.6 million for 1996, compared to $14.4 million for 1995,
representing an increase of $4.2 million, or 29.2%. As previously mentioned,
GMMC accounted for $3.1 million of the increase, while the remaining $1.1
million was attributable to George Mason Bank and George Mason Bank, N.A. The
increase in employee related costs for 1995 accounted for 57.1% of the total
increase in noninterest expenses for 1995 and was also largely attributable to
the expansion of GMMC. Salaries and employee benefits totalled $11.1 million for
1994.
Occupancy and furniture and equipment expenses increased by $991 thousand,
or 23.3%, in 1996 to $5.2 million and $1.1 million, or 33.2%, in 1995 to $4.3
million. Occupancy and furniture and equipment expenses for 1994 totalled $3.2
million.
Other operating expenses, which includes advertising, public relations,
business development, merger related expenses, insurance, legal and other
professional fees, data processing, expenses of foreclosed properties,
stationery printing and office supplies, and various other overhead costs,
totalled $8.4 million in 1996, compared to $7.5 million in 1995 and $6.1 million
in 1994. These amounts reflect increases of 11.5% between 1996 and 1995 and
22.4% between 1995 and 1994. Nonrecurring merger related expenses totalled $561
thousand for 1996 compared to $198 thousand for 1995.
INCOME TAX EXPENSE. Reported income tax expense for the year ended December
31, 1996 was $3.1 million compared to $2.1 million for 1995, and $1.8 million
for 1994. The effective tax rate for 1996 was 30.9%, compared to 25.0% for 1995
and 26.9% for 1994. The lower tax rate in 1995 and 1994 primarily relates to the
reversal of the deferred Tax Asset valuation allowance at GMBNA which had been
previously established for net operating losses and other temporary differences.
Note 9 to GMBS' consolidated financial statements provides a reconciliation
between the amount of income tax expense applying the federal statutory income
tax rate and GMBS' actual income tax expense.
BALANCE SHEET ANALYSIS
SECURITIES. The securities portfolio is presently comprised of U.S.
Treasury securities, U.S. Government Agency securities, U.S. Agency mortgage
backed securities, U.S. Agency and private issue collateralized mortgage
obligations, taxable and tax-exempt state and political subdivision securities,
Federal Reserve Bank and Federal Home Loan Bank stock. These securities provide
a stable, yet diversified, income stream and represent a source of collateral
for repurchase agreements and public funds. GMBS relies on its securities
portfolio to ensure safe levels of liquidity, to risk manage interest rate
exposure, to enhance the overall credit
16
<PAGE> 17
quality of GMBS' asset base, and to generate interest income. The cash flows
from these securities are relatively predictable and satisfy GMBS' needs for
liquidity.
At December 31, 1996, the securities portfolio included approximately
$168.8 million in Collateralized Mortgage Obligations (CMOs). These CMOs, which
were predominantly planned amortization class (PAC) and accretion directed (AD)
CMOs, have the same high credit quality as traditional mortgage backed
securities, and provide greater predictability of cash flows because there is a
principal repayment schedule that must be satisfied. Because of their
conservative characteristics, these PAC and AD CMOs have less market value
volatility and a lower yield than traditional mortgage backed securities and
other classes of CMOs. GMBS' CMO portfolio at December 31, 1996 had an average
life of 2.4 years with a yield of 6.43%.
GMBS' securities portfolio at December 31, 1996 consisted of securities
available-for-sale of $280.9 million (81.3% of the securities portfolio) and
securities held-to-maturity totalling $64.6 million (18.7% of the securities
portfolio). Securities available-for-sale at December 31, 1995 totalled $187.6
million (71.6% of the securities portfolio), securities held-to-maturity
totalled $68.7 million (26.2% of the securities portfolio) and trading
securities totalled $5.7 million (2.2% of the securities portfolio). Securities
classified as held-to-maturity are intended to be held until their final
maturity date, while securities available-for-sale may be sold in response to
changes in market interest rates, changes in prepayment or extension risk,
management of the Federal tax position, liquidity needs and other
asset/liability management issues. Held-to-maturity securities are reported at
amortized cost and securities available-for-sale are reported at fair value,
with any unrealized gains and losses excluded from earnings and reported as a
separate component of shareholders' equity. The trading securities which were
reported at December 31, 1995 were held by GMBNA. Trading securities are
reported at fair value with any unrealized gains and losses included in
earnings. The Company does not currently have a trading portfolio.
The securities available-for-sale portfolio on December 31, 1996 had an
unrealized loss of $760 thousand and the securities held-to-maturity portfolio
had an unrealized gain of $783 thousand. On December 31, 1995, the securities
available-for-sale portfolio had an unrealized gain of $1.9 million, while the
securities held-to-maturity portfolio had an unrealized gain of $1.4 million.
One of the primary functions of GMBS' securities portfolio is to manage interest
rate risk exposure. Management uses the securities portfolio, which consists
predominantly of fixed rate securities, to hedge against changes in the loan
portfolio, which consists of floating and fixed rate loans, as well as changes
in deposit rates, which are both variable and fixed. Therefore, any negative
impact of holding below market securities should be partially offset by
increases in earnings in the loan portfolio and corresponding increases in the
market value of fixed rate liabilities. Also, the securities portfolio, which
has an average life of approximately three years, provides a steady stream of
cash flows which are reinvested at current market rates, which in turn helps to
manage long term exposure to interest rate changes. For a more detailed
discussion of interest rate risk management, see "-- Asset/Liability
Management."
17
<PAGE> 18
Note 3 to the consolidated financial statements details the amortized cost,
market values and scheduled maturities of the available-for-sale and
held-to-maturity portfolios at December 31, 1996 and 1995.
Additionally, TABLE 3 reflects the amortized cost, yield and contractual
maturity of securities available-for-sale and securities held-to-maturity at
December 31, 1996.
AVAILABLE-FOR-SALE PORTFOLIO(1)
<TABLE>
<CAPTION>
DUE AFTER 1 DUE AFTER 5
DUE IN 1 YEAR THROUGH 5 THROUGH 10 DUE AFTER
OR LESS YEARS YEARS 10 YEARS TOTAL
-------------- --------------- --------------- ---------------- ----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ------- ----- ------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities... $3,514 5.37% $ 6,496 5.88% $ 0 0.00% $ 0 0.00% $ 10,010 5.70%
U.S. Government Agency
Securities............... 1,502 4.97% 8,723 6.36% 13,021 7.07% 1,001 7.99% 24,247 6.72%
Mortgage-backed
Securities............... 671 5.82% 29,390 6.47% 73,133 6.57% 140,080 6.56% 243,274 6.55%
State and Political
Subdivision
Securities(2)............ 0 0.00% 464 8.96% 622 7.48% 230 7.34% 1,316 7.98%
Equity and Other
Securities............... 0 0.00% 250 5.70% 0 0.00% 2,522 6.83% 2,772 6.73%
------ ----- ------- ----- ------- ----- -------- ----- -------- -----
Total...................... $5,687 5.32% $45,323 6.39% $86,776 6.65% $143,833 6.58% $281,619 6.54%
====== ==== ======= ==== ======= ==== ======== ==== ======== ====
</TABLE>
HELD-TO-MATURITY PORTFOLIO
<TABLE>
<CAPTION>
DUE AFTER 1 DUE AFTER 5
DUE IN 1 YEAR THROUGH 5 THROUGH 10 DUE AFTER
OR LESS YEARS YEARS 10 YEARS TOTAL
-------------- --------------- --------------- ---------------- ----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ------- ----- ------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Agency
Securities............... $3,223 6.88% $ 1,448 7.32% $ 0 0.00% $ 0 0.00% $ 4,671 7.02%
Mortgage-backed
Securities............... 0 0.00% 15,446 6.10% 17,451 6.51% 8,188 6.69% 41,085 6.39%
State and Political
Subdivision
Securities(2)............ 250 7.80% 3,105 8.29% 5,417 7.53% 10,046 7.84% 18,818 7.82%
------ ----- ------- ----- ------- ----- -------- ----- -------- -----
Total...................... $3,473 6.95% $19,999 6.53% $22,868 6.75% $ 18,234 7.32% $ 64,574 6.85%
====== ==== ======= ==== ======= ==== ======== ==== ======== ====
</TABLE>
- ---------------
(1) Available-for-sale securities are presented at amortized cost.
(2) The yield on State and Political Subdivision Securities is included on a
taxable-equivalent basis using a 34% tax rate.
LOAN PORTFOLIO. The loan portfolio constitutes the largest segment of
earning assets and is a significant source of interest and fee income for the
Company. The loan portfolio at December 31, 1996 was composed of 27.0% in
commercial loans, 8.6% in real estate construction loans, 41.9% in real
estate-mortgage loans, 11.8% in home equity loans, and 10.7% in consumer loans.
The loan portfolio mix did not change significantly from December 31, 1995, with
the exception of consumer loans which increased by $27.2 million or 211.3%. The
growth in consumer loans was primarily attributable to indirect auto loans which
totalled $28.7 million at December 31, 1996 compared to $5.2 million at December
31, 1995. The growth in the consumer loan portfolio was attributable to GMBS'
strategy to further diversify the loan portfolio which has traditionally been
concentrated in real estate and commercial lending.
Loan demand continued to improve throughout 1996 as loans, net of unearned
income (exclusive of mortgage loans held for resale), increased to $373.6
million at December 31, 1996, compared to $299.6 million at December 31, 1995
and $246.5 million at December 31, 1994. These amounts reflect increases of
$74.1 million, or 24.7%, from 1995 to 1996 and $53.1 million, or 21.5%, from
1994 to 1995.
The real estate loan portfolio is comprised of both commercial and
residential loans on properties, primarily in the Washington Metropolitan area.
Real estate mortgage loans totalled $157.0 million at December 31, 1996.
Approximately 58% of mortgage loans consisted of loans secured by commercial
properties and approximately 42% consisted of residential mortgages. Risk in the
commercial mortgage
18
<PAGE> 19
portfolio is controlled through conservative underwriting based on an analysis
of independent appraisals and historical cash flow generated by the underlying
commercial property. Risk in the residential mortgage portfolio is controlled
through analysis of market appraisals of the collateral as well as the
sufficiency and stability of the borrowers' historical income sources. Real
estate construction loans constituted 8.6% of the total loan portfolio at
December 31, 1996 compared to 10.9% on December 31, 1995. This concentration of
risk is minimized by limiting the speculative unit/lot inventory that GMBS will
finance in any project and by maintaining conservative loan-to-value ratios.
Moreover, these projects are dispersed over a significant number of submarkets
and across a diversified group of high quality builders. Economic and market
factors affecting this industry grouping are reviewed frequently and adjustments
are made to coincide with trends identified through analysis of relevant
factors. In addition, GMMC pre-qualifies contract buyers to add validity to the
repayment source for pre-sold units.
Commercial loans are well diversified as to the purpose and types of
organizations, companies and individuals, which helps to minimize risk within
this category of loans. Loans to government contractors constitute 11.0% of the
commercial loan portfolio. Concentration risk is mitigated in this area by the
direct assignment of prime government receivables due to these borrowers. In
addition, GMBS performs frequent borrowing base reviews to assess the quality of
underlying receivable assets for this group of borrowers. Finally, independent
accounting firms are engaged to perform periodic field audits to determine
compliance with borrowing agreements and to verify the borrowers' pledged
receivables. The remainder of GMBS' commercial loan portfolio consists of loans
typically extended to commercial, professional and retail concerns for the
financing of working capital, equipment, fixed assets and other commercial
purposes. Conservative loan-to-value ratios, cash flow coverage and debt service
ratios are employed to mitigate standard risk factors in these credits.
Mortgage loans held for resale totalled $73.0 million at December 31, 1996,
$55.5 million at December 31, 1995, and $18.5 million at December 31, 1994. The
substantial increase from 1994 to 1996 was due to the strategic expansion of
GMMC described above. GMMC originates permanent mortgage loans that are sold in
the secondary market.
During 1994, product development efforts were focused on an innovative home
equity product which was unveiled in early 1994, resulting in an increase in
home equity loans outstanding to $44.1 million at December 31, 1996, compared to
$32.0 million at December 31, 1995, and $22.0 million at December 31, 1994. In
addition, GMBS has focused its efforts on Small Business Administration (SBA)
lending, government contract lending, lending to the medical community and
indirect auto lending. The continued efforts to expand consumer lending and
business banking relationships in 1997 will help to continue to diversify the
loan portfolio. TABLE 4 summarizes the composition of the loan portfolio at the
periods indicated and TABLE 4A presents the maturities of commercial and real
estate construction loans as of December 31, 1996.
19
<PAGE> 20
TABLE 4. LOAN PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------------------------
% OF % OF % OF % OF % OF
LOANS LOANS LOANS LOANS LOANS
TO TO TO TO TO
GROSS GROSS GROSS GROSS GROSS
1996 LOANS 1995 LOANS 1994 LOANS 1993 LOANS 1992 LOANS
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial.................... $100,986 27.0% $ 91,268 30.4% $103,575 41.8% $ 92,698 41.7% $ 92,857 48.0%
Real Estate -- Construction... 32,203 8.6% 32,614 10.9% 36,913 14.9% 44,480 20.0% 14,124 7.3%
Real Estate -- Mortgage....... 156,958 41.9% 131,789 43.8% 76,930 31.0% 64,846 29.2% 64,497 33.3%
Home Equity Lines............. 44,141 11.8% 31,962 10.6% 21,978 8.9% 10,190 4.6% 12,718 6.6%
Consumer...................... 40,083 10.7% 12,874 4.3% 8,583 3.4% 9,962 4.5% 9,341 4.8%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Gross Loans........... 374,371 100.0% 300,507 100.0% 247,979 100.0% 222,176 100.0% 193,537 100.0%
Deferred Loan Fees & Unearned
Discount.................... (758) (949) (1,523) (1,222) (804)
-------- -------- -------- -------- --------
Loans (net of unearned
income)..................... 373,613 299,558 246,456 220,954 192,733
-------- -------- -------- -------- --------
Allowance for Loan Losses... (5,659) (5,529) (5,805) (5,641) (6,119)
-------- -------- -------- -------- --------
Loans, net.................... 367,954 294,029 240,651 215,313 186,614
-------- -------- -------- -------- --------
Mortgage loans held for
resale...................... 72,983 55,482 18,506 21,831 2,598
-------- -------- -------- -------- --------
Total Loans (Net)............. $440,937 $349,511 $259,157 $237,144 $189,212
======== ======== ======== ======== ========
</TABLE>
TABLE 4A. MATURITY SCHEDULE OF SELECTED LOANS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OVER ONE
ONE YEAR THROUGH OVER FIVE
OR LESS FIVE YEARS YEARS TOTAL
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Commercial.................................................. $83,215 $ 12,239 $ 5,532 $ 100,986
Real Estate Construction.................................... 32,094 109 0 32,203
-------- ------- ------ --------
Total................................................... $115,309 $ 12,348 $ 5,532 $ 133,189
======== ======= ====== ========
Loans with predetermined rates.............................. $ 1,865 $ 6,047 $ 4,559 $ 12,471
Loans with variable rates................................... $109,355 11,054 309 120,718
-------- ------- ------ --------
Total................................................... $111,220 $ 17,101 $ 4,868 $ 133,189
======== ======= ====== ========
</TABLE>
DEPOSITS. Deposits continue to represent GMBS' most stable and fundamental
funding source, as GMBS continues to benefit from its growing retail network,
quality customer service and reputation for safety and soundness. GMBS offers
individuals and businesses a variety of deposit accounts, including checking,
savings, money market, and certificates of deposit, which are obtained primarily
from the communities which GMBS services.
Deposits totalled $693.6 million at December 31, 1996, compared to $554.5
million at December 31, 1995, representing an increase of $139.1 million, or
25.1%. The growth in deposits was primarily attributable to time deposits, as
certificates of deposit grew by $106.7 million, which accounted for 76.7% of the
growth in total deposits. Demand deposits totalled $132.4 million and
represented 19.1% of total deposits at December 31, 1996 compared to $116.7
million (21.1% of total deposits) at December 31, 1995. Savings deposits grew by
$16.0 million to $162.4 million at December 31, 1996.
Certificates of deposit $100 thousand and over at December 31, 1996
totalled $81.9 million. Certificates of deposit $100 thousand and over totalled
$64.6 million and $37.6 million at December 31, 1995 and 1994, respectively.
Total brokered deposits at year-end 1996 totalled $2.2 million compared to $2.1
million at December 31, 1995, and $5.0 million on December 31, 1994. GMBS does
not rely on brokered deposits as a source of funding, but will solicit brokered
deposits from time to time when the interest rates on these deposits are
particularly attractive.
20
<PAGE> 21
TABLE 5 shows the components of average deposits and interest rates and
TABLE 6 shows the maturity schedule of certificates of deposit $100 thousand and
over.
TABLE 5. DEPOSIT ANALYSIS
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------ ------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
-------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-BEARING DEPOSITS
Interest Checking Deposits......... $ 45,953 2.06% $ 43,974 2.47% $ 41,193 2.59%
Money Market Deposits.............. 102,817 3.02% 115,730 3.16% 133,214 2.79%
Savings Deposits................... 57,235 4.31% 23,748 3.98% 19,357 2.68%
Certificates of Deposit............ 221,034 5.50% 168,145 5.66% 94,887 4.54%
Certificates of Deposit
>$100,000....................... 70,561 5.42% 46,853 5.67% 27,047 4.25%
-------- ---- -------- ---- -------- ----
Total Interest-Bearing
Deposits...................... 497,600 4.52% 398,450 4.49% 315,698 3.41%
Total Demand Deposits........... 105,376 0.00% 94,449 0.00% 85,256 0.00%
-------- ---- -------- ---- -------- ----
Total Deposits.................. $602,976 3.73% $492,899 3.63% $400,954 2.69%
======== ==== ======== ==== ======== ====
</TABLE>
TABLE 6. MATURITY OF CDS $100,000 AND OVER
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
BALANCE PERCENT BALANCE PERCENT BALANCE PERCENT
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Three months or less..................... $11,314 13.8% $21,838 33.8% $ 9,232 24.5%
Over three months to six months.......... 12,328 15.1% 8,971 13.9% 4,736 12.6%
Over six months to twelve months......... 44,377 54.2% 23,025 35.7% 12,307 32.7%
Over twelve months....................... 13,858 16.9% 10,729 16.6% 11,353 30.2%
------- ---- ------- ---- ------- ----
Total.......................... $81,877 100.0% $64,563 100.0% $37,628 100.0%
======= ==== ======= ==== ======= ====
</TABLE>
SHORT-TERM BORROWING ANALYSIS
The major component of short-term borrowings is funds acquired from
securities sold under repurchase agreements. These repurchase agreements
generally mature daily or on demand. Average repurchase agreements for 1996
totalled $59.7 million, or 79.8% of total short-term borrowings.
Other short-term borrowings consisted of Federal funds borrowed from
correspondent banks, advances from the Federal Home Loan Bank of Atlanta and
U.S. Treasury tax and loan deposit notes which are payable on demand. TABLE 7
summarizes short-term debt and weighted average interest rates for 1996, 1995
and 1994.
TABLE 7. SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1995 1994
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at December 31....................................... $102,398 $55,747 $40,129
Weighted average interest rate at December 31................ 4.68% 4.14% 3.59%
Average daily amount outstanding............................. $ 74,876 $44,076 $33,254
Weighted average interest rate during the year............... 4.66% 4.46% 2.50%
Maximum outstanding at any month end......................... $102,398 $42,313 $41,991
Memorandum item:
FHLB Short-Term Advances Outstanding....................... $ 1,000 $ 4,500 $ 0
</TABLE>
21
<PAGE> 22
CAPITAL RESOURCES
Shareholders' equity at December 31, 1996 was $64.3 million, compared to
$57.9 million on December 31, 1995 and $46.8 million on December 31, 1994.
Factors contributing to the increase in equity for 1996 were earnings of
$6.9 million and new shares issued through various employee stock option and
dividend reinvestment plans, resulting in additional equity of $3.3 million. The
increase in equity was partially offset by the regular quarterly cash dividend
totalling $2.2 million ($.46 per share) and a $1.6 million decrease in the
unrealized holding gains and losses in the securities available-for-sale
portfolio.
The growth in shareholders' equity during 1995 was primarily attributable
to $6.3 million in earnings, and an increase in the unrealized holding gains and
losses on securities available-for-sale of $4.7 million. Additional factors
contributing to the equity increase in 1995 were new shares issued through
various employee stock option plans and GMBS' dividend reinvestment plan,
resulting in additional equity of $1.6 million. The largest reduction in
shareholders' equity during 1995 resulted from the regular quarterly dividend,
which totalled $1.5 million for the year, or $.38 per share.
Various regulatory agencies, including the FRB, have adopted risk-based
capital requirements for assessing bank holding companies' capital adequacy.
These standards define capital and establish minimum capital requirements in
relation to assets and off-balance sheet exposure as adjusted for credit risk.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among bank holding
companies and banks, to account for off-balance sheet exposure and to minimize
disincentives for holding liquid assets. Assets and off-balance sheet items are
assigned to broad risk categories, each with appropriate risk weights. The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance sheet items.
The capital requirements classify capital into two tiers, referred to as
Tier 1 and Tier 2. Tier 1 capital generally includes common shareholders' equity
less deductions for goodwill and other intangibles, and Tier 2 capital is
primarily a portion of the general valuation allowance for loan losses and
certain qualifying debt instruments. The minimum requirement for the ratio of
total capital to risk-adjusted assets is 8%.
In addition, the FRB has established minimum leverage ratio requirements
for bank holding companies that provide for a minimum ratio of Tier 1 capital to
total average quarterly assets, less goodwill and other intangible assets. The
minimum leverage ratio for bank holding companies receiving the highest rating
under the regulatory rating system and meeting certain other specified criteria
is 3%. All other banking organizations are required to maintain a leverage ratio
of at least 4% to 5%.
At December 31, 1996, GMBS' Tier 1 and total risk-based capital ratios were
12.3% and 13.4%, respectively, compared to 13.7% and 14.9% at December 31, 1995,
and 14.1% and 15.3% at December 31, 1994. GMBS' leverage ratio was 7.6% at
December 31, 1996, 8.8% at December 31, 1995 and 9.6% at December 31, 1994. As
shown in the TABLE 8 and Note 16 to the consolidated financial statements, GMBS'
capital structure places it well above the FRB's guidelines.
22
<PAGE> 23
TABLE 8. SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
TIER 1 CAPITAL:
Common Stock............................................... $ 5,581 $ 5,278 $ 5,099
Surplus.................................................... 38,472 35,523 34,072
Retained Earnings.......................................... 21,094 16,416 11,616
Treasury Stock & unearned ESOP............................. 0 (42) (102)
Unrealized holding gains (losses) on securities available
for sale................................................. (803) 752 (3,909)
-------- -------- --------
Total Shareholders' Equity....................... 64,344 57,927 46,776
Less: unrealized (gains) losses on securities available for
sale..................................................... 803 (752) 3,909
Less: disallowed intangibles............................... (204) (256) (307)
-------- -------- --------
Total Tier 1 Capital............................. 64,943 56,919 50,378
TIER 2 CAPITAL:
Qualifying allowance for loan losses....................... 5,659 5,195 4,471
-------- -------- --------
Total Tier 2 Capital............................. 5,659 5,195 4,471
-------- -------- --------
TOTAL RISK-BASED CAPITAL................................... $ 70,602 $ 62,114 $ 54,849
======== ======== ========
Risk Weighted Assets....................................... $527,449 $415,559 $357,718
RATIOS:
Tier 1 Capital to risk weighted assets..................... 12.3% 13.7% 14.1%
Total risk-based capital ratio............................. 13.4% 14.9% 15.3%
Leverage Ratio-Tier 1 Capital to quarterly average assets
less intangibles......................................... 7.6% 8.8% 9.6%
</TABLE>
ASSET QUALITY
CREDIT POLICIES. GMBS employs extensive written policies and procedures to
enhance management of credit risk. The loan portfolio is managed under a
specifically defined credit process. This process includes formulation of
portfolio management strategy, guidelines for underwriting standards and risk
assessment, procedures for on-going identification and management of credit
deterioration, and regular portfolio reviews to estimate loss exposure and to
ascertain compliance with GMBS' policies. GMBS' loan approval policies provide
for various levels of officer lending authority. In general, the largest
unsecured individual lending authority currently granted by the Company is $100
thousand and the largest secured lending authority given to any one individual
is currently $500 thousand. A combination of approvals from four officers, two
of whom must be the President and Senior Credit Officer, may lend up to an
aggregate of $1.0 million on an unsecured basis, and $2.5 million on a secured
basis to any one borrower. Loans which in the aggregate exceed $1.0 million on
an unsecured basis, or $2.5 million on a secured basis, must be approved both by
the officers' loan committee and the Board loan committee comprised of George
Mason Bank's President, Senior Credit Officer and three members of the Board of
Directors who serve on a rotating basis.
A major element of credit risk management is the diversification of risk.
GMBS' objective is to maintain a diverse loan portfolio to minimize the impact
of any single event or set of circumstances. Concentration parameters are based
upon individual risk factors, policy constraints, economic conditions,
collateral and products. GMBS has no highly leveraged transaction loans or loans
to foreign countries. GMB generally does not make loans outside its market area
unless the borrower has an established relationship with GMB and conducts its
principal business operations within GMB's market area. Consequently, GMB and
its borrowers are directly affected by the economic conditions prevailing in its
market area. In particular, GMB has been very active in lending to builders of
single family homes in Northern Virginia. Although considered to be a real
estate transaction,the credit risk associated with these loans has been managed
through the use of conservative underwriting criteria. In general, GMB lends on
single family homes which have been pre-sold to qualified
23
<PAGE> 24
home buyers, and GMB limits its exposure on lot loans and speculative units.
Other than loans to single family home builders, GMB does not presently have a
significant exposure to any one individual client or industry.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses represents
management's view as to the amount necessary to absorb potential losses in the
loan portfolio. The amount of the provision charged to expense each year is
dependent upon an assessment of the loan portfolio quality, current economic
trends and conditions, evaluation of specific client compositions, past loan
experience and the net charge-offs during the year.
Judgments of lending officers and senior management, opinions of an
independent loan review consulting firm, bank regulatory agencies and advice
from GMBS' independent public accountants are considered in reviewing and
assessing the adequacy of the allowance for loan losses. Management believes
that the allowance for loan losses at December 31, 1996 was adequate to cover
credit losses inherent in the loan portfolio.
Net charge-offs in 1996 declined to $51 thousand, compared to $294 thousand
for the same period last year. Net charge-offs for 1994 totalled $3 thousand.
The ratio of net charge-offs to average total loans was 0.02% in 1996 compared
to 0.11% in 1995 and 0.00% in 1993. A detailed analysis of charge-offs,
recoveries and provision for loan losses is provided in TABLE 9. The ratio of
allowance for loan losses to total loans at year end 1996 was 1.51%, compared to
1.85% at year end 1995 and 2.36% at year end 1994. For a more detailed
discussion of nonperforming assets and past due loans, see "-- Nonperforming
Assets and Past Due Loans."
TABLE 9. ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year........ $ 5,529 $ 5,805 $ 5,641 $ 6,119 $ 5,286
Provision charged to expense........ 181 18 167 620 5,050
Charge-offs:
Commercial and other.............. 86 92 274 361 264
Consumer.......................... 47 36 22 123 163
Real Estate -- Mortgage........... 41 300 236 1,147 4,162
Real Estate -- Construction....... 0 63 1 0 0
-------- -------- -------- -------- --------
Total Charge-offs.............. 174 491 533 1,631 4,589
Recoveries:
Commercial and other.............. 34 35 165 316 96
Consumer.......................... 11 30 14 111 65
Real Estate -- Mortgage........... 78 112 325 106 211
Real Estate -- Construction....... 0 20 26 0 0
-------- -------- -------- -------- --------
Total Recoveries............... 123 197 530 533 372
Net Charge-Offs..................... 51 294 3 1,098 4,217
-------- -------- -------- -------- --------
Balance at end of year.............. $ 5,659 $ 5,529 $ 5,805 $ 5,641 $ 6,119
======== ======== ======== ======== ========
Average Total Loans(1).............. $330,837 $263,194 $235,497 $206,145 $192,691
Total Loans at December 31,(1)...... $373,613 $299,558 $246,456 $220,954 $192,733
Ratio of net charge-offs to average
total loans....................... 0.02% 0.11% 0.00% 0.53% 2.19%
Ratio of allowance for loan losses
to total loans at year end........ 1.51% 1.85% 2.36% 2.55% 3.17%
</TABLE>
- ---------------
(1) Total Loans are reported net of unearned income and do not include Mortgage
Loans Held for Resale.
24
<PAGE> 25
TABLE 9A. ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial.......................... $ 934 $ 706 $ 967 $ 950 $ 2,720
Consumer............................ 256 224 195 256 231
Real Estate -- Mortgage............. 2,650 3,041 3,100 2,853 2,703
Real Estate -- Construction......... 511 729 685 662 343
Unallocated......................... 1,308 829 858 920 122
-------- -------- -------- -------- --------
Total............................... $ 5,659 $ 5,529 $ 5,805 $ 5,641 $ 6,119
======== ======== ======== ======== ========
PERCENTAGE ALLOCATION TO TOTAL LOANS
Commercial.......................... 27.0% 30.4% 41.8% 41.7% 48.0%
Consumer............................ 10.7% 4.3% 3.4% 4.5% 4.8%
Real Estate -- Mortgage............. 53.7% 54.4% 39.9% 33.8% 39.9%
Real Estate -- Construction......... 8.6% 10.9% 14.9% 20.0% 7.3%
-------- -------- -------- -------- --------
Total............................... 100.0% 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ======== ========
Gross Loans......................... $374,371 $300,507 $247,979 $222,176 $193,537
======== ======== ======== ======== ========
</TABLE>
NONPERFORMING ASSETS AND PAST DUE LOANS. Nonperforming assets, consisting
of nonaccrual loans, restructured loans and other real estate, totalled $2.0
million at December 31, 1996, compared to $3.9 million at December 31, 1995, and
$3.6 million at December 31, 1994.
Nonaccrual loans, the single largest category of nonperforming assets, are
those loans on which the accrual of interest has been discontinued. Commercial
loans are generally placed on nonaccrual status when either principal or
interest is past due 90 days or more, or when management believes the collection
of principal or interest is in doubt. Nonaccrual loans decreased by $1.5 million
during 1996 to $1.5 million, compared to $3.0 million at December 31, 1995.
Nonaccrual loans at December 31, 1994 totalled $1.7 million. GMBS had loans
totalling $95 thousand at the end of 1996, $744 thousand at the end of 1995, and
$1.6 million at the end of 1994, as to which the loan terms were modified to
provide for a reduced rate of interest due to the financial condition of the
borrower.
Other real estate at December 31, 1996 totalled $398 thousand. Other real
estate totalled $109 thousand at December 31, 1995, compared to $237 thousand at
December 31, 1994. The properties and collateral securing these loans are
constantly reevaluated and loan balances written down as deemed necessary.
25
<PAGE> 26
TABLE 10. CREDIT QUALITY
TABLE 10 details nonperforming assets and past due loans and the related
asset quality ratios for the past five years.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans.................... $ 1,487 $ 3,024 $ 1,709 $ 3,695 $ 5,878
Restructured Loans.................. 95 744 1,595 204 785
-------- -------- -------- -------- --------
TOTAL NONPERFORMING LOANS...... 1,582 3,768 3,304 3,899 6,663
Other Real Estate................... 398 109 237 534 3,024
-------- -------- -------- -------- --------
TOTAL NONPERFORMING ASSETS..... 1,980 3,877 3,541 4,433 9,687
Loans past due 90 days or more and
accruing interest................. 0 0 10 780 1,396
-------- -------- -------- -------- --------
TOTAL NONPERFORMING ASSETS AND
LOANS PAST DUE 90 DAYS OR
MORE......................... $ 1,980 $ 3,877 $ 3,551 $ 5,213 $ 11,083
======== ======== ======== ======== ========
Total Loans at December 31,(1)...... 373,613 $299,558 $246,456 $220,954 $192,733
Allowance for Loan Losses........... 5,659 5,529 5,805 5,641 6,119
Total Assets........................ 872,470 679,596 550,799 461,184 406,781
ASSET QUALITY RATIOS:
Allowance for Loan Losses to
Period-end Loans.................. 1.51% 1.85% 2.36% 2.55% 3.17%
Allowance for Loan Losses to
Nonperforming Loans (Multiple).... 3.58x 1.47x 1.76x 1.45x 0.92x
Total Nonperforming Loans to Total
Loans............................. 0.42% 1.26% 1.34% 1.76% 3.46%
Total Nonperforming Assets to Total
Assets............................ 0.23% 0.57% 0.64% 0.96% 2.38%
Nonperforming Assets to Total Loans
plus Other Real Estate............ 0.53% 1.29% 1.44% 2.00% 4.95%
Nonperforming Assets and Loan Past
Due 90 days or more to Total Loans
and Other Real Estate............. 0.53% 1.29% 1.44% 2.35% 5.66%
</TABLE>
- ---------------
(1) Total Loans are reported net of unearned income and do not include Mortgage
Loans Held for Resale.
POTENTIAL PROBLEM ASSETS. GMBS has a policy to continually review and
monitor extensions of credit for possible adverse conditions that may affect
contractual repayments and institutes appropriate actions to minimize any
potential loss. GMBS maintains an internal list of loans for management that
includes performing loans that have been identified as requiring a closer level
of monitoring. Approximately 2.1% of the total loan portfolio appeared on this
internal list as of December 31, 1996. Loans appearing on the internal list at
December 31, 1996 included $2.8 million in special mention and $5.0 million in
loans classified as substandard, with no loans classified as doubtful or loss.
In management's judgment, there are no other loans which represent material
credits which cause management to have serious doubts as to the ability of
borrowers to comply with their respective loan repayment terms.
At December 31, 1996, loans that were 30 to 89 days past due totalled $251
thousand.
ASSET/LIABILITY MANAGEMENT
LIQUIDITY AND INTEREST RATE SENSITIVITY ANALYSIS. The primary function of
asset/liability management is to maintain adequate levels of liquidity while
minimizing fluctuations in net interest margin as a percentage of total assets.
The objective of liquidity management is to maintain sufficient cash flows
to meet the demand for funds from both depositors and borrowers. GMBS manages
its liquidity position by maintaining adequate levels of
26
<PAGE> 27
liquid assets, which include cash and due from banks, Federal funds sold and the
securities available-for-sale portfolio. GMBS also maintains additional sources
of liquidity through a variety of short term borrowing arrangements. GMBS
maintains Federal funds lines with the Federal Home Loan Bank of Atlanta and a
number of larger regional and money-center banking institutions. The Federal
Home Loan Bank of Atlanta has extended a secured line of credit in the amount of
$95 million. GMBS currently has $4.0 million in long-term advances outstanding
from the Federal Home Loan Bank of Atlanta. Note 8 to the consolidated financial
statements provides further details on GMBS' borrowing arrangements.
At December 31, 1996, cash equivalents and securities available-for-sale
totalled $345.8 million, compared to $237.2 million at December 31, 1995. In
addition, GMBS' strong capital position, a large core deposit base, the quality
of assets and continued earnings power will help support GMBS' long term
liquidity needs.
An important element of asset/liability management is the monitoring of
GMBS' sensitivity to interest rate movements. In order to measure the effect of
interest rates on GMBS' net interest income, management takes into consideration
the expected cash flows from the securities and loan portfolios, as well as the
expected magnitude of the repricing of specific asset and liability categories,
by assigning earnings change ratios to individual balance sheet items. GMBS
evaluates interest sensitivity risk and then formulates guidelines to manage
this risk based upon their outlook regarding the economy, forecasted interest
rate movements and other business factors. Management uses the securities
portfolio, which is primarily fixed rate, to hedge against movements in the loan
portfolio, which contains fixed and variable rate assets. Management's goal is
to maximize and stabilize the net interest margin by limiting exposure to
interest rate changes.
The data in TABLE 11 reflects contractual repricing or maturities of
various assets and liabilities at December 31, 1996. This gap represents the
difference between interest sensitive assets and liabilities in a specific time
interval. Interest sensitivity gap analysis presents a position that existed at
one particular point in time and assumes that assets and liabilities with
similar repricing characteristics will reprice to the same degree. Therefore,
GMBS' static gap position is not necessarily indicative of the impact of changes
in interest rates on net interest income. Therefore, in addition to the
traditional "static gap presentation," TABLE 11 also presents interest
sensitivity on an income statement basis using Beta adjustments. Beta
adjustments give recognition to the fact that assets and liabilities do not
reprice to the same degree and are designed to predict changes in consumer
deposit rates and other interest rates, based on changes in the prime rate. In
addition, mortgage loans held for resale, which generally have maturities of
seven years or more are included in the one to 90 day category as they are
pre-sold and are kept on GMBS' books for less than 90 days. GMBS' cumulative gap
at the one-year repricing period showed that GMBS was liability sensitive by
$229.9 million, or 26.4% of total assets at December 31, 1996. On an adjusted
basis, GMBS' cumulative gap showed a liability sensitive position of $64.2
million, or 7.4% of total assets, which would indicate that the net interest
margin would decrease in a rising rate environment and increase in a falling
rate environment.
27
<PAGE> 28
TABLE 11. INTEREST RATE GAP ANALYSIS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------
1-90 91-180 181-365 1-5 OVER 5
DAYS DAYS DAYS YEARS YEARS
--------- --------- --------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INTEREST-SENSITIVE ASSETS:
Federal Funds Sold..................... $ 23,800 $ 0 $ 0 $ 0 $ 0
Securities............................. 14,614 15,818 43,774 209,648 61,579
Mortgage Loans Held for Resale......... 72,983 0 0 0 0
Loans.................................. 182,434 6,407 7,632 143,457 33,683
--------- --------- --------- -------- --------
Total.......................... 293,831 22,225 51,406 353,105 95,262
--------- --------- --------- -------- --------
Cumulative Totals.............. 293,831 316,056 367,462 720,567 815,829
INTEREST-SENSITIVE LIABILITIES:
Interest Checking Accounts............. 49,002 0 0 0 0
Savings Accounts....................... 73,973 0 0 0 0
Money Market Deposit Accounts.......... 88,441 0 0 0 0
Certificate of Deposits................ 195,122 25,968 61,990 55,711 10,972
Repurchase Agreements & Federal
Funds............................... 97,469 0 0 0 0
FHLB -- Advances....................... 0 500 500 3,000 0
U.S. Demand Notes...................... 4,429 0 0 0 0
--------- --------- --------- -------- --------
Totals......................... 508,436 26,468 62,490 58,711 10,972
--------- --------- --------- -------- --------
Cumulative Totals.............. 508,436 534,904 597,394 656,105 667,077
--------- --------- --------- -------- --------
Gap............................ $(214,605) $ (4,243) $ (11,084) $294,394 $ 84,290
========= ========= ========= ======== ========
Cumulative Gap................. $(214,605) $(218,848) $(229,932) $ 64,462 $148,752
========= ========= ========= ======== ========
Adjustments:
Beta Adjustments
Interest Checking (beta factor
.15).............................. 41,651 0 0 0 0
Savings Accounts (beta factor
.10).............................. 66,576 0 0 0 0
Money Market Accounts (beta factor
.35).............................. 57,487 0 0 0 0
--------- --------- --------- -------- --------
Cumulative Beta Adjusted Gap............. $ (48,891) $ (53,134) $ (64,218) $230,176 $314,466
========= ========= ========= ======== ========
As Reported Information:
Interest-Sensitive
Assets/Interest-Sensitive Liabilities
(Cumulative):.......................... 57.79% 59.09% 61.51% 109.82% 122.30%
Cumulative Gap/Total Assets.............. (24.60)% (25.08)% (26.35)% 7.39% 17.05%
Beta Adjusted Information:
Interest-Sensitive
Assets/Interest-Sensitive Liabilities
(Cumulative):.......................... 85.73% 85.61% 85.12% 146.94% 162.72%
Cumulative Gap/Total Assets.............. (5.60)% (6.09)% (7.36)% 26.38% 36.04%
</TABLE>
IMPACT OF INFLATION AND CHANGING PRICES. The financial statements and
related data presented herein have been prepared in accordance with generally
accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation.
Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the price
of goods and services, since such prices are affected by inflation.
28
<PAGE> 29
NEW ACCOUNTING STANDARDS
SFAS NO. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION." SFAS No. 123
provides companies with an alternative to APB Opinion No. 25, "Accounting for
Stock Issued to Employees," in accounting for stock-based compensation plans.
This standard is effective in 1996. GMBS does not intend to adopt this
alternative. Therefore, there is no effect on the 1996 and 1995 financial
statements. Note 14 to the consolidated financial statements details required
pro forma disclosures for awards granted in 1996 and 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this Item as it relates to financial
statements is incorporated herein by reference to pages 13 to 29 in the
Company's 1996 Annual Report to Shareholders.
The Audited Consolidated Financial Statements of The Palmer National
Bancorp, Inc., and Subsidiaries as of December 31, 1995 and 1994, and For the
Years Ended December 31, 1995, 1994, and 1993 are included herein.
29
<PAGE> 30
EXHIBIT 13A
ARTHUR ANDERSEN LLP
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994, AND
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993,
TOGETHER WITH AUDITORS' REPORT
<PAGE> 31
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
The Palmer National Bancorp, Inc.,
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of The Palmer
National Bancorp, Inc. ("Bancorp," a Delaware corporation), and Subsidiaries as
of December 31, 1995 and 1994, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. These consolidated financial
statements are the responsibility of Bancorp's management. Our responsibility
is to express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Palmer National Bancorp,
Inc., and Subsidiaries as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As explained in Note 1 of the notes to the financial statements, effective
January 1, 1993, Bancorp changed its method of accounting for income taxes and,
effective December 31, 1993, changed its method of accounting for securities.
ARTHUR ANDERSEN LLP
Washington, D.C.,
February 14, 1996, except
with respect to the matter
discussed in Note 20, as to
which the date is May 17, 1996.
<PAGE> 32
THIS PAGE LEFT BLANK INTENTIONALLY
<PAGE> 33
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
------------ -------------
<S> <C> <C>
CASH AND DUE FROM BANKS $ 5,364,481 $ 4,476,667
FEDERAL FUNDS SOLD 6,000,000 13,900,000
------------ -------------
Total cash and cash equivalents 11,364,481 18,376,667
TRADING SECURITIES 5,693,474 5,299,172
INVESTMENT SECURITIES 19,806,781 18,066,247
FEDERAL RESERVE BANK STOCK 215,900 215,900
LOANS RECEIVABLE, net 61,058,642 48,962,953
ACCRUED INTEREST RECEIVABLE 631,292 482,544
PREMISES AND EQUIPMENT, net 604,264 615,612
OTHER REAL ESTATE OWNED, net 109,032 -
DEFERRED TAX ASSET, net 478,942 274,382
OTHER ASSETS 1,200,680 1,159,171
------------ -------------
Total assets $101,163,488 $93,452,648
============ =============
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
<PAGE> 34
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31,1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
DEPOSITS:
Demand deposits $ 16,367,033 $15,596,221
Savings and interest-bearing demand deposits 17,132,723 17,288,128
Money market demand deposits 30,882,271 29,131,077
Certificates of deposit-
Denominations less than $100,000 7,722,648 7,499,415
Denominations of $100,000 or more 6,799,472 4,935,581
------------ -----------
Total deposits 78,904,147 74,450,422
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE 11,884,940 10,811,350
ACCRUED INTEREST PAYABLE 190,018 110,674
DEBT OF EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP") - 81,252
OTHER LIABILITIES 601,031 218,916
------------ -----------
Total liabilities 91,580,136 85,672,614
------------ -----------
STOCKHOLDERS' EQUITY
CLASS B VOTING COMMON STOCK, $5 per share par value, 1,000,000
shares authorized, 509,114 shares issued 2,545,570 2,545,570
COMMON STOCK, $5 per share par value, 1,500,000 shares
authorized, 97,774 and 97,574 shares issued, respectively 488,870 487,870
NON-VOTING COMMON STOCK, $5 per share par value, 500,000
shares authorized, 115,605 shares issued and outstanding 578,025 578,025
PAID-IN CAPITAL 6,589,403 6,588,003
RETAINED DEFICIT (653,678) (1,522,764)
UNREALIZED GAIN (LOSS) ON AVAILABLE-FOR-SALE SECURITIES, net of tax 77,137 (794,846)
LESS- TREASURY STOCK, AT COST-
Class B voting common stock and common stock, 2,470 and
1,433 shares and 712 and 282 shares, respectively (41,975) (20,572)
------------ -----------
9,583,352 7,861,286
UNEARNED ESOP SHARES - (81,252)
------------ -----------
Total stockholders' equity 9,583,352 7,780,034
------------ -----------
Total liabilities and stockholders' equity $101,163,488 $93,452,648
============ ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
<PAGE> 35
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- ----------
<S> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $4,769,027 $4,116,390 $3,611,298
Trading account interest 230,687 179,007 137,979
Interest on investment securities 1,208,681 1,199,239 1,077,915
Federal funds sold 611,729 357,266 343,134
Federal Reserve Bank stock dividends 12,954 11,746 11,866
---------- ----------- -----------
Total interest and dividend income 6,833,078 5,863,648 5,182,192
---------- ----------- -----------
INTEREST EXPENSE:
Savings and interest-bearing demand deposits 368,713 404,714 395,239
Money market demand deposits 1,007,664 782,362 740,682
Certificates of deposit-
Denominations less than $100,000 437,164 306,670 329,736
Denominations of $100,000 or more 305,846 173,321 163,466
---------- ----------- -----------
Total interest on deposits 2,119,387 1,667,067 1,629,123
Securities sold under agreements to repurchase 373,339 195,651 173,367
Other 6,855 - 30,289
---------- ----------- -----------
Total interest expense 2,499,581 1,862,718 1,832,779
---------- ----------- -----------
Net interest income 4,333,497 4,000,930 3,349,413
RECOVERY OF PROVISION FOR LOAN LOSSES 221,000 163,000 180,354
---------- ----------- -----------
Net interest income after recovery of provision
for loan losses 4,554,497 4,163,930 3,529,767
---------- ----------- -----------
OTHER INCOME:
Fees for other customer services 323,531 218,009 225,984
Trading account gain (loss) 179,519 (13,629) 14,970
Investment securities gain (loss) 2,317 (24,716) 138,098
Other 236,070 244,958 212,898
---------- ----------- -----------
Total other income 741,437 424,622 591,950
---------- ----------- -----------
OPERATING EXPENSES:
Salaries and benefits 2,349,829 1,910,300 1,697,081
Occupancy expense of bank premises 814,833 790,339 767,455
Furniture and equipment 343,823 279,893 246,230
Other 1,051,265 1,041,143 1,062,363
---------- ----------- -----------
Total operating expenses 4,559,750 4,021,675 3,773,129
---------- ----------- -----------
INCOME BEFORE BENEFIT FOR INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 736,184 566,877 348,588
BENEFIT FOR INCOME TAXES 132,902 24,801 15,953
---------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 869,086 591,678 364,541
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE - - 216,710
---------- ----------- -----------
NET INCOME $ 869,086 $ 591,678 $ 581,241
========== =========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
<PAGE> 36
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31 1995, 1994 AND 1993
(CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
EARNINGS PER SHARE:
Primary-
Income before cumulative effect of change in
accounting principle $1.16 $.81 $.50
Cumulative effect of change in accounting principle - - .30
---------- ----------- -----------
Net income 1.16 .81 .80
---------- ----------- -----------
Fully diluted-
Income before cumulative effect of change in
accounting principle 1.12 .80 .50
Cumulative effect of change in accounting principle - - .30
---------- ----------- -----------
Net income $1.12 $.80 $.80
========== =========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
<PAGE> 37
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
CLASS B
VOTING NONVOTING RETAINED
COMMON COMMON COMMON PAID-IN (DEFICIT)
STOCK STOCK STOCK CAPITAL EARNINGS
---------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 $2,545,570 $487,870 $578,025 $6,588,003 $(2,695,693)
Purchase of Treasury stock - - - - -
ESOP note payment - - - - -
Unrealized gain on available-for-sale securities - - - - -
Net income - - - - 581,251
---------- -------- -------- ---------- ---------
BALANCE, December 31, 1993 2,545,570 487,870 578,025 6,588,003 (2,114,442)
Purchase of Treasury stock - - - - -
ESOP note payment - - - - -
Unrealized loss on available-for-sale securities - - - - -
Net income - - - - 591,678
---------- -------- -------- ---------- ---------
BALANCE, December 31, 1994 2,545,570 487,870 578,025 6,588,003 (1,522,764)
Exercise of stock options - 1,000 - 1,400 -
Purchase of Treasury stock - - - - -
ESOP note payment - - - - -
Unrealized gain on available-for-sale securities - - - - -
Net income - - - - 869,086
---------- -------- -------- ---------- ---------
BALANCE, December 31, 1995 $2,545,570 $488,870 $578,025 $6,589,403 $(653,678)
========== ======== ======== ========== =========
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
AVAILABLE-FOR-SALE TREASURY UNEARNED
SECURITIES STOCK ESOP SHARES TOTAL
------------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1992 $ - $ - $(243,757) $7,260,018
Purchase of Treasury stock - (3,104) - (3,104)
ESOP note payment - - 81,253 81,253
Unrealized gain on available-for-sale securities 168,453 - - 168,453
Net income - - - 581,251
-------- -------- --------- ----------
BALANCE, December 31, 1993 168,453 (3,104) (162,504) 8,087,871
Purchase of Treasury stock - (17,468) - (17,468)
ESOP note payment - - 81,252 81,252
Unrealized loss on available-for-sale securities (963,299) - - (963,299)
Net income - - - 591,678
-------- -------- --------- ----------
BALANCE, December 31, 1994 (794,846) (20,572) (81,252) 7,780,034
Exercise of stock options - - - 2,400
Purchase of Treasury stock - (21,403) - (21,403)
ESOP note payment - - 81,252 81,252
Unrealized gain on available-for-sale securities 871,983 - - 871,983
Net income - - - 869,086
-------- -------- --------- ----------
BALANCE, December 31, 1995 $ 77,137 $(41,975) $ - $9,583,352
======== ======== ========= ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
<PAGE> 38
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 869,086 $ 591,678 $ 581,251
Adjustments to reconcile net income to net cash provided by (used
in) operating activities-
Recovery of provision for loan losses (221,000) (163,000) (180,354)
(Gain) loss on sale of investment securities (2,317) 24,716 (138,098)
Gain on sale of property - (16,363) -
Amortization of premiums, discounts, and net deferred loan
fees 48,201 179,185 (253,700)
Unrealized gain on foreign currency - (5,300) -
Depreciation and amortization 191,859 161,708 126,326
Provision for deferred taxes (265,786) (40,719) -
Cumulative effect of change in accounting principle - - (216,710)
Net increase in trading securities (394,302) (155,946) (5,143,226)
(Increase) decrease in accrued interest receivable (148,748) (15,529) 48,351
Increase (decrease) in accrued interest payable 79,344 13,439 (71,819)
Increase in other assets (41,509) (363,889) (5,995)
Increase (decrease) in other liabilities 382,115 118,026 (3,775)
----------- ----------- -----------
Net cash provided by (used in) operating activities 496,943 328,006 (5,257,749)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities 1,047,069 1,318,160 2,795,508
Proceeds from maturities of investment securities 2,705,307 7,408,646 6,368,762
Purchases of investment securities (4,641,282) (5,950,355) (16,029,366)
Loan fundings, net of principal collections on loans (11,959,825) (7,819,733) 5,540,359
Capital expenditures, net of retirements (168,710) (243,145) (232,905)
(Purchase) retirement of Federal reserve bank stock - (26,650) 14,750
Proceeds from sale of real estate - 109,038 435,000
----------- ----------- -----------
Net cash used in investing activities (13,017,441) (5,204,039) (1,107,892)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, savings and interest-
bearing demand deposits, and money market demand deposits 2,366,601 5,087,919 (1,863,634)
Net increase (decrease) in certificates of deposit 2,087,124 1,762,414 (2,401,098)
Net increase in securities sold under agreements to repurchase 1,073,590 2,025,674 2,064,793
Principal payments on note payable - - (250,000)
Net principal payments on debt of ESOP (81,252) (81,252) (81,253)
Reduction in unearned ESOP shares 81,252 81,252 81,253
Proceeds from exercise of stock options 2,400 - -
Purchase of Treasury stock (21,403) (17,468) -
----------- ----------- -----------
Net cash provided by (used in) financing activities 5,508,312 8,858,539 (2,449,939)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,012,186) 3,982,506 (8,815,580)
CASH AND CASH EQUIVALENTS, beginning of year 18,376,667 14,394,161 23,209,741
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $11,364,481 $18,376,667 $14,394,161
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 2,309,563 $ 1,849,279 $ 1,904,598
=========== =========== ===========
Income taxes $ 1,644 $ - $ -
=========== =========== ===========
Charge-offs of loans receivable $ 302,541 $ 114,529 $ 536,521
=========== =========== ===========
Loans transferred to other real estate owned $ 116,000 $ - $ 117,000
=========== =========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
<PAGE> 39
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31,1995 AND 1994, AND
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF ACCOUNTING POLICIES AND
OPERATIONS:
OPERATIONS
The Palmer National Bancorp, Inc. ("Bancorp"), was incorporated in the state of
Delaware on September 2, 1983. On September 14, 1983, Bancorp acquired all of
the outstanding shares of The Palmer National Bank (the "Bank," incorporated in
the District of Columbia on September 12,1982). The Bank's principal business
is attracting deposits from the general public and investing those funds in
loans. The Bank operates three branches located in northwest Washington, D.C.
On December 23, 1994, Palmer National Mortgage, Inc., was formed. Palmer
National Mortgage, Inc., is a wholly owned subsidiary of Bancorp, established
for the purpose of originating and selling single family residential mortgage
loans. Palmer National Mortgage, Inc., commenced operations in April 1995.
The accounting and reporting policies of Bancorp are in accordance with
generally accepted accounting principles ("GAAP") and conform to general
practices within the banking industry. The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. In
addition, it is reasonably possible that a change in certain of these
estimates, such as loan loss reserves, will occur in the near term. The
following is a summary of Bancorp's significant accounting policies.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Bancorp, the Bank, and Palmer National Mortgage, Inc., as of December 31, 1995
and 1994, and for the years ended December 31, 1995, 1994 and 1993. All
significant intercompany accounts and transactions have been eliminated.
CASH EQUIVALENTS
Cash equivalents include amounts due from depository institutions and highly
liquid investments with original maturities of three months or less.
<PAGE> 40
- 2 -
TRADING AND INVESTMENT SECURITIES
As of December 31, 1993, Bancorp adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." SFAS No. 115 establishes three categories of investments in
debt securities and the related accounting treatment for each, as follows.
- - Debt securities that Bancorp has the positive intent and ability to hold to
maturity are classified as held-to-maturity and reported at amortized cost.
- - Debt securities that are bought and held principally for the purpose of
selling in the near term are classified as trading securities and reported
at fair value, with unrealized holding gains and losses included in
earnings.
- - Debt securities not classified as either held-to-maturity or trading
securities are classified as available-for-sale securities and reported at
fair value, with unrealized holding gains and losses excluded from earnings
and reported in a separate component of shareholders' equity, net of the
related tax effect, until realized.
As of December 31, 1995 and 1994, securities classified as trading securities
are presented as such on the accompanying consolidated balance sheets (see Note
2). Securities classified as available-for-sale and held-to-maturity are
included in investment securities on the accompanying consolidated balance
sheets (see Note 3).
In late 1995, the Financial Accounting Standards Board ("FASB") published
implementation guidance related to SFAS No. 115 (the "Special Report"). The
report was designed to provide additional guidance and clarification on the
implementation of SFAS No. 115. The Special Report included a special
transition provision, allowing a reassessment of the initial classifications of
all securities and the ability to reclassify, after review of the guidance in
the Special Report, securities between the classifications of held-to-maturity
and available-for-sale. This transfer between portfolios can occur without the
prescribed accounting for transfers between portfolios under SFAS No. 115, for
transfers made on or before December 31, 1995. Upon review of the Special
Report, Bancorp transferred all of its securities classified as
held-to-maturity to available-for-sale.
LOANS RECEIVABLE
Loans are carried at amounts advanced, less payments collected, reduced by
unearned interest, the reserve for loan losses, and net deferred loan fees.
Interest on loans is accrued over the term of the loan, based on the principal
amount outstanding.
<PAGE> 41
- 3 -
Loans are generally placed on nonaccrual status when they are 90 days past due
as to either principal or interest. However, loans that are in the process of
renewal or that are well secured and in the process of collection may not be
placed on nonaccrual status, based on the judgment of management. When a loan
is placed on nonaccrual status, previously accrued and uncollected interest is
charged to interest on loans. Income is subsequently recognized only to the
extent that cash payments are received or until, in management's judgment, the
borrower's ability to make periodic payments has been restored, in which case
the loan is returned to accrual status.
IMPAIRED LOANS
Effective January 1, 1995, Bancorp adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditor
for Impairment of a Loan - Income Recognition and Disclosures," which defines
impaired loans as specifically reviewed loans for which it is probable that
Bancorp will be unable to collect all amounts due according to the terms of the
loan agreement. Bancorp's impaired loans are generally defined as nonaccrual
loans as detailed above (see Note 5).
LOAN FEES
Bancorp defers and amortizes loan fees, net of related costs, over the
anticipated lives of the loans originated. For each of the years presented in
the accompanying consolidated statements of income, the amortization of net
deferred loan fees is included with interest and fees on loans.
RESERVE FOR LOAN LOSSES
The reserve for loan losses is an estimate based upon loan loss experience,
adjusted for such factors as changes in the character of the loan portfolio and
current economic conditions. An evaluation of the loan portfolio is performed
periodically by management as a basis for maintaining an adequate reserve
balance, and adjustments, as they become necessary, are reported in earnings in
the periods in which they become known. In the opinion of management, the
reserve for loan losses is adequate to absorb estimated losses that have been
incurred in the present loan portfolio.
PREMISES AND EQUIPMENT
Premises and equipment includes furniture, equipment and leasehold
improvements. These assets are stated at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over the assets'
estimated useful lives (three to ten years).
OTHER REAL ESTATE OWNED
Other real estate owned is property acquired through foreclosure and is
recorded at the lower of cost or fair value, less estimated costs to sell. Any
write-downs to fair value on other real estate owned at the date of foreclosure
are charged to the reserve for loan losses. A reserve for other real estate
owned is maintained to recognize subsequent declines in fair value.
<PAGE> 42
- 4 -
INCOME TAXES
Effective January 1, 1993, Bancorp adopted SFAS No. 109, "Accounting for Income
Taxes." SFAS No. 109 requires a change from the deferred method to the
liability method of accounting for income taxes. Under the liability method,
deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax laws and rates applicable to
future years to differences between the financial statement carrying amounts
and the tax bases of existing assets and liabilities. Under this new standard,
the effect on deferred taxes of a change in tax rates is recognized in income
in the period that included the enactment date. Under the deferred method,
deferred taxes were recognized using the tax rate applicable in the year of the
calculation and were not adjusted for subsequent changes in tax rates. The
January 1, 1993, cumulative effect of change in accounting principle recognized
as income from the adoption of SFAS No. 109 was $216,710 (see Note 12).
EARNINGS PER COMMON SHARE
Earnings per common share are calculated by dividing net earnings by the
weighted average number of shares of common stock and common stock equivalents
outstanding during each period. Stock options are considered common stock
equivalents unless determined to be antidilutive. The weighted average number
of shares used to compute primary net income per share were 752,181 for 1995,
732,781 for 1994 and 722,284 for 1993. The weighted average number of shares
used to compute fully diluted net income per share were 773,529 for 1995,
743,604 for 1994 and 722,284 for 1993. The weighted average number of shares
have been adjusted to reflect the assumed exercise of outstanding options. The
adjustment made was based on the "treasury stock" method, as defined in
Accounting Principles Board ("APB") Opinion No. 15.
ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Such
recoverability is measured based on the estimated future cash flows expected to
result from the use of the asset as well as its eventual disposition. SFAS No.
121 excludes financial instruments, long-term customer relationships of
financial institutions, mortgage and other servicing rights and deferred tax
assets. SFAS No. 121 is effective for fiscal years beginning after December
15, 1995. Bancorp does not anticipate any material effect on its financial
position or results of operations from the implementation of SFAS No. 121.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 defines a "fair value based method" of accounting
for an employee stock option or similar equity instrument. Under the fair
value based method, compensation cost is measured at the grant date based on
the value of the award and is recognized over the service period. Prior to the
issuance of SFAS No. 123, employee stock options or similar equity instruments
were accounted for under the "intrinsic value method" as defined by APB Opinion
No. 25, "Accounting for Stock Issued to Employees." Under the intrinsic value
method,
<PAGE> 43
- 5 -
compensation cost is the excess, if any, of the quoted market price of the
stock at grant date or other measurement date over the amount an employee must
pay to acquire the stock.
SFAS No. 123 allows an entity to continue to use the intrinsic value method.
However, entities electing to remain with the accounting in Opinion No. 25 must
make pro forma disclosures of net income and earnings per share, as if the fair
value based method of accounting had been applied.
SFAS No. 123 is effective for transactions entered into in fiscal years that
begin after December 15, 1995. Management has not yet concluded if it will use
the fair value or the intrinsic value method. As such, the potential impact on
the results of operations or financial condition of the Bancorp cannot be
determined at this time.
RECLASSIFICATIONS
Certain reclassifications have been made to amounts in order to make them
consistent with the current-year presentation.
2. TRADING SECURITIES:
During 1993, Bancorp established a trading account for certain securities. As
discussed in Note 1, these securities are valued at estimated fair value. The
net unrealized gains or (losses) included in the consolidated statement of
income for the years ending December 31, 1995, 1994 and 1993 are $36,091,
$(50,842), and $(9,676), respectively.
3. INVESTMENT SECURITIES:
As discussed in Note 1, as of December 31,1993, Bancorp implemented SFAS No.
115. The gross unrealized gains and losses in Bancorp's investment securities
are as follows.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
-------------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED AGGREGATE
AMORTIZED HOLDING HOLDING FAIR
COST GAINS LOSSES VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Investments available-for-sale:
U.S. Treasury securities $ 5,563,793 $ 21,644 $(8,098) $5,577,339
U.S. government agency
securities 5,233,751 55,034 (7,304) 5,281,481
Mortgage-backed securities 8,114,275 93,051 (12,020) 8,195,306
Corporate securities 756,598 152 (4,095) 752,655
----------- -------- -------- -----------
Total investments
available-for-sale $19,668,417 $169,881 $(31,517) $19,806,781
=========== ======== ======== ===========
</TABLE>
<PAGE> 44
- 6 -
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
-------------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED AGGREGATE
AMORTIZED HOLDING HOLDING FAIR
COST GAINS LOSSES VALUE
------------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
Investments available-for-sale:
U.S. Treasury securities $ 6,446,844 $ - $(289,680) $ 6,157,164
U.S. government agency
securities 3,470,934 1,243 (225,776) 3,246,401
Mortgage-backed securities 6,890,834 11,257 (291,890) 6,610,201
------------ --------- --------- ------------
Total investments
available-for-sale $16,808,612 $12,500 $(807,346) $16,013,766
============ ========= ========= ============
Investments held-to-maturity:
U.S. Treasury security $ 499,540 $ - $ (3,290) $ 496,250
Mortgage-backed securities 793,054 15,649 (14,698) 794,005
CORPORATE securities 759,887 457 (28,469) 731,875
------------ --------- --------- ------------
Total investments
held-to-maturity $ 2,052,481 $16,106 $ (46,457) $ 2,022,130
============ ========= ========= ============
</TABLE>
Investments available-for-sale are included in investment securities at fair
value, with unrealized gains and losses, net of the effect of tax, included as
a separate component of stockholders' equity in the accompanying balance
sheets. The portfolio had net unrealized gains of $138,364 as of December 31,
1995, and net unrealized losses of $794,846 as of December 31, 1994.
Investments held-to-maturity are included in investment securities at cost,
adjusted for the amortization of premiums and the accretion of discounts. At
December 31, 1995, there were no securities held-to-maturity. The decrease
from December 31, 1994 was primarily due to the transfer of $1,909,965 in
held-to-maturity securities, with a corresponding unrealized net gain of
$27,086, to the available-for-sale portfolio in December 1995. This transfer
was made in connection with the issuances of the FASB's Special Report
discussed in Note 1.
A comparison of amortized cost and fair value for investment securities, along
with the contractual dates of maturity, by category of investment as of
December 31, 1995, is as follows.
<PAGE> 45
- 7 -
<TABLE>
<CAPTION>
AGGREGATE
AMORTIZED FAIR
COST VALUE
------------ ------------
<S> <C> <C>
Investments available-for-sale:
U.S. Treasury securities-
Maturing within one year $ 1,513,665 $ 1,512,108
Maturing after one year, but within five years 4,050,128 4,065,231
------------ ------------
Total U.S. Treasury securities 5,563,793 5,577,339
------------ ------------
U.S. government agency securities-
Maturing within one year 2,003,972 2,010,936
Maturing after one year, but within five years 3,229,779 3,270,545
------------ ------------
Total U.S. government agency securities 5,233,751 5,281,481
------------ ------------
Mortgage-backed securities 8,114,275 8,195,306
------------ ------------
Corporate securities-
Maturing within one year 250,000 249,453
Maturing after one year, but within five years 506,598 503,202
------------ ------------
Total corporate securities 756,598 752,655
------------ ------------
Total investments available-for-sale $19,668,417 $19,806,781
============ ============
</TABLE>
During 1995,1994 and 1993, investment securities with a book value of
approximately $1,045,000, $1,343,000 and $6,344,000, respectively, were sold,
resulting in total realized gains and (losses) of $2,317, $(24,716) and
$138,098, respectively, which are included in other income in the accompanying
financial statements. Specific identification of assets is used for purposes
of computing realized gains and losses.
The book value of investment securities pledged to secure deposits and
securities sold under agreements to repurchase amounted to approximately
$13,724,000 and $12,087,000 as of December 31, 1995 and 1994, respectively.
4. LOANS RECEIVABLE:
Loans receivable include the following as of December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Commercial $11,662,685 $ 7,397,133
Consumer 1,612,880 1,893,902
Real estate - mortgage 48,823,234 40,796,668
Real estate - construction - 538,143
All other loans 547,576 472,277
------------ ------------
Total loans receivable 62,646,375 51,098,123
Reserve for loan losses (1,489,141) (1,996,528)
Net deferred loan fees (98,592) (138,642)
------------ ------------
$61,058,642 $48,962,953
============ ============
</TABLE>
<PAGE> 46
- 8 -
Activity in the reserve for loan losses for the years ended December 31, 1995,
1994 and 1993, is as follows.
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year $1,996,528 $1,961,945 $2,558,093
Recovery of provision for loan losses (221,000) (163,000) (180,354)
Net recoveries (charge-offs) (286,387) 197,583 (415,794)
----------- ----------- -----------
Balance, end of year $1,489,141 $1,996,528 $1,961,945
=========== =========== ===========
</TABLE>
The effective yield on the loan portfolio was 8.4%, 9.0% and 8.9% as of
December 31, 1995, 1994 and 1993, respectively.
Net deferred loan fees totaled $98,592 and $138,642 as of December 31, 1995 and
1994, respectively. The amortization of net deferred loan fees amounted to
$55,837, $55,026 and $119,266, respectively, for the years ended December 31,
1995, 1994 and 1993.
5. IMPAIRED LOANS:
Effective January 1, 1995, Bancorp implemented SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Credit for
Impairment of a Loan-Income Recognition and Disclosures."
A loan is considered impaired when, based on all current information and
events, it is probable that Bancorp will be unable to collect all amounts due
according to the contractual terms of the agreement, including all scheduled
principal and interest payments. Such impaired loans are measured based on the
present value of expected future cash flows, discounted at the loan's effective
interest rate or, as a practical expedient, impairment may be measured based on
the loan's observable market price, or if the loan is collateral dependent, the
fair value of the collateral. When the measure of the impaired loan is less
than the recorded investment in the loan, the impairment is recorded through a
valuation allowance. Loans for which foreclosure is probable continue to be
accounted for as loans.
Income on impaired loans is subsequently recognized only to the extent that
cash payments are received or until, in management's judgment, the borrower's
ability to make periodic payments has been restored.
At December 31, 1995, Bancorp had impaired loans with carrying value of $31,216
before related allowance for loan losses of $20,000. The average recorded
investment in impaired loans for the year ended December 31, 1995 was $340,550.
Bancorp recognized no interest income on its impaired loans for the year ended
December 31, 1995.
<PAGE> 47
- 9 -
As of December 31, 1995 and 1994, Bancorp had $31,216 and $726,140,
respectively, of loans on nonaccrual status. Renegotiated loans are loans for
which terms have been renegotiated to provide a reduction or deferral of
interest or principal as a result of a deterioration in the financial position
of the borrower and are accounted for in accordance with SFAS No. 15,
"Accounting for Troubled Debt Restructurings." Extensions of loans, at market
terms, are not considered by Bancorp to be renegotiated. As of December 31,
1995 and 1994, Bancorp had $107,778 and $951,882, respectively, in renegotiated
loans.
6. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK:
Most of Bancorp's lending activity is with customers located within the
Washington, D.C., metropolitan area. As of December 31, 1995 and 1994, the
loan portfolio was secured by the following asset types.
<TABLE>
<CAPTION>
1995 1994
------------------------- ------------------------
PRINCIPAL PRINCIPAL
COLLATERAL TYPE BALANCE PERCENT BALANCE PERCENT
- ------------------------------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
Residential real estate:
First deed of trust $31,341,049 50% $25,030,464 49%
Other deed of trust 4,643,228 7 4,115,987 8
Commercial real estate:
First deed of trust 12,022,076 19 10,868,771 21
Other deed of trust 840,281 1 893,700 2
Partnership interest 151,958 1 422,032 1
General assets 5,700,844 9 2,383,751 5
Other 5,782,306 9 5,309,644 10
----------- ------- ------------ -------
Total secured loans 60,481,742 96 49,024,349 96
Unsecured loans 2,164,633 4 2,073,774 4
----------- ------- ------------ -------
Total loans $62,646,375 100% $51,098,123 100%
=========== ======= ============ =======
</TABLE>
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-
SHEET RISK:
In the normal course of business, Bancorp is a party to financial instruments
with off-balance-sheet risk in order to meet the financing needs of its
customers. These financial instruments primarily include commitments to extend
credit and standby letters of credit. Those instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amounts
recognized in the accompanying consolidated balance sheets. The contract
amounts of those instruments reflect the extent of involvement Bancorp has in
particular classes of financial instruments.
Bancorp's exposure to credit loss in the event of nonperformance by the other
party related to those financial instruments is represented by the contractual
amount of the instruments. Bancorp uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments. Bancorp requires collateral or other security to support certain
financial instruments with credit risk.
<PAGE> 48
- 10 -
<TABLE>
<CAPTION>
CONTRACT AMOUNT
AS OF
DECEMBER 31,
(IN THOUSANDS)
----------------------
1995 1994
------- ------
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit-
Commercial and consumer $15,136 $9,105
Home equity lines 5,738 2,130
Overdraft lines 1,257 902
Standby letters of credit 2,033 1,265
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses.
Because many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. Bancorp evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained (if deemed necessary by
Bancorp) upon extension of credit is based on management's credit evaluation of
the counterparty. Collateral held varies but may include cash, accounts
receivable, inventory, property, plant and equipment, and income-producing
commercial properties.
Standby letters of credit are conditional commitments issued by Bancorp to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. As of December 31,
1995 and 1994, Bancorp holds cash as collateral supporting standby letters of
credit in the amount of $1,355,000 and $589,000, respectively.
8. PREMISES AND EQUIPMENT:
The composition of premises and equipment as of December 31, 1995 and 1994, is
as follows.
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Furniture and equipment $ 1,019,198 $ 850,134
Leasehold improvements 1,213,433 1,208,141
------------ ------------
2,232,631 2,058,275
Less- Accumulated depreciation and amortization (1,628,367) (1,442,663)
------------ ------------
$ 604,264 $ 615,612
============ ============
</TABLE>
<PAGE> 49
- 11 -
9. OTHER ASSETS:
Bancorp's other assets consist primarily of the cash surrender value of certain
insurance policies. Bancorp purchased key man life insurance policies under
which Bancorp is the owner and beneficiary. In addition, Bancorp has purchased
four split-dollar life insurance policies under which Bancorp pays the premiums
and has endorsed the death benefit to four key executives. In the event of the
death of the insured, Bancorp will recover the cumulative amount of the
premiums paid. Bancorp has also purchased life insurance policies to fund
postretirement benefits of certain key executives (see Note 14).
Also included in other assets is the cumulative amount of premiums paid by
Bancorp for two split-dollar life insurance policies owned by one of Bancorp's
officers. The officer is to reimburse Bancorp for the cumulative amount of the
premiums paid. The policy has been assigned to Bancorp to secure the repayment
of the premiums upon the officer's termination, retirement or death.
10. CERTIFICATES OF DEPOSIT:
Certificates of deposit as of December 31, 1995 and 1994, mature as follows.
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Within one month $ 3,352,256 $ 3,008,510
One month to three months 2,903,397 2,345,999
Four months to six months 3,293,995 2,508,178
Over six months 4,972,472 4,572,309
------------ ------------
Total $14,522,120 $12,434,996
============ ============
</TABLE>
The rates on these deposits ranged from 4.1 to 6.5 percent as of December 31,
1995. The weighted-average rate for total certificates of deposit was 5.6 and
4.9 percent as of December 31, 1995 and 1994, respectively.
11. LINES OF CREDIT AND SECURITIES SOLD
UNDER AGREEMENTS TO REPURCHASE:
Bancorp has unused lines of credit with various banks, aggregating
approximately $4,300,000 as of December 31, 1995. The rates on borrowings
under these lines of credit approximate the respective banks' Federal funds
rates.
Securities sold under agreements to repurchase amounted to $11,884,940 and
$10,811,350 as of December 31, 1995 and 1994, respectively, and were at
weighted-average interest rates of 3.9 and 3.8 percent, respectively. As of
December 31, 1995 and 1994, Bancorp had pledged investment securities, with a
book value of approximately $12,868,000 and $11,213,000, respectively, as
collateral securing borrowings under repurchase agreements.
<PAGE> 50
- 12 -
12. INCOME TAXES:
As discussed in Note 1, effective January 1, 1993, Bancorp adopted SFAS No.
109. The cumulative effect of this change of $216,710 is included in the 1993
statement of income.
The benefit (provision) for income taxes consisted of the following.
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Current (provision) benefit:
Federal $(129,839) $(15,918) $(132,773)
District of Columbia (3,045) - 15,953
Deferred (provision) benefit:
Federal (148,567) (214,608) (25,834)
District of Columbia 2,137 (4,660) -
Change in valuation allowance for
deferred tax assets 412,216 259,987 158,607
---------- ---------- ---------
Total benefit $ 132,902 $ 24,801 $ 15,953
========== ========== =========
</TABLE>
A reconciliation of the statutory Federal income tax rate to Bancorp's
effective income tax rate follows.
<TABLE>
<CAPTION>
PERCENT OF PRETAX INCOME
---------------------------------
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
Statutory Federal income tax 34.0% 34.0% 34.0%
District of Columbia income tax, net of
Federal income tax benefit 6.8 6.8 6.9
Change in valuation allowance for
deferred tax assets (56.0) (45.9) (45.5)
Other (2.9) 0.7 -
--------- --------- --------
(18.1)% (4.4)% (4.6)%
========= ========= ========
</TABLE>
Temporary differences which give rise to deferred tax assets and liabilities as
of December 31, 1995 and 1994, are as follows.
<PAGE> 51
- 13 -
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax assets:
Tax credit carryforwards $ 81,697 $ 15,918
Operating loss carryforwards - 130,065
Reserve for loan losses 341,006 574,752
Deferred loan fees 35,913 47,885
Post-retirement benefits 62,393 13,275
Depreciation 46,279 33,004
Other 100,293 1,251
---------- ----------
Gross deferred tax assets 667,581 816,150
Valuation allowance - (412,216)
---------- ----------
Net deferred tax assets 667,581 403,934
---------- ----------
Deferred tax liabilities
Unrealized appreciation on debt securities 61,226 -
Other 127,413 129,552
---------- ----------
Deferred tax liabilities 188,639 129,552
---------- ----------
Net deferred tax asset $478,942 $274,382
========== ==========
</TABLE>
As of December 31, 1995 and 1994, Bancorp had established a valuation allowance
of $0 and $412,216, respectively. The decrease in the valuation allowance was
primarily due to the fact that management no longer believed an allowance is
necessary based on past and estimated future operating performance and the use
of all operating loss carryforwards. Realization of the deferred tax asset is
dependent on generating future taxable income. Although realization is not
assured, management believes it is more likely than not that all of the
deferred tax assets will be realized. The amount of deferred tax assets
considered realizable, however, could be reduced in the near term if estimates
of future taxable income are reduced.
13. STOCKHOLDERS' EQUITY:
COMMON STOCK
As of December 31, 1995 and 1994, Bancorp had three classes of common stock
with the following characteristics.
- - Common Stock ("Common") - One vote per share and receives 105 percent of
dividends granted on Class B Voting Common Stock and Non-Voting Common
Stock.
- - Class B Voting Common Stock ("Class B") - Ten votes per share and dividends
must equal Non-Voting Common Stock. Convertible into Common, on a
share-for-share basis, at the option of the holder.
<PAGE> 52
- 14 -
- - Non-Voting Common Stock ("Non-Voting") - No votes per share. Dividends are
equal to Class B Voting Common Stock. Convertible into Common, on a
share-for-share basis, at the option of the holder, at any time after a
"change of control." "Change of control" has been defined as approval of
such a change by the Board of Governors of the Federal Reserve Board.
STOCK OPTION PLAN
Bancorp has a stock option plan for certain officers and other key employees of
Bancorp and the Bank. Under the terms of the stock option plan, options for
the purchase of Bancorp's stock are granted generally at the greater of par
value or 100 percent of the fair market value of the stock at the date of the
grant, as determined by the Board of Directors of Bancorp, and are exercisable
upon granting over periods up to ten years.
As of December 31, 1995, there were 250,000 shares in the plan, of which
137,800 options to purchase Bancorp's Common Stock were outstanding. Option
prices range from $5.00 to $14.50 per option. During 1995, 19,000 options were
granted at the estimated fair market value of $14.50 per share. In addition,
200 options were exercised during the year at a price of $12.00 per share.
EMPLOYEE STOCK OWNERSHIP PLAN
During 1985, the Board of Directors of Bancorp established a trust to operate
an employee stock ownership plan (the "ESOP Plan"), which is provided to
employees of Bancorp and the Bank who meet certain age and service
requirements. In connection with the acquisition of these shares, the ESOP
Plan borrowed the funds to purchase the shares. Bancorp has guaranteed the
notes payable and, as such, has recorded the total outstanding balance as a
liability, with a like amount recorded as a reduction of stockholders' equity.
Certain of the ESOP Plan's shares collateralize the notes payable as of
December 31, 1994, and will be released into the Plan as Bancorp makes payments
on the notes payable. These notes payable are scheduled to be repaid in
installments of $81,252 per year, with the final installment due in 1995.
During 1995, the final installment on the notes was paid and all have been
released into the Plan.
Compensation expense related to the ESOP Plan of $81,252, $81,252 and $81,252,
for the years ended December 31, 1995, 1994 and 1993, respectively, is included
in salaries and benefits expense in the accompanying consolidated financial
statements.
<PAGE> 53
- 15 -
14. COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS
Bancorp's leases principally involve office space and equipment. In 1995, 1994
and 1993, rent expense for office space was approximately $760,000, $726,000
and $682,000, respectively. Minimum future annual rental payments under leases
that have initial or remaining noncancelable lease terms in excess of one year
are as follows.
<TABLE>
<CAPTION>
YEAR ENDED OPERATING
DECEMBER 31, LEASES
------------ ----------
<S> <C>
1996 $ 728,652
1997 692,838
1998 685,588
1999 242,101
2000 227,206
2001 and thereafter 374,682
----------
Total minimum lease payments $2,951,067
==========
</TABLE>
DATA PROCESSING CONTRACT
Bancorp entered into a five-year agreement with Electronic Data Systems ("EDS")
of Plano, Texas, on September 5, 1995, for data processing and bank operation
services. Services include loan accounting, deposit accounting, financial
management systems, statement rendering, and proof of deposit. Terms of the
contract provide for termination due to acquisition of 50 percent or more of
the stock or the assets of the EDS customer. An addendum to the contract
details the amount of termination charges resulting from an early termination
of the contract. Should termination occur within the first twelve months of
the contract, termination charges would be twelve times the average monthly
billing for the most recent three-month period, or ten times the proposed
monthly billing, whichever is greater. Subsequent periods would result in
lower termination charges. Estimated current monthly expense approximates
$14,000.
POST-RETIREMENT BENEFIT AGREEMENTS
Bancorp has entered into Supplemental Post-Retirement Benefit agreements with
five key executives under which the executive is entitled to either a
post-retirement benefit, payable in equal monthly installments over fifteen
years beginning at age 65, or a death benefit, payable to the executive's
beneficiary in the event of the death of the executive in equal monthly
installments over fifteen years. The total benefit amount is preestablished
for each executive; however, if the key executive elects early retirement at
age 55 with 10 years of service, the executive is entitled to a reduced
post-retirement benefit amount. Bancorp is accruing the liability related to
the post-retirement benefits over the estimated service period of each of the
executives. As of December 31, 1995, Bancorp has accrued $141,500 related to
these postretirement benefits agreements. As discussed in Note 9, Bancorp has
purchased life insurance policies to fund these post-retirement benefits.
<PAGE> 54
- 16 -
LITIGATION
In the normal course of business, Bancorp is involved in certain pending
litigation. In the opinion of management, the ultimate resolution of such
matters will not have a material impact on the financial condition or the
future results of operations of Bancorp.
15. RELATED-PARTY TRANSACTIONS:
Bancorp has had, and expects to have in the future, banking transactions with
directors, advisory directors, principal officers, and affiliated companies in
which the directors are officers and/or stockholders. In management's opinion,
such transactions are on the same terms, including interest rates and
collateral, as similar transactions with independent parties. These persons and
affiliated companies were indebted or contingently liable to Bancorp for loans
totaling $838,723 and $781,426 as of December 31, 1995 and 1994, respectively.
Bancorp also holds deposits for these individuals and affiliated companies.
The total amount of deposits held was $6,395,775 and $5,695,423 as of December
31, 1995 and 1994, respectively. Furthermore, the chief executive officer of
the investment company with which Bancorp established a trading account during
1993 resigned from the Board of Directors in October 1993 and currently serves
as an investment advisor to the Board of Directors.
In addition, an officer of Bancorp owns split-dollar, universal life insurance
policies for which Bancorp advances premiums. The officer is to reimburse
Bancorp for the cumulative amount of the premiums paid upon the officer's
termination, retirement, or death. The policy has been assigned to Bancorp to
secure the repayment of the premiums.
<PAGE> 55
- 17 -
16. CONDENSED FINANCIAL STATEMENTS
(PARENT COMPANY ONLY)
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
------- -------
<S> <C> <C>
Assets:
Cash and due from banks $ 4 $ 535
Investment in subsidiaries 8,694 6,740
Investment securities 509 500
Income tax receivable from subsidiary 380 85
Other - 2
------- -------
Total assets $9,587 $7,862
======= =======
Liabilities:
Accrued interest payable $ - $ 1
Debt of Employee Stock Ownership Plan (ESOP) - 81
Other 4 -
------- -------
Total liabilities 4 82
Stockholders' equity:
Common stock 3,613 3,612
Paid-in capital 6,589 6,588
Retained deficit (654) (1,523)
Unrealized gain (loss) on available-for-sale securities 77 (795)
Less- Treasury stock, at cost (42) (21)
Unearned ESOP shares - (81)
------- -------
Total stockholders' equity 9,583 7,780
------- -------
Total liabilities and stockholders' equity $9,587 $7,862
======= =======
</TABLE>
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Interest income $ 39 $ 42 $ 50
Noninterest expense 333 279 262
----- ----- -----
Loss before equity in net income of subsidiaries (294) (237) (212)
Equity in net income of subsidiaries 872 921 646
----- ----- -----
Income before income tax benefit (provision) 578 684 434
Income tax benefit (provision) 291 (92) 147
----- ----- -----
Net income $ 869 $ 592 $ 581
===== ===== =====
</TABLE>
<PAGE> 56
- 18 -
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
1995 1994 1993
------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 869 $ 592 $ 581
Adjustment to reconcile net income to net cash used
in operating activities-
Equity in net income of subsidiaries (872) (921) (646)
(Increase) decrease in income tax receivable from
subsidiary (295) 92 (151)
(Decrease) increase in accrued interest payable (1) 6 -
Other 3 - -
------ ------ ------
Net cash used in operating activities (296) (231) (216)
------ ------ ------
Cash flows from investing activities:
Investment in subsidiary (216) - -
Proceeds from investment securities - 461 -
Purchase of investment securities - - (248)
------ ------ ------
Net cash (used in) provided by investing
activities (216) 461 (248)
------ ------ ------
Cash flows from financing activities:
Net principal payments on debt of ESOP (81) (81) (81)
Reduction in unearned ESOP shares 81 81 81
Principal payments on note payable - - (250)
Proceeds from exercise of stock options 2 - -
Purchase of Treasury stock (21) (18) (3)
------ ------ ------
Net cash used in financing activities (19) (18) (253)
------ ------ ------
Net (decrease) increase in cash (531) 212 (717)
Cash and due from banks, beginning of year 535 323 1,040
------ ------ ------
Cash and due from banks, end of year $ 4 $ 535 $ 323
====== ====== ======
</TABLE>
The primary activity of Bancorp is that of a bank holding company. No cash
dividends have been received by the Bancorp from subsidiaries during the last
three years.
17. ESTIMATED FAIR VALUE OF FINANCIAL
INSTRUMENTS:
Bancorp adopted SFAS No. 107 "Disclosure About Fair Value of Financial
Instruments" as of December 31, 1995. SFAS No. 107 requires disclosure of the
fair value of assets and liabilities recognized and not recognized in the
balance sheet, when fair value is estimable. Fair value information that
pertains to Bancorp's financial instruments does not purport to represent the
aggregate net value of the entity. Much of the information used to determine
fair value is
<PAGE> 57
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information required by this Item is not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item is incorporated herein by reference
to the information under the caption "Election of GMBS Directors" in the
Company's Proxy Statement for the Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item is incorporated herein by reference
to the information under the caption "Executive Officers" in the Company's Proxy
Statement for the Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item is incorporated herein by reference
to the information under the caption "Election of GMBS Directors" in the
Company's Proxy Statement for the Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item is incorporated herein by reference
to the information under the caption "Transactions with Directors, Officers and
Associates" in the Company's Proxy Statement for the Annual Meeting of
Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1)(a) The following consolidated financial statements of the Company are
incorporated herein by reference to pages 13 to 29 of the Company's
1996 Annual Report to Shareholders.
1. Report of Ernst & Young LLP, Independent Auditors.
2. Consolidated Balance Sheets for December 31, 1996 and 1995.
3. Consolidated Statements of Income for the years ended December 31,
1996, 1995, and 1994.
4. Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1996, 1995, and 1994.
5. Consolidated Statements of Cash Flows for the years ended December
31, 1996, 1995, and 1994.
6. Notes to Consolidated Financial Statements.
(a)(1)(b) The audited consolidated financial statements of The Palmer National
Bancorp, Inc., and Subsidiaries as of December 31, 1995 and 1994 for
the years ended December 31, 1995, 1994, and 1993 are incorporated
herein by reference Exhibit 13A.
1. Report of Arthur Andersen LLP, Independent Auditors.
2. Consolidated Balance Sheets for December 31, 1995 and 1994.
3. Consolidated Statements of Income for the years ended December 31,
1995, 1994, and 1993.
4. Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994, and 1993.
30
<PAGE> 58
5. Consolidated Statements of Cash Flows for the years ended December
31, 1995, 1994, and 1993.
6. Notes to Consolidated Financial Statements.
(a)(2) Schedules to the Consolidated Financial Statements required by Article
9 of Regulation S-X are not required under the related instructions or
are inapplicable, and therefore have been omitted.
(a)(3) The following exhibits required to be filed by Item 601 of Regulation
S-K are filed herewith:
(b) No reports on Form 8-K were required to be filed during the last
quarter of 1996.
Exhibit 3A Articles of Incorporation of George Mason Bankshares, Inc., as
amended (incorporated herein by reference to Exhibit 3A to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995).
Exhibit 3B Fifth Amended Bylaws of George Mason Bankshares, Inc., (dated
February 24, 1996 incorporated herein by reference to Exhibit 3B
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
Exhibit 10A Lease for the Vienna branch site (filed herewith).
Exhibit 10B Lease for the McLean branch site (filed herewith).
Exhibit 10C Restated and Amended Deferred Compensation Agreements of Mr.
Groom and Mr. Wimer dated as of May 1, 1984 and August 1, 1984,
respectively (incorporated herein by reference to Exhibit 10C to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
Exhibit 10D Land Lease for George Mason Bank, Lease and Addendum to Lease for
George Mason University branch (incorporated herein by reference
to Exhibit 10D to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).
Exhibit 10E Assignment and Contract of Sale for purchase of Chantilly,
Virginia proposed branch site and Contract of Sale for parking
area site (incorporated herein by reference to Exhibit 10E to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995).
Exhibit 10F Lease for Woodburn Avenue branch site (filed herewith).
Exhibit 10G [reserved]
Exhibit 10H 1986 Incentive Stock Option Plan (incorporated herein by
reference to Exhibit 10H to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).
Exhibit 10I 1986 Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit 10I to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).
Exhibit 10J 1992 Employee Stock Option Plan (incorporated herein by reference
to Exhibit 28.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1992).
Exhibit 10K 1992 Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit 28.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1992).
Exhibit 10L Purchase of Chantilly Operations Center (incorporated herein by
reference to Exhibit 10L to the Company's Annual Report on Form
10-K for the year ended December 31, 1992).
Exhibit 10M Purchase of Tysons branch site (incorporated herein by reference
to Exhibit 10M to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992).
Exhibit 10N Lease for Reston branch site (incorporated herein by reference to
Exhibit 10N to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992).
Exhibit 10O 1993 Employee Stock Option Plan (incorporated herein by reference
to Exhibit 10.15 to the Company's Registration Statement on Form
S-2, No. 33-61546).
Exhibit 10P Lease for Arlington branch site (filed herewith).
31
<PAGE> 59
Exhibit 10Q Lease for Ballston branch site (incorporated herein by reference
to Exhibit 10Q to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994).
Exhibit 10R Lease for Prince William branch site (incorporated herein by
reference to Exhibit 10R to the Company's Annual Report on Form
10-K for the year ended December 31, 1994).
Exhibit 10S Lease for Loudoun County branch site (incorporated herein by
reference to Exhibit 10S to the Company's Annual Report on Form
10-K for the year ended December 31, 1994).
Exhibit 10T Purchase and construction of Fair Lakes branch site (incorporated
herein by reference to Exhibit 10T to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
Exhibit 10U Lease for Fair Oaks Mall ATM site (incorporated herein by
reference to Exhibit 10U to the Company's Annual Report on Form
10-K for the year ended December 31, 1994).
Exhibit 10V Consulting agreement -- Marshall H. Groom (incorporated herein by
reference to Exhibit 10V to the Company's Annual Report on Form
10-K for the year ended December 31, 1994).
Exhibit 10W Consulting agreement -- Charles Wimer (incorporated herein by
reference to Exhibit 10W to the Company's Annual Report on Form
10-K for the year ended December 31, 1994).
Exhibit 10X Lease for Daly Drive branch site (incorporated herein by
reference to Exhibit 10X to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995).
Exhibit 10Y Lease for Lee Harrison branch site (incorporated herein by
reference to Exhibit 10Y to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995).
Exhibit 10Z Lease for South Arlington branch site (incorporated herein by
reference to Exhibit 10Z to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995).
Exhibit 10AA Lease for Fairfax Hospital ATM site (incorporated herein by
reference to Exhibit 10AA to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995).
Exhibit 10AB Lease for Manassas Mortgage Banking Office (incorporated herein
by reference to Exhibit 10AB to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995).
Exhibit 10AC Lease for Virginia Beach Mortgage Banking Office (incorporated
herein by reference to Exhibit 10AC to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995).
Exhibit 10AD Lease for Woodbridge Mortgage Banking Office (incorporated herein
by reference to Exhibit 10AD to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995).
Exhibit 10AE Lease for GMMC corporate headquarters (incorporated herein by
reference to Exhibit 10AE to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).
Exhibit 10AF Employment Contract -- Bernard H. Clineburg (incorporated herein
by reference to Exhibit 10AE to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995).
Exhibit 10AG Definitive Merger Agreement with The Palmer National Bancorp,
Inc. (incorporated herein by reference to Exhibit 10AF to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995).
32
<PAGE> 60
Exhibit 10AH Amendment No. 1 to Definitive Merger Agreement with The Palmer
National Bancorp, Inc. (incorporated herein by reference to
Exhibit 10AH to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995).
Exhibit 10AI Lease for Leesburg branch site (filed herewith).
Exhibit 10AJ Lease for 1667 K Street branch site (filed herewith).
Exhibit 10AK Lease for 1225 Eye Street branch site (filed herewith).
Exhibit 10AL Lease for 4900 Massachusetts Avenue branch site (filed herewith).
Exhibit 10AN Lease for Rockville, Maryland Mortgage Banking Office (filed
herewith).
Exhibit 10AO Lease for Bethesda, Maryland branch site (filed herewith).
Exhibit 10AP Lease for Rockville, Maryland branch site (filed herewith).
Exhibit 10AQ Employment Contract -- Webb C. Hayes IV (filed herewith).
Exhibit 10AR 1994 Employee Stock Option Plan (filed herewith).
Exhibit 11 Statement re: Computation of Per Share Earnings.
Exhibit 13 The Company's 1996 Annual Report to Shareholders (filed
herewith).
Exhibit 13A The 1995 Audited Consolidated Financial Statements of The Palmer
National Bancorp, Inc. (filed herewith).
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 23A Consent of Ernst & Young LLP
(b)(1) None
Exhibit 27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly authorized this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
GEORGE MASON BANKSHARES, INC.
Date: March 26, 1997 By: /s/ BERNARD H. CLINEBURG
------------------------------------
Bernard H. Clineburg
President and Chief Executive
Officer
33
<PAGE> 61
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- -------------------------------------------------- ------------------------------ ---------------
<S> <C> <C>
/s/ BERNARD H. CLINEBURG Director, President and Chief March 26, 1997
- -------------------------------------------------- Executive Officer (Principal
Bernard H. Clineburg Executive Officer)
/s/ ALAN L. BOX Director March 26, 1997
- --------------------------------------------------
Alan L. Box
/s/ WILLIAM G. BUCK Director March 26, 1997
- --------------------------------------------------
William G. Buck
/s/ RANDOLPH W. CHURCH, JR. Director March 26, 1997
- --------------------------------------------------
Randolph W. Church, Jr.
/s/ C. BARRIE COOK, M.D. Director March 26, 1997
- --------------------------------------------------
C. Barrie Cook, M.D.
/s/ ELIZABETH CARLSON DAHLIN Director March 26, 1997
- --------------------------------------------------
Elizabeth Carlson Dahlin
/s/ EDWARD S. DeBOLT Director March 26, 1997
- --------------------------------------------------
Edward S. DeBolt
/s/ LAWRENCE K. DOLL Director March 26, 1997
- --------------------------------------------------
Lawrence K. Doll
/s/ WILLIAM H. GORDON Director March 26, 1997
- --------------------------------------------------
William H. Gordon
/s/ MARSHALL H. GROOM Director March 26, 1997
- --------------------------------------------------
Marshall H. Groom
/s/ WEBB C. HAYES IV Director March 26, 1997
- --------------------------------------------------
Webb C. Hayes IV
/s/ WILLIAM A. HAZEL Director March 26, 1997
- --------------------------------------------------
William A. Hazel
/s/ BARNARD F. JENNINGS Director March 26, 1997
- --------------------------------------------------
Barnard F. Jennings
/s/ PAUL E. KYLE Director March 26, 1997
- --------------------------------------------------
Paul E. Kyle
/s/ JOHN M. McMAHON Director March 26, 1997
- --------------------------------------------------
John M. McMahon
/s/ E. A. PRICHARD Director March 26, 1997
- --------------------------------------------------
E. A. Prichard
/s/ JAMES J. CONSAGRA, JR. Treasurer (Principal Financial March 26, 1997
- -------------------------------------------------- and Accounting Officer)
James J. Consagra, Jr.
</TABLE>
34
<PAGE> 1
EXHIBIT 10A
[GEORGE MASON BANK LETTERHEAD]
August 14, 1996
Mr. Charles Kia
General Manager
J.T.S., Inc., Investment & Management
226 Maple Avenue, West
Vienna, Virginia 22180
Dear Mr. Kia:
Please find enclosed two (2) copies of the Lease Addendum for our branch bank
location at 226 Maple Avenue, West, Vienna, Virginia.
Upon execution, please return one copy of the Addendum to me.
Thank you for assisting us in this matter.
Sincerely yours,
/s/ GLENN E. KINARD
- --------------------
Glenn E. Kinard
Executive Vice President
Enclosure:
<PAGE> 2
ADDENDUM TO LEASE
This addendum made this 14th day of August, 1996 by and between Japan
Travelers Service, Inc. ("Landlord") and The George Mason Bank ("Tenant").
WHEREAS Japan Travelers Service, Inc. did enter into a certain Lease with The
George Mason Bank dated October 22, 1991 attached hereto as Exhibit "A" and made
a part hereof.
WHEREAS both parties agree to amend said Lease under the following terms and
conditions effective November 1, 1996.
PARAGRAPH 2 "Term and Possession" shall be amend to read; the term of this Lease
shall be for five (5) year(s), commencing of the first day of November, 1996,
and continuing through the last day of October, 2001. All other terms and
conditions of Paragraph 2 shall remain the same.
PARAGRAPH 3 "Rent" (a) Base Rent shall be amend to read; Tenant shall pay to
Landlord during the term hereunder, as base annual rental ("Base Rent") for the
Premises, without setoff, deduction or demand whatsoever, an amount equal to the
sum of all Monthly Installments (as hereinafter defined) stated to be due under
this Paragraph 3 (a). Base Rent is agreed to be as follows:
11/1/96 - 10/31/97 $48,034.95 per annum, payable in monthly installments
of $4,002.91
11/1/97 - 10/31/98 $49,478.80 per annum, payable in monthly installments
of $4,123.23
11/1/98 - 10/31/99 $50,965.75 per annum, payable in monthly installments
of $4,247.15
11/1/99 - 10/31/00 $52,495.80 per annum, payable in monthly installments
of $4,374.65
11/1/00 - 10/31/01 $54,090.50 per annum, payable in monthly installments
of $4,507.54
All other terms and conditions of Paragraph 3 shall remain the same.
<PAGE> 3
All other terms and conditions of said Lease (Exhibit "A") are to remain the
same and be considered in full force and effect.
Agreed and Accepted By: Agreed and Accepted By:
/s/ HIDEO KOGA /s/ GLENN E. KINARD
- ------------------------------ ------------------------------
Hideo Koga, President (Print) Glenn E. Kinard
Japan Travelers Service, Inc. ----------------------
The George Mason Bank
August 21, 1996 August 14, 1996
- ---------------- -----------------
Date Date
<PAGE> 4
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") , made this 22nd day of October,
1991, by and between JAPAN TRAVELERS SERVICES, INC., a District of Columbia
corporation, hereinafter referred to as "Landlord", and The George Mason Bank,
hereinafter referred to as "Tenant."
WITNESSETH, that for and in consideration of the rent hereafter
reserved, the covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Leased Premises
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
for the term, at the rental and upon the conditions set forth herein, the
premises (hereinafter referred to as the Premises or Demised Premises)
containing approximately 2155 square feet known as Suite -- 226 Maple Avenue,
West, Vienna, Virginia 22180.
2. Term and Possession
The term of this Lease shall be for five (5) year(s), commencing on the
first day of November, 1991, and continuing through the last day of October,
1996, unless terminated sooner pursuant to any provision hereof. Each twelve
(12) month period commencing and concluding on the dates aforesaid is
hereinafter referred to as a "Lease Year".
3. Rent
(a) Base Rent. Tenant shall pay to Landlord during the term hereunder,
as base annual rental ("Base Rent") for the Premises, without setoff, deduction
or demand whatsoever, an amount equal to the sum of all Monthly Installments (as
hereinafter defined) stated to be due under this Paragraph 3 (a). Base Rent is
agreed to be as follows: Thirty-Nine Thousand Eight Hundred Sixty-Seven Dollars
and Fifty Cents ($39,867.50) per year, payable in monthly installments of Three
Thousand Three Hundred Twenty-Two Dollars and Twenty-Nine cents ($3,322.29).
Base rent shall be increased for, and as of the commencement of, the second
Lease Year, and for all succeeding Lease Years, by an amount equal to four (4)
percent. The resulting new basic annual rental shall be payable in Twelve (12)
equal monthly installments on the first day of each month of the applicable
year.
(b) The annual Base Rent shall be divided into twelve (12) equal
monthly installments ("Monthly Installments") for each Lease Year and such
Monthly Installments shall be due and payable in advance, on the first day of
each month during each Lease Year to Japan Travelers Services, Inc., 226 Maple
Avenue, West, Suite 403, Vienna, Virginia 22180, or such other place as Landlord
may from time to time designate to Tenant in writing. Rent checks shall be made
payable to Japan Travelers Services, Inc.
<PAGE> 5
Should the term of this Lease commence on a day other than the first day of a
calendar month, the parties agree that rental for the first and last month of
the term shall be pro-rated and rent for the remaining months shall be due and
payable on the first of the month as provided above.
(c) Late Charge. Tenant hereby acknowledges and agrees that if any
Monthly Installment is not received by Landlord within seven (7) days of the
date when due, Landlord will suffer damages and additional expense and Tenant
therefore agrees that a late charge equal to seven and one-half percent (7.50%)
of the Monthly Installment due (including any additional rent as hereinafter
provided) may be assessed by Landlord. Such late charges shall be deemed to be
"additional rent" and not a penalty or forfeiture. Furthermore, in the event
that Tenant's payments are received late and/or returned dishonored by Tenant's
bank more than two (2) times during any consecutive twelve (12) month period,
Landlord shall thereafter have the right to require that rental payments be made
by certified or cashier's check.
(d) Security Deposit. Landlord acknowledges that Tenant has deposited
with Landlord the sum of Six Thousand Six Hundred-Forty-Four Dollars and
58/100th ($6,644.58), as a deposit to insure Tenant's prompt and continued
compliance with the provisions of this Lease. Such deposit shall be forfeited
upon default (as defined in Paragraph 24) by Tenant in any of the terms,
provisions or conditions of this Lease and/or applied to remedy any damage to
the Premises caused by Tenant upon the Tenant's vacating of the Premises.
Landlord may deliver the funds deposited hereunder by Tenant to the purchaser of
or successor to Landlord's interest in the leased Premises and thereupon
Landlord shall be discharged from any further liability with respect to such
deposit. All funds not forfeited as aforesaid shall be returned to Tenant within
sixty (60) days of the expiration or sooner termination of this Lease. In the
event that during the Lease term the Landlord applies the deposit in whole or in
part against a default by Tenant or to repair damage caused by Tenant, Tenant
shall, upon demand by Landlord, deposit sufficient additional funds with
Landlord to maintain the deposit in the initial amount. Failure of Tenant to
deposit such additional funds shall entitle the Landlord to pursue the remedies
provided in this Lease in the event of default by the Tenant.
(e) Additional Rent; CAM Rent.
(i) In addition to payment of Base Rent as aforesaid, Tenant shall be
responsible for the monthly estimated payment to Landlord of Thirteen and
26/100th percent (13.26%) of Fairfax County and Town of Vienna real estate
taxes, including improvements, (Tax parcel 038-4-02-0029A of the Fairfax County
Real Property Identification Map). Each month Tenant shall pay to Landlord as
additional rent, Tenant's pro-rata share of such real estate taxes, which shall
not be deductible from the Base Rent. Landlord shall furnish Tenant with a
statement of actual tax charges including copies of all tax bills for such
period.
-2-
<PAGE> 6
If the total amount paid by Tenant under this section for any calendar or tax
year shall be less than the actual amount due from Tenant for such year as shown
on such statement, Tenant shall pay to Landlord the difference between the
amount paid by Tenant and the actual amount due within thirty (30) days after
the furnishing of each such statement. If the total amount paid by Tenant
hereunder for any such calendar or tax year shall exceed the actual amount due
from Tenant for such calendar or tax year, such excess shall be credited against
the next installment of tax rent due from Tenant to Landlord, except that for
the last year of the term, the excess shall be applied against any sums due from
Tenant to Landlord, and the remainder, if any, refunded to Tenant.
(ii) In addition to the Base Rent and all other amounts payable by
Tenant hereunder, Tenant agrees to pay its pro-rata share of the costs and
expenses of operating and maintaining the land, common areas, and building in
which the Premises is a part ("CAM Rent").
Costs and expenses shall be deemed to include, without limitation, the
following:
Lighting of the parking area; snow and ice removal; rubbish control;
maintenance of landscaping; the cost of air conditioning, electricity, steam
heating, mechanical ventilating and all other utilities not billed independently
to the Premises, and the cost of supplies and equipment, maintenance, and
service contracts in connection therewith; the cost of repairs to the land,
common areas and building, including the foundations, walls, driveways and
sidewalks, parking areas and grounds (except those repairs that are the
responsibility of Tenant) and general maintenance cleaning; the cost of fire,
extended coverage, boiler, sprinkler, public liability, property damage, rent,
earthquake and other insurance for the property; wages, salaries, and other
labor costs, including taxes, insurance, retirement, medical, and other employee
benefits; fees, charges, and other costs of all independent contractors engaged
by Landlord, or reasonably charged by Landlord if Landlord performs management
services in connection with the Property, including management, consulting
legal, and accounting fees; any other expenses of any other kind whatsoever
reasonably incurred in managing, operating, maintaining, and repairing the
property; and the cost of any capital improvements made to the property after
the completion of its construction as labor-saving devices or to effect other
economies in the operation or maintenance of the property, or made to the
property after the date of this Lease that are required under any governmental
law or regulation that was not applicable to the property at the time that
permits for the construction thereof were obtained, this cost to be amortized
over any reasonable period that Landlord shall determine together with interest
on the amortized balance at the rate of ten percent (10%) annually or such
higher rate as may have been paid by Landlord on funds borrowed for the purpose
of constructing these capital improvements.
-3-
<PAGE> 7
Tenant's share of costs and expenses shall be computed by multiplying the total
costs and expenses by a factor, the numerator of which is the square footage
leased to Tenant and the denominator of which is the total rentable square
footage of the office building; which equals Thirteen and 26/100th percent
(13.26%).
Tenant's CAM Rent for each calendar year and partial calendar year
shall be paid in monthly installments on the first (1st) day of each month, in
advance, in an amount estimated by Landlord. Subsequent to each calendar year or
partial calendar year, Landlord shall furnish Tenant with a statement of the
actual amount of Tenant's CAM Rent for such period. If the total amount paid by
Tenant under this section for any calendar year shall be less than the actual
amount due from Tenant for such year as shown on such statement, Tenant shall
pay to Landlord the difference between the amount paid by Tenant and the actual
amount due within thirty (30) days after the furnishing of each such statement.
If the total amount paid by Tenant hereunder for any such calendar year shall
exceed the actual amount due from Tenant for such calendar year, such excess
shall be credited against the next installments of CAM Rent due from Tenant to
Landlord, except that for the last year of the term, the excess shall be applied
against any sums due from Tenant to Landlord, and the remainder, if any,
refunded to Tenant within thirty (30) days of termination of lease or within
thirty (30) days after Landlord has obtained all information necessary to
calculate the actual amount due from Tenant, whichever occurs first.
Landlord warrants those items charged to CAM Rent will include no
capital expenditures.
4. Use.
The Premises shall be used and occupied by the Tenant only for the
following purpose: Bank only.
5. Condition of Improvements; Additional Construction.
Tenant accepts the Premises in "as is" condition. In the event that
Tenant should wish to perform any additional construction, renovation or
redesign of the Premises or any portion thereof, Tenant shall, at its sole cost
and expense, apply for and obtain all necessary building permits, licenses and
similar municipal authorizations required for such additional construction
renovation or redesign and, upon obtaining all such permits, licenses and
authorizations and any other approvals required by this Section , shall perform
the construction in a manner which will comply with all applicable laws,
ordinances, code regulations, and all applicable provisions of this Lease. Any
proposed alteration to the Premises must be approved in writing by the Landlord
prior to commencement of any such construction, renovation or redesign, which
approval shall not be unreasonably withheld. All such requests for Landlord's
approval must be accompanied by a set of plans and specifications which meet
Fairfax County construction codes and ordinances.
-4-
<PAGE> 8
6. Utilities.
Landlord shall pay all utility costs for electricity, gas, water and
sewer service incurred in connection with the Premises, except in the event that
Tenant's use thereof requires extraordinary amounts of electricity, gas, water,
or sewer services, in which event Tenant agrees to pay a reasonable amount, to
be determined mutually by the parties, for its excess usage and to pay said
amount to Landlord upon demand.
7. Parking Areas.
Tenant shall have use, in common with others (but subject to a
reasonable reservation of parking spaces in the front of the building for
short-term use by bank patrons and to any other reasonable rules and regulations
issued from time to time by Landlord), of all automobile parking areas,
driveways, entrances, and exits thereto, and other such facilities furnished by
Landlord in or near the Premises.
8. Maintenance and Repair.
(a) By Landlord. The Landlord shall keep and repair the roof and
exterior of the office building and shall be responsible for exterior office
building repairs and maintenance, including the foundation, walls, driveways and
sidewalks, parking area and grounds for repair and replacements made necessary
by structural failures and defects, unless such repair and/or replacements are
required because of Tenant's negligence, in which event such repairs and/or
replacements shall be promptly performed by Tenant at Tenant's expense.
(b) By Tenant. Tenant shall at all times keep the Premises, (including
maintenance of exterior entrances, all glass and show window moldings) and all
partitions, doors, fixtures, equipment and appurtenances thereof, (including
lighting, heating and plumbing fixtures, and any air conditioning or air
handling system that serves only the Premises), in good working order, condition
and repair (including reasonable periodic maintenance and interior painting).
9. Alterations.
(a) Installations. Tenant shall not make any material alterations,
additions, modifications or improvements to the Premises without the prior
written consent of the Landlord, which consent will not be unreasonably
withheld. If Tenant desires to make any such alterations, plans for the same
shall first be submitted to and approved by Landlord, which approval shall not
be unreasonably withheld. All such work shall be done by Tenant, at its own
expense, and Tenant agrees that all such work shall be done in a good and
workmanlike manner and in compliance with applicable codes and ordinances, that
the structural integrity of the building shall not be impaired, that no liens
shall attach to the Premises as a result thereof, and that Tenant will secure
all necessary permits pertaining to such installation or alteration.
-5-
<PAGE> 9
(b) Ownership and Removal. The alterations, additions, modifications
and improvements referred to in Paragraph 9(a) and consented to in writing by
Landlord, shall become part of the real property as soon as they are affixed
thereto; however, Landlord may, at Landlord's option require that Tenant remove
all or any part of said alterations prior to the expiration of the Lease Term.
If Landlord so requires, Tenant agrees, at its own expense, to remove same and
to restore the Premises to its original condition, reasonable wear and tear
excepted.
10. Hazardous Storage.
Tenant agrees that it will not store gasoline or other explosives,
environmental hazards, flammable or toxic material in the Premises or do
anything which may cause Landlord's insurance company to void the policy
covering the Premises or to increase the premium thereon, and that Tenant will
immediately conform to all rules and regulations regarding storage of hazardous
materials from time to time made or established by the Landlord or Landlord's
insurance company or insurance rating bureau.
11. Covenant of Quiet Enjoyment.
Landlord covenants that so long as Tenant makes the rental payments due
hereunder and observes and performs its other covenants and conditions, Tenant
shall have quiet possession of the Premises for the entire term hereof,
including any renewal terms. Landlord warrants and represents that the
individuals executing this Lease on behalf of Landlord are fully authorized and
legally capable of executing this Lease on Landlord's behalf and that such
execution is binding upon all parties holding an ownership interest in the
Premises.
12. Insurance.
(a) Fire insurance. Tenant agrees, in addition to the provisions of
Paragraph 10, that it will not do anything that will cause Landlord's insurance
against loss by fire or other hazards, as well as public liability insurance, to
be canceled or that will prevent Landlord from procuring same in acceptable
companies and at standard rates. Tenant agrees to carry, at its own expense, at
all times during the term hereof, insurance covering the Premises, including any
alterations, improvements, fixtures or personal property of Tenant, in an amount
not less than one hundred percent (100%) of full replacement cost, providing
protection against fire, lightning, extended coverage, vandalism and "all risk"
peril, including water damage.
(b) Liability Insurance and Indemnification of Landlord. It is
understood and agreed that all personal property in the Premises is and shall
remain at the Tenant's sole risk and Landlord shall not be liable to Tenant for
any injury, loss or damages to the Tenant or to any other person or property
occurring upon the Premises or the approaches thereto or the parking facilities
in or adjacent thereto from any cause other than the gross negligence of
Landlord. Except as set forth in the preceding sentence, Tenant agrees to
indemnify and save the Landlord harmless against and from any and all liability
damages, expenses, including reasonable
-6-
<PAGE> 10
attorney's fees, claims and demands of every kind, that may be brought against
it, for or on account of any damage, loss or injury to persons or property in
the Premises during the term of this Lease, or during any occupancy by Tenant
prior to the commencement of this Lease. Tenant further agrees to carry, at its
own expense, at all times during the term hereof, public liability insurance
covering against claims for bodily injury and property damage occurring upon, in
or about the Premises, in a form and with a company reasonably satisfactory to
Landlord, with limits of at least $1,500,000.00 for injury, including death, per
occurrence, and $500,000.00 for property damage, per occurrence.
(c) Any insurance policy required herein shall name the Tenant and the
Landlord as parties insured, shall contain a provision that the same may not be
canceled or materially modified without giving the Landlord at least thirty (30)
days prior written notice, and shall contain the insurance company's waiver of
any right to subrogation against the Landlord and the Landlord's mortgagee. In
addition, such policies or certificates evidencing such policies shall be
delivered to Landlord at least ten (10) days prior to the commencement of the
Lease term.
13. Permits - Compliance with Laws.
(a) Tenant shall at Tenant's own expense, obtain from the appropriate
governmental authorities, and keep in effect, any and all permits, licenses and
the like required to permit Tenant to occupy the Premises for the purposes
herein stated.
(b) Tenant shall thereafter, at its expense, promptly comply with all
statutes, laws, ordinances, orders, rules, regulations and requirements of the
Federal, State and local governments and of the Board of Fire Underwriters
applicable to Tenant's use of the Premises.
14. Assignment and Subletting.
Tenant shall not transfer, assign, mortgage or encumber this Lease, by
operation of law or otherwise, or sublet or permit the leased Premises, or any
part thereof, to be used by others without the prior written consent of the
Landlord in each instance, such consent not to be unreasonably withheld. This
prohibition includes assignment or subletting which would otherwise occur by
operation of law, merger, consolidation, reorganization, transfer or other
change of Tenant's proprietary structure, or an assignment or subletting to or
by a receiver or trustee in any Federal or State bankruptcy, insolvency or
similar proceeding and any encumbering of this Lease in violation of the
foregoing sentence, shall be void and confer no rights upon any third person.
Any assignment or subletting consented to by Landlord shall not relieve Tenant
of any of its primary responsibilities for all obligations under this Lease, and
such consent by Landlord shall not be effective unless and until (i) Landlord
gives written consent thereof to Tenant, (ii) such transferee, assignee, or
sublessee shall deliver to Landlord a written agreement in form and substance
satisfactory to Landlord pursuant to which such transferee, assignee, or
sublessee assumes all of the obligations and liabilities of the Tenant
hereunder, and (iii) such transferee,
-7-
<PAGE> 11
assignee or sublessee shall deliver to Landlord a certified true copy of the
assignment or sublease.
15. Subordination.
Tenant accepts this Lease, and the tenancy created hereunder, subject
and subordinate to any mortgages, deeds of trust, leasehold mortgages or other
security interest now or hereafter constituting a lien upon or affecting the
property of which the Premises is a part. Tenant shall, at any time hereafter,
promptly upon request, execute any instruments in recordable form that may be
required by any mortgage, mortgagee, deed of trust, trustee, or underlying owner
or Landlord hereunder to subordinate Tenant's interest hereunder to the lien of
any such mortgage or mortgages, deed or deeds of trust or underlying lease, and
the failure of Tenant to execute any such instruments, leases or documents shall
constitute a default hereunder. In the event Tenant fails to execute any
instrument as aforesaid, within five (5) days of a request therefor, Tenant
hereby appoints Landlord, or Landlord's successors in interest, as Tenant's
attorney-in-fact, with full authority and power to execute any such instrument
on behalf of Tenant, hereby fully binding Tenant in accordance with the terms
thereof.
16. Attornment and Non-Disturbance.
Tenant agrees that upon any termination of Landlord's interest in the
Leased Premises, Tenant will, upon request, attorn to the person or entity then
holding title to, or succeeding to Landlord's interest in, the leased Premises
(the "Successor") and to all subsequent Successors, and shall pay to the
Successor all rents and other monies required to be paid by the Tenant hereunder
and perform all the other terms, covenants, conditions and obligations contained
in this Lease, provided, however, that Tenant shall not be so obligated to
attorn unless, if Tenant shall so request in writing, such Successor will
execute and deliver to Tenant an instrument wherein such Successor agrees that
so long as Tenant performs all of the terms, covenants and conditions of this
Lease, Tenant's possession under the provisions of this Lease shall not be
disturbed by any such successor.
17. Property Loss or Damage.
Tenant hereby expressly agrees that Landlord shall not be responsible
or liable in any manner for any damage or injury to the property of Tenant or
any employee, agent, customer or person or to Tenant's business, directly or
indirectly, unless caused by gross negligence or willful misconduct of Landlord.
18. Tenant's Failure to Perform.
(a) Emergency Repairs. If, in the event of an emergency, it becomes
necessary to make any repairs or replacements otherwise required to be made by
Tenant, then Landlord may enter the Premises and proceed to have such repairs or
replacements made and pay the costs thereof for Tenant's account. Tenant shall
pay to Landlord, within thirty (30) days of demand therefor, all costs of such
repairs or replacements.
-8-
<PAGE> 12
(b) Non Emergency Repairs. , a non-emergency situation,
Tenant fails, after ten (10) days written notice from Landlord, to commence and
continuously make required repairs, Landlord may (at its option, but without
being required to do so) immediately, or at any time thereafter and without
notice, perform the same for the account of Tenant (including entering the
Premises at all reasonable hours to make repairs and do any act or make any
payment which Tenant has failed to do), and if Landlord makes any expenditures,
or incurs any obligations for the payment of money in connection therewith, such
sums paid or obligations incurred, with interest at the rate of twelve percent
(12%) per annum, shall be deemed to be additional rent hereunder and shall be
paid by Tenant to Landlord within ten (10) days of demand therefor by Landlord.
19. Landlord's Right to Enter and Show Premises.
(a) Landlord's Right to Inspect and Repair. Tenant agrees to permit
Landlord or its agents to enter the Premises at any reasonable time for the
purpose of determining the condition of the Premises and making repairs thereto,
as provided above in Paragraph 18.
(b) Landlord's Right to Show Premises. Tenant agrees that Landlord may,
within the last six (6) months of the Lease term, display a "For Lease" and/or
"For Sale" sign on the Premises and show the Premises to potential tenants
and/or purchasers at any reasonable time.
20. Surrender at End of Term.
Except as otherwise provided in Paragraph 9(b), Tenant shall vacate
the Premises at the expiration or other termination of this Lease and shall
remove all goods and effects not belonging to Landlord and shall surrender
possession of the Premises and all fixtures and systems thereof free to trash
and debris and in good repair, reasonable wear and tear and damage by fire or
other unavoidable casualty excepted. If Tenant shall fail to perform any of the
foregoing obligations, in addition to applying the security deposit thereto,
Landlord is hereby expressly authorized, to sell such articles left on the
Premises as Landlord in its sole discretion deems saleable, and may dispose of
others in any manner which it chooses. The Proceeds of any such sale be applied
toward the expenses thus incurred and any outstanding sums due Landlord from
Tenant. If no sums remain due to Landlord, Tenant will receive net proceeds, if
any, from Landlord.
21. Holding Over.
If Tenant shall not immediately surrender possession of the Premises at
the termination of this Lease, Tenant shall, with the written consent of the
Landlord, become a month-to-month Tenant upon all the terms and conditions
contained in the Lease, at the then current market rent for the Premises, to be
determined conclusively by the Landlord, but in no event shall the base monthly
rental during this holdover period be less than the monthly rental just prior to
termination of this Lease. If consented to, such tenancy may thereafter be
terminated by Landlord upon thirty (30) days notice to the Tenant. Tenant
further agrees that it shall be liable for any damages suffered by Landlord by
reason of
-9-
<PAGE> 13
Tenant's failure to immediately surrender the premises, including court costs
and reasonable attorney's fees, if Landlord does not give permission to the
Tenant to become a month-to-month Tenant or acts to terminate the month-to-month
tenancy once commenced.
22. Destruction - Fire or Other Casualty.
In case of partial damage to the Premises by fire or other casualty,
insured against by Landlord, Tenant shall give immediate notice thereof to
Landlord, and Landlord, to the extent that insurance proceeds respecting such
damage are subject to and, in fact, are under the control and use of Landlord,
shall thereupon, within ninety (90) days from date of fire or casualty, commence
repairs of such damage to all property owned by Landlord, to be repaired with
reasonable speed at the expense of Landlord, due allowance being made for
reasonable delay which may arise by reason of adjustment of loss under insurance
policies on the part of Landlord and/or Tenant, and for reasonable delay on
account of "labor troubles" or any other cause beyond Landlord's control, and
Base Rent shall be abated in proportion to the amount of floor area of the
premises rendered untenantable. Notwithstanding the foregoing, if such partial
damage is due to the fault or neglect of Tenant or any of its servants,
employees, agents, licensees, invitees or visitors, the damage shall be promptly
repaired by Tenant at Tenant's sole expense. In the event the damage to the
Premises and/or the office building of which the Premises is a part shall be so
extensive as to render restoration unfeasible or uneconomical, in Landlord's
sole opinion, or if Landlord is required to apply all or any portion of the
proceeds of insurance to indebtedness due to any mortgagee or secured party,
this Lease, at the option of Landlord, shall be terminated upon written notice
to Tenant and the rent shall, in such event, be paid to or adjusted as to date
of such termination. Tenant shall thereupon vacate the Premises and surrender
the same to Landlord, but no such termination shall release Tenant from any
liability to Landlord arising from such damage or from any breach of the
obligations imposed on Tenant hereunder.
23. Eminent Domain.
If the Premises shall be taken (either temporarily or permanently) for
public purposes, or in the event Landlord shall convey or lease the property to
any public authority in settlement of a threat of condemnation or taking, the
rent shall be adjusted to the date of such taking or leasing or conveyance, and
this Lease shall thereupon terminate. If only a portion of the Premises and/or
the office building of which the Premises is a part shall be so taken, leased or
condemned, and as result of such partial taking, Tenant is reasonably able to
use the remainder of the Premises for the purposes intended hereunder, then this
Lease shall not terminate, but, effective as of the date of such taking, leasing
or condemnation, the Base Rent hereunder shall be abated in an amount
proportionate to the floor area of the Premises so taken, leased or condemned.
If, following such partial taking, Tenant shall not be reasonably able to use
the remainder of the premises for the purposes intended hereunder, then this
Lease shall terminate as if the entire Premises had been taken, leased or
condemned. In the event of a taking, lease or condemnation, as described in this
paragraph, whether or not there is a termination
-10-
<PAGE> 14
hereunder, Tenant shall have no claim against Landlord for and shall not be
entitled to any portion of any amount that may be awarded to Landlord as damages
or paid as a result of or in settlement of such taking, lease or condemnation.
24. Defaults - Remedies.
The occurrence of any one or more of the following events shall
constitute a material default and breach of this Lease by Tenant.
(a) The vacating or abandonment of the Premises by Tenant.
(b) The failure by Tenant to make any payment of Base Rent,
additional rent or any other payment required to be made by Tenant hereunder, as
and when due.
(c) The failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease to be kept, observed or
performed by Tenant (other than a monetary default as described in Paragraph
24(b) hereinabove) where such failure shall continue for a period of five (5)
days after written notice thereof from Landlord to Tenant; provided, however,
that if the nature of the Tenant's default is such that more than five (5) days
are reasonably required for its cure, than Tenant, so long as it promptly
commences such cure within said five (5) day period and thereafter diligently
proceeds to cure such default, shall have a period, not to exceed thirty (30)
days, to complete the cure.
(d) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors, the filing by or against Tenant of
petition to have Tenant adjudged a bankrupt or the filing of a petition for
reorganization or arrangement under any law relating to bankruptcy (unless in
the case of a petition filed against Tenant, the same is dismissed within sixty
(60) days), the appointment of a Trustee or a receiver to take possession of
substantially all of the Tenant's assets located in the Premises or the
Tenant's interest in this Lease where possession is not restored to Tenant
within thirty (30) days or the attachment execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or Tenant's
interest in this Lease, where such seizure is not discharged within thirty (30)
days.
In the event of any such default or breach by Tenant, Landlord may,
with or without notice or demand, without limiting Landlord in the exercise of
any right or remedy which Landlord may have by reason of such default or breach,
proceed in the following manner:
(i) Terminate Tenant's right to possession of the Premises by any
lawful means, in which case Tenant's possession shall be terminated and Tenant
shall immediately surrender possession of the Premises to the Landlord. In such
event, Landlord shall be entitled to recover from Tenant, all damages incurred
by Landlord by reason of Tenant's default, including, but not limited to, the
costs of recovering possession of the Premises; expenses of re-letting,
including necessary renovation or alteration of the Premises; court costs and
reasonable attorney's
-11-
<PAGE> 15
fees; any real estate commission actually paid for the purposes of re-letting
the premises for the unexpired term of this Lease; and such other out-of-pocket
expenses as the Landlord might incur. Unpaid installments of rent or other sums
shall bear interest from date due at the rate of ten percent (10%) per annum.
(ii) Maintain Tenant's right to possession in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event, Landlord shall be entitled to enforce all of Landlord's
rights and remedies under this Lease, including the right to recover all rents
as they becomes due hereunder.
(iii) Pursue any other remedy now or hereafter available to Landlord
under the laws of the state in which the Premises is located.
25. Several Liability.
If the Tenant shall be one or more individuals, corporations or other
entities, whether or not operating as a partnership or joint venture, then each
such individual corporation, entity, joint venture or partner shall be deemed to
be both jointly and severally liable for the payment of the entire rent and
other payments specified herein and all other duties and obligations hereunder.
26. Acceptance of Premises.
Tenant's occupancy of the Premises shall constitute acceptance thereof
as complying with all requirements of Tenant and Landlord with respect to the
condition, order and repair thereof.
27. Estoppel Certificates.
Tenant agrees at any time and from time to time, upon not less than
five (5) days' prior notice by Landlord, to execute, acknowledge and deliver to
Landlord a statement in writing certifying that this Lease is unmodified and in
full force and effect (or in there have been modifications, that the same is in
full force and effect as modified and stating the modifications) and the dates
to which the rent and other charges have been paid in advance, if any, and
stating whether or not, to the best knowledge of the signer of such certificate,
Landlord is in default in performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which the
signer may have knowledge, and any other information which Landlord may
reasonably request, it being intended that any such statement delivered
hereunder may be relied upon by any third party not a party to this Lease.
28. Notices.
All notices, demands and requests required under this Lease shall be in
writing. All such notices shall be deemed to have been properly given if sent by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed to the Landlord at:
-12-
<PAGE> 16
Japan Travelers Services, Inc.
226 Maple Avenue, West
Suite 403
Vienna, Virginia 22810
Attention: Charles Kia
and to the Tenant at the main office. Either party may designate a change of
address by written notice to the other party.
Notices, demands, and requests which shall be served by registered or
certified mail in the manner aforesaid shall be deemed sufficiently served or
given for all purposes hereunder at the time such notice, demand or request
shall be mailed by United States registered or certified mail as aforesaid in
any post office or branch post office regularly maintained by the United
States Government.
29. Separability.
If any term or provision of this Lease, or the application thereof to
any person or circumstances shall, to any extent, be invalid or unenforceable,
the remainder of this Lease or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term and provision of this
Lease shall be valid and enforceable to the fullest extent permitted by law.
30. Signs.
Tenant shall have the right to install a sign on the exterior door of
the demised Premises, provided the Landlord shall have the right to approve the
size, design, color, location and type of sign, thirty (30) days prior to the
installation, which approval shall not be unreasonably withheld. Tenant may
remove the sign at the expiration and termination of this Lease, it being
expressly understood that any damage to the Premises as a result of the removal,
will be repaired at the sole cost of the Tenant.
31. Captions.
All headings in this Lease are intended for convenience of reference
only and are not to be deemed or taken as a summary of the provisions to which
they pertain or as a construction thereof.
32. Successors and Assigns.
The covenants, conditions and agreements contained in this Lease shall
bind and insure to the benefit of Landlord and Tenant, and their respective
heirs, distributees, executors, administrators, successors and, to the extent
permitted by the terms of this Lease, their assigns.
33. Governing Law.
This Lease shall be governed by and construed in all respects in
accordance with the laws of the Commonwealth of Virginia.
-13-
<PAGE> 17
34. Notice Agreement.
This Lease contains all agreements of the parties with respect to the
Premises. There are no agreements or understandings, oral or written, express or
implied, which have not been incorporated in writing herein. This Lease may be
modified only in writing and signed by the parties in interest at the time of
the modification.
35. Cumulative-Remedy.
No remedy or election parties hereunder by Landlord shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
36. Restrictions on Use.
The Premises shall be used by the Tenant solely for the purpose of
conducting therein the business as stated in Paragraph 4. Tenant will occupy the
Premises promptly upon commencement of the terms and will immediately being the
continuous operation of the specified business in the Leased Premises. It is
further understood that the Landlord has the sole and absolute discretion as to
approval of any proposed change of the use specified in Paragraph 4.
37. No Partnership.
Nothing contained in this Lease shall be construed to create a
partnership, joint venture, agency or any other relationship between the parties
except that of Landlord and Tenant.
38. Miscellaneous.
(a) As used in this Lease, and where the context requires (1) the
masculine shall be deemed to include the feminine and neuter and vice-versa; and
(2) the singular shall be deemed to include the plural and vice-versa.
(b) Tenant hereby waives trial by jury in any action or proceeding
brought by Landlord or in any counterclaim brought by Tenant in connection with
any matters whatsoever arising out of or in any way connected with this Lease or
in connection with Tenant's use or occupancy of the Premises, or in connection
with any claim of injury or damage.
(c) Tenant waives all right to notice to quit and vacate Premises prior
to institution of action to recover Premises based upon non-payment of Base Rent
or additional rent.
(d) Except for Base Rent, all monies due from Tenant to Landlord under
any of the provisions of this Lease shall be considered as additional rent.
-14-
<PAGE> 18
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and
sealed this Lease as of the day and year first above written.
WITNESS our hands and seals this 22nd day of October 1991.
WITNESS/ATTEST LANDLORD:
JAPAN TRAVELERS SERVICES, INC.
[SIG] By: [SIG] (SEAL)
- ------------------------------ -----------------------------------
WITNESS/ATTEST: TENANT: THE GEORGE MASON BANK
/s/ JOHN W. PARKER, JR. By: MARSHALL H. GROOM, CHAIRMAN (SEAL)
- ------------------------------ -----------------------------------
<PAGE> 19
ADDENDUM TO LEASE
This addendum shall become a part of the Lease to which it is attached and shall
provide an Option to Renew the Lease.
IT IS FURTHER UNDERSTOOD AND AGREED THAT, provided Tenant is not in default
under any of the terms of this Lease, Tenant will have the option to renew this
Lease for three (3) additional five (5) year terms. In order to exercise such
option, Tenant shall be required to give to the Landlord not less than One
Hundred twenty (120) days written notice prior to the expiration of the
preceding Lease term of its intention to exercise the option.
Upon the commencement date of this option term, the Basic Annual Rental shall
escalate to an amount equal to the fair market rental value for similarly
situated property as of the date of the exercise of the option.
The Landlord shall determine the fair market value for the new rental amount of
the Premises. If the Tenant fails to agree with the Landlord on the new rental
amount, then the Landlord and Tenant will each choose a qualified appraiser. The
two appraisers so chosen shall work together to determine the fair market rental
value of the Premises. In the event that the two appraisers are unable to agree
as to the fair market rental value of the Premises, the two appraisers shall
appoint a third appraiser. The three appraisers shall then determine by majority
vote the fair market rental value of the Premises, which determination is to be
binding upon the parties. The cost of the appraiser chosen by the Landlord shall
be paid by the Landlord, the cost of the appraiser chosen by the Tenant shall be
paid by the Tenant, and the cost of the third appraiser shall be borne by the
Landlord and the Tenant equally. All necessary appraisals shall be completed and
the fair market rental value shall be set at least one (1) month prior to the
commencement of the renewal term for the option. All appraisers and appraisals
shall conform to the requirements below. In no event shall the fair market
rental value be set at an amount less than the Basic Annual Rental payable for
the year preceding the exercise of the option.
Any appraisal required as set forth above shall be made by a qualified appraiser
who is a member of the American Institute of Real Estate Appraisers, MAI, and
who has no affiliation or business relationship with Tenant or Landlord.
The Basic Annual Rental as may be re-established as set forth above shall be
subject to the rental adjustments and Tenant reimbursements and payments as set
forth in this Lease.
In arriving at the fair market rental value of the Premises the appraiser shall
appraise the Premises based on its use as retail/service. The intent of the
escalation clause involving appraisal of the Premises is to keep the fair market
rental of the
<PAGE> 20
Premises consistent with the current fair market rental values of comparable
properties. The economic effect of this Lease shall be disregarded in such
appraisals and such appraisal shall be made as if the Premises were unencumbered
by this Lease, but to be devoted to use as retail.
WITNESS the following signatures and seals:
LANDLORD:
Date: 10-24-91 By: [SIG]
------------------------ -------------------------------
TENANT: THE GEORGE MASON BANK
Date: October 22, 1991 By: MARSHALL H. GROOM, CHAIRMAN
------------------------ -------------------------------
Date: By:
------------------------ -------------------------------
<PAGE> 1
EXHIBIT 10B
LEASE COMMENCEMENT AGREEMENT AND CERTIFICATE
THIS AGREEMENT made and entered into this 9th day of March, 1992, by and
between 1320 OLD CHAIN BRIDGE ROAD ASSOCIATES, (hereinafter referred to as
"Landlord"), and THE GEORGE MASON BANK, (hereinafter referred to as "Tenant").
W I T N E S S E T H
WHEREAS, by Lease Agreement dated the 13th day of December, 1991, Landlord
and Tenant entered into a Lease for approximately 2,852 square feet of gross
floor area on the 1st floor, in a building known as the Madison Building, 1320
Old Chain Bridge Road, McLean, Virginia 22101, on terms and conditions as more
specifically set forth in said Lease; and,
WHEREAS, the parties hereto desire to set forth certain matters concerning
the date upon which the Lease term has commenced, and the date that the original
term of the Lease is to terminate.
NOW, THEREFORE, the parties hereto agree as follows:
The Landlord and Tenant do hereby declare that possession of the
Demised Premises was accepted by Tenant on the 9th day of March, 1992, and that
the Lease is now in full force and effect; the Rent Commencement Date, as that
term is defined in paragraph 2(a) of the Lease, is established as beginning on
the 1st day of April, 1992; and the original term of the Lease shall expire on
the 31st day of March, 1997.
IN WITNESS WHEREOF the parties hereto have executed this Agreement under
their respective seals on the day and date first above written.
LANDLORD:
1320 OLD CHAIN BRIDGE ROAD ASSOCIATES
/s/ JAMES COMPARATO
-----------------------------------
James Comparato, General Partner
Date: 3/12/92
TENANT:
THE GEORGE MASON BANK
/s/ BERNARD H. CLINEBURG
---------------------------------
Date: 3/14/92
---------------------------------
<PAGE> 2
[GEORGE MASON BANK LETTERHEAD]
CERTIFIED MAIL #Z 191 033 779
RETURN RECEIPT REQUESTED
September 23, 1996
1320 Old Chain Bridge Road Associates
1320 Old Chain Bridge Road
Suite 400
McLean, Virginia 22101
RE: George Mason Bank, Madison Building, 1320 Old Chain Bridge Road, McLean, Va
In accordance with the terms of the lease under Page 1, Section 2(e), George
Mason Bank hereby gives notice to Landlord to renew the term of the lease for
one (1) additional period of five (5) years on the same terms and conditions
contained in the lease effective April 1, 1997.
The minimum annual rent shall increase three percent (3%) per annum during the
option term. Remaining, will be one (1) five (5) year option term.
Sincerely yours,
/s/ Glenn E. Kinard
Glenn E. Kinard
Executive Vice President
Retail Banking
<PAGE> 3
OFFICE
LEASE
Between
1320 OLD CHAIN BRIDGE ROAD ASSOCIATES
and
THE GEORGE MASON BANK
TABLE OF CONTENTS
- -----------------
1. Premises
2. Term
3. Rent And Other Charges
4. Adjustment Of Rent
5. Deposit
6. Conditions Of Lease
7. Tenant's Covenants
8. Use Of Demised Premises
9. Leasehold Improvements And Alterations
10. Signs And Advertising
11. Safes, Fixtures And Equipment; Repair Of Damage
12. Insurance
13. Insurance Rating
14. Landlord's Covenants Services And Utilities
15. Default
16. No Waiver
17. Landlord's Cure Of Default By Tenant/Reimbursement of Expenses
18. Landlord's Lien
19. Inspection Of Demised Premises
20. Liability For Damage To Personal Property And Persons; Indemnification
21. Liability Of Landlord
22. Conduct Of Business
23. Damage Or Destruction To Building
24. Condemnation
25. Parking Areas
26. Assignment And Sub-Letting
27. Holding Over
28. Subordination
29. Estoppel Certificates
30. Managing Agent
31. Notices
32. No Partnership
33. No Representations By Landlord
34. Brokerage
35. Waiver Of Trial By Jury
36. Quiet Enjoyment
37. Binding Effect Of Lease
38. Rules And Regulations
39. Necessary Approvals
40. Applicable Law and Construction
41. Permitted Uses Exclusive
42. Gender
43. Entire Agreement
EXHIBITS
- --------
Exhibit "A" - Floor Plan
Exhibit "B" - Legal Description
Exhibit "C" - Site Plan
Exhibit "D" - Work Letter
Exhibit "E" - Rules And Regulations
<PAGE> 4
THE MADISON BUILDING
MCLEAN, VIRGINIA
OFFICE BUILDING LEASE
THIS LEASE is made this 13th day of December, 1991, between l320 OLD
CHAIN BRIDGE ROAD ASSOCIATES, a Virginia Limited Partnership, ("Landlord"),
whose address is 1320 Old Chain Bridge Road, Suite 400, McLean, Virginia 22101
and THE GEORGE MASON BANK, ("Tenant"), whose address is 11185 Main Street,
Fairfax, Virginia 22030.
1. PREMISES
Landlord hereby leases to Tenant those certain premises outlined in red
on the Plans attached hereto as Exhibit "A" (the "Demised Premises"), consisting
of a total of approximately 2,852 square feet of gross floor area on the 1st
floor, as measured from the outside wall of all exterior and common area walls,
and from the centerline of all demising walls between contiguous tenant space,
and which includes a thirteen percent (13%) core factor, in a building located
on the real property described on Exhibit "B" attached hereto and known as the
Madison Building, 1320 Old Chain Bridge Road, McLean, Virginia, (hereinafter the
"Building"), together with a non-exclusive right, subject to the provisions
hereof, to use all appurtenances thereunto, including but not limited to, other
areas and facilities designated by Landlord for use in common by tenants of the
Building. The Building, real property on which the same is situated, other areas
and appurtenances are hereinafter collectively sometimes called the "Building
Complex". This Lease is subject to the terms, covenants and conditions set forth
herein and Tenant and Landlord each covenant as a material part of the
consideration of this Lease to keep and perform each and all of said terms,
covenants and conditions by it to be kept and performed and that this Lease is
made upon the conditions of such performances.
2. TERM
(a) The term of this Lease shall commence upon execution hereof, and
shall be for a term of five (5) years (the "Primary Lease Term") commencing on
the Rent Commencement Date, as hereinafter defined, and terminating at 12:00
midnight on the last day of the sixtieth (60th) calendar month thereafter,
unless sooner terminated pursuant to this Lease.
(b) Upon the Rent Commencement Date, Landlord and Tenant shall execute
a commencement of Lease certificate, setting forth the exact date of
commencement and expiration of the term hereof.
(c) The "Rent Commencement Date" shall occur on the date which Tenant
has received all approvals from Federal, State and County Banking authorities,
but in no event later that sixty (60) days following full execution hereof. In
the event that Tenant has failed to obtain all such approvals within said sixty
(60) day period, Tenant shall have the option to terminate this Lease within
three (3) days of expiration of said sixty (60) day period, or Tenant's right to
terminate shall cease and this Lease shall be in full force and effect.
(d) The first "lease year" during the term hereof shall be the period
commencing on the Rent Commencement Date and terminating on the last day of the
twelfth (12) full calendar month after the Rent Commencement Date. Each
subsequent "lease year" during the term hereof (including any extensions or
renewals) shall commence on the date immediately following the last day of the
preceding lease year, and shall continue for a period of twelve (12) full
calendar months, except that the last lease year during the term hereof shall
terminate on the date that this Lease expires.
(e) Provided that Tenant is not in default, Tenant shall have the
option, upon one hundred eighty (180) days advance written notice to Landlord,
to renew the term of this Lease for two (2) additional periods of five (5) years
on the same terms and conditions contained herein, provided however that the
Minimum Annual Rent shall increase three percent (3%)per annum during the option
term.
Initials: Landlord [SIG]
--------------
Tenant [SIG]
--------------
1
<PAGE> 5
3. RENT AND OTHER CHARGES
(a) During the term hereof, commencing on the Rent Commencement Date,
Tenant covenants and agrees to pay to Landlord, without previous notice or
demand therefor, and without deduction, set-off or abatement, minimum annual
rent as set forth below, and as adjusted annually pursuant to Paragraph 4
hereinafter, payable in equal monthly installments in advance, (hereinafter
referred to as the "Minimum Annual Rent"), on the first day of each calendar
month during the term hereof. The first monthly installment of Minimum Annual
Rent shall be paid at the time of execution of this Lease. In the event that the
Lease commences on a day other than the first day of the month, Minimum Annual
Rent for any partial month shall be prorated at the rate of one-thirtieth
(1/30th) of the basic monthly rent per day. Tenant covenants and agrees to pay,
as additional rent, a late fee equal to five percent (5%) of any monthly
installment of Minimum Annual Rent, or other payments due under this Lease, if
said payments are not paid within ten (10) days of their due date. In addition
such unpaid installment shall bear interest at the lesser of eighteen percent
(18%) per annum or the highest non-usurious rate of interest permitted between
the parties hereto by the laws of the jurisdiction in which the Demised Premises
are located, and shall constitute additional rent hereunder, due and payable
with the monthly installment of Minimum Annual Rent next due.
<TABLE>
<CAPTION>
MINIMUM ANNUAL RENT SCHEDULE
ANNUAL RENT MONTHLY RENT
----------- ------------
<S> <C> <C>
Year 1 4-92 - 3-31-93 $69,874.00 $5,822.83
Year 2 4-93 - 3-31-94 $74,152.00 $6,179.33
Year 3 4-94 - 3-31-95 $78,430.00 $6,535.83
Year 4 4-95 - 3-31-96 $82,708.00 $6,892.33
Year 5 4-96 - 3-31-97 $86,986.00 $7,248.83
</TABLE>
(b) Tenant shall be entitled to three (3) parking spaces in the
underground garage at no additional charge during the entire term hereof, at
such location as is designated by Landlord. Tenant shall also be entitled to the
exclusive use of six (6) parking spaces in the front of the building for use of
their customers.
(c) The Minimum Annual Rent for the first lease year provided in
Paragraph 3(a) is calculated on the basis of Twenty-Four Dollars and Fifty
Cents ($24.50), full service, per square foot of gross floor area in the Demised
Premises, as specified in Paragraph 1 hereinabove.
4. ADJUSTMENT OF RENT
(a) In addition to the rental adjustment provided for in Paragraph 3 above,
the Minimum Annual Rent shall be adjusted annually, commencing July 1, 1992, and
each July 1st thereafter, (it being understood that the fiscal year from July 1,
1990 until June 30, 1991, shall serve as the base year for determining increases
in operating expenses) by Tenant's pro rata share of the amount of increases in
Landlord's Operating Expenses (as hereinafter defined). Tenant's pro rata share
shall be computed by multiplying .035 (3.5%) (being the approximate proportion
that the floor area of the Demised Premises bears to the total gross rentable
area of the Building, times the increase, if any, in Operating Expenses of the
Building for such fiscal year over the Operating Expenses during the base year.
In no event shall the Minimum Annual Rent be reduced as a result of any such
adjustment.
(b) Initial Operating Expenses for the base year are estimated to be Six
Dollars and Four Cents ($6.04) per square foot of gross floor area of Office
Space, which amount is included in the calculation of Minimum Annual Rent. In
the event that during any fiscal year the actual Operating Expenses exceed Six
Dollars and Four Cents ($6.04), Tenant shall pay its proportionate share of any
increase in such actual amount of Operating Expenses above Six Dollars and
Four Cents ($6.04). Any payment required by Tenant under this Paragraph shall be
deemed an increase in the Minimum Annual Rent.
(c) "Operating Expenses" shall mean: (i) All Operating Expenses of any kind
or nature with respect to the Building Complex as determined in accordance with
generally accepted accounting principles to which shall be added an additional
amount equal to fifteen percent (15%) of such expenses as an administration
charge, and shall include, but not be limited to, all general and special real
estate or ad valorem taxes or special assessments levied against the Building
Complex by any governmental or quasi-governmental authority or any taxes or
assessments, or which shall be levied on the Building Complex in lieu of or in
addition to all or any portion of any such real estate taxes or assessments, or
which shall be levied on the
Initials: Landlord [SIG]
--------------
Tenant [SIG]
--------------
2
<PAGE> 6
rentals of the Building Complex (other than Landlord's income taxes), but in
this case, the computation shall be made as if this were Landlord's only
building, or which shall be levied on Landlord as a result of the use, ownership
or operation of the Building Complex; the cost of Building Complex supplies;
cost incurred in connection with all energy sources for the Building Complex
such as propane, butane, natural gas, steam, electricity, solar energy and fuel
oil, excluding therefrom these costs which are separately metered and paid
directly by other Tenants; the costs of water and sewer services; janitorial
services; provided however that Tenant shall provide nightly cleaning and char
services to the Demised Premises; general maintenance and normal repair of the
Building Complex, including the heating and air conditioning systems of the
Building Complex; landscaping maintenance; the cost of rubbish removal, snow
removal and service contracts for the elevator, HVAC and alarm systems of the
Building Complex; the cost of such security guard and protection services as may
be deemed reasonably necessary by Landlord; insurance in amounts and coverages
determined by Landlord, including fire, extended coverage and all risk casualty
insurance, rental interruption, sprinkler leakage, plate glass and comprehensive
liability insurance (but Tenant shall have no interest in such insurance or the
proceeds thereof); labor costs incurred in the operation and maintenance of the
Building Complex, including wages and other payments, costs to Landlord of
Workmen's Compensation and disability insurance; payroll taxes, and welfare
fringe benefits; building management fees, legal, accounting, inspection and
consultation fees incurred in connection with the Building Complex to the extent
required by any governmental authority or any other inspection or consultation
fees required for the normal prudent operation of the Building Complex and not
normally the responsibility of the managing agent; the cost of any capital
improvements to the Building Complex or of any machinery or equipment installed
in the Building Complex which is installed to reduce operating expenses, and
which costs shall be amortized over the useful life of the capital improvement,
all other common area costs and expenses relating to the Building Complex and
all other charges properly allocable to the repair, operation and maintenance of
the Building Complex in accordance with general accepted accounting principles.
If the Building is not fully occupied during any calendar year, the Operating
Expenses for such year shall be adjusted to reflect the greater of; (a) actual
occupancy; or (b) a ninety-five percent (95%) occupancy of the Building.
(ii) The term Operating Expenses shall expressly exclude Landlord's income
taxes; leasing commissions, interest on debt or amortization payments on any
mortgages or deeds of trust; advertising and promotional expenditures; any
expense borne directly by a Tenant and not included in Building Operating
Expenses, and any other expenses which under generally accepted accounting
principles would not be considered a normal maintenance or operating expense,
except as otherwise specifically provided herein.
5. DEPOSIT
Tenant shall deposit with Landlord at the date of Rent Commencement Date,
a security deposit in the amount of Eleven Thousand Eight Hundred Forty-Five
Dollars and Sixty-Six Cents ($11,845.66) to be held by Landlord, without
interest during the entire term of the Lease, to insure Tenant's faithful
performance hereunder.
6. CONDITIONS OF LEASE
The Tenant does hereby take and hold said Demised Premises at the rent
hereinabove specifically reserved and payable as aforesaid, and upon and subject
to the terms and conditions herein contained.
7. TENANT'S COVENANTS
The Tenant agrees that it will keep the Demised Premises and the fixtures
therein in good order and condition, and will, at the expiration or other
termination of the term hereof, surrender and deliver up the same in like good
order and condition as the same now is or shall be at the commencement of the
term hereof, ordinary wear and tear, and damage by the elements, fire and other
unavoidable casualty not due to the negligence of Tenant, excepted. The Tenant
further agrees not to make any material or permanent additions or alterations,
structural or otherwise, in or upon the Demised Premises, or the Building of
which they are a part, without first having obtained the Landlord's written
consent; and that any such additions or alterations must conform to any and all
applicable building code standards, as well as any and all other applicable
requirements of the federal, state and local governments. It is understood and
agreed that any and all additions, alterations, installations, changes,
replacements or improvements upon the Demised Premises shall remain upon the
Demised Premises, and be surrendered with the Demised Premises at the
expiration or other termination of this Lease without disturbance, molestation
or injury. Should the Landlord elect that certain alterations, installations,
changes, replacements, additions to or improvements upon the Demised Premises
be removed upon expiration or other termination of this Lease, or any renewal
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period hereof, Tenant hereby agrees to cause the same to be removed at Tenant's
sole cost and expense, and to repair any damage to the Demised Premises arising
from the installation of or the removal of same, and should Tenant fail to
remove the same, then and in such event the Landlord shall cause same to be
removed at Tenant's sole risk and expense, and Tenant hereby agrees to reimburse
the Landlord for the cost of such removal, together with any and all damages
which the Landlord may suffer and sustain by reason of the failure of Tenant to
remove the same.
8. USE OF DEMISED PREMISES
Tenant shall use and occupy the Demised Premises solely as a full
service Bank and any incidental use subject to, and in accordance with, all
applicable zoning and other governmental regulations. The Tenant will not
obstruct or interfere with the rights of other tenants, or in any way injure or
annoy them or those having business with them, or conflict with them, or
conflict with the fire laws or regulations, or with any insurance policy upon
said Building or any part thereof, or with any statutes, rules or regulations
now existing or subsequently enacted or established by the local, state or
federal governments. Nor will the Tenant use or permit the Demised Premises,
or any part thereof, to be used for any disorderly, unlawful or hazardous
purpose, not for any purpose other than hereinbefore specified, and will not
manufacture any commodity therein, without the prior written consent of the
Landlord.
9. LEASEHOLD IMPROVEMENTS AND ALTERATIONS
None. Tenant accepts the Demised Premises in "As Is" condition. In
addition, Tenant agrees to pay to Landlord, on the Rent Commencement Date the
sum of Fifty Thousand Dollars ($50,000.00) toward to cost of leasehold
improvements to the Demised Premises which Landlord has made available to Tenant
for Tenant's use.
Tenant will not make or permit anyone to make any material or permanent
alterations, decorations, additions or improvements, structural or otherwise, in
or to the Demised Premises or the Building, without prior written consent of
Landlord. All of such alterations, decorations, additions or improvements
permitted by Landlord must conform to all rules and regulations established from
time to time by the Underwriters' Association of the local area and conform to
all requirements of the Federal, state and local governments. As a condition
precedent to such written consent of Landlord, Tenant agrees to obtain and
deliver to Landlord written and unconditional waivers of mechanics' and
materialmens' liens upon the Land and Building of which the Demised Premises
are a part, for all work, labor and services to be performed, and materials to
be furnished, by them in connection with such work, signed by all contractors,
subcontractors, materialmen and laborers to become involved in such work. If
notwithstanding the foregoing, any mechanic's or materialmen's lien is filed
against the Demised Premises, the Building and/or the Building Complex, for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant, such lien shall be discharged or bonded off by Tenant within thirty (30)
days thereafter, at Tenant's sole cost and expense, by the payment thereof or by
filing any bond required by law. If Tenant shall fail to discharge any such
mechanics's or materialmen's lien, Landlord may, at its option, discharge the
same and treat the cost thereof as additional rent payable with the monthly
installment of rent next becoming due; it being hereby expressly covenanted and
agreed that such discharge by Landlord shall not be deemed to waive, or release,
the default of Tenant in not discharging the same. It is understood and agreed
by Landlord and Tenant that any such alterations, decorations, additions or
improvements shall be conducted on behalf of Tenant. It is further understood
and agreed that in the event Landlord shall give its written consent to Tenant's
making any such alterations, decorations, additions or improvements, such
written consent shall not be deemed to be an agreement or consent by Landlord
to subject Landlord's interest in the Demised Premises, the Building or the
Building Complex to any mechanic's or materialmen's liens which may be filed in
respect of any such alterations, decorations, additions or improvements made by
or on behalf of Tenant. It is expressly agreed between the parties that all
improvements, including the three front desks, will remain the property of the
Landlord upon expiration of this Lease. All furniture purchased by the Lessee
shall remain the property of the Lessee upon termination of this Lease.
10. SIGNS AND ADVERTISING
No signs, advertising or notices shall be inscribed, affixed or displayed
on any part of the outside or the inside of the Building, except as approved in
writing in advance by Landlord, and then only in such place, number, size,
color and style as approved by Landlord, and if any such sign, advertisement or
notice is improperly exhibited, Landlord shall have the right to remove the
same, and Tenant shall be liable for any and all expenses incurred by Landlord
by said removal. Tenant understands that any sign on the exterior of the Demised
Premises shall be in individual white molded letters of such size and design as
may
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be approved by Landlord. Landlord hereby consents to signs on the front of the
building facing Old Chain Bridge Road and further agrees to signage on the side
of the building if Tenant is able to obtain permission for said sign from the
County of Fairfax. Landlord makes no representation or accepts no liability
regarding Tenant's ability to obtain signage on the side of the building. Any
such permitted use shall be at the sole expense and cost of the Tenant. Tenant
shall be entitled to construct a free standing sign in size and color approved
by Landlord at the location designated on Exhibit "A", and further conditioned
upon Tenant first obtaining all necessary County approvals.
11. SAFES, FIXTURES AND EQUIPMENT; REPAIR OF DAMAGE
Landlord shall have the right to prescribe the weight and position of safes
and other heavy equipment or fixtures. Tenant shall not install or operate in
the Demised Premises any electrically operated equipment or machinery, other
than typewriters, adding machines, personal computers, copying machines, and
such other electrically operated office machinery and equipment normally used in
modern offices, excluding main frame computers and other equipment requiring
high energy consumption, without first obtaining the prior written consent of
the Landlord, who may condition such consent upon the payment by Tenant of
additional rent as compensation for such excess consumption of water and/or
electricity, as well as the cost of such additional wiring as may be occasioned
by the operation of said equipment or machinery; nor shall Tenant install any
other equipment of any kind of nature whatsoever which will or may necessitate
any changes, replacements or additions to, or require the use of the water
system, plumbing system, heating system, air conditioning systems or the
electrical system of the demised premised without the prior written consent of
the Landlord, who may condition such consent upon the payment by Tenant of the
cost of any such changes, replacements or additions to any of said systems. The
Landlord shall have the right to require at Tenant's expense such shielding and
other protection around x-ray machines and other similar equipment installed by
Tenant as Landlord in its sole discretion may designate.
No furniture, equipment or other bulky matter of any description will be
received into the Building or carried in the elevators except as approved by
Landlord. Tenant agrees promptly to remove from the public areas adjacent to the
Building, any of the Tenant's furniture, equipment or other material there
delivered or deposited. All injury to the Demised Premises or the Building of
which they are a part, caused by moving any property of Tenant into or out of
the said Building, and all breakage done by Tenant, or the agents, servants,
employees and visitors of Tenant, shall be repaired by Tenant, at the expense of
the Tenant. In the event that Tenant shall fail to do so, then the Landlord
shall have the right to make such necessary repairs, alterations and
replacements (structural, non-structural or otherwise), and any charge or cost
so incurred by the Landlord shall be paid by Tenant, with the right on the part
of the Landlord to elect, in its discretion, to regard the same as additional
rent, in which event such cost or charge shall become additional rent payable
with the installment of rent next becoming or thereafter falling due under the
terms of this Lease. This provision shall be construed as an additional remedy
granted to the Landlord, and not in limitation of any other rights and remedies
which the Landlord has or may have in said circumstances.
12. INSURANCE
Landlord shall insure the Building, of which the Demised Premises are a
part, against damage by fire, including extended coverage and all risk casualty,
in any amount Landlord in its sole discretion shall deem adequate, and shall
maintain such insurance throughout the term hereby demised. The cost of such
insurance shall be included in Operating Expenses.
Tenant shall procure and keep in effect comprehensive liability and
property damage insurance, naming the Landlord as a named insured in the sum of
One Million Dollars ($1,000,000.00) combined single limit for damages resulting
from one casualty, and One Million Dollars ($1,000,000.00) for damage to
property resulting from any one occurrence, and shall deliver said policies or
certificates to Landlord prior to initial occupancy and continuously maintain
such coverage thereafter. Landlord shall have the right, upon not less than
thirty (30) days prior written notice, to raise the limits hereinabove set forth
not more often than annually during the term of this lease. Landlord may, at its
option, procure the same for the account of Tenant, provided Tenant fails to do
so, and the cost thereof shall be paid to Landlord upon receipt by Tenant of
bills therefor. Tenant shall procure and maintain at its own cost during the
term of this Lease and any extension hereof fire and extended coverage insurance
on property of Tenant. All such insurance carried by Tenant shall be with
companies approved in advance by Landlord, and shall have a Best's rating of A+
or better.
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Each party agrees to use its best efforts to include in each of its
policies insuring against loss, damage or destruction by fire or other casualty
(insuring the Building and Landlord's Property therein and rental value thereof,
in the case of Landlord, and insuring Tenant's Property and business interest in
the Demised Premises (business interruption insurance) in the case of the
Tenant), a waiver of the insurer's right of subrogation against the other party,
or if such waiver should be unobtainable or unenforceable (i) an express
agreement that such policy shall not be invalidated if the insured waives the
right of recovery against any party responsible for a casualty covered by the
policy before the casualty, or (ii) any other form of permission for the release
of the other party. If such waiver, agreement or permission shall not be, or
shall cease to be, obtainable without additional charge or at all, the insured
party shall so notify the other party promptly after learning thereof. In such
case, if the other party shall so elect and shall pay the insurer's additional
charge therefore, such waiver, agreement or permission shall be included in the
policy, or other party shall be named as an additional insured in the policy.
Each such policy which shall so name a party hereto as an additional insured
shall contain agreements by the insurer that the policy will not be canceled
without at least thirty (30) days prior notice to all insured and that the act
of omission of one insured will not invalidate the policy as to the other
insured. The failure by Tenant, if named as an additional insured, promptly to
endorse to the order of Landlord, without recourse, any instrument for the
payment of money under or with respect to the policy of which Landlord is the
owner or primary insured, shall be deemed a default under this lease.
Each party hereby releases the other party with respect to any claim
(including a claim for negligence) which it might otherwise have against the
other party for loss, damage or destruction with respect to its property
(including the Building, Building Complex, the Demised Premises and rental value
or business interruption) occurring during the term of this Lease to the extent
to which it is insured under a policy or policies containing a waiver of
subrogation or permission to release liability or naming the other party as an
additional insured as provided above.
Any building employee to whom property shall be entrusted by or on
behalf of Tenant shall be deemed to be acting as Tenant's agent with respect to
such property and neither Landlord nor its agents shall be liable for any damage
to the property of Tenant or others entrusted to employees of the Building, nor
for the loss of or damage to any property of Tenant by theft or otherwise.
13. INSURANCE RATING
Tenant will not conduct or permit to be conducted any activity, or
place any equipment in or about the Demised Premises, which will, in any way,
increase the rate of fire insurance or other insurance on the Building; and if
any increase in the rate of fire insurance or other insurance is stated by any
insurance company or by the applicable Insurance Rating Bureau to be due to
activity or equipment in or about the Demised Premises, such statement shall be
conclusive evidence that the insurance in such rate is due to such activity or
equipment and, as a result thereof, Tenant shall be liable for such increase and
shall reimburse Landlord therefor.
14. LANDLORD'S COVENANTS SERVICES AND UTILITIES
Landlord shall furnish reasonably adequate electricity, water, lavatory
supplies, and automatically operated elevator service, during normal building
hours and on the days specified below, and normal and customary cleaning and
char service in the Common Areas of the Building Complex, after business hours.
Landlord shall furnish hot and cold water at those points of supply provided for
the general use of all of the tenants in the Building, as well as heat and air
conditioning which shall be controlled by the Tenant. The proper electrical
facilities will be furnished by Landlord in accordance with Exhibit "D" to
supply sufficient power for standard office machines of low electrical
consumption; provided, however, that Tenant shall bear the utilities costs
occasioned by electro-data processing machines, commercial copying machines,
computers and similar machines of high electrical consumption including air
conditioning costs therefor. Landlord shall provide routine maintenance,
painting, and electrical lighting service for all public areas and special
services areas of the Building, in the manner and to the extent deemed by
Landlord to be standard. The electrical wiring, risers and other equipment in
the Building are not represented by Landlord to be adequate for any purpose
other than general office use including standard office machines of low
electrical consumption. Tenant agrees that it will not make any use of the
electrical equipment of the Building which exceeds the capacity of such
equipment. Failure by Landlord to any extent to furnish these defined services,
or any cessation thereof, shall not render Landlord liable in any respect for
damages to either person or property, nor shall such events be construed an
eviction of Tenant, nor work an abatement of rent, nor relieve Tenant from
fulfillment of any term, condition covenant or agreement hereof. Should any of
the common area building equipment or machinery break down, or for any cause or
reason cease to function properly,
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Landlord shall use reasonable diligence to repair the same promptly but Tenant
shall have no claim for rebate of rent or for any damages on account of any
interruptions in services occasioned thereby or resulting therefrom. Tenant
shall be responsible for the maintenance of the heating and air conditioning
unit, char service for their suite, and bulb replacement of lighting fixtures.
15. DEFAULT
(a) The following events (herein referred to as an "event of default")
shall constitute defaults of Tenant hereunder;
(1) Tenant shall default in the due and punctual payment of
rent, or any other amounts payable hereunder, and such default shall continue
for five (5) days after written notice to Tenant;
(2) This Lease or the estate of Tenant hereunder shall be
transferred to or shall pass to or devolve upon any other person or party except
as permitted herein;
(3) This Lease or the Demised Premises or any part thereof
shall be taken upon execution or by other process of law directed against
Tenant, or shall be taken upon or subject to any attachment at the instance of
any creditor or claimant against Tenant, and said attachment shall not be
discharged or disposed of within fifteen (15) days after the levy thereof;
(4) Tenant shall file a petition in bankruptcy or insolvency
or for reorganization or arrangement under the bankruptcy laws of the United
States or under any insolvency act of any state, or shall voluntarily take
advantage of any such law or act by answer or otherwise, or shall be dissolved
or shall make an assignment for the benefit of creditors, unless such action
will permit Tenant to continue performance of this Lease;
(5) Involuntary proceedings under any such bankruptcy law or
insolvency act or for the dissolution or Tenant shall be instituted against
Tenant, or a receiver of trustee shall be appointed of all or substantially all
of the property of Tenant, and such proceeding shall not be dismissed or such
receivership or trusteeship vacated within thirty (30) days after such
institution or appointment unless such action will permit Tenant to continue
performance of this Lease.
(6) Tenant shall fail to take possession of the Demised
Premises within thirty (30) days of the Rent Commencement Date;
(7) Tenant shall abandon the Demised Premises, or
(8) Tenant shall fail to perform any of the other agreements,
terms, covenants or conditions hereof on Tenant's part to be performed, and such
non-performance shall continue for a period of thirty (30) days after written
notice thereof by Landlord to Tenant, or if such performance cannot be
reasonably had within such thirty (30) day period, Tenant shall not in good
faith have commenced such performance with such thirty (30) day period and shall
not diligently proceed therewith to completion.
(b) Upon the occurrence of an event of default, Landlord shall have the
right, at its election, then or at any time thereafter and while any such event
of default shall continue, either;
(1) To give Tenant written notice of Landlord's intention to
terminate this Lease on the date of such given notice or on any later date
specified therein, whereupon on the date specified in such notice, Tenant's
right to possession of the Demised Premises shall cease and this Lease shall
thereupon be terminated, except as to Tenant's liability, as if the expiration
of the term fixed in such notice were the end of the term herein originally
demised, or,
(2) To re-enter and take possession of the Demised Premises or
any part thereof, and repossess the same as Landlord's former estate and expel
Tenant and those claiming through or under Tenant, and remove the effects of
both or either without being deemed guilty of any manner of trespass, and
without prejudice to any remedies for arrears of rent or preceding breach of
covenants or conditions. Should Landlord elect to re-enter as provided in this
Paragraph 15(b)(2) or should Landlord take possession pursuant to legal
proceedings or pursuant to any notice provided for by law, Landlord may, from
time to time, without terminating this Lease, relet the Demised Premises or any
part thereof in Landlord's or Tenant's name, but for the account of Tenant, for
such term or terms (which may be greater or less than the period which would
otherwise have constituted the balance of the term of this Lease) and on such
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conditions and upon such other terms (which may include concessions of free rent
and alteration and repair of the Demised Premises) as Landlord, in its sole
discretion, may determine, and Landlord may collect and receive the rents
therefor. Landlord shall in no way be responsible or liable for any failure to
relet the Demised Premises, or any part thereof or for any failure to collect
any rent due upon such reletting. No such re-entry or taking possession of the
Demised Premises by Landlord shall be construed as an election on Landlord's
part to terminate this Lease unless a written notice of such intention be given
to Tenant. No notice from Landlord hereunder or under a forcible entry and
detainer statute or similar law shall constitute an election by Landlord to
terminate this Lease unless such notice specifically so states. Landlord
reserves the right following any such re-entry and/or reletting to exercise its
right to terminate this Lease by giving Tenant such written notice, in which
event this Lease will terminate as specified in such notice.
(c) In the event that Landlord does not elect to terminate this lease
as permitted in Paragraph 15 (b)(1) hereof, but on the contrary, elects to take
possession as provided in Paragraph 15(b)(2), Tenant shall pay to Landlord: (i)
the rent and other sums as herein provided, which would be payable hereunder if
such repossession had not occurred, less (ii) the net proceeds, if any, of any
reletting of the Demised Premises after deducting all Landlord's expenses in
connection with such reletting, including, but without limitation, all
repossession costs, brokerage commissions, legal expenses, attorneys' fees,
expenses of employees, alteration and repair costs and expenses of preparation
for such reletting. If, in connection with any reletting, the new lease term
extends beyond the existing term, or the Demised Premises covered thereby
include other promises not part of the Demised Premises, a fair apportionment of
the rent received from such reletting and the expenses incurred in connection
therewith as provided aforesaid will be made in determining the net proceeds
from such reletting.
(d) In the event this Lease is terminated, Landlord shall be entitled
to recover forthwith against Tenant as damages for loss of the bargain and not
as a penalty, an aggregate sum which, at the time of such termination of this
Lease, represents the excess, if any, of the aggregate of the rent and all other
sums payable by Tenant hereunder that would have accrued for the balance of the
term over the aggregate rental value of the Demised Premises for the balance of
such term, both discounted to present value at the rate of ten percent (10%) per
annum.
(e) Suit or suits for the recovery of the amounts of damages set forth
above may be brought by Landlord, from time to time, at Landlord's election and
nothing herein shall be deemed to require Landlord to await the date whereon
this Lease or the term hereof would have expired by limitation had there been no
such default by Tenant or no such termination, as the case may be. Each right
and remedy provided for in this Lease shall be cumulative and shall be in
addition to every other rights or remedy provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise, including,
but not limited to, suits for injunctive relief and specific performances. The
exercise or beginning of the exercise by Landlord of any one or more of the
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise shall not preclude the simultaneous
or later exercise by Landlord or any and all other right or remedies provided
for in this Lease or now or hereafter existing at law or in equity or by statute
or otherwise. All costs incurred by Landlord in connection with collecting any
amounts and damages owing by Tenant pursuant to the provisions of this Lease or
to enforce any provision of this Lease, including reasonable attorneys' fees
from the date any such matter is turned over to an attorney, shall also be
recoverable by Landlord from Tenant.
(f) No failure by Landlord to insist upon the strict performance of any
agreement, term, covenant or condition hereof or to exercise any right or remedy
consequent upon a breach thereof, and no acceptance of full or partial rent
during the continuance of any such breach, shall constitute a waiver of any such
breach of such agreement, term, covenant or condition. No agreement, term,
covenant or condition hereof to be performed or complied with by Tenant, and no
breach thereof, shall be waived, altered or modified except by written
instrument executed by Landlord. No waiver of any breach shall affect or alter
this Lease, but each and every agreement, term, covenant and condition hereof
shall continue in full force and effect with respect to any other than existing
or subsequent breach thereof. Notwithstanding any unilateral termination of this
Lease, this Lease shall continue in full and effect as to any provisions hereof
which require observance or performance of Landlord or Tenant subsequent to
termination.
16. NO WAIVER
If under the provisions of this Lease, a compromise or settlement
thereof shall be made, it shall not be considered a waiver of any breach of any
covenant, condition, or agreement herein contained, and that no waiver of any
breach of any covenant, condition, or agreement itself shall be considered a
waiver of any subsequent breach thereof. No payment by Tenant or receipt by the
Landlord of a lesser amount than the
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monthly installments of rent herein stipulated shall be deemed to be other than
on account of earliest stipulated rent, nor shall any endorsement or statement
on any check, or any letter accompanying any check or payment as rent, be deemed
an accord and satisfaction, and the Landlord may accept any such check or
payment without prejudice to the Landlord's right to recover the balance of such
rent, or to pursue any other remedy in this Lease. No re-entry by the Landlord,
and no acceptance by Landlord of keys from Tenant, shall be considered an
implied acceptance of a surrender of this Lease.
17. LANDLORD'S CURE OF DEFAULT BY TENANT/REIMBURSEMENT OF EXPENSES
If the Tenant defaults in the making of any payment or in the doing of
any act herein required to be made or done by Tenant, then the Landlord may, but
shall not be required to, make such payment or do such act, or if the Landlord
shall incur any charge or expense on behalf of Tenant under the terms of this
Lease, the amount of the expense thereof, if made or done by the Landlord, with
interest thereon at the lesser of eighteen percent (18%) per annum or the
highest non-usurious rate of interest permitted between the parties hereto by
the laws of the jurisdiction in which the Demised Premises are located, from the
date paid by Landlord, shall be paid by Tenant to Landlord, and shall constitute
additional rent hereunder, due and payable with the monthly installment of rent
next due and payable after Landlord sends a written invoice therefor; provided,
however, that the making of such payment or the doing of such act by the
Landlord shall not operate to cure such default by Tenant, or to stop Landlord
from the pursuit of any remedy to which Landlord would otherwise be entitled.
18. LANDLORD'S LIEN
INTENTIONALLY DELETED
19. INSPECTION OF DEMISED PREMISES
Tenant further agrees that it will allow the Landlord, its agents or
employees, to enter the Demised Premises at all reasonable times, without charge
therefor to Landlord, and without diminution of the rent payable by Tenant, to
examine, inspect or to protect the same, or to prevent damage or injury to the
same, or to make such alterations and repairs as the Landlord may deem
necessary, or to exhibit the same to prospective tenants.
20. LIABILITY FOR DAMAGE TO PERSONAL PROPERTY AND PERSONS: INDEMNIFICATION
Landlord shall not be liable for any accident or damage caused by
electric lights or wires, or any accident or damage which may occur through the
operation of elevators, heating, electrical or plumbing apparatus, or any
accident or injury occurring in connection with said Building and its services,
unless caused by the negligence of Landlord or its employees, agents, or
contractors. Landlord will not be liable for loss of or damage to property of
Tenant caused by rain, snow, water or steam that may leak into or flow from any
part of said Building through any defects in the roof or plumbing or from any
other source, including but not limited to acts or omissions on the part of
other tenants of the Building or persons using the Building, or present therein,
not resulting from acts of negligence on the part of Landlord. All goods,
property or personal effects stored or placed by Tenant in or about the Building
shall be at the risk of the tenant, unless the loss is caused by the negligence
of Landlord or its employees, agents, or contractors.
Tenant shall indemnify Landlord and its Managing Agent, and shall save
them harmless from and against any and all claims, actions, damages, liability
and expense, including reasonable attorneys' fees, in connection with loss of
life, personal injury and/or damage to property arising from or out of any
occurrence in, upon or at the Demised Premises, or the occupancy or use by
Tenant of the Demised Premises or any part thereof, or occasioned wholly or in
part by any action or omission of Tenant, its agents, servants, employees,
subtenants, assignees or invitees. In case Landlord and/or its Managing Agent
shall, without fault on their part, be made a party(ies) to any litigation
commenced by or against Tenant, the Tenant shall protect and hold them harmless,
and shall pay all costs, expenses and reasonable attorneys' fees incurred or
paid by the Landlord and/or its Managing Agent in connection with such
litigation. Tenant shall also pay all costs, expenses and reasonable attorneys'
fees that may be incurred or paid by Landlord in enforcing the covenants and
agreements in this Lease.
Landlord shall indemnify Tenant, and shall save it harmless from and
against any and all claims, actions, damages, liability and expense, including
reasonable attorneys' fees, in connection with loss of life, personal injury
and/or damage to property arising from or out of any occurrence in, upon or at
the Demised Premises, or occasioned wholly or in part by any action or omission
of Landlord, its agents, servants,
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employees, subtenants, assignees or invitees. In case Tenant shall, without
fault on its part, be made a party(ies) to any litigation commenced by or
against Landlord, the Landlord shall protect and hold it harmless, and shall pay
all costs, expenses and reasonable attorneys' fees incurred or paid by the
Tenant in connection with such litigation.
21. LIABILITY OF LANDLORD
Tenant shall look only to Landlord's estate and interest in the Building
for the satisfaction of Tenant's remedies for the collection of any judgement
(or other judicial process) requiring the payment of money by Landlord in the
event of any default by Landlord under this Lease, and no other property or
other assets of Landlord shall be subject to levy, execution or other
enforcement, procedure for the satisfaction of Tenant's remedies under or with
respect to this Lease. Neither Landlord nor any of the partners comprising the
partnership which is the Landlord herein, shall be liable for any deficiency.
Nothing contained in this Paragraph shall be construed to permit Tenant to
offset against rents due a successor landlord, a judgement (or other judicial
process) requiring the payment of money by reason of any default of a prior
landlord, except as otherwise specifically set forth herein.
22. CONDUCT OF BUSINESS
The Landlord and its Managing Agent assume no liability or responsibility
whatever with respect to the conduct and operation of Tenant's business to be
conducted in the Demised Premises nor with respect to the conduct and operation
of any other use of the Demised Premises.
23. DAMAGE OR DESTRUCTION TO BUILDING
(a) In the event the Demised Premises or the Building are damaged by fire
or other insured casualty and the insurance proceeds have been made available
therefor by the holder or holders of any mortgages or deed of trust covering the
Building, the damage shall be repaired by and at the expense of Landlord to the
extent of such insurance proceeds available therefor, provided such repairs and
restoration can, in Landlord's reasonable opinion, be made within two hundred
seventy (270) days after the occurrence of such damage without the payment of
overtime or other premiums, and until such repairs and restoration are completed
the rent shall be abated in proportion to the part of the Demised Premises
which is unusable by Tenant in the conduct of its business to the extent of
rental interruption insurance (but there shall be no abatement of rent by
reason of any portion of the Demised Premises being unusable for a period equal
to three (3) days or less). Landlord agrees to notify Tenant within thirty (30)
days after such casualty if it estimates that it will be unable to repair and
restore the Demised Premises within said two hundred seventy (270) day period.
Such notice shall set forth the approximate length of time Landlord estimates
will be required to complete such repairs and restoration. Notwithstanding
anything to the contrary contained herein, if Landlord cannot or estimates it
cannot make such repairs and restoration within said two hundred seventy (270)
day period, then Tenant, may by written notice to Landlord, terminate this Lease
as of the date of the occurrence of such damage, provided such notice is given
to Landlord within fifteen (15) days after Landlord notifies Tenant of the
estimated time for completion of such repairs and restoration. Except as
provided in this Paragraph 23, there shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business or property arising from the making of any such repairs, alterations or
improvements in or to fixtures, appurtenances and equipment. Tenant understands
that Landlord will not carry insurance of any kind on Tenant's furniture and
furnishings or on any fixtures or equipment removable by Tenant under the
provisions of this Lease, and that Landlord shall not be obligated to repair any
damage thereto or replace the same unless damage is caused by Landlord's
negligence. Landlord shall not be required to repair any injury or damage by
fire or other cause, or to make any repairs or replacements of improvements
installed in the Demised Premises by or for Tenant.
(b) In case the Building throughout shall be so injured or damaged,
whether by fire or otherwise (though the Demised Premises may not be affected,
or if affected, can be repaired within said two hundred seventy (270) days)
that Landlord, within sixty (60) days after the happening of such injury, shall
decide not to reconstruct or rebuild the Building, then notwithstanding anything
contained herein to the contrary, upon notice in writing to that effect given by
Landlord to Tenant within said sixty (60) days, Tenant shall pay the rent,
properly apportioned up to date of such occurrence, and this Lease shall
terminate from the date of delivery of said written notice, and both parties
hereto shall thereafter be discharged from all further obligations hereunder.
24. CONDEMNATION
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If the whole of the Demised Premises or so much thereof as to render the
balance unusable by Tenant for the proper conduct of its business shall be taken
under power of eminent domain or transferred under threat thereof, then this
Lease, at the option of either Landlord or Tenant exercised by either party
giving notice to the other of such termination within thirty (30) days after
such conveyance or taking possession whichever is earlier, shall forthwith cease
and terminate and the rent shall be duly apportioned as of the date of such
taking or conveyance. No award for any partial or entire taking shall be
apportioned, and Tenant hereby assigns to Landlord any award which may be made
in such taking or condemnation, together with any and all rights of Tenant now
or hereafter arising in or to the same or any part thereof; provided, however,
that nothing contained herein shall be deemed to give Landlord any interest in
or to require Tenant to assign to Landlord any award made to Tenant for the
taking of personal property, fixtures and leasehold improvements belonging to
Tenant and/or for expenses of moving to a new location. In the event of a
partial taking which does not result in a termination of this Lease, rent shall
not be reduced. Promptly after obtaining knowledge hereof, Landlord or Tenant,
as the case may be, shall notify the other of any pending or threatened
condemnation or taking affecting the Demised Premises or the Building.
25. PARKING AREAS
Subject to the provisions of Article 3(b), the Landlord agrees to provide
for the use of Tenant in common with others, a surface parking area adjacent to
the Building in which the Demised Premises are located. The Landlord reserves
the right to promulgate rules and regulations relating to the use of such
surface parking area, including such limitations as may, in the opinion of the
Landlord, be necessary and desirable. Tenant and Tenant's employees shall park
their cars only in those portions of the parking areas designated for employee
parking by the Landlord. Further, Tenant and its employees are expressly
prohibited from parking in any portion of the parking area designated or marked
for visitor or retail parking only. Tenant shall, within five (5) days after
taking possession of the Demised Premises, furnish Landlord or its agent with
the automobile license numbers assigned to Tenant's cars and the cars of
Tenant's employees, and shall thereafter notify the Landlord or its agent of any
changes within five (5) days after such changes occur. In the event that the
Tenant or any of its employees shall park their cars in any portion of the
parking area other than that portion designated for that purpose, then the
Landlord shall have the right, at Landlord's option, to assess Tenant a fine or
penalty for any such improperly parked car, and/or to have any such improperly
parked car towed at Tenant's expense.
26. ASSIGNMENT AND SUB-LETTING
Tenant will not sublet the Demised Premises or any part thereof, or
transfer possession or occupancy thereof, to any person, partnership, firm or
corporation, or transfer or assign this Lease, without the prior written
consent, of Landlord, nor shall any subletting or assignment hereof be effected
by operation of law or otherwise, without the prior written consent of Landlord,
which consent may be granted or withheld by Landlord for any reason in
Landlord's sole discretion. Landlord shall consent to the assignment or
subleasing of the Demised Premises to another Bank, Financial Institution, or a
tenant otherwise engaged in financial services. In the event that Tenant
requests Landlord's consent to assign this Lease or to sublet all of the Demised
Premises (which request must be made in writing), Landlord shall upon receipt of
such written request have the option of terminating this Lease, which option
shall be exercisable by submitting written notice thereof to Tenant within sixty
(60) days following receipt of such a written request. Landlord's options shall
in no way affect or limit Landlord's right to withhold consent to Tenant's
request. Consent by Landlord to any assignment, transfer or subletting to any
party, shall not be construed as a waiver or release of Tenant from the terms of
any covenant or obligation under this Lease, nor shall a consent to one
assignment, transfer or sublease to any person, partnership, firm or corporation
be deemed to be a consent to any subsequent assignment, transfer or subletting
to another person, partnership firm or corporation. Any assignment or subletting
consented to by Landlord shall not relieve Tenant of any of its primary
responsibility for all obligations under this Lease, and such consent by
Landlord shall not be effective unless and until (i) Tenant gives written notice
thereof to Landlord, and (ii) such transferee, assignee or sublessee shall
deliver to Landlord (A) a written agreement in form and substance satisfactory
to Landlord pursuant to which such transferee, assignee or sublessee assumes all
of the obligations and liabilities of Tenant hereunder, and (B) a certified copy
of the assignment agreement or sublease. Any assignment, transfer or subletting
without Landlord's written consent shall be void, and shall, at the option of
Landlord, constitute a default under the terms of this Lease unless Tenant's
stock is publicly traded, if at any time during the term of this Lease any part
or all of the shares of Tenant's stock or Tenant's partnership interests shall
be transferred by sale, assignment, merger, operation of law or other
disposition so as to result in a transfer of more than twenty-five percent (25%)
of Tenant's stock or partnership interest, such transfer shall be deemed as an
assignment and, therefore, prohibited without the express written consent of
Landlord.
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27. HOLDING OVER
In the event that Tenant shall not immediately surrender the Demised
Premises on the date of expiration of the term hereof, Tenant shall, by virtue
of the provisions hereof, become a Tenant by the month at a monthly rent equal
to the greater of (a) the then fair market rental value of the Demised Premises
or (b) twice the monthly rental in effect during the last month of the term of
this Lease, which said monthly tenancy shall commence with the first day next
after the expiration of the term of this Lease. The Tenant as a monthly tenant
shall be subject to all of the conditions and covenants of this Lease as though
the same had originally been a monthly tenancy. Tenant shall give to Landlord at
least thirty (30) days written notice of any intention to quit the Demised
Premises, and Tenant shall be entitled to thirty (30) days written notice to
quit the Demised Premises, except in the event of nonpayment of rent in advance
or of the breach of any other covenant by the Tenant, in which event Tenant
shall not be entitled to any notice to quit, the usual thirty (30) days notice
to quit being hereby expressly waived. Notwithstanding the foregoing provisions
of the paragraph, in the event that Tenant shall hold over after the expiration
of the term hereby created, and if Landlord shall desire to regain possession of
the Demised Premises promptly at the expiration of the term of this Lease, then
at any time prior to Landlord's acceptance of rent from Tenant as a monthly
tenant hereunder, Landlord at its option, may forthwith re-enter and take
possession of the Demised Premises without process, or by any legal process in
force in the jurisdiction in which the Demised Premises are located.
28. SUBORDINATION
This Lease is subject and subordinate to all ground or underlying,
leases, and to any first mortgage and/or first deed of trust (which terms shall
include both construction and permanent financing) which may now or hereafter
encumber or otherwise affect the real estate (including the Building) of which
the Demised Premises form a part, or Landlord's leasehold interest therein, and
to all renewals, extensions, modifications, consolidations, replacements,
recasting and/or refinancing thereof. This clause shall be self-operative, and
no further instrument of subordination shall be required by any mortgagee or
trustee to effect the subordination of this Lease. Nonetheless, in confirmation
of such subordination, Tenant shall, at Landlord's request, promptly execute any
requisite or appropriate certificate or document. Tenant hereby constitutes and
appoints Landlord as Tenant's attorney-in-fact to execute any such certificate
or documents for or on behalf of Tenant. Tenant agrees that in the event that
any proceedings are brought for the foreclosure of any such mortgage, Tenant
shall attorn to the purchaser at such foreclosure sale, if requested to do so by
such purchaser, and to recognize such purchaser as the Landlord under this
Lease, and 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 and the obligations of Tenant
hereunder, in the event that any such foreclosure proceeding is prosecuted or
completed. And Tenant covenants and agrees that it will, at the written request
of the party secured by any such deed of trust, execute, acknowledge and
deliver any instrument that has for its purpose and affect the subordination of
said deed of trust to the lien of the Lease. Landlord shall use its "best
efforts" to obtain a non-disturbance agreement from Landlord's Mortgagee.
29. ESTOPPEL CERTIFICATES
Tenant agrees, at any time and from time to time, upon not less than
five (5) days prior written notice by Landlord, to execute, acknowledge and
deliver to Landlord, a statement in writing (i) certifying that this Lease is
unmodified and in full force and effect, or, if there have been modifications,
that this Lease is in full force and effect as modified, and stating any such
modifications; (ii) certifying that Tenant has accepted possession of the
Demised Premises, and that any improvements required by the terms of this Lease
to be made by the Landlord have been completed to the satisfaction of the
Tenant; (iii) stating that no rent under this Lease has been paid more than
thirty (30) days in advance of its due date; (iv) stating the address to which
notices to Tenant should be sent; (v) certifying that Tenant, as of the date of
any such certification, has no charge, lien or claim of set-off under this
Lease, or otherwise, against rents or other charges due or to become due
hereunder; and (vi) stating whether or not, to the best of Tenant's knowledge,
Landlord is in default in the performance of any covenant, agreement or
condition contained in this Lease, and, if so, specifying each such default of
which Tenant may have knowledge. Any such statement delivered pursuant hereto
may be relied upon by any owner of the Building, any prospective purchaser of
the Building, any mortgagee or prospective mortgagee of the Building or of
Landlord's interest, or any prospective assignee of any such mortgagee.
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Tenant further agrees that, from the date of execution of this Lease,
it will not seek any redress under this Lease by reason of any act or omission
of the Landlord, until the Tenant shall have given written notice of such act or
omission to Landlord's mortgagee, and until a reasonable period of time shall
have elapsed following the giving of such notice, during which period of time
Landlord's mortgagee shall have the right, but shall not be obligated, to remedy
such act or omission.
30. MANAGING AGENT
Tenant is hereby notified that the Landlord has appointed Compson
Development Limited Partnership, its Managing Agent. The Landlord has authorized
said Managing Agent to act for, and in the name of, the Landlord for any and all
purposes under this Lease, and Tenant shall direct any and all notices and
inquiries or any kind whatsoever pursuant to or regarding this Lease to said
Managing Agent after execution hereof. The Landlord reserves the right to
substitute any other person, firm or corporation for said Managing Agent, and
upon written notice thereof by the Landlord to Tenant, Tenant hereby
acknowledges the authority of any such substitute Managing Agent to act for, and
in the name of, the Landlord for any and all purposes under this Lease, and
Tenant shall direct any and all notices and inquiries of any kind whatsoever
pursuant to or regarding this Lease to said Managing Agent.
31. NOTICES
All notices required or desired to be given hereunder by either party to
the other shall be given by certified or registered mail, first class postage
prepaid, return receipt requested. Notices to the respective parties shall be
addressed as follows:
If to the Landlord: 1320 OLD CHAIN BRIDGE ROAD ASSOCIATES
1320 Old Chain Bridge Road
Suite 400
McLean, Virginia 22101
If to Landlord's mortgagee: GENERAL ELECTRIC CAPITAL CORPORATION
100 Prospect Street, North Tower, Suite 3000
Stamford, CT 06927-6020
If to the Tenant: THE GEORGE MASON BANK
11185 Main Street
Fairfax, Virginia 22030
Either party may, by like written notice, designate a new address to which
such notices shall be directed.
32. NO PARTNERSHIP
Nothing contained in this Lease shall be deemed or construed to create
a partnership or joint venture of or between Landlord and Tenant, or create any
other relationship between the parties hereto other than
that of Landlord and Tenant.
33. NO REPRESENTATIONS BY LANDLORD
Neither Landlord nor any agent or employee of Landlord, has made any
representations or promises, with respect to the Demised Premises or the
Building except as herein expressly set forth, and no rights, privileges,
easements or licenses are acquired by Tenant except as herein set forth. The
Tenant by taking possession of the Demised Premises, shall accept the same "as
is", and such taking of possession shall be conclusive evidence that the Demised
Premises and the Building are in good and satisfactory condition at the time of
such taking of possession.
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34. BROKERAGE
Landlord and Tenant each represents that they had no dealings with any real
estate broker, finder or other person, with respect to this Lease in any manner.
Tenant agrees to indemnify and hold harmless Landlord against and from any
claims for any brokerage commission or other fees and all costs, expenses and
liabilities in connection therewith, including, without limitation, attorneys'
fees and expenses, arising out of any dealings had by Tenant with any broker.
35. WAIVER OF TRIAL BY JURY
The parties hereto shall, and they hereby do, waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
and occupancy of the Demised Premises and/or any claim of injury or damage. In
the event that Landlord commences any proceedings for non-payment of rent,
minimum rent or additional rent, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceedings. This shall not, however,
by construed as a waiver of Tenant's right to assert such claims in any separate
action brought by Tenant.
36. QUIET ENJOYMENT
Upon payment by Tenant of all items of rent, additional rent, and any and
all other sums to be paid by Tenant to Landlord hereunder, and the observance
and performance of all of the covenants, terms and conditions to be observed and
performed by Tenant, Tenant shall have the peaceful and quiet use of the Demised
Premises, and all right, servitudes and privileges belonging, or in anywise
appertaining thereto or granted hereby, for the term of this Lease, without
hindrance or interruption by Landlord, or any other person or persons lawfully
claiming by, through or under Landlord, subject nevertheless to the terms and
conditions of this Lease, and to any mortgage, deed of trust, ground lease or
agreement to which this Lease, and/or Landlord's interest in the Demised
Premises and the Building of which they are a part, is subordinate. Landlord
warrants that it has full right and authority to enter into this Lease for the
full term hereof.
37. BINDING EFFECT OF LEASE
It is agreed that all rights, remedies and liabilities herein given to or
imposed upon either of the parties hereto, shall extend to their respective
heirs, executors, administrators, and except as otherwise expressly provided in
this Lease, their successors and assigns. Landlord may freely and fully assign
its interest hereunder. The term "Landlord" shall mean only the owner at the
time in question of the Building or of a lease of the Building, so that in the
event of any transfer or transfers of title in the Building or of Landlord's
interest in a lease of the Building, the transferor shall be and hereby is
relieved and freed of all obligations of Landlord under this Lease accruing
after such transfer, and it shall be deemed, without further agreement, that
such transferee has assumed and agreed to perform and observe all obligations of
Landlord herein during the period it is the holder of Landlord's interest under
this Lease.
38. RULES AND REGULATIONS
Tenant, its agents, employees, invitees, licensees, customers, clients,
family members and guests shall at all times abide by and observe the rules, and
regulations attached hereto as Exhibit "E". In addition, Tenant, its agents,
employees, invitees, licensees, customers, clients, family members and guests
shall abide by and observe such other rules and regulations as may be
promulgated from time to time by Landlord, with a copy sent to Tenant, for the
operation and maintenance of the Building; provided, however, that the same are
in conformity with common practice and usage in similar buildings and are not
inconsistent with the provisions of this Lease. Nothing contained in this Lease
shall be construed to impose upon Landlord any duty or obligation to enforce
such rules and regulations, or the terms, conditions or covenants contained in
any other leases, as against any other tenant, and Landlord shall not be liable
to Tenant for violation of the same by any other tenant, its employees, agent,
business invitees, licensees, customers, clients, family members or guests. If
there is any inconsistency between this Lease and the rules and regulations as
set forth in Exhibit "E", this Lease shall govern.
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39. NECESSARY APPROVALS
This Lease is subject to the approval of General Electric Capital
Corporation, Mortgagee of the Demised Premises prior to Tenant's obligation to
occupy the Demised Premises.
40. APPLICABLE LAW AND CONSTRUCTION
The laws of the jurisdiction in which the Demised Premises are located
shall govern the validity, performance and enforcement of this Lease. If any
provision of this Lease shall at any time be deemed to be invalid or illegal by
any court of competent jurisdiction, this Lease shall not be invalidated
thereby; and in such event, this Lease shall be read and construed as if such
invalid or illegal provision only had not been contained herein, thereby
preserving all of the other terms, conditions and provisions of this Lease.
41. PERMITTED USES EXCLUSIVE
All parties hereby confirm that the Demised Premises are leased exclusively
for uses as specified herein, and such other ancillary and related uses as
Landlord may approve. Notwithstanding any provision to the contrary, the Demised
Premises shall not be used in whole or in part for any residential purposes, and
shall not be subject to any rent control act or redemption right relating to
residential leases, or any other such provision of law now or hereafter in
effect in the jurisdiction in which the Demised Premises are located.
42. GENDER
Feminine or neuter pronouns shall be substituted for the masculine form,
and the plural substituted for the singular number, in any place or places
herein in which the context may require such substitution or substitutions. The
Landlord herein for convenience has been referred to in neuter form.
43. ENTIRE AGREEMENT
This Lease, together with accompanying Exhibits "A" through "E" contains
the entire and only agreement between the parties and no oral statements or
representations or prior written matter not contained or referred to in this
instrument shall have any force or effect. This Lease shall not be modified in
any way except by a writing subscribed by both parties hereto. The failure of
the Landlord or Tenant to insist upon strict performance by the other of any of
the covenants or conditions of this Lease in any one or more instances shall not
be construed as a waiver or relinquishment for the future of any such covenants
or conditions, but the same shall be and remain in full force and effect. No
waiver of any provision of this Lease shall be deemed to have been made, unless
it be in writing and signed by the party to be charged therewith.
IN WITNESS WHEREOF the parties hereto have executed this Lease.
LANDLORD:
WITNESS: 1320 OLD CHAIN BRIDGE ROAD ASSOCIATES
a Virginia Limited Partnership
[SIG] By: /s/ JAMES COMPARATO
- ----------------------------- ----------------------------------------
JAMES COMPARATO, General Partner
Date: 12/13/91
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WITNESS or ATTEST: TENANT:
THE GEORGE MASON BANK
/s/ CHARLES WIMER By: /s/ BERNARD H. CLINEBURG
- ----------------------------- ----------------------------------------
Date: 12/13/91
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<PAGE> 19
EXHIBIT "A"
[FLOOR PLAN]
<PAGE> 20
EXHIBIT "B"
THE MADISON BUILDING
LEGAL DESCRIPTION
All of Lots Eleven (11) through Twenty-five (25), both inclusive, and Lots
Thirty-five (35) through Fifty-two (52), both inclusive, Block D, of the
Subdivision known as Beverly Manor, as the same appears duly dedicated, platted
and recorded in Deed Book T-9 at Page 353 and in Plat Book 5 at Page 92, among
the Land Records of Fairfax County, Virginia.
and
A vacated portion of Beverly Road, all as more particularly described as
follows:
Beginning at a point on the Easterly R/W line of Beverly Road (Route #1807)
marking the Northwesterly corner of Old McLean Village Condominium; thence with
the Easterly R/W line of Beverly Road with a curve to the left whose radius is
440.00 feet (and whose chord is N 14 degrees 15' 53" E, 108.75 feet) an arc
distance of 109.03 feet and N 05 degrees 05' 10" W, 331.44 feet to a point
marking the Southwesterly corner of Lot 34 Beverly Manor, Block D; thence
departing from the Road with the Southerly line of said Lot 34, N 84 degrees
54' 50" E, 125.00 feet to a point marking the Southeasterly corner of Lot 34;
thence with the Easterly lines of Lots 34 - 32 Beverly Manor N 05 degrees 05'
10" W, 75.00 feet to a point marking the Southwesterly corner of Lot 26 Beverly
Manor; thence with the Southerly line of Lot 26 Beverly Manor N 84 degrees 54'
50" E, 137.29 feet to a point on the Westerly R/W line of Old Chainbridge Road
(Route #1820); thence with the Westerly line of Old Chainbridge Road with curve
to the right whose radius is 289.40 feet (and whose chord is S 11 degrees 00'
09" E, 60.05 feet) an arc distance of 60.16 feet and S 05 degrees 02' 51" E,
315.32 feet to a point marking the Northeasterly corner of Lot 10, Block D,
Beverly Manor; thence departing from the road with the Northerly line of said
Lot 10 S 84 degrees 54' 50" W, 143.27 feet to a point marking the Northwesterly
corner of Lot 10; thence with a Westerly line of Lots 10 - 1 Beverly Manor,
Block D S 05 degrees 05' 10" E, 214.15 feet to a point on the Northerly line of
the aforementioned Old McLean Village Condominium; thence with a Northerly
line of Old McLean Village Condominium N 68 degrees 37' 30" W, 179.88 feet to
the point of beginning, containing 2.66233 acres of land.
<PAGE> 21
[SITE PLAN]
<PAGE> 22
EXHIBIT "D"
THE MADISON BUILDING
WORK LETTER - OFFICE SPACE
TENANT INTERIOR IMPROVEMENTS SUPPLIED BY LANDLORD
None. Tenant accepts the Demised Premises in "As Is" condition.
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EXHIBIT "E"
THE MADISON BUILDING
RULES AND REGULATIONS
ATTACHED TO AND MADE A PART OF LEASE, DATED DECEMBER , 1991, BY AND BETWEEN
1320 OLD CHAIN BRIDGE ROAD ASSOCIATES, AS LANDLORD, AND THE GEORGE MASON BANK,
AS TENANT. TENANT AGREES FOR ITSELF, ITS EMPLOYEES AND AGENTS TO COMPLY FULLY
WITH THE FOLLOWING RULES AND REGULATIONS AND WITH SUCH REASONABLE MODIFICATIONS
THEREOF AND ADDITIONS THERETO AS LANDLORD MAY MAKE FOR THE BUILDING:
1. No sign, picture, lettering, notice or advertisement of any kind shall
be painted or displayed on or from the windows, doors, roof, or outside walls of
the Building. All of Tenant's interior signs, sign painting or lettering shall
be done in a manner approved by Landlord, and the cost thereof shall be paid by
Tenant. In the event of the violation of the foregoing by Tenant, Landlord may
remove same without any liability and may charge the expense incurred for such
removal to Tenant.
2. Tenant shall not use the name of the Building for any purpose other than
that of the business address of Tenant. Tenant agrees that Landlord may assign a
name to the Building and/or change the name of the Building at Landlord's
option.
3. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, or halls shall not be obstructed or encumbered by any
tenant or used for any purpose other than ingress and egress to and from the
Demised Premises.
4. No curtains, blinds, shades, screens, awnings, or other projections
shall be attached to or hung in, or used in connection with, any window or door
of the Demised Premises or outside wall of the Building without the prior
written consent of the Landlord, nor shall Tenant place objects against glass
partitions, doors or windows which would be unsightly from the Building's
corridors, or from tile exterior of the Building.
5. Any carpeting cemented down shall be installed with a releasable
adhesive.
6. No animals or pets or bicycles or other vehicles shall be brought or
permitted to be in the Building or the Demised Premises.
7. The water and wash closets and other plumbing fixtures shall not be used
for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein. All
damage resulting from any misuse of the fixtures shall be borne by the Tenant
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same. Tenant shall not waste electricity, water or air conditioning,
and shall cooperate fully with landlord to assure the most effective operation
of the Building's heating and air conditioning. Tenant shall not adjust any
controls other than room thermostats installed for Tenant's use. Tenant shall
not tie, wedge or otherwise fasten open any water faucet or outlet. Tenant shall
keep all corridor doors closed.
8. No tenant shall mark, paint, drill into, or in any way deface any part
of the Demised Premises or the Building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of the Landlord, and as the Landlord may direct.
9. Tenant shall not cause or permit unusual or objectionable odor to be
produced upon or permeate from the Demised Premises, including duplicating or
printing equipment emitting noxious fumes. Tenant shall not allow any cooking on
the Demised Premises. Tenant shall not disturb any occupants of this or
neighboring buildings or premises by the use of any musical instruments, radio,
television, loudspeakers, or by any unseemingly or disturbing noise.
10. No tenant shall throw anything out of the door, windows, or down any
passageways or elevator shafts.
Initials: Landlord [SIG]
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<PAGE> 24
11. Vending machines will not be permitted to be installed by anyone but
the Landlord.
12. Canvassing, soliciting, and peddling in the Building is prohibited and
each tenant shall cooperate to prevent the same.
13. No additional locks or bolts of any kind shall be placed upon any of
the doors and windows by any tenant, nor shall any change be made in existing
locks or the mechanism thereof. Each tenant must, upon the termination of his
tenancy, restore to the Landlord all keys of stores, offices, and toilet rooms,
either furnished to or otherwise procured by Tenant and in the event of the loss
of any keys, so furnished, such tenant shall pay to the Landlord the cost
thereof.
14. Tenant assumes full responsibility for protecting the Demised Premises
from theft, robbery and pilferage. Except during Tenant's normal business hours,
Tenant shall keep all doors to the Demised Premises locked and other means of
entry of the Demised Premises closed and secured.
15. Tenant is not permitted to use any part of the Building or the common
areas for any manufacturing, storage, or sale of merchandise, or property of any
kind; or for lodging or sleeping, or for any immoral or illegal purpose. Tenant
shall not install or operate any machinery or mechanical devices of a nature not
directly related to Tenant's ordinary use of the Demised Premises for general
office purposes.
16. All loading, unloading, receiving or delivery of goods, supplies or
disposal of garbage or refuse shall be made only through entry ways provided for
such purposes by Landlord.
17. All safes, freight, furniture, or other bulky matter of any description
shall be carried in or out of the Demised Premises only at such times and in
such manner as shall be prescribed in writing by Landlord, and Landlord shall in
all cases have the right to specify the proper position of any such safe,
furniture, or other bulky article, which shall only be used by Tenant in a
manner which will not interfere with or cause damage to the Demised Premises or
the Building. Tenant shall be responsible for any damage to the Building or the
property of it tenants or others and injuries sustained by any person whomsoever
resulting from the use or moving of such articles in or out of the Demised
Premises, and shall make all repairs and improvements required by Landlord or
governmental authorities in connection with the use or moving of such articles.
18. Tenant shall not bring in or allow to be kept upon the Demised Premises
any inflammable, combustible or explosive fluid, chemical or substance or any
article deemed extra hazardous on account of fire or other dangerous property.
19. Tenant shall not employ arty person to perform any cleaning, repairing,
janitorial, decorating, painting, or other services or work in or about the
Demised Premises, except with the approval of Landlord.
20. Tenant shall not overload any floor and shall not install any heavy
objects, safes, business machines, files or other equipment without having
received Landlord's prior written consent as to size, maximum weight, routing
and location thereof. Safes, furniture, equipment, machines and other large or
bulky articles shall be brought through the Building and into and out of the
Demised Premises at such times and in such manner as the Landlord shall direct
(including the designation of elevator) and at Tenant's sole risk and
responsibility. Prior to Tenant's removal of any such articles from the Demised
Premises, Tenant shall obtain written authorization therefor at the Office of
the Building and shall present such writing to a designated employee of
Landlord.
21. Landlord shall not be responsible for any lost or stolen property,
equipment, money or jewelry from the Demised Premises or the public areas of the
Building regardless of whether such loss occurs when the Demised Premises are
locked or not.
22. The Landlord reserves the right to exclude from the Building between
the hours of 6:00 o'clock p.m. and 8:00 o'clock a.m. and at all hours on Sundays
and legal holidays all persons who do not present a pass to the Building signed
by the Landlord. The Landlord will furnish passes to persons for whom any tenant
requests same in writing. Each tenant shall be responsible for all persons for
whom he requests such pass and shall be liable to the Landlord for all acts of
such persons.
Initials: Landlord [SIG]
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Tenant [SIG]
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23. The work of the janitor or cleaning personnel shall not be hindered by
Tenant after 5:30 o'clock p.m., and the windows may be cleaned at any time.
Tenant Shall provide adequate waste and rubbish receptacles to prevent
unreasonable hardship to Landlord in discharging its obligation regarding
cleaning services.
24. Tenant will refer all contractors, installation technicians rendering
any service for Tenant for supervision and approval before performance of any
contractual services. Tenant will not permit any mechanic's liens to be placed
against the Demised Premises.
25. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord's opinion, tends to impair the reputation of the Building or
its desirability for offices, and upon written notice from Landlord, Tenant
shall refrain from or discontinue such advertising.
26. Tenant may request heating mid/or air conditioning for nonbusiness
hours by submitting a written request therefor to the Building Manager's Office
no later than 2:00 o'clock p.m. the preceding workday (Monday through Friday).
The request must clearly state the start and stop of the nonbusiness hour
service. Each Tenant representative designated in the Lease will submit to the
Building Manager a list of personnel who are authorized to made such requests.
Changes, to be determined when the Building is in operation, will be fair
and reasonable and reflect the additional operating costs involved and the
necessity of having maintenance personnel on duty for a full shift, regardless
of the actual time the equipment is in use. If two or more tenants originate
similar requests, charges shall be prorated by hours of operation.
27. Wherever the word "Tenant" occurs, it is understood and agreed that it
shall mean Tenant's associates, agents, clerks, servants and visitors. Wherever
the word "Landlord" occurs, it is understood and agreed that it shall mean
Landlord's assigns, agents, clerks, servants and visitors.
Initials: Landlord [SIG]
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Tenant [SIG]
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<PAGE> 1
EXHIBIT 10F
LEASE AMENDMENT NO. 2
This Amendment to Lease Agreement is by and between WOODBURN HOLDING
LIMITED PARTNERSHIP II, a Florida limited partnership ("Landlord") and GEORGE
MASON BANKSHARES, INC. ("Tenant").
STATEMENT OF FACTS
A. On January 15, 1988, Tenant and Landlord entered into a certain Lease
Agreement for premises known as Suite 120 in the medical building located at
3289 Woodburn Road, Annandale, Virginia, as amended by an Addendum to Lease
dated January 15, 1988 (the "Lease").
B. Landlord is a successor in title to Centennial Woodburn II Associates
Limited Partnership.
C. Landlord and Tenant have agreed to extend the term of the Lease on the
terms and conditions more fully set forth in this Amendment.
NOW, THEREFORE, in consideration of the covenants herein contained, the
receipt and sufficiency of which is hereby acknowledged,
IT IS AGREED:
1. Term. The Lease Term is hereby extended for an additional period of ten
(10) years, commencing on September 1, 1996, and terminating on August 31, 2006
("Extension Period"), unless sooner terminated in accordance with the terms of
the Lease.
2. Annual Base Rent During Extension Period. The Annual Base Rent due and
payable during the Extension Period shall be Fifty-One Thousand Four Hundred
Eighty and no/100 Dollars ($51,480.00), calculated on the basis of Twenty-Six
and no/100 Dollars ($26.00) per square foot, which amount is subject to
adjustment pursuant to Section 4.2 of the Lease.
3. Operating Charges Per Square Foot Base Rate. Section 1.1(c) of the
Lease is hereby amended as follows: "The Basic Operating Charges Per Square Foot
Base Amount" during the Extension Period shall be an amount equal to the actual
expenses incurred for the Building during the twelve (12) months prior to the
Extension Period.
4. Tenant Area Janitorial Charges Per Square Foot Base Amount. Section
1.1(n) of the Lease is hereby amended as follows: "The Tenant Area Janitorial
Charges Per Square Foot Base Amount" during the Extension Period shall be an
amount equal to the actual janitorial charges incurred for the Building during
the twelve (12) months prior to the Extension Period.
5. Option To Renew. Landlord and Tenant acknowledge that Tenant has
exercised its renewal option as provided in Paragraph 5 of the Addendum to Lease
dated January 15, 1988, which is of no further force and effect. Landlord hereby
grants to Tenant the Option To Renew this Lease as follows:
"Section 3.6 Landlord hereby grants to Tenant the conditional right,
exercisable at Tenant's option, to renew the term of this Lease for two (2)
five-year terms (the "Renewal Term(s)"). If exercised, and if the conditions
applicable thereto have been satisfied, the Renewal Term shall commence
immediately following the end of the then current Lease term. The right of
renewal herein granted to Tenant shall be subject to, and shall be exercised in
accordance with, the following terms and conditions:
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<PAGE> 2
(a) Tenant shall exercise its right of renewal with respect to the
Renewal Term by giving Landlord written notice of such election not earlier than
fifteen (15) months nor later than twelve (12) months prior to the expiration of
the then current Lease term. The parties shall have thirty (30) days after
Landlord's timely receipt of such notice in which to agree on the annual base
rent, escalation factor and additional rent which shall be payable during each
year of the Renewal Term. Among the factors to be considered by the parties
during such negotiations shall be the general office rental market in Fairfax
County, Virginia, the rental rates then being quoted by Landlord to comparable
tenants for comparable space in the Building, and the rents being charged
similar tenants for similar office space in multi-tenanted, multi-story, medical
buildings. In no event, however, shall Landlord be under any obligation to agree
to an annual base rent, escalation factor or additional rent for the Renewal
Term which is less than the annual base rent, escalation factor or additional
rent in effect under this Lease during the Lease Year immediately preceding the
commencement of the Renewal Tem. If during such thirty (30) day period the
parties agree on such annual base rent, escalation factor and additional rent
payable during each year of the Renewal Term, then they shall promptly execute
an amendment to this Lease stating the rent so agreed upon. If during such
thirty (30) day period the parties are unable, for any reason whatsoever, to
agree on such annual base rent, escalation factor and additional rent payable,
then Tenant's rights with respect to the Renewal Term shall lapse and be of no
further force or effect.
(b) If Tenant's renewal notice is not given timely, then Tenant's
right of renewal with respect to the Renewal Term shall lapse and be of no
further force or effect.
(c) If Tenant is in default under this Lease on the date Tenant sends
a renewal notice or any time thereafter until the Renewal Term is to commence,
then, at Landlord's election, the Renewal Term shall not commence and the term
of this Lease shall expire at the expiration of the then current Lease term.
(d) Tenant's right of renewal under this Section may be exercised
only by Tenant and shall not be exercised by any transferee, sublessee or
assignee of Tenant."
6. General Provisions. Section 25.6 of the Lease is hereby amended as
follows:
All notices or other required communications shall be in writing and
shall be deemed duly given when delivered in person (with receipt therefor), or
when sent by certified or registered mail, return receipt requested, postage
prepaid, to the following addresses:
If to Landlord: Realty Management Company
3 Bethesda Metro Center
Suite 600
Bethesda, Maryland 20814
With a copy to: WLD Enterprises, Inc.
One East Broward Boulevard
Suite 1101
Ft. Lauderdale, Florida 33301
If to Tenant: at the Tenant address for Notices
Either party may change its address for the giving of notices or
provide for additional copies of notices by notice given in accordance with this
Section. If Landlord or the holder of any 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
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<PAGE> 3
such holder, and no such notice shall be considered duly sent unless such copy
is 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.
7. Managing Agent. Tenant is hereby notified that the Landlord has
appointed Realty Management Company, 3 Bethesda Metro Center, Suite 600,
Bethesda, Maryland 20814, as its Managing Agent. The Landlord has authorized
said Managing Agent to act for, and in the name of, the Landlord, for any and
all purposes under this Lease, and Tenant shall direct any and all notices and
inquiries of any kind whatsoever pursuant to and regarding this Lease to said
Managing Agent. The Landlord reserves the right to substitute any other person,
firm or corporation for said Managing Agent, upon written notice thereof by the
Landlord to Tenant. Tenant hereby acknowledges the authority of any such
Managing Agent to act for, and in the name of, the Landlord for any and all
purposes under this Lease, and Tenant shall direct any and all notices and
inquires of any kind whatsoever pursuant to or regarding this Lease to said
Managing Agent.
8. Broker. Landlord and Tenant recognize CB Commercial as the only broker
involved with this transaction.
9. Conflict. In the event of any conflict between the provisions of this
Amendment to Lease Agreement and the provisions of the Lease, the provisions of
this Amendment to Lease Agreement shall govern.
10. Survival. As modified herein, the Lease is hereby ratified and shall
remain in full force and effect.
Signed this 30 day of October, 1996.
ATTEST: LANDLORD:
WOODBURN HOLDING LIMITED
PARTNERSHIP II, a Florida
limited partnership
BY: Woodburn Holding Corp. II,
a Florida corporation
Its Sole General Partner
- ----------------------------- By:
-------------------------------------
Title:
----------------------------------
Date:
-----------------------------------
WITNESS: TENANT: GEORGE MASON BANKSHARES, INC.
/s/ GLENN E. KINARD By: /s/ KEVIN F. DECOSTE
- ----------------------------- -------------------------------------
Kevin F. DeCoste
Title: Executive vice President
----------------------------------
Date: October 30, 1996
-----------------------------------
3
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<PAGE> 1
EXHIBIT 10P
LEASE AGREEMENT
THIS LEASE AGREEMENT made the 6th day of APRIL, 1996, to be effective
February 1, 1996, by and between WILLIAMSBURG SHOPPING CENTERS, INC., a Virginia
corporation with its principal place of business at 9330 Mellenbrook Road,
Columbia, Maryland 21045 (the "Landlord") and GEORGE MASON BANK, a Virginia
corporation with its principal place of business at 4221 Walney Road, Chantilly,
Virginia 22021 (the "Tenant"):
WITNESSETH, That:
1. LEASED PREMISES: In consideration of the covenants herein
contained, Landlord hereby lets to Tenant and
Tenant hires from Landlord that portion of the
building located at 6402 Williamsburg Boulevard,
Arlington, Virginia 22213, containing
approximately 1,200 square feet as shown on
"Exhibit A" attached hereto and made a part
hereof, with the right to use the parking areas
located on the property along with the other
tenants of the building, for a term of five (5)
years commencing on the 1st day of February,
1996, and ending on the 31st day of the January,
2001.
2. RENT: Tenant hereby covenants and agrees to pay
Landlord the sum of THIRTY THOUSAND DOLLARS
($30,000) per year for each year of the term of
this lease, in equal monthly installments of TWO
THOUSAND FIVE HUNDRED DOLLARS ($2,500), payable
in advance no later than the 1st day of every
calendar month of the term of this lease
(commencing on February 1, 1996), hereinafter
designated as the "base rent". All said payments
shall be made at the office of Landlord, set
forth above, or at such other place as Landlord
shall from time to time designate by written
notice. There shall be a late charge of $150 for
any monthly installment not received by the
fifth (5th) day of the month.
In addition, Tenant shall also pay as rent, its
proportionate share (5.4%) ("proportionate
share"), which is its square footage rented
versus total square footage of the building,
hereinafter referred to as its proportionate
share) of any real estate taxes and assessments
and sewer charges. (Currently taxes are due no
later than 1/2 on June 30 and 1/2 on December
30). Landlord shall notify Tenant of the receipt
of the tax bill and the amount of tax owed by
Tenant. Thereupon, Tenant shall pay Landlord its
share of the taxes and sewer charges no later
than five (5) days of receipt of such
notification by Landlord. Landlord shall further
prorate Tenant's proportionate share of taxes
and assessments to be paid by Tenant for any
partial tax periods occurring during the lease.
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Notwithstanding anything to the contrary
contained in this Lease, "Real Estate Taxes"
shall not include any of the following:
1. tax upon Landlord's net income or
profits.
2. federal, state or local income taxes,
franchise, gift, transfer, excise,
capital stock, estate, succession, or
inheritance taxes.
3. the portion of real estate taxes that
is allocable to any building capital
improvements made after the Building
was fully assessed as a completed and
occupied unit and the Lease was signed
shall not be included, except to the
extent that the additional improvements
directly benefit all tenants, or at
least directly benefit the Tenant.
4. any fines, interest or penalties
incurred by Landlord by reason of
Landlord's failure to pay in a timely
manner any real estate taxes.
5. any taxes based on increases in
assessed value due to (a) any sale,
transfer or conveyance of the Building
or Land including any of Landlord's
right, title or interest thereto; (b)
the creation of a net lease; (c) any
mortgaging or refinancing of the
Building or the Land; (d) improvements
for other occupants of the property;
(e) capital improvements to the
Building which do not benefit Tenant;
and (f) increases in the rentable area
of the Building and additions to the
Land.
Notwithstanding anything to the contrary
contained in this Lease, in the event any real
estate taxes are payable in installments over
time, then Landlord shall elect (or shall be
deemed for purposes hereof to have elected) to
pay such taxes over the maximum permissible
number of installments. Any interest or fee
charged by the taxing authority as a condition
to Landlord's right to pay such taxes in
installments may be included in real estate
taxes. Landlord shall pay all real estate taxes
by the date due, and shall, upon Tenant's
written request, furnish Tenant with evidence of
such payment. Real estate taxes shall be deemed
to assume that the Building and that portions of
the Land (including only that much of the
parking area required to satisfy existing
Arlington zoning requirements to fully park the
Building) upon which the Building is located
constitute a separate tax lot, and that the
Building is the only building on said portion of
the Land. If, however, either assumption is not
correct, then the real estate taxes attributable
to the Building shall be those allocated to the
Building on the tax rolls or the records of the
tax assessor. Notwithstanding anything to the
contrary contained in this Lease, Tenant shall
have the right to contest tax assessments if
Landlord does not, and to recover amounts
earlier paid resulting from a successful contest
together with
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the reasonable costs of the contest (including
reasonable attorneys' fees).
3. COMMON AREA
MAINTENANCE: Landlord agrees that it will properly maintain
and operate the Common Areas, as hereinafter
defined, and shall keep same in good order and
condition and maintain existing lighting. The
obligation of the Landlord shall consist of the
prompt repairing, re-striping, repaving,
resurfacing and resealing, when required, of the
Common Areas, the maintenance and repair of all
curbing and directional marker, the prompt
removal of snow and ice, landscaping, common
area utility usage, and maintaining existing
lighting during all hours of darkness that
Tenant shall be open for business. Landlord will
also assume responsibility for the maintenance
of any property boundary walls and catch basins
in the parking lot. Any trash removal costs for
the Common Areas shall not include any costs
attributable to the removal of trash of any
tenant in the Building. Common Areas shall be
defined as all Building sidewalks, ramps, paved
parking areas, paved service areas, signs,
lighting/and all means of ingress, egress,
acceleration, deceleration and circulation for
the aforesaid parking and service areas of the
Building to and from public streets and roadways
bordering the Building now or hereafter made
available or maintained by Landlord in
connection with the Building. All of the
aforesaid obligations of Landlord shall be
performed in accordance with good and accepted
shopping center practices throughout the term,
Landlord recognizing that the Common Areas must
be available, in good order and condition, to
serve Tenant's customers, employees and vendors.
Provided Landlord complies with the provisions
of this Article, Tenant agrees to pay to
Landlord its proportionate share of the Common
Area Maintenance ("CAM") costs incurred by
Landlord in fulfilling its obligations and for
no other costs. CAM costs will not include any
management, administrative, accounting, data
processing or audit fees; and will not include
capital expenditures or capital improvements
made by Landlord to the Common Areas. Any sum
payable to Landlord under this Article shall be
paid by Tenant within thirty (30) days, but not
more than twice annually, after receipt from
Landlord of demand therefor, accompanied by
detailed documentation, including copies of all
receipted bills and by a computation of Tenant's
percentage share.
"CAM Costs" shall mean only those normal,
reasonable and customary expenses, charges and
fees consistent with similar first-class office
buildings in Arlington County, Virginia which
are actually incurred by the Landlord but only
to the extent incurred in connection with the
management, operation, maintenance, servicing,
cleaning, and insuring of the demised premises
or the building containing the demised premises.
All CAM Costs shall be determined according to
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generally accepted accounting principles,
consistently applied ("GAAP").
Notwithstanding anything to the contrary
contained in this Lease, in the event there
exists a conflict as to an expense which is
specified to be included in CAM Costs and is
also specified to be excluded from CAM Costs as
hereinafter described, the exclusions listed
below shall prevail and the expenses shall be
deemed excluded. Notwithstanding anything to the
contrary contained in this Lease, "CAM Costs"
shall not include the following:
(1) any ground lease rents;
(2) any and all costs, expense, fine and
interest payments (including but not limited to
capital expenditures) incurred or required to be
paid due to Landlord's failure to comply with
applicable Legal Requirements (hereinafter
defined);
(3) costs incurred for capital improvements
reasonably expected to reduce CAM Costs above
the amount actually saved as the result of such
capital improvements;
(4) costs incurred by Landlord for the repair of
damage to the building containing the demised
premises or the demised premises to the extent
that Landlord is entitled to be reimbursed by
insurance (or would have been entitled had
Landlord carried the insurance required to be
carried hereunder by the Landlord), or other
third parties, and costs attributable solely to
a particular tenant of the building containing
the demised premises;
(5) depreciation and amortization of any type,
except on materials, tools, supplies and vendor
type equipment purchased by Landlord to enable
Landlord to supply services Landlord might
otherwise contract for with a third party where
such depreciation and amortization would
otherwise have been included in the charge for
such third party's services, all as determined
according to GAAP, and when depreciation or
amortization is permitted or required, the item
shall be amortized over its reasonably
anticipated useful life;
(6) leasing commissions, attorney's fees, and
other costs and expenses incurred in connection
with negotiations or disputes with present or
prospective tenants or other third parties;
(7) subject to Item No. (3) above, costs of a
capital nature, including, without limitation,
capital improvements, capital repairs, capital
equipment and capital tools, all as determined
under GAAP;
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(8) expenses in connection with services or
other benefits which are not offered to Tenant
or for which Tenant is charged directly but
which are not provided to another tenant or
occupant;
(9) costs incurred by Landlord due to the
violation by Landlord or any other tenants of
the terms and conditions of any lease;
(10) interest, principal, points and fees on
debt or amortization on any mortgage or
mortgages or any other debt instrument;
(11) any compensation paid to clerks.
attendants, or other persons in commercial
concessions operated by Landlord or in the
parking areas;
(12) rentals and other related expenses incurred
in leasing air conditioning systems, elevators
or other equipment ordinarily considered to be
of a capital nature;
(13) all items and services for which Tenant or
any other tenant reimburses or should be
reimbursing Landlord and which Landlord provides
selectively to one or more tenants (other than
Tenant) without reimbursement;
(14) advertising and promotional expenditures,
and costs of signs identifying the Landlord or
any tenant;
(15) electric power costs for which any tenant
directly contracts with the local public service
company;
(16) services provided and costs incurred in
connection with any operation of any retail,
restaurant or deli or garage operations, if any;
(17) costs incurred in connection with
replacing, repairing, retrofitting or upgrading
to comply with ADA, handicapped, life, fire and
safety codes in effect from time to time;
(18) costs incurred in connection with
alternatives to chlorofluorocarbons and related
equipment;
(19) wages, salaries, fees and fringe benefits
paid to administrative or executive personnel or
officers or partners of Landlord or management
agents or anyone else over the level of building
supervisor; wages, salaries, fees and fringe
benefits paid to administrative or executive
personnel or officers or partners of Landlord or
management agent; and wages, salaries, fees and
fringe benefits paid to construction supervisory
personnel;
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(20) the cost of any repair made by Landlord
because of the condemnation or total or partial
destruction of the demised premises or the
building containing the demised premises;
(21) the cost of overtime or other expense to
Landlord due to Landlord's defaults or incurred
while performing work expressly provided in this
lease to be borne at Landlord's expense;
(22) allowances, concession, permits, licensees,
inspections, and other costs and expenses
incurred in completing, fixturing, renovating or
otherwise improving, decorating or redecorating
space for tenants (including Tenant),
prospective tenants or other occupants or
prospective occupants;
(23) after hours or overtime HVAC costs or
electricity costs if chargeable or charged
separately to other tenants;
(24) any cost representing an amount paid for
first class services and/or materials to a
related person, firm, or entity to the extent
such amount exceeds the amount that would be
paid for such first class services and/or
materials at the then existing market rates to
an unrelated person, firm, or entity;
(25) costs incurred due to the late payment of
taxes, utility bills or other amounts owing, so
long as Landlord was obligated to make such
payments and did not in good faith dispute the
amount of such payments;
(26) general overhead and general administrative
expenses and accounting, record-keeping and
clerical support of Landlord or the management
agent, except reasonable expenses incurred in
connection with the on-site operations of the
property management office, on a prorated basis
to the extent such operations are directly
servicing the Building;
(27) increased insurance premiums caused by
Landlord's or any tenant's hazardous or prior
acts or omissions;
(28) moving expense costs of tenants;
(29) costs incurred for any items to the extent
Landlord is entitled to or recovers under a
manufacturer's, materialmen's vendor's or
contractor's warranty;
(30) costs of acquisition of sculpture,
paintings, or other objects of art;
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<PAGE> 7
(31) the rent or expenses in lieu of rent for
any storage space or other facilities for the
benefit of Landlord;
(32) costs incurred to test, survey, clean up,
contain, abate, remove or otherwise remedy
hazardous materials and/or indoor air quality
problems;
(33) costs directly resulting from the
negligence or misconduct of Landlord or its
employees, agents, contractors or employees;
(34) costs or fees relating to the defense of
Landlord's title or interest;
(35) costs or expenses incurred by Landlord in
financing, refinancing, pledging, selling,
granting or otherwise transferring or
encumbering its ownership rights;
(36) cost of installing, operating and
maintaining any specialty service operated by
the Landlord, such as an athletic or
recreational club;
(37) any other expenses that under GAAP would
not be considered normal maintenance, repair,
management, or operation expenses. CAM Costs
shall be reduced by all cash discounts, trade
discounts or quantity discounts received by
Landlord or Landlord's managing agent in the
purchase of any goods, utilities or services. If
any amounts comprising CAM Costs are incurred
not just with respect to an office area, but
also with respect to a retail area, then
Landlord shall reasonably allocate such amounts
between the office and retail areas. Such
allocation shall be made on a fair and equitable
basis, based on the usage of or benefits
received from the service, utility or item in
question. Landlord shall not recover more than
100% of the CAM Costs actually incurred by
Landlord.
4. USE OF PREMISES: Tenant may use the demised premises or any part
thereof for any lawful purpose, including any
retail use and including the operation of a
branch bank. If the Tenant desires to use the
premises for other purposes it must obtain the
Landlord's prior written approval, which shall
not be unreasonably withheld. The Tenant
understands that in deciding whether to grant
such approval, the Landlord can consider the
economic effect of such change upon the other
tenants and the nature of the Building.
5. ALTERATIONS: Tenant shall have the right to install Automatic
Teller Machines (ATMs), night depositories,
alarm and security systems, vaults, safes, safe
deposit boxes, tellers' cages, etc., as required
for Tenant's business; and upon termination of
the Lease, Tenant may remove such installations
at it sole cost and expense. To the extent that
Tenant
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<PAGE> 8
installs vaults and safes, or undertakes
structural alterations, then, prior to
installation, Tenant shall take all necessary
actions to endure that such installation or
alteration does not adversely affect the
structural integrity of the Building. Tenant may
make any and all alterations to the demised
premises provided, however that if permits are
required from the applicable governmental
authorities as a precondition to undertaking
such alterations, Tenant shall provide copies of
its plans for such alterations, if any, to
Landlord.
6. SIGNAGE: Tenant shall have the right to retain its
exterior building signage currently displayed. A
Pylon sign shall be erected by Landlord to
advertise the Shopping Center, Tenant shall have
the right to place a sign on such pylon in
accordance with the attached and incorporated
signage plan.
7. REPAIRS AND
RETURN OF
PREMISES: Tenant shall, at its expense, keep the interior
nonstructural portions of the demised premises
(including floor coverings, ceiling tiles, paint
and plate glass and including plumbing, HVAC and
electrical systems contained within the demised
premises) in good working order and repair.
Except as otherwise provide above, Landlord
shall make all other repairs and replacements to
the demised premises and the building containing
the demised premises, including but not limited
to the roof, floor, walls and structural
portions of the demised premises, as well as the
HVAC system serving the demised premises. Tenant
agrees that the termination of this Lease, by
lapse of time or otherwise, to return said
demised premises to Landlord in as good
condition as when received, ordinary wear and
tear, casualty loss and loss by condemnation
accepted. In addition to the foregoing and
notwithstanding anything to the contrary
contained in this Lease, it is agreed that
Landlord and not Tenant shall be responsible for
complying with any present or future laws, rules
or regulations of federal, state, county,
municipal or other governmental authorities or
any of their departments, commissions, boards or
agencies or with any direction or recommendation
of any public officer or officers pursuant to
law, or with any orders or notices of the
National Board of Fire Underwriters or any
requirements of any insurer of the demised
premises or any part thereof, including but not
limited to The Americans With Disabilities Act.
8. ASSIGNMENT &
ALTERATIONS: Tenant may assign this Lease or sublet all or
any portion of the demised premises for any
lawful retail use or as a branch bank without
the approval of the Landlord. Notwithstanding
the foregoing, in the event that Tenant's
sublessee or assignee intends to operate the
demised premises for the sale of fabric or
sewing notions, health and beauty aids, greeting
cards or prescription drugs or as a gift store,
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<PAGE> 9
drug store or candy store, Tenant's right to
sublease or assign shall be subject to
Landlord's prior written consent which shall not
be unreasonably withheld, conditioned or
delayed. All additions, fixtures and
improvements made in or upon said premises by
Landlord shall be the Landlord's property and
shall remain upon said demised premises at the
termination of the this Lease. Any additions,
fixtures and improvements made by the Tenant may
be removed by Tenant upon the termination of
this Lease, provided that Tenant makes any
necessary repairs to the area caused by the
removal.
9. UTILITIES &
HVAC: Landlord shall furnish the necessary plumbing,
electrical and HVAC systems to provide adequate
environmental conditions and use of the demised
premises all in quantities commensurate with
those expected in a first class office building
in the Arlington, Virginia area. The parties
acknowledge that the premises are currently
equipped with plumbing, electric and HVAC and
that Landlord will not be making any alterations
or modifications to those systems. In addition,
Landlord will not furnish such systems as are
made necessary by any approved improvements to
the premises made by Tenant including modifying
the sewer/drainage systems.
In addition, the Tenant shall be responsible for
its proportionate share of unmetered utility
charges. To the extent that the premises are
individually metered for electric, gas, and
water, Tenant shall arrange for those utilities
directly with the utility companies. Any such
utility bills shall be paid on time and any
charges for Tenant's proportionate share of
unmetered utility charges shall be paid within
five (5) days of receipt of written request for
payment.
In the event that Tenant is prevented from using
and does not use the demised premises or any
part thereof for five (5) consecutive business
days or ten (10) days in any twelve (12) month
period (the "Eligibility Period") as a result of
any damage or destruction to the demised
premises, or any repair, maintenance or
alteration performed by Landlord after the date
of this Lease which interferes with the Tenant's
use of the demised premises or any failure to
provide utility services or access to the
demised premises, or because of an eminent
domain proceeding or because of the presence of
hazardous substances in, on or around the
demised premises or the Building containing the
demised premises which could in the Tenant's
business judgment and taking into account the
Requirements of any governmental authority with
respect to hazardous substances, pose a health
risk to the occupants to the demised premises
(the foregoing circumstances being referred to
as the "Suspension Events") then, all rent and
all charges due hereunder shall be abated or
reduced, as the case may be, after expiration of
the Eligibility Period for such time that Tenant
continues to be so prevented from using and does
not use, the demised premises
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<PAGE> 10
or a portion thereof in the proportion that the
rentable area of the portion of the demised
premises that Tenant is prevented from using and
does not use, bears to the total rentable area
of the demised premises. However, in the event
that Tenant is prevented from so conducting, and
does not conduct its business in any portion of
the demised premises for a period of time in
excess of the Eligibility Period and the
remaining portion of the demised premises is not
sufficient to allow Tenant to effectively
conduct its business therein, and if Tenant does
not conduct its business from such remaining
portion, then for such time after the expiration
of the Eligibility Period during which Tenant is
so prevented from effectively conducting its
business therein, all rent and additional
charges for the entire demised premises shall be
abated. If Tenant's right to abatement occurs
because of an eminent domain taking and/or
because of damage or destruction to the demised
premises, Tenant's abatement period shall
continue until Tenant has been given sufficient
time, and sufficient access to the demised
premises to rebuild the portion of the demised
premises that is required to rebuild (if any) to
install its property, furniture, fixtures and
equipment, and to move in over one weekend. If
Tenant is prevented from using and does not use
substantially the entire demised premises for a
period of excess of thirty (30) days after a
Eligibility Period because of the occurrence of
a Suspension Event, Tenant may at its option
thereafter, terminate this Lease by notice in
writing to Landlord.
10. DEFAULT: It is further covenanted and agreed by and
between the parties hereto that if Tenant shall
fail to pay the rent herein reserved, or any
installment thereof, within ten (10) days after
written notice from Landlord accurately stating
that the same has not been paid when due, or
Tenant shall fail to keep and perform any other
covenant or agreement herein on Tenant's part to
be performed, provided that Tenant shall have a
thirty (30) day cure period for any such default
or such longer period as is reasonable in the
circumstances given the nature of the obligation
and the ability to cure such default within the
prescribed time, then the term hereby created,
at the option of Landlord, shall cease and
terminate, and said nonpayment of rent or breach
of covenant shall operate as a Notice to Quit,
all and every other kind of notice to quit being
hereby expressly waived, and said Landlord or
its assigns shall have the right to distrain for
rent in arrears, or take such other action as
Landlord may be advised, and reentry by Landlord
shall not operate to cancel this lease, but all
liability herein imposed upon and assumed by
Tenant shall remain and continue. Landlord shall
have the right also to recover possession of
said premises forthwith upon any nonpayment of
rent and breach of covenant without any further
notice to quit or otherwise.
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<PAGE> 11
11. RULES &
REGULATIONS: Tenant agrees to comply with all the reasonable
rules and regulations now or at any time
hereafter during the existence of this lease
adopted by Landlord, and posted in or about the
said building, or otherwise brought to the
attention of Tenant, provided that the same do
not conflict with any right of Tenant under this
lease. Landlord shall apply all such rules and
regulations equally to all tenants of the
Building contained in the demised premises.
12. DAMAGE TO THE
DEMISED
PREMISES: If the demised premises shall be damaged by fire
or other cause, Landlord shall diligently and as
soon as practicable after such damage occurs
repair such damage to the demised premises
(excluding the Tenant's personal property) at
the expense of Landlord. Notwithstanding the
foregoing, (i) if the demised premises or the
building containing the demised premises is
damaged by fire or other cause to such an extent
that, in Landlord's or Tenant's reasonable
judgment, the damage cannot be substantially
repaired within two hundred (200) days after the
date of such damage then either Landlord or
Tenant within sixty (60) days from the date of
such damage may terminate this Lease by written
notice to the other. If either Landlord or
Tenant terminates this Lease, the rent and all
other charges due hereunder shall be apportioned
and paid to the date of such damage. If neither
Landlord nor Tenant so elects to terminate this
Lease but the damage required to be repaired by
Landlord is not repaired within two hundred
(200) days from the date of such damage (such
two hundred (200) day period to be extended by
the period of any delay outside the direct
control of Landlord plus a reasonable period for
a satisfactory settlement with any insurance
company involved), Tenant, within ten (10) days
from the expiration of such two hundred (200)
day period (as the same may be extended), may
terminate this Lease by written notice to
Landlord. During the period that Tenant is
deprived of the use of all or any portion of the
demised premises, all rent and other charges due
hereunder shall be abated.
13. CONDEMNATION: If, in Tenant's reasonable opinion, a
substantial portion of the demised premises or
the building containing the demised premises
shall be taken or condemned by any governmental
or quasi-governmental authority for any public
or quasi-public use or purpose (including,
without limitation, sale under threat of such a
taking), then the term of this Lease shall cease
and terminate as of the date when title vests in
such governmental or quasi-governmental
authority, and rent and all other charges due
hereunder shall be prorated to the date when
title vests in such governmental or
quasi-governmental authority. If, in Tenant's
reasonable opinion less than a substantial part
of the demised premises or the building
containing the demised premises is taken or
condemned by any governmental or
quasi-governmental authority for
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<PAGE> 12
any public or quasi-public use or purpose
(including, without limitation, sale under
threat of such a taking), all rent and other
charges due hereunder shall be reduced by the
ratio that the portion so taken bears to the
rentable square footage of the demised premises
before such taking, effective as of the date
when title vests in such governmental or
quasi-governmental authority, and this Lease
shall otherwise continue in full force and
effect. Tenant hereby agrees to make no claim
against the condemning authority for any portion
of the amount that may be awarded as
compensation or damages as a result of such
taking; provided, however, that Tenant may, to
the extent allowed by law, claim an award for
moving expenses and for the taking of any of
Tenant's personal property.
14. NOTICES: All notices and demands authorized or required
to be given to Tenant and landlord hereunder
will be sent in writing by Certified Mail,
overnight courier service, or hand delivery to
the addresses, set forth above, or at such other
place as the parties shall from time to time
designate by written notice.
15. INUREMENT
& WAIVER: All covenants are, as the case may require,
binding and shall inure to the benefit not only
of Landlord and of Tenant, but also to their
respective heirs, legal representatives and
permitted assigns, unless otherwise contrary to
the provisions of this lease. Waiver of any
specific covenant or provision without this
lease. Waiver of any specific covenant or
provision within this lease agreement in any
single instance shall not operate as a blanket
waiver or otherwise affect any of the terms and
provisions herein, or of any subsequent breach
thereof.
16. ACCESS TO
PREMISES: Tenant further covenants that Landlord or its
agent shall have access to said premises at any
time after reasonable notice for the purpose of
inspection, or in the event of fire or other
property damage, or for the purpose of making
any repairs, emergency or otherwise, that
Landlord considers necessary or desirable.
17. SUBORDINATION: Provided Landlord provides to Tenant a
subordination, nondisturbance and attornment
agreement satisfactory in all respects to Tenant
from any mortgagee, Tenant agrees that the lien
of this leasehold shall be subordinated to the
lien of any construction loan or permanent
financing secured upon the said premises by
Landlord, which subordination shall be effected
by the recordation of a proper instrument among
appropriate land records by Landlord without
signature of Tenant. Tenant agrees to execute
such further reasonable assurances, including
subordination agreements and estoppel letters,
as may be reasonably required by Landlord.
Notwithstanding the foregoing or anything else
to the contrary in his lease, so long as
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<PAGE> 13
Tenant is not in any breach of any material
provision of this lease, Tenant shall have the
sole right to quiet enjoyment, use and occupancy
of the demised premises without interruption or
interference from Landlord, any mortgagee or
lienholder or any other third party.
18. RISK OF LOSS,
INSURANCE: Tenant agrees that all personal property in said
premises shall be and remain at the sole risk of
Tenant, and Landlord shall not be liable to
Tenant, its employees, agents, contractors,
business invitees, licensees, customers,
clients, family members, guests or other
persons, for any damage to or loss of such
personal property or bodily injury arising from
any act or acts of negligence of any person or
persons, or from the leaking roof, or from the
bursting, leaking or overflowing of water, sewer
or steam pipes, or from heating or plumbing
fixtures, or from any other cause whatsoever,
and Tenant agrees not to do anything or permit
anything to be done or brought on to the
premises which shall increase the rate of fire
or similar insurance on the building. If the
rate of fire or similar insurance on the
building increases because of Tenant's
possession of the property for any reason, such
increase shall be paid by Tenant no later than
five (5) days of receipt of such notification by
Landlord. Tenant agrees to indemnify and hold
Landlord, its offices and agents, harmless from
and against any and all liability and expense of
any nature, including court costs and attorney's
fees, arising out of or connected with Tenant's
use and occupancy of the premises. In addition,
Tenant agrees to maintain liability insurance
for bodily injury and property damage of at
least $1,000,000/$1,000,000.
In addition, Tenant shall pay its proportionate
share of insurance maintained by the Landlord on
the Building within five (5) days of receipt of
request for payment.
Notwithstanding anything to the contrary
contained in this Lease, beginning on the date
of this Lease and at all times thereafter during
the term of this Lease, the Landlord shall
maintain:
1. standard "all-risk" casualty insurance,
covering the demised premises and the building
containing the demised premises and all
leasehold improvements therein and all personal
property of Landlord located therein in amounts
at least equal to full replacement cost at the
time in question, but in no event less than such
coverage as is required to avoid coinsurance
provisions;
2. commercial general liability insurance
against claims for property damage or loss,
bodily injury or death, personal injury,
products liability, and contractual liability,
naming Tenant as an additional insured and
having a cross-liability endorsement, providing
combined single limit coverage on an occurrence
basis in the amount
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<PAGE> 14
of $1,000,000; such policy (or policies) shall
be primary coverage which do not contribute to
and are not in excess of coverage which Tenant
may carry.
3. employer's liability insurance with a minimum
limit of $1,000,000 for bodily injury;
4. workmen's compensation insurance in statutory
limits;
5. rental income insurance in an amount equal to
twelve (12) months of rent (including CAM costs
payable by Tenant) under this Lease; and
6. such other insurance coverages as are
customarily carried by similar landlords of
comparable first class office buildings located
in the Northern Virginia area.
In no event shall the limits of such policy be
considered as limiting the liability of Landlord
under this Lease.
At the Tenant's request the Landlord shall
furnish the Tenant a certificate or certificate
of insurance certifying that the insurance
coverage required hereby is in force. Any
insurance required by the terms of this Lease to
be carried by the Landlord may be under a
blanket policy (or policies) covering other
properties of the Landlord and/or its related or
affiliated corporations. If such insurance is
maintained under a blanket policy, the Landlord
shall procure and deliver to the Tenant a
statement from the insurer or general agent of
the insurer setting forth the coverage
maintained and the amounts thereof allocated to
the risks intended to be insured hereunder.
Notwithstanding any other provision of this
Lease, Landlord hereby waives any claims it may
hereafter have against Tenant on account of any
damage for which Landlord is covered by
insurance required to be carried by the Landlord
hereunder or under any other insurance actually
carried by Landlord.
Notwithstanding anything to the contrary
contained in this Lease, Landlord and Tenant
each waive any and all rights to recover against
the other or against any other tenant or
occupant of the building containing the demised
premises, or against the officers, directors,
shareholders, partners, joint venturers,
employees, agents, customers, invitees or
business visitors of such other party or of such
other tenant or occupant, for any loss or damage
to such waiving party arising from any cause
(whether or not such loss or damage is caused by
the fault or negligence of the other party or
anyone for whom said other party may be
responsible) covered by any insurance required
to be carried by such party pursuant to this
Lease (or which would have been covered by had
the insurance been carried as required hereby)
or
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<PAGE> 15
any such insurance actually carried by such
party to the extent of the limits of such
policy. Landlord and Tenant will, from time to
time upon reasonable request by the other party,
cause their respective insurers to issue
appropriate waiver of subrogation rights
endorsements to all property insurance policies
as required hereunder. This provision is
intended to restrict each party to recovery
against insurance carriers and waive fully any
rights and/or claims which might give rise to a
right of subrogation in any insurance carrier.
19. HOLDOVER: It is hereby agreed that, in the event Tenant
holds the premises over after the expiration of
the specific period provided in this lease, said
tenancy shall be at a rate per month equal to
125% of the monthly rent payable by Tenant
immediately preceding the expiration of this
Lease, and under the terms and conditions of
this lease.
20. WAIVER OF
EXEMPTIONS: Tenant waives the benefit of the homestead or
any other exemption provided by law as to any of
its obligations hereunder.
21. REGULATORY
COMPLIANCE: Landlord and Tenant each agree to comply with
all applicable federal, state and local laws,
rules, orders, ordinances and regulations,
including environmental. Landlord and Tenant
each represent that they are and will remain in
full compliance with all federal, state and
local statutes and regulations concerning
hazardous substances and will remedy at that
party's own expense and in an expeditious manner
any and all violations of the same for which
that party is responsible.
22. EMINENT
DOMAIN: If more than 10% of the demised premises is
taken by eminent domain or if a significant
portion of any parking areas are taken by
eminent domain so that Tenant's business cannot
be reasonably operated; this Lease may be
terminated by Tenant giving Landlord notice no
later than ninety (90) days from the date title
vests in the condemning authority. Landlord
shall be entitled to all damages and
compensation awarded for any taking, and Tenant
assigns to Landlord all its right to any such
award. Tenant, however, may claim any award made
specifically for fixtures and other equipment
installed by it, but only if such award shall be
made by the condemnation court in addition to
and stated separately from the award made by it
for the land and the building or part thereof so
taken, but Tenant shall not claim any award for
its leasehold.
23. NATURE OF
RELATIONSHIP: The relationship between the parties is solely
that of Landlord and Tenant and nothing in this
Lease shall be construed to creating a
partnership or joint venture between the
parties.
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<PAGE> 16
24. BROKERAGE: The parties represent and warrant to each other
that they have had no dealings with any real
estate brokers regarding this lease and each
agrees to indemnify and hold the other harmless
from any claim for brokerage fee or commission
arising from their respective acts.
25. GOVERNING LAW: This Lease shall be governed and construed in
accordance with the laws of the State of
Virginia. The parties hereby waive all right to
trial by jury in any claim, action, proceeding,
or counterclaim by either of them against the
other or any matters arising out of or in any
way connected with this Lease, the relationship
of Tenant and Landlord and/or Tenant's use or
occupancy of the Leased Premises.
26. SEVERABILITY: If any provision of this Lease or any
application thereof shall be invalid, illegal,
or unenforceable, the validity, legality, and
enforceability of the remaining provisions
hereof and any other application thereof shall
not be impaired thereby.
27. MODIFICATION: This writing is intended by the parties as final
expression of their agreement and as a complete
and exclusive statement of the terms thereof,
all negotiations, considerations, and
representations between the parties having been
incorporated herein. No course of prior dealings
between the parties or their affiliates shall be
relevant or admissible to supplement, explain,
or vary any of the terms of this lease.
Acceptance of, or acquiescence in, a course of
performance rendered under this or any prior
agreement between the parties or their
affiliates shall not be relevant or admissible
to determine the meaning of any of the terms of
this Lease. No representations, understandings,
or agreements have been made or relied upon in
the making of this Lease other than those
specifically set forth herein. This Lease can
only be modified by a writing signed by all of
the parties or their duly authorized agents.
Time shall be of the essence with respect to all
of the parties' obligations hereunder.
28. RIDER: The parties hereto have discussed the
possibility of Tenant relocating within the
Building. To cover that possibility, a Rider is
attached hereto and made a part hereof.
29. SUB-LEASE: It is understood and agreed by and between the
parties that Tenant's previous sub-lease is
hereby terminated.
30. TENANT'S RIGHT
TO AUDIT: Notwithstanding anything to the contrary
contained in this Lease, after receipt of
Landlord's annual audited reconciliation
statement, Tenant at its expense shall have the
right at all reasonable times and upon five (5)
business days notice to audit Landlord's books
and records relating to items affecting CAM
costs or real estate taxes for any prior or
subsequent calendar year(s) for which additional
rental payments become due.
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<PAGE> 17
Landlord shall fully cooperate with Tenant and
its auditor so as to facilitate the performance
of Tenant's audit. Tenant may review and copy
such documentation during normal business hours.
Tenant agrees to endeavor in good faith and use
its reasonable efforts to conduct the audit in a
manner which will cause minimum disruption to
the operation of the Building and the management
office.
In the event that it is determined that the
actual CAM costs or real estate taxes for any
calendar year, as chargeable to Tenant under
this Lease are less than the amount set forth in
the Landlord's reconciliation statement of such
charges submitted by Landlord for such year,
then Landlord shall reimburse Tenant for such
overcharge within thirty (30) days of receipt of
notice thereof.
IN WITNESS WHEREOF, the parties to this Lease set their hands as of the
date hereinabove written.
Landlord: WILLIAMSBURG SHOPPING CENTER,
INC.
By: /s/ GEORGE R. COLVIN, SR.
------------------------------
GEORGE R. COLVIN, SR.
Chairman
Tenant: GEORGE MASON BANK
By: /s/ KEVIN F. DECOSTE
------------------------------
Name: KEVIN F. DECOSTE
----------------------------
Title: EVP.
----------------------------
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<PAGE> 18
RIDER TO LEASE
THIS RIDER TO LEASE is dated the _____ day of __________, 1996 by and
between WILLIAMSBURG SHOPPING CENTERS, INC., a Virginia corporation ("Landlord")
and GEORGE MASON BANK ("Tenant") and is attached to and incorporated in a
certain Lease by and between the Landlord and Tenant of even date with respect
to space located at 6402 Williamsburg Boulevard, Arlington, Virginia, 22213.
Capitalized terms not otherwise defined herein shall have the meaning set forth
in the Lease. To the extent any provision herein conflicts with any provision of
said Lease, the terms and conditions of this Rider shall control.
FOR AND IN CONSIDERATION OF the mutual promises set forth in the Lease and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. For a period of twelve (12) months from the date hereof,
Landlord may offer the demised premises for lease to a third party
(subject however to Tenant's rights hereunder). If such third party
agrees to lease the demised premises within the time period aforesaid,
Tenant at its option may, by sending written notice to Landlord no later
than ten (10) days after being informed by Landlord that such third party
has agreed to lease the demised premises:
A) terminate the Lease 150 days after giving Landlord written
notice of its intent to so terminate
B) elect to remain in the demised premises upon the following
terms:
(i) rent - $30,000 per year triple net payable in
12 monthly installments
(ii) term - 5 years from date of election
(iii) renewal options - 1st 5 year extension at
$33,000 per year triple
net
-2nd 5 year extension
at $36,300 per year
triple net, or
C) elect to move into the space labeled "Adjacent Space" on
Exhibit A containing approximately 1,000 leasable square
feet of space upon the following terms:
(i) rent - $25,000 per year triple net payable in
12 monthly installments, rent to
commence upon substantial completion
of the Adjacent Space
(ii) term - 5 years from date of substantial
completion of the Adjacent Space
(iii) renewal options - 1st 5 year extension at
$27,500 per year triple
net
<PAGE> 19
- 2nd 5 year extension at
$30,250 per year triple
net
(iv) termination payment
- if Tenant moves into the Adjacent Space but
does not exercise the first renewal option,
it shall pay Landlord upon expiration of the
initial term of the Lease, the sum of
$25,000.
(v) buildout allowance
- Landlord will contribute $50,000 toward the
cost of completing the Adjacent Space to
Tenant's specifications. Landlord will make
best efforts to build the Adjacent Space and
move the Tenant to the Adjacent Space in a
manner to minimize the disruption of the
Tenant's business activities.
2. If Tenant exercises its option to move to the Adjacent Space,
Tenant shall pay, based on monthly invoices, the cost of any work in
excess of the $50,000 allocated portion of Tenant's allowance. Tenant
shall be entitled, at its option, to a credit refund (payable at
occupancy) to the extent Tenant does not use the entire allowance to
cover the cost of completing the Adjacent Space.
3. With respect to the Adjacent Space, all of the work to be done
by Landlord in completing the Adjacent Space shall be substantially in
accordance with the plans and specifications prepared by Tenant's
architects and shall be done in compliance with all laws, ordinances,
rules and regulations of all applicable governmental authorities. Upon
Tenant's election to move into the Adjacent Space, Landlord shall
immediately commence and proceed with due diligence to complete the
Adjacent Space for Tenant's use and occupancy in accordance with Tenant's
plans and specifications. All work shall be performed in a first class
workmanlike manner and all materials shall be of first class quality.
WITNESS THE FOLLOWING SIGNATURES AND SEALS:
Date: APRIL 6, 1996 LANDLORD:
WILLIAMSBURG SHOPPING CENTERS, INC., a
Virginia corporation
By: /s/ GEORGE R. COLVIN, SR. (SEAL)
--------------------------
Name: GEORGE R. COLVIN, SR
Title: CHAIRMAN
- 19 -
<PAGE> 20
TENANT:
GEORGE MASON BANK
By: /s/ KEVIN F. DECOSTE (SEAL)
---------------------
Name: Kevin F. DeCoste
Title: EVP
- 20 -
<PAGE> 21
WILLIAMSBURG SHOPPING CENTERS, INC.
9330 MELLENBROOK ROAD
COLUMBIA, MD 21045
APRIL 6, 1996
MINUTES - MEETING OF THE STOCKHOLDERS
A meeting being held at 1:00 PM this date of the stockholders of the
corporation. The following motions are put forth:
George R. Colvin, Jr., President, made a motion that will authorize George R.
Colvin, Sr., Chairman, to sign the lease between the corporation and the George
Mason Bank for the rental of 1,200 Square Feet of space in the shopping center
and as further described in said lease.
Mary M. Colvin, Secretary, seconds the motion.
A majority of stockholders being present and voting, the above motion is
unanimously approved.
In Witness Whereof, I have hereunto subscribed my name
and affixed the seal of this corporation on April 6,
1996.
/s/ GEORGE R. COLVIN /s/ MARY M. COLVIN
------------------------ ----------------------
Attested Secretary
[SIG]
-------------------------
Attested
<PAGE> 1
EXHIBIT 10AI
[BARNES, MORRIS, PARDOE, & FOSTER MANAGEMENT SERVICES, LLC LETTERHEAD]
May 16, 1996
Mr. Glenn E. Kinard
Executive Vice President
George Mason Bank
4221 Walney Road
Chantilly, VA 22021
RE: 531 EAST MARKET STREET
LEESBURG, VIRGINIA
Dear Glenn:
Enclosed please find one fully executed original of the Assignment and
Assumption Agreement by and among First Union National Bank of Virginia, George
Mason Bank, and Bellewood Associates Limited Partnership, for your files.
Please call me with any questions that you may have.
Sincerely,
BARNES, MORRIS, PARDOE & FOSTER MANAGEMENT SERVICES, LLC
/s/ MICHAEL ZACHARIA
Michael Zacharia
Retail Leasing
Enclosure
cc: Bruce Christman, Esq. (w/copy of enclosure)
<PAGE> 2
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the Assignment), dated as of
the 18 day of April, 1996 (the Effective Date), by and among FIRST UNION
NATIONAL BANK OF VIRGINIA (the Assignor), GEORGE MASON BANK (the Assignee), and
BELLEWOOD ASSOCIATES LIMITED PARTNERSHIP (the Lessor), recites and provides:
RECITALS:
By Lease dated April 23, 1993 (the Lease), between the Lessor (as
landlord) and the Assignor, successor to Columbia First Bank, (as tenant), the
Lessor leased to the Assignor certain real estate located in the County of
Loudoun, Virginia, and more particularly described in the Lease (the Leased
Premises). A true and complete copy of the Lease is attached hereto as Exhibit
A. Under the terms of the Lease, the Assignor may not assign its interest in the
Lease except with the prior written consent of the Lessor.
The Assignor now wishes to assign and transfer to the Assignee all of
the Assignor's right, title, and interest in and to the Lease. The Lessor is
willing to consent to such assignment on the terms and conditions set forth
herein.
ASSIGNMENT AND ASSUMPTION AGREEMENT:
FOR and in consideration of the premises, the mutual covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Assignment. The Assignor hereby assigns and transfers to the
Assignee all of the Assignor's right, title, and interest in and to the Lease
for the remainder of the term thereof (including any rights to renew the Lease
or extend the term thereof) subject to the rental, terms, covenants, and
conditions of the Lease. Notwithstanding the foregoing, however, Assignee shall
have the right to
<PAGE> 3
terminate this Assignment on or before sixty (60) days from the Effective Date
(the [OCC] Bureau of Financial Institutions of the Commonwealth of Virginia
Approval Period) in the event Assignee is not able to obtain, or is denied,
approval from the [Office of Comptroller of the Currency (OCC)] Bureau of
Financial Institutions of the Commonwealth of Virginia before the expiration of
the [OCC] Bureau of Financial Institutions of the Commonwealth of Virginia
Approval Period. Assignee shall exercise due diligence to obtain such approval.
In the event [OCC] Bureau of Financial Institutions of the Commonwealth of
Virginia approval is not obtained within the [OCC] Bureau of Financial
Institutions of the Commonwealth of Virginia Approval Period, either party may
extend the [OCC] Bureau of Financial Institutions of the Commonwealth of
Virginia Approval Period for an additional thirty (30) days by written notice to
the other party received prior to the expiration of the [OCC] Bureau of
Financial Institutions of the Commonwealth of Virginia Approval Period. Upon
receipt of approval from the [OCC] Bureau of Financial Institutions of the
Commonwealth of Virginia, Assignee shall pay Fifty Thousand Dollars ($50,000) to
Assignor.
Assignee acknowledges that it has had an opportunity to examine the
Leased Premises. This assignment and transfer is made "as is" and there are no
warranties, express or implied, with respect to the Leased Premises.
2. Representations and Warranties. The Assignor and Assignee each
represent and warrant to the other that (a) it has full power and authority to
execute and deliver this Assignment, and (b) the execution and delivery hereof
and the terms and obligations hereof do not contravene any agreement to which it
is a party or by which it or the Leased Premises is bound. Assignor and Lessor
represent and warrant to the Assignee: (i) that the Lease is in full force and
effect, (ii) that to the best of their knowledge, there exists no event of
default thereunder on the part of either Assignor or Lessor, (iii) that to the
best of their knowledge, there exists no event which with the giving of notice
or the expiration of any applicable cure period would constitute an event of
default by either Assignor or Lessor under the Lease, and (iv) that the Leased
Premises as of this date contains among other equipment, the following items (as
they were on March 15, 1995, the date Assignor and Assignee walked through the
Leased Premises): (a) one night depository unit, (b) a drive through banking
2
<PAGE> 4
facility including one remote station and one drive up window, (c) one night
teller safe, and (d) under-counter teller equipment for six stations plus the
drive-in teller station.
3. Indemnity by Assignor. The Assignor covenants to hold the Assignee
harmless from and indemnify the Assignee for any loss, damage, cost, or expense
(including reasonable attorneys' fees) arising out of any failure of the
Assignor to perform any of its obligations under the Lease up to and including
the Effective Date.
4. Acceptance, Assumption, and Indemnity by Assignee. The Assignee (a)
accepts the assignment of all of Assignor's right, title, and interest in and to
the Lease, (b) agrees to be bound by all of the terms, covenants, and conditions
thereof, and (c) assumes the obligations of the Assignor under the Lease from
and after the Effective Date; provided, however, that Assignee's obligation to
pay rent under the Lease shall not commence until May 1, 1996. The Assignee
covenants and agrees to perform each term, covenant, and condition directly for
the benefit of the Lessor and to hold the Assignor harmless from and indemnify
the Assignor for any loss, damage, cost, or expense (including reasonable
attorneys' fees) arising out of any failure of the Assignee to perform any of
its obligations under the Lease from and after the Effective Date.
Notwithstanding the foregoing, Assignee shall have no responsibility with
respect to any of the obligations under the Lease up to and including the
Effective Date or at any time after the date Assignee terminates this
Assignment, if it terminates this Assignment pursuant to Paragraph 1 hereof.
5. Consent of Lessor. The Lessor executes this Agreement to evidence
its consent to the assignment effected hereby; provided, however, that such
consent shall neither be nor be deemed to be a consent to, or a waiver of the
necessity of obtaining the consent of the Lessor to, any proposed future
assignment.
3
<PAGE> 5
6. Release by Lessor. The Lessor hereby remises, releases and forever
discharges the Assignor and it successors and assigns of and from all manner of
action, causes of actions, suits, debts, dues, sums of money, contracts,
agreements, promises, claims, and demands whatsoever in law or in equity, which
the Lessor ever had or now has or which its successors and assigns hereafter
can, shall, or may have against the Assignor upon or by reason of any matter,
cause, or thing whatsoever arising with respect to the Lease.
7. Change of Address. For all purposes under the Lease, including, but
not limited to paragraph thereof, the mailing address for the tenant thereunder
shall be changed to the following:
Mr. Dennis Danko, AVP, Facilities Dept.
George Mason Bank
4241 Walney Road
Chantilly, Virginia 22021
8. Further Assurances. Each party hereto covenants and agrees to
execute and deliver, or cause to be executed and delivered, and to do or make,
or cause to be done or made, upon the reasonable request of any other party, any
and all instruments, papers, deeds, acts, or things, supplemental, confirmatory,
or otherwise, as may be reasonably required by such other party for the purpose
of effecting the assignment described herein.
9. Completeness and Modification. This Agreement constitutes the entire
agreement between the parties hereto as to the transactions contemplated hereby
and supersedes all prior discussions, understandings, or agreements between the
parties hereto.
10. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
4
<PAGE> 6
11. Governing Law. This Agreement and all other instruments referred to
herein shall be governed by, and shall be construed according to the laws of the
Commonwealth of Virginia.
12. Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof, and it shall be sufficient that the signature on behalf of each party
hereto appear on one or more such counterparts. All counterparts shall
collectively constitute a single agreement.
13. Incorporation by Reference. All of the Exhibits attached hereto or
referred to herein and all documents in the nature of such Exhibits are by
reference incorporated herein and made a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives.
ASSIGNOR:
FIRST UNION NATIONAL BANK OF VIRGINIA
By: [SIG]
---------------------------------
Its: V.P.
ASSIGNEE:
GEORGE MASON BANK
By: /s/ GLENN E. KINNARD
--------------------------------
Its: Executive Vice President
5
<PAGE> 7
LESSOR:
BELLEWOOD ASSOCIATED LIMITED PARTNERSHIP
By: [SIG]
-----------------------------------
By: [SIG]
-----------------------------------
By: [SIG]
-----------------------------------
Its: President
STATE OF VIRGINIA
County of Fairfax, to wit:
The foregoing instrument was duly acknowledged before me in the County
of Fairfax, this 18 day of April, 1996, by Glenn E. Kinard, [, as EVP of George
Mason Bank, a N/A on behalf of the BANK.
/s/ CHARMAINE E. BORA
-------------------------------------
Notary Public
My commission expires: 7-31-97.
STATE OF ________
_______________ of ______________, to wit:
The foregoing instrument was duly acknowledged before me in the
______________ of ____________, this ____ day of ________, 1996, by
________________, [,as _______ of ___________________________, a _______________
on behalf of the ________________________.
[SIG]
---------------------------------------
Notary Public
My commission expires: _____________.
STATE OF ________
_______________ of ______________, to wit:
The foregoing instrument was duly acknowledged before me in the
______________ of ____________, this ____ day of ________, 1996, by
________________, [,as _______ of ___________________________, a _______________
on behalf of the ________________________.
______________________________________
Notary Public
My commission expires: _____________.
6
<PAGE> 8
LEASE
Between
Bellewood Associates Limited Partnership
as
LANDLORD
and
Columbia First Bank, a Federal Savings Bank
as
TENANT
-----------------
<PAGE> 9
LEASE
THIS LEASE dated April 23, 1993, for identification purposes only,
is between Landlord and Tenant.
For and in consideration of the covenants and agreements set forth
in the Lease to be kept and performed by both parties, Landlord demises and
leases to Tenant, and Tenant leases from Landlord, the Premises for the Term
specified below.
ARTICLE 1
BASIC LEASE PROVISIONS
1.0l PROVISIONS This Article 1.01 is an integral part of this Lease
and all of its terms (collectively, the "Basic Lease Provisions") are
incorporated into and made a part of this Lease. Each reference in this Lease to
any of the following subjects shall be construed to incorporate the data stated
for that subject in this Section 1.01. In the event of any conflict between a
Basic Lease Provision and the balance of this Lease (including Exhibits and
Riders, if any), the latter shall control.
(a) LANDLORD: Bellewood Associates Limited Partnership
(b) TENANT: Columbia First Bank, a Federal Savings Bank
(c) PREMISES: Store Number 36 as marked on the site plan attached as
Exhibit A.
(d) SIZE OF THE
PREMISES: An area consisting of approximately 3,000 square feet, to
be measured from the center line of all walls common to
other tenant premises to the exterior faces of all other
walls, and to the building line.
(e) STREET ADDRESS
OF PREMISES: 531 East Market Street
Leesburg, Virginia
(f) SHOPPING
CENTER: Bellewood Commons Shopping Center
<PAGE> 10
PAGE 2
(g) BUILDING: Building D of Bellewood Commons Shopping Center
(h) RENT
COMMENCEMENT
DATE: May 1, 1993
(i) SIGNS: Tenant's building signs and dedicated freestanding sign at
the street curb.
(j) TERM: Beginning on the Rent Commencement Date and expiring 120
months after the Rent Commencement Date, and thereafter as
extended upon the exercise of any renewal option or options
pursuant to Section 2.03.
(k) OPTIONS: Two additional five-year periods.
(l) BASE ANNUAL
RENT: (for $42,000. This figure shall be adjusted after measurement of
months 1-60) the Premises and shall be calculated at the rate of $14 per
square foot.
BASE ANNUAL
RENT: (for
months 61-120) $48,000. This figure shall be adjusted after measurement of
the Premises and shall be calculated at the rate of $16.00
per square foot.
BASE ANNUAL
RENT: (for
first and
second Option
Period) Market Value Rent determined in accordance Article 3.03.
(m) ESTIMATED
FIRST YEAR
CAM: $3.00 per square foot
(n) TENANT'S PRO
RATA SHARE: A percentage, based on a fraction, the numerator of which
shall be the leasable square feet of the Premises and the
denominator of which shall be the aggregate leasable square
feet of the Shopping Center. As of the Commencement Date,
Tenant's Pro Rata Share is 4.86%.
<PAGE> 11
PAGE 3
(o) ADDRESS FOR
NOTICES AND
PAYMENTS: Landlord:
Bellewood Associates Limited Partnership
c/o Holladay Property Management Services and
HM Leesburg Limited Partnership
3400 Idaho Avenue N. W.
Washington, D. C. 20016
Tenant:
Columbia First Bank, a Federal Savings Bank
1560 Wilson Boulevard
Arlington, Virginia 22209
Attention: Thomas J. Schaefer
President & CEO
(p) INSURANCE: Public Liability:
$2,000,000/$500,000/$2,000,000.
Fire and Extended Coverage: Replacement Cost
(q) TRADE
FIXTURES: The fixtures located on the Premises and listed on
Exhibit C.
(r) EXHIBITS:
EXHIBIT A - Site Plan
EXHIBIT B - Confirmation of Rent Commencement Date
EXHIBIT C - Trade Fixtures
EXHIBIT D - Estoppel Certificate
All Exhibits attached to this Lease are incorporated by this
reference and made a part of this Lease.
ARTICLE 2
DEMISED PREMISES, TERM AND USE
2.01 PREMISES Landlord hereby leases the Premises to Tenant for the
Term and grants to Tenant, for the Term, all easements, rights and privileges
appurtenant to the Premises, including the right to use the banking drive-thru
lanes, parking
<PAGE> 12
PAGE 4
areas, driveways, loading docks, roads, alleys and means of ingress and egress.
Landlord also grants Tenant the right to use the Trade Fixtures for the Term
and, in Tenant's discretion, to upgrade or replace the Trade Fixtures. Tenant
agrees to maintain the Trade Fixtures at its expense.
2.02 CHARACTER OF SHOPPING CENTER Tenant has entered into this Lease in
reliance upon representations by Landlord that the Shopping Center is and will
remain retail in character and well maintained.
2.03 TERM When the Rent Commencement Date has been ascertained,
Landlord and Tenant shall enter into a Confirmation of Rent Commencement Date
substantially in the form of Exhibit B confirming the Rent Commencement Date and
specifying the actual expiration date for the initial Term. If the Term would
otherwise end on a day other than the 1st day of the month, the Term shall be
extended to the last day of such month.
2.04 OPTION(S) TO RENEW PROVIDED that Tenant is not then in default of
any material term, condition or covenant contained in this Lease, Tenant shall
have the option(s) to renew this Lease for a First Option Period of 60 months
and a Second Option Period of 60 months. Tenant shall give Landlord notice of
the exercise of such option(s) in writing not later than 180 days prior to
expiration of the initial Term or of the First Option Period, as the case may
be. The terms and conditions of the Lease applicable at the Expiration Date will
govern the applicable Option Period, except as follows: (i) Tenant will have no
further right to extend the Lease Term following Tenant's exercise of its second
option to renew; and (ii) rent shall be payable at the Market Value Rent rate
agreed to by Landlord and Tenant no later than 3 months prior to the Expiration
Date of the Date of the Lease Term or Extended Lease Term, as applicable. If
Landlord and Tenant are unable to agree on the Base Annual Rent payable during
the Extended Lease Term prior to 3 months before the Expiration Date, then the
rent shall be determined in accordance with Article 3.03. The Market Value Rent
so determined shall be deemed the Base Annual Rent during the related Option
Period.
2.05 ACCESS TO PREMISES Upon reasonable prior notice (but in no event
less than 24 hours except in the case of an emergency), Landlord may enter the
Premises, so long as such entry does not interfere with Tenant's business,
during Tenant's business hours to inspect the Premises, to show them to
prospective purchasers and lenders, or to perform maintenance and repairs.
2.06 USE The Premises will be used as an office of a financial
institution, for uses incidental to such purposes and for no other purpose.
Tenant will not do or permit to be done in or about the Premises, nor bring to,
keep or permit to be brought
<PAGE> 13
PAGE 5
or kept in the Premises, anything which is prohibited by any law, statute,
ordinance or governmental rule or regulation which is now in force or which may
be enacted or promulgated after the Lease Date; use or allow the Premises to be
used for any improper, immoral, unlawful or objectionable purpose; cause,
maintain or permit any nuisance in, on, or about the Premises or commit or allow
to be committed any waste in, on, or about the Premises.
2.07 COMPLIANCE WITH LAW Tenant and Landlord agree to comply with all
laws, ordinances, orders and regulations affecting the use and occupancy of the
Premises and the Shopping Center, respectively, and the cleanliness, safety or
operation thereof. Tenant agrees to comply with the reasonable regulations and
requirements of any insurance underwriter, inspection bureau or similar agency
with respect to that portion of the Premises installed by Tenant. Tenant also
agrees to permit Landlord to comply with the reasonable regulations and
requirements of any insurance underwriter, inspection bureau or similar agency
with respect to that portion of the Premises installed by Landlord.
2.08 ADVERTISING AND PROMOTION Landlord and Tenant agree that it is in
their mutual interest to advertise and promote the Shopping Center. Accordingly,
Tenant agrees to use the name "Bellewood Commons" in describing the location of
its branch to the same extent that Tenant uses the names of shopping centers
when describing the location of its other branches. Tenant also agrees to pay
Landlord, in advance, on the first day of each calendar month, Tenant's Pro Rate
Share of Landlord's cost of advertising and promoting the Shopping Center as a
whole but not individual tenants of the Shopping Center ("Landlord's Advertising
Costs"). Landlord and Tenant agree that, during calendar year 1993, Tenant shall
not be obligated to pay a share of Landlord's Advertising Costs to the extent
such costs exceed $12,000 or, during subsequent calendar years during the term
of this Lease, to the extent Landlord's Advertising Costs increase by more than
3% over the previous calendar year. Within 90 days after the end of each
calendar year, Landlord shall furnish to Tenant a statement, certified as
correct by a certified public accountant or an officer of Landlord, showing
Landlord's Advertising Costs for the previous calendar year and the monthly
payments paid or payable shall be adjusted between Landlord and Tenant, by
Landlord's crediting Tenant's account or by Tenant's paying Landlord, as the
case may be.
ARTICLE 3
RENT
3.01 RENT COMMENCEMENT DATE The Base Annual Rent and all other charges
shall begin to accrue on the Rent Commencement
<PAGE> 14
PAGE 6
Date.
3.02 BASE ANNUAL RENT Tenant agrees to pay for the use and occupancy of
the Premises, at the times and in the manner hereinafter provided, an amount
equal to one-twelfth of the Base Annual Rent ("Monthly Rent Installment"), in
advance, without notice or invoice from Landlord, on the first day of each
calendar month during the Term, beginning upon the Rent Commencement Date and
ending on the first day of the month in which the Lease expires. In the event
the Rent Commencement Date shall be a day other than the first day of a calendar
month, then the Monthly Rent Installment for the period from the Rent
Commencement Date until the first day of the month next following shall be
prorated based on the number of days during such month and the number of days
during such month from and after the Rent Commencement Date.
3.03 MARKET VALUE RENT (a) The term "Market Value Rent" shall mean the
annual fixed rent that a willing lessee would pay and a willing lessor would
accept in an arms-length lease of the demised premises as of the Exercise Date.
If Landlord and Tenant shall fail to agree upon the Market Value Rent within 30
days after the date of Tenant's Notice to extend this lease, then Landlord and
Tenant each shall give notice (the "Determination Notice") to the other setting
forth their respective determinations of the Market Value Rent, and, subject to
the provisions of subsection (b) below, either party may apply to the American
Arbitration Association or any successor to it for the designation of an
arbitrator satisfactory to both parties to render a final determination of the
Market Value Rent. The arbitrator shall be a real estate appraiser or consultant
who shall have at least 15 years continuous experience in the business of
appraising. The arbitrator shall conduct such hearings and investigations as the
arbitrator shall deem appropriate and shall, within 30 days after having been
appointed, choose one of the determinations set forth in either Landlord's or
Tenant's Determination Notice, and that choice by the arbitrator shall be
binding upon Landlord and Tenant. Each party shall pay its own counsel fees and
expenses, if any, in connection with any arbitration under this subsection (a),
and the parties shall share equally all other expenses and fees of any such
arbitration. The determination rendered in accordance with the provision of this
subsection (a) shall be final and binding in fixing the Market Value Rent. The
arbitrator shall not have the power to add to, modify, or change any of the
provisions of this lease.
(b) In the event that the determination of the Market Value Rent set forth
in the Landlord's and Tenant's Determination Notices shall differ by less than
$1.00 per leasable square foot per annum for each year during the Renewal Lease
Term, then the Market Value Rent shall not be determined by arbitration, but
shall instead be set by taking the average of the determinations set forth in
Landlord's and Tenant's Determination Notices. Only
<PAGE> 15
PAGE 7
if the determinations set forth in Landlord's and Tenant's Determination Notices
shall differ by more than $1.00 per leasable square foot per annum for any year
during the Renewal Lease Term shall the actual determination of Market Value
Rent be made by an arbitrator as set forth in subsection (a) above.
(c) If for any reason the Market Value Rent has been determined prior to
the commencement of the Renewal Lease Term, then, until the Market Value Rent
and, accordingly, the Base Annual Rent, is finally determined, the Base Annual
Rent shall remain the same as payable during the last year of the initial Term
or the First Option Period, as the case may be. Upon final determination of the
Market Value Rent, an appropriate adjustment to the Base Annual Rent shall be
made reflecting such final determination, and Landlord or Tenant, as the case
may be, shall promptly refund or pay to the other any overpayment or deficiency,
as the case may be, in the payment of Base Annual Rent from the commencement of
the Renewal Lease Term to the date of such final determination.
ARTICLE 4
COMMON AREAS
4.01 MAINTENANCE Landlord covenants and agrees to maintain, or cause to
be repaired or maintained, the Common Areas in good order and repair. The Common
Areas shall consist of all those areas and items described in Article 7.02(a) as
Landlord's responsibility, and shall include parking areas, landscaped areas,
streets, sidewalks, driveways, loading platforms, and any other facilities of
the Shopping Center as they may from time to time exist, but repair and
maintenance shall not include ordinary janitorial services nor shall Common
Areas include those items excluded from Landlord responsibility under Article
7.02(b).
4.02 COMMON AREA COSTS Common Area Costs shall mean costs reasonably
incurred for operation, maintenance, management and repair of the Common Areas,
including Taxes determined under Article 5.01 and Insurance determined under
Article 14.01; certified public accountant fees; repairing, repainting and
restriping and repaving when necessary the parking areas; refuse collection;
snow removal from the Shopping Center; cleaning, sweeping and other janitorial
services outside of the Premises; sanitation and maintenance of refuse
receptacles; planting and replanting landscaping; maintenance of directional
signs and other markers; and upkeep of lighting and other utilities. Common Area
Costs may include any expenditures which, in accordance with generally accepted
accounting principles, are not fully chargeable to current account in the year
the expenditure is incurred
<PAGE> 16
PAGE 8
(capital expenses). Items which are capital in nature shall be amortized
according to such principles, and only the part thereof attributable to a
particular year, pro-rated for each day in the Term, shall be included in Common
Area Costs for that year.
4.03 PAYMENT BY TENANT Effective on the Rent Commencement Date, Tenant
shall pay to Landlord, in advance, on the first day of each calendar month,
Tenant's Pro Rata Share of the monthly allocation for Common Area Costs (based
upon Landlord's estimates), subject to readjustment under Article 4.04.
4.04 STATEMENT FROM LANDLORD Within 90 days after the end of each
calendar year, Landlord shall furnish to Tenant a statement, certified as
correct by a certified public accountant or an officer of Landlord, showing the
total Common Area Costs for the calendar year just expired (including any
allocation of capital expenses or special assessments), the actual allocated
monthly and annual amount of Common Area Costs, and the payments actually made
by Tenant during such calendar year. If the actual Common Area Costs for such
calendar year shall exceed Tenant's payments as shown on such statement, then
Tenant shall, within 30 days after receipt of such statement, pay the difference
to Landlord. If the statement indicates an overpayment by Tenant, then Tenant
shall, at its option, be entitled to offset such excess against payments
becoming due or any other payment obligations under this Lease. Upon termination
of the Lease, Landlord shall refund any overpayment of Common Area Costs. Common
Area Costs shall be subject to audit by Tenant, and Landlord shall use its best
efforts to minimize such costs in a manner consistent with good building
management practices. The obligations under this Article shall survive the
expiration of the Lease.
ARTICLE 5
TAXES
5.01 TENANT'S PAYMENT OF REAL PROPERTY TAXES Tenant shall pay its Pro
Rata Share of all real property taxes, general assessments and special
assessments that may he levied or assessed against the Premises by any lawful
authority, beginning on the Rent Commencement Date ("Taxes"). Taxes for the tax
year in which the Term begins and the Term expires shall be prorated daily based
on the number of days of the tax year included in the Term; and special
assessments shall be prorated based on a reasonable estimate of the useful life,
if any, of the work for which the special assessment is made and the portion of
that useful life included in the Term. Taxes shall be paid under Article 4.02 as
Common Area Charges.
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5.02 PAYMENT OF PERSONAL PROPERTY TAXES, CHARGES AND LEVIES Tenant
shall pay before delinquency all taxes, license fees and public charges levied,
assessed or imposed upon its business operation in the Premises and upon its
leasehold improvements, fixtures, equipment and personal property in or upon the
Premises or any other taxes, charges of levies (including judgments) which may
either immediately or after the passage of time become a lien on the Premises or
charge upon Tenant's estate in the Premises. If there are any such taxes,
charges or levies assessed or imposed on Tenant's property together with
property of Landlord, then such assessment shall be equitably divided between
Landlord and Tenant so that Tenant shall pay only its equitable share of such
assessment. Landlord shall determine the basis of such proration based upon the
records of the tax assessor. No taxes, assessments, fees or charges referred to
in this paragraph shall be considered Taxes under the provisions of Article 4.
ARTICLE 6
UTILITIES
6.01 TENANT'S RESPONSIBILITY Tenant shall be solely responsible for and
promptly pay all charges for the use or consumption within the Premises of
sewer, gas, electricity, water and all other utility services.
6.02 LIMITED LIABILITY FOR DAMAGE Landlord shall not be liable to
Tenant in damages or otherwise if the utilities or services are interrupted or
terminated because of necessary repairs, installations or improvements, or any
cause beyond Landlord's reasonable control; nor shall any such interruption or
termination relieve Tenant of the performance of any of its obligations
hereunder, except that if Tenant is unable to operate its business without
material impediment for longer than 30 days, all rent obligations hereunder
shall abate thereafter until reasonable service is restored. "Reasonable
service" shall be such as to permit Tenant to operate its business substantially
as it did prior to the interruption or termination. If such interruption
continues for more than 180 days, Tenant may elect to terminate this Lease.
ARTICLE 7
CONDITION OF PREMISES
7.01 CONDITION OF THE PREMISES Tenant is fully familiar with the
physical condition of the Premises and the Building, including the improvements,
Trade Fixtures, and
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equipment. Landlord has made no representations of any nature in connection with
the condition of the Premises or of the Building, improvements, Trade Fixtures,
or equipment, and the Landlord shall not be liable for any latent or patent
defects. Tenant understands and agrees that the Premises are leased in "as is"
condition, subject to Landlord's agreements to repair and maintain the Premises,
and Tenant shall be presumed to have accepted possession of the Premises on the
Rent Commencement Date.
7.02 REPAIR AND MAINTENANCE (a) Landlord covenants and agrees, at its
expense, to keep in good condition and repair the foundations, exterior paint,
plumbing system, electrical system, utility lines and connections to the
Premises, sprinkler mains, if any, structural components (including without
limitation the roof, roof covering and load-bearing walls and floor slabs) and
masonry walls of the Premises, after notice from Tenant of the need for such
repairs. Tenant shall promptly notify Landlord of any condition respecting such
structure or exterior that may need repair. Landlord's obligation with respect
to maintenance of and repairs of the Premises shall be only as expressly set
forth in this Article and Landlord shall not be responsible for wall cracks
which in the sole opinion of Landlord do not constitute a danger to the
Premises. Landlord shall not be in default unless Landlord fails to perform its
obligations within a reasonable time, but in no event later than 30 days after
written notice from Tenant specifying Landlord's failure to perform; provided,
however, that if the nature of Landlord's obligation is such that more than 30
days are required for performance, Landlord shall not be in default if Landlord
commences performance within such 30 day period and thereafter diligently
carries out its duties.
(b) Tenant, at its expense, shall make all necessary repairs and
replacements not required to be made by Landlord under paragraph (a) above
(including but not limited to repairs and replacements to the plumbing, heating,
air conditioning and sprinkler system and equipment in the Premises, and the
floors, interior walls, and ceiling of the Premises and the windows, doors, and
store front thereof, and repairs necessitated by the act or failure to act of
Tenant and/or its agents, employees, customers or invitees). If Tenant refuses
or fails to make or complete with reasonable dispatch any required repairs or
replacements, Landlord may make such repairs or replacements or cause them to be
made at Tenant's expense, and, upon demand, Tenant shall pay the cost to
Landlord as additional rent. Tenant agrees to place its trash in the dumpster
assigned by Landlord from time to time.
7.03 ALTERATIONS Tenant will not alter the exterior of the Premises
without the prior written consent of Landlord; provided, however, Landlord will
not unreasonably delay or withhold its consent to alterations reasonably
intended to promote or improve Tenant's banking services or operations. Tenant
may at
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its expense make such alterations or improvements to the interior of the
Premises as may be required for the conduct of its business, provided the
written approval of Landlord as to the improvement and the contractor has been
first obtained; and further provided that such alterations and improvements
shall be performed in a workmanlike manner and shall not be harmful to the
structure nor overload the electrical, plumbing, heating or air conditioning
facilities of the Premises or the Building. Tenant shall not to cause any
protrusions to be made in, to or through the roof without Landlord's prior
written consent. At the expiration of the Lease, Tenant shall, at its expense,
restore the Premises to their original condition, reasonable wear and tear
excepted and shall be broom clean. If Tenant fails to perform such restoration,
Landlord may do it at Tenant's expense and Tenant shall on demand pay the cost
to the Landlord.
7.04 MECHANICS LIENS Tenant shall not permit to be created or to remain
undischarged any lien, encumbrance or charge arising out of any work performed
for Tenant by any contractor, mechanic, laborer or any material supplied or
claimed to be supplied by any materialman to or for Tenant that might be or
become a lien, encumbrance or charge upon the Premises or the income therefrom.
If any lien or notice of lien on account of an alleged debt of Tenant or any
contractor to work in the Premises shall be filed against the Premises or the
Shopping Center, Tenant shall, within 30 days after notice of the filing
thereof, cause the same to be discharged of record by payment, deposit or bond,
by order of a court of competent jurisdiction or otherwise. If Tenant shall fail
to cause such lien or notice of lien to be discharged by either paying the
amounts claimed to be due or by procuring the discharge of such lien by deposit
or by bonding proceedings, Landlord shall be entitled to defend any foreclosure
action of such lien by the lienor. Tenant shall reimburse Landlord, upon demand,
for any money paid by Landlord and all costs and expenses, including reasonable
attorneys' fees, incurred by Landlord in connection therewith, together with 10%
annual interest thereon from the date of Landlord's making of the payment or
incurring of the cost and expense. If Tenant diligently contests any such claim,
but does not cause such lien or notice of lien to be discharged, Tenant agrees
to indemnify, defend and hold harmless Landlord from any and all costs,
liabilities and damages, including reasonable attorneys' fees resulting
therefrom, and upon demand, to deposit with Landlord cash or a surety bond, in
form and with a company reasonably satisfactory to Landlord, in an amount equal
to the amount of such contested claim.
ARTICLE 8
SUBORDINATION AND ATTORNMENT
8.01 SUBORDINATION Tenant agrees that this Lease is
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subject and subordinate to the lien of any first mortgages or deeds of trust now
on or which at any time may be made a lien upon the Shopping Center, or any part
of it, and to all advances made or hereafter to be made upon the security
thereof. This subordination provision shall be self-operative and no further
instrument of subordination shall be required. Tenant agrees to execute and
deliver, upon request, such further instrument or instruments confirming this
subordination as shall be desired by Landlord or by any mortgagee or proposed
mortgagee; and Tenant appoints Landlord as Tenant's attorney-in-fact to execute
any such instrument or instruments. Tenant further agrees that, as the option of
the holder any first mortgagee or of the trustee under any first deed of trust,
this Lease may be made superior to said first mortgage or first deed of trust by
the insertion therein of a declaration that this Lease is superior thereto.
8.02 ATTORNMENT In the event any proceedings are brought for the
foreclosure of, or in the event of exercise of the power of sale under, any deed
to secure debt given by Landlord and covering the Leased Premises, Tenant shall
attorn to the Purchaser upon any such foreclosure or sale and recognize such
purchaser as the owner and landlord under this Lease, provided such owner, as
landlord, shall recognize Tenant's rights to continue to occupy the Lease
Premises and exercise and enjoy all of its rights hereunder so long as Tenant
complies with the terms and provisions of this Lease and further provided any
such purchaser shall be deemed to assume and agree to perform the duties of the
landlord hereunder.
ARTICLE 9
SIGNS
Landlord and Tenant acknowledge that this Lease is contingent upon
Tenant receiving final approval in writing of Tenant's exclusive use of its
building and curb signs. Upon receipt of such approval, Tenant shall install
such signs at Tenant's expense and Tenant shall be solely responsible for the
expenses of operation, maintenance and replacement of such signs.
ARTICLE 10
DAMAGE TO PREMISES
10.01 REPAIR OF PREMISES (a) In the event the Premises are damaged or
destroyed or rendered partially untenantable for their accustomed uses by fire
or other casualty, which is insured or would be insured under the coverage that
Landlord is obligated
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to carry pursuant to Article 12.01, then Landlord shall, within 60 days after
such casualty, commence to repair the premises, and within 120 days after
commencement of such repair, restore them to substantially the condition in
which they were immediately prior to the happening of such casualty, except as
otherwise provided in this Article 10.
(b) In the event the Premises or the Building are damaged or destroyed
by a peril not covered by the insurance Landlord is obligated to carry pursuant
to Article 12.01 ("Uninsured Risk") and the Premises or the Building are damaged
by such Uninsured Risk to an extent equal to or greater than 25% of the
replacement cost of the Premises or the Building above the foundation, then
Landlord shall have the option to (1) elect to repair the damage, in which event
this Lease shall continue in full force and effect, provided that such repairs
are commenced within 120 days after such casualty and Landlord diligently and
continually pursues such repairs to completion no longer than one year after the
date of the casualty, or (2) elect not to repair the damage, in which event this
lease shall automatically terminate effective as of the date Landlord gives
Tenant written notice of termination. Landlord shall notify Tenant within 90
days after the happening of such casualty of its election to repair the Premises
or to terminate this Lease by not repairing the Premises. If the Premises or the
Building are damaged by an Uninsured Risk to an extent less than 25% of the
replacement cost of the Premises, or the Building above the foundation, then
such damage shall be treated as an insured risk and Landlord shall be obligated
to repair the Premises in accordance with the provisions of Article 10.01.
10.02 RENT ABATEMENT AND TERMINATION From the date of any casualty
described in Article 10.01 until the Premises or Shopping Center are so repaired
and restored (or until Landlord notifies Tenant of its election to terminate
this Lease in accordance with the provisions of Article 10.01) , Base Annual
Rent and all other charges payable under this Lease shall abate in the same
proportion as the untenantable portion of the Premises bears to the entire
Premises.
ARTICLE 11
EMINENT DOMAIN
11.01 ELECTION TO TERMINATE In the event that any portion of the
Premises or all or a substantial portion of the Shopping Center shall be
appropriated or taken under the power of eminent domain by any public or
quasi-public authority, then at the election of either Landlord or Tenant, upon
written notice to the other party within 60 days after receipt of written notice
of
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such taking, this Lease shall terminate and expire as of the date of such taking
and both Landlord and Tenant shall thereupon be released from any liability
thereafter accruing hereunder.
11.02 ELECTING NOT TO TERMINATE If neither Landlord nor Tenant elects
to terminate this Lease, Tenant shall remain in that portion of the Premises
that shall not have been appropriated or taken, and Landlord agrees, at
Landlord's cost and expense, as soon as reasonably possible, to restore the
remaining portion of the Premises to a complete unit of like quality and
character as existed prior to such appropriation or taking; and as of the date
of such appropriation or taking all rent and payment obligations of Tenant shall
be adjusted on an equitable basis, taking into account the relative value of the
portion taken in comparison to the portion remaining. A voluntary sale or
conveyance in lieu of condemnation under threat of condemnation shall be deemed
an appropriation or taking under the power of eminent domain.
ARTICLE 12
INSURANCE
12.01 LANDLORD'S OBLIGATION. Landlord agrees to carry or cause to be
carried during the Term, public liability insurance and fire and extended
coverage with such endorsements as are commonly included in the market area on
the Premises. Public Liability Coverage shall be not less than $1,000,000 for
bodily injury, including death and personal injury arising out of any one
occurrence and insurance for fire, extended coverage, vandalism and malicious
mischief, insuring the improvements located on Landlord's property in the
Shopping Center. Fire and Extended Coverage shall not be for more than the
replacement value of the Premises. Landlord shall have the option to carry
additional insurance or insurance with higher coverage, provided that Tenant
shall be responsible for paying only the insurance coverage specified herein
with limits that are customary and reasonable in the general vicinity of the
Shopping Center for structures similar to the Premises. Such insurance shall
cover the Premises and all appurtenances thereto. Landlord shall provide to
Tenant a certificate of such insurance. Landlord's premiums for such insurance
shall be paid as Common Area Costs under Article 4.
12.02 TENANT'S OBLIGATION. Tenant shall carry public liability
insurance on the Premises covering both Tenant, Landlord and any trustee or
beneficiary under a deed of trust on the Premises as additional insureds with
terms and companies reasonably satisfactory to Landlord and giving Landlord,
Tenant and other additional insureds of which Landlord has previously notified
Tenant in writing a minimum of 10 days written notice by the insurance company
prior to cancellation, termination or change
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in such insurance. Such insurance shall be for limits of not less than
$2,000,000 for bodily injury, including death and personal injury, arising out
of any one occurrence, and not less than $500,000 for damage to property arising
out of any one occurrence or a policy having a combined single limit of
$2,000,000. Tenant shall obtain tenant insurance with standard coverage against
loss by fire, theft or other casualty on its personal property, and such
insurance shall have the same provisions on coverage and notification of
Landlord, trustees and beneficiaries and others as the public liability
insurance. Nothing in this Article 12.02 shall prevent Tenant from carrying and
maintaining any insurance required hereunder within the coverage of a blanket
insurance policy or policies carried by Tenant covering other properties as well
as the Premises. Tenant shall from time to time on Landlord's request provide
such certificates of insurance to Landlord or its lenders as Landlord may
reasonably request.
12.03 MUTUAL RELEASE Landlord and Tenant for themselves and all parties
claiming under them, mutually release and discharge each other and their
respective officers, directors, partners, agents and employees, from all claims
and liabilities arising from or caused by any casualty or hazard, covered or
required hereunder to be covered in whole or in part by insurance on the
Premises, the Shopping Center of in connection with property on or activities
conducted on the Premises or the Shopping Center, and mutually waive (and shall
cause their respective insurers to waive) any right of subrogation that might
otherwise exist in or accrue to any person on account thereof. Landlord and
Tenant shall obtain any endorsements necessary so that such release shall not
operate in any case to invalidate such insurance coverage.
12.04 MUTUAL INDEMNIFICATION Tenant and Landlord hereby agree to
indemnify, defend and hold harmless each other, their agents, officers and
employees, from and against any and all liability, claims, demands, damages,
expenses, fees, fines, penalties, suits, proceedings, actions and causes of
action of every kind and nature arising or growing out of or in any way
connected, as to Landlord, with Tenant's use, occupancy, management or control
of the Premises and, as to Tenant, Landlord's use, occupancy, management or
control of the Shopping Center, respectively. This obligation to indemnify shall
include reasonable legal and investigation costs and all other reasonable costs,
expense and liabilities from the first notice that any claim or demand is to be
made or may be made.
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ARTICLE 13
ASSIGNMENT AND SUBLETTING
Tenant agrees that it will not assign, mortgage or encumber this Lease,
nor sublease, or permit the Premises or any part of the Premises to be used or
occupied by others, without the prior written consent of Landlord in each
instance. Landlord's consent shall not be unreasonably withheld if Tenant wishes
to sublet to another financial institution.
Any assignment or sublease in violation of this section will be void.
If this Lease is assigned, or if the Premises or any part of the Premises are
subleased or occupied by anyone other than Tenant, Landlord may, after default
by Tenant, collect rent from the assignee, subtenant or occupant, and apply the
net amount collected to Rent. No assignment, sublease, occupancy or collection
will be deemed (a) a waiver of the provisions of this section; or (b) the
acceptance of the assignee, subtenant or occupant as tenant; or (c) a release of
Tenant from the further performance by Tenant of covenants on the part of Tenant
contained in this Lease. The consent by Landlord to an assignment or sublease
will not be construed as consent to any further assignment or sublease. No
permitted subtenant may assign or encumber its sublease or further sublease all
or any portion of its subleased space, or otherwise permit the subleased space
or any part of its subleased space to be used or occupied by other, without
Landlord's prior written consent in each instance.
ARTICLE 14
DEFAULT
14.01 EVENTS OF DEFAULT The following events are referred to
collectively as "Events of Default," or individually as an "Event of Default:"
(a) Tenant defaults in the due and punctual payment of Rent, and such
default continues for more than 5 business days following notice from Landlord;
(b) this Lease or the Premises or any part of the Premises are taken
upon execution or by other process of law directed against Tenant, or are taken
upon or subject to any attachment at the instance of any creditor or claimant
against Tenant, and the attachment is not discharged or disposed of within 45
days after its levy;
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(c) Tenant files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United States or
under any insolvency act of any state, or admits the material allegations of any
such petition by answer or otherwise, or is dissolved or makes an assignment for
the benefit of creditors;
(d) voluntary or involuntary proceedings under any such bankruptcy law
or insolvency act or for the dissolution of Tenant are instituted against
Tenant, or a receiver or trustee is appointed for all or substantially all of
the property of Tenant, and such proceeding is not dismissed or such
receivership or trusteeship vacated within 60 days after such institution or
appointment;
(e) Tenant fails to take possession of the Premises on the Commencement
Date of the Term; or
(f) Tenant breaches any of the other agreements, terms covenants or
conditions which this Lease requires Tenant to perform, and such breach
continues for a period of 30 days after written notice from Landlord; or if such
breach cannot be cured reasonably within such 30 day period and Tenant fails to
commence and proceed diligently to cure such breach within a reasonable time
period.
14.02 LANDLORD'S REMEDIES Upon the occurrence and continuance of an
Event of Default, Landlord, without notice to Tenant (except where expressly
provided for below) may do any one or more of the following:
(a) declare the rent for the entire Lease Term immediately due and
payable and collect the same by distress or otherwise;
(b) declare the term of this Lease ended and this Lease terminated,
cancelled and annulled;
(c) with or without terminating this Lease, reenter and take possession
of the Premises and every part thereof and rerent the Premises at the risk and
cost of the Tenant, whose default shall not relieve it of the responsibility for
the difference between the rent due under this Lease and the rent actually
received by landlord during the remaining Lease Term, or, if such rent received
is in excess of the rent called for hereunder, the entire amount shall belong to
Landlord free of any claim of Tenant;
(d) perform, on behalf and at the expense of Tenant, any obligation of
Tenant under this Lease that Tenant has failed to perform and of which Landlord
has given Tenant notice, the cost of which performance by Landlord, together
with interest at the
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rate of 6% per year from the date of such expenditure, shall be payable on
demand; and/or
(e) institute such other appropriate proceeding as Landlord may be
legally entitled to employ.
If an Event of Default occurs, then Tenant agrees to compensate Landlord
for any costs incurred by Landlord in enforcing the provisions of this Lease,
including Landlord's attorneys' fees.
14.03 CUMULATIVE REMEDIES Any suit or suits for the recovery of the
amounts and damages set forth in this Article may be brought by Landlord, from
time to time, at Landlord's election, and nothing in this Lease will be deemed
to require Landlord to await the date upon which this Lease or the Term would
have expired had there occurred no Event of Default. Each right and remedy
provided for in this Lease is cumulative and is in addition to every other right
or remedy provided for in this Lease or now or after the Lease Date existing at
law or in equity or by statue or otherwise, and the exercise or beginning of the
exercise by Landlord of any one or more of the rights or remedies provided for
in this Lease or now on after the Lease date existing at law or in equity or by
statute or otherwise will not preclude the simultaneous or later exercise by
Landlord of any or all other rights or remedies provided for in this Lease or
now or after the Lease Date existing at law or in equity or by statute or
otherwise. All costs incurred by Landlord in collecting any amounts and damages
owing by Tenant pursuant to the provisions of this Lease or to enforce any
provision of this Lease, including attorneys; fees from the date any such matter
is turned over to an attorney, whether or not on or more actions are commenced
by Landlord, will also be recoverable by Landlord from Tenant.
ARTICLE 15
GOVERNMENT APPROVAL
This Lease and Tenant's obligations are conditioned upon Tenant's
receipt of approval from governmental regulatory agencies having jurisdiction
over Tenant. Tenant agrees to pursue such approvals in good faith and with due
diligence and will advise Landlord promptly of its receiving or failing to
receive such approvals. If Tenant fails to receive such approval, this Lease
shall be terminated; provided, however, that if Tenant's application is not
approved within 45 days of the date of this Lease, Landlord shall have the
option to terminate the Lease.
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ARTICLE 16
DEFAULTS BY LANDLORD
TERMINATION BY TENANT
In addition to any rights Tenant may have under this Lease or by law or
in equity, if Landlord fails to perform or observe any material provision of
this Lease to be performed by Landlord or if Tenant is provided under this Lease
a right to terminate this Lease before expiration of its Term, Tenant shall give
Landlord written notice thereof (specifying the condition or default on which
termination or default is based) , and Landlord shall have 30 days to cure any
condition or any default so specified (except that this 30-day period shall be
extended by a reasonable period of time if the alleged condition or default is
not reasonably capable of cure within such 30-day period and Landlord proceeds
diligently to cure the condition or default). If Landlord does not so cure,
Tenant may, at its option and upon written notice, terminate this Lease without
waiving any rights or remedies (including the right to recover damages) or incur
any expense necessary to perform the obligation of Landlord specified in such
notice, and deduct such expense from the rents or other charges next coming due.
ARTICLE 17
SURRENDER OF PREMISES
Tenant shall, upon termination of the Term or any earlier termination
of this Lease for any cause, surrender to Landlord the Premises, including
without limitation all equipment then on the Premises other than equipment and
fixtures owned or leased by Tenant. In addition, provided Tenant is not in
default under this Lease, Tenant may remove the Trade Fixtures. Tenant shall
surrender to Landlord all alterations and other additions that may be made or
installed by either party to, in, upon or about the Premises, without any
damage, injury or disturbance, normal wear and tear and damage by casualty
excepted.
ARTICLE 18
MISCELLANEOUS PROVISIONS
18.01 PAYMENTS All amounts due under this Lease shall be paid on or
before the first day of each month at the address
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specified for Landlord in Article 1 or at such other place as Landlord
designates.
18.02 NOTICES All notices and demands required or permitted to be given
under this Lease shall be in writing and sent by certified mail, return receipt
requested, to the addresses of the parties set forth in Article 1. Either party
may change its address by giving notice as set forth in this Article.
18.03 REMEDIES All rights and remedies of Landlord and Tenant granted
by this Lease or otherwise existing at law are cumulative, and may be exercised
and enforced concurrently and whenever and as often as the exercising party
deems desirable.
18.04 SUCCESSORS AND ASSIGNS Subject to the provisions of Article 18,
all covenants, promises, conditions, representations and agreements herein
contained shall be binding upon, apply and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
18.05 WAIVERS The failure of either Landlord or Tenant to insist upon
strict performance by the other of any of the covenants, conditions or
agreements of this Lease shall not be deemed a waiver of any subsequent breach
or default in any of such covenants, conditions or agreements. No surrender of
the Premises by Tenant shall be affected by Landlord's acceptance of rent or by
any other means whatsoever unless the same shall be evidenced by Landlord's
written acceptance thereof as a surrender.
18.06 HOLDING OVER If Tenant or any party claiming under Tenant remains
in possession of the Premises or any part thereof after any termination or
expiration of this Lease, Landlord, in its sole discretion, may treat such
holdover as an automatic renewal of this Lease for a month-to-month tenancy
subject to all the terms and conditions of this Lease.
18.07 ESTOPPEL At any time and from time to time either party, upon
request of the other party, shall execute, acknowledge and deliver a
certificate, stating (if the same be true) that (a) this Lease is a true and
correct copy of the lease between the parties, (b) there are no amendments (or
stating what amendments there may be), (c) the same is then in full force and
effect, (d) to the best of its knowledge, there are no offsets, defenses or
counterclaims with respect to the payment of rent reserved hereunder or the
performance of the other terms, covenants and conditions hereof on the part of
Tenant or Landlords, as the case may be, to be performed, and (e) as of such
date no default has been declared hereunder by either party, and stating such
other information concerning this Lease as shall be reasonably requested. If
such certificate is not executed by the other party and delivered to the
requesting party within 15 days after receipt of the request, the statements
made in the proposed estoppel request
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shall be deemed to be correct. Tenant's certificate shall be substantially in
the form of Exhibit D.
18.08 TIME OF THE ESSENCE Time is of the essence for the performance of
each and every provision hereof.
18.09 FORCE MAJEURE If either party hereto shall be delayed or hindered
in or prevented from the performance of any act required hereunder by reason of
strikes, lockouts, labor troubles, failure of power, riots, insurrection, war or
other reason of like nature not the fault of the party delayed in performing
work or doing acts, such party shall be excused from performance for the period
of delay and the period for performance shall be extended by the period of the
delay.
18.10 CONSENT Wherever in this Lease Landlord or Tenant is required to
give its consent or approval to any action on the part of the other, such
consent or approval shall not be unreasonably withheld.
18.11 AMENDMENTS This Lease may be modified, amended, changed or
terminated, in whole or in part, only by an agreement in writing duly authorized
and executed by both Landlord and Tenant. This Lease may not be modified,
amended, changed or terminated by any oral agreement or understanding between
the parties unless the same shall be reduced to writing and duly authorized and
executed by both Landlord and Tenant.
18.12 SEVERABILITY Invalidation of any of the provisions of this Lease
or any paragraph, sentence, clause, phrase or work herein, or the application
thereof in any particular circumstance, shall not affect the validity of the
remainder of this Lease.
18.13 EXCLUSIVE AGREEMENT This Lease contains the entire agreement
between the parties hereto and no statement, promise, or inducement made by
either party or its agent that is not contained in this Lease shall be valid or
binding.
18.14 BINDING EFFECT This Lease shall become binding upon the parties
upon the date of the last party signing hereunder, notwithstanding that the Term
shall commence at a future date.
18.15 RELATIONSHIP OF PARTIES Nothing herein shall be deemed by the
parties hereto or by any third party to create any relationship between the
parties other than that of landlord and tenant.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease
<PAGE> 30
PAGE 22
to be executed by their respective duly authorized representatives as of the
date set forth above.
LANDLORD
ATTEST: BELLEWOOD ASSOCIATES
LIMITED PARTNERSHIP
[SIG] By: /s/ H.M. LEESBURG LTD PTR - GENERAL PARTNER
- --------------------------- -------------------------------------------
By: /s/ MINSHALL CAPITAL CORP.(SEAL)
-------------------------------------------
By: [SIG]
-------------------------------------------
TENANT
ATTEST: COLUMBIA FIRST BANK, A
FEDERAL SAVINGS BANK
/s/ LYNDA R. SHULIN By /s/ THOMAS J. SHAEFER (SEAL)
- --------------------------- -------------------------------------------
AW-101
<PAGE> 31
EXHIBIT A
[COUNTY RECORDERS STREET MAP]
<PAGE> 32
EXHIBIT B
CONFIRMATION OF RENT C0MMENCEMENT DATE
THIS CONFIRMATION OF RENT COMMENCEMENT DATE is made this 23 day of
April, 1993, by and between Bellewood Associates Limited Partnership
("Landlord") and Columbia First Bank, a Federal Savings Bank ("Tenant").
WHEREAS, Landlord and Tenant entered into a lease dated April 23, 1993
("Lease") ;
WHEREAS, the Rent Commencement Date is dependent upon the occurrence of
certain events; and
WHEREAS, those events have occurred and Landlord and Tenant now desire
to specify the Rent Commencement Date.
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Landlord and Tenant agree as follows:
The Rent Commencement Date is May 1, 1993; provided, however, that if
an appeal is filed to the decision of the Leesburg Architectural Review Board
with respect to Tenant's Signs, Tenant shall have the right to terminate this
Lease.
IN WITNESS WHEREOF, Landlord and Tenant execute this Confirmation under
seal on the date written above.
LANDLORD:
BELLEWOOD ASSOCIATES
LIMITED PARTNERSHIP
ATTEST: By /s/ HM LEESBURG GENERAL PARTNER
-------------------------------
/s/ [SIG] /s/ MINSHALL CAPITAL CORP.
- ----------------------- -------------------------------
By [SIG]
-------------------------------
TENANT:
COLUMBIA FIRST BANK, A
FEDERAL SAVINGS BANK
ATTEST:
/s/ LYNDA R. SHULIN By /s/ THOMAS J. SCHAEFER
- ----------------------- -------------------------------
<PAGE> 33
EXHIBIT C
One NCR Model 5085 automated teller machine
One night depository unit
A drive-thru banking facility including one remote station
One night teller safe
<PAGE> 34
EXHIBIT D
Estoppel Certificate
, 19__
[Name and address of Landlord,
Secured Lender, or Purchaser
of Bellewood Commons]
Re: Lease dated April 23, 1993 by and between Bellewood Associates
Limited Partnership as Landlord and Columbia First Bank, a Federal
Savings Bank as Tenant
Ladies and Gentlemen:
The undersigned, Tenant under the above Lease, confirms that as of the
date of this Certificate:
1. Tenant is in full and complete possession of the Premises known as
Store 36, Bellewood Commons Shopping Center, possession of such Premises having
been delivered by Landlord and having been accepted by Tenant; the Rent
Commencement Date was May 1, 1993; Tenant is paying Base Annual Rent in monthly
installments of $____________; and rents have been paid through ______________.
2. The Lease is a bona fide lease and is in full force and effect; the
Lease has not been amended or modified except as follows:
_____________________________________
3. A correct copy of the Lease and all amendments are attached to this
Certificate.
4. There is no default on the part of the Landlord except as follows:
_____________________________________
5. No rents have been prepaid except as provided by the Lease; Tenant does
not now have any claim against Landlord which might be set off or credited
against future accruing rents except as follows:
_____________________________________
6. Tenant has received no notice of a prior sale, transfer, assignment,
hypothecation or pledge of the Lease or of the rents secured therein, except
that it has received notice of an Assignment of Leases and Rents (as additional
security) dated
<PAGE> 35
______________________________, to ______________________.
7. Tenant has not subordinated and will not subordinate its Lease to the
lien of any other mortgage or deed of trust without the prior written consent of
Lender.
Very truly yours,
Columbia First Bank, a
Federal Savings Bank
Attachment
<PAGE> 36
[BARNES, MORRIS, PARDOE & FOSTER MANAGEMENT SERVICES, LLC LETTERHEAD]
May 16, 1996
Mr. Glenn E. Kinard
Executive Vice President
George Mason Bank
4221 Walney Road
Chantilly, VA 22021
RE: 531 EAST MARKET STREET
LEESBURG, VIRGINIA
Dear Glenn:
Enclosed please find one fully executed original of the Assignment and
Assumption Agreement by and among First Union National Bank of Virginia, George
Mason Bank, and Bellewood Associates Limited Partnership, for your files.
Please call me with any questions that you may have.
Sincerely,
BARNES, MORRIS, PARDOE & FOSTER MANAGEMENT SERVICES, LLC
/s/ MICHAEL ZACHARIA
- --------------------
Michael Zacharia
Retail Leasing
Enclosure
cc: Bruce Christman, Esq. (w/copy of enclosure)
<PAGE> 37
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the Assignment), dated as of
the 18th day of April, 1996 (the Effective Date), by and among FIRST UNION
NATIONAL BANK OF VIRGINIA (the Assignor), GEORGE MASON BANK (the Assignee), and
BELLEWOOD ASSOCIATES LIMITED PARTNERSHIP (the Lessor), recites and provides:
RECITALS:
By Lease dated April 23, 1993 (the Lease), between the Lessor (as
landlord) and the Assignor, successor to Columbia First Bank, (as tenant), the
Lessor leased to the Assignor certain real estate located in the County of
Loudoun, Virginia, and more particularly described in the Lease (the Leased
Premises). A true and complete copy of the Lease is attached hereto as Exhibit
A. Under the terms of the Lease, the Assignor may not assign its interest in the
Lease except with the prior written consent of the Lessor.
The Assignor now wishes to assign and transfer to the Assignee all of
the Assignor's right, title, and interest in and to the Lease. The Lessor is
willing to consent to such assignment on the terms and conditions set forth
herein.
ASSIGNMENT AND ASSUMPTION AGREEMENT:
FOR and in consideration of the premises, the mutual covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Assignment. The Assignor hereby assigns and transfers to the
Assignee all of the Assignor's right, title, and interest in and to the Lease
for the remainder of the term thereof (including any rights to renew the Lease
or extend the term thereof), subject to the rental, terms, covenants, and
conditions of the Lease. Notwithstanding the foregoing, however, Assignee shall
have the right to
<PAGE> 38
terminate this Assignment on or before sixty (60) days from the Effective Date
(the [OCC] Bureau of Financial Institutions of the Commonwealth of Virginia
Approval Period) in the event Assignee is not able to obtain, or is denied,
approval from the [Office of Comptroller of the Currency (OCC)] Bureau of
Financial Institutions of the Commonwealth of Virginia before the expiration of
the [OCC] Bureau of Financial Institutions of the Commonwealth of Virginia
Approval Period. Assignee shall exercise due diligence to obtain such approval.
In the event [OCC] Bureau of Financial Institutions of the Commonwealth of
Virginia approval is not obtained within the [OCC] Bureau of Financial
Institutions of the Commonwealth of Virginia Approval Period, either party may
extend the [OCC] Bureau of Financial Institutions of the Commonwealth of
Virginia Approval Period for an additional thirty (30) days by written notice to
the other party received prior to the expiration of the [OCC] Bureau of
Financial Institutions of the Commonwealth of Virginia Approval Period. Upon
receipt of approval from the [OCC] Bureau of Financial Institutions of the
Commonwealth of Virginia, Assignee shall pay Fifty Thousand Dollars ($50,000) to
Assignor.
Assignee acknowledges that it has had an opportunity to examine the
Leased Premises. This assignment and transfer is made "as is" and there are no
warranties, express or implied, with respect to the Leased Premises.
2. Representations and Warranties. The Assignor and Assignee each
represent and warrant to the other that (a) it has full power and authority to
execute and deliver this Assignment, and (b) the execution and delivery hereof
and the terms and obligations hereof do not contravene any agreement to which it
is a party or by which it or the Leased Premises is bound. Assignor and Lessor
represent and warrant to the Assignee: (i) that the Lease is in full force and
effect, (ii) that to the best of their knowledge, there exists no event of
default thereunder on the part of either Assignor or Lessor, (iii) that to the
best of their knowledge, there exists no event which with the giving of notice
or the expiration of any applicable cure period would constitute an event of
default by either Assignor or Lessor under the Lease, and (iv) that the Leased
Premises as of this date contains among other equipment, the following items
(as they were on March 15, 1995, the date Assignor and Assignee walked through
the Leased Premises): (a) one night depository unit, (b) a drive through
banking
2
<PAGE> 39
facility including one remote station and one drive up window, (c) one night
teller safe, and (d) under-counter teller equipment for six stations plus the
drive-in teller station.
3. Indemnity by Assignor. The Assignor covenants to hold the Assignee
harmless from and indemnify the Assignee for any loss, damage, cost, or expense
(including reasonable attorneys' fees) arising out of any failure of the
Assignor to perform any of its obligations under the Lease up to and including
the Effective Date.
4. Acceptance, Assumption, and Indemnity by Assignee. The Assignee (a)
accepts the assignment of all of Assignor's right, title, and interest in and to
the Lease, (b) agrees to be bound by all of the terms, covenants, and conditions
thereof, and (c) assumes the obligations of the Assignor under the Lease from
and after the Effective Date; provided, however, that Assignee's obligation to
pay rent under the Lease shall not commence until May 1, 1996. The Assignee
covenants and agrees to perform each term, covenant, and condition directly for
the benefit of the Lessor and to hold the Assignor harmless from and indemnify
the Assignor for any loss, damage, cost, or expense (including reasonable
attorneys' fees) arising out of any failure of the Assignee to perform any of
its obligations under the Lease from and after the Effective Date.
Notwithstanding the foregoing, Assignee shall have no responsibility with
respect to any of the obligations under the Lease up to and including the
Effective Date or at any time after the date Assignee terminates this
Assignment, if it terminates this Assignment pursuant to Paragraph 1 hereof.
5. Consent of Lessor. The Lessor executes this Agreement to evidence
its consent to the assignment effected hereby; provided, however, that such
consent shall neither be nor be deemed to be a consent to, or a waiver of the
necessity of obtaining the consent of the Lessor to, any proposed future
assignment.
3
<PAGE> 40
6. Release by Lessor. The Lessor hereby remises, releases and forever
discharges the Assignor and it successors and assigns of and from all manner of
action, causes of actions, suits, debts, dues, sums of money, contracts,
agreements, promises, claims, and demands whatsoever in law or in equity, which
the Lessor ever had or now has or which its successors and assigns hereafter
can, shall, or may have against the Assignor upon or by reason of any matter,
cause, or thing whatsoever arising with respect to the Lease.
7. Change of Address. For all purposes under the Lease, including, but
not limited to paragraph thereof, the mailing address for the tenant thereunder
shall be changed to the following:
Mr. Dennis Danko, AVP, Facilities Dept.
George Mason Bank
4241 Walney Road
Chantilly, Virginia 22021
8. Further Assurances. Each party hereto covenants and agrees to
execute and deliver, or cause to be executed and delivered, and to do or make,
or cause to be done or made, upon the reasonable request of any other party, any
and all instruments, papers, deeds, acts, or things, supplemental, confirmatory,
or otherwise, as may be reasonably required by such other party for the purpose
of effecting the assignment described herein.
9. Completeness and Modification. This Agreement constitutes the entire
agreement between the parties hereto as to the transactions contemplated hereby
and supersedes all prior discussions, understandings, or agreements between the
parties hereto.
10. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
4
<PAGE> 41
11. Governing Law. This Agreement and all other instruments referred to
herein shall be governed by, and shall be construed according to the laws of the
Commonwealth of Virginia.
12. Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof, and it shall be sufficient that the signature on behalf of each party
hereto appear on one or more such counterparts. All counterparts shall
collectively constitute a single agreement.
13. Incorporation by Reference. All of the Exhibits attached hereto or
referred to herein and all documents in the nature of such Exhibits are by
reference incorporated herein and made a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives.
ASSIGNOR:
FIRST UNION NATIONAL BANK OF VIRGINIA
By: [SIG]
------------------------------------
Its: V.P.
ASSIGNEE:
GEORGE MASON BANK
By: /s/ GLENN E. KINARD
------------------------------------
Its: Executive Vice President
5
<PAGE> 42
LESSOR:
BELLEWOOD ASSOCIATED LIMITED PARTNERSHIP
By: /s/ HM LEESBURG L.P.
------------------------------------
By: /s/ MINSHALL CAPITAL CORP G.P.
------------------------------------
By: [SIG]
------------------------------------
Its: President
STATE OF VIRGINIA
COUNTY OF FAIRFAX, to wit:
The foregoing instrument was duly acknowledged before me in the County
of Fairfax, this 18 day of April, 1996, by Glenn E. Kinard, [,as EVP of George
Mason Bank, a N/A on behalf of the Bank.
/s/ CHARMAINE E. BORA
------------------------------------
Notary Public
My commission expires: 7-31-97
STATE OF ________________
___________ of ________________, to wit:
The foregoing instrument was duly acknowledged before me in the
____________ of _________________, this ____ day of ________, 1996, by
_______________, [, as ____________ of ____________________________, a
________________ on behalf of the _______________________.
[SIG]
------------------------------------
Notary Public
My commission expires: ___________.
STATE OF ________________
___________ of ________________, to wit:
The foregoing instrument was duly acknowledged before me in the
____________ of _________________, this ____ day of ________, 1996, by
_______________, [, as ____________ of ____________________________, a
________________ on behalf of the _______________________.
------------------------------------
Notary Public
My commission expires: ___________.
6
<PAGE> 1
EXHIBIT 10AJ
[THE JOHN AKRIDGE COMPANY LETTERHEAD]
October 23, 1992
HAND DELIVERY
Mr. Webb C. Hayes, IV
President & CEO
The Palmer National Bank
1667 K Street, N.W.
Washington, DC 20006
1667 K Street, N.W.
Dear Webb:
Enclosed are four (4) bluebacked copies of the Second Amendment to
Agreement of Lease between 1667 K Street N.W. Associates Limited Partnership and
Palmer National Bank.
Please sign all of the copies and have each signature attested with seals
affixed. Upon completion, please return all four (4) originals to our office,
and we will, in turn, obtain the necessary signatures and approvals and return
one (1) fully executed copy to you.
Thank you for your attention to this matter. If you have any questions or
comments, please do not hesitate to call me.
Sincerely,
1667 K Street N.W. Associates
Limited Partnership
/s/ STEVEN AKRIDGE
--------------------------------
D. Steven Akridge
Vice President
The John Akridge Company
Managing General Partner
Enclosure
cc: John E. Akridge, III
DSA/mlg/0035K/18
<PAGE> 2
[PALMER NATIONAL BANK LETTERHEAD]
November 3, 1992
D. Steven Akridge
Vice President
The John Akridge Company
601 - 13th Street, N.W.
Suite 300 North
Washington, DC 20005
Dear Steve:
As you requested in your letter of October 23, 1992, enclosed
please find the four bluebacked copies of the Second Amendment to Agreement of
Lease by and between 1667 K Street, N.W. Associates Limited Partnership and The
Palmer National Bank, fully executed on behalf of the Bank.
When all documents have been executed on behalf of the
Partnership, please return one copy to me for our files.
Sincerely,
/s/ WEBB C. HAYES IV
---------------------------
Webb C. Hayes IV
President and Chairman
of the Board
Enclosures
WCH/jmb
<PAGE> 3
THE JOHN AKRIDGE COMPANY
SECOND AMENDMENT
TO
AGREEMENT OF LEASE
This Second Amendment to Agreement of Lease (hereinafter called "Second
Amendment") is made as of the _______day of October, 1992 by and between 1667 K
Street N.W. Associates Limited Partnership (hereinafter called "Landlord") and
Palmer National Bank (hereinafter called "Tenant"), having its principal office
at 1667 K Street, N.W., Suite 100, Washington, D.C. 20006.
WITNESSETH:
WHEREAS, Landlord and Tenant entered into an Agreement of Lease dated
December 31, 1981 and a First Amendment to Agreement of Lease dated November 19,
1982 (collectively the "Lease") whereby Landlord leased to Tenant a portion of
the first floor and first basement of the Building;
WHEREAS, it is the desire of the parties to amend the Lease to extend the
Term of the Lease and to amend the Lease in certain other respects as
particularly set forth herein.
NOW THEREFORE, in consideration of the mutual covenants of the parties, it
is hereby mutually agreed as follows:
1. Pursuant to paragraph 2(a) of the Lease, the Lease Expiration Date
shall be revised from April 30, 1993 to December 31, 1998.
2. Pursuant to paragraph 3(a) of the Lease, commencing January 1, 1993
("Renewal Commencement Date") Tenant shall pay to Landlord as Basic
Rent for the Premises the sum of Four Hundred Thousand and 00/100
Dollars ($400,000.00) annually, payable in equal monthly installments,
in advance, of Thirty-Three Thousand Three Hundred Thirty-Three and
33/100 Dollars ($33,333.33).
3. Pursuant to paragraphs 3(b) and 3(c) of the Lease, the base year for
purposes of calculating increases in Real Estate Taxes and Annual
Operating Charges shall be revised from the calendar year 1983 to the
calendar year 1993.
4. Notwithstanding anything to the contrary, paragraph 3(e) of the Lease
shall be deleted in its entirety and the following shall be
substituted in lieu thereof:
"Commencing January 1, 1994, in lieu of any increases in the Consumer
Price Index, Tenant's Basic Rent shall be increased annually by two
and one-quarter percent (2.25%) of the previous years' adjusted annual
Rent."
5. Tenant shall accept the Premises in an "as-is" condition. However,
Landlord shall provide Tenant with an allowance of up to Seventy-Five
Thousand and 00/100 Dollars ($75,000.00) for cosmetic improvements
within the Premises.
6. Except as herein modified, all other terms and conditions of the Lease
shall remain unchanged and in full force and effect.
IN WITNESS HEREOF, the parties have duly executed this Second Amendment to
the Agreement of Lease as of the date first written above.
ATTEST: LANDLORD: 1667 K Street, N.W. Associates
Limited Partnership
By: By:
--------------------------- -------------------------------------
Assistant Secretary John E. Akridge, III
President
The John Akridge Company
Managing General Partner
[Corporate Seal]
ATTEST: TENANT: Palmer National Bank
By: [SIG] By: /s/ WEBB C. HAYES
--------------------------- -------------------------------------
Secretary Webb C. Hayes
President and CEO
[Corporate Seal]
<PAGE> 4
THE JOHN AKRIDGE COMPANY
FIRST AMENDMENT
Agreement made this 19 day of November 1982 by and between 1667 K
Street, N.W. Associates Limited Partnership (hereinafter called "Landlord"), and
Palmer National Bank, a National Banking Association, having its principal
office at 1700 Wisconsin Avenue, Washington, D.C. prior to Lease Commencement
Date, (herein after called "Tenant").
WITNESSETH:
Whereas, Landlord and Tenant entered into a written agreement of lease
dated December 31, 1981, whereby Landlord leased to Tenant Suite 10 and 100 on
the ground floor and first basement of that certain building situated at 1667 K
Street, N.W., Washington, D.C. and
Whereas it is the desire of the parties to further amend the Lease;
Now, therefore, in consideration of the premises and of the mutual
agreements hereinafter set forth, it is mutually agreed as follows:
1. The Premises shall be increased by Suite 106 as outlined in red on
the attached floor plan.
<PAGE> 5
2. Commencing on the Lease Commencement Date the annual rent as set
forth in Exhibit F of the Lease shall be amended as follows:
<TABLE>
<CAPTION>
Annual Monthly
Year Rent Rent
---- ---------- ----------
<S> <C> <C>
1 $267,360.00 $22,280.00
2 359,542.83 29,961.90
3 367,542.87 30,628.57
4 375,542.79 31,295.23
5 383,542.83 31,961.90
6 391,542.87 32,628.57
7 399,542.79 33,295.23
8 407,532.87 33,961.07
9 415,542.87 34,628.57
10 423,542.79 35,295.23
</TABLE>
3. The provisions of Exhibit B of the Lease, Work Agreement and
Allowances, shall remain in full force and effect and Landlord shall provide the
following items for the additional space:
a. A cash allowance of up to Five Thousand Dollars ($5,000) for
widening the interior stair. If the stair is not widened
credit for this allowance will not be given.
b. Building standard ceiling and fifteen (15) fluorescent light
fixtures.
c. Building standard HVAC unit and ductwork.
d. Five (5) building standard interior doors and frames.
e. One Hundred Sixteen (116) lineal feet of building standard
partitioning.
f. Furred drywall at exterior walls.
g. Seven (7) building standard electrical outlets.
h. Ten (10) building standard telephone outlets.
i. Seven (7) building standard light switches.
j. $715.00 floor covering allowance.
<PAGE> 6
4. The Forty-Eight and Twenty-Two Hundredths percent (48.22%) prorata
share of increases of Annual Operating Charges shall be increased to Fifty-Eight
and Three Tenths percent (58.3%) and the Four and Forty-Two Hundredths percent
(4.42%) prorata share of increase of Real Estate Taxes shall be increased to
Five and Thirty-Five Hundredths percent (5.35%).
5. Except as herein modified, this Lease shall continue in full force
and effect.
IN WITNESS WHEREOF, the parties have duly executed this agreement as
of the date first above written.
ATTEST: LANDLORD:
1667 K street, N.W. Associates
Limited Partnership
The John Akridge Company
Managing General Partner
By: /s/ MARY EBERT By:
---------------------------- ---------------------------------
Ass't Secretary John E. Akridge, III
President
ATTEST: TENANT:
Palmer National Bank
By: /s/ PAULINE SHIRLEY By: [SIG]
---------------------------- ---------------------------------
<PAGE> 7
[SITE PLAN]
<PAGE> 8
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (the "Amendment") made this 3rd day of
June, 1993, by and between 1667 K Street, N.W. Associates Limited Partnership
("Landlord") and Palmer National Bank ("Tenant").
WHEREAS, Landlord and Tenant have previously entered into a certain
Agreement of Lease dated May 10, 1988 (the "Lease"), pursuant to which Tenant
leased certain space at 1667 K Street, N.W. located on the 2nd floor of the
Building and known as Suite 200 (the "PREMISES");
WHEREAS, the term under the Lease expires April 30, 1993;
WHEREAS, Tenant desires to extend the term of the Lease; and
WHEREAS, Landlord and Tenant desire to provide for the terms and
conditions for such extension, and to amend the Lease for certain other
purposes, all as hereinafter more fully set forth.
NOW, THEREFORE, for and in consideration of ten Dollars ($10.00) in
hand paid, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:
1. Definitions; Premises.
(a) Defined or capitalized terms used herein and not otherwise
defined herein shall have the same meanings as in the Lease. Defined terms set
forth in the Lease and not expressly modified herein shall continue to have the
meanings set forth in the Lease.
(b) Effective as of the Effective Date (as defined in
Paragraph 2 below) the Premises are hereby agreed to consist of three thousand
nine hundred thirty (3,930) rentable square feet. No actual adjustment is being
made to the physical boundaries of the Premises as a result of this Amendment,
the sole change being in the agreed upon square footage thereof. Neither
Landlord nor Tenant shall have any further right to challenge the square footage
of the Premises.
2. Term.
Effective as of May 1, 1993 (the "Effective Date"), the term
under the Lease is hereby extended to expire April 30, 2003, which expiration
date shall hereafter constitute the "Lease Expiration Date" under the Lease. all
options to renew or extend the term of the Lease, if any, are hereby deemed
deleted.
3. Rent.
(a) Basic Rent. Effective as of the Effective Date, the basic
rent (the "Basic Rent") is agreed to be One Hundred Twenty-Seven Thousand Seven
Hundred Twenty-Five Dollars ($127,725.00) annually, payable in equal monthly
installments, in advance, of Ten Thousand six Hundred Forty-Three and 75/100
Dollars ($10,643.75). Effective May 1, 1998, the annual Basic Rent then in
effect shall be increased by Fifteen Thousand Seven Hundred Twenty Dollars
($15,720.00), with Tenant's monthly payments then being increased by One
Thousand Three Hundred Ten Dollars ($1,310.00). The inserts marked "*" and "**"
at the bottom of page 1 to the Lease are hereby deleted.
(b) Increases in Real Estate Taxes. Effective as of the
Effective Date, Paragraph 3(b) of the Lease shall be deemed amended to
substitute "1993" for "1984" as the Base Year for purposes of Real Estate Taxes
and to provide that Tenant's proportionate share for purposes of Real Estate
Taxes shall be two and twenty-nine one-hundredths percent (2.29%). The foregoing
notwithstanding, Landlord shall continue to have the right to make any
adjustments permitted under Paragraph 3(b) of the Lease for periods prior to the
Effective Date.
(c) Increases in Annual Operating Charges. Effective as of the
Effective Date, Paragraph 3(c) of the lease is hereby deleted. The foregoing
notwithstanding, Landlord shall continue to have the right to make any
adjustments permitted under Paragraph 3(c) of the Lease for periods prior to the
Effective Date.
(d) Base Rate for Real Estate Taxes and Operating Charges.
Effective as of the Effective Date, Paragraph 3(d) of the Lease is hereby
deleted.
(e) Increase in Cost of Living. Paragraph 3(e) of the Lease is
amended and restated to read as follows:
Commencing effective January 1, 1994, and thereafter on
January lst of each calendar year during the term hereof, the Rent then in
<PAGE> 9
effect shall be increased by three percent (3%) of the Basic Rent then in
affect. The foregoing notwithstanding, Landlord shall continue to have the right
to make any adjustments permitted under Paragraph 3(e) of the Lease for periods
prior to the Effective Date.
(f) Minimum Rent. In no event shall the aggregate rent which
Tenant is required to pay pursuant to the Lease for any calendar year be less
than the rent which Tenant was required to pay for the preceding calendar year.
(g) Right of Inspection. Tenant's right of inspection pursuant
to Paragraph 3(g) of the Lease is hereby deleted.
4. Assignment and Subletting. The approval standards and conditions set
forth in Paragraph 5(b) of Lease shall apply to proposed assignments as well as
to proposed sublettings and, provided that Tenant is not in default under the
Lease, but subject to the other terms of the Lease, Landlord's consent to any
proposed assignment or subletting shall not be unreasonably withheld,
conditioned or delayed. Tenant shall in all events reimburse Landlord for all of
Landlord's reasonable costs and expenses (including, but not limited to, credit
check fees and reasonable attorneys' fees) incurred by Landlord in reviewing and
processing any request for Landlord's consent pursuant to Paragraph 5 of the
Lease. Landlord agrees that, provided that Tenant and its assignee and/or
sublessee accept Landlord's then standard form of consent letter, Landlord's
attorneys' fees to be reimbursed by Tenant shall not exceed One Thousand
($1,000.00) Dollars.
5. Insurance. The following is added as a new Paragraph 11(c) to the
Lease;
(c) Waiver of Subrogation. Landlord and Tenant each hereby
release the other and its agents and employees from any claims for damage or
loss to any person or the Premises, the Building, the Land and any property
contained therein or thereon, or any other property, caused by or resulting from
any risks insured against under any insurance policies carried (or which would
be insured against under any insurance policies required hereunder to be
carried) by Landlord or Tenant at the time of any such damage or loss,
regardless of the cause of the damage or loss (including the negligence of
Landlord or Tenant or their respective agents or employees). Tenant's insurance
policies shall name Landlord, Landlord's general partners, Landlord's lender(s)
and the property management company as additional named insureds and shall
contain an express waiver of subrogation in favor of Landlord, Landlord's
insurers and each of the foregoing additional named insureds.
6. Landlord's Indemnifications. Landlord's indemnifications (if any)
under the Lease are subject to the terms of Paragraphs 11(c), 13(a) and 21(f) of
the Lease.
7. Waiver of Jury Trial. Paragraph 21(e) of the Lease is amended and
restated to read as follows:
(e) Waiver of Jury Trial. LANDLORD AND TENANT HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE
PARTIES HERETO AGAINST THE OTHER ON OR IN RESPECT OF ANY MATTER WHATSOEVER
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE LEASE, THE RELATIONSHIP OF
LANDLORD AND TENANT THEREUNDER, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
AND/OR ANY CLAIM OF INJURY OR DAMAGE.
8. Liability. Paragraph 21(f) of the Lease is amended and restated to
read as follows:
Limitation of Landlord Liability. Notwithstanding any
provision to the contrary contained in the Lease, Tenant shall look solely to
the estate and property of Landlord in and to the Land and the Building in the
event of any claim against Landlord arising out of or in connection with the
Lease, the relationship of Landlord and Tenant, or Tenant's use of the Premises,
and Tenant agrees that the liability of Landlord arising out of or in connection
with the Lease, the relationship of Landlord and Tenant, or Tenant's use of the
Premises, shall be limited to such estate and property of Landlord in and to the
Land and the Building. No properties or assets of Landlord other than the estate
and property of Landlord in and to the Land and the Building and no property
owned by any partner of Landlord shall be subject to levy, execution or other
enforcement procedures for the satisfaction of any judgment (or other judicial
process) or for the satisfaction of any other remedy of Tenant arising out of or
in connection with the Lease, the relationship of Landlord and Tenant or
Tenant's use of the Premises. Notwithstanding anything to the contrary contained
in the Lease, if any Provision of the Lease expressly or
- 2 -
<PAGE> 10
impliedly obligates Landlord not to unreasonably withhold or delay its consent
or approval, an action for declaratory judgment or specific performance shall be
Tenant's sole right and remedy in any dispute as to whether Landlord has
violated such obligation.
9. Improvements to Premises. Landlord shall have no obligation to make
any improvements, alterations or repairs to the Premises and Tenant shall accept
same "as is". Landlord shall provide a construction allowance in the amount of
Forty-Seven Thousand Four Hundred Forty-Eight Dollars ($47,448.00)(the
"Construction Allowance") to be used by Tenant in making alterations to the
Premises and/or to Tenant's other premises in the Building (including, but not
limited to, at Tenant's option, painting, recarpeting, etc.). All such
alterations shall be subject to Paragraph 7 of the Lease and to Tenant obtaining
Landlord's consent thereto in accordance with such Paragraph 7. Subject to the
preceding sentence, Tenant shall have the right to install an interior stairway
between the Premises and Tenant's first floor premises and to construct an
entrance to its lower level premises from the lower level elevator lobby;
provided, however, that upon the expiration or earlier termination of the Lease,
Landlord shall have the right, at Landlord's option, to restore all or any part
of such areas to their prior condition (or, at Landlord's option, to direct
Tenant to perform such restoration) and, in such event, Tenant shall be solely
responsible for all costs and expenses in connection therewith (including a ten
percent (10%) construction management fee to Landlord in the event Landlord
performs such work). Landlord shall advance the Construction Allowance to Tenant
against contractor invoices, provided, however, that Landlord shall not be
required to advance any of such Allowance at any time that an Event of Default
exists hereunder. Landlord shall, if requested by Tenant, perform the
alterations desired to be performed by Tenant (and consented to by Landlord) for
a construction management fee equal to ten percent (10%) of the actual costs
incurred in connection with such work (including, but not limited to, all costs,
fees and expenses of the general contractor and any subcontractors).
10. Broker. Landlord and Tenant represent and warrant that with the
exception of The John Akridge Management Company (the "Broker") neither of them
has dealt with or employed any broker, agent or finder in connection with this
Amendment. The Broker shall be paid a commission by Landlord pursuant to a
separate written agreement.
11. No Further Modification. Except as otherwise provided herein, the
Lease continues unmodified and in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have caused their signatures
and seals to be hereunto affixed as of the date and year first above written.
LANDLORD:
ATTEST 1667 K STREET, N.W. ASSOCIATES
LIMITED PARTNERSHIP
By: The John Akridge Company
Its Managing General Partner
[SIG] By: /s/ JOHN E. AKRIDGE
- ----------------------------- -------------------------
Assistant Secretary John E. Akridge, III
[Corporate Seal] Its President
TENANT:
PALMER NATIONAL BANK
[SIG] By: /s/ WEBB C. HAYES
- ----------------------------- -------------------------
Secretary Webb C. Hayes, IV
[Corporate Seal] Its President
- 3 -
<PAGE> 11
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE ("Lease") is made this 10th day of May, 1988 by
(i) 1667 K Street, N.W. Associates Limited Partnership (hereinafter referred to
as "Landlord") and (ii) The Palmer National Bank (hereinafter referred to as
Tenant").
WHEREAS, Landlord is the owner of an office building located at 1667 K
Street, N.W., Washington, D.C. and more fully and legally described as Lot 71
in Square 184 in the District of Columbia as so denominated by the Surveyor of
the District of Columbia (such building being hereinafter referred to as the
"Building"); and
WHEREAS, Tenant desires to lease space in the Building and Landlord is
willing to rent Tenant space in the Building, upon the terms, conditions,
covenants and agreements set forth herein.
NOW, THEREFORE, the parties hereto, intending legally to be bound,
hereby covenant and agree as set forth below:
1. THE PREMISES. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord, for the term and upon the terms, conditions, covenants
and agreements hereinafter provided, Suite 200, located on the second floor of
the Building (such space being hereinafter referred to as the "premises"). The
premises are outlined in red on Exhibit A attached hereto and made a part
hereof. The lease of the premises includes the right, together with other
tenants of the Building and members of the public, to use the common public
areas of the Building, but includes no other rights not specifically set forth
herein. landlord shall finish the premises as set forth in Exhibit B attached
hereto and made a part hereof. It is understood and agreed that Landlord will
not make, and is under no obligation to make, any structural or other
alterations, decorations, additions or improvements in or to the premises
except as set forth in Exhibit B.
2. Term. See paragraph 22 for Option to Renew.
(a) The term of this Lease (hereinafter referred to as the "term")
shall be for a period commencing on June 1, 1988 (the "Lease Commencement
Date") and expiring at midnight on April 30, 1993, the "Lease Expiration Date").
(b) It is understood and agreed that if Tenant has fully and timely
performed in accordance with the provisions of Exhibit B hereof and if,
notwithstanding the timely submissions and approvals required of Tenant
therein, the premises are not substantially assigned to Landlord in accordance
with the provisions of paragraph 2 of Exhibit B on or before the Lease
Commencement Date, or if for any other reason Landlord is unable to deliver
possession of the premises to Tenant on the Lease Commencement Date, this Lease
shall not be void or voidable, nor shall Landlord or Landlord's agents and
employees be liable to Tenant for any loss or damage resulting therefrom. In
such event the Lease Commencement Date shall be extended to the date on which
Landlord substantially completes the premises.
(c) If is further understood and agreed that if Tenant does not take
possession of the premises on the Lease Commencement Date for any reason other
than the inability of Landlord to deliver possession of the premises to Tenant
on such date as provided in paragraph 2(b) above, or if Tenant causes a delay
in the delivery of possession of the premises as set forth in paragraph 4 of
Exhibit B, the Lease Commencement Date shall not be extended, the term of this
Lease shall nonetheless begin on the Lease Commencement Date and Tenant's
obligations hereunder shall commence as of such date.
(d) If, pursuant to the provisions of this Lease, the term of this
Lease begins on a date other than the Lease Commencement Date indicated in
Paragraph 2(a) above, then Landlord shall advise Tenant in writing of such date
and thereafter the Lease Commencement Date shall be such date and the Lease
Expiration Date shall be the same number of days after the Lease Commencement
Date as it was after the original lease commencement date. For all purposes of
this Lease, the term "Lease Year" shall mean any period of twelve consecutive
calendar months during the term of this Lease which begins on the Lease
Commencement Date or an anniversary thereof.
*3. RENT. Tenant shall pay as rent for the premises the following
amounts (each of which amounts shall be considered rent and all of which,
unless the context requires otherwise, are collectively referred to herein as
"rent"):
(a) BASIC RENT. Tenant shall pay as the basic rent the sum of One
Hundred Forty Four Thousand Three Hundred Five and 04/100 Dollars ($144,305.04)
annually, payable in equal monthly installments, in advance, of Twelve Thousand
Twenty Five and 42/100 Dollars ($12,025.42) the first payment to be made upon
the signing of this Lease by Tenant, and the second and subsequent monthly
payments to be made on the first day of each and every calendar month
(beginning with the second month) during the term hereof. Rent shall be made
payable to Landlord at the office of Landlord, or such other party or at such
other address as Landlord may designate from time by written notice to Tenant.
If the term of this Lease begins on a date other than on the first day of a
month, rent from such date until the first day of the following month shall be
prorated at the rate of one-thirtieth (1/30th) of the fixed monthly rental for
each day, payable in advance. **
(b) INCREASES IN REAL ESTATE TAXES.
(i) Tenant shall, for each calendar year after the Base Year (as
hereinafter defined), pay to Landlord, as additional rent, Two and 50/100
percent (2.50%) (being Tenant's agreed-upon proportionate share) of the
increase in Real Estate Taxes (as hereinafter defined) for such calendar year
over the Real Estate Taxes for the Base Year. For the purposes of this
paragraph 3(b) the term "Base year" is hereby defined to mean the calendar year
1988 and the term "Real Estate Taxes" for any calendar year is hereby defined
to mean the total amount of all taxes and assessments, general and special,
ordinary and extraordinary, foreseen and unforeseen, now or hereafter assessed,
levied or imposed upon the Building and the land on which the Building is
situated (the "Land")for such year, together with any tax in the nature of a
real estate tax, an ad valorem tax on rent or any tax on income if imposed, in
whole or in part, in lieu of real estate taxes and assessments, and any taxes
and assessments which may hereafter be substituted for Real Estate Taxes.
(u) In the event that the method currently used for the computation of
the assessed market value of the Building and/or the Land is discontinued or
revised, the determination of the increase in Real Estate Taxes under this
paragraph 3(b) shall thereafter be made according to 1 formula and procedure
which most nearly approximates the method of determination hereinabove set
forth. In the event that any business, rent or other taxes which are now or
hereafter levied upon Tenant's use or occupancy of the premises, on Tenant's
leasehold improvements.
* Commencing the first day of the third Lease Year, the basic rent pursuant to
this paragraph 3(a) shall be increased to the sum of One Hundred Fifty Four
Thousand Six Hundred Twelve and 56/100 Dollars($154,612.56) annually, payable in
equal monthly installments, in advance, of Twelve Thousand Eight Hundred Eighty
Four and 38/100 Dollars ($12,884.38). Commencing the first day of the fifth
Lease Year, the basic rent pursuant to this paragraph 3(a) shall be increased to
the sum of One Hundred Sixty Four thousand Nine Hundred Nineteen and 96/100
Dollars(164,919.96) annually, payable in equal monthly installments, in advance,
of Thirteen Thousand Seven Hundred Forty Three and 33/100 Dollars($13,743.33).
** Notwithstanding the provisions of this paragraph 3, fifty per cent (50%) of
the first twelve (12) month's basic rent shall be abated.
JACo
rev. 4-2-81
1
<PAGE> 12
on Tenant's business at the premises or on Landlord by virtue of Tenant's
occupancy of the premises, are enacted, changed or altered so that any of such
taxes are levied against Landlord or in the event that the mode of collection
of such taxes is changed so that Landlord is responsible for collection or
payment of such taxes, any and all such taxes shall be deemed to be a part of
the increase in Real Estate Taxes and Tenant shall pay to Landlord Tenant's
proportionate share of the full amount of all of such taxes.
(iii) At any time or times in which the Real Estate Taxes for the Base
Year are determined or estimated, Landlord may submit to Tenant a statement of
Landlord's estimate of the increase in the Real Estate Taxes for the current
calendar year over the Real Estate Taxes for the Base Year, and within thirty
(30) days after delivery of such statement. Tenant shall begin paying to
Landlord, as additional monthly rent due and payable on the first day of each
month, an amount equal to one-twelfth (1/12th) of the amount determined to be
Tenant's aforesaid percentage of such increase in Real Estate Taxes. Within
ninety (90) days after the expiration of each calendar year in which
Tenant's monthly rent is increased pursuant to this paragraph 3(b), Landlord
shall submit a statement showing the determination of the total increase in
Real Estate Taxes for such calendar year over the Base Year, and Tenant's
proportionate share of such increase. If such statement shows that Tenant's
monthly payments pursuant to this paragraph 3(b) exceeded Tenant's share of the
actual increase in Real Estate Taxes for the preceding calendar year, then
Tenant may deduct such overpayment from its next payment or payments of monthly
rent. If such statement shows that Tenant's share of the actual increase in
Real Estate Taxes exceeded Tenant's monthly payments for the preceding calendar
year, then Tenant shall pay the total amount of such deficiency to Landlord with
the next payment of rent due hereunder after receipt of the statement. In the
event that the Lease Expiration Date is not December 31st, the increase in Real
Estate Taxes to be paid by Tenant for the calendar year in which the Lease
Expiration Date occurs shall be determined by multiplying the amount of
Tenant's share thereof for the full calendar year by a fraction, the numerator
of which shall be the number of days prior to the Lease Expiration Date during
such calendar year and the denominator of which shall be 365.
(c) INCREASE IN OPERATING COSTS. Tenant shall, for each calendar year
after the year in which the Base Year Operating Charges (as hereinafter defined)
are determined, pay to Landlord, as additional rent, two and 50/100 percent
(2.50%) (being Tenant's agreed-upon proportionate share) of the increase during
the term of this Lease in Annual Operating Charges (as hereinafter defined) over
the Base Year Operating Charges. The Annual Operating Charges for any calendar
year are hereby defined as the sum of the following costs and expenses: (i) gas,
electricity, water, sewer and other utility charges (including surcharges) of
whatever nature, (ii) insurance premiums, (iii) building personnel costs,
including, but not limited to, salaries, wages, fringe benefits and other direct
and indirect costs of engineers, superintendents, watchmen, porters and any
other building personnel, (iv) costs of service and maintenance contracts,
including, but not limited to, chillers, boilers, controls, elevators, mail
chute, windows, janitorial and general cleaning, security services, and
management fees, (v) all other maintenance and repair expenses and supplies
which are deducted by Landlord for such calendar year in computing its Federal
income tax liability, (vi) any other costs and expenses (i.e., items which are
not capital improvements) incurred by Landlord in operating the Building,
including ground rent, if any, and principal and interest payments, in excess of
the amount paid during the Base Year on the permanent loan,* (vii) the cost of
any additional services not provided to the Building at the Lease Commencement
Date but thereafter provided by Landlord in the prudent management of the
Building, and (viii) the cost of any capital improvements which are made by
Landlord after completion of initial construction of the Building; provided,
however, that the cost of each such capital improvement, together with any
financing charges incurred in connection therewith, or imputed financing charge
if the improvement is not financed by borrowing shall be amortized in constant
annual payments over the useful life thereof and only that portion thereof
attributable to such calendar year shall be included in the Annual Operating
Charges for such calendar year.** Annual Operating Charges shall not include (i)
principal payments or interest payments in an amount equal to the Base Year
payments, on any permanent mortgages, (ii) leasing commissions payable by
Landlord or (iii) deductions for depreciation of the Building.
The Base Year Operating Charges are hereby defined as the Annual Operating
Charges for the calendar year 1988. At any time or times after the year in
which the Base Year Operating Charges are reasonably determined or estimated,
Landlord may submit to Tenant a statement of Landlord's estimate of the
increase of the Annual Operating Charges for the current calendar year over the
Base Year Operating Charges, and within thirty (30) days after the delivery of
such statement, Tenant shall begin paying to Landlord, as additional monthly
rent due and payable on the first day of each month, an amount equal to
one-twelfth (1/12th) of the amount determined to be Tenant's aforesaid
percentage of the increase in the Annual Operating Charges. Within ninety (90)
days after the expiration of each calendar year in which Tenant's monthly rent
is increased pursuant to this paragraph 3(c), Landlord shall, upon the request
of Tenant, submit a statement showing the determination of the total increase
in Annual Operating Charges for such calendar year over the Base Year Operating
charges, and Tenant's proportionate share of such increase. If such statement
shows that Tenant's monthly payments pursuant to this paragraph 3(c) exceeded
Tenant's share of the actual increase in Annual Operating Charges for the
preceding calendar year, then Tenant may deduct such overpayment from its next
payment or payments of monthly rent. If such statement shows that Tenant's
share of the actual increase in Annual Operating Charges exceeded Tenant's
monthly payments for the preceding calendar year, then Tenant shall pay the
total amount of such deficiency to Landlord with the next payment of rent due
hereunder after receipt of this statement. In the event that the Lease
Expiration Date is not December 31st, the increase in Annual Operating Charges
to be paid by Tenant for the calendar year in which the Lease Expiration Date
occurs shall be determined by multiplying the amount of Tenant's share thereof
for the full calendar year by a fraction, the numerator of which shall be the
number of days prior to the Lease Expiration Date during such calendar year and
the denominator of which shall be 365.
- ------------
* provided that the annual increase attributable to ground rent,
principal and interest shall not exceed one half (1/2) the
escalation provided for under paragraph 3(e).
** Notwithstanding, Landlord shall limit capital improvements.
JACo
rev. 3-10-83
2
<PAGE> 13
(e) INCREASE IN COST OF LIVING. The basic annual rent set forth in
paragraph 3(a) above shall be increased annually, effective on January 1st of
each calendar year during the term hereof, by an amount equal to thirty percent
(30%) of any increase in the CPI (as hereinafter defined). The basic annual rent
shall be adjusted based upon the increase, if any, in the index now known as the
Consumer Price Index for Urban Wage Earners and Clerical Workers, All Items,
Washington, D.C., Maryland and Virginia SMSA (1967 - 100) as published by the
Bureau of Labor Statistics, United States Department of Labor (hereinafter
referred to as the "CPI"). The amount of the increase shall be determined by
multiplying the amount of the basic annual rent set forth in paragraph 3(a)
hereof by the product of (a) thirty percent (30%) of (b) a fraction, the
numerator of which shall be (i) the CPI for the month of December immediately
preceding the commencement of the calendar year for which such annual adjustment
is to be made minus (ii) the CPI for the month immediately preceding the Lease
Commencement Date, and the denominator of which shall be the CPI for the month
immediately preceding the Lease Commencement Date. Written notice of the
estimated amount of such annual adjustment for the following calendar year shall
be sent to Tenant during the month of December of every calendar year during the
term of this Lease, and on January 1st of the next calendar year. Tenant shall
begin paying to Landlord, as additional monthly rent due and payable on the
first day of each month of such calendar year, an amount equal to one-twelfth
(1/12th) of such annual adjustment. Within ninety (90) days after the expiration
of each calendar year in which Tenant's monthly rent is increased pursuant to
this paragraph 3(e), Landlord shall submit a statement showing the determination
of the actual amount of the increase in the CPI for the preceding calendar year.
If such statement shows that Tenant's monthly payments pursuant to this
paragraph 3(e) exceeded the adjustment to be made based upon the actual
increase in the CPI, then Tenant may deduct such overpayment from its next
payment or payments of monthly rent. If such statement shows that the increase
of Tenant's basic annual rent, based upon the actual increase in the CPI,
exceeded Tenant's monthly payments for the preceding calendar year, then Tenant
shall pay the total amount of such deficiency to Landlord with the next payment
of rent due hereunder after receipt of the statement. In the event that the
Lease Expiration Date is not December 31st, the increase to be paid by Tenant
for the calendar year in which the Lease Expiration Date occurs shall be
determined by multiplying the amount of the increase for the full calendar year
by a fraction, the numerator of which shall be the number of days prior to the
Lease Expiration Date, during such calendar year, and the denominator of which
shall be 365. If the CPI shall be discontinued with no successor or comparable
successor index, the parties shall attempt to agree upon a substitute formula,
but if the parties are unable to agree upon a substitute formula, then such
substitute formula shall be the formula recommended by the Washington Board of
Realtors; provided, however, that in no event shall the amount of the basic
annual rent payable by Tenant under this Lease for any calendar year be less
than the amount of basic annual rent paid in the calendar year immediately prior
thereto.
(f) DEMAND; TIME. Each of the foregoing amounts of rent shall be paid
to Landlord without demand and without deduction, set-off or counterclaim on
the first (1st) day of every month during the term of this Lease. If Landlord
shall at any time or times accept rent after it shall become due and payable,
such acceptance shall not excuse a delay upon subsequent occasion, or
constitute, or be construed as, a waiver of any or all of Landlord's rights
hereunder.
(g) RIGHT OF INSPECTION. Landlord agrees Tenant shall have the right to
inspect Landlord's books to verify increases in Real Estate Taxes and/or Annual
Operating Charges at Landlord's office at reasonable times and reasonable
intervals with at least fifteen (15) days prior written notice.
4. USE OF PREMISES. Tenant will use and occupy the premises solely
for general office, commercial banking or other financial services institution
purposes and only in accordance with the uses permitted under applicable zoning
and other municipal regulations; without the prior written consent of Landlord,
the premises will not be used for any other purpose. Tenant will not use or
occupy the premises for any unlawful purpose, and will comply with all present
and future laws, ordinances, regulations and orders of the United States of
America, the District of Columbia, and any other public or quasi-public
authority having jurisdiction over the premises. Landlord will obtain the
initial certificate of occupancy for Tenant; provided, however, it is expressly
understood that if any future law, ordinance, regulation or order or any change
in the use of the premises by Tenant, requires a new certificate of occupancy
for the premises, Tenant will obtain such permit at Tenant's own expense.
Tenant represents and warrants to Landlord that Tenant has entered into this
Lease entirely for a business or commercial purpose and warrants that it shall
not use the premises for any residential purpose.
5. ASSIGNMENT AND SUBLETTING. Provided Landlord and Tenant fully
executes a formal sublease approval letter agreement, The Washington Institute
for Values in Public Policy shall be an approved subtenant of Tenant.
(a) LANDLORD'S PRIOR CONSENT REQUIRED. Tenant and Tenant's
representatives, successors and assigns will not assign, transfer, mortgage or
otherwise encumber this Lease or sublet or rent (or permit the occupancy or
use of) the premises, or any part thereof, without obtaining the prior written
consent of Landlord, nor shall any assignment or transfer of this Lease or the
right of occupancy hereunder be effectuated by operation of law or otherwise
without the prior written consent of Landlord, except by merger or acquisition
of, or by, Tenant.
(b) QUALIFICATIONS OF SUBTENANT. Subject to the provisions of
paragraph 5(c) hereof, Landlord shall not unreasonably withhold its consent
hereunder to any sublease by Tenant, provided that all of the following
conditions are met:
(i) Tenant must first notify Landlord, in writing, of any proposed
sublease, at least fifteen (15) days prior to the effective date of such
proposed sublease. The notice to Landlord must include a copy of the proposed
sublease and an audited copy of the proposed subtenant's most recent financial
statement, prepared by a certified public accountant;
(ii) The subtenant must have a credit rating satisfactory to Landlord
(in Landlord's sole but reasonable judgment);
(iii) The sublease must be expressly subject and subordinate to this
Lease, must require that any subtenant must comply with and abide by all of the
terms of this Lease, and must provide that any termination of this Lease shall
extinguish the sublease as well;
(iv) The subtenant may not use the premises or propose to conduct its
business in a manner which, in Landlord's sole judgment, is not appropriate for
a first class office building in Washington, D.C.;
(v) The Tenant may not be in default under this Lease, or have
committed two events of default hereunder during the previous twelve (12)
months, whether cured or not; and
JACo
rev. 3-10-83
3
<PAGE> 14
(c) LANDLORD'S RIGHT OF FIRST REFUSAL. Landlord shall have the right,
within sixty thirty (30) after receipt of the notice from Tenant, required under
paragraph 5(b)(i) above, that Tenant proposes to sublease all or a portion of
the premises, to elect (i) to sublet the premises from Tenant at the rent then
being paid by Tenant for the premises under paragraph 3 hereof (or that portion
thereof which Tenant proposes to sublease) by a proportionate reduction in the
rent as hereinafter set forth: (ii) to terminate this Lease in its entirety if
Tenant intends to sublet all of the premises or, if Tenant proposes to sublet a
portion of the premises, to terminate this Lease only with respect to such
portion of the premises or (iii) to require Tenant to pay Landlord, within five
(5) days of receipt, one-half (1/2) of the amount of rent payable by such
sublessee in excess of the amount of rent payable by Tenant hereunder with
respect to the portion of the premises sublet. Upon exercise by Landlord of
either of the options set forth in subsections (i) or (ii) above. Tenant shall
surrender the premises or such portion of the premises, as the case may be, to
Landlord, and thereafter the rent to be paid by Tenant pursuant to paragraph 3
above shall be that portion of the total rent which the amount of square foot
area remaining in the possession of Tenant bears to the total square foot area
of the premises. In the event that Landlord does not exercise its right to
sublet the premises, or such portion of the premises, as the case may be, or to
terminate this Lease, within said sixty (60)-day period. Tenant shall have the
right, subject to the provisions of subsection (iii) above, to sublet the
premises or a portion thereof after first obtaining the written consent of
Landlord as provided in paragraph 5(a) above. Upon exercise by Landlord of the
option set forth in subsection (iii) above. Tenant covenants and agrees to
provide Landlord with quarterly statements, prepared and verified by a
certified public accountant, stating the amount of rent received by Tenant from
its subtenant(s) during such quarterly period. If such statement shows Tenant
failed to make the full payments required by subsection (iii) above, a late
charge equal to five percent (5%) of the amount due shall be paid by Tenant, as
additional rent hereunder.
(d) NO WAIVER OR RELEASE. The consent by Landlord to any assignment or
subletting shall not be construed as a waiver or release of Tenant from the
terms of any covenant or obligation under this Lease, nor shall the collection
or acceptance of rent from any such assignee, subtenant or occupant constitute a
waiver or release of Tenant of any covenant or obligation contained in this
Lease, nor shall any such assignment or subletting be construed to relieve
Tenant from obtaining the consent in writing of Landlord to any further
assignment or subletting. Tenant hereby assigns to Landlord the rent due from
any subtenant of Tenant and hereby authorizes each such subtenant to pay said
rent directly to Landlord, at Landlord's option, in the event of any default by
Tenant under the terms of this Lease.
6. MAINTENANCE OF THE PREMISES.
(a) OBLIGATIONS OF LANDLORD AND TENANT. Tenant will keep the premises
and fixtures and equipment therein in clean, safe and sanitary condition, will
take good care thereof, will suffer no waste or injury thereto, and will, at
the expiration or other termination of the term of this Lease, surrender the
same, broom clean, in the same order and condition in which they are on the
Lease Commencement Date, ordinary wear and tear and unavoidable damage by the
elements excepted; provided, however, that if Tenant is insured for any such
damage, Tenant shall either (i) apply the insurance proceeds to repair such
damage or (ii) surrender such insurance proceeds to Landlord upon delivery of
the premises. All special improvements to and equipment installed in the
premises by Landlord at the request of Tenant shall be maintained, repaired,
replaced and insured by Tenant. All such insurance shall provide coverage in
the amount of the full replacement value of such special improvements and
equipment, and shall name Landlord as an additional insured as its interests
may appear. Except as otherwise provided in this Lease, Landlord shall maintain
and repair the exterior of the Building, including all base Building structural
elements, unless damaged by Tenant's negligence, and shall maintain, repair and
paint all building standard common area elements installed by Landlord, in a
manner befitting a first class office building in Washington, D.C. Landlord, at
its cost, shall provide and install all original building standard fluorescent
tubes within the premises necessary to provide required lighting and all
replacement tubes for such lighting; all other bulbs, tubes and lighting
fixtures for the premises shall be provided and installed by Landlord at
Tenant's cost and expense.
(b) DAMAGE TO PREMISES OR BUILDING. All damage or injury to the
premises or to any other part of the Building, or to its fixtures, equipment
and appurtenances, whether requiring structural or nonstructural repairs,
caused by or resulting from carelessness, omission, neglect or improper conduct
of Tenant, Tenant's agents, employees, contractors, invitees or licensees,
shall be repaired promptly, at Tenant's sole cost and expense, by either
Landlord or, at Landlord's option, by Tenant subject to Landlord's direction
and supervision (and in accordance with paragraph 7 hereof). If Landlord gives
Tenant written notice that Tenant will be required to make such repairs and
Tenant fails within ten days of the giving of such notice to proceed with due
diligence to make the required repairs, the same may be made by Landlord, in
which event all expenses incurred by Landlord therefor shall be paid by Tenant
to Landlord as additional rent, and shall be due and payable with the monthly
installment of rent next becoming due in accordance with the terms of paragraph
17(d) below; provided, however, that Tenant shall not be liable to Landlord for
such expenses if and to the extent that (i) Landlord is insured for such
hazards and damages under an insurance policy and (ii) Landlord is actually
reimbursed by its insurer for such expenses.
(c) NOTICE OF DEFECTIVE CONDITION. Tenant shall give Landlord prompt
notice of any defective condition in any plumbing or heating system or any
electrical lines located in, servicing or passing through the premises.
Following such notice Landlord shall remedy the condition with due diligence;
provided, however, that such repairs shall be at the expense of Tenant if such
repairs are necessitated by damage or injury attributable to Tenant, Tenant's
agents, employees, contractors, invitees or licensees as provided in paragraph
6(b) above. Except as specifically provided in this Lease, there shall be no
allowance to Tenant for a diminution of rental value and no liability on the
part of Landlord by reason of inconvenience, annoyance or injury to business
arising from Landlord. Tenant, or others making or failing to make any repairs,
alterations, additions, or improvements in or to a portion of the Building or
the premises or in or to the fixtures, appurtenances or equipment thereof.
7. TENANT ALTERATIONS.
(a) ALTERATIONS. The original improvement of the premises by Landlord
for Tenant shall be in accordance with Exhibit B attached hereto. Tenant will
not make or permit anyone to make any alterations, decorations, additions or
improvements, structural or otherwise, in or to the premises or the Building,
without the prior written consent of Landlord. All of such alterations,
decorations, additions or improvements permitted by Landlord must conform to
all rules and regulations established from time to time by the Underwriters'
Association of the District of Columbia and conform to all requirements of the
Federal and District of Columbia governments. As a condition precedent to such
written consent of Landlord, Tenant agrees to obtain and deliver to Landlord
written and unconditional waivers of mechanics' and materialmens' liens upon
the Land and the Building, for all work, labor and services to be performed,
and materials to be furnished, by them in connection with such work, signed by
all contractors, subcontractors, materialmen and laborers to become involved in
such work. If, notwithstanding the foregoing, any mechanic's or materialmen's
lien is filed against the premises, the Building and/or the Land, for work
claimed to have been done for or materials claimed to have been furnished to
Tenant, such lien shall be discharged by Tenant within ten (10) days
thereafter, at Tenant's sole cost and expense, by the payment thereof or by
filing any bond required by law. If Tenant shall fail to discharge any such
mechanic's or materialmen's lien, Landlord may, at its option, discharge the
same and treat the cost thereof as additional rent payable with the monthly
installment of rent next becoming due; it being hereby expressly covenanted and
agreed that such discharge by Landlord shall not be deemed to waive or release
the default of Tenant in not discharging the same. It is understood and agreed
that in the event Landlord shall give its written consent to Tenant's making
any such alterations, decorations, additions or improvements, such written
consent shall not be deemed to be an agreement or consent by Landlord to
subject Landlord's interest in the premises, the Building or the Land to any
mechanic's or materialmen's liens which may be filed in respect of any such
alterations, decorations, additions or improvements made by or on behalf of
Tenant.
(b) INDEMNIFICATION. Tenant will indemnify and hold Landlord harmless
from and against any and all expenses, liens, claims or damages to person or
property which may or might arise directly or indirectly by reason of the
making of any such alterations, decorations, additions or improvements. If any
such alteration, decoration, addition or improvement is made without the prior
written consent of Landlord. Landlord may correct or remove the same, and
Tenant shall be liable for any and all expenses incurred by Landlord in the
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<PAGE> 15
performance of this work to all alterations, decorations, additions or
improvements in or to the premises or the Building made by either party shall
immediately become the property of Landlord and shall remain upon and be
surrendered with the premises as a part thereof at the end of the term hereof
without disturbance, molestation or injury; provided, however, that if Tenant
is not in default in the performance of any of its obligations under this
Lease. Tenant shall have the right to remove, prior to the expiration of the
term of this Lease, all movable furniture, furnishings, or equipment installed
in the premises at the expense of Tenant. If such property of Tenant is not
removed by Tenant prior to the expiration or termination of this Lease, the
same shall become the property of Landlord and shall be surrendered with the
premises as a part thereof.
8. SIGNS; FURNISHINGS.
(a) SIGNS. No sign, advertisement or notice shall be inscribed,
painted, affixed or otherwise displayed on any part of the exterior or interior
of the Building except on the directories and the doors of offices, and then
only in such place, number, size, color and style as is harmonious with the
design of the Building and its furnishings and is approved by Landlord in
writing and provided by Landlord at Tenant's cost and expense. If any sign,
advertisement or notice which does not conform to the foregoing is nevertheless
exhibited by Tenant. Landlord shall have the right to remove the same and
Tenant shall be liable for any and all expenses incurred by Landlord in said
removal. Landlord shall have the right to prohibit any advertisement of Tenant
which in its opinion tends to impair the reputation of the Building or its
desirability as a high-quality building for offices or for financial, insurance
and other institutions of like nature, and, upon written notice from Landlord,
Tenant shall immediately refrain from and discontinue any such advertisement.
(b) FURNISHINGS. Landlord shall have the right to prescribe the weight
and position of safes and other heavy equipment or fixtures, which shall, if
considered necessary by the Landlord, stand on plank strips to distribute the
weight. Any and all damage or injury to the premises or the Building caused by
moving the property of Tenant into, in or out of the premises, or due to the
same being on the premises, shall be repaired by and at the sole cost of
Tenant. No furniture, equipment or other bulky matter of any description will
be received into the Building or carried in the elevators except as approved by
Landlord, and all such furniture, equipment, and other bulky matter shall be
delivered only during hours approved by Landlord and only through the
designated delivery entrance of the Building. All moving of furniture,
equipment and other materials shall be under the direct control and supervision
of Landlord who shall, however, not be responsible for any damage to or charges
for moving the same. Tenant agrees promptly to remove from the sidewalks
adjacent to the Building any of the Tenant's furniture, equipment or other
material there delivered or deposited.
9. TENANT'S EQUIPMENT. Tenant will not install or operate in the
premises any electrically operated equipment or other machinery, other than
electric typewriters, adding machines, radios, televisions, clocks and other
electrically operated equipment of a type used in commercial banking or
financial services institutions and copying machines, without first obtaining
the prior written consent of Landlord. Landlord may condition such consent upon
the payment by Tenant of additional rent in compensation for such excess
consumption of utilities and for the cost of additional wiring and/or
additional electrical systems as may be occasioned by the operation of said
equipment or machinery, or Landlord may require Tenant to pay the cost for such
excess consumption of utilities and additional wiring and/or additional
electrical systems directly to the utility company furnishing the same. The
electrical system for the entire door of the Building on which the premises are
located is sufficient for consumption of 38,000 watts on a 265/460 volt panel
board and 25,000 watts on a 120/208 volt panel board. Tenant is entitled to use
thirty two and no/100 percent (32.00%) of such electrical power (being Tenant's
agreed-upon proportionate share). If any portion or all of Tenant's equipment
and lighting shall result in electrical usage in excess of Tenant's
proportionate share of the capacity of the electrical system as so described,
additional transformers, distribution panels and wiring may be required, and if
so required may be installed by Landlord, at the cost and expense of Tenant.
Tenant shall not install any other equipment of any kind or nature whatsoever
which will or may necessitate any changes, replacements or additions to, or in
the use of, the water system, heating system, plumbing system, air-conditioning
system, or electrical system of the premises or the Building without first
obtaining the prior written consent of Landlord. Business machines and
mechanical equipment belonging to Tenant which cause noise or vibration that
may be transmitted to the structure of the Building or to any space therein to
such a degree as to be objectionable to Landlord or to any tenant in the
Building shall be installed and maintained by Tenant, at Tenant's expense, on
vibration eliminators or other devices sufficient to eliminate such noise and
vibration, and if such noise and/or vibration is not so eliminated, Landlord
shall have the right to require Tenant to remove such machines and/or equipment
from the premises.
10. INSPECTION. Tenant will permit Landlord, or its agents or other
representatives, to enter the premises, without charge therefor to Landlord and
without diminution of the rent payable by Tenant, to examine, inspect and
protect the premises and the Building and to make such alterations and/or
repairs as in the sole judgment of Landlord may be deemed necessary, or to
exhibit the same to prospective tenants during the last one hundred eighty
(180) days of the term of this Lease upon reasonable notice and in
accompaniment of Tenant's authorized representative.
11. INSURANCE.
(a) INSURANCE RATING. Tenant will not conduct or permit to be
conducted, any activity, or place any equipment in or about the premises or the
Building, which will, in any way, invalidate the insurance coverage in effect
or increase the rate of fire insurance or other insurance on the Building; and
if any invalidation of coverage or increase in the rate of fire insurance or
other insurance is stated by any insurance company or by the applicable
Insurance Rating Bureau to be due to any activity or equipment of Tenant in or
about the premises or the Building, such statement shall be conclusive evidence
that the increase in such rate is due to such activity or equipment and as a
result thereof, Tenant shall be liable for such increase and shall reimburse
Landlord therefor upon demand and any such sum shall be considered additional
rent payable with the monthly installment of rent next becoming due.
(b) REQUIRED INSURANCE. Tenant shall carry public liability insurance
in a company or companies licensed to do business in the District of Columbia
and approved by Landlord. Said insurance shall be in minimum amounts approved
by Landlord from time to time (as set forth in the rules and regulations
attached hereto as Exhibit C) and shall name Landlord as an additional insured,
as its interests may appear and shall provide Landlord with evidence, when
requested, that such insurance is in full force and effect. Tenant shall carry
property damage insurance for all of its equipment and for all leasehold
improvements above the building standard which are made by Landlord or Tenant
in and to the Premises. If required by Landlord, receipts evidencing payment
for said insurance shall be delivered to Landlord at least annually by Tenant
and each policy shall contain an endorsement that will prohibit its
cancellation prior to the expiration of fifteen (15) days after notice of such
proposed cancellation to Landlord.
12. SERVICES AND UTILITIES; SECURITY.
(a) It is agreed that Landlord will furnish airconditioning during the
seasons of the year when airconditioning is required and heat during the
seasons of the year when heat is required. It is further agreed that Landlord
will provide reasonably adequate electricity, water, exterior window cleaning
service, and char and janitorial service Monday through Friday (except legal
holidays), all as required in Landlord's sole but reasonable judgment. Landlord
will provide elevator service by means of automatically operated elevators, and
one automatically operated elevator shall be subject to call at all times;
provided, however, that Landlord shall have the right to remove
JACo
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5
<PAGE> 16
elevators from service as the same shall be required for moving freight or for
servicing or maintaining the elevators and/or the Building Landlord will furnish
all services and utilities required by this Lease only during the normal hours
of operation of the Building, unless otherwise specified herein. The normal
hours of operation of the Building are 8:00 a.m. to 6:00 p.m. Monday through
Friday (except legal holidays) and 9:00 a.m. to 1:00 p.m. Saturday (except legal
holidays). There are no normal hours of operation of the Building on Sundays or
legal holidays and Landlord shall not be obligated to maintain or operate the
Building at such times unless special arrangements are requested by Tenant. If
Tenant requires airconditioning or heat beyond the normal hours of operation of
the Building as set forth above, and provided that Tenant has made prior
arrangements with Landlord or Landlord's agent, Landlord will furnish such
airconditioning or heat and the Tenant agrees to pay for the same with the
monthly installment of rent next becoming due in accordance with the
then-current schedule of costs and assessments therefor, which schedule shall be
published from time to time by Landlord and furnished to Tenant. It is
understood and agreed that Landlord shall not be liable for failure to furnish,
or for delay, suspension or reduction in furnishing, any of the utilities or
services required to be furnished by Landlord hereunder, if such failure to
furnish or delay, suspension or reduction in furnishing the utilities and
services is caused by breakdown, maintenance, repairs, strikes, scarcity of
labor or materials, acts of God, Landlord's compliance with governmental
regulation, legislation, or judicial or administrative orders, or from any other
cause whatsoever, provided however, that Landlord shall, in the event of a
breakdown, use reasonable diligence to repair all equipment owned by Landlord
and all building standard equipment furnished by Landlord which is required to
provide such utilities and services.
(b) SECURITY. Landlord agrees, at its option, to provide a security
system or guard service for the Building during the term of the Lease, provided,
however, that no representation or warranty with respect to the adequacy,
completeness or integrity of the security system or guard service is made by
Landlord, and any failure of the security system or guard service in any way
shall not modify or affect any of the terms of this Lease with respect to
Landlord's liability to Tenant. It is anticipated that the initial security
system shall be an electronic system that provides access control at the main
entry of the Building and at individual suite doors. The Landlord reserves the
right to modify, supplement or revise the security system at any time in its
sole judgement.
13. LIABILITY OF LANDLORD.
(a) NO LIABILITY. Landlord shall not be liable to Tenant, its
employees, agents, contractors, business invitees, licensees, customers,
clients, family members or guests for any damage, compensation or claim arising
from the necessity of repairing any portion of the premises or the Building, the
interruption in the use of the premises, accident or damage resulting from the
use or operation (by Landlord, Tenant, or any other person or persons
whatsoever) of elevators or heating, cooling, electrical or plumbing equipment
or apparatus, or the termination of this Lease by reason of the destruction of
the premises, or from any fire, robbery, theft, mysterious disappearance and/or
any other casualty, or from any leakage in any part or portion of the premises
or the Building, or from water, rain or snow that may leak into, or flow from,
any part of the premises or the Building, or from drains, pipes or plumbing work
in the Building, or from any other cause whatsoever, or for any personal injury
arising from the use, occupancy and condition of the premises, unless any of the
foregoing is caused by the gross negligence of Landlord or a willful act or
failure to act on the part of the Landlord. Except for a termination of this
Lease, Tenant shall not be entitled to any abatement or diminution of rent as a
result of any of the foregoing occurrences, nor shall the same release Tenant
from its obligations hereunder or constitute an eviction. Any goods, property or
personal effects of Tenant, its employees, agents, contractors, business
invitees, licensees, customers, clients, family members or guests, stored or
placed in or about the premises or Building shall be at their risk, and the
Landlord shall not in any manner be held responsible therefor. The employees of
the Landlord are prohibited from receiving any packages or other articles
delivered to the Building by Tenant, and if any such employee receives any such
package or articles, such employee shall be the agent of the Tenant for such
purposes and not of the Landlord. Tenant acknowledges that Landlord will not
carry insurance on Tenant's furniture, furnishings, fixtures, equipment and/or
improvements in or to the premises. It is expressly understood and agreed that
Tenant shall look to its business interruption and property damage insurance
policies, and not to Landlord or its agents or employees, for reimbursement for
any damages or losses incurred as a result of any of the foregoing occurrences,
and that said policies must contain waiver of subrogation clauses.
(b) INDEMNITY. Tenant hereby agrees to indemnify and hold Landlord
harmless from and against any cost, damage, claim, liability , or expense
(including attorneys' fees) incurred by or claimed against Landlord, directly or
indirectly, which is occasioned by or results from any default hereunder or any
willful or negligent act on the part of Tenant, its agents, employees,
contractors, invitees, licensees, customers, clients, family members and guests,
or as a result of or in any way arising from Tenant's use and occupancy of the
premises or in any other manner which relates to the business of Tenant. Any
such cost, damage, claim, liability or expense incurred by Landlord for which
Tenant is obligated to reimburse Landlord shall be deemed additional rent due
and payable in accordance with paragraph 17(d) hereof. It is expressly
understood and agreed that Tenant's liability under this Lease extends to the
acts and omissions of any subtenant and any agent, employee contractor, invitee,
licensee, customer, client, family member and guest of any subtenant.
14. RULES AND REGULATIONS. Tenant, its agents, employees, contractors,
invitees, licensees, customers, clients, family members and guests shall at all
times abide by and observe the rules and regulations attached hereto as Exhibit
C. In addition, Tenant, its agents, employees, contractors, invitees, licensees,
customers, clients, family members and guests shall abide by and observe such
other rules or regulations as may be promulgated from time to time by Landlord,
with a copy sent to Tenant, for the operation and maintenance of the Building,
provided, however, that the same shall be in conformity with common practice and
usage in similar buildings and shall not be inconsistent with the provisions of
this Lease. Nothing contained in this Lease shall be construed to impose upon
Landlord any duty or obligation to enforce such rules and regulations, or the
terms, conditions or covenants contained in any other lease, as against any
other tenant, and Landlord shall not be liable to Tenant for violation of the
same by any other tenant, its employees, agents, contractors, invitees,
licensees, customers, clients, family members or guests. If there is any
inconsistency between this Lease and any current or future rules and
regulations, this Lease shall govern.
15. DAMAGE; CONDEMNATION.
(a) DAMAGE TO THE PREMISES. If the premises shall be partially damaged
by fire or other cause without the fault or neglect of Tenant, its employees,
agents, contractors, invitees, licensees, customers, clients, family members or
guests, this Lease shall not be terminated and Landlord shall diligently and as
soon as practicable after such damage occurs, repair such damage, at the expense
of Landlord if Landlord is insured with respect thereto or at the expense of
Tenant if Tenant is required to be insured hereunder with respect to such damage
(in either case taking into account the time necessary to effectuate a
satisfactory settlement with any insurance company involved and for such other
delays as may result from government restrictions, controls on construction, if
any, and from strikes, emergencies and other conditions beyond the control of
the Landlord); provided, however, that if the premises or Building is damaged by
fire or other cause to such extent that the damage cannot be fully repaired
within ninety (90) days from the date of settlement of the insurance claims.
Landlord or Tenant, upon written notice to the other party may terminate this
Lease, in which event the rent shall be apportioned and paid to the date of such
damage. During the period that Tenant is deprived of the use of the damaged
portion of the premises and provided Tenant is able to conduct its customary
banking business in the premises without unreasonable inconvenience or
interruption, as determined by the Building architect. Tenant shall be required
to pay rent (as set forth in paragraph 3) covering only that part of the
premises that Tenant is able to occupy and the rent for such space shall be that
portion of the total rent which the amount of square foot area remaining that
can be occupied by Tenant bears to the total square foot area of the premises.
In the event of any injury or damage to the premises or the Building caused by
Tenant or its agents, employees, contractors, invitees, licensees, customers,
clients, family members or guests, then Tenant shall diligently and as soon as
practicable after such damage occurs, repair such damage, at Tenant's sole cost
and expense. If Tenant shall fail so to do, Landlord shall have the right to
make such repairs or replacements, and any cost or expense so incurred by
Landlord shall be paid by Tenant, and shall become additional rent due and
payable, in accordance with the provisions of paragraph 17(d) hereof, with the
installment of rent next becoming due under the terms of this Lease. No
compensation, claim or diminution in rent, other than as provided in this
paragraph 15(a), will be allowed or paid by Landlord, by reason of
inconvenience, annoyance or injury to business arising from the necessity of
repairing the premises or any portion of the Building, however the necessity may
occur.
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(b) CONDEMNATION. If the whole or a substantial part (as hereinafter
defined) of the premises (or use or occupancy of the premises) shall be taken
or condemned by any governmental or quasi-governmental authority for any
public or quasi-public use or purpose (including sale under threat of such a
taking), then the terms of this Lease shall cease and terminate as of the date
when title vests in such governmental or quasi-governmental authority, and the
rent shall be abated on the date when such title vests in such governmental or
quasi-governmental authority. If less than a substantial part of the premises
is taken or condemned by any governmental or quasi-governmental authority for
any public or quasi-public use or purpose (including sale under threat of such
a taking), the rent shall be equitably adjusted (on the basis of the number of
square feet before and after such event) on the date when title vests in such
governmental or quasi-governmental authority and the Lease shall otherwise
continue in full force and effect. Tenant shall have no claim against Landlord
(or otherwise) and hereby agrees to make no claim against the condemning
authority for any portion of the amount that may be awarded as damage as a
result of any governmental or quasi-governmental taking or condemnation (or
sale under threat of such taking or condemnation) or for the value of any
unexpired term of the Lease or for loss of profits or moving expenses or for
any other claim or cause of action. For purposes of this Paragraph 15(b), a
substantial part of the premises shall be considered to have been taken if
more than fifty percent (50%) of the premises are unusable by Tenant as a
direct result of such taking.(*) NOTWITHSTANDING ANY PROVISION OF THIS LEASE
AGREEMENT, TENANT SHALL NOT BE PREVENTED FROM MAKING A SEPARATE CLAIM OR
CAUSE OF ACTION WHICH TENANT MAY HAVE DIRECTLY AGAINST THE CONDEMNING
AUTHORITY AND WHICH TENANT IS ABLE TO PURSUE WITHOUT INTERFERING WITH
LANDLORD'S CLAIM OR CAUSE OF ACTION AND WITHOUT ELIMINATING LANDLORD'S RIGHT
TO LANDLORD'S AWARD.
16. BANKRUPTCY.
(a) EVENTS OF BANKRUPTCY. The following shall be "Events of
Bankruptcy" under this Lease:
(i) Tenant's becoming insolvent, as that term is defined in Title 11
of the United States Code, entitled Bankruptcy. 11 U.S.C. Section 101 et seq.
(the "Bankruptcy Code"), or under the insolvency laws of any State, District,
Commonwealth or Territory of the United States (the "Insolvency Laws");
(ii) the appointment of a receiver or custodian for all or a
substantial portion of Tenant's property or assets, or the institution of a
foreclosure action upon all or a substantial portion of Tenant's real or
personal property;
(iii) the filing of a voluntary petition under the provisions of the
Bankruptcy Code or Insolvency Laws;
(iv) the filing of an involuntary petition against Tenant as the
subject debtor under the Bankruptcy Code or Insolvency Laws, which is either
not dismissed within sixty (60) days of filing, or results in the issuance of
an order for relief against the debtor or
(v) Tenant's making or consenting to an assignment for the benefit of
creditors or a common law composition of creditors.
(b) LANDLORD'S REMEDIES.
(i) TERMINATION OF LEASE. Upon the occurrence of an Event of
Bankruptcy, Landlord shall have the right to terminate this Lease by giving
written notice to Tenant, whereupon Tenant shall be immediately obligated to
quit the premises upon the giving of notice pursuant to this Paragraph
16(b)(i). Any other notice to quit, or notice of Landlord's intention to
re-enter is hereby expressly waived. If Landlord elects to terminate this
Lease, everything contained in this Lease on the part of Landlord to be done
and performed shall cease without prejudice, subject, however, to the right of
Landlord to recover from Tenant all rent and any other sums accrued up to the
time of termination or recovery of possession by Landlord, whichever is later,
and any other monetary damages or loss of reserved rent sustained by Landlord,
provided, however, and notwithstanding the foregoing or the further remedies
set forth in this Paragraph 16(b). Landlord shall not have the right to
terminate this Lease while a case in which Tenant is the subject debtor under
the Bankruptcy Code is pending, unless Tenant or Tenant's trustee in
bankruptcy is unable to comply with the provisions of Paragraphs 16(b)(v),
(vi) and (vii) below.
(ii) SUIT FOR POSSESSION. Upon termination of this Lease pursuant to
Paragraph 16(b)(i), Landlord may proceed to recover possession under and by
virtue of the provisions of the laws of the District of Columbia, or by such
other proceedings, including re-entry and possession, as may be applicable.
(iii) RELETTING OF PREMISES. Upon termination of this Lease pursuant to
Paragraph 16(b)(i), Landlord shall have the option to relet the premises for
such rent and upon such terms as are not unreasonable under the circumstances
and, if the full rental reserved under this Lease (and any of the costs,
expenses or damages indicated below) shall not be realized by Landlord, Tenant
shall be liable for all damages sustained by Landlord, including, without
limitation, deficiency in rent, reasonable attorneys' fees, brokerage fees and
expenses of placing the premises in first class rentable condition. Landlord,
in putting the premises in good order or preparing the same for rerental may,
at Landlord's option, make such alterations, repairs, or replacements in the
premises as Landlord, in its sole, but reasonable, judgement, considers
advisable and necessary for the purpose of reletting the premises, and the
making of such alterations, repairs, or replacements shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Landlord
shall in no event be liable in any way whatsoever for failure to relet the
premises, or in the event that the premises are relet, for failure to collect
the rent under such reletting, and in no event shall Tenant be entitled to
receive the excess, if any, of such net rent collected over the sums payable
by Tenant to Landlord hereunder.
(iv) MONETARY DAMAGES. Any damage or loss of rent sustained by Landlord
as a result of an Event of Bankruptcy may be recovered by Landlord, at
Landlord's option, at the time of the reletting, or in separate actions, from
time to time, as said damage shall have been made more easily ascertainable by
successive relettings, or at Landlord's option, in a single proceeding
deferred until the expiration of the term of this Lease (in which event Tenant
hereby agrees that the cause of action shall not be deemed to have accrued
until the date of expiration of said term) or in a single proceeding prior to
either the time of reletting or the expiration of the term of this Lease, in
which event Tenant agrees to pay Landlord the difference, if any, between the
present value of the rent reserved under this Lease on the date of breach,
discounted at eight percent (8%) per annum, and the fair market value of the
Lease on the date of breach. In the event Tenant becomes the subject debtor in
a case under the Bankruptcy Code, the provisions of this Paragraph 16(b)(iv)
may be limited by the limitations of damage provisions of the Bankruptcy Code.
(v) ASSUMPTION OR ASSIGNMENT BY TRUSTEE. In the event Tenant becomes the
subject debtor in a case pending under the Bankruptcy Code. Landlord's right
to terminate this Lease pursuant to this Paragraph 16 shall be subject to the
rights of the Trustee in bankruptcy to assume or assign this Lease. The
Trustee shall not have the right to assume or assign this Lease unless the
Trustee (A) promptly cures all defaults under this Lease, (B) promptly
compensates Landlord for monetary damages incurred as a result of such
default, (C) provides "adequate assurance of future performance" (as
hereinafter defined) (D) complies with the provisions of Paragraph 5 hereof.
(vi) ADEQUATE ASSURANCE OF FUTURE PERFORMANCE. Landlord and Tenant
hereby agree in advance that the phrase "adequate assurance of future
performance", as used in this Paragraph 16(b), shall mean that all of the
following minimum criteria must be met; (A) the Trustee must pay to Landlord,
at the time the next payment of rent is then due under this Lease, in addition
to such payment of rent, an amount equal to the next three (3) months rent due
under this Lease, said amount to be held by Landlord in escrow until either
the Trustee or Tenant defaults in its payments of rent or other obligations
under this Lease (whereupon Landlord shall have the right to draw upon such
escrowed funds) or until the expiration of this Lease (whereupon the funds
shall be returned to the Trustee or Tenant); (B) the Tenant or Trustee must
agree to pay to Landlord, at any time the Landlord is authorized to and does
draw upon the funds escrowed pursuant to subparagraph (A) above, the amount
necessary to restore such escrow account to the original level required by
said provision; (C) Tenant must pay the cost of all services, if any, provided
by Landlord for which Tenant is charged other than pursuant to Paragraph 3
hereof (whether directly or through agents or contractors, and whether or not
the cost of such services is to be passed through to Tenant) in advance of the
performance or provision of such services; (D) the Trustee must agree that
Tenant's business shall be conducted in a first class manner, and that no
liquidation sales, auctions, or other non-first class business operations
shall be conducted on the premises; (E) the Trustee must agree that the use of
the premises as stated in this Lease will remain unchanged; and (F) the
Trustee must agree that the assumption or assignment of this Lease will not
violate or affect the rights of other tenants in the Building.
* Nothwithstanding any provision of this Lease Agreement, Tenant shall not be
prevented from making a separate claim or cause of action which Tenant may have
directly against the condemming authority and which Tenant is able to pursue
without interfering with Landlord's claim or cause of action and without
eliminating Landlord's right to Landlord's award.
JACo
rev. 3-10-83
7
<PAGE> 18
(vii) FAILURE TO PROVIDE ADEQUATE ASSURANCE. In the event Tenant is
unable (A) to cure its defaults, (B) to reimburse Landlord for its monetary
damages, (C) to pay when due the rent due under this Lease, or any other
payments required of Tenant under this Lease, or (D) to meet the criteria and
obligations imposed by paragraph 16(b)(vi) above, then Tenant agrees in
advance that it has not met its burden to provide adequate assurance of future
performance, and this Lease may be terminated by Landlord in accordance with
paragraph 16(b)(i) above.
17. DEFAULT OF TENANT.
(a) EVENTS OF DEFAULT. The following shall be "Events of Default"
under this Lease:
(i) If Tenant shall fail to pay any monthly (or annual installment of
rent (as required by paragraph 3 or paragraph 17 (b)(iv) hereof) and if such
failure continues for a period of five (5) days after Landlord's written
notice thereof to Tenant, or
(ii) If Tenant shall fail to timely make any other payment required
under this Lease, if such failure continues for a period of five (5) days
after Landlord's written notice thereof to Tenant, or
(iii) If Tenant shall violate or fail to perform any of the other
terms, conditions, covenants or agreements herein made by Tenant, if such
violation or failure continues for a period of five (5) days after Landlord's
written notice thereof to Tenant; provided that no such notice shall be
required if Tenant has received a similar notice within three hundred
sixty-five (365) days prior to such violation or failure.
(b) LANDLORD'S REMEDIES. Should an Event of Default occur under this
Lease, Landlord may pursue any or all of the following remedies:
(i) TERMINATION OF LEASE. Landlord may terminate this Lease, by
giving written notice of such termination to Tenant, whereupon this Lease
shall automatically cease and terminate and Tenant shall be immediately
obligated to quit the premises. Any other notice to quit or notice of
Landlord's intention to re-enter the premises is hereby expressly waived. If
Landlord elects to terminate this Lease, everything contained in this Lease on
the part of Landlord to be done and performed shall cease without prejudice,
subject, however, to the right of Landlord to recover from Tenant all rent and
any other sums accrued up to the time of termination or recovery of possession
by Landlord, whichever is later.
(ii) SUIT FOR POSSESSION. Upon termination of this Lease pursuant to
paragraph 17(b)(i), Landlord may proceed to recover possession of the premises
under and by virtue of the provisions of the laws of the District of Columbia,
or by such other proceedings, including re-entry and possession, as may be
applicable.
(iii) RELETTING OF PREMISES. Should this Lease be terminated before
the expiration of the term of this Lease by reason of Tenant's default as
hereinabove provided, or if Tenant shall abandon or vacate the premises before
the expiration or termination of the term of this Lease without having paid
the full rental for the remainder of such term, Landlord shall use best
efforts to relet the premises for such rent and upon such terms as are not
unreasonable under the circumstances and, if the full rental reserved under
this Lease (and any of the costs, expenses or damages indicated below) shall
not be realized by Landlord, Tenant shall be liable for all damages sustained
by Landlord, including without limitation, deficiency in rent, reasonable
attorneys' fees, brokerage fees and expenses of placing the premises in first
class rentable condition. Landlord, in putting the premises in good order or
preparing the same for rerental may, at Landlord's option, make such
alterations, repairs, or replacements in the premises as Landlord, in its sole
judgment, considers advisable and necessary for the purpose of reletting the
premises, and the making of such alterations, repairs, or replacements shall
not operate or be construed to release Tenant from liability hereunder as
aforesaid. Landlord shall in no event be liable in any way whatsoever for
failure to relet the premises, or in the event that the premises are relet,
for failure to collect the rent under such reletting, and in no event shall
Tenant be entitled to receive the excess, if any, of such net rent collected
over the sums payable by Tenant to Landlord hereunder.
(iv) ACCELERATION OF PAYMENTS. If Tenant shall fail to pay any
monthly installment of rent pursuant to the terms of paragraph 3 of this
Lease, together with any additional rent due under this Lease, within twenty
(20) days of the date when each such payment is due, for three (3) consecutive
months, or three (3) times in any period of six (6) consecutive months, then
Landlord may, by giving written notice to Tenant exercise any of the following
options: (A) declare the entire rent reserved under this Lease to be due and
payable within ten (10) days of such notice, (B) declare the rent reserved
under this Lease for the next six (6) months (or at Landlord's option for a
lesser period) to be due and payable within ten (10) days of such notice; (C)
require an additional security deposit to be paid to Landlord within ten (10)
days of such notice, in an amount not to exceed six (6) months rent. Landlord
may invoke any of the options provided for herein at any time during which an
Event of Default remains uncured. In the event Landlord gives notice to Tenant
of its election to exercise any of the foregoing options pursuant to this
paragraph 17(b)(iv) and Tenant fails to comply therewith. Landlord may
terminate this Lease as provided elsewhere in this paragraph 17(b).
(v) MONETARY DAMAGES. Any damage or loss of rent sustained by
Landlord may be recovered by Landlord, at Landlord's option, at the time of
the reletting, or in separate actions, from time to time, as said damage shall
have been made more easily ascertainable by successive relettings, or at
Landlord's option in a single proceeding deferred until the expiration of the
term of this Lease (in which event Tenant hereby agrees that the cause of
action shall not be deemed to have accrued until the date of expiration of
said term) or in a single proceeding prior to either the time of reletting or
the expiration of the term of this Lease. In addition, should it be necessary
for Landlord to employ legal counsel to enforce any of the provisions herein
contained, Tenant agrees to pay all attorneys' fees and court costs reasonably
incurred.
(vi) ANTICIPATORY BREACH; CUMULATIVE REMEDIES. Nothing contained
herein shall prevent the enforcement of any claim Landlord may have against
Tenant for anticipatory breach of the unexpired term of this Lease. In the
event of a breach or anticipatory breach by Tenant of any of the covenants or
provisions hereof, Landlord shall have the right of injunction and the right
to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not provided for herein. Mention in this
Lease of any particular remedy shall not preclude Landlord from any other
remedy, in law or in equity. Tenant hereby expressly waives any and all rights
of redemption granted by or under any present or future laws in the event of
Tenant being evicted or dispossessed for any cause, or in the event of
Landlord obtaining possession of the premises, by reason of the violation by
Tenant of any of the covenants and conditions of this Lease, or otherwise.
(c) WAIVER. If, under the provisions hereof, Landlord shall 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 herein contained, nor of any of Landlord's rights hereunder. No
waiver by Landlord of any breach of any covenant, condition or agreement
herein contained shall operate as a waiver of such covenant, condition, or
agreement itself, or of any subsequent breach thereof. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly installments of rent
herein stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement on any check or letter
accompanying a check for payment of rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such rent or to pursue any other remedy
provided in this Lease. No re-entry by Landlord, and no acceptance by Landlord
of keys from Tenant, shall be considered an acceptance of a surrender of the
Lease.
(d) RIGHT OF LANDLORD TO CURE TENANT'S DEFAULT.
If Tenant defaults in the making of any payment or in the doing of 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, and charge the amount of the
expense thereof, if made or done by Landlord, with interest thereon at the
rate per annum which is two percent (2%) greater than the "prime rate" then in
effect at Citibank, N.A., New York, New York, from the date paid by Landlord
to the date of payment thereof by Tenant; provided, however, that nothing
herein contained shall be construed or implemented in such a manner as to
allow Landlord to charge or receive interest in excess of the
JACo
rev. 9-1-91
8
<PAGE> 19
maximum legal rate that is allowed by law. Such payment and interest shall
constitute additional rent hereunder due and payable with the next monthly
installment of rent; but the making of such payment or the taking of such
action by Landlord shall not operate to cure such default or to estop Landlord
from the pursuit of any remedy to which Landlord would otherwise be entitled.
(e) LATE PAYMENT. If Tenant fails to pay any installment of rent and/or
additional rent (in accordance with paragraph 3) on or before the first (1st)
day of the calendar month when such installment becomes due and payable. Tenant
shall pay to Landlord a late charge of five percent (5%) of the amount of such
installment, and, in addition, such unpaid installment shall bear interest at
the rate per annum which is two percent (2%) greater than the "prime rate" then
in effect at Citibank, N.A., New York, New York from the date such installment
became due and payable to the date of payment thereof by Tenant; provided,
however, that nothing herein contained shall be construed or implemented in
such a manner as to allow Landlord to charge or receive interest in excess of
the maximum legal rate then allowed by law. Such late charge and interest shall
constitute additional rent hereunder due and payable with the next monthly
installment of rent due, or if payments have been accelerated pursuant to
paragraph 17(b)(iv) above, due and payable immediately.
18. HOLDING OVER. In the event that Tenant shall not immediately
surrender the premises on the date of expiration of the term hereof, Tenant
shall, by virtue of the provisions hereof, become a tenant by the month. In
such event Tenant shall be required to pay one and one half (1-1/2) the basic
rent required under paragraph 3(a) hereof, together with all additional rent in
effect during the last month of the term of this Lease. Such monthly tenancy
shall commence with the first day next after the expiration of the term of this
Lease. Except as otherwise provided above with respect to the payment of rent,
Tenant shall, as a monthly tenant, be subject to all of the terms, conditions,
covenants and agreements of this Lease. Tenant shall give Landlord at least
thirty (30) day's written notice of any intention to quit the premises, and
Tenant shall be entitled to (30) thirty day's written notice to quit the
premises; provided, however, that if Tenant is in default hereunder, Tenant
shall not be entitled to any notice to quit, the usual thirty (30) day's notice
to quit being hereby expressly waived. Notwithstanding the foregoing provisions
of this paragraph 18, in the event that Tenant shall hold over after the
expiration of the term of this Lease, and if Landlord shall desire to regain
possession of the premises promptly at the expiration of the term of this
Lease, then at any time prior to Landlord's acceptance of rent from Tenant as a
monthly tenant hereunder, Landlord, at its option, may forthwith reenter and
take possession of the premises without process, or by any legal process in
force in the District of Columbia.
19. SECURITY DEPOSIT. In the event Tenant shall commit more than two (2)
events of monetary default in any one (1) Lease Year, Tenant shall deposit with
Landlord the sum of Twelve Thousand Twenty Five and 42/100 Dollars ($12,025,42)
as a security deposit. Such security deposit, which shall not bear interest to
Tenant, shall be considered as security for the payment and performance by
Tenant of all of Tenant's obligations, covenants, conditions and agreements
under the Lease. Upon the expiration of the term hereof (or any renewal or
extension thereof in accordance with this Lease). Landlord shall (provided that
Tenant is not in default under the terms hereof) return and pay back such
security deposit to Tenant, less such portion thereof as Landlord shall have
retained to make good any default by Tenant with respect to any of Tenant's
aforesaid obligations, covenants, conditions or agreements. In the event of any
default by Tenant hereunder during the term of this Lease, Landlord shall have
the right, but shall not be obligated, to apply all or any portion of the
security deposit to cure such default, in which event Tenant shall be obligated
promptly to deposit with Landlord the amount necessary to restore the security
deposit to the amount held by Landlord immediately prior to such advance by
Landlord. In the event of the sale or transfer of Landlord's interest in the
Building, Landlord shall have the right to transfer the security deposit to the
purchaser or transferee, in which event Tenant shall look only to the new
landlord for the return of the security deposit and Landlord shall thereupon be
released from all liability to Tenant for the return of such security deposit.
20. COVENANTS OF LANDLORD.
(a) QUIET ENJOYMENT. Landlord covenants that it has the right to make
this Lease for the term aforesaid, and that if Tenant shall pay the rent and
perform all of the covenants, terms, conditions and agreements of this Lease to
be performed by Tenant, Tenant shall, during the term hereby created, freely,
peaceably and quietly occupy and enjoy the full possession of the premises
without molestation or hindrance by Landlord or any party claiming through or
under Landlord, subject to the provisions of paragraph 20(b) and paragraph
21(k) thereof.
(b) RESERVATION. Landlord hereby reserves to itself and its successors
and assigns the following rights (all of which are hereby consented to by
Tenant): (i) to change the street address and/or name of the Building and/or
the arrangement and/or location of entrances, passageways, doors, doorways,
corridors, elevators, stairs, toilets, or other public parts of the Building,
(ii) to erect, use and maintain pipes and conduits in and through the premises
and (iii) to grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building. Landlord may exercise any or all of
the foregoing rights without being deemed to be guilty of an eviction, actual
or constructive, or a disturbance or interruption of the business of Tenant or
Tenant's use or occupancy of the premises. In the event of any sale or transfer
by the then Landlord hereunder of the Building, the landlord whose interest is
sold or transferred shall be and hereby is completely released and forever
discharged from and in respect of all covenants, obligations and liabilities as
landlord hereunder accruing after the date of such sale or transfer but only if
the transferee landlord agrees in writing to be bound by the terms of this
Lease.
21. MISCELLANEOUS.
(a) NO REPRESENTATIONS BY LANDLORD. Tenant acknowledges that neither
Landlord nor any broker, agent or employee of Landlord has made any
representations or promises with respect to the premises or the Building except
as herein expressly set forth, and no rights, privileges, easements or licenses
are acquired by Tenant except as herein expressly set forth. The Tenant, by
taking possession of the premises, shall accept the same "as is," and such
taking of possession shall be conclusive evidence that the premises and the
Building are in good and satisfactory condition at the time of such taking of
possession, except as conditioned in a executed Exhibit D, Estoppel
Certificate, at the time possession of the premises is taken by Tenant.
(b) NO PARTNERSHIP. Nothing contained in this Lease shall be deemed or
construed to create a partnership or joint venture of or between Landlord and
Tenant, or to create any other relationship between the parties hereto other
than that of Landlord and Tenant.
* except as conditioned in executed Exhibit D. Estoppel Certificate, at the
time pommsion of the premisses is taken by Tenent.
JACo
rev. 2-1-84
9
<PAGE> 20
(c) BROKERS. Landlord recognizes The John Akridge Management Company as
the sole broker procuring this Lease and shall pay said broker a commission
therefor pursuant to a separate agreement between said broker and Landlord.
Landlord and Tenant each represent and warrant one to another that except as
set forth herein neither of them has employed any broker, agent or finder in
carrying on the negotiations relating to this Lease. Landlord shall indemnify
and hold Tenant harmless and Tenant shall indemnify and hold Landlord harmless
from and against any claim or claims for brokerage or other commission arising
from or out of any breach of the foregoing representation and warranty by the
respective indemnitors.
(d) ESTOPPEL CERTIFICATE. Tenant agrees, at any time and from time to
time during the term of this Lease, upon not less than five (5) days prior
written notice by Landlord, to execute, acknowledge and deliver to Landlord a
statement in the form attached as Exhibit D in writing which shall contain
substantially the following provisions: (i) a statement that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the Lease is in full force and effect as modified and stating the
modifications), (ii) a statement of the dates to which the rent and any other
charges hereunder have been paid by Tenant, (iii) a statement of whether or
not, to the best knowledge of Tenant, Landlord is in default in the performance
of any covenant, agreement or condition contained in this Lease, and if so,
specifying each such default of which Tenant may have knowledge, (iv) a
statement of the address to which notices to Tenant should be sent, (v) a
statement that all work required to be performed by the Landlord under this
Lease has been completed and that Tenant accepts the premises and improvements
therein, (vi) a statement that Tenant will not attempt to terminate this Lease
by reason of Landlord's default or omission without giving written notice of
such default or omission to Landlord and any mortgagee of which Tenant has
knowledge and
(vii) such other statement or statements as Landlord, any
prospective purchaser of the Building or the Land, any mortgagee or prospective
mortgagee of the Building or the Land or of Landlord's interest in either
and/or any prospective assignee of any such mortgagee, may reasonably request.
Any such statement delivered pursuant hereto, may be relied upon by any owner
of the Building or the Land, any prospective purchaser of the Building or the
Land, any mortgagee or prospective mortgagee of the Building or the Land or of
Landlord's interest in either, or any prospective assignee of any such
mortgagee. Tenant will agree to make such reasonable changes or modifications
to this Lease as may be required by any mortgagee of the Building and/or the
Land, provided that such changes or modifications shall not increase the amount
of rent required under Paragraph 3(a) hereof, shorten the term of this Lease or
change or redefine the premises.
(e) WAIVER OF JURY TRIAL. Landlord and Tenant hereby waive trial by
jury in any action, proceeding or counterclaim brought by either of the parties
hereto against the other on or in respect of any matter whatsoever arising out
of or in any way connected with this Lease, the relationship of Landlord and
Tenant hereunder, Tenant's use or occupancy of the premises, and/or any claim
of injury or damage.
(f) LIABILITY. It is expressly understood and agreed that the liability
of Landlord to Tenant under this Lease is restricted solely to the assets of
the limited partnership which owns the Building and that the partners thereof
shall have no personal liability under this Lease. Tenant covenants and agrees
to look solely to the Building and the Land for the satisfaction of any
liability of Landlord to Tenant hereunder, and Tenant agrees not to bring any
action asserting personal liability of the partners of said limited
partnership.
(g) NOTICES. All notices or other communications hereunder shall be in
writing and shall be deemed duly given if delivered in person (with receipt
therefor) or by certified or registered mail, return receipt requested,
first-class postage prepaid, (i) if to Landlord at 1225 Eye Street, N.W., Suite
900, Washington, D.C. 20005 with copy to Dennis K. Moyer, Esq., c/o of Lane &
Edson, 2300 M Street, N.W., Washington, D.C. 20037 and (ii) if to Tenant, prior
to the Lease Commencement Date, at 1667 K Street, N.W., Suite 100 Washington,
D.C., 20006 c/o Mr. Webb C. Hayes, IV and after the Lease Commencement Date, at
the premises, unless notice of a change of address is given pursuant to the
provisions of this article.
(h) INVALIDITY OF PARTICULAR PROVISIONS. In any provision of this Lease
or the application thereof to any person or circumstances shall to any extent
be invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
(i) GENDER AND NUMBER. Feminine or neuter pronouns shall be substituted
for those of the masculine form, and the plural shall be substituted for the
singular number, in any place or places herein in which the context may
require such substitution.
(j) BENEFIT AND BURDEN. The provisions of this Lease shall be binding
upon, and shall inure to the benefit of, the parties hereto and each of their
respective representatives, successors and assigns. Landlord may freely and
fully assign its interest hereunder.
(k) SUBORDINATION. This Lease is subject and subordinate to the lien
of any and all mortgages (which term "mortgages" shall include both
construction and permanent financing and shall include deeds of trust, ground
leases and similar security instruments) which may now or hereafter encumber or
otherwise affect the Land and Building of which the premises form a part, or
Landlord's leasehold interest therein, and to all and any renewals, extensions,
modifications, recastings or refinancings thereof. Tenant shall, upon not less
than five (5) days' prior written notice by Landlord, promptly execute,
acknowledge and deliver to Landlord any written statement or agreement
confirming such subordination reasonably required by Landlord or any of its
lenders. Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such certificate or other document for or on
behalf of Tenant. Tenant agrees that in the event that any proceedings are
brought for the foreclosure of any such mortgage, Tenant shall attorn to the
purchaser at such foreclosure sale, if requested to do so by such purchaser,
and shall recognize such purchaser as the landlord under this Lease, and 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 and the obligations of Tenant hereunder
in the event that any such foreclosure proceeding is prosecuted or completed.
In addition, if the Landlord's leasehold interest shall be terminated, Tenant
agrees that this Lease shall remain in full force and effect, (or if terminated
by law as a result of Landlord's interest being terminated, Tenant will enter
into a new Lease with the identical terms and conditions of this Lease)
(l) ENTIRE AGREEMENT. This Lease, together with Exhibits A through E
attached hereto, contains and embodies the entire agreement of the parties
hereto, and no representations, inducements or agreements between the parties,
oral or otherwise, not contained in this Lease and the Exhibits, shall be of any
force or effect. This Lease may not be modified, changed or terminated in whole
or in part in any manner other than by an agreement in writing duly signed by
both parties hereto.
* provided no such changes shall be a material change and Landlord certifies
in writing that every other tenant in the Building must make identical changes
or modifications to their respective leases.
JACo
rev. 2-1-84
10
<PAGE> 21
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under
seal on the day and year first hereinabove written.
ATTEST: LANDLORD: 1225 EYE STREET, N.W.
By: ASSOCIATES LIMITED PARTNERSHIP
[SIG] By: /s/ JOHN E. AKRIDGE
- ---------------------------------- ------------------------------------
ASSISTANT Secretary JOHN E. AKRIDGE, III
PRESIDENT
THE JOHN AKRIDGE COMPANY
MANAGING GENERAL PARTNER
[Corporate Seal]
ATTEST: TENANT: THE PALMER NATIONAL BANK
[SIG] By: /s/ WEBB C. HAYES
- ---------------------------------- ------------------------------------
WEBB C. HAYES, IV
PRESIDENT AND CHIEF EXECUTIVE OFFICER
[CORPORATE SEAL]
The undersigned Broker hereby executes this Lease solely to agree to
the provisions of paragraph 21(c) hereof.
WITNESS: BROKER: THE JOHN AKRIDGE MANAGEMENT
COMPANY
[SIG] By: /s/ WILLIAM C. SMITH
- ---------------------------------- ------------------------------------
WILLIAM C. SMITH
VICE PRESIDENT
22. Option to Renew. Provided Tenant is not in default of this Lease,
Tenant shall have the right, by notifying Landlord at least 270 days prior to
the Lease Expiration Date, to renew the term of this Lease for an additional
five (5) years at ninety-five percent (95%) of the then prevailing "market"
rate. In no event, however, shall the renewal rent be less than Tenant is then
paying, including all escalations, at the time of renewal. All other terms and
conditions of the renewal shall be "market" for comparable space in the
metropolitan Washington, D.C. area. If a mutually acceptable Lease amendment to
renew the term is not fully executed by both the Landlord and Tenant 180 days
prior to the Lease Expiration Date, the right to renew the term of the Lease
shall automatically become null and void and of no further effect.
11
<PAGE> 22
EXHIBIT A
SECOND FLOOR
[FLOOR PLAN]
Reference is hereby made to a certain Agreement of Lease dated May 10,
1988 (the "Lease"), to which this floor plan is attached. Definition of terms
are set forth in the Lease.
<PAGE> 23
EXHIBIT B
WORK AGREEMENT AND ALLOWANCES
Reference is made to a certain Agreement of Lease dated May 10 1988
(the "Lease") to which this Work Agreement and Allowances is attached.
Definition of terms are set forth in the Lease.
1. Landlord agrees to furnish the premises in an "as is" condition.
3. Landlord further agrees to perform, at Tenant's request, and upon
submission by Tenant of necessary drawings, plans and specifications, any
additional or non-standard work over and above that specified in paragraph 2
hereof. Such work shall be performed by
JACo
rev. 2-1-84
1
<PAGE> 24
Landlord at Tenant's sole expense, as extra tenant work. Prior to commencing
any such work requested by Tenant. Landlord will submit to Tenant written
estimates of the cost of any such work. If Tenant shall fail to approve in
writing the drawings, plans or specifications and/or the cost estimates by the
dates set forth in paragraph 1(c) above, the same shall be deemed disapproved in
all respects by Tenant, and Landlord shall not be authorized to proceed
therewith.
Tenant agrees to pay to Landlord, promptly upon being billed therefor,
the cost of all non-standard or additional work, together with ten percent (10%)
overhead, and ten percent (10%) profit of such costs. Tenant shall pay
one-half(1/2) of said costs upon approval of the cost estimates and shall pay
the entire remaining balance of said costs when such non-standard or additional
work is one-half (1/2) complete, as determined by Landlord's architect and/or
engineer. All such payments shall constitute additional rent under the Lease,
and in the event of nonpayment thereof by Tenant, Landlord shall have all of the
rights and remedies set forth in the Lease.
JACo
rev. 4-2-81
2
<PAGE> 25
EXHIBIT C
RULES AND REGULATIONS
Reference is made to a certain Agreement of Lease dated May 10, 1988
(the "Lease"), to which these Rules and Regulations are attached. Definitions
of terms are set forth in the Lease.
The following rules and regulations have been formulated for the safety
and well-being of all tenants of the Building and to insure compliance with all
municipal and other requirements. Strict adherence to these rules and
regulations is necessary to guarantee that each and every tenant will enjoy a
safe and unannoyed occupancy in the Building in accordance with the Lease. Any
continuing violation of these rules and regulations by Tenant, after notice
from Landlord, shall be deemed to be an Event of Default under the Lease.
Landlord may, upon request by any tenant, waive the compliance by such
tenant to any of these rules and regulations, provided that (i) no waiver shall
be effective unless signed by Landlord or Landlord's authorized agent, (ii) any
such waiver shall not relieve such tenant from the obligation to comply with
such rule or regulation in the future unless expressly consented to by
Landlord, (iii) no waiver granted to any tenant shall relieve any other tenant
from the obligation of complying with the rules and regulations unless such
other tenant has received a similar waiver in writing from the Landlord, and
(iv) any such waiver by Landlord shall not relieve Tenant from any obligation
or liability of Tenant to Landlord pursuant to the Lease for any loss or damage
occasioned as a result of Tenant's failure to comply with any such rule or
regulation.
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, halls or other parts of the Building not occupied by any
tenant shall not be obstructed or encumbered by any tenant or used for any
purpose other than ingress and egress to and from the premises, and if the
premises are situated on the ground floor of the Building, the tenant thereof
shall, at said tenant's own expense, keep the sidewalks and curb directly in
front of the premises clean and free from ice and snow. Landlord shall have the
right to control and operate the public portions of the Building and the
facilities furnished for common use of the tenants in such manner as Landlord
deems best for the benefit of the tenants generally. No tenant shall permit the
visit to the premises of persons in such numbers or under such conditions as to
interfere with the use and enjoyment by other tenants of the entrances,
corridors, elevators and other public portions or facilities of the Building.
2. No awnings or other projections shall be attached to the outside
walls of the Building without the prior written consent of Landlord. No drapes,
blinds, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the premises, without the prior written
consent of Landlord. Such awnings, projections, curtains, blinds, shades,
screens or other fixtures must be of a quality, type, design and color, and
attached in the manner, approved by Landlord.
3. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the halls, corridors
or vestibules without the prior written consent of Landlord.
4. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, chemicals, paints, cleaning fluids or other
substances shall be thrown therein. All damages resulting from any misuse of
the fixtures shall be borne by the tenant who, or whose servants, employees,
agents, visitors or licensees, shall have caused the same.
5. There shall be no marking, painting, drilling into or in any way
defacing the Building or any part of the premises visible from public areas of
the Building. Tenant shall not construct, maintain, use or operate within the
premises any electrical device, wiring or apparatus in connection with a loud
speaker system or other sound system, except as reasonably required for its
communication system and approved prior to the installation thereof by
Landlord. No such loud speaker or sound system shall be constructed,
maintained, used or operated outside of the premises.
6. No bicycles, vehicles or animals, birds or pets of any kind shall
be brought into or kept in or about the premises, and no cooking (except for
hot-plate cooking by Tenant's employees for their own consumption, the
equipment for and location of which are first approved by Landlord) shall be
done or permitted by any tenant on the premises. No tenant shall cause or
permit any unusual or objectionable odors to be produced upon or permeate from
the premises.
7. No space in the Building shall be used for manufacturing of goods
for sale in the ordinary course of business, for the storage of merchandise for
sale in the ordinary course of business, or for the sale at auction of
merchandise, goods or property of any kind. Furthermore, the use of the
premises by each tenant was approved by Landlord prior to execution of the
Lease and such use may not be changed without the prior approval of Landlord.
8. No tenant shall make any unseemly or disturbing noises or disturb
or interfere with occupants of the Building or neighboring buildings or
premises or those having business with them whether by the use of any musical
instrument, radio, talking machine, unmusical noise, whistling, singing or in
any other way. No tenant shall throw anything out of the doors or windows or
down the corridors or stairs.
9. No flammable, combustible or explosive fluid, chemical or substance
shall be brought or kept on the premises.
10. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows by any tenant, nor shall any changes be made in
existing locks or the mechanism thereof. The doors leading to the corridors or
main halls shall be kept closed during business hours except as they may be
used for ingress or egress. Each tenant shall, upon the termination of his
tenancy, restore to the Landlord all keys of stores, offices, storage and
toilet rooms either furnished to, or otherwise procured by, such tenant, and in
the event of the loss of any keys so furnished, such tenant shall pay to
Landlord the cost thereof.
11. Landlord reserves the right to inspect all freight to be brought
into the Building and to exclude from the Building all freight which violates
any of these rules and regulations or the Lease.
12. No tenant shall pay any employees on the premises, except those
actually working for such tenant on the premises.
13. Landlord reserves the right to exclude from the Building at all
times any person who is not known or does not properly identify himself to the
Building management, security guard on duty or security system monitor.
Landlord may, at its option, require all persons admitted to or leaving the
Building between the hours of 6:00 p.m. and 8:00 a.m., Monday through Friday,
and at any hour, Saturdays, Sundays and legal holidays, to register. Each
tenant shall be responsible for all persons for whom he authorizes entry into
or exit out of the Building, and shall be liable to Landlord for all acts or
omissions of such persons.
14. The premises shall not, at any time, be used for lodging or
sleeping or for any immoral or illegal purpose.
15. Each tenant, before closing and leaving the premises at any time,
shall see that all windows are closed and all lights turned off.
16. Landlord's employees shall not perform any work or do anything
outside of their regular duties, unless under special instruction from the
management of the Building. The requirements of tenants will be attended to
only upon application to Landlord and any such special requirements shall be
billed to Tenant (and paid with the next installment of rent due) at the
schedule of charges maintained by Landlord from time to time or at such charge
as is agreed upon in advance by Landlord and Tenant.
17. Canvassing, soliciting and peddling in the Building is prohibited
and each tenant shall cooperate to prevent the same.
JACo
rev. 4-2-81
1
<PAGE> 26
18. There shall not be used in any space, or in the public halls of
the Building, either by any tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks except those equipped with rubber tires
and side guards, and Tenant shall be responsible to Landlord for any loss or
damage resulting from any deliveries of Tenant to the Building.
19. Mats, trash or other objects shall not be placed in the public
corridors.
20. Landlord does not maintain suite finishes which are non-standard,
such as kitchens, bathrooms, wallpaper, special lights, etc. However, should
the need for repairs of items not maintained by Landlord arise, Landlord will
arrange for the work to be done at Tenant's expense.
21. Drapes installed by Landlord for the use of Tenant or drapes
installed by Tenant, which are visible from the exterior of the Building, must
be cleaned by Tenant at least once a year, without notice, at Tenant's own
expense.
22. The amount of liability insurance required to be maintained by
Tenant pursuant to Paragraph 11(b) of the Lease for bodily injury and property
damage is $2 million combined single limit. Landlord may from time to time
require Tenant to increase its insurance coverage to an amount determined by
Landlord to be satisfactory in Landlord's sole judgment.
JACo
rev. 4-2-81
2
<PAGE> 27
EXHIBIT D
ESTOPPEL CERTIFICATE (BY TENANT)
Premises
------------------------------------------------------------------
Lease Dated
------------------------------------------------------------------
between
------------------------------------------------------------------
and
------------------------------------------------------------------
commencing , 1987.
-----------------------------------------------------------
The undersigned, the tenant under the above Lease, hereby certifies to
Connecticut General Life Insurance Company, the holder of a Lien Instrument upon
the above property, that said Lease is presently in full force and effect and
unmodified except as indicated at the end of this certificate; that the
undersigned has accepted possession of said property and that any improvements
required by the terms of said Lease to be made by the Lessor, have been
completed to the satisfaction of the undersigned except as specified to the
contrary; that no rent under said Lease has been paid more than thirty (30) days
in advance of its due date; that the address for notices to be sent to the
undersigned is as set forth in said Lease, or set forth below; and that the
undersigned, as of this date has no charge, lien or claim of set off under said
Lease or otherwise, against rents or other charges due or to become due
thereunder, unless set forth specifically below.
The undersigned further agrees with Connecticut General Life Insurance
Company that from and after the date hereof, the undersigned will not seek to
terminate said Lease by reason of any act or omission of the Landlord until the
undersigned shall have given written notice of such act or omission to the
holder of said Lein Instrument (at such holder's address furnished in said
Instrument or last furnished to the undersigned) and until the same cure periods
which are provided Landlord under the Lease shall have elapsed following the
giving of such notice, during which period such holder shall have the right, but
shall not be obligated, to remedy such act or omission.
Dated: , 1988.
-----------------------------
Palmer National Bank
By:
--------------------------------
Webb C. Hayes, IV
President and Chief Executive Officer
Address: 1667 K STREET, N.W.
Suite 200
Washington, D.C. 20006
<PAGE> 28
EXHIBIT E
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
(Mortgagee)
THIS AGREEMENT, made this ______ day of ____________ 1984 between
________________________________________ with offices at _______________________
________________________________________ (hereinafter called "Tenant"),
CONNECTICUT GENERAL LIFE INSURANCE COMPANY, a Connecticut corporation having
its principal office and place of business at 800 Cottage Grove Road,
Bloomfield, Connecticut (hereinafter called "Mortgagee"), and 1667 K Street,
N.W. Associates Limited Partnership, a Limited Partnership organized and
existing under the laws of the District of Columbia (hereinafter referred to as
"Landlord").
WITNESSETH:
WHEREAS, the Tenant has entered into a certain lease (the "Lease")
dated _________________ with Landlord covering premises within a certain
building known as 1667 K Street, N.W. (the "Premises"); and more particularly
described as Lot #1, Square 184, Washington, D.C.; and
WHEREAS, the Mortgagee (has agreed to make a mortgage loan (the
"Mortgage") to the Landlord, provided, however, that said Lease is subordinate
to the lien of the Mortgage) (is currently the holder of a mortgage covering
the Premises pursuant to a Deed of Trust dated _________________, and recorded
as Document ______________________ in the Land Records of the District of
Columbia) (the "Mortgage"); and
WHEREAS, Mortgagee has been requested by Tenant and by Landlord to enter
into a non-disturbance agreement with Tenant;
NOW THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto mutually covenant and agree as
follows:
1. The Lease and any extensions, renewals, replacements or
modifications thereof, and all of the right, title and interest of the Tenant
in and to said Premises are and shall be subject and subordinate to the
Mortgage and to all of the terms and conditions contained herein, and to any
renewals, modifications, replacements, consolidations and extensions thereof.
2. Mortgagee consents to the Lease and, in the event of foreclosure
of said Mortgage, or in the event Mortgagee comes into possession or acquires
title to the Premises as a result of the enforcement of the foreclosure of the
Mortgage or mortgage note, or as a result of any other means. Mortgagee agrees
to recognize Tenant and further agrees that Tenant shall not be disturbed in
its possession of the Premises for any reason other than one which would
entitle the Landlord to terminate the Lease under its terms or would cause,
without any further action by such Landlord, the termination of the Lease or
would entitle such Landlord to dispossess the Tenant from the Premises.
3. Tenant agrees with Mortgagee that if the interests of Landlord
in the Premises shall be transferred to and owned by Mortgagee by reason of
foreclosure or other proceedings brought by it, or by any other matter. Tenant
shall be bound to Mortgagee under all the terms, covenants and conditions of
the Lease for the balance of the term thereof remaining and any extensions or
renewals thereof which may be affected in accordance with any option therefor
in the Lease, with the same force and effect as if Mortgagee were the Landlord
under the Lease, and Tenant does hereby attorn to Mortgagee as its Landlord,
said attornment to be effective and self-operative without the execution of any
further instruments on the part of any of the parties hereto immediately upon
Mortgagee succeeding to the interest of the Landlord in the Premises. Tenant
agrees, however, upon the election of and written demand by Mortgagee within
twenty (20) days after Mortgagee receives title to the Premises, to execute an
instrument in confirmation of the foregoing provisions, satisfactory to
Mortgagee, in which Tenant shall acknowledge such attornment and shall set
forth the terms and conditions of its tenancy.
4. Tenant agrees with Mortgagee that if Mortgagee shall succeed to
the interest of Landlord under the Lease, Mortgagee shall not be (a) liable for
any action or omission of any prior landlord under the Lease, or (b) subject to
any offsets or defenses which Tenant might have against any prior landlord, or
(c) bound by any rent or additional rent which Tenant might have paid for more
than the current month to any prior Landlord, or (d) bound by any security
deposit which Tenant may have paid to any prior landlord, or (e) bound by any
amendment or modification of the Lease made without Mortgagee's consent, or (f)
bound by any provision in the Lease which obligates the Landlord to erect or
complete any building or to perform any construction work or to make any
improvements to the Premises. Tenant further agrees with Mortgagee that Tenant
will not voluntarily subordinate the Lease to any lien or encumbrance without
Mortgagee's consent.
5. In the event that the Landlord shall default in the performance
or observance of any of the terms, conditions or agreements in the Lease,
Tenant shall give written notice thereof to the Mortgagee and the Mortgagee
shall have the right (but not the obligation) to cure such default. Tenant
shall not take any action with respect to such default under the Lease
including without limitation any action in order to terminate, rescind or void
the Lease or to withhold any rental thereunder, for a period of 10 days after
receipt of such written notice thereof by the Mortgagee with respect to any
such default capable of being cured by the payment of money and for a period of
30 days after receipt of such written notice thereof by the Mortgagee with
respect to any other such default (provided, that in the case of any default
which cannot be cured by the payment of money and cannot with diligence be
cured within such 30-day period because of the nature of such default or
because Mortgagee requires time to obtain possession of the Premises in order
to cure the default, if the Mortgagee shall proceed promptly to attempt to
obtain possession of the Premises, where possession is required, and to cure
the same and thereafter shall prosecute the curing of such default with
diligence and continuity, then the time within which such default may be cured
shall be extended for such period as may be necessary to complete the curing of
the same with diligence and continuity).
6. Landlord agrees with Mortgagee that Landlord's estate in the
Premises shall not be conveyed or encumbered without the written consent of the
Mortgagee so long as the Lease is in effect.
7. Landlord agrees with Mortgagee that Landlord's estate in the
Premises shall not be conveyed nor shall Landlord further assign Landlord's
interest in the Lease, unless the grantee or assignee shall acknowledge in
writing to the Mortgagee that the conveyance or assignment is accepted subject
to the Lease. Landlord further agrees that in the event said estate in the
Premises or said interest in the Lease passes to any other person, firm or
corporation, by operation of law or by any other means, such passage of title
shall be applicable to the Lease.
8. This Agreement shall bind and inure to the benefit of the
parties hereto, their successors and assigns. As used herein the term "Tenant"
shall include the Tenant, its successors and assigns; the words "foreclosure"
and "foreclosure sale" as used herein shall be deemed to include the acquisition
of Landlord's estate in the Premises by voluntary deed (or assignment) in lieu
of foreclosure, and the word "Mortgagee" shall include the Mortgagee herein
specifically named and any of its successors and assigns, including anyone who
shall have succeeded to Landlord's interest in the Premises by, through or
under foreclosure of the Mortgage.
JACo
rev. 2-1-84
<PAGE> 29
9. This Agreement shall not be modified or amended except in
writing signed by all parties hereto.
10. The use of the neuter gender in this Agreement shall be deemed
to include any other gender, and words in the singular number shall be held to
include the plural, when the sense requires.
IN WITNESS WHEREOF, the parties hereto have placed their hands and
seals the day and year first above written.
Signed and acknowledge Tenant
the presence of us:
By:
- --------------------------------------- ----------------------------
Attest Mortgagee
By:
- --------------------------------------- ----------------------------
, Secretary , Vice President
[Corporate Seal]
Attest Landlord
By:
- --------------------------------------- ----------------------------
, Secretary
[Corporate Seal]
JACo
rev. 9-1-81
2
<PAGE> 30
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE ("Lease") is made this 31st day of December,
1981, by (i) 1667 K Street, N.W. Associates Limited Partnership (hereinafter
referred to as "Landlord") and (ii) Palmer National Bank (hereinafter referred
to as "Tenant").
WHEREAS, Landlord is the owner of an office building located at 1667 K
Street, N.W., Washington, D.C., and more fully and legally described as Lot 71
in Square 184 in the District of Columbia as so denominated by the Surveyor of
the District of Columbia (such building being hereinafter referred to as the
"Building"); and
WHEREAS, Tenant desires to lease space in the Building and Landlord is
willing to rent Tenant space in the Building, upon the terms, conditions,
covenants and agreements set forth herein.
NOW, THEREFORE, the parties hereto, intending legally to be bound,
hereby covenant and agree as set forth below.
1. THE PREMISES. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord, for the term and upon the terms, conditions, covenants
and agreements hereinafter provided, Suites 10 & 100 located on the B1 & First
floor of the Building (such space being hereinafter referred to as the
"premises"). The premises are outlined in red on Exhibit A attached hereto and
made a part hereof. The lease of the premises includes the right, together with
other tenants of the Building and members of the public, to use the common
public areas of the Building, but includes no other rights not specifically set
forth herein. Landlord shall finish the premises as set forth in Exhibit B
attached hereto and made a part hereof. It is understood and agreed that
Landlord will not make, and is under no obligation to make, any structural or
other alterations, decorations, additions or improvements in or to the premises
except as set forth in Exhibit B. See also Addendum Paragraph 31.
2. TERM * See Addendum Paragraph 22
(a) The term of this Lease (hereinafter referred to as the "term")
shall be for a period commencing on May 1, 1983 (the "Lease Commencement Date")
and expiring at midnight on April 30, 1993 (the "Lease Expiration Date").
(b) It is understood and agreed that if Tenant has fully and timely
performed in accordance with the provisions of Exhibit B hereof and if,
notwithstanding the timely submissions and approvals required of Tenant therein,
the premises are not substantially finished by Landlord in accordance with the
provisions of paragraph 2 of Exhibit B on or before the Lease Commencement Date,
or if for any other reason Landlord is unable to deliver possession of the
premises to Tenant on the Lease Commencement Date, this Lease shall not be void
or voidable, nor shall Landlord or Landlord's agents and employees be liable to
Tenant for any loss or damage resulting therefrom. In such event the Lease
Commencement Date shall be extended to the date on which Landlord substantially
completes the premises (as evidenced by a Certificate of Substantial Completion
by the Architect).
(c) It is further understood and agreed that if Tenant does not take
possession of the premises on the Lease Commencement Date for any reason other
than the inability of Landlord to deliver possession of the premises to Tenant
on such date as provided in paragraph 2(b) above, or if Tenant causes a delay
in the delivery of possession of the premises as set forth in paragraph 4 of
Exhibit B, the Lease Commencement Date shall not be extended, the term of this
Lease shall nonetheless begin on the Lease Commencement Date and Tenant's
obligations hereunder shall commence as of such date. If Landlord permits
Tenant to take possession of the premises prior to the Lease Commencement Date,
such tenancy shall be by the day and Tenant shall be responsible for payment of
rent, in advance, at the rate of one-thirtieth (1/30th) of the monthly rental
as set forth in paragraph 3(a) hereof, for each day of such occupancy prior to
the Lease Commencement Date, and Tenant shall comply fully with all other terms
and provisions of this Lease upon Tenant's possession of the premises. See
Addendum Paragraph 24.
(d) If, pursuant to the provisions of this Lease, the term of this
Lease begins on a date other than the Lease Commencement Date indicated in
paragraph 2(a) above, then Landlord shall advise Tenant in writing of such date
and thereafter the Lease Commencement Date shall be such date and the Lease
Expiration Date shall be the same number of days after the Lease Commencement
Date as it was after the original lease commencement date. For all purposes of
this Lease, the term "Lease Year" shall mean any period of twelve consecutive
calendar months during the term of this Lease which begins on the Lease
Commencement Date or an anniversary thereof.
3. RENT. Tenant shall pay as rent for the premises the following
amounts (each of which amounts shall be considered rent and all of which,
unless the context requires otherwise, are collectively referred to herein as
"rent"):
(a) BASIC RENT. Tenant shall pay as the basic rent the sum of See
Exhibit F Dollars ($ ) annually, payable in equal monthly
installments, in advance of See Exhibit F Dollars ($ ), the first
payment to be made upon the approval of the Comptroller of Currency of the
Tenant's charter and the second and subsequent monthly payments to be made on
the first day of each and every calendar month (beginning with the second month)
during the term hereof. Rent shall be made payable to Landlord at the office of
Landlord, or such other party or at such other address as Landlord may designate
from time to time by written notice to Tenant. If the term of this Lease begins
on a date other than on the first day of a month, rent from such date until the
first day of the following month shall be prorated at the rate of one-thirtieth
(1/30th) of the fixed monthly rental for each day, payable in advance.
(b) INCREASE IN REAL ESTATE TAXES. See Addendum Paragraph 33
(i) Tenant shall, for each calendar year after the Base Year (as
hereinafter defined), pay to Landlord, as additional rent, Four and forty-two
hundredths percent (4.42%) (being Tenant's agreed-upon proportionate share) of
the increase in Real Estate Taxes (as hereinafter defined) for such calendar
year over the Real Estate Taxes for the Base Year. For the purposes of this
paragraph 3(b) the term "Base Year" is hereby defined to mean the later of (i)
the calendar year 1983 or (ii) the calendar year in which the Lease
Commencement Date occurs; and the term "Real Estate Taxes" for any calendar
year is hereby defined to mean the total amount of all taxes and assessments,
general and special, ordinary and extraordinary, foreseen and unforeseen, now
or hereafter assessed, levied or imposed upon the Building and the land on
which the Building is situated (the "Land") for such year, together with any
tax in the nature of a real estate tax, an ad valorem tax on rent or any tax on
income if imposed in lieu of or in addition to real estate taxes and
assessments, and any taxes and assessments which may hereafter be substituted
for Real Estate Taxes.
(ii) In the event that the method currently used for the computation of
the assessed market value of the Building and/or the Land is discontinued or
revised, the determination of the increase in Real Estate Taxes under this
paragraph 3(b) shall thereafter be made according to a formula and procedure
which most nearly approximates the method of determination hereinabove set
forth. In the event that any business, rent or other taxes which are now or
hereafter levied upon Tenant's use or occupancy of the premises, on Tenant's
leasehold improvements,
JACo
rev. 4-2-81
1
<PAGE> 31
on Tenant's business at the premises or on Landlord by virtue of Tenant's
occupancy of the premises, are enacted, changed or altered so that any of such
taxes are levied against Landlord or in the event that the mode of collection
of such taxes is changed so that Landlord is responsible for collection or
payment of such taxes, any and all such taxes shall be deemed to be a part of
the increase in Real Estate Taxes and Tenant shall pay to Landlord Tenant's
proportionate share of the full amount of all such taxes.
(iii) At any time or times after the year in which the Real Estate Taxes
for the Base Year are determined or reasonably estimated, Landlord may submit to
Tenant a statement of Landlord's estimate of the increase in the Real Estate
Taxes for the current calendar year over the Real Estate Taxes for the Base
Year, and within thirty (30) days after delivery of such statement, Tenant shall
begin paying to Landlord, as additional monthly rent due and payable on the
first day of each month, an amount equal to one-twelfth (1/12th) of the amount
determined to be Tenant's aforesaid percentage of such increase in Real Estate
Taxes. Within ninety (90) days after the expiration of each calendar year in
which Tenant's monthly rent is increased pursuant to this Paragraph 3(b),
Landlord shall, upon the request of Tenant, submit a statement showing the
determination of the total increase in Real Estate Taxes for such calendar year
over the Base Year, and Tenant's proportionate share of such increase. If such
statement shows that Tenant's monthly payments pursuant to this Paragraph 3(b)
exceeded Tenant's share of the actual increase in Real Estate Taxes for the
preceding calendar year, then Tenant may deduct such overpayment from its next
payment or payments of monthly rent. If such statement shows that Tenant's share
of the actual increase in Real Estate Taxes exceeded Tenant's monthly payments
for the preceding calendar year, then Tenant shall pay the total amount of such
deficiency to Landlord with the next payment of rent due hereunder after receipt
of the statement. In the event that the Lease Expiration Date is not December
31st, the increase in Real Estate Taxes to be paid by Tenant for the calendar
year in which the Lease Expiration Date occurs shall be determined by
multiplying the amount of Tenant's share thereof for the full calendar year by a
fraction, the numerator of which shall be the number of days during such
calendar year prior to the Lease Expiration Date and the denominator of which
shall be 365.
(c) INCREASE IN OPERATING COSTS. Notwithstanding anything contained
herein, the annual operating charges shall be limited to costs which are
applicable to the First Floor and First Basement only. Landlord agrees Tenant
shall have right to inspect Landlord's books to verify increase in operating
charges at reasonable times and reasonable intervals. See Addendum Paragraph 33.
Tenant shall, for each calendar year after the year in which the Base Year
Operating Charges (as hereunder defined) are determined, pay to Landlord, as
additional rent, Forty-eight and twenty-two hundredths percent (48.22%) (being
Tenant's agreed upon proportionate share) of the increase during the term of
this Lease in Annual Operating Charges (as hereinafter defined) over the Base
Year Operating Charges. The Annual Operating Charges for any calendar year are
hereby defined as the sum of the following costs and expenses: (i) gas,
electricity, water, sewer and other utility charges (including surcharges) of
whatever nature, (ii) insurance premiums, (iii) building personnel costs,
including, but not limited to, salaries, wages, fringe benefits and other direct
and indirect costs of engineers, superintendents, watchmen, porters and any
other building personnel, (iv) costs of service and maintenance contracts,
including, but not limited to, chillers, boilers, controls, elevators, mail
chute, windows, janitorial and general cleaning, security services, and
management fees, (v) all other maintenance and repair expenses and supplies
which are deducted by Landlord for such calendar year in computing its Federal
income tax liability, (vi) any other costs and expenses (i.e. items which are
not capital improvements) incurred by Landlord in operating the Building,
including ground rent, if any, and interest payments, in excess of the amount
paid during the Base Year, (vii) the cost of any additional services not
provided to the Building at the Lease Commencement Date but thereafter provided
by Landlord in the prudent management of the Building, and (viii) the cost of
any capital improvements which are made by Landlord after completion of initial
construction of the Building; provided, however, that the cost of each such
capital improvement, together with any financing charges incurred in connection
therewith, shall be amortized over the useful life thereof and only that portion
thereof attributable to such calendar year shall be included in the Annual
Operating Charges for such calendar year. Annual Operating Charges shall not
include (i) principal payments or interest payments in an amount equal to the
Base Year interest payments, on any mortgages, deeds of trust or other financing
encumbrances, (ii) leasing commissions payable by Landlord or (iii) deductions
for depreciation of the Building. The Base Year Operating Charges are hereby
defined as the Annual Operating Charges for the later to occur of (i) calendar
year 1983 or (ii) the calendar year in which the Lease Commencement Date occurs;
provided, however, that in either case the Base Year Operating Charges shall be
adjusted, if necessary, to reflect the Annual Operating Charges for such
calendar year as if the Building were at least ninety percent (90%) occupied for
the entire calendar year. At any time or times after the year in which the Base
Year Operating Charges are determined or reasonably estimated, Landlord may
submit to Tenant a statement of Landlord's estimate of the increase of the
Annual Operating Charges for the current calendar year over the Base Year
Operating Charges, and within thirty (30) days after the delivery of such
statement, Tenant shall begin paying to Landlord, as additional monthly rent due
and payable on the first day of each month, an amount equal to one-twelfth
(1/12th) of the amount determined to be Tenant's aforesaid percentage of the
increase in the Annual Operating Charges. Within ninety (90) days after the
expiration of each calendar year in which Tenant's monthly rent is increased
pursuant to this Paragraph 3(c), Landlord shall, upon the request of Tenant,
submit a statement showing the determination of the total increase in Annual
Operating Charges for such calendar year over the Base Year Operating Charges,
and Tenant's proportionate share of such increase. If such statement shows that
Tenant's monthly payments pursuant to this Paragraph 3(c) exceeded Tenant's
share of the actual increase in Annual Operating Charges for the preceding
calendar year, then Tenant may deduct such overpayment from its next payment or
payments of monthly rent. If such statement shows that Tenant's share of the
actual increase in Annual Operating Charges exceeded Tenant's monthly payments
for the preceding calendar year, then Tenant shall pay the total amount of such
deficiency to Landlord with the next payment of rent due hereunder after receipt
of the statement. In the event that the Lease Expiration Date is not December
31st, the increase in Annual Operating Charges to be paid by Tenant for the
calendar year in which the Lease Expiration Date occurs shall be determined by
multiplying the amount of Tenant's share thereof for the full calendar year by a
fraction, the numerator of which shall be the number of days during such
calendar year prior to the Lease Expiration Date, and the denominator of which
shall be 365.
(d) BASE RATE FOR REAL ESTATE TAXES AND OPERATING CHARGES.
Notwithstanding the provisions of Paragraph 3(b) and Paragraph 3(c) above,
commencing with the later of (i) the calendar year 1983 or (ii) the calendar
year in which the Lease Commencement Date occurs, if the Real Estate Taxes for
any calendar year during the term of this Lease exceed Two Hundred Seven
Thousand Eight Hundred Sixty Two and Fifty Hundredths ($207,862.50), or if the
Annual Operating Charges for any calendar year during the term of this Lease
exceed Four thousand one hundred forty-seven and fifty hundredths ($4,147.50),
then Tenant shall pay Landlord, as additional rent, for each such calendar
year, Forty-eight and twenty-two hundredths percent for operating charges & four
and forty-two hundredths for real estate taxes (being Tenant's agreed-upon
proportionate share) of the amount of the sum of all Real Estate Taxes and/or
Annual Operating Charges in excess of such amounts. At any time or times after
the Real Estate Taxes and Annual Operating Charges for the calendar year are
determined or estimated, Landlord may submit to Tenant a statement or
statements of Landlord's estimate of the amount by which (i) the sum of all Real
Estate Taxes for such calendar year exceed Two Hundred Seven Thousand Eight
Hundred Sixty Two and Fifty Hundredths ($207,862.50) and (ii) the sum of all
Annual Operating Charges for such calendar year exceed Four thousand one hundred
forty seven and fifty hundredths ($4,147.50), and within thirty (30) days after
the delivery of such statement or statements, Tenant shall begin paying to
Landlord, as additional rent due and payable on the first day of each month, an
amount equal to one-twelfth (1/12th) of the amount determined to be Tenant's
aforesaid percentage of such excess amounts. Within ninety (90) days after the
expiration of each calendar year in which Tenant's monthly rent is increased
pursuant to this Paragraph 3(d), Landlord shall, upon the request of Tenant,
submit a
(1) Nothwithstanding anything contaied herein, the annual operating charges
shall be limited to costs which are applicable to the First Floor and First
Basement only. Landlord agrees Tenant shall have right to inspect Landlord's
books to verify increase in operating charges at resonable times and reasonable
intervals. See Addendum Paragraph 33.
JACo
rev. 4-2-81
2
<PAGE> 32
statement showing the determination of the actual amount of (i) the sum of all
Real Estate Taxes for the preceding calendar year, and Tenant's proportionate
share of the amount thereof in excess Two hundred seven thousand, eight
hundred sixty two and fifty hundredths ($207,862.50) and (ii) the sum of all
Annual Operating Charges for the preceding calendar year, and Tenant's
proportionate share of the amount thereof in excess of Four thousand one
hundred forty seven and fifty hundredths ($4,147.50). If such statement shows
that Tenant's monthly payments pursuant to this Paragraph 3(d) exceeded Tenant's
share of such excess amount or amounts, then Tenant may deduct such overpayment
from its next payment or payments of monthly rent. If such statement shows that
Tenant's share of such excess amount(s) exceeded Tenant's monthly payments for
the preceding calendar year, then Tenant shall pay the total amount of such
deficiency to Landlord with the next payment of rent due hereunder after
receipt of the statement. In the event that the Lease Commencement Date is not
January 1st, or that the Lease Expiration Date is not December 31st, then the
amount of such excess amount(s) to be paid by Tenant for the calendar year in
which the Lease Commencement Date or the Lease Expiration Date occurs shall be
determined by multiplying the amount of Tenant's share thereof for the full
calendar year by a fraction, the numerator of which shall be the number of days
during such calendar year subsequent to the Lease Commencement Date or prior to
the Lease Expiration Date, as the case may be, and the denominator of which
shall be 365.
(e) INCREASE IN COST OF LIVING. The basic annual rent set forth in
Paragraph 3(a) above shall be increased annually, effective on January 1st of
each calendar year during the term hereof, by an amount equal to thirty percent
(30%) of any increase in the CPI (as hereinafter defined). The basic annual rent
shall be adjusted based upon the increase, if any, in the index now known as the
Consumer Price Index for Urban Wage Earners and Clerical Workers, All Items,
Washington, D.C., Maryland and Virginia SMSA (1967=100) as published by the
Bureau of Labor Statistics, United States Department of Labor (hereinafter
referred to as the "CPI"). The amount of the increase shall be determined by
multiplying the amount of the basic annual rent set forth in Paragraph 3(a)
hereof by the product of (a) thirty percent (30%) of (b) a fraction, the
numerator of which shall be (i) the CPI for the month of December immediately
preceding the commencement of the calendar year for which such annual adjustment
is to be made minus (ii) the CPI for the month immediately preceding the Lease
Commencement Date, and the denominator of which shall be the CPI for the month
immediately preceding the Lease Commencement Date. Written notice of the
reasonably estimated amount of such annual adjustment for the following calendar
year shall be sent to Tenant during the month of December of every calendar year
during the term of this Lease, and on January 1st of the next calendar year
Tenant shall begin paying to Landlord, as additional monthly rent due and
payable on the first day of each month of such calendar year, an amount equal to
one-twelfth (1/12th) of such annual adjustment. Within ninety (90) days after
the expiration of each calendar year in which Tenant's monthly rent is increased
pursuant to this Paragraph 3(e), Landlord shall, upon request of Tenant, submit
a statement showing the determination of the actual amount of the increase in
the CPI for the preceding calendar year. If such statement shows that Tenant's
monthly payments pursuant to this Paragraph 3(e) exceeded the adjustment to be
made based upon the actual increase in the CPI, then Tenant may deduct such
overpayment from its next payment or payments of monthly rent. If such statement
shows that the increase of Tenant's basic annual rent, based upon the actual
increase in the CPI, exceeded Tenant's monthly payments for the preceding
calendar year, then Tenant shall pay the total amount of such deficiency to
Landlord with the next payment of rent due hereunder after receipt of the
statement. In the event that the Lease Expiration Date is not December 31st, the
increase to be paid by Tenant for the calendar year in which the Lease
Expiration Date occurs shall be determined by multiplying the amount of the
increase for the full calendar year by a fraction, the numerator of which shall
be the number of days during such calendar year prior to the Lease Expiration
Date, and the denominator of which shall be 365. If the CPI shall be
discontinued with no successor or comparable successor index, the parties shall
attempt to agree upon a substitute formula, but if the parties are unable to
agree upon a substitute formula, then such substitute formula shall be the
formula recommended by the Washington Board of Realtors; provided, however, that
in no event shall the amount of basic annual rent payable by Tenant under this
Lease for any calendar year be less than the amount of basic annual rent paid in
the calendar year immediately prior thereto.
(f) DEMAND; TIME. Each of the foregoing amounts of rent shall be paid to
Landlord without demand and without deduction, set-off or counterclaim on the
first (1st) day of every month during the term of this Lease. If Landlord shall
at any time or times accept rent after it shall become due and payable, such
acceptance shall not excuse a delay upon subsequent occasion, or constitute, or
be construed as, a waiver of any or all of Landlord's rights hereunder.
4. USE OF PREMISES. Tenant will use and occupy the premises solely for
general office and commercial bank or general financial services institution
purposes and only in accordance with the uses permitted under applicable zoning
and other municipal regulations; without the prior written consent of Landlord,
the premises will not be used for any other purpose. Tenant will not use or
occupy the premises for any unlawful purpose, and will comply with all present
and future laws, ordinances, regulations and orders of the United States of
America, the District of Columbia, and any other public or quasi-public
authority having jurisdiction over the premises. Tenant will obtain the initial
certificate of occupancy for Tenant; provided, however, it is expressly
understood that if any future law, ordinance, regulation or order or any change
in the use of the premises by Tenant, requires a new certificate of occupancy
for the premises, Tenant will obtain such permit at Tenant's own expense. Tenant
represents and warrants to Landlord that Tenant has entered into this Lease
entirely for a business or commercial purpose and warrants that it shall not use
the premises for any residential purpose.
5. ASSIGNMENT AND SUBLETTING.
(a) LANDLORD'S PRIOR CONSENT REQUIRED. Tenant and Tenant's
representatives, successors and assigns will not assign, transfer, mortgage or
otherwise encumber this Lease or sublet or rent (or permit the occupancy or use
of) the premises, or any part thereof, without obtaining the prior written
consent of Landlord, nor shall any assignment or transfer of this Lease or the
right of occupancy hereunder be effectuated by operation of law or otherwise
without the prior written consent of Landlord.
(b) QUALIFICATIONS OF SUBTENANT. Subject to the provisions of paragraph
5(c) hereof, Landlord shall not unreasonably withhold its consent hereunder to
any sublease by Tenant, provided that all of the following conditions are met:
(i) Tenant must first notify Landlord, in writing, of any proposed
sublease, at least sixty (60) days prior to the effective date of such proposed
sublease. The notice to Landlord must include a copy of the proposed sublease
and an audited copy of the proposed subtenant's most recent financial statement,
prepared by a certified public accountant;
(ii) The subtenant must have a credit rating satisfactory to Landlord
(in Landlord's reasonable judgment);
(iii) The sublease must be expressly subject and subordinate to this
Lease, must require that any subtenant must comply with and abide by all of the
terms of this Lease, and must provide that any termination of this Lease shall
extinguish the sublease as well;
(iv) The subtenant may not change the use of the premises or propose to
conduct its business in a manner which, in Landlord's sole judgment, is not
appropriate for a first class office building in Washington, D.C.;
(v) The subtenant may not be a tenant, subtenant, or other occupant of
any part of the Building without prior written consent of Landlord;
(vi) The Tenant may not be in default under this Lease, or have
committed two events of default hereunder during the previous twelve (12)
months, whether cured or not; unless this provision is waived by the Landlord
in writing; and
(vii) The Tenant must continue to occupy at least one-third of the
premises unless this provision is waived by the Landlord in writing.
JACo
rev. 4-2-81
3
<PAGE> 33
(c) LANDLORD'S RIGHT OF FIRST REFUSAL. Landlord shall have the right,
within sixty (60) days after receipt of the notice from Tenant, required under
Paragraph 5(b)(i) above, that Tenant proposes to sublease all or a portion of
the premises, to elect (i) to sublet the premises from Tenant at the rent then
being paid by Tenant for the premises under Paragraph 3 hereof (or that
portion thereof which Tenant proposes to sublease) by a proportionate reduction
in the rent as hereinafter set forth; (ii) to terminate this Lease in its
entirety if Tenant intends to sublet all of the premises or, if Tenant proposes
to sublet a portion of the premises, to terminate this Lease only with respect
to such portion of the premises; or (iii) to require Tenant to pay Landlord,
within five (5) days of receipt, one-half (1/2) of the amount of rent payable
by such sublessee in excess of the amount of rent payable by Tenant hereunder
with respect to the portion of the premises sublet. Upon exercise by Landlord
of either of the options set forth in subsections (i) or (ii) above, Tenant
shall surrender the premises or such portion of the premises, as the case may
be, to Landlord, and thereafter the rent to be paid by Tenant pursuant to
Paragraph 3 above shall be that portion of the total rent which the amount of
square foot area remaining in the possession of Tenant bears to the total
square foot area of the premises. In the event that Landlord does not exercise
its right to sublet the premises, or such portion of the premises, as the case
may be, or to terminate this Lease, within said sixty (60)-day period, Tenant
shall have the right, subject to the provisions of subsection (iii) above, to
sublet the premises or a portion thereof after first obtaining the written
consent of Landlord as provided in Paragraph 5(a) above. Upon exercise by
Landlord of the option set forth in subsection (iii) above, Tenant covenants
and agrees to provide Landlord with quarterly statements, prepared and verified
by a certified public accountant, stating the amount of rent received by Tenant
from its subtenant(s) during such quarterly period. If such statement shows
Tenant failed to make the full payments required by subsection (iii) above, a
late charge equal to ten percent (10%) of the amount due shall be paid by
Tenant, as additional rent hereunder. See Addendum Paragraph 29.
(d) NO WAIVER OR RELEASE. The consent by Landlord to any assignment or
subletting shall not be construed as a waiver or release of Tenant from the
terms of any covenant or obligation under this Lease, nor shall the collection
or acceptance of rent from any such assignee, subtenant or occupant constitute
a waiver or release of Tenant of any covenant or obligation contained in this
Lease, nor shall any such assignment or subletting be construed to relieve
Tenant from obtaining the consent in writing of Landlord to any further
assignment or subletting. Tenant hereby assigns to Landlord the rent due from
any subtenant of Tenant and hereby authorizes each such subtenant to pay said
rent directly to Landlord, at Landlord's option, in the event of any default by
Tenant under the terms of this Lease.
6. MAINTENANCE OF THE PREMISES.
(a) OBLIGATIONS OF LANDLORD AND TENANT. Tenant will keep the premises
and fixtures and equipment therein in clean, safe and sanitary condition, will
take good care thereof, will suffer no waste or injury thereto, and will, at the
expiration or other termination of the term of this Lease, surrender the same,
broom clean, in the same order and condition in which they are on the Lease
Commencement Date, ordinary wear and tear and unavoidable damage by the elements
excepted; provided, however, that if Tenant is insured for any such damage,
Tenant shall either (i) apply the insurance proceeds to repair such damage or
(ii) surrender such insurance proceeds to Landlord upon delivery of the
premises. All improvements including storefront glass, doors and closures, to
and equipment installed in the premises shall be maintained, repaired, replaced
and insured by Tenant. All such insurance shall provide coverage in the amount
of the full replacement value of such special improvements and equipment, and
shall name Landlord as an additional insured as its interests may appear. Except
as otherwise provided in this Lease, Landlord shall maintain (maintenance
performed by Landlord will be in accordance with the standards for a first class
office building in Washington, D.C.) and repair the exterior of the Building,
and shall maintain, repair and paint all building standard common area elements
installed by Landlord. Landlord, at its cost, shall provide and install all
original building standard fluorescent tubes within the premises necessary to
provide required lighting and all other bulbs, tubes and lighting fixtures for
the premises shall be provided and installed by Landlord at Tenant's cost and
expense.
(b) DAMAGE TO PREMISES OR BUILDING. All damage or injury to the
premises or to any other part of the Building, or to its fixtures, equipment
and appurtenances, whether requiring structural or nonstructural repairs,
caused by or resulting from carelessness, omission, neglect or improper conduct
of Tenant, Tenant's agents, employees, contractors, invitees or licensees,
shall be repaired promptly, at Tenant's sole cost and expense, by either
Landlord or, at Landlord's option, by Tenant subject to Landlord's direction
and supervision (and in accordance with Paragraph 7 hereof). If Landlord gives
Tenant written notice that Tenant will be required to make such repairs and
Tenant fails within ten days of the giving of such notice to proceed with due
diligence to make the required repairs, the same may be made by Landlord, in
which event all expenses incurred by Landlord therefor shall be paid by Tenant
to Landlord as additional rent, and shall be due and payable with the monthly
installment of rent next becoming due in accordance with the terms of Paragraph
17(d) below; provided, however, that Tenant shall not be liable to Landlord for
such expenses if and to the extent that (i) Landlord is insured for such
hazards and damages under an insurance policy containing a waiver of
subrogation clause as required under Paragraph 11(b) hereon and (ii) Landlord
is actually reimbursed by its insurer for such expenses.
(c) NOTICE OF DEFECTIVE CONDITION. Tenant shall give Landlord prompt
notice of any defective condition in any plumbing or heating system or any
electrical lines located in, servicing or passing through the premises.
Following such notice Landlord shall remedy the condition with due diligence;
provided, however, that such repairs shall be at the expense of Tenant if such
repairs are necessitated by damage or injury attributable to Tenant, Tenant's
agents, employees, contractors, invitees or licensees as provided in Paragraph
6(b) above. Except as specifically provided in this Lease, there shall be no
allowance to Tenant for a diminution of rental value and no liability on the
part of Landlord by reason of inconvenience, annoyance or injury to business
arising from Landlord, Tenant, or others making or failing to make any repairs,
alterations, additions, or improvements in or to a portion of the Building or
the premises or in or to the fixtures, appurtenances or equipment thereof.
7. TENANT ALTERATIONS.
(a) ALTERATIONS. The original improvement of the premises by Landlord
for Tenant shall be in accordance with Exhibit B attached hereto. Tenant will
not make or permit anyone to make any alterations, decorations (decorations
for the basement space shall be excluded if not visible from outside the
premises), additions or improvements, structural or otherwise, in or to the
premises of the Building, without the prior written consent of the Landlord,
not to be unreasonably withheld or delayed. All of such alterations,
decorations, additions or improvements permitted by Landlord must conform to
all rules and regulations established from time to time by the Underwriters'
Association of the District of Columbia and conform to all requirements of the
Federal and District of Columbia governments. As a condition precedent to such
written consent of Landlord, Tenant agrees to obtain and deliver to Landlord
written and unconditional waivers of mechanics' and materialmens' liens upon
the Land and the Building, for all work, labor and services to be performed,
and materials to be furnished, by them in connection with such work, signed by
all contractors, subcontractors, materialmen and laborers to become involved in
such work. If, notwithstanding the foregoing, any mechanic's or materialmen's
lien is filed against the premises, the Building and/or the Land, for work
claimed to have been done for or materials claimed to have been furnished to
Tenant, such lien shall be discharged by Tenant within ten (10) days
thereafter, at Tenant's sole cost and expense, by the payment thereof or by
filing any bond required by law. If Tenant shall fail to discharge any such
mechanic's or materialmen's lien, Landlord may, at its option, discharge the
same and treat the cost thereof as additional rent payable with the monthly
installment of rent next becoming due; it being hereby expressly covenanted and
agreed that such discharge by Landlord shall not be deemed to waive or release
the default of Tenant in not discharging the same. It is understood and agreed
that in the event Landlord shall give its written consent to Tenant's making
any such alterations, decorations, additions or improvements, such written
consent shall not be deemed to be an agreement or consent by Landlord to
subject Landlord's interest in the premises, the Building or the Land to any
mechanic's or materialmen's liens which may be filed in respect of any such
alterations, decorations, additions or improvements made by or on behalf of
Tenant.
(b) INDEMNIFICATION. Tenant will indemnify and hold Landlord harmless
from and against any and all expenses, liens, claims or damages to person or
property which may or might arise directly or indirectly by reason of the
making of any such alterations, decorations, additions or improvements. If any
such alteration, decoration, addition or improvement is made without the prior
written consent of Landlord, Landlord may correct or remove the same, and
Tenant shall be liable for any and all expenses incurred by Landlord in the
* including storefront glass, doors and closures,
** decorations for the basement space shall be excluded if not visible from
outside the premises.
*** not to be unreasonably withheld or delayed.
JACo
rev. 4-2-81
4
<PAGE> 34
performance of this work. All alterations, decorations, additions or
improvements in or to the premises or the Building made by either party shall
immediately become the property of Landlord and shall remain upon and be
surrendered with the premises as a part thereof at the end, of the term hereof
without disturbance, molestation or injury; provided, however, that if Tenant is
not in default in the performance of any of its obligations under this Lease.
Tenant shall have the right to remove, prior to the expiration of the term of
this Lease, all movable furniture, furnishings, or equipment installed in the
premises at the expense of Tenant. Tenant shall have right to remove all
equipment as long as the Premises is restored to original building standard
condition, as per Exhibit B. If such property of Tenant is not removed by Tenant
prior to the expiration or termination of this Lease, the same shall become the
property of Landlord and shall be surrendered with the premises as a part
thereof.
8. SIGNS; FURNISHINGS.
(a) SIGNS. No sign, advertisement or notice shall be inscribed,
painted, affixed or otherwise displayed on any part of the exterior or interior
except as provided in Addendum Paragraph 25 of the Building except on the
directories and the doors of offices, and then only in such place, number,
size, color and style as is harmonious with the design of the Building and its
furnishings and is approved by Landlord in writing and provided by Landlord at
Tenant's cost and expense. If any sign, advertisement or notice which does not
conform in the foregoing is nevertheless exhibited by Tenant, Landlord shall
have the right to remove the same and Tenant shall be liable for any and all
expenses incurred by Landlord in said removal. Landlord shall have the right to
prohibit any advertisement of Tenant which in its opinion tends to impair the
reputation of the Building or its desirability as a high-quality building for
offices or for financial, insurance and other institutions of like nature, and,
upon written notice from Landlord, Tenant shall immediately refrain from and
discontinue any such advertisement.
(b) FURNISHINGS. Landlord shall have the right to prescribe the weight
and position of safes and other heavy equipment or fixtures, which shall, if
considered necessary by the Landlord, stand on plank strips to distribute the
weight. Any and all damage or injury to the premises or the Building caused by
moving the property of Tenant into, in or out of the premises, or due to the
same being on the premises, shall be repaired by and at the sole cost of
Tenant. No furniture, equipment or other bulky matter of any description will
be received into the Building or carried in the elevators except as approved by
Landlord, and all such furniture, equipment, and other bulky matter shall be
delivered only during hours approved by Landlord and only through the
designated delivery entrance of the Building. All moving of furniture,
equipment and other materials shall be under the direct control and supervision
of Landlord who shall, however, not be responsible for any damage to or charges
for moving the same. Tenant agrees promptly to remove from the sidewalks
adjacent to the Building any of the Tenant's furniture, equipment or other
material there delivered or deposited.
9. TENANT'S EQUIPMENT. Tenant shall install at its expense the
electrical panels and meters and pay the utility company directly for charges
incurred for installation and usage. Tenant will not install or operate in the
premises any electrically operated equipment or other machinery, other than
electric typewriters, adding machines, radios, televisions, clocks and copying
machines, and other electrically operated equipment as a type used in
commercial banking or financial services institutions, without first obtaining
the prior written consent of Landlord. Landlord may condition such consent upon
the payment by Tenant of additional rent in compensation for such excess
consumption of utilities and for the cost of additional wiring and/or
additional electrical systems as may be occasioned by the operation of said
equipment or machinery, or Landlord may require Tenant to pay the cost for such
excess consumption of utilities and additional wiring and/or additional
electrical systems as may be occasioned by the operation of said equipment or
machinery, or Landlord may require Tenant to pay the cost for such excess
consumption of utilities and additional wiring and/or additional electrical
systems directly to the utility company furnishing the same. The electrical
system for the entire floor of the Building on which the premises are located
is sufficient for consumption of N/A watts on a N/A volt panel board and N/A
watts on a N/A volt panel board. Tenant is entitled to use N/A percent (N/A%)
of such electrical power (being Tenant's agreed-upon proportionate share). If
any portion or all of Tenant's equipment and lighting shall result in
electrical usage in excess of Tenant's proportionate share of the capacity of
the electrical system as so described, additional transformers, distribution
panels and wiring may be required, and if so required may be installed by
Landlord, at the cost and expense of Tenant. Tenant shall not install any other
equipment of any kind or nature whatsoever which will or may necessitate any
changes, replacements or additions to, or in the use of, the water system,
heating system, plumbing system, air-conditioning system, or electrical system
of the premises or the Building without first obtaining the prior written
consent of Landlord. Business machines and mechanical equipment belonging to
Tenant which cause noise or vibration that may be transmitted to the structure
of the Building or to any space therein to such a degree as to be
objectionable to Landlord or to any tenant in the Building shall be installed
and maintained by Tenant, at Tenant's expense, on vibration eliminators or
other devices sufficient to eliminate such noise and vibration, and if such
noise and/or vibration is not so eliminated, Landlord shall have the right to
require Tenant to remove such machines and/or equipment from the premises.
10. INSPECTION. Tenant will permit Landlord, or its agents or other
representatives, to enter the premises, without charge therefor to Landlord and
without diminution of the rent payable by Tenant, to examine, inspect upon
reasonable notice and in accompaniment of Tenant's authorized representative,
and protect the premises and the Building and to make such alterations and/or
repairs as in the sole judgment of Landlord may be deemed necessary, or to
exhibit the same to prospective tenants during the last one hundred eighty
(180) days of the term of this Lease.
11. INSURANCE.
(a) INSURANCE RATING. Tenant will not conduct or permit to be
conducted, any activity, or place any equipment in or about the premises or
the Building, which will, in any way, invalidate the insurance coverage in
effect or increase the rate of fire insurance or other insurance on the
Building; and if any invalidation of coverage or increase in the rate of fire
insurance or other insurance is stated by any insurance company or by the
applicable Insurance Rating Bureau to be due to any activity or equipment of
Tenant in or about the premises or the Building, such statement shall be
conclusive evidence that the increase in such rate is due to such activity or
equipment and, as a result thereof, Tenant shall be liable for such increase
and shall reimburse Landlord therefor upon demand and any such sum shall be
considered additional rent payable with the monthly installment of rent next
becoming due.
(b) REQUIRED INSURANCE. Tenant shall carry public liability insurance
in a company or companies licensed to do business in the District of Columbia
and approved by Landlord. Said insurance shall be in minimum amounts approved
by Landlord from time to time (as set forth in the rules and regulations
attached hereto as Exhibit C) and shall name Landlord as an additional insured,
as its interests may appear. Tenant shall carry property damage insurance for
all of its equipment and for all leasehold improvements above the building
standard which are made by Landlord or Tenant in and to the premises. Landlord
and Tenant agree that in the event the premises or the contents thereof are
damaged or destroyed by fire or other casualty, the rights, if any, of either
party against the other with respect to such damage or destruction are waived,
and that all policies of fire and/or extended coverage or other insurance
covering the premises or the contents thereof shall contain a clause or
endorsement providing in substance that such insurance shall not be prejudiced
if the assureds thereunder have waived the right of recovery from any person or
persons prior to the date and time of loss or damage, if any. Landlord and
Tenant further agree to provide endorsements for said insurance policies
agreeing to the waiver of subrogation as required. If required by Landlord,
receipts evidencing payment for said insurance shall be delivered to Landlord
at least annually by Tenant and each policy shall contain an endorsement that
will prohibit its cancellation prior to the expiration of fifteen (15) days
after notice of such proposed cancellation to Landlord.
12. SERVICES AND UTILITIES; SECURITY.
(a) It is agreed that Landlord will furnish condenser water during the
seasons of the year when aid conditioning is required. It is further agreed
that Landlord will provide reasonably adequate water, Monday through Friday
(except legal holidays), all as required in Landlord's sole but reasonable
judgment. In addition, Landlord will provide cold water twenty four (24) hours
per day, three hundred sixty five (365) days per year, subject to provisions of
Paragraph 15 (a). Landlord will provide elevator service by means of
automatically operated elevators, and one automatically operated elevator shall
be subject to call at all times; provided, however, that Landlord shall have
the right to remove
* Tenant shall have right to remove all equipment as long as the Premises is
restored to origial building standard condition, as per Exhibit B.
** Tenant shall install at its expenses the electrical panels and meters and
pay the utility company directly for charges incurred for installation and
usage.
JACo
rev. 4-2-81
5
<PAGE> 35
elevators from service as the same shall be required for moving freight or for
servicing or maintaining the elevators and/or the Building. Landlord will
furnish all services and utilities required by this Lease only during the normal
hours unless otherwise provided herein of operation of the Building, unless
otherwise specified herein. The normal hours of operations of the Building are
8:00 a.m. to 6:00 p.m. Monday through Friday (except legal holidays) and 9:00
a.m. to 1:00 p.m. Saturday (except legal holidays). There are no normal hours
of operation of the Building on Sundays or legal holidays, and Landlord shall
not be obligated to maintain or operate the Building at such times unless
special arrangements are requested by Tenant. If Tenant requires condenser
water beyond the normal hours of operation of the Building as set forth above,
and provided that Tenant has made prior arrangements with Landlord or Landlord's
agent, Landlord will furnish such condenser water and the Tenant agrees to pay
for the same with the monthly installment of rent next becoming due in
accordance with the then-current schedule of costs and assessments therefor at
the rate of $7.50 per hour escalated by increases in the Pepco GS rate schedule
in effect at the time, over the schedule effective as of October, 1981, which
schedule shall be published from time to time by Landlord and furnished to
Tenant. It is understood and agreed that Landlord shall not be liable for
failure to furnish, or for delay, suspension or reduction in furnishing, any of
the utilities or services required to be furnished by Landlord hereunder, if
such failure to furnish or delay, suspension or reduction in furnishing the
utilities and services is caused by breakdown, maintenance, repairs, strikes,
scarcity of labor or materials, acts of God, Landlord's compliance with
governmental regulation, legislations, or judicial or administrative orders, or
from any other cause whatsoever, provided, however, that Landlord shall, in the
event of a breakdown, use reasonable diligence to repair all equipment as
required hereunder which is required to provide such utilities and services.
Tenant shall have access to space 24 hours per day, 365 days per year.
13. LIABILITY OF LANDLORD.
(a) NO LIABILITY. Landlord shall not be liable to Tenant, its employees,
agents, contractors, business invitees, licenses, customers, clients, family
members or guests for any damage, compensation or claim arising from the
necessity of repairing any portion of the premises or the Building, the
interruption in the use of the premises, accident or damage resulting from the
use or operation (by Landlord, Tenant, or any other person or persons
whatsoever) of elevators or heating, cooling, electrical or plumbing equipment
or apparatus, or the termination of this Lease by reason of the destruction of
the premises, or from any fire, robbery, theft, mysterious disappearance and/or
any other casualty, or from any leakage in any part or portion of the premises
or the Building, or from water, rain or snow that may leak into, or flow from,
any part of the premises or the Building, or from drains, pipes or plumbing work
in the Building, or from any other cause whatsoever, or for any personal injury
arising from the use, occupancy and condition of the premises, unless any of the
foregoing is caused by the negligence of Landlord or a willful act or failure to
act on the part of the Landlord. Tenant shall not be entitled to any abatement
or diminution of rent as a result of any of the foregoing occurrences, nor shall
the same release Tenant from its obligations hereunder or constitute an
eviction. Any goods, property or personal effects of Tenant, its employees,
agents, contractors, business invitees, licensees, customers, clients, family
members or guests, stored or placed in or about the premises or Building shall
be at their risk, and the Landlord shall not in any manner be held responsible
therefor. The employees of the Landlord are prohibited from receiving any
packages or other articles delivered to the Building by Tenant, and if any such
employee received any such package or articles, such employee shall be the agent
of the Tenant for such purposes and not of the Landlord. Tenant acknowledges
that Landlord will not carry insurance on Tenant's furniture, furnishings,
fixtures, equipment and/or improvements in or to the premises. It is expressly
understood and agreed that Tenant shall look to its business interruption and
property damage insurance policies, and not to Landlord or its agents or
employees, for reimbursement for any damages or losses incurred as a result of
any of the foregoing occurrences, and that said policies must contain waiver of
subrogation clauses.
(b) INDEMNITY. Tenant hereby agrees to indemnify and hold Landlord
harmless from and against any cost, damage, claim, liability or expense
(including attorney's fees) incurred by or claimed against Landlord, directly or
indirectly, which is occasioned by or results from any default hereunder or any
willful or negligent act on the part of Tenant, its agents, employees,
contractors, invitees, licensees, customers, clients, family members and guests,
or as a result of or in any way arising from Tenant's use and occupancy of the
premises or in any other manner which relates to the business of Tenant. Any
such cost, damage, claim, liability or expense incurred by Landlord for which
Tenant is obligated to reimburse Landlord shall be deemed additional rent due
and payable in accordance with paragraph 17(d) hereof. It is expressly
understood and agreed that Tenant's liability under this Lease extends to the
acts and omissions of any subtenant and any agent, employee, contractor,
invitee, licensee, customer, client, family member and guest of any subtenant.
14. RULES AND REGULATIONS. Tenant, its agents, employees, contractors,
invitees, licensees, customers, clients, family members and guests shall at all
times abide by and observe the rules and regulations attached hereto as Exhibit
C. In addition, Tenant, its agents, employees, contractors, invitees,
licensees, customers, clients, family members and guests shall abide by and
observe such other rules or regulations as may be promulgated from time to time
by Landlord, with a copy sent to Tenant, for the operation and maintenance of
the Building; provided, however, that the same shall be in conformity with
common practice and usage in similar buildings and shall not be inconsistent
with the provisions of this Lease. Nothing contained in this Lease shall be
construed to impose upon Landlord any duty or obligation to enforce such rules
and regulations, or the terms, conditions or covenants contained in any other
lease, as against any other tenant, and Landlord shall not be liable to Tenant
for violation of the same by any other tenant, its employees, agents,
contractors, invitees, licensees, customers, clients, family members or guests.
If there is any inconsistency between this Lease and any current or future rules
and regulations, this Lease shall govern.
15. DAMAGE; CONDEMNATION.
(a) DAMAGE TO THE PREMISES. If the premises shall be partially damaged by
fire or other cause without the fault or neglect of Tenant, its employees,
agents, contractors, invitees, licensees, customers, clients, family members or
guests, this Lease shall not be terminated and Landlord shall diligently and as
soon as practicable after damage occurs, repair such damage, at the expense of
Landlord if Landlord is insured with respect thereto or at the expense of Tenant
if Tenant is required to be insured hereunder with respect to such damage (in
either case taking into account the time necessary to effectuate a satisfactory
settlement with any insurance company involved and for such other delays as may
result from government restrictions, controls on construction, if any, and from
strikes, emergencies and other conditions beyond the control of the Landlord);
provided, however that if the premises or Building is damaged by fire or other
cause to such extent that the damage cannot be fully repaired within ninety (90)
days from date of settlement of the insurance claims, Landlord, upon written
notice to Tenant, may terminate this Lease, in which event the rent shall be
apportioned and paid to the date of such damage. During the period that Tenant
is deprived of the use of the damaged portion of the premises, Tenant shall be
required to pay rent (as set forth in paragraph 3) covering only that part of
the premises that Tenant is able to occupy and the rent for such space shall be
that portion of the total rent which the amount of square foot area remaining
that can be occupied by Tenant bears to the total square foot area of the
premises. In the event of any injury or damage to the premises or the Building
caused by Tenant or its agents, employees, contractors, invitees, licensees,
customers, clients, family members or guests, then Tenant shall diligently and
as soon as practicable after such damage occurs, repair such damage, at Tenant's
sole cost and expense. If Tenant shall fail so to do, Landlord shall have the
right to make such repairs or replacements, and any cost or expense so incurred
by Landlord shall be paid by Tenant, and shall become additional rent due and
payable, in accordance with the provisions of paragraph 17(d) hereof, with the
installment of rent next becoming due under the terms of this Lease. No
compensation, claim or diminution in rent, other than as provided in this
paragraph 15(a), will be allowed or paid by Landlord, by reason of
inconvenience, annoyance or injury to business arising from the necessity of
repairing the premises or any portion of the Building, however the necessity may
occur.
* at the rate of $7.50 par hour escalated by increases in the Pepco GS rate
schedule in effect at the time, over the schedule effective as of Octobe, 1981.
** Tenant ???? access to space 24 hours per day, 356 days per year
JACo
rev. 4-2-81
6
<PAGE> 36
(b) CONDEMNATION. If the whole or a substantial part (as hereinafter
defined) of the premises (or use or occupancy of the premises) shall be taken
or condemned by any governmental or quasi-governmental authority for any public
or quasi-public use or purpose (including sale under threat of such a taking),
then the terms of this Lease shall cease and terminate as of the date when
title vests in such governmental or quasi-governmental authority, and the rent
shall be abated on the date when such title vests in such governmental or
quasi-governmental authority. If less than a substantial part of the premises is
taken or condemned by any governmental or quasi-governmental authority for any
public or quasi-public use or purpose (including sale under threat of such a
taking), the rent shall be equitably adjusted (on the basis of the number of
square feet before and after such event) on the date when title vests in such
governmental or quasi-governmental authority and the Lease shall otherwise
continue in full force and effect. Tenant shall have no claim against Landlord
(or otherwise) and hereby agrees to make no claim against the condemning
authority for any portion of the amount that may be awarded as damage as a
result of any governmental or quasi-governmental taking or condemnation (or sale
under threat of such taking or condemnation) or for the value of any unexpired
term of the Lease or for loss of profits or moving expenses or for any other
claim or cause of action. For purposes of this Section 15(b), a substantial part
of the premises shall be considered to have been taken if more than fifty
percent (50%) of the premises are unusable by Tenant as a direct result of such
taking. See Addendum Paragraph 30.
16. BANKRUPTCY.
(a) EVENTS OF BANKRUPTCY. The following shall be "Events of
Bankruptcy" under this Lease:
(i) Tenant's becoming insolvent, as that term is defined in Title 11
of the United States Code, entitled Bankruptcy, 11 U.S.C. Section 101 et seq.
(the "Bankruptcy Code"), or under the insolvency laws of any State, District,
Commonwealth or Territory of the United States (the "Insolvency Laws");
(ii) the appointment of a receiver or custodian for all or a
substantial portion of Tenant's property or assets, or the institution of a
foreclosure action upon all or a substantial portion of Tenant's real or
personal property;
(iii) the filing of a voluntary petition under the provisions of the
Bankruptcy Code or Insolvency Laws;
(iv) the filing of an involuntary petition against Tenant as the
subject debtor under the Bankruptcy Code or Insolvency Laws, which is either
not dismissed within ninety (90) days of filing, or results in the issuance of
an order for relief against the debtor, whichever is later; or
(v) Tenant's making or consenting to an assignment for the benefit of
creditors or a common law composition of creditors.
(b) LANDLORD'S REMEDIES.
(i) TERMINATION OF LEASE. Upon the occurrence of an Event of
Bankruptcy, Landlord shall have the right to terminate this Lease by giving
written notice to Tenant, whereupon Tenant shall be immediately obligated to
quit the premises upon the giving of notice pursuant to this paragraph
16(b)(i). Any other notice to quit, or notice of Landlord's intention to
re-enter is hereby expressly waived. If Landlord elects to terminate this
Lease, everything contained in this Lease on the part of Landlord to be done
and performed shall cease without prejudice, subject, however, to the right of
Landlord to recover from Tenant all rent and any other sums accrued up to the
time of termination or recovery of possession by Landlord, whichever is later,
and any other monetary damages or loss of reserved rent sustained by Landlord;
provided, however, and notwithstanding the foregoing or the further remedies
set forth in this paragraph 16(b), Landlord shall not have the right to
terminate this Lease while a case in which Tenant is the subject debtor under
the Bankruptcy Code is pending, unless Tenant or Tenant's trustee in bankruptcy
is unable to comply with the provisions of paragraphs 161(b)(v), (vi) and (vii)
below.
(ii) SUIT FOR POSSESSION. Upon termination of this Lease pursuant to
paragraph 16(b)(i), Landlord may proceed to recover possession under and by
virtue of the provisions of the laws of the District of Columbia, or by such
other proceedings, including re-entry and possession, as may be applicable.
(iii) RELETTING OF PREMISES. Upon termination of this Lease pursuant
to paragraph 16(b)(i), Landlord shall have the option to relet the premises for
such rent and upon such terms as are not unreasonable under the circumstances
and, if the full rental reserved under this Lease (and any of the costs,
expenses or damages indicated below) shall not be realized by Landlord. Tenant
shall be liable for all damages sustained by Landlord, including, without
limitation, deficiency in rent, reasonable attorneys' fees, brokerage fees and
expenses of placing the premises in first class rentable condition. Landlord, in
putting the premises in good order or preparing the same for rerental may, at
Landlord's option, make such alterations, repairs, or replacements in the
premises as Landlord, in its sole judgment, considers advisable and necessary
for the purpose of reletting the premises, and the making of such alterations,
repairs, or replacements shall not operate or be construed to release Tenant
from liability hereunder as aforesaid. Landlord shall in no event be liable in
any way whatsoever for failure to relet the premises, or in the event that the
premises are relet, for failure to collect the rent under such reletting, and
in no event shall Tenant be entitled to receive the excess, if any, of such net
rent collected over the sums payable by Tenant to Landlord hereunder.
(iv) MONETARY DAMAGES. Any damage or loss of rent sustained by
Landlord as a result of an Event of Bankruptcy may be recovered by Landlord, at
Landlord's option, at the time of the reletting, or in separate actions, from
time to time, as said damage shall have been made more easily ascertainable by
successive relettings, or at Landlord's option, in a single proceeding deferred
until the expiration of the term of this Lease (in which event Tenant hereby
agrees that the cause of action shall not be deemed to have accrued until the
date of expiration of said term) or in a single proceeding prior to either the
time of reletting or the expiration of the term of this Lease, in which event
Tenant agrees to pay Landlord the difference, if any, between the present value
of the rent reserved under this Lease on the date of breach, discounted at
eight percent (8%) per annum, and the fair market value of the Lease on the
date of breach. In the event Tenant becomes the subject debtor in a case under
the Bankruptcy Code, the provisions of this Section 16(b)(iv) may be limited by
the limitations of damage provisions of the Bankruptcy Code.
(v) ASSUMPTION OR ASSIGNMENT BY TRUSTEE. In the event Tenant becomes
the subject debtor in a case pending under the Bankruptcy Code, Landlord's
right to terminate this Lease pursuant to this paragraph 16 shall be subject to
the rights of the Trustee in bankruptcy to assume or assign this Lease. The
Trustee shall not have the right to assume or assign this Lease unless the
Trustee (A) promptly cures all defaults under this Lease, (B) promptly
compensates Landlord for monetary damages incurred as a result of such default,
(C) provides "adequate assurance of future performance" (as hereinafter
defined) and (D) complies with the provisions of paragraph 5 hereof.
(vi) ADEQUATE ASSURANCE OF FUTURE PERFORMANCE. Landlord and Tenant
hereby agree in advance that the phrase "adequate assurance of future
performance", as used in this paragraph 16(b), shall mean that all of the
following minimum criteria must be met: (A) the Trustee must pay to Landlord,
at the time the next payment of rent is then due under this Lease, in addition
to such payment of rent, an amount equal to the next three (3) months rent due
under this Lease, said amount to be held by Landlord in escrow until either the
Trustee or Tenant defaults in its payments of rent or other obligations under
this Lease (whereupon Landlord shall have the right to draw upon such escrowed
funds) or until the expiration of this Lease (whereupon the funds shall be
returned to the Trustee or Tenant); (B) the Tenant or Trustee must agree to pay
to Landlord, at any time the Landlord is authorized to and does draw upon the
funds escrowed pursuant to subparagraph (A) above, the amount necessary to
restore such escrow account to the original level required by said provision;
(C) Tenant must pay the cost of all services, if any, provided by Landlord for
which Tenant is charged other than pursuant to paragraph 3 hereof (whether
directly or through agents or contractors, and whether or not the cost of such
services is to be passed through to Tenant) in advance of the performance or
provision of such services; (D) the Trustee must agree that Tenant's business
shall be conducted in a first class manner, and that no liquidation sales,
auctions, or other non-first class business operations shall be conducted on
the premises; (E) the Trustee must agree that the use of the premises as
stated in this Lease will remain unchanged; and (F) the Trustee must agree that
the assumption or assignment of this Lease will not violate or affect the
rights of other tenants in the Building.
JACo
rev. 4-2-81
7
<PAGE> 37
(vii) FAILURE TO PROVIDE ADEQUATE ASSURANCE. In the event Tenant is
unable (A) to cure its defaults, (B) to reimburse Landlord for its monetary
damages, (C) to pay when due the rent due after this Lease, or any other
payments required of Tenant under this Lease, or (D) to meet the criteria and
obligations imposed by Paragraph 16(b)(vi) above, then Tenant agrees in advance
that it has not met its burden to provide adequate assurance of future
performance, and this Lease may be terminated by Landlord in accordance with
Paragraph 16(b)(i) above.
17. DEFAULT OF TENANT.
(a) EVENTS OF DEFAULT. The following shall be "Events of Default" under
this Lease:
(i) If Tenant shall fail to pay any monthly (or annual) installment of
rent (as required by Paragraph 3 or Paragraph 17(b)(iv) hereof) when due,
although no legal or formal demand has been made therefor, for a period of five
(5) days after Landlord's written notice thereof to Tenant; provided that no
such notice shall be required if Landlord has sent Tenant a similar notice
within one hundred eighty (180) days prior to such failure;
(ii) If Tenant shall fail to timely make any other payment required
under this Lease, if such failure continues for a period of five (5) days after
Landlord's written notice thereof to Tenant; provided that no such notice shall
be required if Landlord has sent Tenant a similar notice within one hundred
eighty (180) days prior to such failure; or
(iii) If Tenant shall violate or fail to perform any of the other
terms, conditions, covenants or agreements herein made by Tenant, if such
violation or failure continues for a period of ten (10) days after Landlord's
written notice thereof to Tenant; provided that no such notice shall be
required if Tenant has received a similar notice within three hundred
sixty-five (365) days prior to such violation or failure.
(b) LANDLORD'S REMEDIES. Should an Event of Default occur under this
Lease, Landlord may pursue any or all of the following remedies:
(i) TERMINATION OF LEASE. Landlord may terminate this Lease, by giving
written notice of such termination to Tenant, whereupon this Lease shall
automatically cease and terminate and Tenant shall be immediately obligated to
quit the premises. Any other notice to quit or notice of Landlord's intention
to re-enter the premises is hereby expressly waived. If Landlord elects to
terminate this Lease, everything contained in this Lease on the part of
Landlord to be done and performed shall cease without prejudice, subject,
however, to the right of Landlord to recover from Tenant all rent and any other
sums accrued up to the time of termination or recovery of possession by
Landlord, whichever is later.
(ii) SUIT FOR POSSESSION. Upon termination of this Lease pursuant to
Paragraph 17(b)(i), Landlord may proceed to recover possession of the premises
under and by virtue of the provisions of the laws of the District of Columbia,
or by such other proceedings, including re-entry and possession, as may be
applicable.
(iii) RELETTING OF PREMISES. Should this Lease be terminated before the
expiration of the term of this Lease by reason of Tenant's default
as hereinabove provided, or if Tenant shall abandon or vacate the premises
before the expiration or termination of the term of this Lease without having
paid the full rental for the remainder of such term, Landlord shall have the
option to relet the premises for such rent and upon such terms as are not
unreasonable under the circumstances and, if the full rental reserved under
this Lease (and any of the costs, expenses or damages indicated below) shall
not be realized by Landlord, Tenant shall be liable for all damages sustained
by Landlord, including, without limitation, deficiency in rent, reasonable
attorneys' fees, brokerage fees and expenses of placing the premises in first
class rentable condition. Landlord, in putting the premises in good order or
preparing the same for rerental may, at Landlord's option, make such
alterations, repairs, or replacements in the premises as Landlord, in its sole
judgment, considers advisable and necessary for the purpose of reletting the
premises, and the making of such alterations, repairs, or replacements shall
not operate or be construed to release Tenant from liability hereunder as
aforesaid. Landlord shall in no event be liable in any way whatsoever for
failure to relet the premises, or in the event that the premises are relet, for
failure to collect the rent under such reletting, and in no event shall Tenant
be entitled to receive the excess, if any, of such rent collected over the sums
payable by Tenant to Landlord hereunder.
(iv) ACCELERATION OF PAYMENTS. If Tenant shall fail to pay any monthly
installment of rent pursuant to the terms of Paragraph 3 of this Lease,
together with any additional rent due under this Lease, within twenty (20) days
of the date when each such payment is due, for three (3) consecutive months, or
three (3) times in any period of six (6) consecutive months, then Landlord may,
by giving written notice to Tenant, exercise any of the following options: (A)
declare the entire rent reserved under this Lease to be due and payable within
ten (10) days of such notice; (B) declare the rent reserved under this Lease for
the next six (6) months (or at Landlord's option for a lesser period) to be due
and payable within ten (10) days of such notice; or (C) require an additional
security deposit to be paid to Landlord within ten (10) days of such notice, in
an amount not to exceed six (6) months rent. Landlord may invoke any of the
options provided for herein at any time during which an Event of Default
remains incurred. In the event Landlord gives notice to Tenant of its election
to exercise any of the foregoing options pursuant to this Paragraph 17(b)(iv)
and Tenant fails to comply therewith, Landlord may terminate this Lease as
provided elsewhere in this Paragraph 17(b).
(v) MONETARY DAMAGES. Any damage or loss of rent sustained by Landlord
may be recovered by Landlord, at Landlord's option, at the time of the
reletting, or in separate actions, from time to time, as said damage shall have
been made more easily ascertainable by successive relettings, or at Landlord's
option in a single proceeding deferred until the expiration of the term of this
Lease (in which event Tenant hereby agrees that the cause of action shall not be
deemed to have accrued until the date of expiration of said term) or in a
single proceeding prior to either the time of reletting or the expiration of
the term of this Lease. In addition, should it be necessary for Landlord to
employ legal counsel to enforce any of the provisions herein contained, Tenant
agrees to pay all attorney's fees and court costs reasonably incurred.
(vi) ANTICIPATORY BREACH; CUMULATIVE REMEDIES. Nothing contained herein
shall prevent the enforcement of any claim Landlord may have against Tenant for
anticipatory breach of the unexpired term of this Lease. In the event of a
breach or anticipatory breach by Tenant of any of the covenants or provisions
hereof, Landlord shall have the right of injunction and the right to invoke any
remedy allowed at law or in equity as if re-entry, summary proceedings and
other remedies were not provided for herein. Mention in this Lease of any
particular remedy shall not preclude Landlord from any other remedy, in law or
in equity. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed for any cause, or in the event of Landlord obtaining
possession of the premises, by reason of the violation by Tenant of any of the
covenants and conditions of this Lease, or otherwise.
(c) WAIVER. If, under the provisions hereof, Landlord shall 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 herein contained nor of any of Landlord's rights hereunder. No
waiver by Landlord of any breach of any covenant, condition or agreement herein
contained shall operate as a waiver of such covenant, condition, or agreement
itself, or of any subsequent breach thereof. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly installments of rent herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement on any check or letter
accompanying a check for payment of rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such rent or to pursue any other remedy
provided in this Lease. No re-entry by Landlord, and no acceptance by Landlord
of keys from Tenant, shall be considered an acceptance of a surrender of the
Lease.
(d) RIGHT OF LANDLORD TO CURE TENANT'S DEFAULT.
If Tenant defaults in the making of any payment or in the doing of 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, and charge the amount of the
expense thereof, if made or done by Landlord, with interest thereon at the rate
per annum which is two percent (2%) greater than the "prime rate" then in
effect at Citibank, N.A., New York, New York, from the date paid by Landlord to
the date of payment thereof by Tenant; provided, however, that nothing herein
contained shall be construed or implemented in such a manner as to allow
Landlord to charge or receive interest in excess of the
* In addition, should it be necessary for Landload to employ legal counsel to
enforce any of the provisions herein contained, Tenant agrees to pay all
attorney's fees and court costs reasonable incurred.
JACo
rev. 4-2-81
8
<PAGE> 38
maximum legal rate then allowed by law. Such payment and interest shall
constitute additional rent hereunder due and payable with the next monthly
installment of rent; but the making of such payment or the taking of such
action by Landlord shall not operate to cure such default or to estop Landlord
from the pursuit of any remedy to which Landlord would otherwise be entitled.
(e) LATE PAYMENT. If Tenant fails to pay any installment of rent and/or
additional rent (in accordance with paragraph 3) on or before the first (1st)
day of the calendar month when such installment becomes due and payable, Tenant
shall pay to Landlord a late charge of five percent (5%) of the amount of such
installment, and, in addition, such unpaid installment shall bear interest at
the rate per annum which is two percent (2%) greater than the "prime rate" then
in effect at Citibank, N.A., New York, New York from the date such installment
became due and payable to the date of payment thereof by Tenant; provided,
however, that nothing herein contained shall be construed or implemented in such
a manner as to allow Landlord to charge or receive interest in excess of the
maximum legal rate then allowed by law. Such late charge and interest shall
constitute additional rent hereunder due and payable with the next monthly
installment of rent due, or if payments have been accelerated pursuant to
paragraph 17(b)(iv) above, due and payable immediately.
(f) LIEN ON PERSONAL PROPERTY. Landlord shall have a lien upon all the
personal property owned by Tenant without prior encumbrances and located within
Premises, as and for security for the rent and other obligations of Tenant
herein provided. In order to perfect and enforce said lien, Landlord may, at
any time after default by Tenant in the payment of rent or default of other
obligations to be performed or complied with by Tenant under this Lease, seize
and take possession of any and all personal property belonging to Tenant which
may be found in and upon the premises. If Tenant fails to redeem the personal
property so seized, by payment of whatever sum may be due Landlord under and by
virtue of the provisions of this Lease, then and in that event, Landlord shall
have the right, after twenty (20) days written notice to Tenant of its intention
to do so, to sell such personal property so seized at public or private sale and
upon such terms and conditions as to Landlord may appear advantageous, and after
the payment of all proper charges incident to such sale, apply the proceeds
thereof to the payment of any balance due to Landlord on account of rent or
other obligations of Tenant pursuant to this Lease. In the event there shall
then remain in the hands of Landlord any balance realized from the sale of said
personal property as aforesaid, the same shall be paid over to Tenant. The
exercise of the foregoing remedy by Landlord shall not relieve or discharge
Tenant from any deficiency owed to Landlord which Landlord has the right to
enforce pursuant to any other provision of this Lease.
18. HOLDING OVER. In the event that Tenant shall not immediately
surrender the premises on the date of expiration of the term hereof, Tenant
shall, by virtue of the provisions hereof, become a tenant by the month. In
such event Tenant shall be required to pay twice the basic rent required under
paragraph 3(a) hereof, together with all additional rent in effect during the
last month of the term of this Lease. Such monthly tenancy shall commence with
the first day next after the expiration of the term of this Lease. Except as
otherwise provided above with respect to the payment of rent, Tenant shall, as a
monthly tenant, be subject to all of the terms, conditions, covenants and
agreements of this Lease. Tenant shall give Landlord at least thirty (30) days
written notice of any intention to quit the premises, and Tenant shall be
entitled to thirty (30) days written notice to quit the premises; provided,
however, that if Tenant is in default hereunder, Tenant shall not be entitled to
any notice to quit, the usual thirty (30) days notice to quit being hereby
expressly waived. Notwithstanding the foregoing provisions of this paragraph
18, in the event that Tenant shall hold over after the expiration of the term of
this Lease, and if Landlord shall desire to regain possession of the premises
promptly at the expiration of the term of this Lease, then at any time prior to
Landlord's acceptance of rent from Tenant as a monthly tenant hereunder,
Landlord, at its option, may forthwith reenter and take possession of the
premises without process, or by any legal process in force in the District of
Columbia.
19. SECURITY DEPOSIT. Provided Tenant is not in default hereunder,
Tenant shall be allowed to substitute letter of credit to Landlord on the second
anniversary of the Lease Commencement Date. Simultaneously with the execution
of this Lease, Tenant shall deposit with Landlord the sum of Twenty-four
thousand Dollars ($24,000.00) and one (1) year prior to the Lease Expiration
Date, Tenant shall deposit with Landlord the sum of None Dollars ($), each as a
security deposit. Such security deposit (which shall not bear interest to
Tenant unless required to do so by any provision of law) shall be considered as
security for the payment and performance by Tenant of all of Tenant's
obligations, covenants, conditions and agreements under the Lease. Upon the
expiration of the term hereof (or any renewal or extension thereof in accordance
with this Lease), Landlord shall (provided that Tenant is not in default under
the terms hereof) return and pay back such security deposit to Tenant, less such
portion thereof as Landlord shall have retained to make good any default by
Tenant with respect to any of Tenant's aforesaid obligations, covenants,
conditions or agreements. In the event of any default by Tenant hereunder
during the term of this Lease, Landlord shall have the right, but shall not be
obligated, to apply all or any portion of the security deposit to cure such
default, in which event Tenant shall be obligated promptly to deposit with
Landlord the amount necessary to restore the security deposit to the amount held
by Landlord immediately prior to such advance by Landlord. In the event of the
sale or transfer of Landlord's interest in the Building, Landlord shall have the
right to transfer the security deposit to the purchaser or transferee, in which
event Tenant shall look only to the new landlord for the return of the security
deposit and Landlord shall thereupon be released from all liability to Tenant
for the return of such security deposit. See Addendum paragraph 27.
20. COVENANTS OF LANDLORD.
(a) QUIET ENJOYMENT. Landlord covenants that it has the right to make
this Lease for the term aforesaid, and that if Tenant shall pay the rent and
perform all of the covenants, terms, conditions and agreements of this Lease to
be performed by Tenant, Tenant shall, during the term hereby created, freely,
peaceably and quietly occupy and enjoy the full possession of the premises
without molestation or hindrance by Landlord or any party claiming through or
under Landlord, subject to the provisions of paragraph 20(b) and paragraph
21(k) hereof.
(b) RESERVATION. Landlord hereby reserves to itself and its successors
and assigns the following rights (all of which are hereby consented to by
Tenant): (i) to change the street address and/or name of the Building and/or
the arrangement and/or location of entrances (street entrances from first floor
to the Premises shall not be altered), passageways, doors, doorways, corridors,
elevators, stairs, toilets, or other public parts of the Building, (ii) to
erect, use and maintain pipes and conduits in and through the premises and (iii)
to grant to anyone the exclusive right to conduct any particular business or
undertaking in the Building. Landlord may exercise any or all of the foregoing
rights without being deemed to be guilty of an eviction, actual or constructive,
or a disturbance or interruption of the business of Tenant or Tenant's use or
occupancy of the premises. In the event of any sale or transfer by the then
Landlord hereunder of the Building, the landlord whose interest is sold or
transferred shall be and hereby is completely released and forever discharged
from and in respect of all covenants, obligations and liabilities as landlord
hereunder occurring after the date of such sale or transfer.
21. MISCELLANEOUS.
(a) NO REPRESENTATIONS BY LANDLORD. Tenant acknowledges that neither
Landlord nor any broker, agent or employee of Landlord has made any
representations or promises with respect to the premises or the Building except
as herein expressly set forth, and no rights, privileges, easements or licenses
are acquired by Tenant except as herein expressly set forth. The Tenant, by
taking possession of the premises, shall accept the same "as is," and such
taking of possession shall be conclusive evidence that the premises and the
Building are in good and satisfactory condition at the time of such taking of
possession.
(b) NO PARTNERSHIP. Nothing contained in this Lease shall be deemed or
construed to create a partnership or joint venture of or between Landlord and
Tenant, or to create any other relationship between the parties hereto other
than that of Landlord and Tenant.
* Provided Tenant is not in default hereunder, Tenant shall be allowed to
substitute letter of credit to Landlord on the second anniversary of the
Lease Commencement Date.
** owned by Tenant without prior encumbrances and located within Premises,
JACo
rev. 4-2-81
9
<PAGE> 39
(c) BROKERS. Landlord recognizes Julien J. Studley, Inc. as the sole
broker procuring this Lease and shall pay said broker a commission therefor
pursuant to a separate agreement between said broker and Landlord. Landlord and
Tenant each represent and warrant one to another that except as set forth
herein neither of them has employed any broker, agent or finder in carrying on
the negotiations related to this Lease. Landlord shall indemnify and hold
Tenant harmless, and Tenant shall indemnify and hold Landlord harmless, from
and against any claim or claims for brokerage or other commission arising from
or out of any breach of the foregoing representation and warranty by the
respective indemnitors.
(d) ESTOPPEL CERTIFICATE. Tenant agrees, at any time and from time to
time during the term of this Lease, upon not less than five (5) days prior
written notice by Landlord, to execute, acknowledge and deliver to Landlord a
statement in writing which shall contain substantially the following provisions:
(i) a statement that this Lease is unmodified and in full force and effect (or
if there have been modifications, that the Lease is in full force and effect as
modified and stating the modifications), (ii) a statement of the dates to which
the rent and any other charges hereunder have been paid by Tenant, (iii) a
statement of whether or not, to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition contained in
this Lease, and if so, specifying each such, (iv) a statement of the address to
which notices to Tenant should be sent, (v) a statement that all work required
to be performed by the Landlord under this Lease has been completed and that
Tenant accepts the premises and improvements therein, that Tenant accepts the
premises and the improvements therein, (vi) a statement that Tenant will not
attempt to terminate this Lease by reason of Landlord's default or omission
without giving written notice of such default or omission to Landlord and any
mortgagee of which Tenant has knowledge and (vii) such other statement or
statements as Landlord, any prospective purchaser of the Building or the Land,
any mortgagee or prospective mortgagee of the Building or the Land or of
Landlord's interest in either and/or any prospective assignee of any such
mortgagee, may reasonably request. Any such statement delivered pursuant hereto,
may be relied upon by any owner of the Building or the Land, any prospective
purchaser of the Building or the Land, any mortgagee or prospective mortgagee of
the Building or the Land or of Landlord's interest in either, or any prospective
assignee of any such mortgagee. Tenant will agree to make such reasonable
changes or modifications to this Lease as may be required by any mortgagee of
the Building and/or the Land, provided that such changes or modifications shall
not increase the amount of rent required under paragraph 3(a) hereof, shorten
the term of this Lease or change or redefine the premises as long as it is not a
material change and further provided that Landlord furnishes written
certification that every other tenant in the building must make identical
changes or modifications to their respective leases.
(e) WAIVER OF JURY TRIAL. Landlord and Tenant hereby waive trial by
jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on or in respect of any matter whatsoever
arising out of or in any way connected with this Lease, the relationship of
Landlord and Tenant hereunder, Tenant's use or occupancy of the premises,
and/or any claim of injury or damage.
(f) LIABILITY. It is expressly understood and agreed that the liability
of Landlord to Tenant under this Lease is restricted solely to the assets of
the limited partnership which owns the Land and the Building and that the
partners thereof shall have no personal liability under this Lease. Tenant
covenants and agrees to look solely to the Building and the Land for the
satisfaction of any liability of Landlord to Tenant hereunder, and Tenant
agrees not to bring any action asserting personal liability of the partners of
said limited partnership.
(g) NOTICES. All notices or other communications hereunder shall be in
writing and shall be deemed duly given if delivered in person (with receipt
therefor) or by certified or registered mail, return receipt requested,
first-class postage prepaid, (i) if to Landlord at 1015 Fifteenth Street, N.W.
Suite 800, Washington, D.C. 20005 with copy to Joan Kaufman, 1730 Massachusetts
Avenue, N.W. Washington, D.C. 20036 and (ii) if to Tenant, prior to the Lease
Commencement Date, at Arnold & Porter, 1200 New Hampshire Avenue, N.W.,
Washington, D.C. 20036 and after the Lease Commencement Date, at the premises,
unless notice of a change of address is given pursuant to the provisions of
this article.
(h) INVALIDITY OF PARTICULAR PROVISIONS. If any provision of this Lease
or the application thereof to any person or circumstances shall to any extent
be invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
(i) GENDER AND NUMBER. Feminine or neuter pronouns shall be substituted
for those of the masculine form, and the plural shall be substituted for the
singular number, in any place or places herein in which the context may
require such substitution.
(j) BENEFIT AND BURDEN. The provisions of this Lease shall be binding
upon, and shall inure to the benefit of, the parties hereto and each of their
respective representatives, successors and assigns. Landlord may freely and
fully assign its interest hereunder.
(k) SUBORDINATION. This Lease is subject and subordinate only to the
lien of a first mortgage (which term "first mortgage" shall include both
construction and permanent financing and shall include deeds of trust and
similar security instruments) which may now or hereafter encumber of otherwise
affect the Land and Building of which the premises form a part, or Landlord's
leasehold interest therein, and to all and any renewals, extensions,
modifications, recastings or refinancings thereof. Tenant shall, upon not less
than five (5) days' prior written notice by Landlord, promptly execute,
acknowledge and deliver to Landlord any written statement or agreement
confirming such subordination reasonably required by Landlord or any of its
lenders. Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such certificate or other document for or on
behalf of Tenant. Tenant agrees that in the event that any proceedings are
brought for the foreclosure of any such mortgage, Tenant shall attorn to the
purchaser at such foreclosure sale, if requested to do so by such purchaser, and
shall recognize such purchaser as the landlord under this Lease, and 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 and the obligations of Tenant hereunder in the event
that any such foreclosure proceeding is prosecuted or completed. In addition, if
the Landlord's leasehold interest shall be terminated, Tenant agrees that this
Lease shall remain in full force and effect, (or if terminated by law as a
result of Landlord's interest being terminated, Tenant will enter into a new
Lease with the identical terms and conditions of this Lease).
(l) ENTIRE AGREEMENT. This Lease, together with Exhibits A through F
and Addendum attached hereto, contains and embodies the entire agreement of the
parties hereto, and no representations, inducements or agreements between the
parties, oral or otherwise, not contained in this Lease and the Exhibits, shall
be of any force or effect. This Lease may not be modified, changed or
terminated in whole or in part in any manner other than by an agreement in
writing duly signed by both parties hereto.
* a statement that all work required to be preformed by the Landlord under
this Lease has been completed and the Tenant accepts the premises and
improvements therein,
** In addition, if the Landlord's leasehold interest shall be terminated,
Tenant agrees that this Lease shall remain in full force and effect, (or if
terminated by law as a result of Landlord's interest being terminated,
Tenant will enter into a new Lease with the identical terms and conditions
of this Lease.)
*** and further provided that Landlord furnishes written certification that
every other tenant in the building must make identical changes or
modifications to their respective leases.
JACo
rev. 4-2-81
10
<PAGE> 40
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under
seal on the day and year first hereinabove written.
LANDLORD:*
ATTEST BY: 1667 K Street, N.W. Associates
Limited Partnership
/s/ MARY EBERT By: /s/ JOHN E. AKRIDGE, III
- ------------------------- --------------------------------
Asst. Secretary John E. Akridge, III
President
The John Akridge Company
Managing General Partner
[Corporate Seal] * Subject to Lenders' Approval
WITNESS: TENANT: Palmer National Bank
(in organization)
/s/ LOIS A. ZAMBO By: /s/ STEFAN A. HALPER
- ------------------------- ---------------------------------
Stefan A. Halper*
WITNESS:
By: /s/ HARVEY MCLEAN
- ------------------------- ---------------------------------
Harvey McLean
The undersigned Broker hereby executes this Lease solely to agree to
the provisions of paragraph 21(c) hereof.
WITNESS: BROKER: Julien J. Studley, Inc.
/s/ LOIS A. ZAMBO By: [SIG]
- ------------------------- ---------------------------------
Before me, the undersigned authority, on this day personally appeared Harvey D.
McLean, Jr. known to me to be the person whose name is subscribed to the
foregoing document, under my hand and seal of office, the 4th day of January,
1982.
/s/ MURIEL L. CHRISTOPHER
- ------------------------------
Notary Public
County of Dallas, Texas
My Commission expires February 2, 1985.
11
<PAGE> 41
[MAP OF FLOOR PLAN]
Exhibit A
Reference is made to a certain Agreement of Lease dated 12/31 , 1981
(the "Lease") to which this First Floor Plan is attached. Definition of terms
are set forth in the lease.
<PAGE> 42
[MAP OF FLOOR PLAN]
Exhibit A
Reference is made to a certain Agreement of Lease dated 12/31 , 1981
(the "Lease") to which this First Basement Plan is attached. Definition of
terms are set forth in the Lease.
<PAGE> 43
Landlord at Tenant's sole expense, as extra tenant work. Prior to commencing
any such work requested by Tenant, Landlord will submit to Tenant written
estimates of the cost of any such work. If Tenant shall fail to approve in
writing the drawings, plans or specifications and/or the cost estimates by the
dates set forth in paragraph 1(c) above, the same shall be deemed disapproved
in all respects by Tenant, and Landlord shall not be authorized to proceed
therewith.
Tenant agrees to pay to Landlord, promptly upon being billed therefor,
the cost of all non-standard or additional work, together with ten percent (10%)
overhead, and ten percent (10%) profit of such costs. Tenant shall pay [one half
(1/2)] forty-five percent (45%) of said costs upon approval of the cost
estimates and shall pay the entire remaining balance of said costs when such
non-standard or additional work is [one half (1/2)] forty five percent (45%)
complete, as determined by Landlord's architect and/or engineer. All such
payments shall constitute additional rent under the Lease, and in the event of
nonpayment thereof by Tenant, Landlord shall have all of the rights and remedies
set forth in the Lease and remaining ten percent (10%) upon completion.
4. It is agreed that notwithstanding the date provided in the Lease as
the Lease Commencement Date thereof, Tenant's obligations for the payment of
rent hereunder shall not commence until Landlord has substantially completed
(as evidenced by a Certificate of Substantial Completion by the Architect) all
building standard work to be performed by Landlord as set forth in paragraph 2
hereof; provided, however, that if Landlord shall be delayed in substantially
completing said building standard work as a result of:
(a) Tenant's failure to furnish its requirements and/or approve
drawings, plans, specifications and the cost estimates by the dates set forth
in paragraph 1(c) hereof;
(b) Tenant's request for changes in drawings, plans and specifications
subsequent to January 1, 1983;
(c) Tenant's failure to approve in writing the drawings, plans or
specifications and/or the cost estimates for non-standard or additional work
within the time required under paragraph 3 hereof;
(d) Tenant's request for materials, finishes or installations other
than Building standard as set forth in paragraph 2(a) through 2(l) hereof; or
(e) The performance by a person, firm or corporation employed by
Tenant and/or the completion of the work of said person, firm or corporation;
then Tenant shall be liable for the payment of rent commencing on the Lease
Commencement Date and the Lease Commencement Date and Lease Expiration Date
shall not be extended, except to the extent of the number of days that
Landlord's architect determines, in its sole judgment, that Landlord's work
would not have been completed by the Lease Commencement Date, without the
occurrence of the foregoing delays. The number of days that the Lease
Commencement Date shall be extended pursuant to the provisions of paragraph
2(b) of the Lease shall be that number of days of delay that is determined by
Landlord's architect to be due to the actions of Landlord, and Tenant shall not
be responsible for the payment of rent until the Lease Commencement Date as
extended pursuant to the provisions hereof.
*(m) Exterior perimeter walls with 1/2 inch gypsum wall/board with no
visible joints, finished and ready for painting.
(n) A single conduit with Tenant's line capacity as required from the
main building panel to a Tenant supplied service box within the
premises.
(o) A single conduit for telephone service with Tenant's required
capacity from the main distribution closet to one distribution
point in the premises.
JACo
rev. 4-2-81
2
<PAGE> 44
EXHIBIT C
RULES AND REGULATIONS
Reference is made to a certain Agreement of Lease dated 12/31, 1981
(the "Lease"), to which these Rules and Regulations are attached. Definitions
of terms are set forth in the Lease.
The following rules and regulations have been formulated for the safety
and well-being of all tenants of the Building and to insure compliance with
all municipal and other requirements. Strict adherence to these rules and
regulations is necessary to guarantee that each and every tenant will enjoy a
safe and unannoyed occupancy in the Building in accordance with the Lease. Any
continuing violation of these rules and regulations by Tenant, after notice
from Landlord, shall be deemed to be an Event of Default under the Lease.
Landlord may, upon request by any tenant, waive the compliance by such
tenant to any of these rules and regulations, provided that (i) no waiver shall
be effective unless signed by Landlord or Landlord's authorized agent, (ii) any
such waiver shall not relieve such tenant from the obligation to comply with
such rule or regulation in the future unless expressly consented to by Landlord,
(iii) no waiver granted to any tenant shall relieve any other tenant from the
obligation of complying with the rules and regulations unless such other tenant
has received a similar waiver in writing from the Landlord, and (iv) any such
waiver by Landlord shall not relieve Tenant from any obligation or liability of
Tenant to Landlord pursuant to the Lease for any loss or damage occasioned as a
result of Tenant's failure to comply with any such rule or regulation.
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, halls or other parts of the Building not occupied by any
tenant shall not be obstructed or encumbered by any tenant or used for any
purpose other than ingress and egress to and from the premises, and if the
premises are situated on the ground floor of the Building, the tenant thereof
shall, at said tenant's own expense, keep the sidewalks and curb directly in
front of the premises clean and free from ice and snow. Landlord shall have the
right to control and operate the public portions of the Building and the
facilities furnished for common use of the tenants in such manner as Landlord
deems best for the benefit of the tenants generally. No tenant shall permit the
visit to the premises of persons in such numbers or under such conditions as to
interfere with the use and enjoyment by other tenants of the entrances,
corridors, elevators and other public portions or facilities of the Building.
2. No awnings or other projections shall be attached to the outside
walls of the Building without the prior written consent of Landlord. No drapes,
blinds, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the premises, without the prior written
consent of Landlord. Such awnings, projections, curtains, blinds, shades,
screens or other fixtures must be of a quality, type, design and color, and
attached in the manner, approved by Landlord.
3. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the halls, corridors
or vestibules without the prior written consent of Landlord.
4. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, chemicals, paints, cleaning fluids or other
substances shall be thrown therein. All damages resulting from any misuse of
the fixtures shall be borne by the tenant who, or whose servants, employees,
agents, visitors or licenses, shall have caused the same.
5. There shall be no marking, painting, drilling into or in any way
defacing the Building or any part of the premises visible from public areas of
the Building. Tenant shall not construct, maintain, use or operate within the
premises any electrical device, wiring or apparatus in connection with a loud
speaker system or other sound system, except as reasonably required for its
communication system and approved prior to the installation thereof by
Landlord. No such loud speaker or sound system shall be constructed,
maintained, used or operated outside of the premises.
6. No bicycles, vehicles or animals, birds or pets of any kind shall be
brought into or kept in or about the premises, and no cooking (except for
hot-plate cooking by Tenant's employees for their own consumption, the
equipment for and location of which are first approved by Landlord) shall be
done or permitted by any tenant on the premises. No tenant shall cause or
permit any unusual or objectionable odors to be produced upon or permeate from
the premises.
7. No space in the Building shall be used for manufacturing of goods
for sale in the ordinary course of business, for the storage of merchandise for
sale in the ordinary course of business, or for the sale at auction of
merchandise, goods or property of any kind. Furthermore, the use of the
premises by each tenant was approved by Landlord prior to execution of the
Lease and such use may not be changed without the prior approval of Landlord.
8. No tenant shall make any unseemly or disturbing noises or disturb or
interfere with occupants of the Building or neighboring buildings or premises
or those having business with them whether by the use of any musical
instrument, radio, talking machine, unmusical noise, whistling, singing or in
any other way. No tenant shall throw anything out of the doors or windows or
down the corridors or stairs.
9. No flammable, combustible or explosive fluid, chemical or substance
shall be brought or kept upon the premises.
10. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any tenant, nor shall any changes be made in existing
locks or the mechanism thereof. The doors leading to the corridors or main halls
shall be kept closed during business hours except as they may be used for
ingress or egress. Each tenant shall, upon the termination of his tenancy,
restore to the Landlord all keys of stores, offices, storage and toilet rooms
either furnished to, or otherwise procured by, such tenant, and in the event of
the loss of any keys so furnished, such tenant shall pay to Landlord the cost
thereof [???????] permitted to install such additional locks and security
devices as are deemed necessary to conduct its banking business provided Tenant
supplies Landlord with a key except to vault areas.
11. Landlord reserves the right to inspect all freight to be brought
into the Building and to exclude from the Building all freight which violates
any of these rules and regulations or the Lease. Excluding any freight
delivered by Brinks, Wells Fargo or any other messenger or delivery service
customarily employed to deliver money or negotiable instruments to financial
institutions.
12. No tenant shall pay any employees on the premises, except those
actually working for such tenant on the premises.
13. Landlord reserves the right to exclude from the Building at all
times any person who is not known or does not properly identify himself to the
Building management, security guard on duty or security system monitor.
Landlord may, at its option, require all persons admitted to or leaving the
Building between the hours of 6:00 p.m. and 8:00 a.m., Monday through Friday,
and at any hour, Saturdays, Sundays and legal holidays, to register. Each
tenant shall be responsible for all persons for whom he authorizes entry into
or exit out of the Building, and shall be liable to Landlord for all acts or
omissions of such persons.
14. The premises shall not, at any time, be used for lodging or
sleeping or for any immoral or illegal purpose.
15. Each tenant, before closing and leaving the premises at any time,
shall see that all windows are closed and all lights turned off, except as may
be necessary for emergency or security purposes.
16. Landlord's employees shall not perform any work or do anything
outside of their regular duties, unless under special instruction from the
management of the Building. The requirements of tenants will be attended to
only upon application to Landlord and any such special requirements shall be
billed to Tenant (and paid with the next installment of rent due) at the
schedule of charges maintained by Landlord from time to time or at such charge
as is agreed upon in advance by Landlord and Tenant.
17. Canvassing, soliciting and peddling in the Building is prohibited
and each tenant shall cooperate to prevent the same.
* Excluding any freight delivered by Brinks, Wells Fargo or any other messanger
or delivery service customarily employed to deliver money or negotiable
instruments to financial institutions.
JACo
rev. 4-2-80
1
<PAGE> 45
18. There shall not be used in any space, or in the public halls of the
Building, either by any tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks except those equipped with rubber tires
and side guards, and Tenant shall be responsible to Landlord for any loss or
damage resulting from any deliveries of Tenant to the Building.
19. Mats, trash or other objects shall not be placed in the public
corridors.
20. Landlord does not maintain suite finishes, such as kitchens,
bathrooms, wallpaper, special lights, etc. However, should the need for repairs
of items not maintained by Landlord arise, Landlord will arrange for the work
to be done at Tenant's expense.
21. Drapes installed by Landlord for the use of Tenant or drapes
installed by Tenant, which are visible from the exterior of the Building, must
be cleaned by Tenant at least once a year, without notice, at Tenant's own
expense.
22. The amount of liability insurance required to be maintained by
Tenant pursuant to paragraph 11(b) of the Lease for bodily injury and property
damage is $2 million combined single limit. Landlord may from time to time
require Tenant to increase its insurance coverage to an amount determined by
Landlord to be satisfactory in Landlord's reasonable judgment.
JACo
rev. 4-2-80
2
<PAGE> 46
EXHIBIT D
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
(Mortgagee)
THIS AGREEMENT, made this 31st day of Dec 1981 between Palmer National
Bank with offices at ___________________________ (hereinafter called "Tenant"),
CONNECTICUT GENERAL LIFE INSURANCE COMPANY, a Connecticut corporation having its
principal office and place of business at 800 Cottage Grove Road, Bloomfield,
Connecticut (hereinafter called "Mortgagee"), and 1667 K Street, N.W. Associates
Limited Partnership, a Limited Partnership organized and existing under the laws
of the District of Columbia (hereinafter referred to as "Landlord").
W I T N E S S E T H:
WHEREAS, Tenant has entered into a certain lease (the "Lease") dated
12/31/81, with Landlord covering premises within a certain building known as
1667 K Street, N.W. (the "Premises"); and more particularly described as Lot 71,
Square 184, Washington, D.C.; and
WHEREAS, the Mortgagee (has agreed to make a mortgage loan (the
"Mortgage") to the Landlord, provided, however, that said Lease is subordinate
to the lien of the Mortgage)(is currently the holder of a mortgage covering the
Premises pursuant to a Deed of Trust dated ____________, and recorded as
Document ______________ in the Land Records of the District of Columbia) (the
"Mortgage"); and
WHEREAS, Mortgagee has been requested by Tenant and by Landlord to
enter into a non-disturbance agreement with Tenant;
NOW THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto mutually covenant and agree as
follows:
1. The Lease and any extensions, renewals, replacements or
modifications thereof, and all of the right, title and interest of the Tenant in
and to said Premises are and shall be subject and subordinate to the Mortgage
and to all of the terms and conditions contained herein, and to any renewals,
modifications, replacements, consolidations and extensions thereof.
2. Mortgagee consents to the Lease and, in the event of foreclosure of
said Mortgage, or in the event Mortgagee comes into possession or acquires title
to the Premises as a result of the enforcement of the foreclosure of the
Mortgage or mortgage note, or as a result of any other means, Mortgagee agrees
to recognize Tenant and further agrees that Tenant shall not be disturbed in its
possession of the Premises for any reason other than one which would entitle the
Landlord to terminate the Lease under its terms or would cause, without any
further action by such Landlord, the termination of the Lease or would entitle
such Landlord to dispossess the Tenant from the Premises.
3. Tenant agrees with Mortgagee that if the interests of Landlord in
the Premises shall be transferred to and owned by Mortgagee by reason of
foreclosure or other proceedings brought by it, or by any other matter, Tenant
shall be bound to Mortgagee under all the terms, covenants and conditions of the
Lease for the balance of the term thereof remaining and any extensions or
renewals thereof which may be affected in accordance with any option therefor
in the Lease, with the same force and effect as if Mortgagee were the Landlord
under the Lease, and Tenant does hereby attorn to Mortgagee as its Landlord,
said attornment to be effective and self-operative without the execution of any
further instruments on the part of any of the parties hereto immediately upon
Mortgagee succeeding to the interest of the Landlord in the Premises. Tenant
agrees, however, upon the election of and written demand by Mortgagee within
twenty (20) days after Mortgagee receives title to the Premises, to execute an
instrument in confirmation of the foregoing provisions, satisfactory to
Mortgagee, in which Tenant shall acknowledge such attornment and shall set forth
the terms and conditions of its tenancy.
1
<PAGE> 47
4. Tenant agrees with Mortgagee that if Mortgagee shall succeed to the
interest of Landlord under the Lease, Mortgagee shall not be (a) liable for any
action or omission of any prior landlord under the Lease, or (b) subject to any
offsets or defenses which Tenant might have against any prior landlord, or (c)
bound by any rent or additional rent which Tenant might have paid for more than
the current month to any prior Landlord, or (d) bound by any security deposit
which Tenant may have paid to any prior landlord, or (e) bound by any amendment
or modification of the Lease made without Mortgagee's consent, or (f) bound by
any provision in the Lease which obligates the Landlord to erect or complete
any building or to perform any construction work or to make any improvements to
the Premises. Tenant further agrees with Mortgagee that Tenant will not
voluntarily subordinate the Lease to any lien or encumbrance without Mortgagee's
consent.
5. In the event that the Landlord shall default in the performance or
observance of any of the terms, conditions or agreements in the Lease, Tenant
shall give written notice thereof to the Mortgagee and the Mortgagee shall have
the right (but not the obligation) to cure such default. Tenant shall not take
any action with respect to such default under the Lease including without
limitation any action in order to terminate, rescind or void the Lease or to
withhold any rental thereunder, for a period of 10 days after receipt of such
written notice thereof by the Mortgagee with respect to any such default capable
of being cured by the payment of money and for a period of 30 days after receipt
of such written notice thereof by the Mortgagee with respect to any other such
default (provided, that in the case of any default which cannot be cured by the
payment of money and cannot with diligence be cured within such 30-day period
because of the nature of such default or because Mortgagee requires time to
obtain possession of the Premises in order to cure the default, if the Mortgagee
shall proceed promptly to attempt to obtain possession of the Premises, where
possession is required, and to cure the same and thereafter shall prosecute the
curing of such default with diligence and continuity, then the time within which
such default may be cured shall be extended for such period as may be necessary
to complete the curing of the same with diligence and continuity).
6. Landlord agrees with Mortgagee that Landlord's estate in the
Premises shall not be conveyed or encumbered without the written consent of the
Mortgagee so long as the Lease is in effect.
7. Landlord agrees with Mortgagee that Landlord's estate in the
Premises shall not be conveyed nor shall Landlord further assign Landlord's
interest in the Lease, unless the grantee or assignee shall acknowledge in
writing to the Mortgagee that the conveyance or assignment is accepted subject
to the Lease. Landlord further agrees that in the event said estate in the
Premises or said interest in the Lease passes to any other person, firm or
corporation, by operation of law or by any other means, such passage of title
shall be applicable to the Lease.
8. This Agreement shall bind and inure to the benefit of the parties
hereto, their successors and assigns. As used herein the term "Tenant" shall
include the Tenant, its successors and assigns; the words "foreclosure" and
"foreclosure sale" as used herein shall be deemed to include the acquisition of
Landlord's estate in the Premises by voluntary deed (or assignment) in lieu of
foreclosure, and the word "Mortgagee" shall include the Mortgagee herein
specifically named and any of its successors and assigns, including anyone who
shall have succeeded to Landlord's interest in the Premises by, through or under
foreclosure of the Mortgage.
9. This Agreement shall not be modified or amended except in writing
signed by all parties hereto.
10. The use of the neuter gender in this Agreement shall be deemed to
including any other gender, and words in the singular number shall be held to
include the plural, when the sense requires.
IN WlTNESS WHEREOF the parties hereto have placed their hands and seals
the day and year first above written.
2
<PAGE> 48
Signed and acknowledge Tenant: Palmer National Bank
the presence of us: (in organization)
/s/ LOIS A. ZAMBO BY: /s/ STEFAN A. HALPER
- ---------------------------- ----------------------------
Stefan A. Halper
BY: /s/ HARVEY MCLEAN
----------------------------
Harvey McLean
Attest Mortgagee
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
/s/ ROBERT P. VESTEWIG BY:/s/ ROBERT E. RAYMOND
- ---------------------------- ----------------------------
Robert P. Vestewig, Secretary Robert E. Raymond,
Second Vice President
(Corporate Seal)
Attest Landlord:
1667 K Street, N.W. Associates
Limited Partnership
/s/ MARY EBERT By /s/ JOHN E. AKRIDGE
- ---------------------------- ----------------------------
Ass't Secretary John E. Akridge, III
President
(Corporate Seal) The John Akridge Company
Managing General Partner
<PAGE> 49
Exhibit D - Continued
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT, made this 31st day of December 1981 between Palmer
National Bank with offices at ______________________________ (hereinafter called
"Tenant"), CONNECTICUT GENERAL LIFE INSURANCE COMPANY, a Connecticut corporation
having its principal office and place of business at 900 Cottage Grove Road,
Bloomfield, Connecticut (hereinafter called "Over Lessor"), and 1667 K
Street,N.W. Associates, Limited Partnership a partnership organized and existing
under the laws of the District of Columbia (hereinafter referred to as
"Landlord").
WITNESSETH
WHEREAS, the Tenant has entered into a certain lease (the "Lease")
dated 12/31/81, with Landlord covering premises within a certain building known
as 1667 K Street, N.W. (the "Premises"); and more particularly described in
Exhibit "A" attached hereto and incorporated herein; and
WHEREAS, the Over Lessor will enter into, or has entered into, a
certain lease (the "Over Lease") with Landlord in which Landlord leases premises
owned by Over Lessor.
WHEREAS, Over Lessor has been requested by Tenant and by Landlord to
enter into a non-disturbance agreement with Tenant;
NOW THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto mutually covenant and agree as
follows:
1. In the event of termination of the Over Lease or in the event Over
Lessor acquires the Landlord's leasehold interest, Over Lessor agrees to
recognize Tenant and further agrees that Tenant shall not be disturbed in its
<PAGE> 50
possession of the leased premises for any reason other than one which would
entitle the Landlord to terminate the Lease under its terms or would cause
without any further action by such Landlord the termination of the Lease or
would entitle such Landlord to dispossess the Tenant from the leased premises.
2. Tenant agrees with Over Lessor that if the interest of Landlord in
the leased premises shall be transferred to and owned by Over Lessor by reason
of termination of the Over Lease or in any other manner, Tenant shall be bound
to Over Lessor under all of the terms, covenants and conditions of the Lease for
the balance of the term thereof remaining and any extension or renewal thereof
which may be affected in accordance with any option therefor in the Lease, with
the same force and effect as if Over Lessor were the Landlord under the Lease,
and Tenant does hereby attorn to Over Lessor as its Landlord, said attornment
to be effective and self-operative without the execution of any further
instruments on the part of any of the parties hereto immediately upon Over
Lessor succeeding to the interest of the Landlord in the leased premises.
3. In the event that the Landlord shall default in the performance or
observance of any of the terms, conditions or agreements in the Lease, Tenant
shall give written notice thereof to Over Lessor and Over Lessor shall have the
right (but not the obligation) to cure such default. Tenant shall not take any
action with respect to such default under the Lease including without limitation
any action in order to terminate, rescind or void the Lease or to withhold any
rental thereunder, for a period of ten (10) days after mailing of such written
notice thereof to Over Lessor with respect to any such default capable of being
cured by the payment of money and for a period of thirty (30) days after mailing
of such written notice thereof to the Over Lessor with respect to any other such
default (provided that in the case of any default which cannot be cured by the
payment of money and cannot with diligence be cured within such thirty (30) day
period because of the nature of such default or because Over Lessor requires
time to obtain possession of the leasehold estate in order to cure the default,
if the Over Lessor shall proceed promptly to attempt to obtain possession of the
leasehold estate, where possession is required to cure the same and thereafter
shall prosecute the curing of such
2
<PAGE> 51
default with diligence and continuity, then the time within which such default
may be cured shall be extended for such a period as may be necessary to complete
the curing of the same with diligence and continuity).
4. Landlord agrees with Over Lessor that Landlord's estate in the
leased premises shall not be conveyed, encumbered nor shall the Landlord further
assign Landlord's interest in the Lease without the prior written consent of
Over Lessor. Landlord further agrees that in the event said estate in the leased
premises or said interest in the Lease passes to any person, firm or corporation
by operation of law or by any other means, such passage of title shall be
subject to the Lease.
5. This agreement shall bind and inure to the benefit of the parties
hereto, their successors and assigns.
6. This agreement shall not be modified or amended except in writing
signed by all parties hereto.
IN WITNESS WHEREOF, the parties hereto have placed their hands and
seals the day and year first above written.
Signed and acknowledged TENANT: Palmer National Bank
in the presence of: (in organization)
/s/ LOIS A. ZAMBO /s/ STEFAN A. HALPER
- ---------------------------- ------------------------------------
Stefan A. Halper
- ----------------------------
- ---------------------------- /s/ HARVEY MCLEAN
------------------------------------
- ---------------------------- Harvey McLean
LANDLORD: 1667 K Street, N.W. Associates
Limited Partnership
/s/ MARY EBERT By /s/ JOHN E. AKRIDGE
- ---------------------------- ---------------------------------
Ass't Secretary John E. Akridge, III, President
- ---------------------------- The John Akridge Company
Managing General Partner
(Signatures continued on next page)
OVER LESSOR:
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By /s/ ROBERT E. RAYMOND
----------------------------
Robert E. Raymond,
Second Vice President
Acknowledgment
3
<PAGE> 52
EXHIBIT E
[LOGO] CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Hartford, Connecticut
MODIFICATION AND RATIFICATION OF ASSIGNED LEASE
The undersigned (hereinafter called Landlord),
of , County of ,
State of , and
(hereinafter called Tenant), of , in consideration of One Dollar
($1.00 and other considerations, hereby agree between themselves as follows:
1. A certain lease from Landlord to Tenant dated ,
19 and recorded in County, State of
, described as follows:
together with amendments dated:
is now in full force and effect and is hereby modified to state that the
commencement of the original term of said lease shall be , 19 .
2. Tenant has accepted and is now in possession of said premises.
3. Tenant and Landlord acknowledge that an Assignment of Lessor's Interest
in said lease will be or has been made to Connecticut General Life
Insurance Company and that no modification, adjustment, revision, or
cancellation of said Lease or amendments thereto shall be effective
unless written consent of Connecticut General Life Insurance Company is
obtained, and that until further notice payments under said Lease may
continue as heretofore.
4. No rent under said Lease has been paid for more than thirty days in
advance of its due date.
5. Tenant is paying the full lease rental.
6. All work required to be performed by Landlord under the lease has been
completed.
7. There are no defaults in the lease.
Except as modified herein, all other provisions of said lease and the
amendments referred to above are hereby ratified.
<PAGE> 53
In witness whereof Landlord and Tenant have executed this document
this day of 19 .
Signed, sealed, acknowledged
and delivered in the presence
of Witnesses and at the request
of Landlord and Tenant
Delete this clause if Witnesses not necessary.
- ------------------------------ -------------------------------------(SEAL)
Landlord
Address of Landlord
- ------------------------------
-------------------------------------------
Street and No. City State
- ------------------------------ -------------------------------------(SEAL)
Tenant
Address of Tenant
- ------------------------------
--------------------------------------------
Street and No. City State
Acknowledgments for Landlord and Tenant
STATE OF )
: ss.
COUNTY OF )
STATE OF )
: ss.
COUNTY OF )
<PAGE> 54
Exhibit F
Basic Rent Schedule
(8,000 square feet)
<TABLE>
<CAPTION>
Annual Monthly
Rent Rent
----------- ---------
<S> <C> <C>
Year 1 $267,360.00 22,280.00
2 274,320.00 22,860.00
3 282,320.04 23,526.67
4 290,319.96 24,193.33
5 298,320.00 24,860.00
6 306,320.04 25,526.67
7 314,319.96 26,193.33
8 322,310.04 26,859.17
9 330,320.04 27,526.67
10 338,319.96 28,193.33
</TABLE>
<PAGE> 55
ADDENDUM
This Addendum to Agreement of Lease dated 12/31, 1981 by and between
1667 K Street, N.W. Associates Limited Partnership ("Landlord") and Palmer
National Bank ("Tenant") covering a portion of the First Basement and a portion
of the First Floor ("Premises") of an office building under construction by
Landlord at 1667 K Street, N.W. Washington D. C. (the "Building").
The parties hereto incorporate in to the above Agreement of Lease (the
"Lease") as though therein fully rewritten and made a part hereof, the following
terms and conditions which amend, supplement or define the provisions contained
in such Lease and agree that whatsoever any provision contained in this Lease,
the Addendum provisions shall prevail.
22. Provided Tenant is not in default hereunder, Tenant shall have the right to
renew the term of this lease for an additional term of nine (9) years at market
terms and conditions by giving Landlord three hundred sixty (360) days written
notice. In the event the Lease Amendment is not executed at least one hundred
eighty (180) days prior to the Lease Expiration Date this option shall become
null and void.
23. Tenant shall have the right to install an automatic teller machine in a
prominent location on the first floor street level within the Premises at a
location mutually acceptable to Landlord and Tenant.
24. Provided Tenant has performed hereunder, Landlord shall allow Tenant
beneficial occupancy of the Premises at least ninety (90) days prior to the
Lease Commencement Date to install fixtures and equipment.
25. Tenant shall have the right to install at Tenant expense, building standard
signage (similiar to 1015 Fifteenth Street, N.W.) approved in writing by
Landlord.
26. Tenant shall have the right to lease six (6) monthly parking spaces from the
garage operator at the prevailing rate adjusted from time to time. Said spaces
may or may not be reserved, assigned, attendant park or self park.
27. in the event Tenant is unable to obtain approval of the Comptroller of the
Currency for the charter of the bank within two hundred thirty (230) days of
lease approval by lender, the lease shall become null and void. In that event
Tenant shall be entitled to a refund of the security deposit and all parties
shall be relieved of further liability hereunder.
28. Tenant shall pay for the cost of design and structural reinforcement for the
slabs and columns to support the vaults, stairs and stair openings, not to
exceed Fifteen Thousand Dollars ($15,000), which shall not be refundable in the
event the lease is cancelled. Said amount shall be placed in escrow pending
lease execution and shall be due and payable upon completion of the design and
pricing of the work and the execution of the Lease by all parties.
29. Notwithstanding the provision in Paragraph 5 Landlord shall waive the right
of first refusal and terminate (provided in Paragraph 5c) provided Tenant
continues to occupy one third of the Premises. Further, Landlord agrees to
exclude from the profits any leasing fees or advertising necessary to Sublet the
space or the amortized cost of extra tenant work.
30. Notwithstanding the provisions of Paragraph 15(b), Tenant shall not be
prevented from making any separate claim or cause of action which Tenant may
have directly against the condemning authority and which Tenant is able to
pursue without interfering with Landlord's claim or cause of action and without
eliminating Landlord's right to Landlord's award.
<PAGE> 56
31. Provided Tenant is not In default hereunder, Tenant shall have the first
right to negotiate for any space which is contigious to the Premises at said
time said space becomes available for lease excluding the initial leasing of the
space. Landlord shall give notice to Tenant of the anticipated availability,
terms and conditions for lease of the space. In the event a lease is not
executed within fifteen days of the date Landlord gives Tenant notice, Tenant's
right to negotiate shall become null and void.
32. The individuals executing this Lease on behalf of Palmer National Bank
(which is in organization) are two of the organizers of the Tenant. This Lease
shall be deemed to be assigned to Palmer National Bank upon issuance to Palmer
National Bank by the Comptroller of the Currency of final unconditional approval
of its national bank charter application, unless the Lease has been terminated
prior to that time. Landlord agrees that from and after the date of the
Comptroller of the Currency's approval Landlord shall look exclusively to the
Tenant for the satisfaction of all of the Tenant's obligations under this Lease.
33. Notwithstanding the provision of Paragraph 3(b) and 3(c), Tenant's
proportionate share of increased operating charges for capital improvements,
financing costs and ground rent shall not exceed the product of 0.15 times the
Basic Rent times the percentage change in the CPI index for any calendar year.
<PAGE> 1
EXHIBIT 10AK
[GARY K. BAHENA LETTERHEAD]
July 16, 1996
BY MESSENGER
Mr. Webb C. Hayes, IV
President
Palmer National Bank
1667 K Street, N.W.
Washington, D.C. 20006
Re: Akridge/1225 Eye Street, N.W. -- Proposed First
Amendment to Lease
Dear Webb:
Enclosed please find a fully executed original of the above for your
records.
As usual, please do not hesitate to call me if you have any questions
or comments.
Sincerely yours,
/s/ GARY K. BAHENA
Gary K Bahena
Enclosures
ak3169
cc(w/o encl.): Alan Wasserbach
Cindy Judge
Wil Pace
<PAGE> 2
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (the "Amendment") made this 20th day of
June, 1996, by and between 1225 Eye Street, N.W. Associates Limited Partnership
("Landlord") and The Palmer National Bank ("Tenant").
WHEREAS, Landlord and Tenant previously entered into a certain
Agreement of Lease dated October 28, 1985 (the "Lease"), pursuant to which
Tenant leased certain space at 1225 Eye Street, N.W. located on the 1st floor of
the Building and known as Store #2 (the "Premises");
WHEREAS, the original term of the Lease expires May 31, 1996;
WHEREAS, Tenant desires to extend the term of the Lease; and
WHEREAS, Landlord and Tenant desire to provide for the terms and
conditions for such extension, and to amend the Lease for certain other
purposes, all as hereinafter more fully set forth.
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) in
hand paid, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:
1. Definitions; Premises.
(a) Definitions. Defined or capitalized terms used herein and not
otherwise defined herein shall have the same meanings as in the Lease.
(b) Premises -- Construction at 1215 Eye Street, N.W.
(i) Tenant acknowledges that current zoning contemplates that
an office building may be constructed at 1215 Eye Street, N.W. (the "1215
Building") and that such 1215 Building may be constructed so as to at least have
the appearance of being joined with and a part of the Building. In such a case,
Landlord and/or the owner of the 1215 Building may reconstruct the existing
lobby of the Building, the entrance lobby/corridors leading thereto and/or the
adjoining retail areas (the "Reconfigured Lobby/Retail Area"). Landlord shall
use reasonable efforts to keep Tenant apprised of Landlord's plans for the
Reconfigured Lobby/Retail Area, however, Tenant acknowledges that, subject to
the terms of Paragraph l(b)(ii) below, Landlord may undertake such
reconfiguration without Tenant's approval thereof (the terms contained in the
"*" in Paragraph 120 of the Lease being hereby deleted). Tenant expressly
acknowledges that the terms of this Paragraph l(b) (and Landlord's rights
hereunder) shall apply not only during the Initial Extension described in
Paragraph 2(a) below but, as well, during the Additional Extension described in
Paragraph 2(b) below.
(ii) Landlord and Tenant agree that in the event of any
reconstruction which requires Landlord to close or otherwise substantially
restrict access from or configure the existing east corridor entrance lobby of
the Building (including, but not limited to, Tenant's existing lobby entrance
foyer and/or Tenant's existing conference room) then Landlord shall abate all
Rent due in respect of the portion or portions of Tenant's lobby entrance foyer
and/or conference room so taken, such monthly abatement to be equal to the
product obtained by multiplying the Rent times a fraction the numerator of which
is the rentable square footage of the area actually so taken or closed off by
Landlord and the denominator of which is two thousand one hundred fourteen
(2,114) and dividing the resulting number by twelve (12). The foregoing
abatement shall be applied on a monthly basis for so long as such closure or
substantial restriction continues and shall be pro-rated for partial months.
Landlord shall provide Tenant with at least ten (10) business days prior written
notice of the commencement and termination dates of such closure or substantial
restriction.
(iii) In the event that the Reconfigured Lobby/Retail Area
results in the creation of a single, joint Eye Street lobby for both 1215 Eye
Street and 1225 Eye Street then Tenant shall have the right, subject to
Landlord's designation of the location thereof and to Landlord's approval of the
design thereof (including all finishes), to maintain identification signage in
the Reconfigured Lobby/Retail Area adjacent to Tenant's lobby entrance into the
Premises and to have direct access to the Premises from the Reconfigured
Lobby/Retail Area, all as Landlord may determine. In the event that such direct
access requires that additional space be added to the Premises, then Landlord
and Tenant shall reasonably agree upon a time table for doing so and upon a
design therefor and upon the completion of such work the Lease shall be amended
to add such additional Premises to the Premises at the same rental rate, and
upon the same terms, as the other portions of the Premises (the "Additional
Premises"). Such Addition, and all required related work (including all agreed
and other required or related construction, design and other work, the "Tenant
Work"), shall be done at the sole cost and expense of Tenant (the "Tenant Work
Costs"). The term "Tenant Work Costs" shall include a construction management
fee payable to Landlord and equal to such amount as Landlord and Tenant may
mutually agree (not, however, to exceed
<PAGE> 3
eight percent (8%) of the total other Tenant Work Costs). In the event that
total amount of the Tenant Work Costs (exclusive of Landlord's construction
management fee) are originally estimated by Landlord to exceed Forty Thousand
Dollars ($40,000.00), then Landlord shall solicit bids or cost estimates from at
least three (3) of Landlord's usual contractors and Tenant shall have the right,
within five (5) business days following receipt thereof, to select the bid
acceptable to it, whereupon Landlord may utilize the services of any contractor
Landlord may determine to use so long as the total initial price agreed to be
paid to such contractor (e.g., exclusive of changes, clarifications and the
like) does not exceed the bid or estimate price approved by Tenant. Landlord and
Tenant shall cooperate reasonably with each other in connection with the design
and construction of the Tenant Work, and the approval of the costs therefor,
with the intent being to minimize to the greatest degree possible the time
involved in connection therewith and Tenant shall, within three (3) business
days following receipt of written request therefor, respond with all approvals,
sign-offs, consents, etc. requested of it. The foregoing notwithstanding, in the
event that Landlord determines that Tenant has failed to timely respond with any
required information, or has otherwise caused the design, bidding, performance
and completion of the Tenant Work to be delayed, then Landlord shall notify
Tenant of such fact in writing and the Additional Premises Addition shall be
deemed to have occurred and Tenant shall thereafter be liable therefor as
though the Tenant Work had been completed. Landlord shall notify Tenant upon
Landlord's determination of the size, location and configuration of the
Additional Premises (the "Additional Premises Notification") and Tenant shall
have the right, by written notice received by Landlord within thirty (30) days
following Tenant's receipt of the Additional Premises notification, to elect to
accept or decline such Additional Premises. The Additional Premises Notification
shall also set forth Landlord's good faith estimate of the cost or ranges of
costs of the Tenant work, assuming that the scope thereof is to continue the
then existing character and look of the Premises into the Additional Premises.
Landlord may also, at or following the time of the Additional Premises
Notification and/or Landlord's receipt of Tenant's acceptance, submit a lease
amendment to Tenant more formally confirming such acceptance. Anything to the
contrary contained herein notwithstanding, in the event that Tenant fails to
timely and unequivocally accept the Additional Premises (which acceptance shall
not be deemed to constitute acceptance of any Tenant Work costs estimate made by
Landlord in the Additional Premises Notification), including if Tenant fails to
execute and return the aforedescribed lease amendment within such thirty (30)
day period (or, if later, within ten (10) days following Tenant's receipt of
such amendment), then Tenant shall be deemed to have rejected such Additional
Premises and the terms of this Paragraph 1(b)(iii) shall no longer apply.
2. Term.
(a) Initial Extension. Effective as of June 1, 1996 (the
"Effective Date"), the term under the Lease (the "term" or "Term") is hereby
extended to expire May 31, 1997, which expiration date shall hereafter
constitute the "Lease Expiration Date" under the Lease. Except as otherwise
expressly provided in Paragraph 2(b) below, all options to renew or extend
the term of the Lease, if any, are hereby deemed deleted.
(b) Additional Extension.
(i) Provided that there is no uncured default hereunder by
Tenant, and that no more than two (2) Events of Default have occurred
hereunder during the Term, Tenant shall have one option to extend the Term of
the Lease for an additional five (5) years. Such option shall be exercised by
Landlord receiving, on or before December 1, 1996, written notice (the
"Extension Notice") of Tenant's desire to effect such extension. Within ten
(10) days of Landlord's receipt of the Extension Notice, Landlord shall notify
Tenant of Landlord's proposal ("Landlord's Proposal") for the Basic Rent and
other economic terms. Landlord's Proposal shall be Landlord's good faith
estimate of the fair market rent for the Premises over the proposed extension
Term, i.e., Landlord's good faith estimate of the gross market rent over such
proposed term. Landlord's Proposal shall also contain a proposed improvement
allowance. Tenant and Landlord shall then have twenty (20) days (the
"Discussion Period") following Tenant's receipt of Landlord's Proposal to
reach agreement on such rent and allowance. Should Landlord and Tenant be
unable to agree on the rent and allowance during such Discussion Period, then
the option and right contained in this Paragraph 2(b) shall be null and void.
(ii) The foregoing extension option and obligations shall
apply to the originally named Tenant only (and only in the event that such
originally named Tenant then occupies, and shall for the first lease year of
the renewal Term continue to occupy, at least sixty-six percent (66%) of the
Premises) and not to any assignee or subtenant under the Lease. As used
herein, the phrase "the originally named Tenant" shall include any current or
successor parent or subsidiary of Tenant and/or of any entity which may
acquire Tenant or into which Tenant may be merged provided that such successor
or other entity then conducts (and thereafter continues to conduct) retail
banking operations in the Premises.
2
<PAGE> 4
3. Rent.
(a) Basic Rent. Effective as of the Effective Date, the basic rent
(the "Basic Rent") is agreed to be One Hundred One Thousand Nine Hundred Twelve
and 04/100 Dollars ($101,912.04) annually, payable in equal monthly
installments, in advance, of Eight Thousand Four Hundred Ninety-Two and 67/100
Dollars ($8,492.67).
(b) Increases in Real Estate Taxes. Effective as of the Effective
Date, and continuing through May 31, 1997, Landlord shall abate all additional
rent due under Paragraph 3(b)(i) of the Lease. The foregoing notwithstanding,
Landlord shall continue to have the right to make any adjustments permitted
under Paragraph 3(b) of the Lease for periods prior to the Effective Date.
(c) Increases in Annual Operating Charges. Effective as of the
Effective Date, and continuing through May 31, 1997, Landlord shall abate all
additional rent due under Paragraph 3(c) of the Lease. The foregoing
notwithstanding, Landlord shall continue to have the right to make any
adjustments permitted under Paragraph 3(c) of the Lease for periods prior to
the Effective Date.
(d) Base Rate for Real Estate Taxes and Operating Charges.
Effective as of the Effective Date, and continuing through May 31, 1997,
Landlord shall abate all additional rent due under Paragraph 3(d) of the Lease.
The foregoing notwithstanding, Landlord shall continue to have the right to
make any adjustments permitted under Paragraph 3(d) of the Lease for periods
prior to the Effective Date.
(e) Increase in Cost of Living. Effective as of the Effective
Date, and continuing through May 31, 1997, Landlord shall abate all additional
rent due under Paragraph 3(e) of the Lease. The foregoing notwithstanding,
Landlord shall continue to have the right to make any adjustments permitted
under Paragraph 3(e) of the Lease for periods prior to the Effective Date.
(f) Electricity and Char. Nothing in this Paragraph 3 shall be
deemed to modify or reduce Tenant's obligation to continue to arrange for its
own janitorial cleaning service and to continue to pay the applicable suppliers
directly for all utilities consumed in the Premises.
4. Assignment and Subletting. The approval standards and conditions set
forth in Paragraph 5(b) of Lease shall apply to proposed assignments as well as
to proposed sublettings and, provided that Tenant is not in default under the
Lease, but subject to the other terms of the Lease, Landlord's consent to any
proposed assignment or subletting shall not be unreasonably withheld,
conditioned or delayed. Tenant shall in all events reimburse Landlord for all
of Landlord's reasonable costs and expenses (including, but not limited to,
credit check fees and reasonable attorneys' fees) incurred by Landlord in
reviewing and processing any request for Landlord's consent pursuant to
Paragraph 5 of the Lease. Landlord agrees that, provided that Tenant and its
assignee and/or sublessee accept Landlord's then standard form of consent
letter, Landlord's attorneys' fees to be reimbursed by Tenant shall not exceed
One Thousand ($1,000.00) Dollars.
5. Insurance. The following is added as a new Paragraph 11(c) to the
Lease:
(c) Waiver of Subrogation. Landlord and Tenant each hereby release
the other and its agents and employees from any claims for damage or loss to
any person or the Premises, the Building, the Land and any property contained
therein or thereon, or any other property, caused by or resulting from any
risks insured against under any insurance policies carried (or which would be
insured against under any insurance policies required hereunder to be carried)
by Landlord or Tenant at the time of any such damage or loss, regardless of the
cause of the damage or loss (including the negligence of Landlord or Tenant or
their respective agents or employees). Tenant's insurance policies shall name
Landlord, Landlord's general partners, Landlord's lender(s) and the property
management company as additional named insureds and shall contain an express
waiver of subrogation in favor of Landlord, Landlord's insurers and each of the
foregoing additional named insureds.
6. Landlord's Indemnifications. Landlord's indemnifications (if any)
under the Lease are subject to the terms of Paragraphs 11(c), 13(a) and 21(f) of
the Lease.
7. Waiver of Jury Trial. Paragraph 21(e) of the Lease is amended and
restated to read as follows:
(e) Waiver of Jury Trial. LANDLORD AND TENANT HEREBY WAIVE TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE
PARTIES HERETO AGAINST THE OTHER ON OR IN RESPECT OF ANY MATTER WHATSOEVER
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE LEASE, THE RELATIONSHIP OF
3
<PAGE> 5
LANDLORD AND TENANT THEREUNDER, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
AND/OR ANY CLAIM OF INJURY OR DAMAGE.
8. Liability. Paragraph 21(f) of the Lease is amended and restated to
read as follows:
Limitation of Landlord Liability. Notwithstanding any provision to
the contrary contained in the Lease, Tenant shall look solely to the estate and
property of Landlord in and to the Land and the Building in the event of any
claim against Landlord arising out of or in connection with the Lease, the
relationship of Landlord and Tenant, or Tenant's use of the Premises, and Tenant
agrees that the liability of Landlord arising out of or in connection with the
Lease, the relationship of Landlord and Tenant, or Tenant's use of the Premises,
shall be limited to such estate and property of Landlord in and to the Land and
the Building. No properties or assets of Landlord other than the estate and
property of Landlord in and to the Land and the Building and no property owned
by any partner of Landlord shall be subject to levy, execution or other
enforcement procedures for the satisfaction of any judgment (or other judicial
process) or for the satisfaction of any other remedy of Tenant arising out of or
in connection with the Lease, the relationship of Landlord and Tenant or
Tenant's use of the Premises. Notwithstanding anything to the contrary contained
in the Lease, if any provision of the Lease expressly or impliedly obligates
Landlord not to unreasonably withhold or delay its consent or approval, an
action for declaratory judgment or specific performance shall be Tenant's sole
right and remedy in any dispute as to whether Landlord has violated such
obligation.
9. Improvements to Premises. Landlord shall have no obligation to make
any improvements, alterations or repairs to the Premises and Tenant shall accept
same "as is".
10. Broker. Landlord and Tenant represent and warrant that with the
exception of The John Akridge Management Company (the "Broker") neither of them
has dealt with or employed any broker, agent or finder in connection with this
Amendment. The Broker shall be paid a commission by Landlord pursuant to a
separate written agreement.
11. Non-Competition. Landlord agrees that the terms of Paragraph 25 of
the Lease shall apply to the 1215 Building as well as to the Building during any
period or periods that the 1215 Building is actually held in common legal
ownership with the Building, with the effect that no lease shall during any such
common ownership period be entered into for first floor retail space in the 1215
Building which would violate such Paragraph 25. Tenant acknowledges that the
foregoing extension of such Paragraph 25 shall not be deemed to be binding upon
the 1215 Building, or any owner thereof, except at such time as both such
buildings are legally owned by the same person. In addition, Tenant further
acknowledges that the prohibition contained in such Paragraph 25 shall be
limited to prohibiting such a lease only if the bank or savings and loan
association proposes to conduct retail banking services therefrom, such
Paragraph not being deemed to prohibit a lease with a bank or savings and loan
association which proposes to use its premises for brokerage, insurance or other
purposes not then constituting a significant (i.e., greater than thirty percent
(30%)) portion of Tenant's then business operations in the Premises.
12. No Further Modification. Except as otherwise provided herein, the
Lease continues unmodified and in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have caused their signatures and
seals to be hereunto affixed as of the date and year first above written.
LANDLORD:
ATTEST 1225 EYE STREET, N.W.
ASSOCIATES LIMITED PARTNERSHIP
By: The John Akridge Company
Its General Partner
[SIG] By: /s/ JOHN E. AKRIDGE, III
- ---------------------------- -----------------------------
Assistant Secretary John E. Akridge, III
[Corporate Seal] Its President
TENANT:
ATTEST THE PALMER NATIONAL BANK
[SIG] By: /s/ WEBB C. HAYES, IV
- ---------------------------- ---------------------------------
Assistant Secretary Webb C. Hayes, IV
[Corporate Seal] Its President
4
<PAGE> 6
[GARY K. BAHENA LETTERHEAD]
July 16, 1996
BY MESSENGER
Mr. Webb C. Hayes, IV
President
Palmer National Bank
1667 K Street, N.W.
Washington, D.C. 20006
Re: Akridge/1225 Eye Street, N.W. -- Proposed First
Amendment to Lease
Dear Webb:
Enclosed please find a fully executed original of the above for your
records.
As usual, please do not hesitate to cal1 me if you have any questions
or comments.
Sincerely yours,
/s/ GARY K. BAHENA
------------------
Gary K. Bahena
Enclosures
ak3169
cc(w/o encl.): Alan Wasserbach
Cindy Judge
Wil Pace
<PAGE> 7
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (the "Amendment") made this 20th day of
June, 1996, by and between 1225 Eye Street, N.W. Associates Limited Partnership
("Landlord") and The Palmer National Bank ("Tenant").
WHEREAS, Landlord and Tenant previously entered into a certain
Agreement of Lease dated October 28, 1985 (the "Lease"), pursuant to which
Tenant leased certain space at 1225 Eye Street, N.W. located on the 1st floor of
the Building and known as Store #2 (the "Premises");
WHEREAS, the original term of the Lease expires May 31,1996;
WHEREAS, Tenant desires to extend the term of the Lease; and
WHEREAS, Landlord and Tenant desire to provide for the terms and
conditions for such extension, and to amend the Lease for certain other
purposes, all as hereinafter more fully set forth.
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) in
hand paid, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:
1. Definitions; Premises.
(a) Definitions. Defined or capitalized terms used herein and
not otherwise defined herein shall have the same meanings as in the Lease.
(b) Premises -- Construction at 1215 Eye Street, N.W.
(i) Tenant acknowledges that current zoning contemplates
that an office building may be constructed at 1215 Eye Street, N.W. (the "1215
Building") and that such 1215 Building may be constructed so as to at least have
the appearance of being joined with and a part of the Building. In such a case,
Landlord and/or the owner of the 1215 Building may reconstruct the existing
lobby of the Building, the entrance lobby/corridors leading thereto and/or the
adjoining retail areas (the "Reconfigured Lobby/Retail Area"). Landlord shall
use reasonable efforts to keep Tenant apprised of Landlord's plans for the
Reconfigured Lobby/Retail Area, however, Tenant acknowledges that, subject to
the terms of Paragraph 1(b)(ii) below, Landlord may undertake such
reconfiguration without Tenant's approval thereof (the terms contained in the
"*" in Paragraph 20 of the Lease being hereby deleted). Tenant expressly
acknowledges that the terms of this Paragraph l(b) (and Landlord's rights
hereunder) shall apply not only during the Initial Extension described in
Paragraph 2(a) below but, as well, during the Additional Extension described in
Paragraph 2(b) below.
(ii) Landlord and Tenant agree that in the event of
any reconstruction which requires Landlord to close or otherwise substantially
restrict access from or configure the existing east corridor entrance lobby of
the Building (including, but not limited to, Tenant's existing lobby entrance
foyer and/or Tenant's existing conference room) then Landlord shall abate all
Rent due in respect of the portion or portions of Tenant's lobby entrance foyer
and/or conference room so taken, such monthly abatement to be equal to the
product obtained by multiplying the Rent times a fraction the numerator of which
is the rentable square footage of the area actually so taken or closed off by
Landlord and the denominator of which is two thousand one hundred fourteen
(2,114) and dividing the resulting number by twelve (12). The foregoing
abatement shall be applied on a monthly basis for so long as such closure or
substantial restriction continues and shall be pro-rated for partial months.
Landlord shall provide Tenant with at least ten (10) business days prior written
notice of the commencement and termination dates of such closure or substantial
restriction.
(iii) In the event that the Reconfigured Lobby/Retail
Area results in the creation of a single, joint Eye street lobby for both 1215
Eye Street and 1225 Eye Street then Tenant shall have the right, subject to
Landlord's designation of the location thereof and to Landlord's approval of the
design thereof (including all finishes), to maintain identification signage in
the Reconfigured Lobby/Retail Area adjacent to Tenant's lobby entrance into the
Premises and to have direct access to the Premises from the Reconfigured
Lobby/Retail Area, all as Landlord may determine. In the event that such direct
access requires that additional space be added to the Premises, then Landlord
and Tenant shall reasonably agree upon a time table for doing so and upon a
design therefor and upon the completion of such work the Lease shall be amended
to add such additional Premises to the Premises at the same rental rate, and
upon the same terms, as the other portions of the Premises (the "Additional
Premises"). Such Addition, and all required related work (including all agreed
and other required or related construction, design and other work, the
"Tenant Work"), shall be done at the sole cost and expense of Tenant (the
"Tenant Work Costs"). The term "Tenant Work Costs" shall include a construction
management fee payable to Landlord and equal to such amount as Landlord and
Tenant may mutually agree (not, however, to exceed
<PAGE> 8
eight percent (8%) of the total other Tenant Work Costs). In the event that
total amount of the Tenant Work Costs (exclusive of Landlord's construction
management fee) are originally estimated by Landlord to exceed Forty Thousand
Dollars ($40,000.00), then Landlord shall solicit bids or cost estimates from at
least three (3) of Landlord's usual contractors and Tenant shall have the right,
within five (5) business days following receipt thereof, to select the bid
acceptable to it, whereupon Landlord may utilize the services of any contractor
Landlord may determine to use so long as the total initial price agreed to be
paid to such contractor (e.g., exclusive of changes, clarifications and the
like) does not exceed the bid or estimate price approved by Tenant. Landlord and
Tenant shall cooperate reasonably with each other in connection with the design
and construction of the Tenant Work, and the approval of the costs therefor,
with the intent being to minimize to the greatest degree possible the time
involved in connection therewith and Tenant shall, within three (3) business
days following receipt of written request therefor, respond with all approvals,
sign-offs, consents, etc. requested of it. The foregoing notwithstanding, in the
event that Landlord determines that Tenant has failed to timely respond with any
required information, or has otherwise caused the design, bidding, performance
and completion of the Tenant Work to be delayed, then Landlord shall notify
Tenant of such fact in writing and the Additional Premises Addition shall be
deemed to have occurred and Tenant shall thereafter be liable therefor as
though the Tenant Work had been completed. Landlord shall notify Tenant upon
Landlord's determination of the size, location and configuration of the
Additional Premises (the "Additional Premises Notification") and Tenant shall
have the right, by written notice received by Landlord within thirty (30) days
following Tenant's receipt of the Additional Premises notification, to elect to
accept or decline such Additional Premises. The Additional Premises Notification
shall also set forth Landlord's good faith estimate of the cost or ranges of
costs of the Tenant Work, assuming that the scope thereof is to continue the
then existing character and look of the Premises into the Additional Premises.
Landlord may also, at or following the time of the Additional Premises
Notification and/or Landlord's receipt of Tenant's acceptance, submit a lease
amendment to Tenant more formally confirming such acceptance. Anything to the
contrary contained herein notwithstanding, in the event that Tenant fails to
timely and unequivocally accept the Additional Premises (which acceptance shall
not be deemed to constitute acceptance of any Tenant Work Costs estimate made by
Landlord in the Additional Premises Notification), including if Tenant fails to
execute and return the aforedescribed lease amendment within such thirty (30)
day period (or, if later, within ten (10) days following Tenant's receipt of
such amendment), then Tenant shall be deemed to have rejected such Additional
Premises and the terms of this Paragraph 1(b)(iii) shall no longer apply.
2. Term.
(a) Initial Extension. Effective as of June 1, 1996 (the
"Effective Date"), the term under the Lease (the "term" or "Term") is hereby
extended to expire May 31, 1997, which expiration date shall hereafter
constitute the "Lease Expiration Date" under the Lease. Except as otherwise
expressly provided in Paragraph 2(b) below, all options to renew or extend the
term of the Lease, if any, are hereby deemed deleted.
(b) Additional Extension.
(i) Provided that there is no uncured default hereunder by
Tenant, and that no more than two (2) Events of Default have occurred hereunder
during the Term, Tenant shall have one option to extend the Term of the Lease
for an additional five (5) years. Such option shall be exercised by Landlord
receiving, on or before December 1, 1996, written notice (the "Extension
Notice") of Tenant's desire to effect such extension. Within ten (10) days of
Landlord's receipt of the Extension Notice, Landlord shall notify Tenant of
Landlord's proposal ("Landlord's Proposal") for the Basic Rent and other
economic terms. Landlord's Proposal shall be Landlord's good faith estimate of
the fair market rent for the Premises over the proposed extension Term, i.e.,
Landlord's good faith estimate of the gross market rent over such proposed term.
Landlord's Proposal shall also contain a proposed improvement allowance. Tenant
and Landlord shall then have twenty (20) days (the "Discussion Period")
following Tenant's receipt of Landlord's Proposal to reach agreement on such
rent and allowance. Should Landlord and Tenant be unable to agree on the rent
and allowance during such Discussion Period, then the option and right contained
in this Paragraph 2(b) shall be null and void.
(ii) The foregoing extension option and obligations shall apply
to the originally named Tenant only (and only in the event that such originally
named Tenant then occupies, and shall for the first lease year of the renewal
Term continue to occupy, at least sixty-six percent (66%) of the Premises) and
not to any assignee or subtenant under the Lease. As used herein, the phrase
"the originally named Tenant" shall include any current or successor parent or
subsidiary of Tenant and/or of any entity which may acquire Tenant or into which
Tenant may be merged provided that such successor or other entity then conducts
(and thereafter continues to conduct) retail banking operations in the Premises.
2
<PAGE> 9
3. Rent.
(a) Basic Rent. Effective as of the Effective Date, the basic
rent (the "Basic Rent") is agreed to be One Hundred One Thousand Nine Hundred
Twelve and 04/100 Dollars ($101,912.04) annually, payable in equal monthly
installments, in advance, of Eight Thousand Four Hundred Ninety-Two and 67/100
Dollars ($8,492.67).
(b) Increases in Real Estate Taxes. Effective as of the
Effective Date, and continuing through May 31, 1997, Landlord shall abate all
additional rent due under Paragraph 3(b)(i) of the Lease. The foregoing
notwithstanding, Landlord shall continue to have the right to make any
adjustments permitted under Paragraph 3(b) of the Lease for periods prior to the
Effective Date.
(c) Increases in Annual Operating Charges. Effective as of the
Effective Date, and continuing through May 31, 1997, Landlord shall abate all
additional rent due under Paragraph 3(c) of the Lease. The foregoing
notwithstanding, Landlord shall continue to have the right to make any
adjustments permitted under Paragraph 3(c) of the Lease for periods prior to the
Effective Date.
(d) Base Rate for Real Estate Taxes and Operating Charges.
Effective as of the Effective Date, and continuing through May 31, 1997,
Landlord shall abate all additional rent due under Paragraph 3(d) of the Lease.
The foregoing notwithstanding, Landlord shall continue to have the right to make
any adjustments permitted under Paragraph 3(d) of the Lease for periods prior to
the Effective Date.
(e) Increase in Cost of Living. Effective as of the Effective
Date, and continuing through May 31, 1997, Landlord shall abate all additional
rent due under Paragraph 3(e) of the Lease. The foregoing notwithstanding,
Landlord shall continue to have the right to make any adjustments permitted
under Paragraph 3(e) of the Lease for periods prior to the Effective Date.
(f) Electricity and Char. Nothing in this Paragraph 3 shall be
deemed to modify or reduce Tenant's obligation to continue to arrange for its
own janitorial cleaning service and to continue to pay the applicable suppliers
directly for all utilities consumed in the Premises.
4. Assignment and Subletting. The approval standards and conditions set
forth in Paragraph 5(b) of Lease shall apply to proposed assignments as well as
to proposed sublettings and, provided that Tenant is not in default under the
Lease, but subject to the other terms of the Lease, Landlord's consent to any
proposed assignment or subletting shall not be unreasonably withheld,
conditioned or delayed. Tenant shall in all events reimburse Landlord for all of
Landlord's reasonable costs and expenses (including, but not limited to, credit
check fees and reasonable attorneys' fees) incurred by Landlord in reviewing and
processing any request for Landlord's consent pursuant to Paragraph 5 of the
Lease. Landlord agrees that, provided that Tenant and its assignee and/or
sublessee accept Landlord's then standard form of consent letter, Landlord's
attorneys' fees to be reimbursed by Tenant shall not exceed One Thousand
($1,000.00) Dollars.
5. Insurance. The following is added as a new Paragraph 11(c) to the
Lease:
(c) Waiver of Subrogation. Landlord and Tenant each hereby
release the other and its agents and employees from any claims for damage or
loss to any person or the Premises, the Building, the Land and any property
contained therein or thereon, or any other property, caused by or resulting from
any risks insured against under any insurance policies carried (or which would
be insured against under any insurance policies required hereunder to be
carried) by Landlord or Tenant at the time of any such damage or loss,
regardless of the cause of the damage or lose (including the negligence of
Landlord or Tenant or their respective agents or employees). Tenant's insurance
policies shall name Landlord, Landlord's general partners, Landlord's lender(s)
and the property management company as additional named insureds and shall
contain an express waiver of subrogation in favor of Landlord, Landlord's
insurers and each of the foregoing additional named insureds.
6. Landlord's Indemnifications. Landlord's indemnifications (if any)
under the Lease are subject to the terms of Paragraphs 11(c), 13(a) and 21(f) of
the Lease.
7. Waiver of Jury Trial. Paragraph 21(e) of the Lease is amended and
restated to read as follows:
(e) Waiver of Jury Trial. LANDLORD AND TENANT HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE
PARTIES HERETO AGAINST THE OTHER ON OR IN RESPECT OF ANY MATTER WHATSOEVER
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE LEASE, THE RELATIONSHIP OF
3
<PAGE> 10
LANDLORD AND TENANT THEREUNDER, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
AND/OR ANY CLAIM OF INJURY OR DAMAGE.
8. Liability. Paragraph 21(f) of the Lease is amended and restated to
read as follows:
Limitation of Landlord Liability. Notwithstanding any
provision to the contrary contained in the Lease, Tenant shall look solely to
the estate and property of Landlord in and to the Land and the Building in the
event of any claim against Landlord arising out of or in connection with the
Lease, the relationship of Landlord and Tenant, or Tenant's use of the Premises,
and Tenant agrees that the liability of Landlord arising out of or in connection
with the Lease, the relationship of Landlord and Tenant, or Tenant's use of the
Premises, shall be limited to such estate and property of Landlord in and to the
Land and the Building. No properties or assets of Landlord other than the estate
and property of Landlord in and to the Land and the Building and no property
owned by any partner of Landlord shall be subject to levy, execution or other
enforcement procedures for the satisfaction of any judgment (or other judicial
process) or for the satisfaction of any other remedy of Tenant arising out of or
in connection with the Lease, the relationship of Landlord and Tenant or
Tenant's use of the Premises. Notwithstanding anything to the contrary contained
in the Lease, if any provision of the Lease expressly or impliedly obligates
Landlord not to unreasonably withhold or delay its consent or approval, an
action for declaratory judgment or specific performance shall be Tenant's sole
right and remedy in any dispute as to whether Landlord has violated such
obligation.
9. Improvements to Premises. Landlord shall have no obligation to make
any improvements, alterations or repairs to the Premises and Tenant shall accept
same "as is".
10. Broker. Landlord and Tenant represent and warrant that with the
exception of The John Akridge Management Company (the "Broker") neither of them
has dealt with or employed any broker, agent or finder in connection with this
Amendment. The Broker shall be paid a commission by Landlord pursuant to a
separate written agreement.
11. Non-Competition. Landlord agrees that the terms of Paragraph 25 of
the Lease shall apply to the 1215 Building as well as to the Building during any
period or periods that the 1215 Building is actually held in common legal
ownership with the Building, with the effect that no lease shall during any such
common ownership period be entered into for first floor retail space in the 1215
Building which would violate such Paragraph 25. Tenant acknowledges that the
foregoing extension of such Paragraph 25 shall not be deemed to be binding upon
the 1215 Building, or any owner thereof, except at such time as both such
buildings are legally owned by the same person. In addition, Tenant further
acknowledges that the prohibition contained in such Paragraph 25 shall be
limited to prohibiting such a lease only if the bank or savings and loan
association proposes to conduct retail banking services therefrom, such
Paragraph not being deemed to prohibit a lease with a bank or savings and loan
association which proposes to use its premises for brokerage, insurance or other
purposes not then constituting a significant (i.e., greater than thirty percent
(30%)) portion of Tenant's then business operations in the Premises.
12. No Further Modification. Except as otherwise provided herein, the
Lease continues unmodified and in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have caused their signatures
and seals to be hereunto affixed as of the date and year first above written.
LANDLORD:
ATTEST: 1225 EYE STREET, N.W.
ASSOCIATES LIMITED PARTNERSHIP
By: The John Akridge Company
Its General Partner
[SIG] By: /s/ JOHN E. AKRIDGE, III
- ------------------------- -----------------------------
Assistant Secretary John E. Akridge, III
[Corporate Seal] Its President
TENANT:
ATTEST: THE PALMER NATIONAL BANK
[SIG] By: /s/ WEBB C. HAYES, IV
- ------------------------- -----------------------------------
Assistant Secretary Webb C. Hayes, IV
[Corporate Seal] Its President
4
<PAGE> 11
EXHIBIT X
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE ("Lease") is made this 28th day of October,
1985, by (i) 1225 Eye Street, N.W. Associates Limited Partnership (hereinafter
referred to as "Landlord") and (ii) The Palmer National Bank (hereinafter
referred to as Tenant").
WHEREAS, Landlord is the owner of an office building located at 1225
Eye Street, N.W., Washington, D.C., and more fully and legally described as Lot
47 in Square 285 in the District of Columbia as so denominated by the Surveyor
of the District of Columbia (such building being hereinafter referred to as the
"Building"); and
WHEREAS, Tenant desires to lease space in the Building and Landlord is
willing to rent Tenant space in the Building, upon the terms, conditions,
covenants and agreements set forth herein.
NOW, THEREFORE, the parties hereto, intending legally to be bound,
hereby covenant and agree as set forth below.
1. THE PREMISES. Landlord hereby leases to Tenant and Tenant hereby
leases from the Landlord, for the term and upon the terms, conditions,
covenants and agreements hereinafter provided, Store No. 2 located on the first
(1st) floor of the Building (such space being hereinafter referred to as the
"premises"). The premises are outlined in red on Exhibit A attached hereto and
made a part hereof. The lease of the premises includes the right, together with
other tenants of the Building and members of the public, to use the common
public areas of the Building, but includes no other rights not specifically set
forth herein. Landlord shall finish the premises as set forth in Exhibit B
attached hereto and made a part hereof. It is understood and agreed that
Landlord will not make, and is under no obligation to make, any structural or
other alterations, decorations, additions or improvements in or to the premises
except as set forth in Exhibit B.
2. TERM.
(a) The term of this Lease (hereinafter referred to as the "term")
shall be for a period commencing on June 1, 1986 (the "Lease Commencement
Date") and expiring at midnight on May 31, 1996 (the "Lease Expiration Date").*
(b) It is understood and agreed that if Tenant has fully and timely
performed in accordance with the provisions of Exhibit B hereof and if,
notwithstanding the timely submissions and approvals required of Tenant
therein, the premises are not substantially finished by Landlord in accordance
with the provisions of paragraph 2 of Exhibit B on or before the Lease
Commencement Date, or if for any other reason Landlord is unable to deliver
possession of the premises to Tenant on the Lease Commencement Date, this Lease
shall not be void or voidable, nor shall Landlord or Landlord's agents and
employees be liable to Tenant for any loss or damage resulting therefrom. In
such event the Lease Commencement Date shall be extended to the date on which
Landlord substantially completes the premises.
(c) It is further understood and agreed that if Tenant does not take
possession of the premises on the Lease Commencement Date for any reason other
than the inability of Landlord to deliver possession of the premises to Tenant
on such date as provided in Paragraph 2 (b) above, or if Tenant causes a delay
in the delivery of possession of the premises as set forth in paragraph 4 of
Exhibit B, the Lease Commencement Date shall not be extended, the term of this
Lease shall nonetheless begin on the Lease Commencement Date and Tenant's
obligations hereunder shall commence as of such date.
(d) If, pursuant to the provisions of this Lease, the term of this
Lease begins on a date other than the Lease Commencement Date indicated in
Paragraph 2(a) above, then Landlord shall advise Tenant in writing of such date
and thereafter the Lease Commencement Date shall be such date and the Lease
Expiration Date shall be the same number of days after the Lease Commencement
Date as it was after the original lease commencement date. For all purposes of
this Lease, the term "Lease Year" shall mean any period of twelve consecutive
calendar months during the term of this Lease which begins on the Lease
Commencement Date or an anniversary thereof.
3. RENT. Tenant shall pay as rent for the premises the following
amounts (each of which amounts shall be considered rent and all of which,
unless the context requires otherwise, are collectively referred to herein as
"rent"):
(a) BASIC RENT. Tenant shall pay as the basic rent the sum of Eighty
Four Thousand Five Hundred Sixty and 04/100 Dollars ($84,560.04) annually,
payable in equal monthly installments, in advance, of Seven Thousand Forty Six
and 67/100 Dollars ($7,046.67), the first payment to be made upon the signing
of this Lease by Tenant, and the second and subsequent monthly payments to be
made on the first day of each and every calendar month (beginning with the
second month rent becomes due) during the term hereof. Rent shall be made
payable to Landlord at the office of Landlord, or such other party or at such
other address as Landlord may designate from time to time by written notice to
Tenant. If the term of this Lease begins on a date other than on the first day
of a month, rent from such date until the first day of the following month
shall be prorated at the rate of one-thirtieth (1/30th) of the fixed monthly
rental for each day, payable in advance. See paragraph 23 of the Addendum for
rental abatement.
(b) INCREASES IN REAL ESTATE TAXES.
(i) Tenant shall, for each calendar year after the Base Year (as
hereinafter defined), pay to Landlord, as additional rent, One and Forty-Three
One Thousandths percent (1.043%) (being Tenant's agreed-upon proportionate
share) of the increase in Real Estate Taxes (as hereinafter defined) for such
calendar year over the Real Estate Taxes for the Base Year. For the purposes of
this Paragraph 3(b) the term "Base Year" is hereby defined to mean the later of
(i) the calendar year 1986 or (ii) the calendar year in which the Lease
Commencement Date occurs; and the term "Real Estate Taxes" for any calendar
year is hereby defined to mean the total amount of all taxes and assessments,
general and special, ordinary and extraordinary, foreseen and unforeseen, now
or hereafter assessed, levied or imposed upon the Building and the land on
which the Building is situated (the "Land") for such year, together with any
tax in the nature of a real estate tax, an ad valorem tax on rent or any tax on
income if imposed, in whole or in part, in lieu of real estate taxes and
assessments, and any taxes and assessments which may hereafter be substituted
for Real Estate Taxes.
(ii) In the event that the method currently used for the computation of
the assessed market value of the Building and/or the Land is discontinued or
revised, the determination of the increase in Real Estate Taxes under this
Paragraph 3(b) shall thereafter be made according to a formula and procedure
which most nearly approximates the method of determination hereinabove set
forth. In the event that any business, rent or other taxes which are now or
hereafter levied upon Tenant's use or occupancy of the premises, on Tenant's
leasehold improvements.
*Notwithstanding, provided Tenant performs in accordance with Exhibit B of this
Lease Agreement, the Lease Commencement Date shall not commence until the
improvements provided by Landlord, as set forth in Exhibit B, have been
substantially completed (except punchlist items), as determined by the Building
architect. Additionally, the Lease Commencement Date shall not commence until
the Building's exterior sidewalk has been substantially completed to allow for
public access to Tenant's premises. In the event the Lease Commencement Date
is delayed, the Lease Expiration Date shall correspondingly be delayed by the
same period of time.
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on Tenant's business at the premises or on Landlord by virtue of Tenant's
occupancy of the premises, are enacted, changed or alerted so that any of such
taxes are levied against Landlord or in the event that the mode of collection
of such taxes is changed so that Landlord is responsible for collection or
payment of such taxes, any and all such taxes shall be deemed to be a part of
the increase in Real Estate Taxes and Tenant shall pay to Landlord Tenant's
proportionate share of the full amount of all of such taxes.
(iii) At any time or times in which the Real Estate Taxes for the Base
Year are determined or estimated, Landlord may submit to Tenant a statement of
Landlord's estimate of the increase in the Real Estate Taxes for the current
calendar year over the Real Estate Taxes for the Base Year, and within thirty
(30) days after delivery of such statement, Tenant shall begin paying to
Landlord, as additional monthly rent due and payable on the first day of each
month, an amount equal to one-twelfth (1/12th) of the amount determined to be
Tenant's aforesaid percentage of such increase in Real Estate Taxes. Within
ninety (90) days after the expiration of each calendar year in which Tenant's
monthly rent is increased pursuant to this Paragraph 3(b), Landlord shall submit
a statement showing the determination of the total increase in Real Estate Taxes
for such calendar year over the Base Year, and Tenant's proportionate share of
such increase. If such statement shows that Tenant's monthly payments pursuant
to this Paragraph 3(b) exceeded Tenant's share of the actual increase in Real
Estate Taxes for the preceding calendar year, then Tenant may deduct such
overpayment from its next payment or payments of monthly rent. If such statement
shows that Tenant's share of the actual increase in Real Estate Taxes exceeded
Tenant's monthly payments for the preceding calendar year, then Tenant shall pay
the total amount of such deficiency to Landlord with the next payment of rent
due hereunder after receipt of the statement. In the event that the Lease
Expiration Date is not December 31st, the increase in Real Estate Taxes to be
paid by Tenant for the calendar year in which the Lease Expiration Date occurs
shall be determined by multiplying the amount of Tenant's share thereof for the
full calendar year by a fraction, the numerator of which shall be the number of
days prior to the Lease Expiration Date during such calendar year and the
denominator of which shall be 365.
*(c) INCREASE IN OPERATING COSTS. Tenant shall, for each calendar year
after the year in which the Base Year Operating Charges (as hereinafter defined)
are determined, pay to Landlord, as additional rent, Twenty-Four and Seventeen
Hundredths percent (24.17%) (being Tenant's agreed-upon proportionate share) of
the increase during the term of this Lease in Annual Operating Charges (as
hereinafter defined) over the Base Year Operating Charges. The Annual Operating
Charges for any calendar year are hereby defined as the sum of the following
costs and expenses: (i) gas, water, sewer and other utility charges (including
surcharges) of whatever nature, (ii) insurance premiums, (iii) building
personnel costs, including, but not limited to, salaries, wages, fringe benefits
and other direct and indirect costs of engineers, superintendents, watchmen,
porters and any other building personnel, (iv) costs of service and maintenance
contracts, including, but not limited to, chillers, boilers, controls,
elevators, mail chute, windows, security services, and management fees, (v) all
other maintenance and repair expenses and supplies which are deducted by
Landlord for such calendar year in computing its Federal income tax liability,
(vi) any other costs and expenses (i.e. items which are not capital
improvements) incurred by Landlord in operating the Building, including ground
rent, if any, and principal and interest payments, in excess of the amount paid
during the Base Year on the permanent loan, provided that the annual increase
for ground rent, principal and interest shall not exceed one half (1/2) the
escalation provided under paragraph 3(e). (vii) the cost of any additional
services not provided to the Building at the Lease Commencement Date but
thereafter provided by Landlord in the prudent management of the Building,
(Annual Operating Charges shall not include the cost or expense of any service
not provided by Landlord to Tenant. Additionally, Landlord shall not provide any
additional services to other First Floor Retail Tenants on more favorable
terms.) and (viii) the cost of any capital improvements which are made by
Landlord after completion of initial construction of the Building; provided,
however, that the cost of each such capital improvement, together with any
financing charges incurred in connection therewith, or imputed financing charge
if the improvement is not financed by borrowing shall be amortized in constant
annual payments over the useful life thereof and only that portion thereof
attributable to such calendar year shall be included in the Annual Operating
Charges for such calendar year. Notwithstanding, Landlord shall limit capital
improvements operating charges to improvements applicable to the first floor of
the Building that are required by governmental regulations, building code
revisions and those which will reduce the Annual Operating Charges, after
amortization of the improvement, of the Building; or those agreed to in writing
by Tenant and Landlord. Annual Operating Charges shall not include (i) principal
payments or interest payments in an amount equal to the Base Year payments, on
any permanent mortgages; (ii) leasing commissions payable by Landlord or (iii)
deductions for depreciation of the Building. The Base Year Operating Charges are
hereby defined as the Annual Operating Charges for the later to occur of (i)
calendar year 1986 or (ii) the calendar year in which the Lease Commencement
Date occurs; provided, however, that in either case the Base Year Operating
Charges shall be adjusted, if necessary, to reflect the Annual Operating Charges
for such calendar year as if the Building were at least ninety percent (90%)
occupied for the entire calendar year. At any time or times after the year in
which the Base Year Operating Charges are reasonably determined or estimated,
Landlord may submit to Tenant a statement of Landlord's estimate of the increase
of the Annual Operating Charges for the current calendar year over the Base Year
Operating Charges, and within thirty (30) days after the delivery of such
statement, Tenant shall begin paying to Landlord, as additional monthly rent due
and payable on the first day of each month, an amount equal to one-twelfth
(1/12th) of the amount determined to be Tenant's aforesaid percentage of the
increase in the Annual Operating Charges. Within ninety (90) days after the
expiration of each calendar year in which Tenant's monthly rent is increased
pursuant to this Paragraph 3(c), Landlord shall, upon the request of Tenant,
submit a statement showing the determination of the total increase in Annual
Operating Charges for such calendar year over the Base Year Operating Charges,
and Tenant's proportionate share of such increase. If such statement shows that
Tenant's monthly payments pursuant to this Paragraph 3(c) exceeded Tenant's
share of the actual increase in Annual Operating Charges for the preceding
calendar year, then Tenant may deduct such overpayment from its next payment or
payments of monthly rent. If such statement shows that Tenant's share of the
actual increase in Annual Operating Charges exceeded Tenant's monthly payments
for the preceding calendar year, then Tenant shall pay the total amount of such
deficiency to Landlord with the next payment of rent due hereunder after receipt
of the statement. In the event that the Lease Expiration Date is not December
31st, the increase in Annual Operating Charges to be paid by Tenant for the
calendar year in which the Lease Expiration Date occurs shall be determined by
multiplying the amount of Tenant's share thereof for the full calendar year by a
fraction, the numerator of which shall be the number of days prior to the Lease
Expiration Date during such calendar year and the denominator of which shall be
365.
(d) BASE RATE FOR REAL ESTATE TAXES AND OPERATING CHARGES.
Notwithstanding the provisions of Paragraph 3(b) and Paragraph 3(c) above,
commencing with the later of (i) the calendar year 1986 or (ii) the calendar
year in which the Lease Commencement Date occurs, if the Real Estate Taxes for
any calendar year during the term of this Lease exceed Five Hundred Six Thousand
Eight Hundred Sixty-Five and No/100 Dollars ($506,865.00), or if the Annual
Operating Charges for any calendar year during the term of this Lease exceed
Eight Thousand Seven Hundred Forty-Six and No/100 Dollars ($8,746.00), then
Tenant shall pay Landlord, as additional rent, for each such calendar year,
Twenty-Four and Seventeen Hundredths percent (24.17%) for operating expenses and
One and Forty-Three One Thousandths percent (1.043%) for real estate taxes
(being Tenant's agreed-upon proportionate share) of the amount of the sum of all
Real Estate Taxes and/or Annual Operating Charges in excess of such amounts. At
any time or times after the Real Estate Taxes and Annual Operating Charges for
the calendar year are determined or estimated, Landlord may submit to Tenant a
statement or statements of Landlord's estimate of the amount by which (i) the
sum of all Real Estate Taxes for such calendar year exceed Five Hundred Six
Thousand Eight Hundred Sixty-Five and No/100 Dollars ($506,865.00) and (ii) the
sum of all Annual Operating Charges for such calendar year exceed Eight Thousand
Seven Hundred Forty-Six and No/100 Dollars ($8,746.00), and within thirty (30)
days after the delivery of such statement or statements, Tenant shall begin
paying to Landlord, as additional rent due and payable on the first day of each
month, an amount equal to one-twelfth (1/12th) of the amount determined to be
Tenant's aforesaid percentage of such excess amounts. Within ninety (90) days
after the expiration of each calendar year
*Notwithstanding anything contained herein, the Annual Operating Charges shall
be limited to costs which are applicable to the First Floor of the Building
only.
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in which Tenant's monthly rent is increased pursuant to this Paragraph 3(d),
Landlord shall, upon the request of Tenant, submit a statement showing the
determination of the actual amount of (i) the sum of all Real Estate Taxes for
the preceding calendar year, and Tenant's proportionate share of the amount
thereof in excess of Five Hundred Six Thousand Eight Hundred Sixty-Five and
No/100 Dollars ($506,865.00) and (ii) the sum of all Annual Operating Charges
for the preceding calendar year, and Tenant's proportionate share of the amount
thereof in excess of Eight Thousand Seven Hundred Forty-Six and No/100 Dollars
($8,746.00). If such statement shows that Tenant's monthly payments pursuant to
this Paragraph 3(d) exceeded Tenant's share of such excess amount or amounts,
then Tenant may deduct such overpayment from its next payment or payments of
monthly rent. If such statement shows that Tenant's share of such excess
amount(s) exceeded Tenant's monthly payments for the preceding calendar year,
then Tenant shall pay the total amount of such deficiency to Landlord with the
next payment of rent due hereunder after receipt of the statement. In the event
that the Lease Commencement Date is not January 1st, or that the Lease
Expiration Date is not December 31st, then the amount of such excess amount(s)
to be paid by Tenant for the calendar year in which the Lease Commencement Date
or the Lease Expiration Date occurs shall be determined by multiplying the
amount of Tenant's share thereof for the full calendar year by a fraction, the
numerator of which shall be the number of days subsequent to the Lease
Commencement Date or prior to the Lease Expiration Date, during such calendar
year, as the case may be, and the denominator of which shall be 365.*
(e) INCREASE IN COST OF LIVING. The basic annual rent set forth in
Paragraph 3(a) above shall be increased annually, effective on January 1st of
each calendar year during the term hereof, by an amount equal to thirty percent
(30%) of any increase in the CPI (as hereinafter defined). The basic annual rent
shall be adjusted based upon the increase, if any, in the index now known as
the Consumer Price Index for Urban Wage Earners and Clerical Workers, All Items,
Washington, D.C., Maryland and Virginia SMSA (1967 = 100) as published by the
Bureau of Labor Statistics, United States Department of Labor (hereinafter
referred to as the "CPI"). The amount of the increase shall be determined by
multiplying the amount of the basic annual rent set forth in Paragraph 3(a)
hereof by the product of (a) thirty percent (30%) of (b) a fraction, the
numerator of which shall be (i) the CPI for the month of December immediately
preceding the commencement of the calendar year for which such annual adjustment
is to be made minus (ii) the CPI for the month immediately preceding the Lease
Commencement Date, and the denominator of which shall be the CPI for the month
immediately preceding the Lease Commencement Date. Written notice of the
estimated amount of such annual adjustment for the following calendar year shall
be sent to Tenant during the month of December of every calendar year during the
term of this Lease, and on January 1st of the next calendar year Tenant shall
begin paying to Landlord, as additional monthly rent due and payable on the
first day of each month of such calendar year, an amount equal to one-twelfth
(1/12th) of such annual adjustment. Within ninety (90) days after the expiration
of each calendar year in which Tenant's monthly rent is increased pursuant to
this Paragraph 3(e), Landlord shall, submit a statement showing the
determination of the actual amount of the increase in the CPI for the preceding
calendar year. If such statement shows that Tenant's monthly payments pursuant
to this Paragraph 3(e) exceeded the adjustment to be made based upon the actual
increase in the CPI, then Tenant may deduct such overpayment from its next
payment or payments of monthly rent. If such statement shows that the increase
of Tenant's basic annual rent, based upon the actual increase in the CPI,
exceeded Tenant's monthly payments for the preceding calendar year, then Tenant
shall pay the total amount of such deficiency to landlord with the next payment
of rent due hereunder after receipt of the statement. In the event that the
Lease Expiration Date is not December 31st, the increase to be paid by Tenant
for the calendar year in which the Lease Expiration Date occurs shall be
determined by multiplying the amount of the increase for the full calendar year
by a fraction, the numerator of which shall be the number of days prior to the
Lease Expiration Date, during such calendar year, and the denominator of which
shall be 365. If the CPI shall be discontinued with no successor or comparable
successor index, the parties shall attempt to agree upon a substitute formula,
but if the parties are unable to agree upon a substitute formula, then such
substitute formula shall be the formula recommended by the Washington Board of
Realtors; provided, however, that in no event shall the amount of basic annual
rent payable by Tenant under this Lease for any calendar year be less than the
amount of basic annual rent paid in the calendar year immediately prior thereto.
(f) DEMAND; TIME. Each of the foregoing amounts of rent shall be paid
to Landlord without demand and without deduction, set-off or counterclaim on
the first (1st) day of every month during the term of this Lease. If Landlord
shall at any time or times accept rent after it shall become due and payable,
such acceptance shall not excuse a delay upon subsequent occasion, or
constitute, or be construed as, a waiver of any or all of the Landlord's rights
hereunder.
4. USE OF PREMISES. Tenant will use and occupy the premises solely for
general office and commercial bank or other financial services institution
purposes and only in accordance with the uses permitted under applicable zoning
and other municipal regulations; without the prior written consent of Landlord,
the premises will not be used for any other purpose. Tenant will not use or
occupy the premises for any unlawful purpose, and will comply with all present
and future laws, ordinances, regulations and orders of the United States of
America, the District of Columbia, and any other public or quasi-public
authority having jurisdiction over the premises. Landlord will obtain the
initial certificate of occupancy for Tenant; provided, however, it is expressly
understood that if any future law, ordinance, regulation or order or any change
in the use of the premises by Tenant, requires a new certificate of occupancy
for the premises, Tenant will obtain such permit at Tenant's own expense.
Tenant represents and warrants to Landlord that Tenant has entered into this
Lease entirely for a business or commercial purpose and warrants that it shall
not use the premises for any residential purpose.
5. ASSIGNMENT AND SUBLETTING.
(a) LANDLORD'S PRIOR CONSENT REQUIRED. Tenant and Tenant's
representatives, successors and assigns will not assign, transfer, mortgage or
otherwise encumber this Lease or sublet or rent (or permit the occupancy or use
of) the premises, or any part thereof, without obtaining the prior written
consent of Landlord, nor shall any assignment or transfer of this Lease or the
right of occupancy hereunder be effectuated by operation of law or otherwise
without the prior written consent of Landlord except by merger or acquisition
of or by Tenant.
(b) QUALIFICATIONS OF SUBTENANT. Subject to the provisions of paragraph
5(c) hereof, Landlord shall not unreasonably withhold its consent hereunder to
any sublease by Tenant, provided that all of the following conditions are met;
(i) Tenant must first notify Landlord, in writing, of any proposed
sublease, at least [sixty (60)] days prior to the effective date of such
proposed sublease. The notice to Landlord must include a copy of the proposed
sublease and a copy of the proposed subtenant's most recent financial statement,
prepared by a certified public accountant;
(ii) The subtenant must have a credit rating satisfactory to Landlord
(in Landlord's sole but reasonable judgment);
(iii) The sublease must be expressly subject and subordinate to this
Lease, must require that any subtenant must comply with and abide by all of the
terms of this Lease, and must provide that any termination of this Lease shall
extinguish the sublease as well;
(iv) The subtenant may not use the premises or propose to conduct its
business in a manner which, in Landlord's sole judgment, is not appropriate for
a first class office building in Washington, D.C.;
(v) The subtenant may not be a tenant, subtenant, or other occupant of
any part of the Building; and
(vi) The Tenant may not be in default under this Lease, or have
committed two events of default hereunder during the previous twelve (12)
months, whether cured or not.
*Landlord agrees Tenant shall have the right to inspect Landlord's books to
verify increases in real estate taxes and/or operating charges at Landlord's
office at reasonable times and reasonable intervals.
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(c) LANDLORD'S RIGHT OF FIRST REFUSAL. Landlord shall have the right,
within thirty (30) days after receipt of the notice from Tenant, required under
paragraph 5(b)(i) above, that Tenant proposes to sublease all or a portion of
the premises, to elect (i) to sublet the premises from Tenant at the rent then
being paid by Tenant for the premises under paragraph 3 hereof (or that portion
thereof which Tenant proposes to sublease) by a proportionate reduction in the
rent as hereinafter set forth; (ii) to terminate this Lease in its entirety if
Tenant intends to sublet all of the premises or, if Tenant proposes to sublet a
portion of the premises, to terminate this Lease only with respect to such
portion of the premises; or (iii) to require Tenant to pay Landlord, within five
(5) days of receipt, one-half (1/2) of the amount of rent payable by such
sublessee in excess of the amount of rent payable by Tenant hereunder with
respect to the portion of the premises sublet. Upon exercise by Landlord of
either of the options set forth in subsections (i) or (ii) above, Tenant shall
surrender the premises or such portion of the premises, as the case may be, to
Landlord, and thereafter the rent to be paid by Tenant pursuant to paragraph 3
above shall be that portion of the total rent which the amount of square foot
area remaining in the possession of Tenant bears to the total square foot area
of the premises. In the event that Landlord does not exercise its right to
sublet the premises, or such portion of the premises, as the case may be, or to
terminate this Lease, within said sixty (60)-day period, Tenant shall have the
right, subject to the provisions of subsection (iii) above, to sublet the
premises or a portion thereof after first obtaining the written consent of
Landlord as provided in paragraph 5(a) above. Upon exercise by Landlord of the
option set forth in subsection (iii) above, Tenant covenants and agrees to
provide Landlord with quarterly statements, prepared and verified by a certified
public accountant, stating the amount of rent received by Tenant from its
subtenant(s) during such quarterly period. If such statement shows Tenant failed
to make the full payments required by subsection (iii) above, a late charge
equal to five percent (5%) of the amount due shall be paid by Tenant, as
additional rent hereunder.
(d) NO WAIVER OR RELEASE. The consent by Landlord to any assignment or
subletting shall not be construed as a waiver or release of Tenant from the
terms of any covenant or obligation under this Lease, nor shall the collection
or acceptance of rent from any such assignee, subtenant or occupant constitute a
waiver or release of Tenant of any covenant or obligation contained in this
Lease, nor shall any such assignment or subletting be construed to relieve
Tenant from obtaining the consent in writing of Landlord to any further
assignment or subletting. Tenant hereby assigns to Landlord the rent due from
any subtenant of Tenant and hereby authorizes each such subtenant to pay said
rent directly to Landlord, at Landlord's option, in the event of any default by
Tenant under the terms of this Lease.
6. MAINTENANCE OF THE PREMISES.
(a) OBLIGATIONS OF LANDLORD AND TENANT. Tenant will keep the premises
and fixtures and equipment therein in clean, safe and sanitary condition, will
take good care thereof, will suffer no waste or injury thereto, and will, at
the expiration or other termination of the term of this Lease, surrender the
same, broom clean, in the same order and condition in which they are on the
Lease Commencement Date, ordinary wear and tear and unavoidable damage by the
elements excepted; provided, however, that if Tenant is insured for any such
damage, Tenant shall either (i) apply the insurance proceeds to repair such
damage or (ii) surrender such insurance proceeds to Landlord upon delivery of
the premises. All improvements to, including storefront glass, doors and
closures and equipment installed in the premises shall be maintained,
repaired, replaced and insured by Tenant. All such insurance shall provide
coverage in the amount of the full replacement value of such special
improvements and equipment, and shall name Landlord as an additional insured
as its interests may appear. Except as otherwise provided in this Lease,
Landlord shall maintain and repair the exterior of the Building, including all
base building structural members, unless damaged by Tenant's negligence, and
shall maintain, repair and paint all building standard common area elements
installed by Landlord, in a manner befitting a first class office building in
Washington, D.C. Landlord, at its cost, shall provide and install all original
building standard fluorescent tubes within the premises necessary to provide
required lighting and all replacement tubes for such lighting; all other bulbs,
tubes and lighting fixtures for the premises shall be provided and installed by
Landlord at Tenant's cost and expense.
(b) DAMAGE TO PREMISES OR BUILDING. All damage or injury to the
premises or to any other part of the Building, or to its fixtures, equipment and
appurtenances, whether requiring structural or nonstructural repairs, caused by
or resulting from carelessness, omission, neglect or improper conduct of Tenant,
Tenant's agents, employees, contractors, invitees or licensees, shall be
repaired promptly, at Tenant's sole cost and expense, by either Landlord or, at
Landlord's option, by Tenant subject to Landlord's direction and supervision
(and in accordance with paragraph 7 hereof). If Landlord gives Tenant written
notice that Tenant will be required to make such repairs and Tenant fails within
ten days of the giving of such notice to proceed with due diligence to make the
required repairs, the same may be made by Landlord, in which event all expenses
incurred by Landlord therefor shall be paid by Tenant to Landlord as additional
rent, and shall be due and payable with the monthly installment of rent next
becoming due in accordance with the terms of paragraph 17(d) below; provided,
however, that Tenant shall not be liable to Landlord for such expenses if and to
the extent that (i) Landlord is insured for such hazards and damages under an
insurance policy and (ii) Landlord is actually reimbursed by its insurer for
such expenses.
(c) NOTICE OF DEFECTIVE CONDITION. Tenant shall give Landlord prompt
notice of any defective condition in any plumbing or heating system or any
electrical lines located in, servicing or passing through the premises.
Following such notice Landlord shall remedy the condition with due diligence;
provided, however, that such repairs shall be at the expense of Tenant if such
repairs are necessitated by damage or injury attributable to Tenant, Tenant's
agents, employees, contractors, invitees or licensees as provided in paragraph
6(b) above. Except as specifically provided in this Lease, there shall be no
allowance to Tenant for a diminution of rental value and no liability on the
part of Landlord by reason of inconvenience, annoyance or injury to business
arising from Landlord, Tenant, or others making or failing to make any repairs,
alterations, additions, or improvements in or to a portion of the Building or
the premises or in or to the fixtures, appurtenances or equipment thereof.
7. TENANT ALTERATIONS.
(a) ALTERATIONS. The original improvement of the premises by Landlord
for Tenant shall be in accordance with Exhibit B attached hereto. Tenant will
not make or permit anyone to make any alterations, decorations, additions or
improvements, structural or otherwise, in or to the premises or the Building,
without the prior written consent of Landlord. All of such alterations,
decorations, additions or improvements permitted by Landlord must conform to all
rules and regulations established from time to time by the Underwriters'
Association of the District of Columbia and conform to all requirements of the
Federal and District of Columbia governments. As a condition precedent to such
written consent of Landlord, Tenant agrees to obtain and deliver to Landlord
written and unconditional waivers of mechanics' and materialmens' liens upon the
Land and the Building, for all work, labor and services to be performed, and
materials to be furnished, by them in connection with such work, signed by all
contractors, subcontractors, materialmen and laborers to become involved in such
work. If, notwithstanding the foregoing, any mechanic's or materialmen's lien is
filed against the premises, the Building and/or the Land, for work claimed to
have been done for or materials claimed to have been furnished to Tenant, such
lien shall be discharged by Tenant within ten (10) days thereafter, at Tenant's
sole cost and expense, by the payment thereof or by filing any bond required by
law. If Tenant shall fail to discharge any such mechanic's or materialmen's
lien, Landlord may, at its option, discharge the same and treat the cost thereof
as additional rent payable with the monthly installment of rent next becoming
due; it being hereby expressly covenanted and agreed that such discharge by
Landlord shall not be deemed to waive or release the default of Tenant in not
discharging the same. It is understood and agreed that in the event Landlord
shall give its written consent to Tenant's making any such alterations,
decorations, additions or improvements, such written consent shall not be deemed
to be an agreement or consent by Landlord to subject Landlord's interest in the
premises, the Building or the Land to any mechanic's or materialmen's liens
which may be filed in respect of any such alterations, decorations, additions or
improvements made by or on behalf of Tenant.
(b) INDEMNIFICATION. Tenant will indemnify and hold Landlord harmless
from and against any and all expenses, liens, claims or damages to person or
property which may or might arise directly or indirectly by reason of the
making of any such alterations, decorations, additions or improvements. If any
such alteration, decoration, addition or improvement is made without the prior
written consent of Landlord, Landlord may correct or remove the same, and
Tenant shall be liable for any and all expenses incurred by Landlord in the
JACo
rev. 4-2-81
4
<PAGE> 15
performance of this work. All alterations, decorations, additions or
improvements in or to the premises or the Building made by either party shall
immediately become the property of Landlord and shall remain upon and be
surrendered with the premises as a part thereof at the end of the term hereof
without disturbance, molestation or injury; provided, however, that if Tenant
is not in default in the performance of any of its obligations under this
Lease, Tenant shall have the right to remove, prior to the expiration of the
term of this Lease, all automated teller machines, vault doors, special banking
equipment and other furniture, furnishings, or equipment installed in the
premises at the expense of Tenant. If such property of Tenant is not removed by
Tenant prior to the expiration or termination of this Lease, the same shall
become the property of Landlord and shall be surrendered with the premises as a
part thereof.
8. SIGNS; FURNISHINGS.
(a) SIGNS. Except as provided for in paragraph 28 of the Addendum, no
sign, advertisement or notice shall be inscribed, painted, affixed or otherwise
displayed on any part of the exterior or interior of the Building except on the
directories and the doors of offices, and then only in such place, number,
size, color and style as is harmonious with the design of the Building and its
furnishings and is approved by Landlord in writing and provided by Landlord at
Tenant's cost and expense. If any sign, advertisement or notice which does not
conform to the foregoing is nevertheless exhibited by Tenant, Landlord shall
have the right to remove the same and Tenant shall be liable for any and all
expenses incurred by Landlord in said removal. Landlord shall have the right to
prohibit any advertisement of Tenant which in its opinion tends to impair the
reputation of the Building or its desirability as a high-quality building for
offices or for financial, insurance and other institutions of like nature, and,
upon written notice from Landlord, Tenant shall immediately refrain from and
discontinue any such advertisement.
(b) FURNISHINGS. Landlord shall have the right to prescribe the weight
and position of safes and other heavy equipment or fixtures, which shall, if
considered necessary by the Landlord, stand on plank strips to distribute the
weight. Any and all damage or injury to the premises or the Building caused by
moving the property of Tenant into, in or out of the premises, or due to the
same being on the premises, shall be repaired by and at the sole cost of
Tenant. No furniture, equipment or other bulky matter of any description will
be received into the Building or carried in the elevators except as approved by
Landlord, and all such furniture, equipment, and other bulky matter shall be
delivered only during hours approved by Landlord and only through the
designated delivery entrance of the Building. All moving of furniture,
equipment and other materials shall be under the direct control and supervision
of Landlord who shall, however, not be responsible for any damage to or charges
for moving the same. Tenant agrees promptly to remove from the sidewalks
adjacent to the Building any of the Tenant's furniture, equipment or other
material there delivered or deposited.
9. TENANT'S EQUIPMENT.* Tenant will not install or operate in the
premises any electrically operated equipment or other machinery, other than
electric typewriters, adding machines, radios, televisions, clocks and copying
machines, and other electrically operated equipment of a type used in
commercial banking or financial services institutions without first obtaining
the prior written consent of Landlord. Tenant shall not install any other
equipment of any kind or nature whatsoever which will or may necessitate any
changes, replacements or additions to, or in the use of, the water system,
heating system, plumbing system, air-conditioning system, or electrical system
of the premises or the Building without first obtaining the prior written
consent of Landlord. Business machines and mechanical equipment belonging to
Tenant which cause noise or vibration that may be transmitted to the structure
of the Building or to any space therein to such a degree as to be objectionable
to Landlord or to any tenant in the Building shall be installed and maintained
by Tenant, at Tenant's expense, on vibration eliminators or other devices
sufficient to eliminate such noise and vibration, and if such noise and/or
vibration is not so eliminated, Landlord shall have the right to require Tenant
to remove such machines and/or equipment from the premises.
10. INSPECTION. Tenant will permit Landlord, or its agents or other
representatives, to enter the premises, without charge therefor to Landlord
and without diminution of the rent payable by Tenant, to examine, inspect and
protect the premises and the Building and to make such alterations and/or
repairs as in the sole judgment of Landlord may be deemed necessary, or to
exhibit the same to prospective tenants during the last one hundred eighty (180)
days of the term of this Lease upon reasonable notice and in accompaniment of
Tenant's authorized representative.
11. INSURANCE.
(a) INSURANCE RATING. Tenant will not conduct or permit to be
conducted, any activity, or place any equipment in or about the premises or the
Building, which will, in any way, invalidate the insurance coverage in effect
or increase the rate of fire insurance or other insurance on the Building; and
if any invalidation of coverage or increase in the rate of fire insurance or
other insurance is stated by any insurance company or by the applicable
Insurance Rating Bureau to be due to any activity or equipment of Tenant in or
about the premises or the Building, such statement shall be conclusive evidence
that the increase in such rate is due to such activity or equipment and, as a
result thereof, Tenant shall be liable for such increase and shall reimburse
Landlord therefor upon demand and any such sum shall be considered additional
rent payable with the monthly installment of rent next becoming due.
(b) REQUIRED INSURANCE. Tenant shall carry public liability insurance
in a company or companies licensed to do business in the District of Columbia
and approved by Landlord. Said insurance shall be in minimum amounts approved
by Landlord from time to time (as set forth in the rules and regulations
attached hereto as Exhibit C) and shall name Landlord as an additional insured,
as its interests may appear and shall provide Landlord with evidence, when
requested, that such insurance is in full force and effect. Tenant shall carry
property damage insurance for all of its equipment and for all leasehold
improvements above the building standard which are made by Landlord or Tenant
in and to the premises. If required by Landlord, receipts evidencing payment
for said insurance shall be delivered to Landlord at least annually by Tenant
and each policy shall contain an endorsement that will prohibit its
cancellation prior to the expiration of fifteen (15) days after notice of such
proposed cancellation to Landlord.
12. SERVICES AND UTILITIES; SECURITY.
It is agreed that Landlord will furnish condenser water during the
normal hours of operation of the building, all as reasonably required. Landlord
will provide elevator service by means of automatically operated elevators and
one automatically operated elevator shall be subject to call at all times;
provided, however, that Landlord shall have the right to remove elevators from
service as the same shall be required for moving freight or for servicing or
maintaining the elevators and/or the building. Landlord shall furnish all
services and utilities required by this Lease only during the normal hours of
operation of the building, unless otherwise specified herein.
*In accordance with Exhibit B of this Lease Agreement, Landlord shall install,
at Tenant's expense, the electrical panels and meters for the premises. The
Tenant shall pay the utility company directly for charges incurred for
connection and usage.
5
<PAGE> 16
The normal hours of operation of the Building are 8:00 a.m. to 6:00 p.m. Monday
through Friday (except legal holidays) and 9:00 a.m. to 1:00 p.m. Saturday
(except legal holidays). There are no normal hours of operation of the Building
on Sundays or legal holidays, and Landlord shall not be obligated to maintain or
operate the Building at such times unless special arrangements are requested by
Tenant. If Tenant requires condenser water beyond the normal hours of operation
of the Building as set forth above, and provided that Tenant has made prior
arrangements with Landlord or Landlord's agent, Landlord will furnish such
condenser water and the Tenant agrees to pay for the same with the monthly
installment of rent next becoming due in accordance with the then-current
schedule of costs and assessments therefor, which schedule shall be published
from time to time by Landlord and furnished to Tenant. It is understood and
agreed that Landlord shall not be liable for failure to furnish, or for delay,
suspension or reduction in furnishing, any of the utilities or services required
to be furnished by Landlord hereunder, if such failure to furnish or delay,
suspension or reduction in furnishing the utilities and services is caused by
breakdown, maintenance, repairs, strikes, scarcity of labor or materials, acts
of God, Landlord's compliance with governmental regulation, legislation, or
judicial or administrative orders, or from any other cause whatsoever, provided,
however, that Landlord shall, in the event of a breakdown, use reasonable
diligence to repair all equipment owned by Landlord and all building standard
equipment furnished by Landlord which is required to provide such utilities and
services.*
13. LIABILITY OF LANDLORD.
(a) NO LIABILITY. Landlord shall not be liable to Tenant, its employees,
agents, contractors, business invitees, licensees, customers, clients, family
members or guests for any damage, compensation or claim arising from the
necessity of repairing any portion of the premises or the Building, the
interruption in the use of the premises, accident or damage resulting from the
use or operation (by Landlord, Tenant, or any other person or persons
whatsoever) of elevators or heating, cooling, electrical or plumbing equipment
or apparatus, or the termination of this Lease by reason of the destruction of
the premises, or from any fire, robbery, theft, mysterious disappearance and/or
any other casualty, or from any leakage in any part or portion of the premises
or the Building, or from water, rain or snow that may leak into, or flow from,
any part of the premises or the Building, or from drains, pipes or plumbing work
in the Building, or from any other cause whatsoever, or for any personal injury
arising from the use, occupancy and condition of the premises, unless any of the
foregoing is caused by the gross negligence of Landlord or a willful act or
failure to act on the part of the Landlord. Except for a termination of the
Lease, Tenant shall not be entitled to any abatement or diminution of rent as a
result of any of the foregoing occurrences, nor shall the same release Tenant
from its obligations hereunder or constitute an eviction. Any goods, property or
personal effects of Tenant, its employees, agents, contractors, business
invitees, licensees, customers, clients, family members or guests, stored or
placed in or about the premises or Building shall be at their risk, and the
Landlord shall not in any manner be held responsible therefor. The employees of
the Landlord are prohibited from receiving any packages or other articles
delivered to the Building by Tenant, and if any such employee receives any such
package or articles, such employee shall be the agent of the Tenant for such
purposes and not of the Landlord. Tenant acknowledges that Landlord will not
carry insurance on Tenant's furniture, furnishings, fixtures, equipment and/or
improvements in or to the premises. It is expressly understood and agreed that
Tenant shall look to its business interruption and property damage insurance
policies, and not to Landlord or its agents or employees, for reimbursement for
any damages or losses incurred as a result of any of the foregoing occurrences,
and that said policies must contain waiver of subrogation clauses.
(b) INDEMNITY. Tenant hereby agrees to indemnify and hold Landlord
harmless from and against any cost, damage, claim, liability or expense
(including attorney's fees) incurred by or claimed against Landlord, directly
or indirectly, which is occasioned by or results from any default hereunder or
any willful or negligent act on the part of Tenant, its agents, employees,
contractors, invitees, licensees, customers, clients, family members and guests,
or as a result of or in any way arising from Tenant's use and occupancy of the
premises or in any other manner which relates to the business of Tenant. Any
such cost, damage, claim, liability or expense incurred by Landlord for which
Tenant is obligated to reimburse Landlord shall be deemed additional rent due
and payable in accordance with paragraph 17(d) hereof. It is expressly
understood and agreed that Tenant's liability under this Lease extends to the
acts and omissions of any subtenant and any agent, employee, contractor,
invitee, licensee, customer, client, family member and guest of any subtenant.
14. RULES AND REGULATIONS. Tenant, its agents, employees, contractors,
invitees, licensees, customers, clients, family members and guests shall at all
times abide by and observe the rules and regulations attached hereto as
Exhibit C. In addition, Tenant, its agents, employees, contractors, invitees,
licensees, customers, clients, family members and guests shall abide by and
observe such other rules or regulations as may be promulgated from time to time
by Landlord, with a copy sent to Tenant, for the operation and maintenance of
the Building; provided, however, that the same shall be in conformity with
common practice and usage in similar buildings and shall not be inconsistent
with the provisions of this Lease. Nothing contained in this Lease shall be
construed to impose upon Landlord any duty or obligation to enforce such rules
and regulations, or the terms, conditions or covenants contained in any other
lease, as against any other tenant, and Landlord shall not be liable to Tenant
for violation of the same by any other tenant, its employees, agents,
contractors, invitees, licensees, customers, clients, family members or guests.
If there is any inconsistency between this Lease and any current or future
rules and regulations, this Lease shall govern.
15. DAMAGE; CONDEMNATION.
(a) DAMAGE TO THE PREMISES. If the premises shall be partially damaged
by fire or other cause without the fault or neglect of Tenant, its employees,
agents, contractors, invitees, licensees, customers, clients, family members or
guests, this Lease shall not be terminated and Landlord shall diligently and as
soon as practicable after such damage occurs, repair such damage, at the
expense of Landlord if Landlord is insured with respect thereto or at the
expense of Tenant if Tenant is required to be insured hereunder with respect to
such damage (in either case taking into account the time necessary to
effectuate a satisfactory settlement with any insurance company involved and
for such other delays as may result from government restrictions, controls on
construction, if any, and from strikes, emergencies and other conditions beyond
the control of the Landlord); provided, however, that if the premises or
Building is damaged by fire or other cause to such extent that the damage
cannot be fully repaired within ninety (90) days from the date of settlement of
the insurance claims, Landlord or Tenant, upon written notice to the other may
terminate this Lease, in which event the rent shall be apportioned and paid to
the date of such damage. During the period that Tenant is deprived of the use
of the damaged portion of the premises, and provided Tenant is able to conduct
its customary banking business in the premises without unreasonable
inconvenience or interruption, as determined by the Building architect. Tenant
shall be required to pay rent (as set forth in paragraph 3) covering only that
part of the premises that Tenant is able to occupy and the rent for such space
shall be that portion of the total rent which the amount of square foot area
remaining that can be occupied by Tenant bears to the total square foot area of
the premises. In the event of any injury or damage to the premises or the
Building caused by Tenant or its agents, employees, contractors, invitees,
licensees, customers, clients, family members or guests, then Tenant shall
diligently and a soon as practicable after such damage occurs, repair such
damage, at Tenant's sole cost and expense. If Tenant shall fail so to do,
Landlord shall have the right to make such repairs or replacements, and any cost
or expense so incurred by Landlord shall be paid by Tenant, and shall become
additional rent due and payable, in accordance with the provisions of paragraph
17(d) hereof, with the installment of rent next becoming due under the terms of
this Lease. No compensation, claim or diminution in rent, other than as provided
in this paragraph 15(a) will be allowed or paid by Landlord, by reason of
inconvenience, annoyance or injury to business arising from the necessity of
repairing the premises or any portion of the Building, however, the necessity
may occur.
*Notwithstanding any other provision of this Lease Agreement, Tenant shall have
access to the premises twenty-four hours per day, 365 days a year except in
cases of emergency or required maintenance. Except during periods of
unavailability or equipment break down, Landlord shall provide unheated water
to the premises at all times.
6
<PAGE> 17
(b) CONDEMNATION. If the whole or a substantial part (as hereinafter
defined) of the premises (or use or occupancy of the premises) shall be taken or
condemned by any governmental or quasi-governmental authority for any public or
quasi-public use or purpose (including sale under threat of such a taking), then
the terms of this Lease shall cease and terminate as of the date when title
vests in such governmental or quasi-governmental authority, and the rent shall
be abated on the date when such title vests in such governmental or
quasi-governmental authority. If less than a substantial part of the premises is
taken or condemned by any governmental or quasi-governmental authority for any
public or quasi-public use or purpose (including sale under threat of such a
taking), the rent shall be equitably adjusted (on the basis of the number of
square feet before and after such event) on the date when title vests in such
governmental or quasi-governmental authority and the Lease shall otherwise
continue in full force and effect. Tenant shall have no claim against Landlord
(or otherwise) and hereby agrees to make no claim against the condemning
authority for any portion of the amount that may be awarded as damage as a
result of any governmental or quasi-governmental taking or condemnation (or sale
under threat of such taking or condemnation) or for the value of any unexpired
term of the Lease or for loss of profits or moving expenses or for any other
claim or cause of action. For purposes of this paragraph 15(b), a substantial
part of the premises shall be considered to have been taken if more than fifty
percent (50%) of the premises are unusable by Tenant as a direct result of such
taking.*
16. BANKRUPTCY.
(a) EVENTS OF BANKRUPTCY. The following shall be "Events of Bankruptcy"
under this Lease:
(i) Tenant's becoming insolvent, as that term is defined in Title 11 of
the United States Code, entitled Bankruptcy, 11 U.S.C. Section 101 et seq. (the
"Bankruptcy Code"), or under the insolvency laws of any State, District,
Commonwealth or Territory of the United States (the "Insolvency Laws");
(ii) the appointment of a receiver or custodian for all or a
substantial portion of Tenant's property or assets, or the institution of a
foreclosure action upon all or a substantial portion of Tenant's real or
personal property;
(iii) the filing of a voluntary petition under the provisions of the
Bankruptcy Code or Insolvency Laws;
(iv) the filing of an involuntary petition against Tenant as the
subject debtor under the Bankruptcy Code or Insolvency Laws, which is either
not dismissed within sixty (60) days of filing, or results in the issuance of
an order for relief against the debtor, or
(v) Tenant's making or consenting to an assignment for the benefit of
creditors or a common law composition of creditors.
(b) LANDLORD'S REMEDIES.
(i) TERMINATION OF LEASE. Upon the occurrence of an Event of
Bankruptcy, Landlord shall have the right to terminate this Lease by giving
written notice to Tenant, whereupon Tenant shall be immediately obligated to
quit the premises upon the giving of notice pursuant to this paragraph
16(b)(i). Any other notice to quit, or notice of Landlord's intention to
re-enter is hereby expressly waived. If Landlord elects to terminate this
Lease, everything contained in this Lease on the part of Landlord to be done
and performed shall cease without prejudice, subject, however, to the right of
Landlord to recover from Tenant all rent and any other sums accrued up to the
time of termination or recovery of possession by Landlord, whichever is later,
and any other monetary damages or loss of reserved rent sustained by Landlord;
provided, however, and notwithstanding the foregoing or the further remedies
set forth in this paragraph 16(b), Landlord shall not have the right to
terminate this Lease while a case in which Tenant is the subject debtor under
the Bankruptcy Code is pending, unless Tenant or Tenant's trustee in bankruptcy
is unable to comply with the provisions of paragraphs 16(b)(v), (vi) and (vii)
below.
(ii) SUIT FOR POSSESSION. Upon termination of this Lease pursuant to
paragraph 16(b)(i), Landlord may proceed to recover possession under and by
virtue of the provisions of the laws of the District of Columbia, or by such
other proceedings, including re-entry and possession, as may be applicable.
(iii) RELETTING OF PREMISES. Upon termination of this Lease pursuant to
paragraph 16(b)(i), Landlord shall have the option to relet the premises for
such rent and upon such terms as are not unreasonable under the circumstances
and, if the full rental reserved under this Lease (and any of the costs,
expenses or damages indicated below) shall not be realized by Landlord, Tenant
shall be liable for all damages sustained by Landlord, including, without
limitation, deficiency in rent, reasonable attorneys' fees, brokerage fees and
expenses of placing the premises in first class rentable condition. Landlord,
in putting the premises in good order or preparing the same for rerental may, at
Landlord's option, make such alterations, repairs, or replacements in the
premises as Landlord, in its reasonable, but sole judgment, considers advisable
and necessary for the purpose of reletting the premises, and the making of such
alterations, repairs, or replacements shall not operate or be construed to
release Tenant from liability hereunder as aforesaid. Landlord shall in no
event be liable in any way whatsoever for failure to relet the premises, or in
the event that the premises are relet, for failure to collect the rent under
such reletting, and in no event shall Tenant be entitled to receive the excess,
if any, of such net rent collected over the sums payable by Tenant to Landlord
hereunder.
(iv) MONETARY DAMAGES. Any damage or loss of rent sustained by
Landlord as a result of an Event of Bankruptcy may be recovered by Landlord, at
Landlord's option, at the time of the reletting, or in separate actions, from
time to time, as said damage shall have been made more easily ascertainable by
successive relettings, or at Landlord's option, in a single proceeding deferred
until the expiration of the term of this Lease (in which event Tenant hereby
agrees that the cause of action shall not be deemed to have accrued until the
date of expiration of said term) or in a single proceeding prior to either the
time of reletting or the expiration of the term of this Lease, in which event
Tenant agrees to pay Landlord the difference, if any, between the present value
of the rent reserved under this Lease on the date of breach, discounted at
eight percent (8%) per annum, and the fair market value of the Lease on the
date of breach. In the event Tenant becomes the subject debtor in a case under
the Bankruptcy Code, the provisions of this paragraph 16(b)(iv) may be limited
by the limitations of damage provisions of the Bankruptcy Code.
(v) ASSUMPTION OR ASSIGNMENT BY TRUSTEE. In the event Tenant becomes
the subject debtor in a case pending under the Bankruptcy Code, Landlord's
right to terminate this Lease pursuant to this paragraph 16 shall be subject to
the rights of the Trustee in bankruptcy to assume or assign this Lease. The
Trustee shall not have the right to assume or assign this Lease unless the
Trustee (A) promptly cures all defaults under this Lease, (B) promptly
compensates Landlord for monetary damages incurred as a result of such default,
(C) provides "adequate assurance of future performance" (as hereinafter
defined) and (D) complies with the provisions of paragraph 5 hereof.
(vi) ADEQUATE ASSURANCE OF FUTURE PERFORMANCE. Landlord and Tenant
hereby agree in advance that the phrase "adequate assurance of future
performance", as used in this paragraph 16(b), shall mean that all of the
following minimum criteria must be met: (A) the Trustee must pay to Landlord,
at the time the next payment of rent is then due under this Lease, in addition
to such payment of rent, an amount equal to the next three (3) months rent due
under this Lease, said amount to be held by Landlord in escrow until either the
Trustee or Tenant defaults in its payments of rent or other obligations under
this Lease (whereupon Landlord shall have the right to draw upon such escrowed
funds) or until the expiration of this Lease (whereupon the funds shall be
returned to the Trustee or Tenant); (B) the Tenant or Trustee must agree to pay
to Landlord, at any time the Landlord is authorized to and does draw upon the
funds escrowed pursuant to subparagraph (A) above, the amount necessary to
restore such escrow account to the original level required by said provision;
(C) Tenant must pay the cost of all services, if any, provided by Landlord for
which Tenant is charged other than pursuant to paragraph 3 hereof (whether
directly or through agents or contractors, and whether or not the cost of such
services is to be passed through to Tenant) in advance of the performance or
provision of such services; (D) the Trustee must agree that Tenant's business
shall be conducted in a first class manner, and that no liquidation sales,
auctions, or other non-first class business operations shall be conducted on the
premises; (E) the Trustee must agree that the use of the premises as stated in
this Lease will remain unchanged; and (F) the Trustee must agree that the
assumption or assignment of this Lease will not violate or affect the rights of
other tenants in the Building.
*Notwithstanding any other provision of this Lease Agreement, Tenant shall not
be prevented from making any separate claim or cause of action which Tenant may
have directly against the condemning authority and which Tenant is able to
pursue without interfering with Landlord's claim or cause of action and without
eliminating Landlord's right to Landlord's award.
7
<PAGE> 18
(vii) FAILURE TO PROVIDE ADEQUATE ASSURANCE. In the event Tenant is
unable (A) to cure its defaults, (B) to reimburse Landlord for its monetary
damages, (C) to pay when due the rent due under this Lease, or any other
payments required of Tenant under this Lease, or (D) to meet the criteria and
obligations imposed by Paragraph 16(b)(vi) above, then Tenant agrees in advance
that it has not met its burden to provide adequate assurance of future
performance, and this Lease may be terminated by Landlord in accordance with
Paragraph 16(b)(i) above.
17. DEFAULT OF TENANT.
(a) EVENTS OF DEFAULT. The following shall be "Events of Default"
under this Lease:
(i) If Tenant shall fail to pay any monthly (or annual) installment of
rent (as required by Paragraph 3 or Paragraph 17(b)(iv) hereof) and if such
failure continues for a period of five (5) days after Landlord's written notice
thereof to Tenant; or
(ii) If Tenant shall fail to timely make any other payment required
under this Lease, if such failure continues for a period of five (5) days after
Landlord's written notice thereof to Tenant; or,
(iii) If Tenant shall violate or fail to perform any of the other
terms, conditions, covenants or agreements herein made by Tenant, if such
violation or failure continues for a period of five (5) days after Landlord's
written notice thereof to Tenant; provided that no such notice shall be required
if Tenant has received a similar notice within three hundred sixty-five (365)
days prior to such violation or failure.
(b) LANDLORD'S REMEDIES. Should an Event of Default occur under this
Lease, Landlord may pursue any or all of the following remedies:
(i) TERMINATION OF LEASE. Landlord may terminate this Lease, by
giving written notice of such termination to Tenant, whereupon this Lease shall
automatically cease and terminate and Tenant shall be immediately obligated to
quit the premises. Any other notice to quit or notice of Landlord's intention
to re-enter the premises is hereby expressly waived. If Landlord elects to
terminate this Lease, everything contained in this Lease on the part of
Landlord to be done and performed shall cease without prejudice, subject,
however, to the right of Landlord to recover from Tenant all rent and any other
sums accrued up to the time of termination or recovery of possession by
Landlord, whichever is later.
(ii) SUIT FOR POSSESSION. Upon termination of this Lease pursuant to
Paragraph 16(b)(i), Landlord may proceed to recover possession of the premises
under and by virtue of the provisions of the laws of the District of Columbia,
or by such other proceedings, including re-entry and possession, as may be
applicable.
(iii) RELETTING OF PREMISES. Should this Lease be terminated before
the expiration of the term of this Lease by reason of Tenant's default as
hereinabove provided, or if Tenant shall abandon or vacate the premises before
the expiration or termination of the term of this Lease without having paid the
full rental for the remainder of such term, Landlord shall use best efforts to
relet the premises for such rent and upon such terms as are not unreasonable
under the circumstances and, if the full rental reserved under this Lease (and
any of the costs, expenses or damages indicated below) shall not be realized by
Landlord, Tenant shall be liable for all damages sustained by Landlord,
including, without limitation, deficiency in rent, reasonable attorneys' fees,
brokerage fees and expenses of placing the premises in first class rentable
condition. Landlord, in putting the premises in good order or preparing the same
for rerental may, at Landlord's option, make such alterations, repairs, or
replacements in the premises as Landlord, in its sole judgment, considers
advisable and necessary for the purpose of reletting the premises, and the
making of such alterations, repairs, or replacements shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Landlord
shall in no event be liable in any way whatsoever for failure to relet the
premises, or in the event that the premises are relet, for failure to collect
the rent under such reletting, and in no event shall Tenant be entitled to
receive the excess, if any, of such net rent collected over the sums payable by
Tenant to Landlord hereunder.
(iv) ACCELERATION OF PAYMENTS. If Tenant shall fail to pay any monthly
installment of rent pursuant to the terms of Paragraph 3 of this Lease, together
with any additional rent due under this Lease, within twenty (20) days of the
date when each such payment is due, for three (3) consecutive months, or three
(3) times in any period of six (6) consecutive months, then Landlord may, by
giving written notice to Tenant, exercise any of the following options: (A)
declare the entire rent reserved under this Lease to be due and payable within
ten (10) days of such notice; (B) declare the rent reserved under this Lease for
the next six (6) months (or at Landlord's option for a lesser period) to be due
and payable within ten (10) days of such notice; or (C) require an additional
security deposit to be paid to Landlord within ten (10) days of such notice, in
an amount not to exceed six (6) months rent. Landlord may invoke any of the
options provided for herein at any time during which an Event of Default remains
uncured. In the event Landlord gives notice to Tenant of its election to
exercise any of the foregoing options pursuant to this Paragraph 17(b)(iv) and
Tenant fails to comply therewith, Landlord may terminate this Lease as provided
elsewhere in this Paragraph 17(b).
(v) MONETARY DAMAGES. Any damage or loss of rent sustained by
Landlord may be recovered by Landlord, at Landlord's option, at the time of the
reletting, or in separate actions, from time to time, as said damage shall have
been made more easily ascertainable by successive relettings, or at Landlord's
option in a single proceeding deferred until the expiration of the term of this
Lease (in which event Tenant hereby agrees that the cause of action shall not
be deemed to have accrued until the date of expiration of said term) or in a
single proceeding prior to either the time of reletting or the expiration of
the term of this Lease. In addition, should it be necessary for Landlord to
employ legal counsel to enforce any of the provisions herein contained, Tenant
agrees to pay all attorney's fees and court costs reasonably incurred.
(vi) ANTICIPATORY BREACH; CUMULATIVE REMEDIES. Nothing contained
herein shall prevent the enforcement of any claim Landlord may have against
Tenant for anticipatory breach of the unexpired term of this Lease. In the
event of a breach or anticipatory breach by Tenant of any of the covenants or
provisions hereof, Landlord shall have the right of injunction and the right to
invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not provided for herein. Mention in this
Lease of any particular remedy shall not preclude Landlord from any other
remedy, in law or in equity. Tenant hereby expressly waives any and all rights
of redemption granted by or under any present or future laws in the event of
Tenant being evicted or dispossessed for any cause, or in the event of Landlord
obtaining possession of the premises, by reason of the violation by Tenant of
any of the covenants and conditions of this Lease, or otherwise.
(c) WAIVER. If, under the provisions hereof, Landlord shall 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 herein contained, nor any of Landlord's rights hereunder. No
waiver by Landlord of any breach of any covenant, condition or agreement
herein contained shall operate as a waiver of such covenant, condition, or
agreement itself, or of any subsequent breach thereof. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly installments of rent
herein stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement on any check or letter
accompanying a check for payment of rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such rent or to pursue any other remedy
provided in this Lease. No re-entry by Landlord, and no acceptance by Landlord
of keys from Tenant, shall be considered an acceptance of a surrender of the
Lease.
(d) RIGHT OF LANDLORD TO CURE TENANT'S DEFAULT.
If Tenant defaults in the making of any payment or in the doing of 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, and charge the amount of the
expense thereof, if made or done by Landlord, with interest thereon at the rate
per annum which is two percent (2%) greater than the "prime rate" then in
effect at Citibank, N.A., New York, New York, from the date paid by Landlord to
the date of payment thereof by Tenant, provided, however, that nothing herein
contained shall be construed or implemented in such a manner as to allow
Landlord to charge or receive interest in excess of the
8
<PAGE> 19
maximum legal rate then allowed by law. Such payment and interest shall
constitute additional rent hereunder due and payable with the next monthly
installment of rent; but the making of such payment or the taking of such
action by Landlord shall not operate to cure such default or to estop Landlord
from the pursuit of any remedy to which Landlord would otherwise be entitled.
(e) LATE PAYMENT. If Tenant fails to pay any installment of rent and/or
additional rent (in accordance with paragraph 3) on or before the first (1st)
day of the calendar month when such installment becomes due and payable, Tenant
shall pay to Landlord a late charge of five percent (5%) of the amount of such
installment, and, in addition, such unpaid installment shall bear interest at
the rate per annum which is two percent (2%) greater than the "prime rate" then
in effect at Citibank, N.A., New York, New York from the date such installment
became due and payable to the date of payment thereof by Tenant; provided,
however, that nothing herein contained shall be construed or implemented in such
a manner as to allow Landlord to charge or receive interest in excess of the
maximum legal rate then allowed by law. Such late charge and interest shall
constitute additional rent hereunder due and payable with the next monthly
installment of rent due, or if payments have been accelerated pursuant to
paragraph 17(b)(iv) above, due and payable immediately.
18. HOLDING OVER. In the event that Tenant shall not immediately
surrender the premises on the date of expiration of the term hereof, Tenant
shall, by virtue of the provisions hereof, become a tenant by the month. In such
event Tenant shall be required to pay twice the basic rent required under
paragraph 3(a) hereof, together with all additional rent in effect during the
last month of the term of this Lease. Such monthly tenancy shall commence with
the first day next after the expiration of the term of this Lease. Except as
otherwise provided above with respect to the payment of rent, Tenant shall, as a
monthly tenant, be subject to all of the terms, conditions, covenants and
agreements of this Lease. Tenant shall give Landlord at least thirty (30) day's
written notice of any intention to quit the premises, and Tenant shall be
entitled to thirty (30) day's written notice to quit the premises; provided,
however, that if Tenant is in default hereunder, Tenant shall not be entitled to
any notice to quit, the usual thirty (30) day's notice to quit being hereby
expressly waived. Notwithstanding the foregoing provisions of this paragraph 18,
in the event that Tenant shall hold over after the expiration of the term of
this Lease, and if Landlord shall desire to regain possession of the premises
promptly at the expiration of the term of this Lease, then at any time prior to
Landlord's acceptance of rent from Tenant as a monthly tenant hereunder,
Landlord, at its option, may forthwith reenter and take possession of the
premises without process, or by any legal process in force in the District of
Columbia.
19. SECURITY DEPOSIT. Simultaneously with the execution of this Lease,
Tenant shall deposit with Landlord an irrevocable Letter of Credit in form and
substance reasonably acceptable to Landlord in the amount of Six Thousand Two
Hundred Fifty-Three and 91/100 Dollars ($6,253.91) as a security deposit. Such
security deposit, which shall not bear interest to Tenant, shall be considered
as security for the payment and performance by Tenant of all of Tenant's
obligations, covenants, conditions and agreements under the Lease. Upon the
expiration of the term hereof (or any renewal or extension thereof in accordance
with this Lease), Landlord shall (provided that Tenant is not in default under
the terms hereof) return and pay back such security deposit to Tenant, less such
portion thereof as Landlord shall have retained to make good any default by
Tenant with respect to any of Tenant's aforesaid obligations, covenants,
conditions or agreements. In the event of any default by Tenant hereunder during
the term of this Lease, Landlord shall have the right, but shall not be
obligated, to apply all or any portion of the security deposit to cure such
default, in which event Tenant shall be obligated promptly to deposit with
Landlord the amount necessary to restore the security deposit to the amount
held by Landlord immediately prior to such advance by Landlord. In the event of
the sale or transfer of Landlord's interest in the Building, Landlord shall have
the right to transfer the security deposit to the purchaser or transferee, in
which event Tenant shall look only to the new landlord for the return of the
security deposit and Landlord shall thereupon be released from all liability to
Tenant for the return of such security deposit.
20. COVENANTS OF LANDLORD. Notwithstanding any other provision of this
agreement, it is agreed that the public entrances to the premises shall not be
relocated during the lease term, or any extensions thereof, without both
Tenant's and Landlord's written consent, except if required by code or
governmental order.
(a) QUIET ENJOYMENT. Landlord covenants that it has the right to make
this Lease for the term aforesaid, and that if Tenant shall pay the rent and
perform all of the covenants, terms, conditions and agreements of this Lease to
be performed by Tenant, Tenant shall, during the term hereby created, freely,
peaceably and quietly occupy and enjoy the full possession of the premises
without molestation or hindrance by Landlord or any party claiming through or
under Landlord, subject to the provisions of paragraph 20(b) and paragraph 21(k)
hereof.
(b) RESERVATION. Landlord hereby reserves to itself and its successors
and assigns the following rights (all of which are hereby consented to by
Tenant): (i) to change the street address and/or name of the Building and/or the
arrangement and/or location of entrances, passageways, doors, doorways,
corridors, elevators, stairs, toilets, or other public parts of the Building,
(ii) to erect, use and maintain pipes and conduits in and through the premises
and (iii) to grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building. Landlord may exercise any or all of the
foregoing rights without being deemed to be guilty of an eviction, actual or
constructive, or a disturbance or interruption of the business of Tenant or
Tenant's use or occupancy of the premises. In the event of any sale or transfer
by the then Landlord hereunder of the Building, the landlord whose interest is
sold or transferred shall be and hereby is completely released and forever
discharged from and in respect of all covenants, obligations and liabilities as
landlord hereunder accruing after the date of such sale or transfer, provided
Landlord's obligations hereunder, accruing after the date of sale or transfer,
are expressly assumed by the transferee.
21. MISCELLANEOUS.
(a) NO REPRESENTATIONS BY LANDLORD. Tenant acknowledges that neither
Landlord nor any broker, agent or employee of Landlord has made any
representations or promises with respect to the premises or the Building except
as herein expressly set forth, and no rights, privileges, easements or licenses
are acquired by Tenant except as herein expressly set forth. The Tenant, by
taking possession of the premises, shall accept the same "as is," and such
taking of possession shall be conclusive evidence that the premises and the
Building are in good and satisfactory condition at the time of such taking of
possession.
(b) NO PARTNERSHIP. Nothing contained in this Lease shall be deemed or
construed to create a partnership or joint venture of or between Landlord and
Tenant, or to create any other relationship between the parties hereto other
than that of Landlord and Tenant.
9
<PAGE> 20
(c) Brokers. Landlord recognizes The John Akridge Management Company and
Shannon and Luchs as the sole brokers procuring this Lease and shall pay said
brokers a commission therefor pursuant to separate agreement between said
brokers and Landlord. Landlord and Tenant each represent and warrant one to
another that except as set forth herein neither of them has employed any
broker, agent or finder in carrying on the negotiations relating to this
Lease. Landlord shall indemnify and hold Tenant harmless, and Tenant shall
indemnify and hold Landlord harmless, from and against any claim or claims for
brokerage or other commission arising from or out of any breach of the
foregoing representation and warranty by the respective indemnitors.
(d) Estoppel Certificate. Tenant agrees, at any time and from time to
time during the term of this Lease, upon not less than five (5) days prior
written notice by Landlord, to execute, acknowledge and deliver to Landlord a
statement in the form attached as Exhibit D in writing which shall contain
substantially the following provisions: (i) a statement that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the Lease is in full force and effect as modified and stating the
modifications), (ii) a statement of the dates to which the rent and any other
charges hereunder have been paid by Tenant, (iii) a statement of whether or
not, to the best knowledge of Tenant, Landlord is in default in the performance
of any covenant, agreement or condition contained in this Lease, and if so,
specifying each such default of which Tenant may have knowledge, (iv) a
statement of the address to which notices to Tenant should be sent, (v) a
statement that all work required to be performed by the Landlord under this
Lease has been completed and that Tenant accepts the premises and improvements
therein, (vi) a statement that Tenant will not attempt to terminate this Lease
by reason of Landlord's default or omission without giving written notice of
such default or omission to Landlord and any mortgagee of which Tenant has
knowledge and (vi) such other statement or statements as Landlord, any
prospective purchaser of the Building or the Land, any mortgagee or prospective
mortgagee of the Building or the Land or of Landlord's interest in either
and/or any prospective assignee of any such mortgagee, may reasonably request.
Any such statement delivered pursuant hereto, may be relied upon by any owner
of the Building or the Land, any prospective purchaser of the Building or the
Land, any mortgagee or prospective mortgagee of the Building or the Land or
of Landlord's interest in either, or any prospective assignee of any such
mortgagee. Tenant will agree to make such reasonable changes or modifications
to this Lease as may be required by any mortgagee of the Building and/or the
Land, provided that such changes or modifications shall not increase the amount
of rent required under paragraph 3(a) hereof, shorten the term of this Lease or
change or redefine the premises, provided no such change shall be a material
change and Landlord certifies in writing that every other tenant in the Building
must make identical changes or modifications to their respective leases.
(e) Waiver of Jury Trial. Landlord and Tenant hereby waive trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other on or in respect of any matter whatsoever arising out
of or in any way connected with this Lease, the relationship of Landlord and
Tenant hereunder, Tenant's use or occupancy of the premises, and/or any claim of
injury or damage.
(f) Liability. It is expressly understood and agreed that the liability
of Landlord to Tenant under this Lease is restricted solely to the assets of
the limited partnership which owns the Building and that the partners thereof
shall have no personal liability under this Lease. Tenant covenants and agrees
to look solely to the Building and the Land for the satisfaction of any
liability of Landlord to Tenant hereunder, and Tenant agrees not to bring any
action asserting personal liability of the partners of said limited partnership.
(g) Notices. All notices or other communications hereunder shall be in
writing and shall be deemed duly given if delivered in person (with receipt
therefor) or by certified or registered mail, return receipt requested,
first-class postage prepaid, (i) if to Landlord at 1015 15th Street, N.W.,
Suite 800, Washington, D.C. 20005 with a copy to Greg Hauptman, Esquire, 1615 L
Street, N.W., Suite 400, Washington, D.C. 20036 and (ii) if to Tenant, prior to
the Lease Commencement Date, at 1667 K Street, N.W., Washington, D.C. 20006,
c/o Mr. Webb C. Hayes, IV and after the Lease Commencement Date, at the
premises, unless notice of a change of address is given pursuant to the
provisions of this article.
(h) Invalidity of Particular Provisions. If any provision of this Lease
or the application thereof to any person or circumstances shall to any extent
be invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
(i) Gender and Number. Feminine or neuter pronouns shall be substituted
for those of the masculine form, and the plural shall be substituted for the
singular number, in any place or places herein in which the context may require
such substitution.
(j) Benefit and Burden. The provisions of this Lease shall be binding
upon, and shall inure to the benefit of, the parties hereto and each of their
respective representatives, successors and assigns. Landlord may freely and
fully assign its interest hereunder.
(k) Subordination. This Lease is subject and subordinate to the lien of
any and all mortgages (which term "mortgages" shall include both construction
and permanent financing and shall include deeds of trust, ground leases and
similar security instruments) which may now or hereafter encumber or otherwise
affect the Land and Building of which the premises form a part, or Landlord's
leasehold interest therein, and to all and any renewals, extensions,
modifications, recastings or refinancings thereof. Tenant shall, upon not less
than five (5) days' prior written notice by Landlord, promptly execute,
acknowledge and deliver to Landlord any written statement or agreement
confirming such subordination reasonably required by Landlord or any of its
lenders. Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such certificate or other document for or on
behalf of Tenant. Tenant agrees that in the event that any proceedings are
brought for the foreclosure of any such mortgage, Tenant shall attorn to the
purchaser at such foreclosure sale, if requested to do so by such purchaser,
and shall recognize such purchaser as the landlord under this Lease, and 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 and the obligations of Tenant hereunder
in the event that any such foreclosure proceeding is prosecuted or completed.
In addition, if the Landlord's leasehold interest shall be terminated, Tenant
agrees that this Lease shall remain in full force and effect, (or if terminated
by law as a result of Landlord's interest being terminated, Tenant will enter
into a new Lease with the identical terms and conditions of this Lease).
(l) Entire Agreement. This Lease, together with Exhibits A through E
and Addendum attached hereto, contains and embodies the entire agreement of the
parties hereto, and no representations, inducements or agreements between the
parties, oral or otherwise, not contained in this Lease and the Exhibits, shall
be of any force or effect. This Lease may not be modified, changed or
terminated in whole or in part in any manner other than by an agreement in
writing duly signed by both parties hereto.
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<PAGE> 21
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under
seal on the day and year first hereinabove written.
LANDLORD: 1225 Eye Street, N.W. Associates
ATTEST: BY: Limited Partnership
[SIG] BY: /s/ JOHN E. AKRIDGE, III
- -------------------------------- ------------------------------------------
Asst. Secretary John E. Akridge, III
President
The John Akridge Company
Managing General Partner
[Corporate Seal]
ATTEST: TENANT: The Palmer National Bank
[SIG] By: /s/ WEBB C. HAYES, IV
- -------------------------------- ------------------------------------------
Webb C. Hayes, IV
President and Chief Executive Officer
The undersigned Brokers hereby execute this Lease solely to
agree to the provisions of paragraph 21(c) hereof.
WITNESS: BROKER: Shannon and Luchs
/s/ CAROL A. MCCARTHY BY: [SIG]
- -------------------------------- ------------------------------------------
WITNESS: BROKER: The John Akridge Management Company
[SIG] BY: /s/ WILLIAM C. SMITH
- -------------------------------- ------------------------------------------
William C. Smith
Vice President
11
<PAGE> 22
EXHIBIT A
---------
First Floor
[Map of Floor Plan]
Reference is made to a certain Agreement of Lease dated OCTOBER 28, 1985 (the
"Lease"), to which this first floor plan is attached. Definition of terms are
set forth in the Lease.
<PAGE> 23
Exhibit B
Work Agreement and Allowances
Reference is made to a certain Agreement of Lease dated OCTOBER 28,
1985 (the "Lease") to which this work Agreement and Allowances is attached.
Definition of terms are set forth in the Lease.
1. Tenant agrees to furnish Landlord the following architectural,
mechanical, and electrical drawings, plans and specifications, to be drawn, at
Tenant's expense, for the premises:
(a) Complete, finished, detailed architectural drawings, plans, and
specifications for Tenant's partition layout, reflected ceiling and other
installations for all building standard and above building standard work
to be provided by Landlord in accordance with this Exhibit B.
(b) Complete mechanical and electrical plans and specifications where
necessary for installation of heating and cooling system, wiring,
plumbing and such other plans, drawn by Landlord's mechanical and
electrical engineers on behalf of Tenant, for building standard and above
building standard work to be provided by Landlord in accordance with this
Exhibit B.
(c) Tenant shall provide Landlord, at Tenant's expense, all final
construction drawings, plans and specifications necessary to construction
the premises on or before January 1, 1986. Tenant shall approve all of
the final construction drawings, plans and specifications in writing on
or before January 1, 1986. Landlord shall approve said plans and shall
submit to Tenant written estimates of the cost of all of the work to be
performed in accordance with said drawings, plans and specifications on
or before January 15, 1986, and Tenant shall approve such estimates in
writing within fifteen (15) days after the same are submitted to Tenant
by Landlord. If Tenant shall fail to approve in writing the final
construction drawings, plans or specifications and/or the cost estimates
by the dates set forth in this paragraph 1(c), the same shall be deemed
disapproved in all respects by Tenant and Landlord shall not be
authorized to proceed therewith. Tenant covenants and agrees to cause the
final construction drawings, plans and specifications to be delivered to
Landlord on or before January 1, 1986, in order to allow Landlord to
substantially complete the building standard work and above standard work
on or before the Lease Commencement Date. Any and all changes in the
requirements of the Tenant which require modification or change to the
drawings, plans or specifications, shall be at the sole cost of the
Tenant.
If Tenant shall desire any additional or non-standard work, over and
above that specified herein, to be performed in the premises by Landlord or by
Tenant, Tenant shall cause all necessary drawings, plans and specifications for
such work to be drawn. All such drawings, plans or specifications for additional
or non-standard work shall expressly be subject to Landlord's written approval
and shall be submitted on or before January 1, 1986, in order to allow Landlord
to substantially complete said work on or before the Lease Commencement Date;
provided, however, that Tenant expressly understands that if any additional or
non-standard work is deemed to be a long lead time by Landlord and advises
Tenant in writing prior to construction commencement and subsequently is not
substantially complete by the Lease Commencement Date, the Lease Commencement
Date shall not be extended and Tenant's obligations under the Lease shall be
fully effective as of the Lease Commencement Date.
<PAGE> 24
Page 2
2. The below listed items include all of the building standard work
which is provided by and at the expense of the Landlord. These improvements are
based upon building standard specifications, finishes, materials and sizes:
(a) Exterior perimeter walls with 1/2 inch gypsum wall board with no
visible joints, finished and ready for painting.
(b) Floor covering from a building standard vinyl composite tile of
uniform color with a standard color vinyl base or, at Tenant's option, a
credit of $0.50 per square foot.
(c) Mineral fissured acoustical tile ceiling with exposed spline
mounting system (2 ft. x 2 ft.).
(d) Fully recessed building standard light fixtures with glare reducing
diffusers.
(e) A single conduit with Tenant's line capacity as required from the
main building panel to a Tenant supplied service box within the
premises.
(f) A single conduit for telephone service with Tenant's required
capacity from the main distribution closet to one distribution point in
the premises.
(g) Building standard heating, ventilating and air conditioning system
and necessary duct work.
(h) Building standard storefront and entrance doors.
3. Landlord shall provide Tenant with up to a Thirty-Three Thousand
Seven Hundred and no/100 Dollar ($33,700.00) allowance for above standard
improvements. Upon Lease execution, Landlord shall establish said allowance in a
tenant improvement account to be applied toward the cost of above building
standard improvements provided by Landlord.
4. Landlord further agrees to perform, at Tenant's request, and upon
submission by Tenant of necessary drawings, plans and specifications, any
additional or non-standard work over and above that specified in paragraph 2
hereof. Such work shall be performed by Landlord at Tenant's sole expense, as
extra tenant work. Prior to commencing any such work requested by Tenant,
Landlord will submit to Tenant written estimates of the cost of any such work.
If Tenant shall fail to approve in writing the drawings, plans or specifications
and/or the cost estimates for the additional or non-standard work by January 1,
1986, the same shall be deemed disapproved in all respects by Tenant, and
Landlord shall not be authorized to proceed therewith.
Tenant agrees to pay to Landlord, promptly upon being billed therefor,
the cost of all non-standard or additional work, not provided at the expense of
Landlord, together with ten percent (10%) overhead, and ten percent (10%) profit
of such costs. Tenant shall pay one-third (1/3) of said costs upon approval of
the cost estimates, one third (1/3) of said costs when being performed by
Landlord is one-half (1/2) complete, and the final one-third (1/3) of said costs
when the work is complete, as determined by Landlord's architect and/or
engineer. All such payments shall constitute additional rent under the Lease,
and in the event of nonpayment thereof by Tenant, Landlord shall have all of the
rights and remedies set forth in the Lease.
5. It is agreed that, notwithstanding the date provided in the Lease as
the Lease Commencement Date thereof, Tenant's obligations for the payment of
rent hereunder shall not commence until Landlord has substantially completed all
building standard and approved above building standard work to be provided by
and performed by Landlord as set forth in paragraph 2 hereof,; provided however,
that if Landlord shall be delayed in substantially completing said work as a
result of:
(a) Tenant's failure to furnish its approved drawings, plans,
specifications by January 1, 1986 and the cost estimate by February 1,
1986;
<PAGE> 25
Page 3
(b) Tenant's request for changes in drawings, plans and specifications
subsequent to January 1, 1986;
(c) Tenant's failure to approve in writing the drawings, plans or
specifications and/or the cost estimates for non-standard or additional
work by January 1, 1986;
(d) Tenant's request for materials, finishes or installations other than
the building standard and above building standard approved by Landlord
prior to commencement of construction, in accordance with paragraph 1 of
this Exhibit B and as described in paragraph 23 of the Addendum,
excluding all "long lead time" items of construction, as determined by
Landlord's architect.
(e) The performance by a person, firm or corporation, other than the
Landlord, employed by Tenant and/or the completion of the work of said
person, firm or corporation;
then Tenant shall be liable for the payment of rent commencing in accordance
with paragraph 23 of this Lease Agreement and the Lease Commencement Date and
Lease Expiration Date shall not be extended, except to the extent of the number
of days that Landlord's architect determines, in its sole judgement, that
Landlord's accepted and approved work would not have been completed by the Lease
Commencement Date, without the occurrence of the foregoing delays. The number of
days that the Lease Commencement Date shall be extended pursuant to the
provisions of paragraph 2(b) of the Lease shall be that number of days of delay
that is determined by Landlord's architect to be due to the actions inactions of
the Landlord.
<PAGE> 26
EXHIBIT C
RULES AND REGULATIONS
Reference is made to a certain Agreement of Lease dated OCTOBER 28,
1985 (the "Lease"), to which these Rules and Regulations are attached.
Definitions of terms are set forth in the Lease.
The following rules and regulations have been formulated for the safety
and well-being of all tenants of the Building and to insure compliance with all
municipal and other requirements. Strict adherence to these rules and
regulations is necessary to guarantee that each and every tenant will enjoy a
safe and unannoyed occupancy in the Building in accordance with the Lease. Any
continuing violation of these rules and regulations by Tenant, after notice
from Landlord, shall be deemed to be an Event of Default under the Lease.
Landlord may, upon request by any tenant, waive the compliance by such
tenant to any of these rules and regulations, provided that (i) no waiver shall
be effective unless signed by Landlord or Landlord's authorized agent, (ii) any
such waiver shall not relieve such tenant from the obligation to comply with
such rule or regulation in the future unless expressly consented to by Landlord,
(iii) no waiver granted to any tenant shall relieve any other tenant from the
obligation of complying with the rules and regulations unless such other tenant
has received a similar waiver in writing from the Landlord, and (iv) any such
waiver by Landlord shall not relieve Tenant from any obligation or liability of
Tenant to Landlord pursuant to the Lease for any loss or damage occasioned as a
result of Tenant's failure to comply with any such rule or regulation.
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, halls or other parts of the Building not occupied by any
tenant shall not be obstructed or encumbered by any tenant or used for any
purpose other than ingress and egress to and from the premises, and if the
premises are situated on the ground floor of the Building, the Landlord thereof
shall, keep the sidewalks and curb directly in front of the premises clean and
free from ice and snow. Landlord shall have the right to control and operate
the public portions of the Building and the facilities furnished for common use
of the tenants in such manner as Landlord deems best for the benefit of the
tenants generally. No tenant shall permit the visit to the premises of persons
in such numbers or under such conditions as to interfere with the use and
enjoyment by other tenants of the entrances, corridors, elevators and other
public portions or facilities of the Building.
2. No awnings or other projections shall be attached to the outside
walls of the Building without the prior written consent of Landlord. No drapes,
blinds, shades or screens shall be attached to or hung in, or used in connection
with, any window or door of the premises, without the prior written consent of
Landlord. Such awnings, projections, curtains, blinds, shades, screens or other
fixtures must be of a quality, type, design and color, and attached in the
manner, approved by Landlord.
3. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the halls, corridors
or vestibules without the prior written consent of Landlord.
4. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, chemicals, paints, cleaning fluids or other
substances shall be thrown therein. All damages resulting from any misuse of
the fixtures shall be borne by the tenant who, or whose servants, employees,
agents, visitors or licensees, shall have caused the same.
5. There shall be no marking, painting, drilling into or in any way
defacing the Building or any part of the premises visible from public areas of
the Building. Tenant shall not construct, maintain, use or operate within the
premises any electrical device, wiring or apparatus in connection with a loud
speaker system or other sound system, except as reasonably required for its
communication system and approved prior to the installation thereof by
Landlord. No such loud speaker or sound system shall be constructed,
maintained, used or operated outside of the premises.
6. No bicycles, vehicles or animals, birds or pets of any kind shall be
brought into or kept in or about the premises, and no cooking (except for
hot-plate cooking by Tenant's employees for their own consumption, the
equipment for and location of which are first approved by Landlord) shall be
done or permitted by any tenant on the premises. No tenant shall cause or
permit any unusual or objectionable odors to be produced upon or permeate from
the premises.
7. No space in the Building shall be used for manufacturing of goods
for sale in the ordinary course of business, for the storage of merchandise for
sale in the ordinary course of business, or for the sale at auction of
merchandise, goods or property of any kind. Furthermore, the use of the
premises by each tenant was approved by Landlord prior to execution of the
Lease and such use may not be changed without the prior approval of Landlord.
8. No tenant shall make any unseemly or disturbing noises or disturb or
interfere with occupants of the Building or neighboring buildings or premises
or those having business with them whether by the use of any musical
instrument, radio, talking machine, unmusical noise, whistling, singing or in
any other way. No tenant shall throw anything out of the doors or windows or
down the corridors or stairs.
9. No flammable, combustible or explosive fluid, chemical or substance
shall be brought or kept upon the premises.
10. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows by any tenant, nor shall any changes be made in
existing locks or the mechanism thereof. The doors leading to the corridors or
main halls shall be kept closed during business hours except as they may be
used for ingress or egress. Each tenant shall, upon the termination of his
tenancy, restore to the Landlord all keys of stores, offices, storage and
toilet rooms either furnished to, or otherwise procured by, such tenant, and in
the event of the loss of any keys so furnished, such tenant shall pay to
Landlord the cost thereof.*
11. Landlord reserves the right to inspect all freight to be brought
into the Building and to exclude from the Building all freight which violates
any of these rules and regulations or the Lease.**
12. No tenant shall pay any employees on the premises, except those
actually working for such tenant on the premises.
13. Landlord reserves the right to exclude from the Building at all
times any person who is not known or does not properly identify himself to the
Building management, security guard on duty or security system monitor. Landlord
may, at its option, require all persons admitted to or leaving the Building
between the hours of 6:00 p.m. and 8:00 a.m., Monday through Friday, and at any
hour, Saturdays, Sundays and legal holidays, to register. Each tenant shall be
responsible for all persons for whom he authorizes entry into or exit out of the
Building, and shall be liable to Landlord for all acts or omissions of such
persons.
14. The premises shall not, at any time, be used for lodging or
sleeping or for any immoral or illegal purpose.
15. Each tenant, before closing and leaving the premises at any time,
shall see that all windows are closed and all lights turned off, except as may
be necessary for emergency and/or security purposes.
16. Landlord's employees shall not perform any work or do anything
outside of their regular duties, unless under special instruction from the
management of the Building. The requirements of tenants will be attended to
only upon application to Landlord and any such special requirements shall be
billed to Tenant (and paid with the next installment of rent due) at the
schedule of charges maintained by Landlord from time to time or at such charge
as is agreed upon in advance by Landlord and Tenant.
17. Canvassing, soliciting and peddling in the Building is prohibited
and each tenant shall cooperate to prevent the same.
*Notwithstanding, Tenant shall be permitted to install such additional locks
and security devices as are deemed necessary to conduct its banking business
provided Tenant supplies Landlord with keys to all locks except the vault or
safe.
**Freight delivered by Brinks, Wells Fargo, or any other messenger or delivery
service customarily employed to deliver money or negotiable instruments to
financial institutions, shall be excluded.
JAYCo
rev. 4-2-81
<PAGE> 27
18. There shall not be used in any space, or in the public halls of the
Building, either by any tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks except those equipped with rubber tires
and side guards, and Tenant shall be responsible to Landlord for any loss or
damage resulting from any deliveries of Tenant to the Building.
19. Mats, trash or other objects shall not be placed in the public
corridors.
20. Landlord does not maintain suite finishes which are non-standard,
such as kitchens, bathrooms, wallpaper, special lights, etc. However, should
the need for repairs of items not maintained by Landlord arise, Landlord will
arrange for the work to be done at Tenant's expense.
21. Drapes installed by Landlord for the use of Tenant or drapes
installed by Tenant, which are visible from the exterior of the Building, must
be cleaned by Tenant at least once a year, without notice, at Tenant's own
expense.
22. The amount of liability insurance required to be maintained by
Tenant pursuant to paragraph 11(b) of the Lease for bodily injury and property
damage is $2 million combined single limit. Landlord may from time to time
require Tenant to increase its insurance coverage to an amount determined by
Landlord to be satisfactory in Landlord's sole but reasonable judgment.
2
<PAGE> 28
EXHIBIT D
Lease Estoppel Certificate
Lease Date: ___________________________
Landlord: ___________________________
Tenant: ___________________________
___________________________
Premises: ___________________________
Area: _________________square feet
The undersigned Landlord and Tenant of the above Lease hereby certify to
Mellon Bank (East), N.A. ("Mellon Bank") as follows:
1. That the term of the Lease commenced on ______________________, 19__,
and the Tenant is in full and complete possession of the premises demised under
the Lease and has commenced full occupancy and use of the premises, such
possession having been delivered by the original Landlord and having been
accepted by the Tenant.
2. That the Lease calls for monthly net rent installments of
$_____________________ to date and that the Tenant is paying monthly
installments of gross rent of $_________________, which commenced to accrue on
the __________ day of ______________________, 19__.
3. That no advance rental or other payment has been made in connection
with the Lease, except rental for the current month and the rent has been paid
to and including ______________________, 198___.
4. That a security deposit in the amount of $ _________________ is being
held by Landlord, which amount is not subject to any set-off or reduction or to
any increase for other credit due to Tenant.
5. That all obligations and conditions under said Lease to be performed
to date by Landlord or Tenant have been satisfied, free of defenses and
set-offs, including all construction work in the demised premises.
6. That the Lease is a valid lease and in full force and effect and
represents the entire agreement between the parties; that there is no existing
default on the part of the Landlord or the Tenant in any of the terms and
conditions thereof and no event has occurred which, with the passing of time or
giving of notice or both, would constitute an event of default, except as set
forth below:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 29
and that said lease has: (initial one)
/ / not been amended, modified, supplemented, extended, renewed or
assigned.
/ / been amended, modified, supplemented, extended, renewed or
assigned as follows by the following described agreements:
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
7. That the Lease provides for a primary term of _____ months; the term
of the Lease expires on the ______ day of _____________________, 198__; and
that: (initial one)
/ / neither the Lease nor any of the documents listed in paragraph 6
(if any), contain any option for any additional term or terms.
/ / the Lease and/or the documents listed under paragraph 6 (if any)
above, contain for _______ additional term(s) of _______ year(s)
and _________ month(s) (each) at a rent to be determined as
follows:
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
8. That there are no actions, voluntary or involuntary, pending against
the Tenant under the bankruptcy laws of the United States or any state thereof.
9. That this certification is made knowing that Mellon Bank is relying
upon the representations herein made.
10. The undersigned Tenant consents to the assignment of Landlord's
interest in the Lease to Mellon Bank and, upon notification by Landlord that the
Lease has been assigned to Mellon Bank, agrees to attorn to Mellon Bank and to
recognize it as Landlord under the Lease.
ATTEST: Tenant:
__________________________ ___________________________
Dated: ___________________
Landlord:
Dated: ___________________ ___________________________
<PAGE> 30
EXHIBIT E
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
(Mortgagee)
THIS AGREEMENT, made this 28th day of OCTOBER 1985 between The Palmer National
Bank with offices at 1667 K Street, N.W. Washington, D.C. (hereinafter called
"Tenant"), Mellon Bank (East) N.A., a national banking corporation having its
principal office and place of business at Three Girard Plaza, Philadelphia, PA
(hereinafter called "Mortgagee"), and 1225 Eye Street, N.W. Associates Limited
Partnership, a Limited Partnership organized and existing under the laws of the
District of Columbia (hereinafter referred to as "Landlord").
WITNESSETH:
WHEREAS, the Tenant has entered into a certain lease (the "Lease") dated
OCTOBER 28, 1985 with Landlord covering premises within a certain building known
as 1225 Eye Street, N.W. (the "Premises"); and more particularly described as
Lot 47, Square 285, Washington, D.C.; and
WHEREAS, the Mortgagee (is currently the holder of a mortgage covering the
Premises pursuant to two Deed of Trusts dated 12/18/84 & 12/20/84, and recorded
as Document #46356 in the Land Records of the District of Columbia) (the
"Mortgage"); and
WHEREAS, Mortgagee has been requested by Tenant and by Landlord to enter
into a non-disturbance agreement with Tenant;
NOW THEREFORE, in consideration of the premises and mutual convenants
hereinafter contained, the parties hereto mutually covenant and agree as
follows:
1. The Lease and any extensions, renewals, replacements or modifications
thereof, and all of the right, title and interest of the Tenant in and to said
Premises are and shall be subject and subordinate to the Mortgage and to all of
the terms and conditions contained herein, and to any renewals, modifications,
replacements, consolidations and extensions thereof.
2. Mortgagee consents to the Lease and, in the event of foreclosure of said
Mortgage, or in the event Mortgagee comes into possession or acquires title to
the Premises as a result of the enforcement of the foreclosure of the Mortgage
or mortgage note, or as a result of any other means, Mortgagee agrees to
recognize Tenant and further agrees that Tenant shall not be disturbed in its
possession of the Premises for any reason other than one which would entitle the
Landlord to terminate the Lease under its terms or would cause, without any
further action by such Landlord, the termination of the Lease or would entitle
such Landlord to dispossess the Tenant from the Premises.
3. Tenant agrees with Mortgagee that if the interests of Landlord in the
Premises shall be transferred to and owned by Mortgagee by reason of foreclosure
or other proceedings brought by it, or by any other matter, Tenant shall be
bound to Mortgagee under all the terms, covenants and conditions of the Lease
for the balance of the term thereof remaining and any extensions or renewals
thereof which may be affected in accordance with any option therefor in the
Lease, with the same force and effect as if Mortgagee were the Landlord under
the Lease, and Tenant does hereby attorn to Mortgagee as its Landlord, said
attornment to be effective and self-operative without the execution of any
further instruments on the part of any of the parties hereto immediately upon
Mortgagee succeeding to the interest of the Landlord in the Premises. Tenant
agrees, however, upon the election of and written demand by Mortgagee within
twenty (20) days after Mortgagee receives title to the Premises, to execute an
instrument in confirmation of the foregoing provisions, satisfactory to
Mortgagee, in which Tenant shall acknowledge such attornment and shall set forth
the terms and conditions of its tenancy.
4. Tenant agrees with Mortgagee that if Mortgagee shall succeed to the
interest of Landlord under the Lease, Mortgagee shall not be (a) liable for any
action or omission of any prior landlord under the Lease, or (b) subject to any
offsets or defenses which Tenant might have against any prior landlord, or (c)
bound by any rent or additional rent which Tenant might have paid for more than
the current month to any prior Landlord, or (d) bound by any security deposit
which Tenant may have paid to any prior landlord, or (e) bound by any amendment
or modification of the Lease made without Mortgagee's consent, or (f) bound by
any provision in the Lease which obligates the Landlord to erect or complete any
building or to perform any construction work or to make any improvements to the
Premises. Tenant further agrees with Mortgagee that Tenant will not voluntarily
subordinate the Lease to any lien or encumbrance without Mortgagee's consent.
5. In the event that the Landlord shall default in the performance or
observance of any of the terms, conditions or agreements in the Lease, Tenant
shall give written notice thereof to the Mortgagee and the Mortgagee shall have
the right (but not the obligation) to cure such default. Tenant shall not take
any action with respect to such default under the Lease including without
limitation any action in order to terminate, rescind or void the Lease or to
withhold any rental thereunder, for a period of 10 days after receipt of such
written notice thereof by the Mortgagee with respect to any such default capable
of being cured by the payment of money and for a period of 30 days after receipt
of such written notice thereof by the Mortgagee with respect to any other such
default (provided, that in the case of any default which cannot be cured by the
payment of money and cannot with diligence be cured within such 30-day period
because of the nature of such default or because Mortgagee requires time to
obtain possession of the Premises in order to cure the default, if the Mortgagee
shall proceed promptly to attempt to obtain possession of the Premises, where
possession is required, and to cure the same and thereafter shall prosecute the
curing of such default with diligence and continuity, then the time within which
such default may be cured shall be extended for such period as may be necessary
to complete the curing of the same with diligence and continuity).
6. Landlord agrees with Mortgagee that Landlord's estate in the Premises
shall not be conveyed or encumbered without the written consent of the Mortgagee
so long as the Lease is in effect.
7. Landlord agrees with Mortgagee that Landlord's estate in the Premises
shall not be conveyed nor shall Landlord further assign Landlord's interest in
the Lease, unless the grantee or assignee shall acknowledge in writing to the
Mortgagee that the conveyance or assignment is accepted subject to the Lease.
Landlord further agrees that in the event said estate in the Premises or said
interest in the Lease passes to any other person, firm or corporation, by
operation of law or by any other means, such passage of title shall be
applicable to the Lease.
8. This Agreement shall bind and inure to the benefit of the parties
hereto, their successors and assigns. As used herein the term "Tenant" shall
include the Tenant, its successors and assigns; the words "foreclosure" and
"foreclosure sale" as used herein shall be deemed to include the acquisition of
Landlord's estate in the Premises by voluntary deed (or assignment) in lieu of
foreclosure, and the word "Mortgagee" shall include the Mortgagee herein
specifically named and any of its successors and assigns, including anyone who
shall have succeeded to Landlord's interest in the Premises by, through or under
foreclosure of the Mortgage.
<PAGE> 31
9. This Agreement shall not be modified or amended except in writing
signed by all parties hereto.
10. The use of the neuter gender in this Agreement shall be deemed to
include any other gender, and words in the singular number shall be held to
include the plural, when the sense requires.
IN WITNESS WHEREOF the parties hereto have placed their hands and seals the
day and year first above written.
Signed and acknowledge Tenant The Palmer National Bank
the presence of us:
[SIG] By: /s/ WEBB C. HAYES
- ---------------------------------- --------------------------------
Webb C. Hayes, IV; Pres & CEO
Attest Mortgagee Mellon Bank (East), N.A.
/s/ ROBERT E. UNGER By: /s/ RICHARD B. WERNER, JR.
- ----------------------------------- ---------------------------------------
Robert E. Unger Richard B. Werner, Jr.
Asst., Secretary Vice President
[Corporate Seal]
Attest Landlord 1225 Eye Street, NW Associated
Limited Partnership
[SIG] By: /s/ JOHN E. AKRIDGE
- ---------------------------------- --------------------------------------
, Secretary John E. Akridge
President
[Corporate Seal] The John Akridge Co.
Managing General Partner
2
<PAGE> 32
ADDENDUM
This Addendum to Agreement of Lease dated OCTOBER 28, 1985, by and
between 1225 Eye Street, N.W. Associates Limited Partnership ("Landlord") and
The Palmer National Bank ("Tenant") covering a portion of the First Floor
("premises") of an office building under construction by Landlord at 1225 Eye
Street, N.W., Washington, D.C. (the "Building").
Whereas, the parties hereto incorporate into the above Agreement of
Lease (the "Lease") as though therein fully rewritten and made a part hereof,
the following terms and conditions which amend, supplement or define the
provisions contained in such Lease and agree, notwithstanding any provision
contained in this Lease, the Addendum provisions shall prevail.
22. Option to Renew
Supplementing paragraph 2 hereof, provided Tenant is not in default
hereunder, Tenant shall have the right to extend the term of the Lease for one
(1) additional term of five (5) years by giving written notice to Landlord at
least 360 days prior to the Lease Expiration Date. The terms and conditions of
said option shall be the "market" for existing, comparable space in the locale
of 1225 Eye Street, N.W., Washington, D.C. Landlord shall notify Tenant in
writing of said "market" terms and conditions within thirty (30) days of
Tenant's written notice to Landlord. Landlord and Tenant shall then have sixty
(60) days to agree upon the Lease terms and conditions for the additional five
(5) year term or the option to extend the term of the Lease shall be void and of
no further force or effect.
23. Rental Abatement
Rent shall be abated on the premises until the earlier of (i) The
National Corporation for Housing Partnership's, and any of its subtenant's,
occupancy of at least eighty percent (80%) of floors 2, 3, 4, 5, 6, 7 and first
cellar space or (ii) January 1, 1987. In no event, however, shall rent payments
become due prior to October 1, 1986.
<PAGE> 33
Page 2
Notwithstanding, provided Tenant performs in accordance with Exhibit B
of the Lease and authorizes Landlord to commence construction by February 1,
1986; and Landlord does not substantially complete both i) the improvements
provided by Landlord as set forth in Exhibit B, except for "long lead time"
items identified by the Landlord in Landlord's written approval of Tenant's
final plans and specifications and ii) the Building's exterior sidewalk areas,
allowing public access to the Premises by June 1, 1986, the rent shall be abated
beyond the appropriate date specified in either (i) or (ii) in the preceding
paragraph. Said additional abatement shall be equal to the period of time
between June 1, 1986, and the date the Premises and exterior sidewalk areas are
substantially completed, as determined by the Building architect.
24. Parking
Throughout the term of this Lease, and any extensions thereof, Landlord
will grant Tenant the right to lease four (4) parking rights from the parking
garage operator at the rate charged by the parking operator. This rate may be
adjusted from time to time. The parking spaces may be offered, at the discretion
of the parking garage operator, on a reserved, assigned, non-reserved,
non-assigned, attendant-parked or self-parked basis.
25. Non-Compete Clause
Notwithstanding anything contained herein to the contrary, Landlord
shall not lease any of the remaining first floor retail space to another
national bank or savings and loan institution during Tenant's initial or renewal
occupancy of the premises.
26. Branch Approval
This Lease Agreement shall be contingent upon approval of a branch
application by the office of the Comptroller of the Currency on or before
January 31, 1986, unless extended by mutual agreement. Tenant shall submit a
formal written application to the Comptroller, with a copy to the Landlord,
within fifteen (15) days from the date of this Lease Agreement. If the formal
application has not been made
<PAGE> 34
Page 3
by such date, Landlord shall have the option of terminating the Lease, or if the
Comptroller's approval has not been received by January 31, 1986, Tenant or
Landlord shall have the option of terminating the Lease.
27. Automatic Teller Machine
Tenant shall have the right to install an automatic teller machine in a
prominent location on the first floor street level within the Premises at a
location mutually acceptable to Landlord and Tenant.
28. Exterior Signage
Tenant shall have the right to install, at Tenant's expense, building
standard exterior signage in designated signage panels. Said signage must be
approved in writing by Landlord prior to fabrication and installation.
<PAGE> 35
EXHIBIT D
Lease Estoppel Certificate
Lease Date: October 28, 1985
Landlord: 1225 Eye Street, N.W.
Associates Limited Partnership
Tenant: The Palmer National Bank
__________________________________
Premises: Store # 2
Area: 2,114 square feet
The undersigned Landlord and Tenant of the above Lease hereby certify
to Sterling Finance B.V. ("Sterling Finance") as follows:
1. That the term of the Lease commenced on June 1, 1986, and the Tenant
is in full and complete possession of the premises demised under the Lease and
has commenced full occupancy and use of the premises, such possession having
been delivered by the original Landlord and having been accepted by the Tenant.
2. That the Lease calls for monthly net rent installments of $7,046.67
to date and that the Tenant is paying monthly installments of gross rent of
$7,046.67, which commenced to accrue on the 1st day of June, 1986.*
3. That no advance rental or other payment has been made in connection
with the Lease, except rental for the current month and the rent has been paid
to and including September 1, 1986.
4. That a security deposit in the amount of $ 6,253.91 is being held by
Landlord, which amount is not subject to any set-off or reduction or to any
increase for other credit due to Tenant.**
5. That all obligations and conditions under said Lease to be performed
to date by Landlord or Tenant have been satisfied, free of defenses and
set-offs, including all construction work in the demised premises.
6. That the Lease is a valid lease and in full force and effect and
represents the entire agreement between the parties; that there is no existing
default on the part of the Landlord or the Tenant in any of the terms and
conditions thereof and no event has occurred which, with the passing of time or
giving of notice or both, would constitute an event of default, except as set
forth below:
None
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
*Notwithstanding, the rent shall be abated until the earlier of (i) The National
Corp. for Housing Partnership's occupancy of at least eighty percent (80%) of
floors 2-7 and first cellar space or (ii) June 1, 1987. In no event, however,
shall rent become due prior to October 1, 1986.
**Security deposit is in the form of an irrevocable letter of credit.
<PAGE> 36
and that said lease has: (initial one)
/XX/ not been amended, modified, supplemented, extended, renewed or
assigned.
/ / been amended, modified, supplemented, extended, renewed or
assigned as follows by the following described agreements:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
7. That the Lease provides for a primary term of 120 months; 96 the term
of the Lease expires on the 31st day of May, 1996 and that: (initial one)
/ / neither the Lease nor any of the documents listed in
paragraph 6 (if any), contain any option for any additions
term or terms.
/XX/ the Lease and/or the documents listed under paragraph 6 (if
any) above, contain for one (1) additional term (s) of
five(5) year(s) and -0- month(s) (each) at a rent to be
determined as follows:
"Market" terms terms and conditions.
________________________________________________________________________
________________________________________________________________________
8. That there are no actions, voluntary or involuntary, pending against
the Tenant under the bankruptcy laws of the United States or any state thereof.
9. That this certification is made knowing that Mellon Bank is relying
upon the representations herein made.
10. The undersigned Tenant consents to the assignment of Landlord'
interest in the Lease to and, upon notification by Landlord
that the Lease has been assigned to agrees to attorn
to and to recognize it as Landlord under the Lease.
ATTEST: TENANT: THE PALMER NATIONAL BANK
[SIG] /s/ WEBB C. HAYES, IV
- -------------------------- ---------------------------
Webb C. Hayes, IV
President and C.E.O.
Dated: 9/3/86
LANDLORD: 1225 Eye Street N.W.
Associates Limited Partnership
Dated:
- -------------------------- ---------------------------
William C. Smith
Vice President
<PAGE> 37
[GARY K. BAHENA LETTERHEAD]
July 16, 1996
BY MESSENGER
Mr. Webb C. Hayes, IV
President
Palmer National Bank
1667 K Street, N.W.
Washington, D.C. 20006
Re: Akridge/1225 Eye Street, N.W. -- Proposed First
Amendment to Lease
Dear Webb:
Enclosed please find a fully executed original of the above for your
records.
As Usual, please do not hesitate to call me if you have any questions or
comments.
Sincerely yours,
/s/ GARY K. BAHENA
Gary K. Bahena
Enclosures
ak3169
cc:(w/o encl.): Alan Wasserbach
Cindy Judge
Wil Pace
<PAGE> 1
EXHIBIT 10AL
[W.C. & A. N. MILLER LETTERHEAD]
October 16, 1995
Palmer National Bank
ATTN: Mr. Jack Connor
4900 Massachusetts Ave N. W.
Suite S100
Washington, D.C. 20016
RE: ESTOPPLE CERTIFICATE
Dear Mr. Connor:
The W.C. & A.N. Miller Companies is finalizing a refinance of 4900 Massachusetts
Avenue, N.W. Our lender, The Riggs National Bank of Washington, D.C., has
requested that our tenants verify to them the basic terms of your lease
agreement. Therefore, enclosed is an Estopple Certificate defining the basic
terms and conditions of our lease arrangement with you. Your cooperation in
reviewing and executing this document expeditiously is earnestly requested. I,
therefore, ask that you return the executed document within five (5) days of
the receipt requested.
This document should be executed by all authorized officer of your company;
however, it does not require the signatures of all parties to the Lease. I have
attached a copy of your Lease clause(s) pertaining to the Lease Commencement
and/or Rent commencement for your convenience.
If you have any questions regarding this matter, please contact me at (202)
895-2718. Again, your expeditious review and execution of this document is
greatly appreciated. Thank you for your cooperation in this matter.
Sincerely,
/s/ WILLIAM C. MILLER
- -------------------------------
William C. Miller
Vice President
WCM:mnk
Enclosure
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ESTOPPEL CERTIFICATE
THE PALMER NATIONAL BANK, ("Tenant") the Tenant of Premises at 4900
Massachusetts Avenue, N.W., Washington D.C. under a Lease dated September
30, l991, ("Lease"), by and between Tenant and W.C. & A.N. Miller Companies,
("Landlord"), upon request of the Landlord hereby certifies that:
a.) The Lease is unmodified and in full force and effect.
b.) Tenant has no defenses, offsets or counterclaims against its
obligations to pay the fixed rent and additional rent and to
perform its other covenants under the Lease.
c.) There are no uncured defaults of Landlord or Tenant under
the Lease.
d.) The Commencement Date as defined in the Lease is March 13,
1992.
e.) Fixed rent, additional rent and other charges commenced to
accrue on March 13, 1992, and have been paid thru October 31,
1995.
This Certificate is delivered to THE RIGGS NATIONAL BANK OF WASHINGTON, D.C, and
may be relied on by it.
The party executing this letter on behalf of Tenant is fully authorized and
empowered to do so.
TENANT: THE PALMER NATIONAL BANK
/s/ JOHN CONNOR 10/16/95
- ------------------------------- -------------
John Connor, Vice President &
name & title: Branch Manager Date
The undersigned hereby acknowledges and agrees with the foregoing certification
this _____ day of October, 1995.
LANDLORD: W.C. & A.N. MILLER COMPANIES
- ---------------------------------- -------------
Edward J. Miller, Jr., President Date
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LEASE
BETWEEN
W.C. AND A.N. MILLER DEVELOPMENT COMPANY,
LANDLORD
AND
THE PALMER NATIONAL BANK,
TENANT
DATED: SEPTEMBER 30, 1991
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ARTICLE I REFERENCE DATA
1.1 Subjects Referred To.............................. 3
1.2 Exhibits.......................................... 4
ARTICLE II PREMISES AND TERM
2.1 Premises.......................................... 5
2.2 Term.............................................. 5
ARTICLE III TENANT IMPROVEMENTS
3.1 Initial Construction.............................. 5
3.2 Preparation of Premises for Occupancy............. 7
3.3 Acceptance of Premises............................ 8
3.4 Construction Subsequent to Initial
Occupancy.................................... 8
3.5 Representatives................................... 8
ARTICLE IV RENT
4.1 Rent.............................................. 8
4.2 Operating Cost Escalation......................... 9
4.3 Estimated Monthly Escalation Payments............. 11
4.4 Payments.......................................... 11
4.5 Rent Abatement.................................... 11
ARTICLE V LANDLORD'S COVENANTS
5.1 Landlord's Covenants During the Term.............. 12
5.2 Interruptions..................................... 12
ARTICLE VI TENANT'S COVENANTS
6.1 Tenant's Covenants During the Term................ 13
6.2 Electrical and HVAC Capacity...................... 18
ARTICLE VII CASUALTY AND TAKING
7.1 Casualty and Taking............................... 18
7.2 Reservation of Award.............................. 19
ARTICLE VIII RIGHTS OF MORTGAGE
8.1 Priority of Lease................................. 19
8.2 Limitation on Mortgagee's Liability............... 20
8.3 No Payment or Modification, Etc................... 20
8.4 No Release of Termination......................... 20
ARTICLE IX DEFAULT
9.1 Events of Default................................. 21
9.2 Tenant's Obligations After Termination............ 21
ARTICLE X MISCELLANEOUS
10.1 Titles............................................ 22
10.2 Notice of Lease................................... 22
10.3 Notice............................................ 23
10.4 Bind and Inure.................................... 23
10.5 No Surrender...................................... 23
10.6 No Waiver, Etc.................................... 23
10.7 No Accord and Satisfaction........................ 23
10.8 Cumulative Remedies............................... 24
10.9 Partial Invalidity................................ 24
10.10 Landlord's Right to Cure.......................... 24
10.11 Estoppel Certificate.............................. 24
10.12 Waiver of Subrogation............................. 25
10.13 Brokerage......................................... 25
10.14 Governing Law..................................... 25
10.15 Waiver of Jury Trial.............................. 25
10.16 Entire Agreement.................................. 25
10.17 Liability......................................... 25
10.18 Contents of Tenant's Safe Deposit Boxes........... 26
10.19 Kiosk or Drive Through Facility................... 26
10.20 Exterior and Lobby Signage........................ 26
10.21 Consents.......................................... 26
10.22 Measurement of Space.............................. 26
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Date of Lease Execution September ______, 1991
ARTICLE I
REFERENCE DATA
1.1 SUBJECTS REFERRED TO:
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1.1:
BUILDING: 4900 Massachusetts
Avenue, N.W., Washington, D.C.
LANDLORD: W.C. and A.N. Miller Development Company
MANAGING AGENT: W.C. and A.N. Miller Development Company
LANDLORD'S AND MANAGING AGENT'S ADDRESS:
4315 50th Street, NW
Washington, DC 20016
LANDLORD'S REPRESENTATIVE: Robert R. Miller
TENANT: The Palmer National Bank
TENANT'S ADDRESS (FOR NOTICE AND BILLING):
1667 K Street, NW
Washington, DC 20006
TENANT'S REPRESENTATIVE: Webb C. Hayes, IV
LEASING BROKER: Barnes, Morris & Pardoe, Inc.
RENTABLE FLOOR AREA OF TENANT'S SPACE: Approximately Three Thousand
Five Hundred Sixteen (3,516)
square feet. Upon completion
of the Premises the space
will be measured in
accordance with the
Washington DC Association of
Realtors' Method of
Measurement dated January 1,
1989.
TOTAL RENTABLE FLOOR AREA OF THE BUILDING: Approximately Thirty Two
Thousand Four Hundred Ninety
Nine (32,499) square feet.
TENANT'S DESIGN COMPLETION DATE: Thirty (30) days following
Lease Execution.
SCHEDULED TERM COMMENCEMENT DATE: One Hundred Fifty (150) Days
from the Lease Execution Date
and approval by Landlord of
Tenant's Plans whichever is
later.
OUTSIDE DELIVERY DATE: One Hundred Seventy (170) Days from the Lease
Execution Date and approval by Landlord of
Tenant's Plans whichever is later.
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TERM EXPIRATION DATE: Ten (10) Years from the Lease Commencement
Date.
APPROXIMATE TERM: Ten (10) Years.
ANNUAL RENT: Twenty Dollars ($20.00) per square foot, (subject to
adjustment as provided in Section 4.1).
ANNUAL ESTIMATED OPERATING COSTS: $______________
FISCAL YEAR (for operating cost
escalation): October 1 through September 30
TENANT IMPROVEMENT REIMBURSEMENT TO LANDLORD:
Landlord shall contribute to Tenant, improvement costs in an
amount equal to $40.00 per net rentable square foot above the
Landlord's shell as further defined in Exhibit H. The cost of
Tenant Work required to be paid by Tenant and in excess of
such $40.00 per net rentable square foot allowance is referred
to as the Tenant Improvement Reimbursement.
PERMITTED USE: Banking and Financial Services Branch Office and other lawful
office and retail uses excluding a Pharmacy subject to Landlord's
consent which consent shall not be unreasonably withheld,
conditioned or delayed.
PRIME RATE: The Base Rate of interest charged from time to time by Palmer
National Bank, or its successor, on commercial loans having a
90-day duration.
PUBLIC LIABILITY INSURANCE: BODILY INJURY: Five Hundred Thousand
Dollars ($500,000.00)
PROPERTY DAMAGE: Five Hundred Thousand
Dollars ($500,000.00)
SPECIAL PROVISIONS: One Million Dollars ($1,000,000.00) Commercial
Liability Umbrella Insurance.
1.2 EXHIBITS
The exhibits listed below in this section are incorporated in this Lease
by reference and are to be construed as part of this Lease:
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EXHIBIT A Tenant's Space in the Building.
EXHIBIT B Plans and Specifications for Tenant Space.
EXHIBIT C Parking as Additional Premises.
EXHIBIT D Landlord's Services.
EXHIBIT E Rules and Regulations.
EXHIBIT F Estoppel Certificate.
EXHIBIT G Option to Renew.
EXHIBIT H Landlord Contribution and Improvements.
EXHIBIT I Conditional Comptroller Approval.
EXHIBIT J Lease Confirmation Agreement.
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ARTICLE II
PREMISES AND TERM
2.1 Premises.
Subject to and with the benefit of the provisions of this Lease and any
ground lease, Landlord hereby leases to Tenant, and Tenant lease from Landlord,
Tenant's Space in the Building, as shown on Exhibit A, measured in accordance
with Washington DC Association of Realtors' Method of Measurement dated January
1, 1989, and excluding the exterior faces of exterior walls, the common
facilities area and building service fixtures and equipment serving exclusively
or in common other parts of the Building. Tenant's Space in the Building, with
such exclusions, is hereinafter referred to as the "Premises."
Prior to the Commencement Date, Tenant's architect shall provide, by
certified statement, to Landlord the actual rentable square footage contained in
the Premises, based upon field measurements and the Washington DC Association of
Realtors' Method of Measurement dated January 1, 1989, and such statement shall,
for all purposes of this Lease, set forth the rentable square footage to be used
for rent calculations. If the square footage is different then what is stated in
this Lease, then the square footage shall change to reflect the difference and
all other terms shall change in accordance with the new square footage.
Tenant shall have, as appurtenant to the Premises, the right to use in
common with others entitled thereto, subject to reasonable rules of general
applicability to tenants of the Building from time to time made by Landlord: (a)
the common facilities included in the building or on the Lot, to the extent from
time to time designated by Landlord: and (b) the building service fixtures and
equipment serving the Premises.
Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use, (a) to install, repair, replace, use, maintain,
and relocate for service to the Premises and to other parts of the Building or
either, building service fixtures and equipment wherever located in the
Building, and (b) to alter or relocate any common facility provided that
substitution are substantially equivalent or better. All work shall be done
after prior reasonable notice to Tenant and with due regard for Tenant's
concerns regarding security and customer inconvenience. No construction or other
materials, tools or supplies will be stored in the Premises, and all fixtures,
equipment and facilities shall be concealed above existing ceilings or within
existing walls.
2.2 Term.
The term of this Lease (the "Term") shall commence when the Premises are
deemed ready for occupancy as provided in Section 3.2 or, if no work is to be
done by Landlord pursuant to Article III, on the scheduled Term Commencement
Date (whichever of said dates is appropriate being hereafter referred to as the
"Commencement Date") and continuing until the Term Expiration Date, unless
sooner terminated, as provided in Section 3.2 or 7.1, in Article IX or in
Section 10.19.
ARTICLE III
TENANT IMPROVEMENTS
3.1 Initial Construction.
Landlord shall, on or before Tenant's Design Completion Date, provide to
Tenant for approval a complete sets of construction drawings and specifications
prepared at Landlord's expense by CHK, including but not limited to:
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(a) Furniture and equipment layout plans including
vault location;
(b) Dimensioned partition plans;
(c) Dimensioned electrical and telephone outlet plans;
(d) Reflected ceiling plans;
(e) Door and hardware schedules;
(f) Room finish schedule including wall, carpet, and
floor tile colors;
(g) Electrical and mechanical engineering plans;
(h) All other necessary construction details and
specifications to complete the Tenant
improvements.
Tenant shall approve or disapprove of such drawings and specifications within
seven (7) days of Landlord's submittal thereof. If disapproved, Landlord shall
submit for Tenant's approval, within five (5) days of such disapproval,
corrected plans and specifications incorporating all of Tenant's required
changes.
Upon Tenant's approval of the Plans prepared by CHK, such Plans shall be
incorporated as Exhibit B to this Lease. Except as provided below, all Tenant
improvements, alterations, changes and additions shall be performed by
Landlord's general contractor and Tenant shall pay the Tenant Improvement
Reimbursement, (as defined below), to Landlord which shall be due and payable,
as additional rent, on the Lease Commencement Date. Landlord will provide to
Tenant three (3) bids for approval of the General Contractor. Landlord, however,
reserves the right to select a Contractor which may not be the lowest bidder but
Landlord will only allocate to Tenant the lowest bidders price for determining
the Tenant Improvement Reimbursement costs. Landlord shall thereafter submit to
Tenant the Tenant Improvement Reimbursement amount which shall be due and
payable as provided below. All Tenant improvements, alterations, changes and
additions shall be performed by Landlord's general contractor and Tenant shall
pay thereof (x) the Tenant Improvement Reimbursement to Landlord and (y) an
additional amount equal to the cost of any changes from the specifications in
Exhibit B, including the cost to Landlord of the general contractor's overhead
and profit incurred in connection therewith, the total of which shall be due and
payable, as additional rent, on the Commencement Date. Landlord will not approve
any construction, alterations, or additions requiring unusual expense to readapt
the Premises to normal office use on lease termination or increasing the cost of
construction, insurance, or taxes on the Building or of Landlord's services
called for by Section 5.1 unless Tenant first gives assurances acceptable to
Landlord that such readaptation will be made prior to such termination without
expense to Landlord and makes provisions acceptable to Landlord for payment of
such increased cost. Landlord will also disapprove any alterations or additions
requested by Tenant which will delay completion of the Premises or the Building.
Except as provided in Section 6.1(b), all improvements, alterations, changes,
and additions shall be part of the Building other than such items as by writing
at the time of approval the parties agree either shall be removed by Tenant on
termination of this Lease, or shall be removed or abandoned at Tenant's
election. Specifically to include the vault, teller line, safety deposit
facility, drive through apparatus, fire suppression, structural repairs,
security system and all other non-structural items which are typical of the
Tenant's fit-up. These items may be left at the election of the Tenant but if
removed, Tenant must yield-up and repair the damage done to the Premises caused
by said removal, normal wear and tear accepted.
Tenant's interior furnishings, including the specification, coordination,
supply and installation of furniture, furnishings, telephones, and movable
equipment, will be the sole responsibility of Tenant. All of Tenant's
construction, installation of furnishings, and later changes or additions shall
be coordinated with any work being performed by Landlord in such manner as to
maintain harmonious labor
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relations and not damage the Building or Lot or interfere with Building
operations.
3.2 Preparation of Premises for Occupancy.
Landlord agrees to use best efforts to have the Premises ready for
occupancy on or before the Scheduled Term Commencement Date, which shall,
however, be extended for a period equal to that of any delays due to government
regulations, unusual scarcity of or inability to obtain labor or materials,
labor difficulties, casualty, or other causes reasonably beyond Landlord's
control. The Premises shall be deemed ready for occupancy on the earlier of:
(a) the date on which Tenant occupies all or any part of the Premises;
(b) the date on which the Tenant improvements are substantially
completed as certified by Landlord's architect; The Premises shall
be substantially complete when (i) the CHK determines that the
Tenant Work has been constructed in accordance with the Plans and
(ii) all necessary approvals from the DC Government (ie: building,
fire marshall, plumbing and electrical inspections) have been
obtained by Landlord and the Premises is ready for the Tenant to
apply for a Certificate of Occupancy. Landlord will use all
reasonable efforts to assist the Tenant in procuring the Certificate
of Occupancy. Notwithstanding the condition in item (i), the
Premises may be considered substantially complete even though there
remain to be completed minor punch list items reasonably acceptable
to Landlord and Tenant, including, but not limited to, minor or
insubstantial details of construction, decoration or mechanical
adjustments, the lack of completion of which will not materially
interfere with Tenant's use and occupancy of the Premises;
provided, however, that if Landlord is unable to complete construction due to
changes in the Tenant plans after approval thereof or due to any item which
Landlord identifies, prior to Tenant Plan approval, as a long lead-time item,
(Landlord hereby agreeing that, provided Tenant is diligently providing the
expeditious delivery of the vault and vault door, such items shall not for
purposes of this provision be considered long lead-time items) then the Premises
shall be deemed ready for occupancy no later than the Scheduled Term
Commencement Date.
In the event of Tenant's failure to comply with the provisions of Section
3.1 of this Lease requiring Tenant to submit information or to deliver
construction drawings and specifications which meet Landlord's approval,
Landlord may, at Landlord's option, exercisable by notice to Tenant, terminate
this Lease on the date specified in said notice to Tenant, and upon such
termination Landlord shall have all the rights provided in event of Tenant's
default in Article IX of this Lease. Landlord may, at Landlord's option, make
said decision for Tenant, instead of terminating the Lease as stated above.
Notwithstanding the foregoing provisions, if the Premises are not deemed ready
for occupancy on or before the Outside Delivery Date for whatever reason, other
than delay in delivery of Tenant long-lead items (including the vault), and
provided that Tenant is not in default hereunder and complied with the
provisions of Section 3.1 hereof, Tenant may elect to cancel this Lease at any
time thereafter while the Premises are not deemed ready for occupancy by giving
notice to Landlord of such cancellation which shall be effective twenty (20)
days after the date of such notice, it being understood that said election shall
be Tenant's sole remedy at law or in equity for Landlord's failure to have the
Premises ready for occupancy. Such notice shall be null and void if
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the Premises become ready for occupancy prior to the expiration of twenty (20)
days after the date of such notice.
3.3 Acceptance of Premises.
Landlord's obligations under Section 3.1 shall be deemed to have been
performed when the conditions set forth in Section 3.2 (a) or (b) have been
satisfied. If Tenant shall not have commenced to occupy the Premises for the
Permitted Uses within 30 days after they are deemed ready for occupancy as
provided in Section 3.2, a certificate of completion by the architect or
registered engineer shall be conclusive evidence that Landlord has performed all
such obligations except for items stated in such certificate to be incomplete or
not in conformity with such requirements.
3.4 Construction Subsequent to Initial Occupancy.
Tenant shall not make or permit any changes, alterations, improvements or
additions to the Premises without first obtaining Landlord's prior written
consent, which consent shall be in Landlord's sole and absolute discretion, as
it relates to structural and mechanical items. Landlord will provide its
reasonable consent, which consent shall not be withheld, conditioned or delayed
as it relates to non-structural and non-mechanical items which are primarily
decorative in nature. Tenant understands and agrees that Landlord's consent may
be conditioned upon Tenant's use of Landlord's contractor or another contractor
approved by Landlord to perform any such changes, alterations, improvements or
additions.
3.5 Representatives.
Each party authorizes the other to rely in connection with their
respective rights and obligations under this Article III upon the written
approval and other actions on the party's behalf by Landlord's Representative in
the case of Landlord or Tenant's Representative in the case of Tenant or by any
person designated in substitution or addition by notice to the party relying.
ARTICLE IV
RENT
4.1 Rent.
Tenant agrees to pay, without any offset, demand or reduction whatever
(except as made in accordance with the express provisions of this Lease), to
Landlord, rent equal to 1/12th of the Annual Rent in equal installments in
advance on the first day of each calendar month included in the Term ("Monthly
Annual Rent"); and for any portion of a calendar month at the beginning or end
of the Term, at the rate of one-thirtieth (1/30th) of the Monthly Annual Rent
for each day, in advance.
The Annual Rent shall be increased ("Annual Rent Bump"), effective on the
following anniversaries of the Lease Commencement Date to be equal to the
amounts as follows:
Third Anniversary Twenty Two Dollars ($22.00)
per net rentable square foot.
Fifth Anniversary Twenty Four Dollars ($24.00)
per net rentable square foot.
Seventh Anniversary Twenty Six Dollars ($26.00)
per net rentable square foot.
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Ninth Anniversary Twenty Eight Dollars ($28.00)
per net rentable square foot.
Additionally, commencing with the second (2nd) Lease Year, Tenant shall
pay as Additional Rent an amount equal to the Annual Rent times the product
obtained by multiplying (x) 50% times (y) the product of (i) the Consumer Price
Index for all Urban Consumers, All Items, as published by the Bureau of Labor
Statistics of the U.S. Department of Labor for the Washington, D.C. SMSA (base
year 1982-1984 = 100) for the bi-monthly period most recently prior to the
applicable anniversary or adjustment date ("CPI New") less the CPI published for
the bi-monthly period in the corresponding calendar month twelve months earlier
("CPI Old") divided by (ii) CPI Old, except that for purposes of this paragraph
only the "Annual Rent" shall be deemed to include all prior Additional Rent in
respect of CPI. For example, if the CPI published most recently prior to the
first anniversary were 166 and the CPI published twelve months earlier were 173,
the Additional Rent in respect of CPI effective for the second lease year would
be $2,965.30) (ie, $70,320.00 Annual Rent times [(173-166)/166]. In the next
lease year, the "Annual Rent" for purposes of the CPI calculation would be
$73,285.30 (ie, the true Annual Rent of $70,320.00 plus the prior CPI Additional
Rent of $2,965.30). If the actual increase in the CPI index is less than 2%,
then the increase in the CPI index shall be deemed to be 2%, if the index
increase is greater than 5%, then the index increase shall be deemed to be 5%.
However, in no event shall the Additional Rent, as computed above, be less than
the prior year's Rent. If such Consumer Price Index should cease to be
published, the most comparable governmental index published in lieu thereof
shall be used. The term Annual Rent shall mean the Annual Rent in effect as of
the date such increase is computed.
4.2 Operating Cost Share.
With respect to each Fiscal Year, or fraction thereof, during the Term
hereof, Tenant shall pay to Landlord, as additional rent, Operating Cost Share
(as defined below). The Operating Cost Share shall be paid annually in arrears
on or before the thirtieth day following receipt by Tenant of Landlord's
Statement (as defined below), except that Landlord may (but shall not be
required to) estimate the Operating Cost Share before or during such Fiscal Year
(not more than once in the aggregate in respect of any one Fiscal Year), and in
that event, Tenant shall pay an Estimated Monthly Share Payment (as defined in
Section 4.3 below), subject to subsequent adjustment upon determination of the
Operating Cost Share for that Fiscal Year.
As soon as practicable after the end of each Fiscal Year ending during the
Term and after Lease termination, Landlord shall render a statement ("Landlord's
Statement") in reasonable detail and according to usual accounting practices
certified by Landlord and showing the preceding Fiscal Year or fraction thereof,
as the case may be, all costs of Landlord incurred in the operation and
maintenance of the Building and the Lot ("Landlord's Operating Costs"), which
shall include without limitation: real estate taxes on the Building and Lot;
landscaping; parking lot maintenance; snow removal; trash hauling; insurance;
window cleaning and all other allocable expenses which relate to the Common Area
of the Building. In connection with the computation under this Section 4.2, in
the event that the Building is less than ninety-five percent (95%) occupied for
any Fiscal Year, then the Landlord's Operating Costs for such year shall include
all additional costs, expenses and disbursements that Landlord reasonably
determines would have been incurred if the Building were at least ninety-five
percent (95%) occupied for the entire Fiscal Year. Landlord's Operating Costs
shall not include the interest and amortization on mortgages for the Building
and Lot or the cost of special services rendered to tenants (including Tenant)
for which a special charge is made, the cost of HVAC, electricity and cleaning
services provided to
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office tenants under "Full Service" leases. Landlord's Statement shall also show
the average number of square feet of the Building which were vacant for the
preceding Fiscal Year or fraction thereof.
"Operating Cost Share" shall be equal to the product of (i) Landlord's
Operating Costs as indicated in Landlord's Statement and (ii) a fraction, the
numerator of which shall be the Rentable Floor Area of Tenant's Space and the
denominator of which shall be the Total Rentable Floor Area of the Building less
one-half of the average number of such square feet as are vacant during such
Fiscal Year or fraction thereof (provided that the denominator shall not be less
than 90 percent of Total Rentable Floor Area of the Building).
In the event that the Commencement Date is not the same date as the
beginning of a Fiscal Year, the Operating Cost Share for such first partial
Fiscal Year shall be adjusted by multiplying such Operating Cost Share by a
fraction, the numerator of which is the number of months or partial months in
the Term that were part of such Fiscal Year, and the denominator of which is 12.
In no event shall Operating Cost Share include Operating Costs incurred prior to
the Commencement Date.
The term "real estate taxes" as used above shall mean all taxes of every
kind and nature assessed by any governmental authority on the Lot, the Building
and improvements, or both, which the Landlord shall become obligated to pay
because of or in connection with the ownership, leasing, and operation of the
Lot, the Buildings and improvements, or both, subject to the following: there
shall be excluded from such taxes all income taxes, excess profits taxes, excise
taxes, franchise taxes, estate, succession, inheritance, and transfer taxes,
provided, however, that if any time during the Term the present system of ad
valorem taxation of real property shall be changed so that in lieu of the whole
or any part of the ad valorem tax on real property there shall be assessed on
Landlord a capital levy or other tax on the gross rents received with respect to
the Lot, Building and improvements, or both, or a federal, state, county,,
municipal, or other local income, franchise, excise or similar tax, assessment,
levy or charge (distinct from any now in effect) measured by or based, in whole
or in part, upon any such gross rents, then any and all of such taxes,
assessments, levies, or charges, to the extent so measured or based, shall be
deemed to be included within the term "real estate taxes" which are directly
attributable to the Building or Lot. The foregoing includes a substitution of a
new or different basis of taxation, but, in such event, Landlord and Tenant
shall reasonably agree upon the basis for calculating Tenant's liability
therefor. In addition, in the event that the applicable municipal authority
adopts a gross receipts tax in lieu of the current tax system, then Tenant shall
be liable for its proportionate share of such tax as provided above, provided
that such tax shall not be in the nature of a net income tax.
Landlord shall have the right from time to time (not more than twice
during the Lease Term) to change the periods of accounting under this Section
4.2 to any annual period other than Fiscal Year, and upon any such change all
items referred to in this Section shall be appropriately apportioned. In all
Landlord's Statements rendered under this Section, the accounting periods shall
be appropriately apportioned, and any items which are not determinable at the
time of a Landlord's Statement shall be included therein on the basis of
Landlord's estimate, and with respect thereto Landlord shall render promptly
after determination a supplemental Landlord's Statement, and appropriate
adjustment shall be according thereto. All Landlord's Statements shall be
prepared on an accrual basis of accounting.
Notwithstanding any other provision of this Section 4.2, if the Term
expires or is terminated as of a date other than the last day of the Fiscal
Year, then for such fraction of a Fiscal Year or the end of the
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Term, Tenant's last payment to Landlord under this Section 4.2 shall be made on
the basis of Landlord's best estimate of the items otherwise includable in
Landlord's Statement and shall be made on or before the later of (a) 10 days
after Landlord delivers such estimate to Tenant or (b) the last day of the Term,
with an appropriate payment or refund to be made upon submission of Landlord's
Statement.
4.3 Estimated Monthly Cost Share Payments.
If, with respect to any Fiscal Year or fraction thereof during the Term,
Landlord estimates that Tenant will be obligated to pay Operating Cost Share,
then, at Landlord's option, Tenant shall pay, as additional rent, on the first
day of each month of such Fiscal Year, together with Monthly Annual Rent, an
Estimated Monthly Escalation equal to 1/12th of Landlord's estimated Operating
Cost Share for the respective Fiscal Year, with an appropriate additional
payment or refund to be made within 30 days after Landlord's Statement for such
Fiscal Year is delivered to Tenant. In no event may Landlord's estimate for any
Fiscal Year exceed the actual charges to Tenant for the prior Fiscal Year
increased by 105% of the increase in the CPI index for such prior Fiscal Year.
In the event that it is determined at any time, including after the expiration
of the Term, that Tenant's payments of Monthly (of Estimated Monthly) Cost Share
Payments exceeded the actual amount of Tenant's Operating Cost Share for the
applicable period, then Landlord shall refund the difference to Tenant within
fifteen (15) days following such determination. Tenant shall have the right to
audit Landlord's books and records from time to time and in the event that such
audit shall reveal that Tenant's payments of its Operating Cost Share have
exceeded Tenant's actual liability therefor, then Landlord shall reimburse
Tenant for the overpayment within fifteen (15) days following Tenant's request
therefor; provided, however, that if such overpayment exceeds three percent (3%)
of Tenant's actual liability, then, in addition to reimbursement of the
overpayment, Landlord shall reimburse Tenant's reasonable costs incurred in
connection with such audit, together with, in the event such overpayment exceeds
five percent (5%), interest thereon at the Prime Rate. Tenant's right to a
refund shall survive the expiration or other termination of the Lease. If
Landlord's Statement of reconciliation for any Fiscal Year is not delivered to
Tenant within one hundred fifty (150) days following the end of such Fiscal
Year, then Tenant's Cost Share Payment will be divided into twelve (12) equal
parts and added to the then current rent.
4.4 Payments
All payments of Annual Operating Cost Shares, Estimated Monthly Cost Share
Payments and all other additional rent shall be made to the Managing Agent, or
to such other person as Landlord may from time to time designate. If any
installment of Annual Rent, Operating Cost Share, Estimated Monthly Cost Share
Payments or other additional rent is paid more than 5 days after the due date
thereof, Tenant shall pay to Landlord, as additional rent, a late penalty equal
to five percent (5%) of the amount of such installment, and such installment
shall bear interest from such due date at the Prime Rate in effect as of such
due date, which interest and penalty shall be immediately due and payable as
further additional rent. The foregoing notwithstanding, neither the late penalty
nor the late interest shall apply to any non-regularly (ie, monthly) scheduled
payment unless Tenant has failed to pay same within thirty (30) days following
Tenant's receipt of Landlord's written request therefor.
4.5 Rent Abatement.
The Base Rental shall be abated for the first month of each year of the
Lease for a total of ten (10) months abatement. In the first year, the Rental
Abatement shall be the first month of occupancy by the Tenant.
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ARTICLE V
LANDLORD'S COVENANTS
5.1 Landlord's Covenants During the Term.
During the Term of this Lease, and provided Tenant is not declared in
default pursuant to Article IX and observes all other terms and conditions of
this Lease, Landlord covenants as follows:
(a) Building Services - To furnish, through Landlord's employees or
independent contractors, the services listed in Exhibit D;
(b) Additional Building Services - To furnish, through Landlord's
employees or independent contractors, reasonable additional Building
operation services upon reasonable advance request of Tenant at
rates from time to time established by Landlord to be paid by
Tenant;
(c) Repairs - Except as otherwise provided in Article VII, to make such
repairs to the roof, exterior walls, floor slabs, and common
facilities of the Building as may be necessary to keep them in
serviceable condition. Landlord shall, at its sole cost and expense
except as provided under Article 4.2, maintain in good repair and
working order, and make all repairs, replacements and restorations
to, the Building and all parts of the Building which are required in
the normal maintenance, operation and use of the Building,
including, but not limited to, the structural elements, mechanical,
plumbing and electrical systems, walkways, paths, landscaping,
exterior walls and roof, glazing and interior common area walls,
floors and ceilings. Additionally, (x) Landlord shall be responsible
for making any improvements or repairs to the Building or Premises
required by any governmental laws, rules or regulations, and for
making repairs to the structural portions of the Premises and the
mechanical, electrical, plumbing systems therein, but (y) Tenant
shall be responsible for making any improvements or repairs to the
Premises necessitated by Tenant's particular (as opposed to general
office) use of same; and
(d) Quiet Enjoyment - That Landlord has the right to make this Lease and
that Tenant shall peacefully and quietly have, hold, and enjoy the
Premises throughout the Term without any manner of hindrance or
molestation from Landlord or anyone claiming under Landlord, subject
however to all the terms and provisions hereof (including Landlord's
rights and remedies upon an Event of Default by Tenant).
5.2 Interruptions.
Landlord shall not be liable to Tenant for any compensation or reduction
of rent by reason of inconvenience or annoyance or for loss of business arising
from power losses or shortages, heating and air conditioning interruptions, or
from the necessity of Landlord's entering the Premises for any of the purposes
in this Lease authorized, or from repairing the Premises or any portion of the
Building or lot. If Landlord is prevented or delayed from making any repairs,
alterations, or improvements, or furnishing any service or performing any other
covenant or duty to be performed on Landlord's part, Landlord shall not be
liable to Tenant thereof, nor, except as expressly otherwise provided in Article
VII,
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shall Tenant be entitled to any abatement or reduction of rent by reason
thereof, nor shall the same give rise to a claim in Tenant's favor that such
failure constitutes actual or constructive, total or partial, eviction from the
Premises. The foregoing notwithstanding, Landlord agrees that in the event that
an interruption occurs due to the gross negligence or willful misconduct of
Landlord, it's agents, servants, employees or licensees which shall render all
or a substantial portion of the Premises untenantable or unusable for the
purpose for which they are leased such that Tenant shall be required to cease
operating its business therein, or shall be required to make material changes in
all or any material part of its operation (eg, to discontinue a significant
banking service or function), and provided further that such gross negligence or
willful misconduct continues substantially uncured, unremedied and/or unabated
for a period of more than five (5) business days following Landlord's receipt of
written notice thereof from Tenant (herein a "Service Failure"), then, in such
event, twenty-five percent (25%) of the Rent shall be equitably abated
(generally based upon the amount of the Premises rendered so untenantable or
unusable) commencing upon the sixth (6th) business day following Landlord's
receipt of such notice and continuing until the day that Tenant may once again
fully use the Premises for the purpose for which they were leased and fully
resume operations; provided, however, that if such gross negligence or willful
misconduct continues substantially uncured, unremedied and/or unabated for a
period of more than ten (10) business days following Landlord's receipt of such
notice, then one hundred percent (100%) of the Rent shall so equitably abate;
and provided further, however, that if such gross negligence or willful
misconduct continues substantially uncured, unremedied and/or unabated for a
period of more than sixty (60) calendar days following Landlord's receipt of
such notice, then Tenant may terminate this Lease upon written notice to
Landlord (such termination to be effective, at Tenant's option, at any time
within ninety (90) days following the date of the termination notice); and,
provided, however, if Landlord is diligently pursuing a cure said period can be
extended for an additional period of ten (10) days; and in addition, if such
gross negligence and willful misconduct, or the failure to cure, remedy or abate
same, were the result of bad faith, willful misconduct or intentional gross
negligence, then Tenant may bring an appropriate action for damages.
Landlord reserves the right to stop any service or utility system when
necessary by reason of emergency or subject to the preceding paragraph,
accident, provided, however, Landlord shall diligently pursue said remedy.
Except in case of emergency repairs, Landlord will give Tenant reasonable
advance notice of any contemplated stoppage and will use best efforts to avoid
unnecessary inconvenience to Tenant by reason thereof.
ARTICLE VI
TENANT'S COVENANTS
6.1 Tenant's Covenants During the Term.
Tenant covenants during the Term and such further time as Tenant occupies
any part of the Premises:
(a) Tenant's Payments - To pay when due (a) all Annual Rent, Operating
Cost Escalations, Estimated Monthly Escalation Payments and all
other additional rent, (b) all taxes which may be imposed on
Tenant's personal property in the Premises (including, without
limitation, Tenant's fixtures and equipment) regardless to whomever
assessed, (c) all charges by public utility for telephone,
electricity, water and sewer and other utility services (including
service inspections thereof) rendered to the Premises not
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furnished by Landlord and (d) as additional rent, all charges of
Landlord for services rendered pursuant to Section 5.1.B hereof;
(b) Repairs and Yielding Up - To keep the Premises in good order,
repair, and condition, reasonable wear only excepted (except as
otherwise provided in Article VII and Section 5.1(c)); and at the
expiration or termination of this Lease peaceably to yield up the
Premises and, subject to Section 3.1, all changes and additions
therein in such order, repair, and condition, first removing all
goods and effects of Tenant and any items, the removal of which is
required by agreement or specified therein to be removed at Tenant's
election and which Tenant elects to remove, and repairing all damage
caused by such removal and restoring the Premises and leaving them
clean and neat, it being specifically agreed that Tenant shall
remove all non-structural improvements to the Premises, including,
but not limited to, teller stations, automatic teller machines,
night depository, safe deposit boxes and contents thereof,
undercounter equipment, counters, cameras and the vault, and Tenant
shall repair any damage to the Premises caused thereby;
(c) Occupancy and Use - Continuously from the Date of Occupancy, to use
and occupy the Premises only for the Permitted Use; and not to
injure or deface the Premises, Building, or Lot; and not to permit
in the Premises any auction sale (except for UCC or similar sales in
the course of Tenant's business), or the emission from the Premises
of any objectionable noise or odor; nor to use the Premises,
Building or Lot for any use or purpose which is improper, offensive,
contrary to law, ordinance, regulation or order of any
public authority, or which may invalidate or increase the premiums
for any insurance on the Building or its contents or render
necessary any alteration or addition to the Building;
(d) Rules and Regulations - To comply, together with its agents,
employees, contractors, invitees, licensees, customers, clients and
guests, with the Rules and Regulations set forth in Exhibit E, and
all other reasonable Rules and Regulations hereafter made by the
Landlord (after Tenant has been given notice of such other Rules and
Regulations), and provided that same are reasonable,
non-discriminatory and are enforced on a uniform basis, for the care
and use of the Premises, the Building and the Lot and their
facilities and approaches, it being understood that Landlord shall
not be liable to tenant for the failure of other tenants of the
Building to conform to such Rules and Regulations;
(e) Safety Appliances, Licenses - To keep the Premises equipped with all
safety appliances required by law or ordinance or any other rule,
regulation or order of any public authority because of any use made
by Tenant and to procure all licenses and permits so required
because of such use, it being understood that the foregoing
provisions shall not be construed to broaden in any way Tenant's
Permitted Use, and it being further understood that Landlord shall
be solely responsible for compliance with all laws, installation of
all safety devices and obtaining all permits, licenses and/or
approvals required generally in connection with office and/or retail
space,
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or required by any law, rule or regulation in effect on the date
hereof (even if such law, rule or regulation does not require
compliance until some future date or the occurrence of some future
event, eg, the Americans With Disabilities Act), Tenant's
responsibility being limited solely to new laws which apply
particularly to Tenant's use and not to businesses or retail uses
generally;
(f) Assignment and Subletting - Not to assign this Lease, to make any
sublease, or to permit occupancy of the Premises or any part thereof
by anyone other than Tenant, voluntarily or by operation of law,
without the prior written consent of Landlord, such consent not to
be unreasonably withheld, conditioned or delayed, it being
understood that in no event shall Landlord consent to any such
assignment, sublease, or occupancy if (i) the same is on terms more
favorable or substantially below market rates to the successor
occupant than to the then occupant, (ii) such successor occupant
intends to use the Premises for any use other than the Permitted
Use, (iii) the successor occupant is then a tenant in the Building,
or (iv) the successor occupant is not, in Landlord's reasonable
judgement, financially responsible and of good reputation; Tenant
further covenants that, as additional rent, Tenant shall reimburse
Landlord promptly for reasonable legal and other expenses incurred
by Landlord in connection with any request by Tenant for consent to
assignment or subletting, or in connection with any attempt to
assign or sublet without Landlord's consent (in either case not to
exceed $500.00 for approved and an unlimited amount for contested);
no assignment or subletting shall affect the continuing primary
liability of Tenant (which, following assignment, shall be joint and
several with the assignee); no consent to any of the foregoing in a
specific instance shall operate as a waiver in any subsequent
instance; and if Tenant requests Landlord's consent to assign this
Lease or sublet more than 50% of the Premises, Landlord shall have
the option, exercisable by written notice to Tenant given within 10
days after receipt of such request, to terminate this Lease as of a
date specified in such notice which shall be not less than 90 or
more than 120 days after the date of such notice; provided however,
that in the event of the sale or other disposition of all of the
voting stock of Tenant or Tenant's parent to a single transferee in
a single transfer in a single transaction, such transfer, or in the
event of a merger, consolidation or other corporate reorganization
or similar change involving Tenant or Tenant's control none of such
events shall not be considered an assignment or sublease for
purposes of this subsection (f);
(g) Indemnity - To defend, with counsel acceptable to Landlord, save
harmless, and indemnify Landlord from and against any liability,
cost, damage, injury, loss, accident, or damage, claim or expense
(including reasonable attorneys fees) for injury, loss, accident, or
damage to any person or property and from any claims, actions,
proceedings, expenses and costs in connection therewith (i) arising
from the omission, fault, act, negligence, or other misconduct of
Tenant, its agents, employees, contractors, invitees, licensees,
customers, clients and guests or from any use made or thing done or
occurring on the Premises not due to the gross negligence
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or willful misconduct of Landlord or Landlord's employees, agents or
contractors or (ii) resulting from the failure of Tenant to perform
and discharge its covenants and obligations under this Lease; it
being understood and agreed that any such liability, cost, damage,
claim or expense incurred by Landlord shall be deemed additional
rent due and payable upon thirty (30) days written demand by
Landlord;
(h) Tenant's Liability Insurance - To maintain public liability
insurance in the Premises, not cancellable without 30 days written
notice to Landlord, in amounts which shall, at the beginning of the
Term, be at least equal to the limits set forth in Section 1.1 and
from time to time during the Term, shall be for such higher limits,
provided said limits in Section 1.1 are within the limits as set
forth in the blanket policy of Tenant, if any, as are customarily
carried in the area in which the Premises are located on property
similar to the Premises and used for similar purposes and to furnish
Landlord with a certificate thereof before taking possession of the
Premises;
(i) Tenant's Workmen's Compensation Insurance - To keep all Tenant's
employees working in the Premises covered by workmen's compensation
insurance in statutory amounts and to furnish Landlord with a
certificate thereof;
(j) Landlord's Right of Entry - To permit Landlord and Landlord's agents
entry during normal banking hours to examine the Premises at
reasonable times, and, if Landlord shall so elect, to make repairs
or replacements subject to the other items hereof and provided that
Landlord uses its best efforts to minimize interference with
Tenant's business; to remove, at Tenant's expense, any changes,
additions, signs, curtains, blinds, shades, awnings, aerials,
flagpoles, or the like not consented to in writing (and where such
consent was required); and to show the Premises to prospective
tenants during the 12 months preceding expiration of the Term, and
to prospective purchasers and mortgagees, at all reasonable times
and upon reasonable prior notice during regular banking hours.
Tenant shall install in the Premises its own security system, which
shall be compatible with the security system of the Building.
Landlord shall not be entitled to the keys or other access to
Tenant's security system, but shall be able to gain access to the
Premises twenty-four (24) hours per day, three hundred sixty-five
(365) days per year. Prior to opening for business in the Premises,
Tenant shall provide Landlord with the full names and home telephone
numbers of three (3) responsible persons (such as Tenant's branch
manger, assistant branch manager and security officer), one of whom
shall always be available twenty-four (24) hours per day, whom
Landlord may contact to obtain entry to the Premises, and Tenant
shall update such names and telephone numbers throughout the Term of
this Lease to the extent necessary. Tenant shall be granted access
to the Premises three hundred sixty-five (365) days per year.
(k) Electricity Consumption - To provide for the separate metering of
Tenant's electric consumption at the Premises, it being understood
and agreed that Tenant shall be solely responsible for the payment
of all electrical consumption
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on and about the Premises. Landlord shall install said electrical
meter at Landlord's expense in addition to the Tenant allowance.
(l) Loading; Vibration; Noise - Not to place a load upon the Premises
exceeding the greater of: (i) an average rate of 50 pounds of live
load per square foot of floor area; or (ii) whatever the structural
engineer determines the live load to actually be; and not to place
or move any safe, vault, or other heavy equipment in, about, or out
of the Premises except in such manner and at such times as Landlord
shall in each instance reasonably approve, it being understood and
agreed that Landlord shall, subject to its receipt and review of the
Tenant plans, approve a vault, and one automatic teller machine and
a night depository to be placed through the exterior wall of the
Premises; not to place in the Premises business machines or
mechanical equipment which cause vibration or noise that may be
transmitted to the Building structure or to any other leased space
in the Building, unless Tenant provides settings of cork, rubber,
spring, or other types of vibration eliminators sufficient in
Landlord's judgement to eliminate such vibration or noise; all
approval with regard to this section shall be mutually agreeable by
both Tenant and Landlord and such approval shall not be unreasonably
withheld;
(m) Landlord's Costs - If Landlord shall, without any fault on its part,
be made party to any litigation commenced by or against any parties
in possession of the Premises or any part thereof claiming under
Tenant, to pay, as additional rent, all costs including, without
implied limitation, reasonable attorneys fees and expenses incurred
by or imposed upon Landlord in connection with such litigation and,
as additional rent, also to pay all such costs and fees incurred by
Landlord in connection with the enforcement by Landlord of any
obligations of Tenant under this Lease provided, however, that
nothing in this Lease shall require Tenant to indemnify Landlord for
any loss, cost, liability, claim, or expense arising in connection
with Landlord's gross negligence or willful misconduct;
(n) Tenant's Property - Subject to the terms of Section 10.12, all the
furnishings, fixtures, equipment, effects, and property of every
kind, nature and description of Tenant and of all persons claiming
by, through, or under Tenant which, during the continuance of this
Lease or any occupancy of the Premises by Tenant or anyone claiming
under Tenant, may be on the Premises or elsewhere in the Building or
on the Lot shall be at the sole risk and hazard of Tenant, and if
the whole or any part thereof shall be destroyed or damaged by fire,
water, or otherwise, or by the leakage or bursting of water pipes,
steam pipes, or other pipes, by theft, or from any other cause, no
part of said loss or damage is to be charged to or to be borne by
Landlord unless due to the willful misconduct or gross negligence of
Landlord;
(o) Labor or Materialmen's Liens - To pay promptly when due the entire
cost of any work done on the Premises by Tenant, its agents,
employees, or independent contractors (it being understood that this
shall not modify Landlord's absolute right to approve all work done
in the Premises in accordance with Section 3.4 hereof); not to cause
or
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permit any liens for labor or materials performed or furnished in
connection therewith to attach to the Premises; and immediately to
discharge any such liens within ten (10) days of the date Tenant has
actual notice of the attachment of such lien;
(p) Holdover - To pay Landlord the then current rent, in the event of a
consented holdover, and twice, in the event of an unconsented
holdover, the total of the Annual and additional rent applicable for
each month or portion Tenant shall retain possession of the Premises
or any part thereof after the termination of this Lease, whether by
lapse of time or otherwise, and also to pay all damages sustained by
Landlord on account thereof; the provisions of this subsection shall
not operate as a waiver by Landlord of any right of re-entry
provided in this Lease; at the option of Landlord exercised by a
written notice given to Tenant while such holding over continues,
such holding over shall constitute and extension of this Lease for a
period of one year; and
(q) Notice of Condition - To give Landlord prompt notice of any
defective condition, which it is aware of or becomes aware of, in
the plumbing or heating system or any electrical lines located in,
servicing or passing through the Premises.
6.2 Electrical and HVAC Capacity.
Subsequent to completion of initial work, Tenant's use of electrical
energy in the Premises shall not at any time exceed the capacity of (i) any of
the electrical conductors or equipment in or otherwise serving the Premises, or
(ii) the air conditioning and ventilation systems serving the Premises. In order
to insure that such capacity is not exceeded and to avert possible adverse
effect upon the Building electric service, Tenant shall not, without the prior
written consent, which consent shall not be unreasonably withheld, conditioned
or delayed, of the Landlord in each instance, connect to the building electric
distribution system any fixtures, appliances, or equipment which operate on a
voltage in excess of approximately 220 volts nominal or make any alteration or
addition to the electric or air conditioning and ventilation systems of the
Premises. Unless Landlord shall object to the connection of any such fixtures,
appliances or equipment, all additional risers or other equipment required
therefore shall be provided by Landlord, and the cost thereof shall be paid by
Tenant as additional rent upon Landlord's demand. In the event of any such
connection, Tenant agrees to pay as additional rent an amount which will reflect
the cost to Landlord of the additional service to be furnished by Landlord, such
increase to be effective as of the date of any such connection. If Landlord and
Tenant cannot agree thereon, such amount shall be conclusively determined by a
reputable independent electrical engineer or consulting firm to be selected by
Landlord and Tenant, and not regularly used by Landlord, and paid by Tenant.
ARTICLE VII
CASUALTY AND TAKING
7.1 Casualty and Taking.
If during the Term all or any substantial part of the Premises, the
Building, or Lot or any one of them, are damaged materially by fire or any other
cause or by action of public or other authority in consequence thereof or are
taken by eminent domain, this Lease shall terminate at Landlord's election,
which may be made, notwithstanding that Landlord's entire interest may have been
divested, by notice given to Tenant within 30
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days after the occurrence of the event giving rise to the election to terminate,
which notice shall specify the effective date of termination which shall be not
less than 90 nor more than 120 days after the date of notice of such
termination. Tenant shall not exercise the foregoing right if the action does
not directly involve the Premises or access thereto unless (a) more than fifty
percent (50%) of the building is taken or destroyed by casualty, (b) fewer than
50% of the parking spaces remain reasonably available for use by Tenant and its
customers, (c) Tenant is no longer able to operate its drive-up or drive-through
in a manner reasonably acceptable to Tenant (it being understood that
restriction or redirection of access to same may constitute sufficient grounds
for termination by Tenant). If, in any such case, the Premises are rendered
untenantable and the Lease is not so terminated, Landlord shall use due
diligence to put the Premises, or, in case of taking, what may remain thereof
(excluding any items installed or paid for by Tenant which Tenant may be
required or permitted to remove) into proper condition for use and occupation to
the extent permitted by the net award of insurance or damages, and just
proportion of the Annual Rent and additional rent according to the nature and
extent of the injury shall be abated until the Premises or such remainder shall
have been put by Landlord in such condition; and in case of a taking which
permanently reduces the area of the Premises, a just proportion of the Annual
Rent and additional rent shall be abated for the remainder of the Term and an
appropriate adjustment shall be made to the Annual Estimated Operating Expenses.
Anything contained in this Lease to the contrary notwithstanding, if any
damage to the Premises, the Building or both are caused by or result from the
negligent or intentionally tortious act or omission of Tenant, its agents,
employees, contractors, or invitees, there shall be no abatement or suspension
of rent as aforesaid, and, except as Tenant may be released from liability
pursuant to the provisions of Section 10.13 hereof, Tenant shall pay to Landlord
upon demand, as additional rent, the cost of (a) any repairs and restoration
made or to be made as the result of such damage or (b) if Landlord elects not
to restore the Building, any damage or loss which Landlord may incur as a result
of such damage.
7.2 Reservation of Award.
Landlord reserves to itself any and all rights to receive awards made for
damages to the Premises, Building, or Lot and the leasehold hereby created, or
any one or more of them, accruing by reason of exercise of eminent domain.
Tenant hereby releases and assigns to Landlord all of Tenant's rights to such
awards, and covenants to deliver such further assignments and assurances thereof
as Landlord may from time to time request. It is agreed and understood, however,
that Landlord does not reserve to itself, and Tenant does not assign to
Landlord, any damages payable for (i) movable trade fixtures installed by Tenant
or anybody claiming under Tenant, at its own expense or (ii) relocation expanses
recoverable by Tenant from such authority.
ARTICLE VIII
RIGHTS OF MORTGAGEE
8.1 Priority of Lease.
This Lease is subject and subordinate to any mortgage or deed of trust now
or hereafter placed on the Lot or Building, or both (the "Mortgaged Premises"),
provided that the holder thereof may, at its option, agree to recognize the
rights of Tenant under this Lease and to accept Tenant as tenant of the Premises
under the terms and conditions of this Lease in the event of acquisition of
title by such holder through foreclosure proceedings or otherwise. Tenant and
its successors and assigns shall recognize the holder of such mortgage (and its
successors and
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assigns and anyone purchasing the Mortgaged Premises at any foreclosure sale) as
Landlord in such event. Landlord shall prepare any documents that Tenant shall
be required to execute to confirm the foregoing recognition. Any such mortgage
to which this Lease shall be subordinated may contain such terms, provisions,
and conditions as the holder deems usual or customary. Landlord shall use it's
best efforts to obtain from any mortgagee under mortgage, now or hereafter
encumbering the Landlord or the Building, a non-disturbance agreement in such
mortgagee's standard form, in favor of the Tenant.
8.2 Limitation on Mortgagee's Liability.
Upon entry and taking possession of the Mortgaged Premises for any purpose
other than foreclosure, the holder of a mortgage shall have all rights of
Landlord and, during the period of such possession, the duty to perform all
Landlord's obligations hereunder. During such period of possession or during any
period such holder shall enter and take possession of the Mortgaged Premises for
a purpose other than foreclosing a mortgage, no such holder shall be liable,
either as mortgagee or as holder of a collateral assignment of this Lease, to
perform or be liable in damages for failure to perform, any of the obligation of
Landlord. Upon entry for the purpose of foreclosing a mortgage, such holder
shall be liable to perform all of the obligations of Landlord, subject to the
provisions of Section 8.3, provided that a discontinuance of any foreclosure
proceeding shall be deemed a conveyance under the provision of Section 10.5 to
the owner of the equity of the Mortgaged Premises. The taking or assuming of
possession or control for more than sixty (60) days shall be deemed to be the
entry for the purposes of foreclosure and shall subject such Mortgagee as
"Landlord" hereunder as respects any obligations or liabilities or obligations
arising during such period of possession or control.
8.3 No Prepayment or Modification, Etc.
No Annual Rent, additional rent, or any other charge shall be paid more
than ten days prior to the due dates thereof, and payments made in violation of
this provision shall (except to the extent that such payments are actually
received by mortgagee in possession or in the process of foreclosing its
mortgage) be a nullity as against such mortgagee, and Tenant shall be liable for
the amount of such payments to such mortgagee. No assignment of this Lease and
no agreement to make or accept any surrender, termination, or cancellation of
this Lease and no agreement to modify so as to reduce the rent, change the Term,
or otherwise materially change the rights of Landlord under this Lease, or to
relieve Tenant of any obligations or liability under this Lease, shall be valid
unless consented to in writing by Landlord's mortgagees who have given Tenant
written notice of their interest, if any.
8.4 No Release of Termination.
No act or failure to act on the part of Landlord which would entitle
Tenant under the terms of this Lease, or by law, to be relieved of Tenant's
obligations hereunder or to terminate this Lease, shall result in a release or
termination of such obligations or a termination of this Lease unless (i) Tenant
shall have first given written notice of Landlord's act or failure to act to
Landlord's mortgagees who have given Tenant written notice of their interest, if
any, specifying the act or failure to act on the part of Landlord which could or
would give basis to Tenant's rights and (ii) such mortgagees, after receipt of
such notice, have failed or refused to correct or cure the condition complained
of within a reasonable time thereafter not to exceed sixty (60) days in the
aggregate, but nothing contained in this Section 8.5 shall be deemed to impose
any obligation on any such mortgagee to correct or cure any such condition.
"Reasonable time" as used above means and includes a reasonable time to
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obtain possession of the Mortgaged Premises, if the mortgagee elects to do so,
and a reasonable time to correct or cure the condition, if such condition is
determined to exist not to exceed sixty (60) days in the aggregate.
ARTICLE IX
DEFAULT
9.1 Events of Default.
If any default by Tenant continues, after notice is provided in accordance
with Section 10.3 hereof (i) in the payment of any installment of Annual Rent,
additional rent or any other monetary amount due hereunder, for more than ten
(10) days, or (ii) in the performance or observance of any non-monetary covenant
or obligation hereunder, for more than twenty (20) days and such additional
time, if any, as is reasonably necessary to cure such non-monetary default (but
in no event more than fifty (50) days) if the default is of such a nature that
it cannot be cured in twenty (20) days and provided that Tenant is diligently
seeking such cure; or (iii) if Tenant makes any assignment for the benefit of
creditors, commits any act of bankruptcy, or files a petition under any
bankruptcy or insolvency law, or if such a petition is filed against Tenant and
is not dismissed within ninety (90) days; or (iv) if a receiver or similar
officer becomes entitled to Tenant's leasehold hereunder and it is not returned
to Tenant within ninety (90) days, or if such leasehold is taken on execution or
other process of law in any action against Tenant then, and in any and each of
such cases, and except as provided in Exhibit C with respect to parking rent,
Landlord and the agents and servants of Landlord may, to the extent permitted by
law and in addition to and not in derogation of any remedies for any preceding
breach of covenant, immediately or at any time thereafter while such default
continues and without further notice and with or without process of law enter
into and upon the Premises or any part thereof in the name of the whole or mail
a notice of termination addressed to Tenant at the Premises and repossess the
same as Landlord's former estate and expel Tenant and those claiming through or
under Tenant and remove its and their effects (forcibly, if necessary) without
being deemed guilty of any manner of trespass and without prejudice to any
remedies which might otherwise be used for arrears of rent or prior breach of
covenant, and upon such entry or mailing as aforesaid, this Lease shall
terminate, but Tenant shall remain liable as hereinafter provided. Landlord
shall have a lien against all of Tenant's property in the Premises at the time
this Lease may be terminated pursuant to the provision of this Section 9.1, and
Tenant hereby waives all statutory rights (including, without limitation, rights
of redemption, if any) to the extent such rights may be lawfully waived, and
Landlord, without notice to Tenant, may store Tenant's effects and those of any
person claiming through or under Tenant at the expense and risk of Tenant and,
if Landlord so elects, may sell such effects at public auction or private sale
and apply the net proceeds to the payment of all sums due to Landlord from
Tenant if any, and pay over the balance, if any, to Tenant.
9.2 Tenant's Obligations After Termination.
In the event that this Lease is terminated under any of the provisions
contained in Section 9.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, the excess of the total rent reserved for the residue of the Term
over the rental value of the Premises for said residue of the Term. In
calculating the rent reserved, there shall be included, in addition to the
Annual Rent and all additional rent, the value of all other consideration agreed
to be paid or performed by Tenant for said residue. Tenant further covenants as
additional and cumulative obligation after any such ending to pay punctually to
Landlord all the sums and perform all the
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obligations which Tenant covenants in this Lease to pay and to perform in the
same manner and to the same extent and at the same time as if this Lease had not
been terminated. In calculating the amounts to be paid by Tenant under the next
covenant stated in the immediately preceding sentence, Tenant shall be credited
with any amount paid to Landlord as compensation as provided in the first
sentence of Section 9.2 and also with the net proceeds of any rents obtained by
Landlord by reletting the Premises, after deducting all Landlord's expenses in
connection with such reletting, including, without limitation, all repossession
costs, brokerage commissions, fees for all legal services and expense of
preparing the Premises for such reletting, it being agreed by Tenant that
Landlord may (i) relet the Premises or any part or parts thereof for a term or
terms which may at Landlord's option be equal to or less than or exceed the
period which would otherwise have constituted the balance of the Term and may
grant such concessions and free rent as Landlord in its sole judgement consider
advisable or necessary to relet the same, and (ii) to make such alterations,
repairs and decorations in the Premises as Landlord in its sole judgement
considers advisable or necessary to relet the same and no action of Landlord in
accordance with the foregoing or failure to relet or to collect rent under
reletting shall operate or be construed to release or reduce Tenant's liability
as aforesaid.
So long as at least 12 months of the Term remain unexpired at the time of
such termination, in lieu of any other damages of indemnity and in lieu of full
recovery by Landlord of all sums payable under all the foregoing provisions of
this Section 9.2, Landlord may by written notice to Tenant, at any time after
this Lease is terminated under any of the provisions contained in Section 9.1,
or is otherwise terminated for breach of any obligation of Tenant and before
such full recovery, elect to recover, and Tenant shall thereupon pay, as
liquidated damages, an amount equal to the aggregate of the Annual Rent and
additional rent accrued under Article IV in the amount 12 months ended next
prior to such termination plus the amount of Annual Rent and additional rent of
any kind accrued and unpaid at the time of termination and less the amount of
any recovery by Landlord under the foregoing provisions of this Section 9.2 up
to the time of payment of such liquidated damages.
Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency, by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to proved, whether or not
the amount be greater, equal to, or less than the amount of the loss or damages
referred to above. Notwithstanding anything to the contrary contained in this
Section 9.2, Landlord agrees to use commercially reasonable efforts to mitigate
its damages.
ARTICLE X
MISCELLANEOUS
10.1 Titles.
The titles of the Articles are for convenience and are not to be
considered in construing this Lease.
10.2 Notice of Lease.
Upon request of either party, both parties shall execute and deliver,
after the Term begins, a short form of this Lease and if this Lease is
terminated before the Term expires, an instrument in such form acknowledging the
date of termination.
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10.3 Notice.
No notice, approval, consent requested, or election required or permitted
to be given or made pursuant to this Lease shall be effective unless the same is
in writing. Communications shall be addressed, if to Landlord, at Landlord's
Address or at such other address as may have been specified by prior notice to
Tenant and, if to Tenant, at Tenant's Address or at such other place as may have
been specified by prior notice to Landlord. Any communication so addressed shall
be deemed duly served if mailed by registered or certified mail, return receipt
requested, or by commercial courier against receipt. All notices shall be given,
and all time periods affected by notice shall be deemed to commence upon
receipt.
10.4 Bind and Inure.
The obligations of this Lease shall run with the land, and this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Landlord named herein and
each successive owner of the Premises shall be liable only for the obligations
accruing during the period of its ownership. Whenever the Premises are owned by
a trustee or trustees, the obligations of Landlord shall be binding upon
Landlord's trust estate, but not upon any trustee, beneficiary, or shareholder
of the trust individually.
10.5 No Surrender.
The delivery of keys to any employee of Landlord or to Landlord's agent or
any employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
10.6 No Waiver, Etc.
The failure of Landlord or Tenant to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this Lease
or, with respect to such failure of Landlord, any of the Rules and Regulations
referred to in Section 6.1(d), whether heretofore or hereafter adopted by
Landlord, shall not be deemed a waiver of such violation nor prevent a
subsequent act, which would have originally constituted a violation, from having
all the force and effect of an original violation, nor shall the failure of
Landlord to enforce any of said Rules and Regulations against any other tenant
in the Building be deemed a waiver of any such Rules and Regulations. The
receipt of Landlord of Annual Rent or additional rent with knowledge of the
breach of any covenant of this Lease shall not be deemed a waiver of such breach
by Landlord, unless such waiver be in writing signed by Landlord. No consent or
waiver, express or implied, by Landlord or Tenant to or of any breach of any
agreement or duty shall be construed as a waiver or consent to or of any other
breach of the same or any other agreement or duty.
10.7 No Accord and Satisfaction.
No acceptance by Landlord of a lesser sum than the Annual Rent and
additional rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent be deemed as
accord or satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
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10.8 Cumulative Remedies.
The specific remedies to which Landlord may resort under the terms of this
Lease are cumulative and are not intended to be exclusive of any other remedies
or means of redress to which it may be lawfully entitled in case of any beach or
threatened breach by Tenant of any provisions of this Lease. In addition to the
other remedies provided in this Lease, Landlord shall be entitled to the
restraint by injunction of the violation of any of the covenants, conditions, or
provisions of this Lease or to a decree compelling specific performance of any
such covenants, conditions, or provisions.
10.9 Partial Invalidity.
If any term of this Lease, or the application thereof to any person or
circumstances shall to any extent be invalid or unenforceable, the remainder of
this Lease, or the application of such term to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby, and each term of this Lease shall be valid and enforceable to the
fullest extent permitted by Law.
10.10 Landlord's Right to Cure.
If Tenant shall fail to keep or perform any of its obligations as provided
in this Lease in respect to (a) maintenance of insurance, (b) repairs and
maintenance of the Premises, (c) compliance with the Rules and Regulations of
any rules, regulations or ordinances of public authorities, or (d) the making of
any other payment or performance of any other obligation, then Landlord may (but
shall not be obligated to do so) upon the continuance of such failure on
Tenant's part for 10 days after written notice to Tenant (or after such
additional period, if any, as Tenant may reasonably require to cure such failure
if of a nature which cannot be cured within said 10 day period or such longer
period as Landlord permits Tenant for the curing of defaults pursuant to Section
9.1) and without waiving or releasing Tenant from any obligation, and as an
additional but not exclusive remedy, make any such payment or perform any such
obligation, and all sums so paid by Landlord and all necessary incidental costs
and expenses, including attorneys fees, incurred by Landlord in making such
payment or performing such obligation, together with interest thereon at the
Prime Rate in effect as of the date of payment from the date of payment, shall
be deemed an Additional Rent and shall be paid to Landlord within fifteen (15)
days following written demand therefor, and if not so paid by Tenant, Landlord
shall have the same rights and remedies as in the case of a default by Tenant in
the payment of rent.
10.11 Estoppel Certificate.
Tenant agrees on the Commencement Date, and from time to time thereafter
upon not less than 15 days prior written request by Landlord, to execute,
acknowledge, and deliver to Landlord a statement in writing in the form attached
hereto as Exhibit F, certifying that this Lease is unmodified and in full force
and effect; that to Tenant's best knowledge Tenant has no defenses, offsets, or
counterclaims against its obligations to pay the Annual Rent and additional rent
and to perform its other covenants under this Lease; that to Tenant's best
knowledge there are no uncured defaults of Landlord or Tenant under this Lease
(or, if there have been any modifications, that this Lease is in full force and
effect as modified and stating the modifications and, if there are any defenses,
offsets, counterclaims, or defaults, setting them forth in reasonable detail);
and the dates to which the Annual Rent, additional rent and other charges have
been paid. Any such statement delivered pursuant to this Section 10.11 may be
relied upon by any prospective purchaser or mortgagee of premises which include
the Premises or any prospective assignee of any such mortgagee.
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10.12 Waiver of Subrogation.
Any insurance carried by either party with respect to the Premises and
property therein or occurrences thereon shall, if the other party so requests
and it can be so written without additional premium or with an additional
premium which the other party agrees to pay, include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrence of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury or loss due to
hazards covered by insurance containing such clause or endorsement to the extent
of the indemnification received thereunder.
10.13 Brokerage.
Tenant and Landlord each represent and warrant to the other that they have
dealt with no broker in connection with this transaction other than the Leasing
Brokers and agree to defend, indemnify, and save the other harmless from and
against any and all claims for any commission or other brokerage fees or
expenses arising from or out of any breach of the foregoing representation and
warranty. Landlord recognizes that the Leasing Brokers are entitled to the
payment of a commission for services rendered in the negotiation and obtaining
of the Lease, and has agreed to pay such commission pursuant to a separate
agreement.
10.14 Governing Law.
The laws of the District of Columbia shall govern the validity,
interpretation, performance, and enforcement of this Lease.
10.15 Waiver of Jury Trial.
Landlord and Tenant hereby waive trial by jury in any action, proceeding
or counterclaim brought by either party on or in respect of any matter
whatsoever arising out of or in any way connected with this Lease, Tenant's use
or occupancy of the Premises, and/or any claim of damage or injury.
10.16 Entire Agreement.
This Lease, together with the Exhibits hereto, contains and embodies the
entire agreement of the parties hereto, and no representations, inducements or
agreements between the parties, oral or otherwise, not contained in the Lease
and the Exhibits shall be of any force or effect.
10.17 Liability.
It is expressly understood and agreed that the liability of Landlord to
Tenant under this Lease is restricted solely to the interest of Landlord in the
Building and the Lot, that the officers, directors, shareholders and employees
of Landlord shall have no personal liability under the terms of this Lease, and
that Tenant shall look solely to Landlord's equity, interest and rights in the
Building and the Lot for satisfaction of Tenant's remedies on account thereof.
The foregoing applies to action for monetary damages and shall not affect other
relief (eg, injunctive relief).
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10.18 Contents of Tenant's Safe Deposit Boxes.
Notwithstanding anything to the contrary herein contained, in no event
shall Landlord's recapture of the Premises, whether due to Tenant default,
condemnation or any other reason, allow Landlord any rights with respect to
ownership of the contents of Tenant's safe deposit boxes and safe keeping
contents, all of which shall remain the property of Tenant and/or Tenant's
customers.
10.19 Kiosk or Drive-Through Facility.
This Lease is contingent upon Landlord obtaining any and all necessary
approvals and/or variances to provide Tenant with an off-site Kiosk or
Drive-Through Facility location located in close proximity to the subject
property. The costs associated with the proposed Kiosk or Drive-Through Facility
shall be the sole responsibility of the Tenant. Tenant shall agree that, should
Landlord expend time and funds to acquire said approvals prior to occupancy but
following execution of this Lease and should such approvals be granted, Tenant
will be bound to obligate itself to the terms of this Lease.
10.20 Exterior and Lobby Signage.
Landlord shall provide an allowance of $2,000 for Tenant exterior signage.
Tenant will have the right to install the Landlord's standard signage, which
consists of back lite pin letters of similar style to those found on 4910
Massachusetts Avenue, NW. All costs in excess of the allowance stated above
shall be borne by the Tenant. The sign design shall be submitted by Tenant's
architect to Landlord for approval, said approval not to be unreasonably
withheld.
On all of the Building marquees, Tenant's name and location shall be
listed in similar style as to what currently exists on the Building marquees.
10.21 Consents.
Except as otherwise expressly provided herein, wherever herein or in
connection herewith a party's consent or approval is required, such consent or
approval shall not be unreasonably withheld, delayed or conditioned. In all
events denial of consent shall be given only in writing and the parties shall
give reasonable detailed grounds therefor, within ten (10) days following
receipt of the request therefor. It shall be unreasonable to request any payment
or other consideration as a condition to granting a consent, except for monies
owed pursuant to the Lease.
10.22 Measurement of Space.
Upon completion and acceptance of the Premises, the Premises shall be
measured and verified by CHK in accordance with the Washington DC Association of
Realtors' Method of Measurement dated January 1, 1989, the correct net rentable
square footage shall be determined, and the amounts specified in the Lease for
Annual Rent, additional rent, etc. shall be adjusted accordingly. The initial
Annual Rent is based upon a rate of $20.00 per rentable square foot of Premises.
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EXECUTED as a sealed instrument on the day and year first above written.
LANDLORD:
ATTEST: W.C. & A.N. MILLER DEVELOPMENT
COMPANY
[SIG] By: /s/ ROBERT R. MILLER
- ------------------------------ -------------------------------
(Seal)
TENANT:
ATTEST: THE PALMER NATIONAL BANK
[SIG] By: /s/ WEBB C. HAYES IV
- ---------------------------- -------------------------------
(Seal)
27
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EXHIBIT B
PLANS AND SPECIFICATIONS FOR TENANT'S SPACE
To be determined.
<PAGE> 31
EXHIBIT C
PARKING AS ADDITIONAL PREMISES
1. Tenant leases six (6) spaces from Landlord to park automobiles ("Parking
Spaces") in the lot adjacent to the Building.
2. The Term of this Parking Spaces lease shall commence and terminate with
the Lease.
3. The rent for said Parking Spaces is Sixty Dollars ($60.00) per month for
each Parking Space, is payable on the first day of each calendar month.
Such rent shall be increased annually, which increase shall be determined
by Landlord on a basis no less favorable than offered to any other tenant.
4. Landlord shall at all times provide adequate parking for the patrons of
the Bank at the prevailing rate, which rate is subject to change. The
Tenant may participate in the Landlord's validation program and provide
it's customers parking validation stamps at a discounted rate of $0.29 per
hour, which rate is subject to change.
5. Parking Spaces shall be considered to be additional premises under the
Lease and rent for Parking Spaces shall be considered as additional rent
under the Lease. The failure of Tenant to pay timely the additional rent
shall constitute a default under the Lease subject to such notice and cure
rights as provided for other monetary defaults and Landlord shall be
entitled to exercise any and all of its remedies under the Lease, except
that it shall not have the remedy of terminating the Lease or otherwise
interfering with Tenant's use of the Premises.
6. (a) Persons using the lot do so at their own risk. Landlord specifically
disclaims all liability, except when caused solely by its gross
negligence or willful misconduct, for personal injury incurred by
users of the lot, their agents, employees, invitees, family, friends
or guests, or as a result of the operation or parking of any
automobiles in the lot.
(b) To insure safe traffic flow within the lot, all traffic signs and
signals must be obeyed. At no time will Tenant or its designated
users alter or damage any traffic signs, signals, entry gates or
other property.
(c) All automobiles must be parked solely within the striped stalls.
(d) Tenant and its designated users shall faithfully observe and comply
with all reasonable and non-discriminatory rules and regulations for
use of the lot which Landlord may from time to time put into effect
once a copy of any rule or regulation has been delivered to Tenant.
(e) Landlord shall have the right to enter upon the Parking Spaces to
inspect same, to perform maintenance services and to make repairs as
Landlord deems necessary or desirable, without such entry
constituting an eviction of Tenant in whole or in part, and the rent
specified herein shall in no way abate while said maintenance and/or
repairs are being effected provided that the Parking Spaces are not
closed for more than three (3) consecutive business days.
<PAGE> 32
EXHIBIT D
LANDLORD'S SERVICES
I. CLEANING OF DEMISED PREMISES
A. Tenant Areas
1. Tenant shall supply all cleaning services for the Demised
Premises. Tenant's cleaning contractor shall not interfere
with Landlord's cleaning contractor.
2. All waste removal shall be Tenant's responsibility. Landlord
will provide appropriate receptacles in a location reasonably
accessible to the Premises.
II. COMMON AREA CLEANING
A. General
1. All cleaning work will be performed between 8:00 am and 12:00
midnight, Monday through Friday, unless otherwise necessary
for stripping, waxing, etc.
2. All waste removal shall be Landlord's responsibility.
B. Daily Operation (5 times per week)
1. Public Lavatories
a. Sweep and wash floors with disinfectants.
b. Disinfect both sides of toilet seats, toilet bowls,
urinals, basins, and vanities.
c. Clean all mirrors and dispensers.
d. Spot clean toilet partitions.
e. Empty and disinfect sanitary napkin disposal
receptacles.
f. Empty hand towel disposal receptacles.
g. Refill toilet tissue, towel, soap, and sanitary napkin
dispensers.
2. Public Areas
a. Wipe down entrance doors and clean glass (interior and
exterior).
b. Vacuum elevator carpets and wipe down doors and walls.
c. Dust and spot mop lobby.
d. Clean drinking fountain.
e. Empty trash and ash containers.
<PAGE> 33
C. Weekly Operations
1. Public Lavatories and Public Areas
a. Hand dust and wipe clean all horizontal surfaces with
treated cloths to include furniture, windowsills, door
ledges, chair rails, baseboards, convector tops, etc.,
within normal reach.
b. Remove finger marks from private entrance doors, light
switches, and doorways.
c. Damp mop lobby and tenant area vinyl tile floors.
d. Sweep all stairways.
D. Monthly Operations
1. Public Areas
a. Wash tenant area glass sidelights and interior glass
partitions.
b. Spot wash corridor and lobby walls.
c. Remove shoe marks from tenant area entry doors.
d. Spot vacuum seat cushions on chairs, sofas, etc.
2. Public Lavatories
a. Wash down toilet partitions and walls around fixtures.
E. Semi-annual Operations: Public Areas
1. Clean inside all windows.
2. Clean outside of all windows.
3. Dust Levelor blinds.
4. Vacuum and dust grill work.
F. Annual Operations: Public Areas
1. Strip and wax lobby vinyl tile floors.
G. As Needed: Public Areas
1. Damp wipe vinyl furniture.
2. Recoat lobby floor wax.
3. Spray buff lobby floor.
III. HEATING, VENTILATING AND AIR CONDITIONING
A. Heating, ventilation and air conditioning shall be supplied by
virtue of a self-contained split system servicing the demised
Premises. Landlord shall deliver to Tenant any product warranties
and/or manufacturers warranties at the commencement of the Lease. It
shall be the Tenant's sole responsibility and cost to maintain,
repair, service and replace this system throughout the term of the
Lease. Tenant shall, prior to occupancy, enter into a preventative
maintenance contract which, at the election of the Tenant, may be
<PAGE> 34
entered into with the Landlord. Tenant is to provide Landlord, upon
occupancy of the Premises, with a copy of said contract. In the
event Tenant fails to provide the aforementioned contract, then,
Landlord will, at Tenant's expense, on behalf of the Tenant, enter
into a contract for the Tenant for preventative maintenance. All
costs associated therein shall be deemed additional rent pursuant to
this Lease.
B. In the event of federal, state or local governmental controls,
rules, regulations or restrictions on the use of consumption of
energy or other utilities during the term of this Lease, including
renewals or extensions thereof, both Tenant and Landlord shall be
bound and shall comply with the same, regardless of any other
provisions of this Lease; in the event of regulations or
restrictions by Landlord and Tenant, the interpretation by the
Landlord shall prevail and Landlord shall, without exposure to legal
process by Tenant, have the right to enforce compliance, including
the right of entry into tenant's space to effect compliance, so long
as the interruption is nondiscriminatory.
IV. WATER
A. Hot water for common lavatory purposes only and cold water for
drinking, lavatory and toilet purposes. Hot and cold water also for
kitchen purposes which shall be part of the Tenant Work.
V. ELEVATORS
A. Elevators are for the use of all Tenants and the general public for
access to and from all floors of the Building. Programming of
elevators (including, but not limited to service elevators) shall be
as Landlord, from time to time, determines best for the Building as
a whole.
VI. RELAMPING OF LIGHT FIXTURES
A. Tenant will reimburse Landlord for the cost of lamps, ballasts and
starters, and the cost of replacing same within the Premises.
VII. CAFETERIA AND VENDING INSTALLATIONS
A. Any space to be used primarily for lunchroom or cafeteria operation
shall be Tenant's responsibility to keep clean and sanitary, it
being understood that Landlord's approval of such installation and
use must be first obtained in writing. Landlord shall approve of an
installation for the sole use of Tenant's employees containing a
sink, refrigerator, stove and microwave oven, provided (i) Tenant
obtains and maintains an extermination service contract providing
for monthly services to the Premises, which contract must be
approved by Landlord (such approval not to be unreasonably withheld)
and (ii) Tenant maintains such installation in a clean and sanitary
condition to the reasonable satisfaction of Landlord.
B. Vending machines or refreshment service installations by Tenant must
be first approved by Landlord in writing and shall be restricted in
use to employees and business callers. All cleaning necessitated by
such installations shall be at Tenant's expense.
VIII. ADDITIONAL SERVICES
A. Any additional services provided to any Tenant, which are not
provided in like manner or quantities to all Tenants, shall be at
the sole cost of those Tenants receiving such service or services.
<PAGE> 35
IX. ELECTRICITY
A. Landlord, at Landlord's expense, shall install a sub-meter to record
the electrical consumption used by Tenant. Landlord shall on a
monthly basis read and record Tenant's electrical consumption and
bill Tenant at Landlord's direct cost for said usage. Amounts due
from Tenant for electrical consumption shall be considered
additional rent under the Lease. The failure of Tenant to pay timely
the additional rent shall constitute a default under this Lease and
Landlord shall be entitled to exercise any and all of its remedies
under the Lease subject to such notice and cure rights as provided
for other monetary defaults.
<PAGE> 36
EXHIBIT E
RULES AND REGULATIONS
1. The entrance, elevators, lobbies, passages, corridors and stairways shall
not be encumbered or obstructed by Tenant, Tenant's agents, servants,
employees, licensees or visitors or to be used by them for any purpose
other than for ingress and egress to and from the Premises. The moving in
or out of all safes, freight, furniture, or bulky matter of any
description may be limited to such hours as Landlord may determine from
time to time. Landlord reserves the right to inspect all freight and bulky
matter to be brought into the Building and to exclude from the Building
all freight and bulky matter which violates any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
2. No curtains, blinds, shades, or screens other than those furnished by
Landlord shall be attached to, hung in, or used in connection with any
window or door of the Premises, without the prior written consent of
Landlord. Landlord hereby agrees to allow Tenant to affix FDIC and VISA
decals and any other permanently affixed decals that are typical for the
banking industry to all entry doors and to paint, in good and workmanlike
manner, The Palmer National Bank name and logo on all entry doors,
together with the hours of operation.
3. Tenant, must, upon the termination of its tenancy, return to Landlord all
keys of doors, stores, shops, booths, stands, offices, and toilet rooms,
either furnished to or otherwise procured by Tenant, and in the event of
the loss of any keys so furnished, Tenant shall pay to Landlord the cost
thereof.
4. Canvassing, soliciting, and peddling in the Building are prohibited, and
Tenant shall cooperate to prevent the same.
5. Tenant shall comply with all security measures from time to time
established by Landlord for the Building, provided such measures do not
conflict with Tenant's security measures.
6. No pets or animals of any kind may be kept or allowed in the Premises.
7. The lavatories, water closets, sinks, faucets, plumbing, and other service
apparatus of any kind shall not be used by Tenant for any purpose other
than those for which they were installed, and no sweepings, rubbish, rags,
ashes, chemicals or other refuse or injurious substances shall be placed
therein or used in connection therewith by Tenant, or left by Tenant in
the lobbies, passages, elevators or stairways or the Building.
8. No sign, lettering, insignia, advertisement, notice or other thing shall
be inscribed, painted, installed, erected or placed in any portion of the
Premises which may be seen from outside the Building, or on any window,
window space or other part of the exterior or interior of the Building, or
in the interior of the Building within three (3) feet of any exterior
window, unless first approved in writing by Landlord which consent shall
not be unreasonably withheld, conditioned or delayed.
<PAGE> 37
9. Tenant shall not or permit to be done anything which obstructs or
interferes with the rights of any other tenant of the Property. Tenant
shall not keep anywhere within the Property any matter having an offensive
odor, or any kerosene, gasoline, benzine, camphene, fuel or other
explosive or highly flammable material. No bird, cat, dog, fish or other
animal shall be brought into or kept in or about the Premises. Except to
the extent prohibited by law, Tenant may put combination locks on the
stairwell side of all fire doors which open on the Premises.
10. Tenant shall see each day that the windows are closed and the doors
securely locked before leaving the Premises, and that all lights and
standard office equipment within the Premises are turned off.
11. Conditioned upon the approval process outlined in Section 3.4, if Tenant
desires to install signalling, telegraphic, telephonic, protective alarm
or other wires apparatus or devices within the Premises, Landlord shall
direct where and how they are to be installed and, except as so directed,
no installation, boring or cutting shall be permitted. Landlord shall have
the right (a) to prevent or interrupt the transmission of excessive,
dangerous or annoying current of electricity or otherwise into or through
the Building or the Premises, (b) to require the changing of wiring
connections or layout at Tenant's expense, to the extent that Landlord may
deem necessary, (c) to require compliance with such reasonable rules as
Landlord may establish relating thereto, and (d) in the event of
noncompliance with such requirements or rules, immediately to cut wiring
or do whatsoever else it considers reasonably necessary to remove the
danger, annoyance or electrical interference with apparatus in any part of
the Building. Each wire installed by Tenant must be clearly tagged at each
distributing board and junction box and elsewhere where required by
Landlord, with the number of the office to which such wire leads and the
purpose for which it is used, together with the name of Tenant or other
concern, if any, operating or using it.
12. Subject to the terms of the Lease, Landlord shall have the right to
rescind, suspend or modify the Rules and Regulations and to promulgate
such other Rules or Regulations as, in Landlord's reasonable judgement,
are from time-to-time needed for the safety, care, maintenance, operation
and cleanliness of the Building or the Lot, or for the preservation of
good order therein, subject to the terms of the Lease. Upon Tenant's
having been given notice of the taking of any such action, the Rules and
Regulations as so rescinded, suspended, modified or promulgated shall have
the same force and effect as if in effect at the time at which Tenant's
lease was entered into.
13. The use of any room within the Building as sleeping quarters is strictly
prohibited at all times.
14. Tenant shall keep the windows and doors of the Premises (including those
opening on corridors and all doors between rooms entitled to receive
heating or air conditioning service and rooms not entitled to receive such
services) closed while the heating or air conditioning system is
operating, in order to minimize the energy used by, and to conserve the
effectiveness of, such systems. Tenant shall comply with all reasonable
Rules and Regulations from time-to-time promulgated by Landlord with
respect to such systems or their use.
<PAGE> 38
EXHIBIT F
ESTOPPEL CERTIFICATE
THE PALMER NATIONAL BANK, ("Tenant"), the Tenant of Premises at 4900
Massachusetts Avenue in Northwest Washington, DC under a lease dated
____________, 1991 ("Lease"), between Tenant and W.C. AND A.N. MILLER
DEVELOPMENT COMPANY, ("Landlord"), upon request of the Landlord hereby certifies
that:
a. The Lease is unmodified and in full force and effect.
b. Tenant has no defenses, offsets or counterclaims against its
obligations to pay the fixed rent and additional rent and to
perform its other covenants under the Lease.
c. There are no uncured defaults of Landlord or Tenant under the
Lease.
d. The Commencement Date as defined in the Lease is________.
e. Fixed rent, additional rent and other charges commenced to
accrue on_______and have been paid through________.
This Certificate is delivered to _________________ and may be relied on by
it.
Executed under seal this ___________day of ___________, 1991.
TENANT:
THE PALMER NATIONAL BANK
BY: /s/ WEBB C. HAYES
------------------------------
<PAGE> 39
EXHIBIT G
OPTION TO RENEW TERM
Provided that at the time of exercise of the following option and at the
commencement of the Renewal Term (as herein defined), (i) Tenant shall not be in
default of any provision of this Lease, (ii) this Lease is in full force and
effect, and (iii) Tenant is occupying all of the Premises, then, and provided
such conditions are satisfied, Tenant shall have the right and option, by giving
notice as set forth herein below, to extend and renew the Term of this Lease for
two (2) additional term of Five (5) years, exercisable together or separately,
beginning on the day immediately following expiration of the Term (the "Renewal
Term"), and upon the same terms and conditions contained in this Lease
(excluding Annual Rent, which shall be adjusted and increased as provided
hereinbelow), and further provided that Landlord shall have no responsibility to
make any improvements to the Premises for such Renewal Term, the Tenant
accepting the same in their "as-is" condition at the end of the Term.
If Tenant desires to exercise said option to renew the Term of this Lease,
Tenant shall give Landlord written notice thereof at least six (6) months prior
to the end of the Term. In no event shall Tenant have any right to extend the
Term of this Lease beyond such Renewal Term, and in the event of any earlier
termination of this Lease, or failure of Tenant to give the written notice
provided hereinabove, or failure of Tenant to satisfy the conditions precedent
described above, all rights of Tenant to the Renewal Term shall be of no further
force or effect.
Provided Tenant gives notice as aforesaid, and all other conditions to
Tenant's exercise of the option for the Renewal Term are satisfied, the parties
shall in good faith attempt to agree on the initial Annual Rent for the Renewal
Term not later than 100 days prior to end of the Term; provided, however, in no
event shall such initial Annual Rent for the Renewal Term be less than the
Annual Rent in effect at the end of the Term of this Lease nor more than
ninety-five percent (95%) of the then prevailing market rental for the Spring
Valley Area. In the event the parties are unable to agree upon the initial
Annual Rent for the Renewal Term, then the initial Annual Rent for the Renewal
Term shall be determined by a board of three (3) licensed real estate brokers,
one of whom shall be selected by Landlord, one of whom shall be selected by
Tenant, and the third of whom shall be selected by the two brokers selected by
Landlord and Tenant. Such initial Annual Rent shall be based upon the fair
rental value, as of the effective date of the Renewal Term, of premises similar
to the Premises in the Building, based upon terms and conditions of leases or
letters of intent negotiated in the immediate prior year, or, if no such
information is available, other comparable buildings located within the
Washington, DC metropolitan area, in either case taking into account the length
of the Renewal Term, the terms of this Lease, and the fact that the Premises are
fit for immediate occupancy and use "as-is," provided that, notwithstanding such
determination, such initial Annual Rent as determined by the brokers shall be no
less than the Annual Rent in effect at the end of the Term of this Lease. All of
said brokers shall be licensed real estate brokers in the D.C. metropolitan
area, specializing in commercial leasing, having not less than ten (10) years
experience and recognized as ethical and reputable within their industry. The
parties each agree to select one (1) designated broker not later than 90 days
prior to end of the Term. The third broker shall be selected by the first two
(2) brokers within ten (10) days after both of the first two (2) brokers have
been selected. Within ten (10) days after the third broker has been selected all
of the brokers shall meet to attempt to agree upon the initial Annual Rent for
the Renewal Term. If the three brokers unanimously agree upon the initial Annual
Rent for the Renewal Term, then such amount shall constitute the initial Annual
Rent for the Renewal Term for the purposes of this Lease. If the three brokers
are unable to reach a unanimous agreement, they shall, within said ten (10) day
period, submit in writing to both the Landlord and Tenant the rate of rental
each deems appropriate
<PAGE> 40
(the "Appraisals"). The three Appraisals shall be added together and their total
divided by three, and the resulting quotient shall be deemed the initial Annual
Rent for the Renewal Term; provided, however, that if the low Appraisal and/or
the high Appraisal is more than fifteen (15%) lower and/or higher than the
middle Appraisal, then any Appraisal which differs from the middle Appraisal by
more than fifteen percent (15%) shall be disregarded and provided further that
if two of such Appraisals are the same, they shall be deemed to be the middle
Appraisal. If only one appraisal is disregarded as described above, the
remaining two Appraisals shall be added together and their total divided by two,
and the resulting quotient shall be the initial Annual Rent for the Renewal
Term. If both the low Appraisal and the high Appraisal are disregarded as
described above, the middle Appraisal shall be the initial Annual Rent for the
Renewal Term.
The parties shall execute an addendum to this Lease to recognize the
initial Annual rent for the Renewal Term and to confirm the Renewal Term and
that all of the other terms, covenants, provisions and conditions of this Lease
(including, without limitation, the payment of Operating Cost Escalation) remain
applicable. As so selected, the Annual Rent shall be effective from the first
day of the Renewal Term shall be adjusted during the term of the Renewal Term in
the same manner as the Annual Rent was adjusted during the Term in accordance
with the provisions of Section 4.1 of the Lease. Each of the parties shall pay
for the costs of the services of the broker selected by it and the costs of the
third broker shall be divided equally between Landlord and Tenant. It is
understood and agreed by the parties that the determination of the brokers shall
be final and binding upon the parties.
<PAGE> 41
EXHIBIT H
LANDLORD CONTRIBUTION AND IMPROVEMENTS.
1. Landlord Contribution. Landlord agrees to provide Tenant with a Landlord
contribution towards the cost of the Tenant improvements in an amount
equal to the product of (i) $40 times (ii) the net rentable floor area of
the Premises. Such contribution shall be credited towards the Tenant
Improvement Reimbursement. Any portion of the Landlord's contribution not
utilized by Tenant may, at Tenant's option, be used for the construction
of the Kiosk and/or applied to Tenant's rent obligations.
2. Landlord Improvements. Landlord shall provide Tenant, at Landlord's cost
and expense, the following Tenant improvements, which improvements shall
be consistent with the design and quality of the Building Standard
Improvements:
a. Dry wall installed around the perimeter of the Premises, paint
ready.
b. Landlord's standard ceiling and lighting. The lighting fixtures will
be locations as specified in Tenant's plans and Specifications.
c. A self-contained HVAC system suspended from the ceiling which shall
be sufficient capacity to heat and cool Tenant's Premises during
daily working conditions.
d. Landlord will make structural improvements to provide a bank vault
plus a night depository and/or ATM facility, if the Tenant decides
to operate this equipment, which costs may be included in the $40.00
per net rentable square foot allowance.
<PAGE> 42
[THE PALMER NATIONAL BANK LETTERHEAD]
September 17, 1991
VIA FAX 895-2715
Robert R. Miller
Vice President
W.C. & A.N. Miller Co.
4315 - 50th Street, N.W.
Washington, DC 20016
Dear Rob:
The Palmer National Bank is currently undergoing a routine regulatory
examination by the Office of the Comptroller of the Currency. The Bank's current
financial condition is strong, with one of the highest capital ratios in the
region.
The Office of the Comptroller of the Currency has granted approval for
Palmer to establish a branch at 4900 Massachusetts Avenue. A copy of their
approval letter is attached. In the event this approval is unconditionally
revoked, thus prohibiting occupancy, then the Lease Agreement for 4900
Massachusetts Avenue will be immediately terminated and the Bank will reimburse
W.C. & A.N. Miller Co. for the cost of improvements and/or required demolition
which have already taken place.
Sincerely,
/s/ WEBB C. HAYES
-----------------------------
Webb C. Hayes IV
President and Chairman
of the Board
Enclosures
WCH/jmb
ACKNOWLEDGED AND AGREED TO THIS
24 DAY OF SEPTEMBER, 1991.
W.C. & A.N. MILLER CO.
By /s/ ROBERT R. MILLER
------------------------------
EXHIBIT I
<PAGE> 43
EXHIBIT J
LEASE CONFIRMATION AGREEMENT
ATTACHED to and made a part of the Lease dated _______________ day of
___________ ,1991 (the "Lease"), entered into by and between W.C AND A.N. MILLER
DEVELOPMENT COMPANY, as Landlord and THE PALMER NATIONAL BANK, as Tenant.
The undersigned Landlord and Tenant do hereby declare that possession of
the leased premises was accepted by Tenant on the ___________________ day of
________________, 1991. The building and other improvements required to be
constructed by Landlord in accordance with the aforesaid Lease have been
satisfactorily completed by Landlord, and accepted by Tenant and that the Lease
is now in full force and effect, and for the purpose of this Certificate and
said Lease, the Lease commencement date is established as beginning on the
_______________ day of _______________, 199_, and the Lease expiration date
being on the ______________day of ___________________ , 200_, and, as of the
date of the acceptance herein set forth, there is no current right to set off
against rents claimed by Tenant against Landlord. Tenant's declarations herein
do not extend to any defects in the leased premises which are not readily
ascertainable.
WITNESS: LANDLORD:
W.C AND A.N. MILLER DEVELOPMENT
COMPANY
By:___________________________ By:__________________________________
Title:_______________________________
WITNESS OR ATTEST: TENANT:
THE PALMER NATIONAL BANK
By:____________________________ By: _________________________________
[Corporate Seal] Title:_______________________________
<PAGE> 1
Exhibit 10AN
SUBLEASE
THIS SUBLEASE is made this 16th day of February 1995, between HOUSEHOLD Bank,
f.s.b. (hereinafter called "Landlord"), Prospect Heights, Illinois and Palmer
National Bancorp Inc., (hereinafter called "Tenant").
WITNESSETH, THAT:
1. DESCRIPTION. Landlord leases to Tenant the following described premises,
(hereinafter termed "Premises"), on the terms set forth herein to be used
and occupied only for the purposes as permitted under the Overlease, and
for no other purpose whatsoever without Landlord's prior written
approval, in the City of Rockville, County of Montgomery, and State of
Maryland, consisting of approximately 2,151 square feet of second floor
space and commonly known as Suite 240 6110 Executive Boulevard Rockville,
Maryland 20852. The location of the floor space leased hereunder is
outlined in red and is, together with the dimensions of the space set forth
on the Layout Plat, attached hereto and made a part hereof as Exhibit 1.
2. TERM. Tenant shall occupy the Premises from the commencement date, and
ending November 30, 1998. Landlord and Tenant shall duly execute a
commencement letter setting forth the actual commencement upon Tenant's
occupancy.
The foregoing notwithstanding, this sublease is contingent upon Tenant
obtaining all necessary regulatory and other approvals and licenses
required in connection with its intended operation of a mortgage banking
business (including residential mortgages) ("Regulatory Conditions").
Tenant shall commence the licensing/approval process promptly following the
full execution hereof and shall use diligence in completing same. Each of
Landlord and Tenant shall have the right to terminate this sublease by
written notice to the other in the event that Tenant has not notified
Landlord, on or before sixty (60) days following Tenant's receipt of two
fully executed originals hereof, that the Regulatory Conditions have been
satisfied or waived.
3. BASE RENT. Tenant, in consideration of this lease, covenants to pay the sum
of $2,486.20 in equal monthly installments on the first day of each month
of the term to Landlord at:
Household Bank, f.s.b.
[1352 A Charwood Road] 2700 Sanders Road
[P.0 Box 739] Prospect Heights, IL
[Hanover, Maryland 21076] 6007
[Attn: Property Management] Attn: Leasing, License
& Contracts
Rental commencement for this lease will begin effective Sixty days (60)
after the term commencement date. Base rental is subject to increase
effective December 1 of each calendar year. Said increase shall be based
upon 30% of the CPI-W increase from the previous year.
4. SECURITY DEPOSIT. Tenant agrees to pay Landlord the sum of $2,486.20 upon
execution of this lease. Landlord shall apply $2,486.20 towards the first
month's rent.
5. ASSIGNMENT OR SUBLETTING. Tenant shall not voluntarily or involuntarily
sublet, assign or transfer this lease; the Premises, or any part thereof
without Landlord's and Overlandlord's prior written consent.
Landlord's consent shall not be unreasonably withheld, conditioned or
delayed, [and shall be deemed given if not denied by written notice
received by Tenant within fifteen (15) business days following Landlord's
receipt of Tenant's written]
<PAGE> 2
request thereof.] Landlord shall use all reasonable efforts to promptly
obtain any required Overlandlord consent.
6. OVERLEASE. This sublease is subject and subordinate to all terms,
conditions and covenants of the Overlease (other than paragraphs 2, 3,
8.4, 31, and 32) and its amendments between Building No. 7 Associates, a
Maryland Joint Venture as Landlord (hereinafter called "Overlandlord"),
to Household Bank, f.s.b. as Tenant for a term beginning December 1, 1993,
and ending November 30, 1998, and is not effective until written consent of
Overlandlord is hereto obtained. A copy of the Overlease is attached
hereto and made a part hereof as Exhibit 2. Landlord will diligently pursue
obtaining Overlandlord's approval as soon as practical. Notice of
Landlord's receipt of Overlandlord's approval will be provided to Tenant
upon full execution of this sublease if then in hand, or within 5 days of
its receipt if later obtained.
Landlord shall use all reasonable efforts to promptly obtain any required
Overlandlord consents, approvals, or the like at any time requested by
Tenant (e.g., alterations). Landlord shall not modify or otherwise take or
omit to take any action under the Overlease which would have an adverse
impact upon Tenant's use and occupancy of the Premises for the term, and
according to the terms, herein demised. Landlord agrees at Tenant's request
to enforce the terms of the Overlease or, if requested by Tenant, Tenant
shall have the right to enforce same in the name if Landlord (Landlord
hereby designating Tenant as its agent for such purpose). Except as
otherwise expressly and directly provided in this Sublease, all consent,
approvals and the like required from Landlord hereunder shall not be
unreasonably withheld, conditioned or delayed and shall be deemed given if
not denied by written notice received by Tenant within fifteen (15)
business days following Landlord's receipt of Tenant's written request
therefor.
7. TENANTS ALTERATIONS. Intentionally omitted.
8. CONDITIONS OF PREMISES. Taking possession of Premises by Lessee shall be
evidence against Tenant that the demised Premises were in good and
satisfactory condition when possession was made.
9. TERMINATION. At the end of this lease by lapse of time or otherwise, Tenant
shall yield up immediate possession of the Premises and all equipment
located therein to Landlord, except those fixtures which Tenant has the
right to remove pursuant to Paragraph 19 of this lease, all in a clean and
sightly condition and in good working order and repair, normal wear and
tear excepted.
10. MAINTENANCE, SERVICES, UTILITIES, REPAIRS. During this lease, the party as
designated below, shall, at its sole expense, pay all of the charges for
and perform, supply, repair and replace the items in the following list:
(Insert "Tenant", "Landlord" or "Overlandlord")
<TABLE>
<CAPTION>
<S> <C> <C>
A. Gas or Fuel Oil Overlandlord
B. Electricity Overlandlord
C. Water Overlandlord
D. Sewer Overlandlord
E. Janitorial Service Overlandlord
F. Exterior Window Washing Overlandlord
G. Trash Removal Overlandlord
H. Parking and Common Area Overlandlord
Cleaning, Repair, Snow
Removal and Lighting
I. Sidewalk - Cleaning, Snow Overlandlord
Removal and Repair
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
J. Entrance, Stairway, Hall, Overlandlord
and Restrooms Cleaning,
Repair and Decorating
K. Furnace/Heating Equipment Overlandlord
Maintenance, Repairs,
Component Replacement
L. Air Conditioning/Ventilation Overlandlord
Equipment - Maintenance,
Repairs, Component
Replacement
M. Elevator Service Overlandlord
</TABLE>
In addition to the above designation, Overlandlord shall provide routine
maintenance to the Premises, to all glass in windows, doors and partitions
in which the Premises are located, and to all equipment and fixtures
leading to the Premises. Tenant shall promptly repair all damage to the
Premises, including Tenant's leasehold improvements, to their condition
immediately preceding such damage. Tenant shall maintain all portions of
the Premises in habitable condition during the lease term. Landlord shall
not be responsible for any repairs to the premises or equipment contained
therein except as provided herein.
11. FIXTURES. At the termination of this lease, Tenant shall be obligated to,
and shall, remove all its fixtures and furniture installed by Tenant;
and Tenant shall repair any damage to the walls, floors or ceilings
resulting from the removal of such fixtures. Tenant's obligation to
repair any such damage shall include the requirement to neatly fill in
or patch any holes left in floors, walls, or ceilings by such removal,
or in Tenant's discretion, to replace individual floor or ceiling
tiles, using reasonable efforts to match them in appearance.
12. SIGNS. Intentionally omitted.
13. COVENANT AGAINST LIENS. Tenant agrees not to permit any mechanics or other
lien to be placed against the Premises or the land or building where the
Premises are located. If any such lien is placed, however, Tenant will
promptly cause it to be removed.
14. LANDLORD'S REMEDIES. In the event of (1) the filing of a petition by or
against Tenant under the Bankruptcy Act; or (2) the appointment of a
receiver or trustee for Tenant or his property; or (3) the making by Tenant
of an assignment for the benefit of creditors; or (4) the nonpayment of the
rent and the continuance of such nonpayment for more than five (5) days
following Tenant's receipt of written notice thereof from Landlord; or (5)
the breach of any covenant in this lease, and the continuance of such
breach for more than twenty (20) days following Tenant's receipt of written
notice thereof from Landlord (except that if Tenant has commenced cure of
such breach within such twenty (20) day period and thereafter diligently
prosecutes same, then such twenty (20) day period shall be extended for
such reasonable additional time as Tenant needs to complete same), Landlord
shall have the option to terminate Tenant's right to possession of the
Premises effective upon the service of written demand therefore on Tenant;
and if Landlord so elects, but not otherwise, this lease shall terminate on
service of written notice thereof on Tenant. Notwithstanding anything
contained herein to the contrary, Landlord agrees not to exercise any
remedy to which it is entitled under this lease or by law in the event of
any default of Tenant, until Landlord shall have given tenant notice in
writing specifying wherein Tenant has made default, and Tenant shall have
failed to remedy such default within a period of Ten (1O) days after the
date of such notice. Upon termination of Tenant's right of possession as
aforesaid,
<PAGE> 4
whether this lease shall be terminated or not, Tenant agrees to surrender
possession immediately and hereby grants to Landlord full license to enter
into and upon said Premises, to take possession thereof with or without
process of law, and to remove Tenant or other who may be occupying the
Premises. Landlord may use such force in removing Tenant and other
occupiers as may reasonably be necessary and Landlord may repossess himself
of Premises, but said entry shall not constitute a trespass nor forcible
entry or detainer. The acceptance of rent, as it falls due or after any
knowledge of breach hereof by Tenant, shall not be construed as a waiver of
any right of Landlord or as an election not to proceed under the provisions
of this lease or to enforce any other remedies available to landlord. Any
holding over by Tenant shall constitute a month-to-month tenancy only at a
monthly rental equal to one and one half (1 1/2) times the BASE RENT
specified in Paragraph 3 of this lease. Tenant shall pay upon demand all
the Landlord's reasonable costs, including the reasonable fees of counsel,
incurred in enforcing Tenant's obligations hereunder.
15. NO RESERVATION OF PREMISES. Submission of this instrument for examination
does not constitute a reservation of or option for the Premises and this
instrument does not become effective as a lease or otherwise until fully
executed and delivered by both Landlord and Tenant and approved in writing
by Overlandlord.
16. NONDISTURBANCE. During the term of this lease, Tenant shall use the
Premises so that there is no noise, odor, vibration, heat gain or loss,
debris or obstruction that, violates the Overlease. If within fifteen (15)
days after notice from Landlord that any provision of this Nondisturbance
Clause is being violated by Tenant, Tenant does not end such violation, or
cause same to be ended, Landlord shall have the option to terminate
Tenant's right to possession of the leased Premises as provided in
Paragraph 14 hereof.
17. TENANT'S INSURANCE. During the term of this lease, Tenant shall provide and
keep in force for the benefit of Landlord and of Tenant, as their
respective interests may appear, general liability policy in standard form
protecting Landlord against any and all liability occasioned by accident
or disaster resulting in injury or loss to property or injury or death to
persons arising out of the use and occupancy of the Premises. Such policy
shall be written by a good and solvent insurance company in the minimum
amount of $500,000 per occurrence. Tenant must provide evidence of
insurance naming Landlord as additional insured via a certificate or copy
of the policy, which must include the insurer's agreement to provide
Landlord at least 30 days prior written notice of cancellation or
expiration. If Tenant carries a blanket liability policy or policies
protecting against accident or disaster at various locations, delivery by
Tenant to Landlord or a certificate issued by the insurance company
writing such policy stating that the Landlord is protected thereunder to
the extent hereinabove specified shall be deemed compliance by Tenant with
the foregoing requirements; however, the above mentioned 30 day notice
provision must be complied with.
Landlord shall carry similar insurance and shall maintain "all-risk"
property insurance upon the furniture and telephone equipment described in
Paragraph 19 hereof. Each of Landlord's and Tenant's insurance policies
shall provide for waiver of subrogation. Anything to the contrary contained
herein notwithstanding, each of Landlord and Tenant hereby waive and
release the other from and against any and all claims, causes in action
and/or expense for which such person is or would be insured by insurance
policies maintained or required to be maintained hereby (or otherwise
maintained by such person). In addition, Tenant shall have no liability to
Overlandlord or to Landlord for any matter which is
<PAGE> 5
customarily insured or insurable under policies of insurance comparable to
those typically carried by large commercial owners of properties similar to
the Property. Tenant shall be responsible for any increase or continued
increase in Landlord's insurance premiums resulting from any action and/or
expense due to Tenant's negligence.
18. SUCCESSORS. This lease shall benefit and bind the heirs, executors,
administrators, successors and assigns of both Landlord and Tenant.
19. TELEPHONE SYSTEM. Tenant shall be allowed the use of Landlord's existing
phone system and furniture for which tenant shall maintain and provide all
necessary repairs throughout the term. Ownership of said phone system and
furniture will be with Tenant and Tenant shall be allowed to remove said
phone system at the expiration of the lease term.
20. NOTICES. All notices under this lease shall be in writing and mailed by
registered or certified mail, or sent by other commercial courier or
overnight delivery service, in all such cases against receipt, addressed to
Tenant at 1667 K Street, N.W., Washington, D.C. 20006, Attention:
President, with a copy to Gary K. Bahena, Esq., 601 Thirteenth Street,
N.W., Suite 660 North, Washington, D.C. 20005, and to Landlord at 2700
Sanders Road, Prospect Heights, IL 60070, Attn: [Assistant Vice
President], Leasing, [&] Licensing and Contracts. Any such notice shall be
deemed given when received.
IN WITNESS WHEREOF, Landlord and Tenant have executed this lease as of
the day and year first above written.
WITNESS/ATTEST: LANDLORD
HOUSEHOLD BANK, f.s.b.
------------------------------
/S/ MARK CHRISTMAN By: /S/ P. D. SCHMIDT
- ----------------------------- -------------------------------------
Mark Christman, Assistant P. D. Schmidt, Authorized Agent
Secretary
WITNESS/ATTEST: TENANT
[SIG] PALMER NATIONAL BANCORP, INC.
- -----------------------------
By: /S/ WEBB C. HAYES, IV
-------------------------------------
WEBB C. HAYES, IV
<PAGE> 1
Exhibit 10 AO
LEASE AGREEMENT
BY AND BETWEEN
("LANDLORD")
AND
PALMER NATIONAL BANK
A ____________________ CORPORATION
("TENANT")
AT THE METROPOLITAN
OLD GEORGETOWN ROAD and WOODMONT AVENUE
BETHESDA, MARYLAND
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I PAGE
<S> <C>
REFERENCE PROVISIONS, DEFINITIONS AND EXHIBITS 1
SECTION 1.1. REFERENCE PROVISIONS 1
SECTION 1.2. DEFINITIONS 2
SECTION 1.3. EXHIBITS 2
ARTICLE II
PREMISES AND THE BUILDING 3
SECTION 2.1. DEMISE 3
SECTION 2.2. CHANGES TO BUILDING 3
SECTION 2.3. MEASUREMENT OF FLOOR SPACE OF THE PREMISES 3
ARTICLE III
TERM
SECTION 3.1. TERM 3
SECTION 3.2. SURRENDER OF PREMISES 3
SECTION 3.3. HOLDING OVER 3
SECTION 3.4. OPTION TERMS 4
ARTICLE IV
USE AND OPERATION OF THE PREMISES 4
SECTION 4.1. USE AND TRADE NAME 4
SECTION 4.2. CONTINUOUS OPERATION BY TENANT 4
SECTION 4.3. STORE HOURS 4
SECTION 4.4. ADDITIONAL OPERATIONAL COVENANTS 4
SECTION 4.5. SIGNS AND ADVERTISING 5
SECTION 4.6. TENANT'S USE OF EXTERIOR WALLS 5
SECTION 4.7. ATM FACILITY 5
SECTION 4.8. VAULT LOCATION 6
ARTICLE V
RENT 6
SECTION 5.1. RENT PAYABLE 6
SECTION 5.2. PAYMENT OF BASE RENT 6
SECTION 5.3. INTENTIONALLY DELETED 6
SECTION 5.4. INTENTIONALLY DELETED 6
SECTION 5.5. INTENTIONALLY DELETED 6
SECTION 5.6. INTENTIONALLY DELETED 6
SECTION 5.7. TAXES 6
SECTION 5.8. PAYMENT OF TAX RENT 6
SECTION 5.9. RENT FOR A PARTIAL MONTH 7
SECTION 5.10. RENT FOR A PARTIAL LEASE YEAR 7
SECTION 5.11. TAXES ON TENANT'S PERSONAL PROPERTY 7
ARTICLE VI
COMMON AREAS 7
SECTION 6.1. USE OF COMMON AREAS 7
SECTION 6.2. MANAGEMENT AND OPERATION OF COMMON AREAS 7
SECTION 6.3. "LANDLORD'S OPERATING COSTS" DEFINED 7
SECTION 6.4. TENANT'S PROPORTIONATE SHARE OF LANDLORD'S OPERATING COSTS 8
ARTICLE VII
UTILITIES 8
SECTION 7.1. UTILITY CHARGES 8
SECTION 7.2. DISCONTINUANCES AND INTERRUPTIONS OF SERVICE 8
ARTICLE VIII
INDEMNITY AND INSURANCE 9
SECTION 8.1. INDEMNITIES 9
SECTION 8.2. LANDLORD NOT RESPONSIBLE FOR ACTS OF OTHERS 9
SECTION 8.3. TENANT'S INSURANCE 9
SECTION 8.4. TENANT'S CONTRACTOR'S INSURANCE 9
SECTION 8.5. POLICY REQUIREMENTS 10
SECTION 8.6. INCREASE IN INSURANCE PREMIUMS 10
SECTION 8.7. WAIVER OF RIGHT OF RECOVERY 10
ARTICLE IX
CONSTRUCTION 10
SECTION 9.1. LANDLORD IMPROVEMENTS 10
SECTION 9.2. TENANT IMPROVEMENTS 10
SECTION 9.3. SCHEDULE OF PLAN SUBMISSION FOR INITIAL
TENANT IMPROVEMENTS 11
SECTION 9.4. INTENTIONALLY DELETED 11
SECTION 9.5. OWNERSHIP OF IMPROVEMENTS 11
SECTION 9.6. MECHANIC'S LIENS 11
SECTION 9.7. LANDLORD'S CONTRIBUTION TO TENANT IMPROVEMENTS 11
ARTICLE X
REPAIRS, MAINTENANCE, LANDLORD'S ACCESS AND ALTERATIONS 11
SECTION 10.1. REPAIRS BY LANDLORD 11
SECTION 10.2. ALTERATIONS, REPAIRS, MAINTENANCE AND DISPLAYS BY TENANT 12
SECTION 10.3. INSPECTIONS AND ACCESS BY LANDLORD 12
ARTICLE XI
CASUALTY 12
SECTION 11.1. RIGHT TO TERMINATE 12
SECTION 11.2. LANDLORD'S DUTY TO RECONSTRUCT 13
SECTION 11.3. TENANT'S DUTY TO RECONSTRUCT 13
SECTION 11.4. INSURANCE PROCEEDS 13
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ARTICLE XII
CONDEMNATION 13
SECTION 12.1. TAKING OF PREMISES 13
SECTION 12.2. TAKING OF BUILDING 13
SECTION 12.3. CONDEMNATION AWARD 13
ARTICLE XIII - INTENTIONALLY DELETED 13
ARTICLE XIV
SUBORDINATION AND ATTORNMENT 13
SECTION 14.1. SUBORDINATION 13
SECTION 14.2. MORTGAGEE'S UNILATERAL SUBORDINATION 14
SECTION 14.3. ATTORNMENT 14
SECTION 14.4. QUIET ENJOYMENT 14
SECTION 14.5. ESTOPPEL CERTIFICATE 14
SECTION 14.6. SUBLEASE ACKNOWLEDGEMENT AND
LIABILITY OF AIR RIGHTS LESSOR 14
ARTICLE XV
ASSIGNMENT AND SUBLETTING 14
SECTION 15.1. LANDLORD'S CONSENT REQUIRED 14
SECTION 15.2. RIGHT TO TERMINATE AND RECAPTURE 15
ARTICLE XVI
DEFAULT AND REMEDIES 15
SECTION 16.1. DEFAULT 15
SECTION 16.2. REMEDIES AND DAMAGES 16
SECTION 16.3. ASSIGNMENT IN BANKRUPTCY 16
SECTION 16.4. LEGAL EXPENSES 16
SECTION 16.5. REMEDIES CUMULATIVE 16
SECTION 16.6. WAIVER 16
ARTICLE XVII
MISCELLANEOUS PROVISIONS 17
SECTION 17.1. NOTICES 17
SECTION 17.2. SHORT FORM LEASE 17
SECTION 17.3. INTEREST AND ADMINISTRATIVE COSTS 17
SECTION 17.4. SUCCESSORS AND ASSIGNS 17
SECTION 17.5. LIMITATION ON RIGHT OF RECOVERY
AGAINST LANDLORD 17
SECTION 17.6. RELATIONSHIP OF THE PARTIES 17
SECTION 17.7. SECURITY DEPOSIT 17
SECTION 17.8. INTERPRETATION 17
SECTION 17.9. NO MODIFICATION 17
SECTION 17.10. SEVERABILITY 17
SECTION 17.11. TENANT LIABILITY 17
SECTION 17.12. BROKER'S COMMISSION 18
SECTION 17.13. OTHER TENANTS 18
SECTION 17.14. RULE AGAINST PERPETUITIES 18
SECTION 17.15. IRREVOCABLE OFFER, NO OPTION 18
SECTION 17.16. INABILITY TO PERFORM 18
SECTION 17.17. SURVIVAL 18
SECTION 17.18. LANDLORD'S SELF-HELP 18
SECTION 17.19. DUE AUTHORIZATION 18
SECTION 17-20. CONFIDENTIALITY 18
SECTION 17.21. HAZARDOUS MATERIALS 18
SECTION 17.22. TENANT'S EXCLUSIVE 19
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STANDARD BUILDING LEASE AGREEMENT
This Lease Agreement (the "Lease") is made as of the _____ day of
________, 1996 by and between the _______________________________ ("Landlord"),
and PALMER NATIONAL BANK, a _______________________________ corporation
("Tenant").
ARTICLE I
REFERENCE PROVISIONS, DEFINITIONS AND EXHIBITS
As used in this Lease, the following terms shall have the meanings set forth in
Sections 1.1 and 1.2 below.
SECTION 1.1. REFERENCE PROVISIONS.
A. Premises: the "cross-hatched" space designated on the lease plan
attached as Exhibit A containing a total floor space of approximately
4,195 square feet to be definitively established pursuant to the procedure set
forth in Section 2.3 and commonly known as 7626 Old Georgetown Road, Bethesda,
Maryland 20814.
Commencing on the Commencement Date, all items of Rent which this Lease
expressly states are calculated on a per square foot basis, including, but not
limited to, Tax Rent, and Tenant's Proportionate Share of Landlord's Operating
costs shall be calculated on the basis of the Floor Space of the Premises (as
defined in Section 2.3 below).
B. Term: Ten (10) Lease Years (as defined in Section 1.2(G) below).
C. Commencement Date: one hundred twenty (120) days from the Possession
Date, subject to Section 17.16.
D. Termination Date: the last day of the tenth (10th) Lease Year, or if
the Term is sooner terminated pursuant to the provisions of this Lease, the
effective date of such termination.
E. Base Rent: $138,435/yr; $11,536.25/mo
(i) Commencing on the Commencement Date and continuing through
the last day of the second (2nd) Lease Year: $33.00 times the Floor Space of the
Premises per annum;
(ii) Commencing on the first (1st) day of the third (3rd)
Lease Year and continuing through the last day of the fourth (4th) Lease Year:
$35.00 times the Floor Space of the Premises per annum;
(iii) Commencing on the first (1st) day of the fifth (5th)
Lease Year and continuing through the last day of the sixty (6th) Lease Year:
$37.14 times the Floor Space of the Premises per annum;
(iv) Commencing on the first (1st) day of the seventh (7th)
Lease Year and continuing through the last day of the eight (8th) Lease Year:
$39.40 times the Floor Space of the Premises per annum; and
(v) Commencing on the first (1st) day of the ninth (9th) Lease
Year and continuing through the last day of the tenth (10th) Lease Year: $41.80
times the Floor Space of the Premises per annum.
F. INTENTIONALLY DELETED
G. INTENTIONALLY DELETED
H. Security Deposit: none
I. Permitted Use: As a retail bank branch office and all normal and
customary ancillary uses.
J. Tenant Trade Name: Palmer National Bank, and no other name, subject
to the provisions of Section 4.1 below.
K. Notice Address:
TO LANDLORD: Legum & Norman
Manager
WITH A COPY TO: Kenneth B. Tecler
Chen, Walsh, Tecler & McCabe
200A Monroe St., Suite 300
Rockville, Md. 20850
TO TENANT: Dennis Danko
Assistant Vice President
George Mason Bank
4221 Walney Road
Chantilly, Va. 22021
L. Building: as shown on the attached Exhibit A, to be known as The
Metropolitan, which is located in Bethesda, Maryland.
M. Possession Date: Tender of possession of the Premises pursuant to
this Lease shall be deemed to have occurred and been accepted on the date set
forth in the Possession Notice (as defined in Section 9.1) and such date shall
constitute the Possession Date for purposes of this Lease. If the Possession
Date is not July 1, 1996, the Possession Date shall be the date that is twenty
(20) days after the Possession Notice (e.g. July 5, 1996 if the Possession
Notice is given on June 25, 1996). The Possession Date shall not be deemed to
have occurred unless the Landlord shall have completed the Building Improvements
contemplated in Section 9.1, including without limitation, the construction of
the demising walls separating the Premises from the other portions of the
Building and the delivery of electricity and water to the Premises in sufficient
capacity to accommodate normal office operations. If water and electricity are
not available to the Premises as of the Possession Date or the water supply
necessary for connection to the HVAC system is not available to the Premises
within thirty (30) days after the Possession Date, the Commencement Date shall
be delayed on a day for day basis until available.
N. Option Term: Three (3) additional terms of five (5) years each on
the terms and conditions
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as provided in the Lease and exercised pursuant to Section 3.4.
O. Guarantors: Mason Holding Corporation, a Virginia corporation.
SECTION 1.2. DEFINITIONS.
A. Common Areas: all improvements, equipment, signs and areas (as the
same may be enlarged, reduced, replaced, removed or otherwise altered by
Landlord), from time to time, made available by Landlord for the non-exclusive
use or benefit of Landlord, Tenant and other tenants, occupants and users of the
Building, and their respective employees, agents, subtenants, concessionaires,
licensees, customers and invitees, or any of them, which may include (but shall
not be deemed a representation as to their availability) the sidewalks,
landscaped areas, service corridors, loading dock, roofs, stairs, ramps, and
other similar areas and improvements, all as Landlord shall, from time to time,
deem appropriate (in its reasonable business judgment).
B. Concessionaire: any person conducting any business in the Premises
by, under or through Tenant under any sublease, concession or license from
Tenant, or otherwise, whether or not the same was authorized under the
provisions of this Lease.
C. Floor Space: the number of square feet in the Premises (as set forth
in Section 1.1 (A)) or in other space in the Building, shall be established
according to Section 2.3.
D. Interest: one (1) percentage point above the rate of interest (the
"Prime Rate") then most recently publicly announced by NationsBank as its "prime
rate" or "base rate" as the case may be. Interest shall be adjusted on the first
day of each month immediately following a month in which a change in such Prime
Rate occurs and such adjustment shall be based upon the average Prime Rate for
such immediately preceding month. If accrual or payment of such interest should
be unlawful, then interest shall be computed at the maximum legal rate.
E. Landlord Related Parties: Landlord, its principals, beneficiaries,
partners, officers, directors, agents, employees and any Mortgagee(s) (as
defined in Section 14.1 below).
F. Laws: all federal, state, county and local governmental and
municipal laws, statutes, ordinances, rules, regulations, codes, decrees, orders
and other such requirements, applicable equitable remedies and decisions by
courts in cases where such decisions are binding precedents in the state or
commonwealth in which the Building is located, and decisions of federal courts
applying the Laws of such state or commonwealth, at the time in question.
G. Lease Year or Partial Lease Year: a period of twelve (12) consecutive
calendar months, the first Lease Year commencing on the Commencement Date, if
the Commencement Date is the first day of a calendar month, and otherwise on the
first day of the first full calendar month following the Commencement Date. Each
succeeding Lease Year shall commence on the anniversary date of the first Lease
Year. Any portion of the Term which is less than a Lease Year shall be deemed a
Partial Lease Year, except that if the Commencement Date occurs on a date other
than the first day of a calendar month, then the period commencing on the
Commencement Date and ending on the last day of the calendar month in which the
Commencement Date occurs shall be included in the first Lease Year.
H. Leasing Agent: the leasing agent of the Building as designated from
time to time by Landlord. The Leasing Agent of the Building is currently Smithy
Braedon * Oncor.
I. Managing Agent: the managing agent of the Building as designated
from time to time by Landlord and currently Legum & Norman. If Landlord elects
to change the Managing Agent of the Building, Landlord will notify Tenant in
writing of such change.
J. Owner: the person(s) or entity(ies) that holds legal title (whether
fee or leasehold) to the Building or the portion thereof in which the Premises
are located. The terms "Owner" and "Landlord" have the same meanings for the
purposes of this Lease and may be used interchangeably.
K. Rent: all Base Rent and Additional Rent.
L. Additional Rent: all sums and charges payable by Tenant to Landlord
in addition to the Base Rent including but not limited to Tax Rent and Tenant's
Proportionate Share of Landlord's Operating Costs whether or not the same shall
be designated as such. Landlord shall have the same remedies for Tenant's
failure to pay Additional Rent as for Tenant's failure to pay Base Rent.
M. Store Space: the aggregate floor space of all commercial premises in
the Building available for use by a tenant, whether occupied or vacant.
N. Tenant Related Parties: Tenant, its principals, beneficiaries,
officers, directors, agents, assignees, Concessionaires, agents, contractors,
employees, or invitees.
SECTION 1.3. EXHIBITS. The exhibits and manuals listed in this Section 1.3 are
attached to this Lease and are hereby incorporated in and made a part of this
Lease.
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Exhibit A Site Plan indicating Retail Area of Building
Exhibit B Legal Description
Exhibit C-1 Landlord's Improvements and
Air Rights Drawings
Exhibit C-2 Tenant's Improvements
Exhibit D Sign Criteria
Exhibit E Rules and Regulations
Exhibit F-1 Form of Subordination, Non-Disturbance and
Attornment Agreement to Mortgage
Exhibit F-2 Form of Subordination, Non-Disturbance and
Attornment Agreement to Air Rights Lease
Exhibit G Air Rights Lease
Exhibit H Method of Measurement for Floor Space
Exhibit I ATM Plan
Exhibit J Operating Cost Formula
Exhibit K Guaranty
Exhibits L-1 and L-2 Rear Entrance Design
Exhibits L-3 and L-4 Lobby Entrance Design
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ARTICLE II
PREMISES AND THE BUILDING
SECTION 2.1. DEMISE. Landlord, in consideration of the Rent to be paid and the
other conditions and covenants to be satisfied and performed by Tenant, demises
and leases to Tenant, and Tenant leases and takes from Landlord, the Premises,
each upon the terms and conditions of this Lease; provided, however, that in
addition to other rights provided to or reserved by Landlord in this Lease or
otherwise, Landlord shall have (i) the exclusive right to use both the exterior
faces of the exterior walls of the Premises, subject to Tenant's signage rights
set forth herein and (ii) the right to install, maintain, use, repair and
replace pipes, ducts, cables, conduits, vents, utility lines and wires to, in,
through, above and below the Premises as and to the extent that Landlord, may
from time to time deem appropriate (in its reasonable business judgment) for the
proper operation and maintenance of the Building. The Floor Space of the
Premises, and Tenants obligation to pay Rent and Additional Rent, will be
reduced proportionately to the floor area used to accommodate any such items,
including any encasements thereof. Landlord shall encase such pipes, ducts, etc.
with appropriate drywall enclosures consistent with the quality of Tenant's
build out. Landlord shall use its reasonable efforts to locate said pipes,
ducts, cables, conduits, plumbing vents, utility lines and/or wires in non-sales
areas of the Premises, however, to the extent any of the same are located within
sales areas of the Premises, they shall not be visible to the public.
SECTION 2.2. CHANGES TO BUILDING. Exhibit A sets forth the general layout of the
Building but is not, and shall not be deemed to be, a warranty, representation
or agreement on the part of Landlord that all or any part of the Building is,
will be, or will continue to be, configured as indicated on Exhibit A. In
addition to other rights provided to or reserved by Landlord under this Lease,
Landlord hereby reserves the right, at any time and from time to time, to (i)
make alterations or additions to, build additional stories on, and demolish or
otherwise change, all or any part of any buildings or other improvement in or
about the Building, and build other buildings or improvements in or about the
Building; (ii) operate the remainder of the area adjacent and contiguous to the
Building as a residential rental facility; and (iii) convey portions of the
Building to others or withdraw portions from the Building. Tenant consents to
the performance of all work deemed appropriate by Landlord to accomplish any of
the foregoing, and any inconvenience caused thereby; provided, however, that
Landlord agrees at all times to use reasonable efforts to minimize the
interference with Tenant's business in the Premises. The design and performance
of such work shall be in the sole discretion of Landlord. None of the Landlord
Related Parties (as defined in Section 1.2(E) above) shall be subject to any
liability as a result of any change in the Building, nor shall the same, in and
of itself, entitle Tenant to any compensation or diminution of Rent, or entitle
Tenant to terminate this Lease or constitute an actual or constructive eviction.
Notwithstanding anything to the contrary contained in this Lease, Landlord shall
not change the dimensions or location of the Premises or materially obstruct
access to or visibility of the Premises without Tenant's consent (which consent
shall not be unreasonably withheld or delayed), unless Landlord is required to
do any of the foregoing by reason of any Law (as defined in Section 1.2(F)
above) as a result of any cause beyond the reasonable control of Landlord, or in
accordance with the provisions of Articles XI or XII below or unless such access
and/or visibility is temporarily affected as a result of repairs, remodeling,
redevelopment, renovation or other construction to the Building. Landlord shall
use due diligence to complete all such repairs, remodeling, renovations,
redevelopment or other construction and restore visibility of and access to the
Premises as soon as reasonably practicable.
SECTION 2.3. MEASUREMENT OF FLOOR SPACE OF THE PREMISES. Upon substantial
completion by Tenant of the initial Tenant improvements (as defined in Section
9.2), Landlord's architect shall measure the square footage of the Premises.
Landlord shall deliver written notice (the "Measurement Notice") to Tenant
specifying the square footage so measured which square footage shall be deemed
the "Floor Space of the Premises". The Landlord's measure of the Floor Space
shall be accompanied by a certificate of the Landlord's architect certifying to
Tenant that the Floor Space is a correct measure of the rentable area of the
Premises based on the standards of measurement attached hereto as Exhibit H.
Tenant shall have the right at any time, at Tenant's expense (except as provided
in the next sentence), to cause its own architect to measure the Floor Space of
the Premises based on the same standards of measure. If the Tenant's measure
shows a discrepancy of more than five percent (5%), as compared to the
Landlord's measure, the Landlord shall pay for the Tenant's measure. If the
Tenant's measure shows any discrepancy, up or down, the Floor Space will be
adjusted, subject to Landlord's right, at Landlord's expense, to verify the
discrepancy, and the Rent will be adjusted accordingly, retroactive to the
Commencement Date. The amount of the adjustment, if Rent shall be retroactively
decreased, will be credited against the Tenant's payments of Base Rent next
coming due. If the Rent is adjusted upward retroactively, the difference shall
be due in a lump sum within thirty (30) days after verification of the measure.
ARTICLE III
TERM
SECTION 3.1. TERM.
A. The Term shall commence at 12:00 A.M. on the Commencement Date and
shall end at 11:59 P.M. on the Termination Date. Tenant and Landlord shall
confirm the Commencement Date in writing.
B. This Lease is contingent on Tenant obtaining the approval of the
United States Office of the Comptroller of the Currency and other applicable
regulatory agencies which Tenant agrees to pursue diligently. In the event
Tenant has not notified Landlord in writing of the denial of approval within
ninety (90) days of execution hereof, this Lease shall be deemed to be in full
force and effect.
SECTION 3.2. SURRENDER OF PREMISES. On the Termination Date (whether by lapse of
time, casualty or otherwise), Tenant shall quit and surrender the Premises in
accordance with the terms of this Lease and in good order, condition and repair,
ordinary wear and tear and damage caused by fire or other casualty excepted.
Tenant shall also deliver all keys for the Premises as specified by Landlord,
and inform Landlord of all combinations on locks, safes and any vaults in the
Premises.
SECTION 3.3. HOLDING OVER.
A. This Lease shall terminate on the Termination Date pursuant to the
terms of this Lease without the necessity of notice from either Landlord or
Tenant. Tenant's occupancy subsequent to the Termination Date, whether or not
with the consent of Landlord, shall be deemed to be that of a tenancy at
sufferance, subject to all the terms, covenants, and conditions of this Lease,
except that for each day Tenant holds over the Rent shall be one and one-half
(1 1/2) times the Base Rent payable in the last year of the Term divided by
three hundred sixty-five (365) ("Holdover Rent"). No extension or renewal of
this Lease shall be deemed to have occurred by any holding over.
B. In addition to paying to Landlord the Holdover Rent, if Tenant fails
to surrender the Premises to Landlord on the Termination Date as required by
this Lease, Tenant shall indemnify, defend (with
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counsel reasonably acceptable to Landlord) and hold the Landlord Related Parties
harmless from and against all reasonably foreseeable loss, liability, damages
and expense (including, without limitation, attorneys' fees) sustained or
incurred by any of the Landlord Related Parties on account of or resulting from
such failure, including, without limitation, claims made by any succeeding
tenant of all or any part of the Premises.
C. Notwithstanding anything contained herein to the contrary, if
Landlord and Tenant elect to negotiate a renewal of this Lease or a new Lease
after the expiration of any and all extension periods, during the period of
their negotiations occurring after the Termination Date (as the same may be
extended pursuant to any extension periods), Tenant shall continue to pay the
Rent payable in the last Lease Year or Partial Lease Year of the Term, provided
that any annual or other periodic escalation of Rent set forth in the Lease
shall continue during the Holdover period as if said Holdover period was part of
the original Term. Notwithstanding anything to the contrary contained herein,
neither Landlord nor Tenant shall have any obligation to commence to negotiate,
or to continue negotiation of, a renewal of this Lease or a new lease covering
the Premises and in the event that such negotiation is not commenced or such
negotiation is discontinued at any time by either party in its sole discretion,
Tenant shall be liable to pay Holdover Rent retroactive to the first day of the
Holdover period as aforesaid.
Section 3.4 OPTION TERMS. As tong as Tenant is not in default hereunder, Tenant
shall have the option to renew this Lease for an additional term of five (5)
years (the "First Option Term") and a second additional term of five (5) years
(the "Second Option Term") and a third additional term of five (5) years (the
"Third Option Term") by giving Lessor at least one hundred eighty (180) days
notice in writing prior to the end of the Lease Term or the First Option term or
the Second Option Term as the case may be, of its intent to exercise such
option. During the Option Term all provisions of this Lease shall remain in
effect including the terms for adjustment of the Basic Rent and the Termination
Date shall be adjusted to the last day of the fifth (5th) Lease Year of the
applicable Option Term.
(i) The Base Rent for the first year in each Option Term shall be an
amount equal to (a) Thirty Three Dollars ($33.00) times the Floor Space of the
Premises multiplied by (b) eighty percent (80%) of a fraction, the numerator of
which is the most recently published CPI Index as of the date that is one
hundred eighty (180) days prior to the commencement of the Option and the
denominator of which is the most recently published CPI Index as of the
Commencement Date. Base Rent during each Option Term shall be increased as of
the third (3rd) and fifth (5th) anniversaries of the first day of the Option
Term by an amount equal to 6.09% of Base Rent for the immediately preceding two
(2) year period, and shall remain in effect until the next adjustment (or the
termination of the Option Term, as applicable). The "CPI Index" shall mean
United States Bureau of Labor Statistics CPI for Urban Wage Earners and Clerical
Workers (CPI-W) for Washington D.C. SMSA (1967 = 100).
ARTICLE IV
USE AND OPERATION OF THE PREMISES
SECTION 4.1. USE AND TRADE NAME. Tenant shall use the Premises solely for the
Permitted Use and for no other purpose, and shall operate its business on the
Premises solely under the Tenant Trade Name and under no other name; provided,
however, Tenant may change its Trade Name to George Mason Bank or any other
Trade Name without Landlord's written consent provided: (i) the use of the trade
name proposed shall be consistent with the trade name used by Tenant or any
related entity in its banking operations in other locations, (ii) Tenant shall
install new internally illuminated storefront signage with Tenant's new trade
name and Tenant shall make all necessary modifications to the sign band and/or
the bulkhead of the Premises at its sole cost and expense and in accordance
with Landlord's specifications and design criteria for the Building and Exhibit
D attached hereto; (iii) Tenant shall reimburse Landlord the reasonable expenses
incurred by Landlord in modifying any directories that reference Tenant's store
to reflect the new Trade Name; and (iv) Tenant notifies Landlord of its change
of Trade Name at least sixty (60) days prior to said change. On or before the
thirtieth (30th) day after Tenant changes its trade name, Tenant shall submit
drawings to Landlord for Landlord's review and approval prior to the
installation of the sign and/or modification of the sign band and/or bulkhead.
SECTION 4.2. CONTINUOUS OPERATION BY TENANT.
A. Tenant shall conduct its business on the Premises at all times
consistent with reputable business standards and practices and operate the
entire Premises continuously and uninterruptedly during all of the hours set
forth below, during the entire Term in accordance with the terms of this Lease.
SECTION 4.3. STORE HOURS. Tenant shall conduct its business in the Premises
during normal banking hours.
SECTION 4.4. ADDITIONAL OPERATIONAL COVENANTS. Tenant covenants and agrees, at
all times during the Term and such other times as Tenant occupies the Premises
or any part thereof, to comply, at its own cost and expense, with the following:
A. Any handling of freight or deliveries to or from the Premises shall
be made in a manner which is consistent with practices normally utilized in a
first class retail facility located within a multi-family high rise residential
building and only at such times, in the areas and through the entrances and
exits designated by Landlord.
B. All garbage and other refuse shall be kept inside the Premises in
the kind of container specified by Landlord and shall be placed in the manner
and at the times and places specified by Landlord. If Landlord elects to furnish
or designate such service for the removal and/or recycling of garbage and other
refuse, Tenant shall use the service furnished or designated by Landlord, but
Tenant shall not be obligated to pay more for such service than the prevailing
competitive rates charged by reputable, independent trash removal and/or
recycling contractors for the same service on a direct and individual basis. If
furnished or billed by Landlord, Tenant shall pay for such service monthly as
additional rent. Landlord may also provide trash compactors for compacting
Tenant's trash and add the cost thereof to Landlord's Operating Costs as defined
in Section 6.3. If Landlord does not provide such service, Tenant shall be
solely responsible for the removal (including any recycling required by any
applicable Law) of all garbage and other refuse from the Premises and shall pay
promptly all charges therefor.
C. Tenant shall not (i) suffer, allow or permit any vibration, noise,
odor or flashing or bright light to emanate from the Premises; (ii) paint or
cause to be displayed, painted or placed, any handbills, bumper stickers or
other advertising devices on any vehicle(s) parked in the parking area(s) of the
Building, whether belonging to Tenant, its employees, or any other person(s);
(iii) solicit business or distribute, or cause to be distributed, in the Common
Areas any handbills, promotional materials or other advertising; (iv) conduct or
permit any other activities in the Premises that might constitute a nuisance;
(v) permit the parking of vehicles so as to interfere with the use of any
driveway, corridor, walkway, parking area, mall or any other Common Area; or
(vi) use or occupy the Premises or do or permit anything to
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be done therein which in any manner might reasonably be expected to cause injury
or damage in or about the Building.
D. Tenant shall use and allow to be used all plumbing within the
Premises and the Building only for the purpose for which it is designed, and no
foreign substance of any kind shall be thrown therein. The expense of any
breakage, stoppage or damage resulting from a violation of this provision shall
be paid for by Tenant upon demand.
E. Tenant shall contract for and utilize termite and pest extermination
services for the Premises as necessary.
F. Tenant shall keep any display windows or signs in or on the Premises
well lighted during, at a minimum, all such hours and days that the Building is
lighted by Landlord.
G. Tenant shall contract for and utilize a window cleaning service and
maintain the windows in the Premises in a reasonably clean condition and in a
manner consistent with a first class retail facility. If Tenant fails to keep
its windows clean, Landlord may cause the same to be kept clean (through a
service or otherwise) and Tenant shall pay the cost thereof upon demand.
I. Tenant shall pay before delinquency all fees and charges and shall
maintain all licenses and permits required for Tenant to lawfully use the
Premises as contemplated by this Lease.
J. Tenant shall not conduct or permit to be conducted any auction,
fire, "going out of business" or similar type of sale; provided, however, that
this provision shall not restrict the absolute freedom (as between Landlord and
Tenant) of Tenant to determine its own selling prices nor shall it preclude
periodic, seasonal or promotional sales held in the ordinary course of business.
K. Tenant shall not place a load on any floor in the Building exceeding
the load which it was designed to carry, nor shall Tenant install, operate or
maintain thereon any heavy item or equipment except in such manner as to achieve
a proper distribution of weight.
L. Tenant shall not install, operate or maintain in the Premises or
in any other area of the Building any electrical equipment which does not bear
the Underwriters Laboratories seal of approval, or its equivalent, or which
would overload the electrical system or any part thereof beyond its capacity for
proper, efficient and safe operation as determined by Landlord (in its
reasonable business judgment), taking into consideration the overall electrical
system and the present and future requirements therefor in the Building.
M. To the extent required by Landlord (in its reasonable business
judgment), or any applicable Law, Tenant shall provide sound barriers for all
mechanical systems installed by Tenant and serving the Premises.
N. Tenant shall not store, display, sell, or distribute any dangerous
materials without the prior written consent of Landlord.
0. Tenant shall not sell, distribute or display any item or provide any
service in any manner which, in Landlord's good faith judgment, is inconsistent
with the quality of operation of the Building or may tend to injure or detract
from the moral character or image of the Building within the community. Without
limiting the generality of the foregoing, Tenant shall not permit any "adult"
entertainment or nudity in the Premises and shall not sell, distribute or
display any paraphernalia commonly used in the use or ingestion of illicit
drugs, or any x-rated, pornographic or so-called "adult" newspaper, book,
magazine, film, picture, video tape, video disk, or other similar representation
or merchandise of any kind.
P. Tenant shall comply with and shall cause the Premises to comply with
all Laws affecting the Premises or any part or the use thereof.
Q. Tenant shall comply with and observe all other reasonable rules and
regulations established by Landlord, from time to time, provided such rules and
regulations shall be uniformly and non-discriminatorily applicable to all other
similarly situated Store Space tenants. (Exhibit E)
SECTION 4.5. SIGNS AND ADVERTISING. Tenant shall not place or permit to be
placed on the exterior of the Premises or the door, window or roof, any sign,
decoration, lettering or advertising matter visible from outside the Premises
without Landlord's prior written approval, except that Tenant may utilize such
material within the Premises on a temporary basis (collectively, the "Temporary
Signs") to advertise special sales or promotional events without Landlord's
approval provided that such Temporary Signs are professionally made, in good
taste and not taped to any window of the Premises. Tenant may also utilize
tastefully designed and professionally prepared lettering display, which may be
affixed to the windows. Tenant shall submit to Landlord reasonably detailed
drawings of its proposed signs (other than Temporary Signs) for review and
approval by Landlord prior to utilizing same. All signs, awnings, canopies,
decorations, lettering, advertising matter or other items used by Tenant shall
be insured and maintained at all times by Tenant in good condition, operating
order and repair and shall be in accordance with the sign criteria set forth on
Exhibit D attached. Flashing signs are prohibited. Tenant shall install one
internally illuminated, individually lettered sign or other type of sign as
specified by Landlord above the storefront of the Premises and professionally
lettered name signs on its service doors both in accordance with plans and
specifications therefor approved by Landlord.
Landlord shall have the right, after twenty-four (24) hours prior
written notice to Tenant and without any liability for damage to the Premises
reasonably caused thereby, to remove any items displayed or affixed in or to the
Premises which Landlord determines (in its reasonable business judgment) to be
in violation of the provisions of this Section 4.5.
For a period of ninety (90) days following the Commencement Date,
Landlord shall permit Tenant to utilize a banner with dimensions of 5' by 26.5'
on the exterior of the Building at the intersection of Woodmont Avenue and Old
Georgetown Road advertising the opening of the Bank. The sign shall be in
accordance with all Montgomery County sign ordinances and standards and shall
not obstruct passage or visibility of other facilities in the Building.
SECTION 4.6. TENANT'S USE OF EXTERIOR WALLS. No radio or television aerial or
other device shall be erected above or on exterior walls of the Premises or the
building in which the Premises are located without first obtaining Landlord's
written consent.
SECTION 4.7. ATM FACILITY. Subject to review and approval of plans submitted by
Tenant to Landlord, Tenant shall be permitted to install an ATM Facility, at its
cost, in the Premises with exterior access as shown on
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Exhibit A. Any costs to modify the Common Areas, including architectural, design
and construction expenses, to accept the ATM Facility shall be paid by Tenant.
The ATM Facility location shall not unreasonably interfere with use of the
Common Areas by pedestrians and Landlord shall have no responsibility for
security therefor except as may otherwise be provided herein. Landlord approves
the location of the ATM and conceptual plan attached as Exhibit I.
SECTION 4.8. VAULT LOCATION. Subject to review and approval of the plans
submitted by Tenant to Landlord, which approval shall not be unreasonably
withheld, conditioned or delayed, Tenant shall be permitted to install a bank
vault, at its cost in the Premises. The vault shall not be located in a manner
to be of such weight as to exceed the loads which the floor in the building is
designed to carry and shall not otherwise unreasonably interfere with operations
of the building by Landlord.
ARTICLE V
RENT
SECTION 5.1. RENT PAYABLE.
A. Tenant shall pay the Base Rent payable under this Lease to Landlord,
without prior demand therefor or any setoff or deduction whatsoever, at the
times set forth in this Lease in lawful money of the United States, at the place
designated from time to time by Landlord by notice given to Tenant. Unless
another time shall be expressly provided for payment, Additional Rent shall be
due and payable within ten (10) days after demand or together with the next
succeeding installment of Base Rent, whichever shall first occur. Tenant's
covenant to pay Rent shall be independent of every other covenant set forth in
this Lease. Tenant shall also pay to Landlord all applicable sales or other
taxes which may be imposed on any item of Rent at the same time as such item of
Rent is due and payable to Landlord (excluding income and franchise taxes
applying generally to Landlord, construction impact taxes, and transfer and
recording fees and taxes). In addition to constituting a default under this
Lease, if Tenant shall fail to make any payment of Rent when due, Tenant shall
pay a late charge of One Hundred Dollars ($100.00) to reimburse Landlord for its
additional administrative costs in processing such payment. Unless Landlord
notifies Tenant otherwise, all Rent payments shall be made payable and sent to:
Legum and Norman Managing Agent.
B. Any payment by Tenant or acceptance by Landlord of a lesser amount
than shall be due from Tenant to Landlord shall be treated as payment on
account. The acceptance by Landlord of a check for a lesser amount with an
endorsement or statement thereon or in any letter accompanying such check, that
such lesser amount is payment in full shall be given no effect, and Landlord may
accept such check without prejudice to any other rights or remedies which
Landlord may have against Tenant.
SECTION 5.2. PAYMENT OF BASE RENT. Tenant shall pay to Landlord the Base Rent
provided in Section 1.1 (E), in equal monthly installments, in advance,
commencing on the Commencement Date and on the first day of each and every
calendar month thereafter throughout the Term; provided, however Tenant shall be
entitled to a rent abatement of one-half (1/2) of the Base Rent on the first six
(6) monthly installments due under this Lease.
SECTION 5.3. INTENTIONALLY DELETED.
SECTION 5.4. INTENTIONALLY DELETED.
SECTION 5.5. INTENTIONALLY DELETED.
SECTION 5.6. INTENTIONALLY DELETED.
SECTION 5.7. TAXES. The term "Taxes" shall mean all federal, state, local
governmental, special district and special service area taxes and assessments,
exactions, (including, without limitation, lease, rent or occupancy taxes)
including any payment in lieu thereof and other governmental charges and levies,
general and special, ordinary and extraordinary, unforeseen as well as foreseen
of any kind and nature (including interest thereon whenever the same may be
payable in installments) which Landlord shall pay or become obligated to pay or
which are or shall become levied, due and payable or liens upon, assessed
directly or indirectly against (of fairly allocable to) the Store Space in the
Building (or any of the rents received therefrom) arising out of the use,
occupancy, ownership, leasing, management, repair, replacement or operation of
the Building, any part thereof, appurtenance thereto or property, fixtures or
equipment therein imposed by any authority having jurisdiction over the Building
or any part thereof, but excluding transfer and recordation taxes or taxes
related to construction of the Building, if any, in the amount billed and
payable immediately prior to the date the same are delinquent together with the
costs (including, without limitation, reasonable attorneys' fees) of any
negotiation, contest or appeal pursued by Landlord to reduce or prevent an
increase in any portion of such Taxes (collectively, a "Tax Appeal"), regardless
of whether any reduction or limitation is obtained, and all of Landlord's
administrative costs with respect to a Tax Appeal, all of which shall arise
during the Term or which shall be attributable to the period included in the
Term. No inheritance, estate, franchise, corporation, income or profit tax that
is or may be imposed upon Landlord personally shall be deemed to be included in
"Taxes". Notwithstanding anything contained herein to the contrary, Tenant's
obligation hereunder to reimburse Landlord for payment of Taxes shall not
include penalties imposed for late payment of Taxes.
SECTION 5.8. PAYMENT OF TAX RENT.
A. Tenant's proportionate share of Taxes (the "Tax Rent") for each Tax
Year (as hereinafter defined) shall be computed by multiplying the amount of the
Taxes, by a fraction, the numerator of which shall be the Floor Space of the
Premises and the Denominator of which shall be the floor space of the Store
Space (excluding the Floor Space of any Separately Assessed Tenants as
hereinafter defined). "Separately Assessed Tenants" shall mean any tenant or
group of tenants (excluding Tenant) whose premises within the Building are
separately assessed and included on a separate tax bill and who is or are
obligated to pay the entire amount of such tax bill directly to the taxing
authorities or to Landlord. The term "Tax Year" means each twelve (12) month
period established as the real estate tax year by the taxing authorities having
jurisdiction over the Building.
B. Tax Rent shall be paid by Tenant in equal monthly installments in
such amounts as are reasonably estimated and billed by Landlord for each Tax
Year during the Term, with the first installment being due on the Commencement
Date and each succeeding installment being due on the first day of each calendar
month thereafter. If at any time during a Tax Year (or after a Tax Year if the
final amount of the Taxes has not been determined) it shall appear that Landlord
has underestimated the Tax Rent for such Tax Year, Landlord may adjust the
amount of the monthly installments of Tax Rent and bill Tenant for any
deficiency which may have accrued during such Tax Year. After Landlord's receipt
of the final tax bills for each Tax Year, Landlord shall notify Tenant of the
amount of Taxes for the Tax Year in question and the
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amount of the Tax Rent for such Tax Year. Any overpayment or deficiency in the
Tax Rent for such Tax Year shall be adjusted between Landlord and Tenant as
follows: Tenant shall pay Landlord or Landlord shall credit to Tenant's account
(or, if such adjustment is at the end of the Term, pay Tenant), as the case may
be, within thirty (30) days after the aforesaid notification to Tenant, the
amount of any such excess or deficiency of Tax Rent paid or payable by Tenant.
SECTION 5.9. RENT FOR A PARTIAL MONTH. For any portion of a calendar month
included at the beginning or end of the Term, Tenant shall pay 1/30th of each
monthly installment of Rent for each day of such portion in advance at the
beginning of such portion.
SECTION 5.10. RENT FOR A PARTIAL LEASE YEAR. During any Partial Lease Year for
each item of Rent which is calculated on an annual basis but payable in monthly
installments (such as, but not limited to, Marketing Fund Dues), Tenant shall
pay an amount equal to the product arrived at by multiplying the annual amount
of such item of Rent payable for the first full Lease Year, in the case of a
Partial Lease Year at the beginning of the Term, or for the last full Lease
Year, in the case of a Partial Lease Year at the end of the Term, by a fraction,
the numerator of which shall be the number of days in the Partial Lease Year and
the denominator of which shall be 360.
SECTION 5.11. TAXES ON TENANT'S PERSONAL PROPERTY. If any such tax, excise on
rents or other imposition, (other than Landlord's ordinary income taxes or
franchise taxes) however described, is levied or assessed by any taxing
authority on account of Tenant's interest in this Lease, Landlord's receivables,
the Rent, Tenant's inventory, the Leasehold Improvements, any Tenant Property,
or if any other taxes are imposed upon this Lease, Tenant's right to occupy the
Premises, Tenant's investment or business operation in the Premises (including,
without Limitation, any and all documentary stamps or similar taxes, transfer or
recordation taxes for the sale or lease of the Premises assessed upon this Lease
or the consideration received by Landlord by reason of this Lease), then Tenant
shall be responsible therefor and shall pay the same before delinquency. If any
taxing authority requires that any such tax or excise on rents or other
imposition, however described, for which Tenant is responsible (other than the
Taxes included in the calculation of the Tax Rent) be paid by Tenant, but
collected by Landlord for and on behalf of such taxing authority and forwarded
by the Landlord to such taxing authority, then the same shall be paid by Tenant
to Landlord at such times as such taxing authority shall require and be
collectible by Landlord and the payment thereof enforced in the same fashion as
provided for the enforcement of payment of Rent.
ARTICLE VI
COMMON AREAS
SECTION 6.1. USE OF COMMON AREAS. During the Term, Tenant, its employees, agents
and customers shall have a non-exclusive license, in common with Landlord and
all others to or for whom Landlord has given or may hereafter give rights to use
the Common Areas (as the same may exist from time to time), but such license
shall at all times be subject to the exclusive control and management by
Landlord and such reasonable rules and regulations as Landlord may, from time to
time, impose.
SECTION 6.2. MANAGEMENT AND OPERATION OF COMMON AREAS. Landlord shall operate,
decorate, repair, equip and maintain, or shall cause to be decorated, operated,
repaired, equipped and maintained, the Common Areas in a manner deemed by
Landlord, in its reasonable business judgment, to be appropriate and lawful,
including those Laws relating to handicap accessibility. In connection with the
exercise of its rights under this Section 6.2, Landlord may: (i) erect, install,
remove and lease, kiosks, planters, pools, sculpture and other improvements
within the Common Areas for repair or to preserve public safety or to avoid a
public dedication; (ii) enter into, modify and terminate easements and other
agreements pertaining to the use and maintenance of any part of the Building;
(iii) close temporarily all or any portion of the Common Areas; (iv) close all
or any portion of the Building and in connection therewith, seal off all access
to the Building or any portion thereof to such extent as may, in the sole
opinion of Landlord, be necessary to prevent a dedication thereof or the accrual
of any rights to any person or to the public thereon; (v) temporarily suspend
any and all services, facilities and access by the public to all or any part of
the Building on legal holidays or due to any event beyond the reasonable control
of Landlord; and (vi) do and perform any other acts in and to said Common Areas
as, in the exercise of good business judgment, Landlord shall deem advisable.
Except as provided hereinabove, Landlord shall not obstruct the Common Areas or
the area immediately in front of the Premises.
SECTION 6.3. "LANDLORD'S OPERATING COSTS" DEFINED. The term "Landlord's
Operating Costs" shall mean all costs and expenses incurred in a manner deemed
by Landlord, in its reasonable business judgment, to be appropriate and for the
best interest of the Store Space in connection with the operation, equipping,
replacement, maintenance and repair of the Store Space in the Building (and all
systems, structures and Common Areas related thereto), including, without
limitation, to the extent fairly allocable to the Store Space, the costs and
expenses of: (i) lighting, cleaning, excluding windows, and painting of the
Common Areas, (ii) removing snow, ice, garbage, trash and debris from the Common
Areas, (iii) operating, maintaining, repairing and replacing, conduits and
similar items, fire protection systems, sprinkler systems, security alarm
systems, storm and sanitary drainage systems and other utility systems, signs
and markers for the Building and Common Areas, (iv) expanding, adding to or
reconfiguring the Common Areas, (v) all insurance applicable to the Building
with types, amounts, and deductibles determined by Landlord; (vi) interior and
exterior planting, replanting and replacing flowers, shrubbery, plants, trees,
and other landscaping of the Common Areas; (vii) complying with any
environmental standards and complying with any other Laws pertaining to the
Building; (viii) all repairs, equipping, operation, maintenance, replacement and
improvements of or to the Building serving the Store Space, including, without
limitation, floors, ceilings, roofs, windows, and any other portions of the
structure pertaining to the Common Areas and; (ix) the purchase, maintenance,
repair and inspection of all machinery and equipment used in the operation or
maintenance of the Building and all personal property taxes and other charges
incurred in connection with such machinery and equipment; (x) all license and
permit fees and any and all parking surcharges that may result from any Laws,
including the cost of obtaining and operating public transportation or shuttle
bus systems, if the same are deemed advisable by Landlord or are required by any
applicable Laws; (xi) personnel, including, without limitation, security and
maintenance personnel employed in connection with the operation, maintenance and
repair of the Building, and all costs and expenses relating to the employment of
such personnel, including, without limitation, the salaries, benefits and
insurance costs of such personnel, provided that Landlord shall make a
reasonable allocation of the costs and expenses of any management and
maintenance personnel that perform services for properties other than the
Building amongst the properties (including the Building) for which such
personnel perform services; and (xii) all utility costs relating to the Common
Areas, if any. Operating Costs shall be calculated in a manner that is
consistent with the calculation attached as Exhibit J.
Landlord's Operating Costs shall not include, however: (a) depreciation;
(b) costs of repairs and replacements to the extent that proceeds of insurance
or condemnation awards are received therefor; (c) the cost of a "Capital
Expenditure" as defined under the Internal Revenue Code Section 263 and the
regulations prescribed thereunder unless such cost is amortized over the "useful
life" of such Capital Expenditure, in
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which event Landlord's Operating Costs for each year included in the period
selected by Landlord shall include the cost of such Capital Expenditure as
amortized over such period; (d) fines, penalties or damage awards or settlements
resulting from Landlord's breach of this Lease or imposed upon Landlord by any
governmental authority as a result of the violation of any Law, by any of the
Landlord Related Parties; (e) the cost of any item or service to the extent of
any direct reimbursement Landlord actually receives with respect thereto from
Tenant or any other tenant or occupant of the Building (other than reimbursement
Landlord receives through payment of a proportionate or other share of
Landlord's Operating Costs); (f) the cost of building out leasable space in
preparation for occupancy (excluding any portion of said cost that results from
repairs, replacements or maintenance work that would otherwise have been
performed or were otherwise required); (g) the amount of brokerage commissions
paid by Landlord in connection with the leasing of space by Landlord in the
Building; (h) principal and interest payments to service the debt under any
mortgage secured by the Building; (i) lease rentals under any ground or
underlying lease affecting the Building; (j) Taxes and Tax Rent; and (k) the
cost of construction of new floor space. Operating Costs also shall not include
(a) any costs or expenses incurred in altering, painting, decorating or
preparing other rentable areas in the Building or of furnishing any gas,
electricity, water, sewer or other utility, or any heating, ventilation or air
conditioning to any one or more tenants of the Store Space if any such utility
is not furnished generally by Landlord to all tenants in the Store Space, (b)
any services or costs relating primarily to the residential portions of the
Building, (c) any advertising or marketing costs, (d) legal fees and other costs
incurred by Landlord in disputes with particular tenants of the Building, (e)
insurance deductibles, (f) wages and benefits of any Building employee at or
above the grade of assistant manager, (g) any cost for which landlord is
entitled to payment from a particular tenant, (h) legal and other costs for the
preparation of form leases and other materials for the Building, (i) legal and
other costs in negotiating leases with particular tenants, or (j) other costs
that are not typically passed along to tenants by landlords in similar projects.
SECTION 6.4. TENANT'S PROPORTIONATE SHARE OF LANDLORD'S OPERATING COSTS. In and
for each Operating Cost Year (as hereinafter defined) or partial Operating Cost
Year during the Term, Tenant shall pay Landlord, as additional rent, a
proportionate share of Landlord's Operating Costs attributable to the Store
Space ("Tenant's Proportionate Share of Landlord's Operating Costs"), which
shall be computed by multiplying the amount of the Landlord's Operating Costs by
a fraction, the numerator of which shall be the Floor Space of the Premises and
the denominator of which shall be the Floor Space of the Store Space. Tenant's
Proportionate Share of Landlord's Operating Costs shall otherwise be paid and
adjusted in the same manner the Tax Rent is paid and adjusted pursuant to
Section 5.8 "Operating Cost Year" shall mean each twelve month period
established by Landlord (from time to time) as the Operating Cost Year at the
Building. Notwithstanding anything in this Lease to the contrary, there will be
no duplication in charges to the Tenant by reason of the provision in this Lease
setting forth Tenant's obligation to reimburse Landlord for Landlord's Operating
Costs or by reason of any other provision in this Lease.
Tenant shall have the right, not to exceed once per Lease Year, at any
time during normal business hours after not Less than five (5) days' prior
written notice to Landlord, to cause an examination or complete audit to be made
of Landlord's Operating Costs by an independent certified accountant. If any
audit or examination by such accountant shall disclose that Tenant has overpaid
Tenant's Proportionate Share of Landlord's Operating Costs, Landlord shall pay
to Tenant, within thirty (30) days of Tenant's delivery to Landlord of written
demand, which written demand shall be supported by the documentation evidencing
the overpayment rendered by the accountant aforesaid, the amount of such
evidenced overpayment by Tenant. If any audit or examination by such accountant
shall disclose that Tenant has underpaid Tenant's Proportionate Share of
Landlord's Operating Costs, Tenant shall pay to Landlord, within thirty (30)
days of ascertainment thereof by Tenant's accountant, the amount of such
evidenced underpayment by Tenant. If Tenant's audit of Operating Expenses
reveals an error of five percent (5%) or more in Landlord's calculation thereof,
Landlord shall reimburse Tenant for the cost of Tenant's audit within ten (10)
days after Tenant submits to Landlord Tenant's invoice therefor.
ARTICLE VII
UTILITIES
SECTION 7.1. UTILITY CHARGES.
A. Tenant shall pay all rents and charges for water, sewer, electricity,
gas, heat, steam, hot and/or chilled water, air-conditioning, ventilating,
telephone service and other utilities directly supplied to the Premises, and
separately metered or submetered (the "Utility Charges"), when the same become
due. If any such utilities are not separately metered or submetered, then in
addition to Tenant's payments of separately metered charges, Tenant shall pay to
Landlord on, at Landlord's option, either the first day of each calendar month
or within ten (10) days after receipt of a bill therefor, Tenant's proportionate
share of such Utility Charges which shall be calculated as follows: the Utility
Charges for such utilities shall be multiplied by a fraction, the numerator of
which shall be the Floor Space of the Premises and the denominator of which
shall be the total Floor Space occupied by tenants in the Store Space using such
utilities. Landlord may, at any time, install submeters in connection with any
or all the utility services furnished to the Premises and thereupon collect all
or any part of the Utility Charges directly from Tenant provided that such
Utility Charges shall not exceed the rates Tenant would be charged if billed
directly by the local utility therefor for the same services. Landlord, in its
sole discretion, shall have the right, at all times, to alter any and all
utilities, and the equipment relating thereto, serving the Building or any
portion thereof, provided such alteration by Landlord does not result in a
diminution or interruption (except a pre-announced brief interruption) of the
utility service to the Premises. Tenant shall execute and deliver to Landlord
without delay such documentation as may be required to effect such alteration.
B. If Tenant shall require natural gas for the operation of Tenant's
business in the Premises, Tenant shall, at its own expense, arrange for such
natural gas utility service from the local gas company in a manner approved by
Landlord (which approval shall not be unreasonably withheld).
SECTION 7.2. DISCONTINUANCES AND INTERRUPTIONS OF SERVICE. None of the Landlord
Related Parties shall be liable to Tenant in damages or otherwise for the
quality, quantity, failure, unavailability, discontinuance or disruption of any
utility service (including any discontinuance pursuant to the immediately
succeeding sentence) and the same shall not (i) constitute a termination of this
Lease; (ii) an actual or constructive eviction of Tenant; or (iii) entitle
Tenant to an abatement of Rent or other charges (except as specifically set
forth herein). Landlord shall attempt to resolve any such disruption,
discontinuance or unavailability of any utility service promptly after notice.
Tenant shall have the right to abate Rent on a day-for-day basis if the
interruption in electricity, water, or HVAC services continues for more than ten
(10) consecutive days. Landlord also reserves the right to discontinue, without
notice to Tenant, any heating, ventilation, air-conditioning or other utility
services furnished by Landlord at any time if Tenant fails to pay timely any
Utility Charges due under this Lease.
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ARTICLE VIII
INDEMNITY AND INSURANCE
SECTION 8.1. INDEMNITIES.
A. Except for losses, liabilities, obligations, damages, penalties,
claims, costs, charges, and expenses resulting from the negligence or willful
misconduct of any of the Landlord Related Parties, Tenant shall indemnify,
defend and hold the Landlord Related Parties harmless against and from all
losses, liabilities, obligations, damages, penalties, claims, costs, charges and
expenses, including, without limitation, reasonable architects' and attorneys'
fees, which may be imposed upon, incurred by, or asserted against any of the
Landlord Related Parties and arising, directly or indirectly, out of or in
connection with the use or occupancy or maintenance of the Premises by, through
or under Tenant, and (without limiting the generality of the foregoing) any of
the following occurring during the Term: (i) any work or thing done in, on or
about the Premises or any part thereof by any of the Tenant Related Parties;
(ii) any use, nonuse, possession, occupation, condition, operation, maintenance
or management of the Premises or any part thereof; (iii) any act or omission of
Tenant or any of the Tenant Related Parties (but as to Tenant's invitees, only
to the extent such act or omission occurs within the Premises); (iv) any injury
or damage to any person or property occurring in, on or about the Premises or
any part thereof; or (v) any failure on the part of Tenant to perform or comply
with any of the covenants, agreements, terms or conditions contained in this
Lease with which Tenant, on its part, must comply or perform. In case any action
or proceeding is brought against any of the Landlord Related Parties by reason
of any of the foregoing, Tenant shall, at Tenant's sole cost and expense, resist
or defend such action or proceeding by counsel approved by Landlord, which
approval shall not be unreasonably withheld.
B. Except for losses, liabilities, obligations, damages, penalties,
claims, costs, charges, and expenses resulting from the negligence or willful
misconduct of any Tenant Related Parties, the Landlord shall indemnify, defend
and hold the Tenant Related Parties harmless against and from all losses,
liabilities, obligation, damages, penalties, claims, charges, costs and
expenses, including without limitation, reasonable architect's and attorney's
fees which may be imposed upon, incurred by or asserted against any of the
Tenant Related Parties and arising directly or indirectly out of, or in
connection, with the use or occupancy or maintenance of the Common Areas by,
through or under Landlord, Landlord's negligence or willful misconduct in the
construction, maintenance, repair or operation of the Building, defects in the
construction of the building, any breach by Landlord of the Air Rights Lease
referred to in Section 14.6 hereof, and the release of or incorporation into the
Building of any Hazardous Materials by or on behalf of the Landlord.
SECTION 8.2. LANDLORD NOT RESPONSIBLE FOR ACTS OF OTHERS. Except for losses,
liabilities, obligations, damages, penalties, claims, costs, charges, and
expenses resulting from the negligence or willful misconduct of any of the
Landlord Related Parties, none of the Landlord Related Parties shall be liable
for, and Tenant waives as against the Landlord Related Parties, all claims for
loss or damage to Tenant's business or damage to person or property sustained by
Tenant or any person claiming by, through or under Tenant resulting from any
accident or occurrence in, on or about the Premises or any other part of the
Building, including, without limitation, claims for loss, theft or damage
resulting from: (i) any equipment or appurtenances becoming out of repair; (ii)
injury done or occasioned by wind or weather; (iii) any defect in or failure to
operate, for whatever reason, of any utility, improvement, system or structure
in the Building; (iv) any act, omission or negligence of other tenants,
licensees or any other persons or occupants of the Building or of adjoining or
contiguous buildings, of owners of adjacent or contiguous property or the
public, or by operations in the construction of any private, public or
quasi-public work; or (v) any other cause of any nature. To the maximum extent
permitted by law, Tenant agrees to use and occupy the Premises, and to use such
other portions of the Building as Tenant is herein given the right to use, at
Tenant's own risk.
SECTION 8.3. TENANT'S INSURANCE. At all times commencing on and after the
earlier of (i) the Possession Date, (i) the Commencement Date, or (iii) the date
Tenant enters the Premises for any purpose, Tenant shall carry and maintain, at
its sole cost and expense:
A. Commercial General Liability Insurance with a broad form
comprehensive general liability endorsement applicable to the Premises and its
appurtenances providing, on an occurrence basis, a minimum combined single limit
of Two Million Dollars ($2,000,000.00) and containing a contractual liability
endorsement.
B. Plate glass insurance and all risks of physical loss insurance
written at replacement cost value and with a replacement cost endorsement
covering all of Tenant's Property in the Premises, and all Leasehold
Improvements installed in the Premises. If at any time this Lease is canceled or
terminated by either party as herein permitted following any casualty loss which
Tenant has self-insured in whole or in part (an "uninsured loss") and Landlord
would have been entitled to receive and retain the insurance proceeds payable
because of such casualty if the uninsured loss had been covered by insurance,
then Tenant shall promptly pay to Landlord an amount equal to the insurance
proceeds that would have been payable with respect to the uninsured loss if
Tenant had carried insurance in the form and amount required by the terms of
this Lease rather than self-insuring such loss.
C. Business interruption insurance covering periods of not Less than one
(1) year in the following amounts: (i) for the first Lease Year an amount equal
to one and one-half (1-1/2) times the Minimum Rent and (ii) for the succeeding
Lease Years or Partial Lease Years, in amounts not less than the Rent and
Tenant's other operating expenses for the preceding twelve (12) month period
(the "Business Interruption Coverage").
D. Whenever good business practice, in accordance with industry
standards, indicates the need of additional insurance coverage or different
types of insurance in connection with the Premises or Tenant's use and occupancy
thereof, Tenant shall, upon request, obtain such insurance at Tenant's expense,
if available at commercially reasonable rates and provide Landlord with evidence
thereof.
E. Tenant may carry any insurance required hereunder under excess or
umbrella policies and may include the Premises in policies insuring Tenant's
other operations.
F. Prior to commencement of the Tenant Improvements, Tenant shall
provide Landlord with a Builder's Risk Insurance Policy and Contractor's
Comprehensive General Liability Insurance Policy with paid receipts naming
Landlord as an additional insured insuring the contractor performing the Tenant
Improvements on behalf of Tenant.
SECTION 8.4. TENANT'S CONTRACTOR'S INSURANCE. Before any alterations, additions,
improvements or construction are undertaken, Tenant shall carry and maintain, at
its expense, or Tenant shall require any contractor performing work on the
Premises to carry and maintain, at no expense to Landlord, in addition to
worker's compensation insurance as required by the jurisdiction in which the
Building is located, All Risk
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Builder's Risk Insurance in the amount of the replacement cost of the Tenant
Improvements and Commercial General Liability Insurance (including, without
limitation, Contractor's Liability coverage, Contractual Liability coverage,
Completed Operations coverage, a Broad Form Property Damage coverage and
Contractor's Protective liability) written on an occurrence basis with a minimum
combined single limit of One Million Dollars ($1,000,000.00); such limit may be
accomplished by means of an umbrella policy.
SECTION 8.5. POLICY REQUIREMENTS. Any company writing any insurance which Tenant
is required to maintain or cause to be maintained pursuant to Sections 8.3 and
8.4 (all such insurance, as well as any other insurance carried by Tenant with
regard to the Premises, shalt be referred to as "Tenant's Insurance") shall at
all times be a company with at least a Best's rating of B/VI and each such
company shall be licensed and qualified to do business in the State or
Commonwealth in which the Premises are located. The form of such Tenant's
Insurance shall be subject to Landlord's approval (which approval shall not be
unreasonably withheld). Tenant's Insurance may be carried under a blanket policy
covering the Premises and any other of Tenant's locations. All policies
evidencing Tenant's Insurance (other than any worker's compensation insurance)
shall (i) specify Tenant and "owner(s) and its (or their) principals,
beneficiaries, partners, officers, directors, employees, agents and
mortgagee(s)" (and any other designees of Landlord as the interest of such
designees shall appear) as additional insureds and (ii) contain endorsements
that the insurer(s) will give to Landlord and its designees at least thirty (30)
days' advance written notice of any change, cancellation, termination or lapse
of said insurance. Any Tenant's Insurance covering the Leasehold Improvements
against damage by fire or other casualty shall provide that any loss to any of
the Leasehold Improvements exceeding One Hundred Thousand Dollars ($100,000.00)
shall be adjusted jointly with Landlord and Tenant and that Landlord shall be
named as a loss payee. Tenant shall deliver to Landlord at least fifteen (15)
days prior to the time Tenant's Insurance is first required to be carried by
Tenant, and upon renewals at least fifteen (15) days prior to the expiration of
the term of any such insurance coverage, a certificate of insurance of all
policies evidencing Tenant's Insurance. The limits of Tenant's Insurance shall
in no event limit Tenant's liability under this Lease, at law or in equity. If
Tenant fails to perform its obligations under this Article VIII, then Landlord
may, but shalt not be required to, perform any such obligations on behalf of
Tenant, after five (5) days' written notice to Tenant, and add the cost of the
same as Additional Rent, payable on demand.
SECTION 8.6. INCREASE IN INSURANCE PREMIUMS. Neither Tenant nor any of the other
Tenant Related Parties shall do or fail to do anything which will (i) violate
the terms of or increase the rate of, any of Landlord's or any other tenant or
occupant's insurance policies; (ii) prevent Landlord from obtaining customary
policies of insurance; or (iii) contravene the rules, regulations and
recommendations of Landlord's insurance companies, the Fire Insurance Rating
Organization or any similar body having jurisdiction over the Premises or the
National Board of Fire Underwriters or any similar body exercising similar
functions in connection with the prevention of fire or the correction of
hazardous conditions. In the event of the occurrence of any of the events set
forth in this Section 8.6, Tenant shall pay Landlord upon demand, as additional
rent, the cost of the amount of any increase in any such insurance premium.
SECTION 8.7. WAIVER OF RIGHT OF RECOVERY. Notwithstanding anything set forth in
this Lease to the contrary, Landlord and Tenant do hereby waive any and all
right of recovery, claim, action or cause of action against the other and their
respective Related Parties for any loss or damage that may occur to Landlord or
Tenant or any party claiming by through or under Landlord or Tenant, as the case
may be, their respective property, the Building or the Premises or any addition
or improvements thereto, or any contents therein, by reason of fire, the
elements or any other cause, regardless of cause or origin, including the
negligence of Landlord or Tenant, or their respective Related Parties, which
loss or damage is covered by valid and collectible policies of insurance, to the
extent that such loss or damage is recoverable under such insurance policies.
All insurance policies carried by either party with respect to the Building or
the Premises, whether or not required to be carried by this Lease and if such
policies can be so written and either do not result in additional premium or the
other party agrees to pay upon demand any resulting additional premium, shall
permit the waiving of any right of recovery on the part of the insured against
the other party for any loss or damage to the extent such rights have been
waived by the insured prior to the occurrence of such loss or damage. For the
purpose of the foregoing waiver, the amount of any deductible applicable to any
loss or damage shall be deemed covered by and recoverable by the insured under
the insurance policy to which such deductible relates. In the event that Tenant
is permitted to and self-insures any risk which would have been covered by the
insurance required to be carried by Tenant pursuant to Section 8.3 of this Lease
or Tenant fails to carry any insurance required to be carried by Tenant pursuant
to Section 8.3 of this Lease, then all loss or damage to Tenant, its business,
its property, the Premises or any additions or improvements thereto or contents
thereof that would have been covered by such insurance had Tenant maintained it
shall, for purposes of the waiver set forth in this Section 8.7, be deemed
covered and recoverable by Tenant under valid and collectible policies of
insurance.
ARTICLE IX
CONSTRUCTION
SECTION 9.1. LANDLORD IMPROVEMENTS. Landlord shall (i) perform all site
improvements, including the construction of the Building and Common Areas ("Site
Improvements") and (ii) construct the shell of the Building (including
foundations, structural walls, roof and bringing of utilities to the Building)
of which the Premises as an enclosed shell are part ("Building Improvements).
The Site Improvements and the Building Improvements shall be performed in
substantial conformance with the site plan previously forwarded to Tenant ("Site
Plan") receipt of which Site Plan is hereby acknowledged by Tenant and in
conformance with the terms and conditions set forth in Exhibit C-1 attached
hereto. The Site Improvements and Building Improvements are collectively the
"Landlord Improvements". Upon substantial completion of the Landlord
Improvements (other than those improvements not affecting Tenant's ability to
perform the Tenant Improvements defined below), Landlord shall provide Tenant at
least twenty (20) days notice in writing of the date the Premises shall be
deemed delivered to Tenant ("Possession Notice") and the Premises shall be
deemed delivered to Tenant as of the date set forth in such notice ("Possession
Date"). Landlord shall be responsible for all fees associated with the
development of the Building Improvements and for obtaining approvals of all
applicable authorities for the Landlord Improvements.
SECTION 9.2. TENANT IMPROVEMENTS.
A. Any and all other improvements to the Premises required pursuant to
this Lease and to operate Tenant's business at the Premises (the "Tenant
Improvements") including, without limitation, the initial Tenant Improvements
(as more particularly described on Exhibit C-2 attached hereto), shall be
performed by (i) Tenant at Tenant's sole cost and expense (subject to sec.9.7),
(ii) in accordance with plans and specifications approved by Landlord pursuant
to Exhibits C-1 and C-2 and the terms of this Lease, (iii) in a first-class
workmanlike manner with first-class materials, (iv) by duty qualified or
licensed persons and (v) without interference with the operation of Landlord or
other occupants of the Building. Upon receipt of Landlord's written approval of
such plans and specifications, Tenant shall promptly apply for and diligently
pursue the procurement of any and all building or other permits and/or licenses
required in order to construct the initial Tenant Improvements ("Permits"). All
building permit fees, health permit fees,
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water and sewer tap-in fees in excess of those required in connection with
Landlord's Improvements, and all Licenses, permits and fees required in
connection with conduct of Tenant's Permitted Use shall be obtained by Tenant at
Tenant's sole expense. Upon receipt of the Permits and provided Landlord has
delivered possession of the Premises pursuant to the Possession Notice, Tenant
shall promptly commence and diligently pursue to completion the construction of
the initial Tenant Improvements within one hundred twenty (120) days subject to
extension for force majeure and Landlord delay as provided in Section 17.16.
B. The initial Tenant Improvements shall mean and include, without
Limitation, all improvements, required in connection with Tenant's initial
occupancy of the Premises in excess of the Landlord improvements, which initial
Tenant Improvements shall be performed as required by all applicable Laws or
necessary to accommodate the initial Tenant Improvements.
Subject to any applicable Law, in the event of a direct conflict
between the final plans and specifications for the initial Tenant Improvements,
as finally approved by Landlord, and the construction provisions contained in
this Lease (including, without Limitation, Exhibits C-1 and C-2), the final
Landlord approved plans and specifications shall control Tenant's construction
of the initial Tenant Improvements and shall supersede any directly inconsistent
construction provisions contained in this Lease, but only to the extent the
approved plans and specifications deal with an item specifically.
Landlord agrees, subject to Landlord's approval of the applicable plans
and specifications, which approval shall not be unreasonably, withheld,
conditioned or delayed, to allow Tenant entry to the Building prior to the
Possession Date for purposes of constructing, at Tenant's cost, any additional
support elements necessary to support the vault to be Located in the Premises.
Tenant's activities in constructing such support elements must be conducted in a
manner that will avoid interference with Landlord's construction schedule for
the Building. Entry for the purposes of constructing such support elements shall
be at Tenant's risk and shall not, in and of itself, be deemed to cause the
Possession Date to occur.
The ATM improvements contemplated in Section 4.7 shall be designed by
the Tenant's architect, subject to Landlord's approval. The rear entrance door
contemplated by Section 9.7 shall be designed by Landlord's architect, and is
shown on Exhibits L-1 and L-2. The lobby door contemplated by Section 9.7 shall
be designed by Tenant's architect, and is shown on Exhibits L-3 and L-4, and
shall be constructed of wood or other materials acceptable to Landlord. The
lobby door shall not be made of glass or other transparent materials.
SECTION 9.3. SCHEDULE OF PLAN SUBMISSION FOR INITIAL TENANT IMPROVEMENTS. The
schedule for all plans submissions is set forth in Exhibits C-1 and C-2.
SECTION 9.4. INTENTIONALLY DELETED
SECTION 9.5. OWNERSHIP OF IMPROVEMENTS. All present and future immovable
alterations, additions or improvements made in, on or to the Premises, by either
party, including, without (limitation, all equipment and non-trade fixtures,
light fixtures, roof-top air-conditioning units, pipes, ducts, conduits,
plumbing, wiring, paneling, partitions, mezzanines, floors, floor and wall
coverings, and similar items (the "Leasehold Improvements") shall be deemed the
property of Landlord and unless Landlord directs otherwise, shall remain upon
and be surrendered with the Premises as part thereof in good order, condition
and repair, ordinary wear and tear, and damage caused by fire or other casualty
excepted, upon Tenant's vacation or abandonment of the Premises. If Landlord
directs, Tenant shall remove all or a portion of the Leasehold Improvements in
the Premises on or immediately prior to the Scheduled Termination Date or 5
business days after the termination of Tenant's right to possession, whichever
is earlier. Tenant shall remove the vault, counters, office equipment, safe
deposit boxes, security systems and ATM and related equipment. All movable
goods, inventory, furniture, trade fixtures and other movable personal property
belonging to Tenant which are installed or stored in the Premises by Tenant and
are not permanently affixed to the Premises, shall remain Tenant's property
("Tenant's Property") and shall be removed by Tenant on or prior to the
Scheduled Termination Date (or within 5 business days after the termination of
Tenant's right to possession of the Premises, whichever is applicable) provided
that: (i) Tenant is not in default under this Lease; and (ii) Tenant shall
immediately repair any damage to the Premises caused by the removal of any of
Tenant's Property and restore the Premises to the same condition as existed
prior to the installation of such property.
Tenant hereby grants Landlord a security interest in Tenant's Property,
and all of the proceeds thereof, to secure the performance of all of Tenant's
obligations under this Lease. Upon Tenant's default under this Lease, Landlord
shall have all remedies available under this Lease and the Uniform Commercial
Code enacted in the State or Commonwealth in which the Premises are located. At
LandLord's request, Tenant shall execute and deliver, from time to time,
financing statements for the purpose of perfecting and maintaining the priority
of the security interest granted to Landlord under this Section 9.5, The lien
granted by this Section 9.5 shall be in addition to any Landlord's lien that may
now or at any time hereafter be provided by law.
SECTION 9.6. MECHANIC'S LIENS. No mechanic's or, other lien shall be allowed
against the Building or the estate of Landlord as a result of work performed by
or at the request by Tenant. If any mechanic's or other lien shall at any time
be filed against the Premises by reason of work, labor, services or materials
performed or furnished, or alleged to have been performed or furnished, to or
for the benefit of Tenant or anyone claiming by, through or under Tenant, Tenant
shall forthwith cause the same to be discharged of record or bonded to the
satisfaction of Landlord. If Tenant shall fail to cause such lien to be so
discharged or bonded within ten (10) days after notice of the filing thereof,
then, in addition to any other right or remedy of Landlord, Landlord may, but
shall not be obligated to, discharge the same, by paying the amount claimed to
be due without inquiring as to the validity of any such lien, and the amount so
paid by Landlord, including attorneys' fees incurred by Landlord in connection
therewith, shall be due and payable by Tenant to Landlord upon demand as
additional rent.
SECTION 9.7. LANDLORD'S CONTRIBUTION TO TENANT IMPROVEMENTS. Landlord shall
contribute toward the cost of Tenant Improvements by payment to Tenant of a sum
equal to Twenty-Five Dollars ($25.00) per square foot multiplied by the Floor
Space of the Premises less fifty percent (50%) of the cost reasonably incurred
by Landlord to design and install a new separate rear exterior exit from the
Premises. The door to the lobby shall be fitted, at Landlord's cost, with a
security device which will permit residents of the adjacent apartment building
to pass from the Premises through the lobby door to the lobby of the Building as
shown on the Site Plan (Exhibit A). Payment shall be made within thirty (30)
days of completion of the Tenant Improvements.
ARTICLE X
REPAIRS, MAINTENANCE, LANDLORD'S ACCESS AND ALTERATIONS
SECTION 10.1. REPAIRS BY LANDLORD. Subject to the terms and conditions set forth
in Articles XI, XII and Sections 4.6 and 17.16, Landlord shall make, or cause to
be made all necessary repairs (structural or otherwise) to the Common
Areas(excluding, however, any areas any tenant or any other occupant of the
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Building is obligated to repair), and the structural elements of the Building,
exterior surfaces thereof, roof, building systems and facilities and equipment
it installed outside the Common Areas that service the Premises promptly after
Landlord obtains actual knowledge of the necessity for such repair.
SECTION 10.2. ALTERATIONS, REPAIRS, MAINTENANCE AND DISPLAYS BY TENANT.
A. Any alterations or improvements made by Tenant in or to the Premises
or any part thereof shall (i) be subject to Landlord's prior written approval
thereof (which approval shall not be unreasonably withheld), and (ii) performed
in accordance with the provisions of Article IX. Tenant shall, at its sole
expense, cause plans and specifications therefor to be prepared by an architect
or other duty qualified person for Landlord's approval. In addition, Tenant
shall not paint or decorate any part of the exterior of the Premises without
first obtaining Landlord's written approval.
Notwithstanding the provisions contained in this Section 10.2 and
provided Tenant is not in default under this Lease, Tenant shall have the
right to make non-structural interior alterations to the Premises without
obtaining Landlord's prior written consent provided that: (i) such interior
alterations shall be completed in a good and workmanlike manner in accordance
with Landlord's design criteria for the Building and the plans and
specifications for the Premises originally approved by Landlord; and (ii) the
cost of any such interior alterations shall not exceed in the aggregate Fifteen
Thousand Dollars ($15,000.00) per Lease Year.
B. Subject to the terms and conditions set forth in Article XI, XII,
Sections. 4.6 and 17.16, Tenant shall at all times during the Term, from and
after the Possession Date, at its own cost and expense, maintain the Premises in
good order, condition and repair and make all necessary replacements and repairs
to the Premises (other than any repairs required to be made by Landlord pursuant
to Sections 10.1, 11.2 or 12.1. Tenant's obligations shall include, without
limitation, repairing, maintaining, and making replacements to items such as the
following, but only to the extent the same are located within or exclusively
serving the Premises: floors; walls; ceilings; utility meters; fixtures; subject
to Section 4.6, electrical, pipes and conduits, and heating, ventilating and
air-conditioning equipment and systems which exclusively serve the Premises;
sprinkler equipment and other equipment within the Premises; the storefront(s);
locks and closing devices; window sashes, casements and frames; glass; and doors
and door frames. Landlord shall provide access, if necessary, for such repairs
in areas outside the Premises.
SECTION 10.3. INSPECTIONS AND ACCESS BY LANDLORD. Tenant shall permit Landlord,
its agents, employees and contractors to enter all parts of the Premises during
the Store Hours after reasonable notice (and in emergencies at any time without
notice, consistent with Tenant's reasonable security procedures) to inspect or
exhibit the same or to make any repairs or alterations thereto as Landlord may
see fit, provided that Landlord agrees to use its reasonable efforts not to
unreasonably disturb Tenant's conduct of business in the Premises.
ARTICLE XI
CASUALTY
SECTION 11.1. RIGHT TO TERMINATE.
A. Subject to the provisions of the Air Rights Lease as described in
Section 14.6, in event of a fire or other casualty ("Casualty"), if (i) portions
(taken in the aggregate) in the Building shall be damaged to the extent of more
than twenty-five percent (25%) of the cost of replacement of the Building; or
(ii) the proceeds of Landlord's insurance recovered or recoverable as a result
of a Casualty and retained by Landlord shall be insufficient to pay fully for
the cost of replacement of the Premises or the building or buildings damaged; or
(iii) the Premises or the building in which the Premises is located shall be
damaged as a result of any cause which is not covered by Landlord's insurance in
an uncovered amount in excess of ten percent (10%) of the replacement cost of
the Building; or (iv) the Premises shall be damaged in whole or to any
substantial degree during the last Lease Year or in any Partial Lease Year at
the end of the Term unless Tenant has exercised its renewal option hereunder; or
(v) either or both of the Premises or the building in which the Premises is
Located shall be damaged to the extent of twenty-five percent (25%) or more of
the cost of replacement thereof; or (vi) the Building is damaged to such extent
that in the sole judgment of Landlord, it cannot be operated as an economically
viable unit; then, in any such event, Landlord may terminate this Lease by
notice given to Tenant within ninety (90) days after the casualty occurs. If
LandLord terminates this Lease as aforesaid, then the Termination Date shall be
the date set forth in the notice to Tenant, which date shall not be not Less
than thirty (30) days after the date of said notice. The "cost of replacement"
shall be determined by the company or companies selected by Landlord's insurers,
or if there shall be no such determination, by an impartial person selected by
Landlord professionally qualified to determine such "cost of replacement".
In the event of a Casualty affecting the Premises, Tenant shall have
the right to terminate this Lease if (a) the Premises shall be damaged in whole
or in part, during the last two (2) Lease Years or in any Partial Lease Year at
the end of the Term unless the Tenant has exercised its option to renew, (b) the
cost to repair or restore the Premises exceeds twenty-five percent (25%) of the
cost of replacement thereof; (c) Landlord fails to begin any restoration work it
is obligated to perform on the Building or Premises within six (6) months after
the date of the Casualty; or (d) Landlord begins to restore the Building or
Premises, if it is required to do so, within such six (6) month period but fails
to complete such work within one (1) year from the date of the Casualty.
Tenant's right to terminate this Lease under this Section 11.1 (A) shall be
exercised by giving Landlord written notice of such exercise within thirty (30)
days after the date of the Casualty in the case of clause (a) above and within
thirty (30) days after the end of the six (6) month period and one (1) year
period, respectively, in the case of clauses (b) and (c) above, and the
effective date of the termination shall be the date that is thirty (30) days
after the date Landlord receives the applicable notice.
B. If the Casualty shall render the Premises untenantable or
inaccessible, in whole or in part, and provided that the Casualty or the
occurrence causing the untenantability of the Premises is not caused by or
primarily attributable to Tenant or Tenant Related Parties, all Rent shall abate
proportionately during the period of such untenantability or inaccessibility on
the basis of the ratio which the amount of floor space of the Premises rendered
untenantable or inaccessible bears to the total floor space of the Premises.
Such abatement of Rent shall terminate on the earlier of (i) the date any repair
and restoration work is substantially completed by Landlord pursuant to its
obligations, if any, under Section 11.2, or thirty (30) days after such date in
the event Tenant is required to perform repair work pursuant to Section 11.3, or
(ii) the date Tenant reopens for business in the portion of the Premises
previously rendered untenantable. Notwithstanding anything to the contrary
contained herein, in the event as a result of a Casualty only a portion of the
Premises is damaged which results in Tenant being unable to operate its business
within that portion of the Premises not so damaged or destroyed, the Premises
shall be deemed to be completely untenantable for purposes of this Section 11.1
(B). Except to the extent specifically set forth in this Section 11.1, neither
the Rent nor any other obligations of Tenant under this Lease shall be
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affected by any Casualty, and Tenant hereby specifically waives all other rights
it might otherwise have under Law or by statute.
C. If any casualty to the Building that materially interferes with
Tenant's use or occupancy of the Premises is not reasonably capable of being
repaired within a period of one hundred eighty (180) days after the occurrence
of such casualty, Tenant shall have the right to terminate this Lease by giving
Landlord written notice of its election to terminate under this Section. Such
notice shall be given within thirty (30) days after the occurrence of the
casualty or, if notice is not given within such thirty (30) day period and the
casualty is not repaired within the required one hundred eighty (180) day
period, or a reasonable period thereafter, within sixty (60) days after the
expiration of such one hundred eighty (180) day period (but in no event after
such repair is completed or at any time when completion of the repairs
reasonably appears to be imminent).
SECTION 11.2. LANDLORD'S DUTY TO RECONSTRUCT. Provided this Lease is not
terminated pursuant to Section 11.1 or any other provision of this Lease, and
subject to the Air Rights Lease and Landlord's ability to obtain the necessary
permits therefor and the availability of insurance proceeds, Landlord shall
repair or reconstruct or demolish and rebuild the Building and the portions of
the Premises Tenant is not required to reconstruct pursuant to Section 11.3 to a
substantially similar condition as existed prior to the Casualty.
Notwithstanding anything to the contrary contained herein, in no event shall any
of the Landlord Related Parties be liable for interruption of Tenant's business
or for damage to or repair of any of those items which Tenant is required to
insure, including all Tenant"s Property and Leasehold Improvements.
SECTION 11.3. TENANT'S DUTY TO RECONSTRUCT. Provided this Lease is not
terminated pursuant to any provision of this Lease, Tenant shall promptly
commence and diligently pursue to completion the repair and refixturing of
portions of the Premises for which Tenant is responsible under Paragraph 10.2 B
to a substantially similar condition as existed prior to the Casualty, and
otherwise in accordance with the terms and conditions of this Lease. Tenant
shall reopen for business in the Premises as soon as practicable after the
occurrence of the Casualty,
SECTION 11.4. INSURANCE PROCEEDS. All proceeds of insurance carried by Tenant
covering the Leasehold Improvements and Tenant's Property shall belong to and be
payable to Tenant.
Should this Lease be terminated as a result of a Casualty Tenant,shall
be entitled to receive all insurance proceeds specifically allocated to the
permanent Leasehold Improvements installed in the Premises by or at the
direction of Tenant.
ARTICLE XII
CONDEMNATION
SECTION 12.1. TAKING OF PREMISES.
A. If any portion of the Premises shall be taken under the power of
eminent domain by any public or quasi-public authority (a "taking"), either
party shall have the right to terminate this Lease as of the date physical
possession of the property taken is delivered to the condemning authority
(hereinafter referred to as the "effective date of the taking") by giving notice
to the other party of such election within thirty (30) days after the effective
date of the taking.
B. Subject to the provisions of the Air Rights Lease as described in
Section 14.6, if there is a taking of a portion of the Premises and this Lease
shall not be terminated pursuant to Section 12.1 (A), then (i) as of the
effective date of the taking, this Lease shall terminate only with respect to
the portion taken; (ii) after the effective date of the taking and during the
balance of the Term, the Minimum Rent, and the Full and Partial Year
Breakpoints, if any, shall be reduced by multiplying the same by a fraction, the
numerator of which shall be the floor space not so taken and the denominator of
which shall be the floor space of the Premises immediately prior to the taking;
(iii) as soon as reasonably possible after the effective date of the taking,
Landlord shall, at its expense and to the extent feasible, restore the remaining
portion of the Premises to a complete Unit; provided, however, that Landlord
shall not be required to expend more on such alteration or restoration work than
an amount equal to the net proceeds of the condemnation award actually received
and retained by Landlord which is allocable to the Premises.
SECTION 12.2. TAKING OF BUILDING. If there is a taking of twenty-five percent
(25%) or more of the leasable floor space within the Building or if there is a
taking of any portion of the Building so as to render, in Landlord's judgment,
the remainder unsuitable for use as a shopping center, regardless in either case
as to whether or not there is a taking of the Premises, Landlord shall have the
right to terminate this Lease upon thirty (30) days' written notice to Tenant.
SECTION 12.3. CONDEMNATION AWARD. ALL compensation awarded for any taking of the
Premises (including, without limitation, the Leasehold Improvements) or the
Building or any interest in either shall belong to and be the property of the
Landlord, and Tenant hereby assigns to Landlord all its right, title and
interest in any such award, except to the extent that this Lease is terminated
and Tenant files a claim, at its sole cost and expense, and the condemning
authority specifically awards to Tenant or specifically allocates a portion of
the award to Tenant for the Unamortized Improvement Cost calculated as set forth
in Section 11.4 as of the effective date of the taking, and Tenant's relocation
expenses and lost goodwill, provided, however, the filing of such claim by
Tenant or allocation by the condemning authority to Tenant does not adversely
affect or diminish the award which would otherwise have been received by
Landlord had Tenant not filed such a claim and received such award.
ARTICLE XIII
INTENTIONALLY DELETED
ARTICLE XIV
SUBORDINATION AND ATTORNMENT
SECTION 14.1. SUBORDINATION. Tenant's rights under this Lease are and shall
remain subject and subordinate to the operation and effect of: (i) all present
and future air rights or underlying leases involving all or any part of the
Building; or (ii) any mortgage, deed of trust or other security instrument now
or hereafter affecting the Premises or the Building; or (iii) Reciprocal
Easement Agreement and condominium regime created on all or a portion of the
Building; or (iv) all renewals, modifications, replacements, consolidations and
extensions of or participations in those transactions evidenced by documents
referred to in (i) and (ii) above, whether the same shall be in existence on the
date hereof or created hereafter (any such lease, mortgage, deed of trust or
other instrument being referred to as a "Mortgage" and the person or persons
having the benefit of same being referred to as a "Mortgagee"), Tenant's
acknowledgment and agreement of subordination provided for in this Section 14.1
is self-operative and no further instrument of subordination shall be required;
however, Tenant shall execute a Subordination, Non-Disturbance and
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Attornment Agreement in the form attached hereto as Exhibits F-1 and F-2 as to
any current Mortgage or any subsequent Mortgage and such further assurances
thereof as may be requested, from time to time, by Landlord. This Lease is
contingent on Landlord's providing to Tenant, prior to the Possession Date,
non-disturbance and attornment agreements in reasonable form from Landlord's
mortgage lender(s) and from the lessor under the Air Rights Lease providing
that, in the event of the termination of the Air Rights Lease or the foreclosure
(or deed in lieu) of the Building, this Lease will be honored as a direct lease
between Tenant and the new owner of the Building, and Tenant's occupancy of the
Premises will not be disturbed so long as Tenant complies with the terms and
conditions hereof.
SECTION 14.2. MORTGAGEE'S UNILATERAL SUBORDINATION. If and as a Mortgagee shall
so elect, this Lease and Tenant's rights hereunder shall be superior and prior
in right to its Mortgage, with the same force and effect as if this Lease had
been executed, delivered and recorded prior to the execution, delivery and
recording of such Mortgage.
SECTION 14.3. ATTORNMENT. If any person shall succeed to all or part of
Landlord's interest in the Premises, whether by purchase, foreclosure, deed in
lieu of foreclosure, power of sale, termination of lease or otherwise, and if
and as so requested or required by such successor-in-interest, Tenant shall,
without charge, attorn to such successor-in-interest only if other party agrees
to non-disturbance.
SECTION 14.4. QUIET ENJOYMENT. Landlord covenants that it has full right, power
and authority to make this Lease and that Tenant, on paying all of the Rent and
performing all of Tenant's other obligations in this Lease, shall peaceably and
quietly have, hold and enjoy the Premises during the term without hindrance,
ejection or molestation by any person lawfully claiming by, through or under
Landlord, subject, however, to all Mortgages, encumbrances, easements and
underlying leases to which this Lease may be or become subject and subordinate,
from time to time.
SECTION 14.5. ESTOPPEL CERTIFICATE.
A. As often as may be requested by Landlord, but in no event more than
three times per year, Tenant shall promptly and without cost to Landlord duly
execute and deliver to Landlord or to any other person designated by Landlord
(i) a written instrument certifying: that this Lease is unmodified and in full
force and effect (or if there has been a modification, that the same is in full
force and effect as modified, and stating the modification); (ii) the dates, if
any, to which the Rent, and other sums and payments due under this Lease have
been paid; (iii) whether Landlord has breached the performance of any covenants,
terms and conditions on Landlord's part to be performed under this Lease, and
the nature of Landlord's breach, if any; and (iv) such other relevant
information as Landlord or any Mortgagee may reasonably request. Landlord may
prepare said document for Tenant's signature and send the same to Tenant for
Tenant's signature
B. Upon request of Landlord, Tenant shall give prompt written notice to
any Mortgagee, of which Tenant has been given the name and address of any
default of Landlord under this Lease, and Tenant shall allow such Mortgagee a
reasonable length of time (in any event, not less than sixty (60) days from the
date of such notice) in which to cure any such default.
SECTION 14.6. SUBLEASE ACKNOWLEDGEMENT AND LIABILITY OF AIR RIGHTS LESSOR.
Tenant recognizes that the Building is constructed within air space
Leased from Montgomery County, Maryland, or its successors or assigns under an
Air Rights Lease. Accordingly, this Lease is a sublease subject to the
provisions of the Air Rights Lease (the "Air Rights Lease") attached hereto as
Exhibit G. Except as may be inconsistent with the terms of this Lease, which is
subject and subordinate to the Air Rights Lease, all the terms, covenants and
conditions of the Air Rights Lease applicable to the Premises, other than the
obligation to pay rent or other money to the Air Rights lessor, shall be
applicable to this Lease with the same force and effect as if Landlord were the
lessor under the Air Rights Lease and Tenant were the lessee, thereunder; and in
case of any breach by Tenant, Landlord shall have all the rights against Tenant
as would be available to the lessor against the lessee under the Air Rights
Lease if such breach were by the lessee thereunder.
Tenant shall do nothing nor permit anything to be done that would cause
the Air Rights Lease to be terminated or forfeited because of any right of
termination or forfeiture reserved or vested in the lessor under the Air Rights
Lease, and Tenant will indemnify and hold Landlord harmless from and against all
claims of any kind by reason of any breach or default on the part of Tenant by
reason of which the Air Rights Lease may be terminated or forfeited.
The Air Rights Lease provides that Montgomery County, Maryland, or its
successors or assigns under the Air Rights Lease shall have no liability to any
Tenant of Landlord hereunder for personal injury, property damage or other
damages except to the extent that they result from the gross negligence or
willful misconduct of Montgomery County, Maryland, or its successors or assigns
under the Air Rights Lease. Accordingly, Tenant agrees that it shall assert no
claim for personal injury or property damage arising in connection with its
presents against Montgomery County, Maryland, its successors or assigns, under
the Air Rights Lease as a result of Montgomery County, Maryland's, or any
successors or assigns as landlord under the Air Rights Lease except as may arise
solely as a result of gross negligence or willful misconduct of Montgomery
County, Maryland, or its successors or assigns under the Air Rights Lease.
Landlord acknowledges that (i) the Air Rights Lease is in full force
and effect, (ii) it will comply with all terms and conditions thereof, and (iii)
there are no provisions in this Lease inconsistent with the Air Rights Lease.
ARTICLE XV
ASSIGNMENT AND SUBLETTING
SECTION 15.1. LANDLORD'S CONSENT REQUIRED.
A. Without first obtaining Landlord's prior written consent (which
consent Landlord may withhold in its sole and absolute discretion), Tenant shall
not pledge, hypothecate or assign all or any of its interest in this Lease,
whether for collateral purposes or otherwise. Tenant may sublet any portion or
all of the Premises for a use compatible with the Permitted Use with the consent
of Landlord which shall not be unreasonably withheld. Any such subletting or
assignment shall be referred to as a "Transfer," and the person to whom Tenant's
interest is transferred shall be referred to as a "Transferee." For purposes of
this Article XV, a Transfer shall include any change in the control of Tenant or
any guarantor, if the same is a corporation (other than a corporation listed on
a "national securities exchange," as defined in the Securities Exchange Act of
1934) or a partnership. For purposes of this Article XV, "control" shall mean
the possession (directly or indirectly) of the power to direct or cause the
direction of management and policies of the Tenant (or the guarantor, as the
case may be) whether by ownership of securities or otherwise,
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provided that the issuance of shares in a public offering registered under the
Securities Exchange Act of 1933 shall not be deemed a change in control for
purposes of this Article XV.
Notwithstanding anything to the contrary contained herein, Tenant may
assign its entire interest under this Lease to a wholly owned corporation or
controlled subsidiary or parent of the Tenant or to any successor to Tenant by
purchase, merger, consolidation or reorganization (hereinafter collectively
referred to as "Corporate Transfer") without the consent of Landlord, provided
(i) Tenant is not in default under this Lease; (ii) if such proposed Transferee
is a successor to Tenant by purchase, said proposed Transferee shall acquire all
or substantially all of the stock or assets of Tenant's business or, if such
proposed Transferee is a successor to Tenant by merger, consolidation or
reorganization, the continuing or surviving corporation shall own all or
substantially all of the assets of Tenant; (iii) such proposed Transferee shall
have a net worth which is equal to or greater than Tenant's net worth at the
date of this Lease; (iv) such proposed transferee assumes all the obligations of
Tenant hereunder; and (v) such proposed Transferee operates the business in the
Premises for the Permitted Use and no other purpose. Tenant shall give Landlord
written notice at least thirty (30) days prior to the effective date of such
Corporate Transfer. As used herein, the term "controlled subsidiary" shall mean
a corporate entity wholly owned by Tenant or at least fifty-one percent (51%) of
whose voting stock is owned by Tenant.
B. Any Transfer by Tenant consented to by Landlord (or permitted under
this Article XV without Landlord's consent) shall be only for the Permitted Use
and for no other purpose, and in no event shall any Transfer (including a
Corporate Transfer) release or relieve Tenant or any Guarantor from any of its
obligations under this Lease if Landlord consents to a Transfer (or, if such
Transfer is permitted under this Article XV without Landlord's consent), the
permitted Transferee shall assume Tenant's obligations under this Lease and such
Transferee, at least fifteen (15) days prior to the effective date of the
permitted Transfer, shall deliver to Landlord the proposed sublease, assignment
and assumption agreement or other instrument evidencing the Transfer, which
shall be subject to Landlord's approval, which shall not be unreasonably
withheld. In the event of a Transfer (i) in the nature of an assignment, Tenant
shall pay as additional rent to Landlord fifty percent (50%) all monies and
other consideration of every kind whatsoever paid or payable to Tenant for such
Transfer and for all property transferred to the Transferee as part of the
consideration including, without Limitation, non-trade fixtures and other
Leasehold Improvements, but excluding Tenant's Property (collectively, all of
the foregoing shall be referred to as the "Transfer Consideration"); provided,
however, Tenant shall be entitled to exclude from the Transfer Consideration the
Unamortized Improvement Cost calculated as set forth in Section 11.4 as of the
effective date of the Transfer; and (ii) in the nature of a sublease, Tenant
shall pay as additional rent to Landlord along with the monthly payments of Rent
due under this Lease, fifty percent (50%) of the amount by which the Transfer
Consideration exceeds the Rent (exclusive of Rent attributable to a default of
Tenant hereunder) reserved under this Lease as reasonably determined by
Landlord, provided however Tenant shall be entitled to exclude from the Transfer
Consideration the Unamortized Improvement Cost calculated as set forth above.
For purposes of this Section 15.1 (B) only, the term "Tenant's Property" shall
be deemed to include goodwill and any other intangible personal property
associated with Tenant's business, but in no event shall it be deemed to include
Tenant's interest under this Lease. If said Transfer requires the consent of
Landlord pursuant to this Article XV, Tenant shall pay to Landlord upon demand
as additional rent Landlord's reasonable attorneys' fees and administrative
expenses incurred in connection with any Transfer.
C. Any Transfer requiring Landlord's consent that is made without
Landlord's consent shall not be binding upon Landlord, and shall confer no
rights upon any third person. Each such unpermitted Transfer shall, without
notice or grace period of any kind, constitute a default by Tenant under this
Lease. The acceptance by Landlord of the payment of Rent following any Transfer
prohibited by this Article XV shall not be deemed to be either a consent by
Landlord to any such Transfer or a waiver by Landlord of any remedy of Landlord
under this Lease. Consent by Landlord to any one Transfer shall not constitute a
waiver of the requirement for consent to any other Transfer. No reference in
this Lease to assignees, Concessionaires, subtenants or licensees shall be
deemed to be a consent by Landlord to the occupancy of the Premises by any such
assignee, Concessionaire, subtenant or licensee.
SECTION 15.2. RIGHT TO TERMINATE AND RECAPTURE. With respect to any Transfer
requiring Landlord's consent, in lieu of consenting to any proposed Transfer,
Landlord shall have the right, but not the obligation, to terminate this Lease
and recapture the Premises upon thirty (30) days notice to Tenant unless, within
five (5) business days after Landlord's notice to Tenant exercising its option
to cancel and terminate this Lease, Tenant notifies Landlord in writing that
Tenant is withdrawing its request for Landlord's consent to such Transfer, in
which event such exercise by Landlord of such option to cancel shall be void and
of no further force and effect. Landlord's exercise of its right under this
Section 15.2 shall result in an immediate termination of the Guaranty with
respect to the space recaptured by Landlord.
ARTICLE XVI
DEFAULT AND REMEDIES
SECTION 16.1. DEFAULT.
A. Any one or more of the following events shall constitute a default
by Tenant under this Lease: if, (i) Tenant fails to pay any portion of Rent
within seven (7) days of its due date; (ii) Tenant fails to observe or perform
any of the terms, conditions or covenants of this Lease to be observed or
performed by Tenant (other than those involving the payment of money and those
set forth in the following clause (iii)) and, such breach shall not have been
cured for a period of thirty (30) days after written notice thereof from
Landlord to Tenant unless such failure, within Landlord's reasonable judgment,
cannot be cured within said thirty (30) days, in which event Tenant shall not be
in default if Tenant commences to cure such breach within the thirty (30) day
period and diligently proceeds to complete the same; (iii) Tenant vacates or
abandons the Premises for a period of more than thirty (30) days (or more than
sixty (60) days in the aggregate in any one lease year) or Tenant shall not open
for business in the Premises in accordance with Article IX or shall fail to
continuously operate its business in the Premises as required by the terms of
this Lease for a period of more than thirty (30) days (or more than sixty (60)
days in the aggregate in any one lease year); (iv) Tenant fails during any
twelve (12) month period to perform any covenant or agreement under this Lease
after Tenant shall have defaulted under this Lease on two previous occasions
during such twelve (12) month period, even though such default or defaults had
been cured by Tenant; (v) Tenant or any guarantor of this Lease shall file a
petition in bankruptcy or shall be adjudicated bankrupt or insolvent, or shall
file any petition or answer seeking any reorganization, dissolution or similar
relief under any applicable Law or if Tenant or any such guarantor shall seek or
consent to the appointment of a trustee, receiver or liquidator of Tenant or
such guarantor or the business of either, shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
when due; (vi) there shall be filed against Tenant or any guarantor of this
Lease an involuntary petition in bankruptcy or any proceeding seeking to
reorganize, dissolve or liquidate Tenant or such guarantor, or if a trustee or
receiver shall be appointed for Tenant or such guarantor or over the business or
substantially all of the property of either of them, and such petition,
proceeding, trustee or receiver is not dismissed with prejudice within sixty
(60) days; (vii) any execution or attachment shall be
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issued against Tenant or any of Tenant's Property, whereby all or any part of
the Premises or Tenant's interest under this Lease shall be taken or occupied,
and such execution or attachment, shall not be set aside, vacated or discharged
within sixty (60) days after the issuance of same; or (viii) if Tenant is
operating its business in the Premises as a franchisee under a franchise
agreement, any termination or expiration of said franchise agreement prior to
the end of the Term of this Lease. An event provided for in clauses (iii)
through (viii), inclusive, shall be a default without notice or grace period of
any kind.
B. Upon the occurrence of any event described in Section 16.1(A),
Landlord shall have all the rights and remedies provided in Section 16.2 in
addition to all other remedies available under this Lease or provided at law or
in equity.
SECTION 16.2. REMEDIES AND DAMAGES.
A. Upon the occurrence of any event described in Section 16.1 (A),
Landlord may elect to terminate this Lease or to terminate Tenant's right to
possession without terminating this Lease and to enter upon the Premises and
expel Tenant or any persons or entities occupying the Premises and so to
repossess and enjoy the Premises. If this Lease or Tenant's right to possession
under this Lease shall at any time be terminated under the terms and conditions
of this Section 16.2 or in any other way, Tenant hereby covenants and agrees to
immediately surrender and deliver up the Premises peaceably to Landlord.
B. If Landlord elects to terminate Tenant's right to possession under
this Lease, but not to terminate this Lease, Landlord may, relet the Premises
(or any part thereof) for the account of Tenant at such rentals and upon such
terms and conditions as Landlord shall reasonably deem appropriate, and to the
extent Landlord receives the rents therefor, Landlord shall apply the same first
to the payment of such expenses as Landlord may have incurred in recovering
possession of the Premises (including, without limitation, legal expenses and
attorneys' fees) and for putting the same into good order and condition and
preparing or altering the same for re-rental, and any other expenses,
commissions and charges paid, assumed or incurred by or on behalf of Landlord in
connection with the reletting of the Premises, and then to the fulfillment of
the covenants of Tenant under this Lease. Tenant shall pay to Landlord the Rent
and all other sums payable up to the time of such termination of this Lease or
Tenant's right to possession under this Lease, and thereafter, Tenant covenants
to pay Landlord until the end of the Term of this Lease the equivalent of the
amount of all the Rent and all other sums required to be paid by Tenant under
this Lease less the net avails of such reletting, if any, during the same
period, and the same shall be due and payable by Tenant to Landlord on the dates
such Rent and other sums are due under this Lease. Any reletting by Landlord
shall not be construed as an election on the part of Landlord to terminate this
Lease unless a notice of such intention is given by Landlord to Tenant.
Notwithstanding any reletting without termination of this Lease, Landlord may at
any time thereafter elect to terminate this Lease. In any event, Landlord shall
not be liable for, nor shall Tenant's obligations hereunder be diminished by
reason of any failure by Landlord, despite good faith efforts, to relet the
Premises or any failure by Landlord, despite good faith efforts, to collect any
sums due upon such reletting, provided that Landlord shall use reasonable
efforts to mitigate the damages recoverable against Tenant in the event that
Tenant defaults under this Lease and Tenant's right to possession of the
Premises is terminated under this Article XVI; provided however, Landlord shall
have no obligation to relet the Premises before Landlord leases other vacant
space in the Building, or to relet the Premises to any potential tenant who
Landlord could reasonably reject as a Transferee Pursuant to Article XV hereof.
C. If Landlord elects to terminate this Lease instead of terminating
only Tenant's right to possession, Landlord shall have the right to recover
against Tenant as damages for loss of the bargain, and not as a penalty, the
excess (if any), as determined by Landlord, of (i) the then present value of the
projected Rent and all other sums payable by Tenant hereunder (as determined by
Landlord on the basis of reasonable estimates) that would have accrued for the
balance of the Term of this Lease less (ii) the then present value of the fair
market value of the Premises for the balance of such term.
SECTION 16.3. ASSIGNMENT IN BANKRUPTCY. In the event of an assignment by
operation of law under the Federal Bankruptcy Code, or any State bankruptcy or
insolvency law and Landlord is prevented from or elects not to terminate this
Lease under Section 16.2, the assignee shall provide Landlord with adequate
assurance of future performance of all of the terms, conditions and covenants of
this Lease, which shall include, without limitation, assumption of all the
terms, covenants and conditions of this Lease by the assignee and the making
by the assignee of the following express covenants to Landlord: (i) that
assignee has sufficient capital to pay the Rent and other charges due under this
Lease for the entire Term; (ii) that assumption of this Lease by the assignee
will not cause Landlord to be in violation or breach of any provision in any
other lease, financing agreement or operating agreement relating to the
Building; and (iii) that such assignment and assumption will not disrupt or
impair any existing tenant mix in the Building.
SECTION 16.4. LEGAL EXPENSES. In the event that either party should retain
counsel and/or institute any suit against the other party for violation of or to
enforce any of the covenants or conditions of this Lease, or should either party
institute a suit against the other party for a declaration of rights hereunder,
or should either party intervene in any suit in which the other party is a
party, to enforce or protect its interest or rights hereunder, the substantially
prevailing party (or, in the case of intervening in any suit, the intervening
party) shall be entitled to all of its costs, expenses and reasonable fees of
its attorney(s) in connection therewith.
SECTION 16.5. REMEDIES CUMULATIVE. No reference to any specific right or remedy
in this Lease shall preclude Landlord from exercising any other right, from
having any other remedy, or from maintaining any action to which it may
otherwise be entitled under this Lease, at law or in equity.
SECTION 16.6. WAIVER.
A. Neither Landlord nor Tenant shall be deemed to have waived any breach
of any term, covenant, or condition herein contained unless the same has been
specifically waived by such party in writing. Any such waiver shall not be
deemed to be a waiver of any subsequent breach of the same or any other term,
covenant or condition herein contained,
B. Tenant hereby waives any and all rights of redemption and all rights
to relief from forfeiture granted by or under any applicable Law. To the fullest
extent permitted by law, Tenant waives the right to a trial by jury and the
right to file any counterclaims or cross-claims other than compulsory
counterclaims or cross-claims in actions for recovery of possession of the
Premises and in actions for breach of monetary obligations under this Lease
only.
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ARTICLE XVII
MISCELLANEOUS PROVISIONS
SECTION 17.1. NOTICES.
A. Whenever any demand, request, approval, consent or notice ("Notice")
shall or may be given to either of the parties by the other, each such Notice
shall be sent by registered or certified mail with return receipt requested, or
sent by overnight courier service (such as Federal Express) at the respective
addresses of the parties as set forth in Section 1.1 (K). Any Notice under this
Lease delivered by registered or certified mail shall be deemed to have been
given and effective on the date such Notice is received or when acceptance of
delivery is refused. Either party may, at any time, change its Notice Address by
giving the other party Notice in accordance with the above, stating the change
and setting forth the new address.
B. If any Mortgagee shall notify Tenant that it is the holder of a
Mortgage affecting the Premises, no Notice thereafter sent by Tenant to Landlord
shall be effective unless and until a copy of the same shall also be sent to
such Mortgagee in the manner prescribed in this Section 17.1 and to such address
as such Mortgagee shall designate.
C. Any notice from Landlord may be given by Landlord, Landlord's
Managing Agent for the Building or Landlord's attorneys.
SECTION 17.2. SHORT FORM LEASE. This Lease shall not be recorded without the
express written consent of Landlord. A "short form lease" may be recorded only
if Landlord requests or consents in writing to such recording. Recording, filing
and like charges including applicable transfer taxes shall be paid by the
requesting party.
SECTION 17.3. INTEREST AND ADMINISTRATIVE COSTS. If (i) Tenant fails to make any
payment under this Lease when due, (ii) Landlord performs or causes the
performance of any obligation of Tenant under this Lease, or (iii) Landlord
incurs any costs or expenses as a result of Tenant's default under this Lease,
then Tenant shall pay, upon demand, the amount due under (i), or the amount of
such costs and expenses incurred under (ii) or (iii) above, plus Interest (as
defined in Section 1.2(D) above) from the date such payment was due or from the
date Landlord incurs such costs or expenses plus Landlord's administrative costs
in connection therewith.
SECTION 17.4. SUCCESSORS AND ASSIGNS. This Lease and the covenants and
conditions herein contained shall inure to the benefit of and be binding upon
Landlord, and Tenant and their respective permitted successors and assigns. Upon
any sale or other transfer by Landlord of its interest in the Premises, Landlord
shall be relieved of any obligations under this Lease occurring subsequent to
such sale or other transfer. Notwithstanding the foregoing, if Tenant is a
single individual and dies or becomes incapacitated, Landlord reserves the right
to terminate this Lease upon thirty (30) days advance Notice to Tenant or
Tenant's legal representative.
SECTION 17.5. LIMITATION ON RIGHT OF RECOVERY AGAINST LANDLORD. It is
specifically understood and agreed that none of the Landlord Related Parties
shall be personally liable for any of the covenants, conditions or provisions of
this Lease. In the event of a breach or default by Landlord of any of its
obligations under this Lease, Tenant shall look solely to the equity of the
Landlord in the Building for the satisfaction of Tenant's remedies. The
limitations on Tenant's right of recovery against the Landlord Related Parties
set forth in this Section 17.5 shall survive the expiration of the Term of this
Lease (whether by lapse of time or otherwise).
SECTION 17.6. RELATIONSHIP OF THE PARTIES. Nothing contained in this Lease shall
be deemed to be construed as creating the relationship of principal and agent or
of partnership or joint venture between Landlord and Tenant, it being understood
and agreed that neither the method of computing Rent nor any other provision
contained herein nor any acts of the parties hereto shall be deemed to create
any relationship between the parties other than that of landlord and Tenant.
SECTION 17.7. SECURITY DEPOSIT. Tenant shall deposit with Landlord, upon
execution of this Lease by Tenant, the Security Deposit defined in Section
1.1.H. above, as security for the performance of each and every covenant,
agreement and condition of this Lease to be performed by Tenant. Landlord may
use all or any part of the security so deposited for the payment of any Rent or
other sums as to which Tenant may be in default hereunder, or for any sum which
Landlord may expend to cure any default of Tenant or by reason of Tenant's
default. After each application from the Security Deposit, Tenant shall upon
demand replenish said deposit to the amount as may be required by Landlord. The
covenants in this Section 17.7 are personal covenants between Landlord and
Tenant and not covenants running with the land, and in no event will any
Mortgagee or any purchaser at a foreclosure sale or a sale in lieu of
foreclosure be liable to Tenant for the return of the Security Deposit. In the
event of a sale of the Building or an assignment of this Lease by Landlord to
any person other than a mortgagee, Landlord may transfer the Security Deposit to
the new Landlord, in which case Tenant shall look solely to the new Landlord for
the return of the Security Deposit.
SECTION 17.8. INTERPRETATION. Whenever used herein, the singular shall include
the plural and the plural shall include the singular, as necessary, and the use
of any gender shall include either gender, as necessary. This Lease and the
rights and obligations of the parties hereunder shall be construed in accordance
with the laws of the State in which the Building is Located.
SECTION 17.9. NO MODIFICATION. This Lease is intended by the parties as a final
expression of their agreement and as a complete and exclusive statement of the
terms thereof, all negotiations, considerations and representations between the
parties having been incorporated herein. Acceptance of a course of performance
rendered under this or any prior agreement between the parties or their
affiliates shall not be relevant or admissible to determine the meaning of any
of the terms of this Lease. No representations, understandings, agreements,
warranties or promises with respect to the Premises or the building or Building
of which they are a part or with respect to past, present or future tenancies,
rents, expenses, operations or any other matter have been made or relied upon in
the making of this Lease other than those specifically set forth herein. This
Lease can be modified only by a written instrument signed by Landlord and
Tenant.
SECTION 17.10. SEVERABILITY. If any term or provision of this Lease, or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances, other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
SECTION 17.11. TENANT LIABILITY. If two or more individuals, corporations,
partnerships or other persons (or any combination of two or more thereof) shall
sign this Lease as Tenant, the liability of each such
17
<PAGE> 21
individual, corporation, partnership or other persons to pay the Rent and
perform all other obligations hereunder shall be deemed to be joint and several,
and all notices, payments and agreements given or made by, with or to any one of
such individuals, corporations, partnerships or other persons shall be deemed to
have been given or made by, with or to all of them.
SECTION 17.12. BROKER'S COMMISSION. Except for Smithy Braedon * Oncor
International, each of the parties represents and warrants to the other that
except as expressly set forth in this Section 17.12, such party has not dealt
with any broker in connection with this Lease and that such party has no
knowledge of any claims for brokerage commissions or finders' fees in
connection with this Lease. Each party agrees to indemnify and defend the other
against, and hold it harmless from, all liability arising from any claim for
brokerage commissions or finders' fees of any kind (including, without
limitation, attorneys' fees incurred in connection therewith) in connection with
this Lease, any amendment hereto or any Transfer, which claim arises (directly
or indirectly) out of an agreement, contract, course of dealings or relationship
between such a party and the claiming party.
SECTION 17.13. OTHER TENANTS. Landlord reserves the absolute right to effect
other tenancies in the Building as Landlord shall determine in the exercise of
its sole business judgment. Tenant does not rely on the fact, nor does Landlord
represent, that any specific tenants, or occupant, or the number of tenants or
occupants, shall occupy any space in the Building during the Term. A vacation of
premises or cessation of operations by any other tenant(s) in the Building shall
not in any way release Tenant from its obligations under this Lease.
SECTION 17.14. RULE AGAINST PERPETUITIES. If the Term of this Lease shall not
have commenced within five (5) years from the date of this Lease, then this
Lease shall thereupon become null and void and have no further force and effect.
SECTION 17.15. IRREVOCABLE OFFER, NO OPTION. In consideration of Landlord's
administrative expense in considering this Lease, Tenant's submission to
Landlord of this Lease, duty executed by Tenant, shall constitute Tenant's
irrevocable offer to continue for fourteen (14) days from and after receipt by
Landlord or until Landlord shall deliver to Tenant written notice of rejection
of Tenant's offer, whichever shall first occur. if within said fourteen (14) day
period Landlord shall neither return this Lease duly executed by Landlord nor so
advise Tenant of Landlord rejection of Tenant's offer, then Tenant shall be
free to revoke its offer. Although Tenant's execution of this Lease shall be
deemed an offer irrevocable by Tenant, the submission of this Lease by Landlord
to Tenant for examination shall not constitute a reservation of or option for
the Premises. This Lease shall become effective only upon execution thereof by
both parties and delivery thereof to Tenant.
SECTION 17.16. INABILITY TO PERFORM. If Landlord or Tenant is delayed or
prevented from performing any of its obligations under this Lease, except for
Tenant's obligation for payment of money, by reason of strike or labor troubles
or any cause whatsoever beyond its control (or beyond the control of its agents,
employees or contractors, as the case may be), the period of such delay or such
prevention shall be deemed added to the time herein provided for the performance
of any such obligation by either party. The Commencement Date will be delayed on
a day-for-day basis for any inability of Tenant to proceed with the build out of
the Premises due to (a) any such causes beyond Tenant's reasonable ability to
control or (b) any interference with Tenant's construction activities by
Landlord's construction activities, any failure by Landlord to obtain any
certificate of occupancy or other permit necessary for Tenant to continue its
construction activities or to take occupancy of the Premises, (c) any failure by
Landlord to respond to Tenant's submission of plans and specifications within
the time periods contemplated in Exhibits C-1 and C-2 attached hereto or (d) any
breach by Landlord of any of its obligations under this Lease. The Commencement
Date shall not be extended by reason of delays in the construction schedule
caused by Tenant's failure to submit plans and specifications for Landlord's
approval within the periods contemplated by Exhibits C-1 and C-2 attached hereto
or by any other breach by Tenant of its obligations hereunder.
SECTION 17.17. SURVIVAL. Notwithstanding anything to the contrary contained in
this Lease, the expiration of the Term of the Lease, whether by lapse of time or
otherwise, shall not relieve either party from their respective obligations
accruing during or attributable to any portion of the Term, subject to the
provisions of Section 17.5.
SECTION 17.18. LANDLORD'S SELF-HELP. In addition to Landlord's rights of
self-help set forth elsewhere in this Lease or as provided by law or in equity,
if Tenant at any time fails to perform any of its obligations under this Lease
in a manner satisfactory to Landlord, Landlord shall have the right but not the
obligation, with ten (10) days prior notice (except in the case of any dangerous
condition or emergency, in which case no notice shall be required) to perform or
cause to be performed such obligations on behalf and at the expense of Tenant.
In such event, Landlord's costs and expenses incurred with respect thereto
shall, upon demand, be paid for by Tenant as additional rent. The performance by
Landlord of any such obligation shall not constitute a release or waiver of any
of Tenant's obligations under this Lease.
SECTION 17.19. DUE AUTHORIZATION. If Tenant is a corporation or a partnership,
the person(s) executing this Lease on behalf of Tenant hereby covenant and
warrant that: Tenant is a duly formed corporation or a duly created partnership
(as the case may be) in good standing, qualified to do business in the State in
which the Building is located; such persons are duty authorized by such
corporation or partnership to execute and deliver this Lease on behalf of such
corporation or partnership; and this Lease constitutes a valid and binding
agreement of Tenant in accordance with the terms hereof.
SECTION 17.20. CONFIDENTIALITY. It is agreed and understood that Tenant may
acknowledge only the existence of this Lease by and between Landlord and Tenant,
and that Tenant may not disclose any of the terms and provisions contained in
this Lease to any tenant or other occupant in the Building or to any agent,
employee, subtenant or assignee of such tenant or occupant. Tenant acknowledges
that any breach by Tenant of the agreements set forth in this Section 17.20
shall cause Landlord irreparable harm. The terms and provisions of this Section
17.20 shall survive the termination of this Lease (whether by lapse of time or
otherwise).
SECTION 17.21. HAZARDOUS MATERIALS. Tenant shall not, without the prior written
consent of Landlord, cause or permit any Hazardous Materials (hereinafter
defined) to be brought or remain upon, kept, used, discharged, leaked, or
emitted in or about, or treated at the Premises except for that normal and
customary for office use provided it is properly maintained and stored. As used
in this Lease, "Hazardous Materials" shall mean any hazardous, toxic or
radioactive substance, material, matter or waste which is or becomes regulated
by any federal, state, commonwealth or local law, ordinance, order, rule,
regulation, code or any other governmental restriction or requirement, and shall
include asbestos, petroleum products and the terms "Hazardous Substance" and
"Hazardous Waste" as defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), 42 U.S.C. Section 9601 et
seq., the Resource Conservation and Recovery Act, as amended ("RCRA"), 42 U.S.C.
Section 6901 et seq. To obtain Landlord's consent, Tenant shall prepare an
"Environmental Audit" for Landlord's review. Such Environmental Audit shall
18
<PAGE> 22
list: (i) the name(s) of each Hazardous Material and a Material Safety Data
Sheet (MSDS) as required by the Occupational Safety and Health Act; (ii) the
volume proposed to be used, stored and/or treated at the Premises (monthly);
(iii) the purpose of such Hazardous Material; (iv) the proposed on-premises
storage location(s); (v) the name(s) of the proposed off-premises disposal
entity; and (vi) an emergency preparedness plan in the event of a release.
Additionally, the Environmental Audit shall include copies of all required
federal, state, commonwealth and local permits concerning or related to the
proposed use, storage, or treatment of Hazardous Materials, at the Premises.
Tenant shall submit a new Environmental Audit whenever it proposes to use,
store, or treat a new Hazardous Material at the Premises or when the volume of
existing Hazardous Materials to be used, stored, or treated at the Premises
increases by ten percent (10%) during any thirty (30) day period. If Landlord in
its reasonable judgment finds the Environmental Audit acceptable, then Landlord
shall deliver to Tenant Landlord's written consent. Notwithstanding such
consent, Landlord may revoke its consent upon: (i) Tenant's failure to remain in
full compliance with applicable environmental permits and/or any other
requirements under any federal, state, commonwealth or local law, ordinance,
order, rule, regulation, code or any other governmental restriction or
requirement (including but not limited CERCLA and/or RCRA), related to
environmental safety, human health, or employee safety; (ii) the Tenant's
business operations pose or potentially pose a human health risk to other
tenants; or (iii) the Tenant expands its use, storage, or treatment of Hazardous
Materials in a manner inconsistent with the safe operation of a Building. Should
Landlord consent in writing to Tenant bringing, using, storing or treating any
Hazardous Material in or upon the Premises, Tenant shall strictly obey and
adhere to any and all federal, state or local laws, ordinances, orders, rules,
regulations, codes or any other governmental restrictions or requirements
(including but not limited to the CERCLA and/or RCRA), which in any way
regulates, governs or impacts Tenant's possession, use, storage, treatment or
disposal of said Hazardous Material. In addition, Tenant represents and warrants
to Landlord that (i) Tenant shall apply for and remain in compliance with
applicable RCRA and Maryland permits; (ii) Tenant shall report to applicable
governmental authorities any release of reportable quantities of a hazardous
substance (s) as mandated by Section 103 (a) of CERCLA; (3) Tenant, within five
(5) days of receipt, shall send to Landlord a copy of any notice, order,
inspection report, or other document issued by any governmental authorities
relevant to the Tenant's compliance status with environmental or health and
safety laws; and, (iv) Tenant shall remove from the Premises all Hazardous
Materials at the termination of this Lease.
In addition to, and in no way limiting Tenant's duties and obligations
as set forth in Section 8.1 of this Lease, should Tenant breach any of its
duties and obligations as set forth in this Section 17.21 of this Lease, or if
the presence of any Hazardous Material on the Premises results in contamination
of the Premises, the Building, any land other than the Building, the atmosphere,
or any water or waterway (including groundwater), or if contamination of the
Premises or of the Building by any Hazardous Materials otherwise occurs for
which Tenant is otherwise Legally liable to. Landlord or damages resulting
therefrom, Tenant shall indemnify, save harmless and, at Landlord's option and
with attorneys chosen by Landlord, defend Landlord, and its contractors, agents,
employees, partners, officers, directors, and Mortgagees, if any, from any and
all claims, demand, damages, expenses, fees, costs, fines, penalties, suits,
proceedings, actions, causes of action, and losses of any and every kind and
nature (including, without limitation, diminution in value of the Premises or
the Building, damages for the loss or restriction on use of the Store Space or
of any amenity of the Premises or the Building, damages arising from any adverse
impact on marketing space in the Building, and sums paid in settlement of claims
and for attorneys' fees, consultant and expert fees, which may arise during or
after the Term or any extension thereof as, as a result of such contamination).
This includes, without limitation, costs and expenses, incurred in connection
with any investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any federal, state, commonwealth or local
governmental agency or political subdivision because of the presence of
Hazardous Materials on or about the Premises or the Building, or because of the
presence of Hazardous Materials anywhere else which came or otherwise emanated
from Tenant or the Premises. Without limiting the foregoing, if the presence of
any Hazardous Materials on or about the Premises or the Building caused or
permitted by Tenant results in any contamination of the Premises or the
Building, Tenant shall, at its sole expense, promptly take all actions and as
are necessary to return the Premises and/or the Building to the condition
existing prior to the introduction of any such Hazardous Materials to the
Premises or the Building; provided, however, that Landlord's approval of such
actions shall first be obtained in writing.
SECTION 17.22. TENANT'S EXCLUSIVE. Landlord agrees that during the Term, as same
may be extended or as same may be earlier terminated pursuant to the terms and
conditions hereof, Landlord will not sell or lease any space within the Building
to any individual or entity whose primary business at such space is retail
banking. This restriction shall automatically terminate upon the termination of
this Lease or upon the termination of Tenant's right to possession of the
Premises pursuant to Section 16 hereof and shalt not apply to any leases
executed by Landlord and any other tenant as of the date of this Lease for space
within the Building.
IN WITNESS WHEREOF, the parties hereto intending to be legally bound
hereby have executed this Lease under their respective hands and seals as of the
day and year first above written. This Lease contains 19 pages, and Exhibits A,
B, C-1, C-2, D, E, F, G, H, I and J.
LANDLORD:
ATTEST/WITNESS:
/s/ [SIG] By: /s/ [SIG]
- --------------------------------- -----------------------------
Title:
TENANT:
PALMER NATIONAL BANK
ATTEST/WITNESS:
/s/ DENNIS J. PANKO By: /s/ KEVIN F. DECOSTE
- --------------------------------- -----------------------------
AVP, Facilities Title: EVP
19
<PAGE> 23
STATE OF Maryland
)ss
COUNTY OF Montgomery
BE IT REMEMBERED, that on the 6th day of September, 1996, before me, a
Notary Public in and for said County, personally appeared the Housing
Opportunity Commission, LANDLORD, in the foregoing Lease Agreement, by Richard
J. Ferraxi, its Exec. Dir. who acknowledged that the signing thereof was the
duly authorized act and deed of said entity for the uses and purposes therein
mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal on the day and year first above written.
/s/ BENETTA B. WALKER
-------------------------------
Notary Public
My Commission Expires: 11-29-97
STATE OF Virginia
)SS
COUNTY Of Fairfax)
BE IT REMEMBERED, that on the 9th day of August, 1996, before
me, a Notary Public in and for said County, personally appeared, PALMER NATIONAL
BANK National Banking corporation, the TENANT in the foregoing Lease Agreement,
by, its President, who acknowledged that the signing thereof was the duly
authorized act and deed of said corporation and his free and voluntary act and
deed as said officer for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal
on the day and year first above written.
/s/ [SIG]
-------------------------------
Notary Public
My Commission Expires: May 31, 1998
20
<PAGE> 1
EXHIBIT 10AP
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assignment"), dated as
of the 10th day of December, 1996 (the "Effective Date"), by and among FIRST
UNION NATIONAL BANK OF MARYLAND (the "Assignor"), THE GEORGE MASON BANK, N.A.
(the "Assignee"), and PIKE SHOPPING CENTER LIMITED PARTNERSHIP (the "Lessor"),
recites and provides:
RECITALS:
By Lease (the "Lease"), between the Lessor (as landlord) and the
Assignor, successor to The Bank of Baltimore (as tenant), the Lessor leased to
the Assignor certain real estate located in the County of Montgomery, Maryland,
and more particularly described in the Lease (the "Leased Premises"). A true and
complete copy of the Lease is attached hereto as Exhibit "A". Under the terms of
the Lease, the Assignor may not assign its interest in the Lease except with
the prior written consent of the Lessor.
The Assignor now wishes to assign and transfer to the Assignee all of
the Assignor's right, title, and interest in and to the Lease. The Lessor is
willing to consent to such assignment on the terms and conditions set forth
herein.
ASSIGNMENT AND ASSUMPTION AGREEMENT:
FOR and in consideration of the premises, the mutual covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Assignment. Effective as of the Effective Date, the Assignor hereby
assigns and transfers to the Assignee all of the Assignor's right, title, and
interest in and to the Lease for the
<PAGE> 2
remainder of the term thereof (including any rights to renew the Lease or extend
the term thereof), subject to the rental, terms, covenants, and conditions of
the Lease. Notwithstanding the foregoing, however, the Assignee shall have the
right to terminate this Assignment on or before thirty (30) days from the
Effective Date (the "Regulatory Approval Period") in the event the Assignee is
not able to obtain, or is denied, approval from the Office of the Comptroller of
the Currency and/or the requisite regulatory agency of the State of Maryland
(collectively, the "Regulatory Approvals") before the expiration of the
Regulatory Approval Period. The Assignee shall exercise due diligence to obtain
the Regulatory Approvals. The Assignee shall have the further right to terminate
this Assignment on or before thirty (30) days from the Effective Date (the
"Environmental Review Period") in the event the Assignee determines within the
Environmental Review Period, in the exercise of reasonable discretion and based
upon an environmental audit of the Leased Premises, that hazardous materials are
located in, on or under the Leased Premises, in violation of local, state or
federal laws. The Lessor executes this Assignment to grant to the Assignee
complete access to the Leased Premises for the purpose of conducting such
environmental audit, provided that the Assignee repairs any damage to the Leased
Premises caused in connection with such environmental audit. The Assignee shall
indemnify and hold the Lessor harmless from and against all costs, expenses, and
liabilities incurred by the Lessor in connection with the environmental audit
conducted by the Assignee and the Assignee's entry upon the Leased Premises
pursuant to this paragraph.
2. Condition of Premises. Within ten (10) days of the Effective Date, the
Assignor shall inspect the HVAC system and the bathroom fixtures within the
Leased Premises and shall make such repairs thereto as the Assignor deems
reasonably necessary to ensure that the same are in good working condition as of
such date. The Assignee acknowledges that it has had and, prior to the
2
<PAGE> 3
Effective Date, shall have an opportunity to examine the Leased Premises.
This assignment and transfer is made "as is" and, except as expressly provided
in this Assignment, there are no warranties, express or implied, with respect to
the Leased Premises.
3. Representations and Warranties. The Assignor and the Assignee each
represent and warrant to the other that (a) it has full power and authority to
execute and deliver this Assignment, and (b) the execution and delivery hereof
and the terms and obligations hereof do not contravene any agreement to which it
is a party or by which it or the Leased Premises is bound. The Lessor (except as
to subparagraph (iv) below) and the Assignor represent and warrant to the
Assignee: (i) that the Lease is in full force and effect, (ii) that to the best
of their knowledge, there exists no event of default thereunder on the part of
either the Assignor or the Lessor, (iii) that to the best of their knowledge,
there exists no event which with the giving of notice or the expiration of any
applicable cure period would constitute an event of default by either the
Assignor or the Lessor under the Lease, and (iv) that the Leased Premises as of
the Effective Date contains among other equipment, the following items (as they
were on September 6, 1996, the date the Assignor and the Assignee walked through
the Leased Premises): (a) a drive through banking facility, (b) one night teller
safe, and (c) undercounter teller equipment.
4. Indemnity by Assignor. Subject to the provisions of paragraph 2 of this
Assignment, the Assignor covenants to hold the Assignee harmless from and
indemnify the Assignee for any loss, damage, cost, or expense (including
reasonable attorneys' fees) arising out of any failure of the Assignor to
perform any of its obligations under the Lease up to and including the Effective
Date. Notwithstanding the foregoing, except as expressly provided in paragraph 5
of this Assignment, Assignor (as between Assignor and Assignee) shall have no
responsibility with respect to any of the obligations under the Lease from and
3
<PAGE> 4
after the Effective Date. Nothing contained in this paragraph 4 shall be deemed
to be a release by Lessor of Assignor from its obligations under the Lease.
5. Acceptance, Assumption, and Indemnity by Assignee. The Assignee (a)
accepts the assignment of all of the Assignor's right, title, and interest in
and to the Lease, (b) agrees to be bound by all of the terms, covenants, and
conditions thereof, and (c) assumes the obligations of the Assignor under the
Lease from and after the Effective Date; provided, however, that the Assignee's
obligation to pay rent under the Lease shall not commence until sixty (60) days
after the Effective Date and during such sixty (60) day period the Assignor
shall pay rent under the Lease. The Assignee covenants and agrees to perform
each term, covenant, and condition directly for the benefit of the Lessor and to
hold the Assignor harmless from and indemnify the Assignor for any loss, damage,
cost, or expense (including reasonable attorneys' fees) arising out of any
failure of the Assignee to perform any of its obligations under the Lease from
and after the Effective Date. Notwithstanding the foregoing, Assignee shall have
no responsibility with respect to any of the obligations under the Lease up to
and including the Effective Date or at any time after the date Assignee
terminates this Assignment, if it terminates this Assignment pursuant to
paragraph 1 hereof
6. Consent of Lessor. The Lessor executes this Assignment to evidence
its consent to the assignment effected hereby; provided, however, that such
consent shall neither be nor be deemed to be a consent to, or a waiver of the
necessity of obtaining the consent of the Lessor to, any proposed future
assignment.
7. Modification of Lease. The Lessor and the Assignee further execute
this Assignment to modify the Lease, effective as of the Effective Date (and
provided Assignee does not terminate this Assignment as provided herein) as
follows:
4
<PAGE> 5
(a) The words "9:00 a.m. to 5:00 p.m. Mondays through
Saturdays" in paragraph 39 of the Lease are deleted and the words "9:00 a.m. to
5:00 p.m. Mondays through Fridays and 9:00 a.m. to 1:00 p.m. Saturdays" are
inserted in their place.
(b) Notwithstanding anything to the contrary contained in the
Lease, the Assignee shall be permitted, with the prior written consent of
Lessor, to renovate the Leased Premises, which renovation shall include (i)
replacement of the shake mansard roof with a standing scam metal roof, painted
red, (ii) painting the exterior of the Leased Premises white, (iii) replacement
of the drive through automatic teller machine, and (iv) painting, wall papering
and redecorating the interior of the Leased Premises.
(d) Notwithstanding anything to the contrary contained in the
Lease, and subject to paragraph 20 of the Lease, the Assignee shall have the
right to place its sign in the dedicated pylon sign previously used by the
Assignor.
(e) Notwithstanding anything to the contrary contained in the
Lease, the Assignee shall have the right from time to time, with the prior
written consent of Lessor, to replace the landscaping located at the corner of
Rockville Pike and Bou Avenue, with such plants and other materials as are
acceptable to the Lessor in the exercise of its reasonable discretion.
8. Change of Address. For all purposes under the Lease,
including, but not limited to paragraph 35 thereof, the mailing address for the
tenant thereunder shall be changed to the following:
5
<PAGE> 6
Mr. Dennis Danko
Assistant Vice President, Facilities Dept.
The George Mason Bank, N.A.
4241 Walney Road
Chantilly, Virginia 22021
9. Further Assurances. Each party hereto covenants and agrees to
execute and deliver, or cause to be executed and delivered, and to do or make,
or cause to be done or made, upon the reasonable request of any other party, any
and all instruments, papers, deeds, acts, or things, supplemental, confirmatory,
or otherwise, as may be reasonably required by such other party for the purpose
of effecting the assignment described herein.
10. Completeness and Modification. This Assignment constitutes the
entire agreement between the parties hereto as to the transactions contemplated
hereby and supersedes all prior discussions, understandings, or agreements
between the parties hereto.
11. Successors and Assigns. This Assignment shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
12. Governing Law. This Assignment and all other instruments referred
to herein shall be governed by, and shall be construed according to the laws of
the State of Maryland.
13. Counterparts. To facilitate execution, this Assignment may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof, and it shall be sufficient that the signature on behalf of each party
hereto appear on one or more such counterparts. All counterparts shall
collectively constitute a single agreement. This Assignment shall not be
effective unless and until it has been executed by all parties hereto, which
must occur, if at all, on or before December 31, 1996.
6
<PAGE> 7
14. Incorporation by Reference. All of the Exhibits attached hereto or
referred to herein and all documents in the nature of such Exhibits are by
reference incorporated herein and made a part of this Assignment.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed by their duly authorized representatives effective as of the later
of the dates of execution set forth below, which later date shall be the
effective date hereof and shall be inserted on page 1 of this Assignment.
ASSIGNOR:
FIRST UNION NATIONAL BANK OF MARYLAND
12/2/96 By: [SIG]
- ------------------------ ---------------------------
Date Its: V.P.
---------------------------
ASSIGNEE:
THE GEORGE MASON BANK, N.A.
11/26/96 By: [SIG]
- ------------------------ ---------------------------
Date Its: Pres
---------------------------
LESSOR:
PIKE SHOPPING CENTER LIMITED PARTNERSHIP
12/10/96 By: [SIG]
- ------------------------ ---------------------------
Date Its: Partner
---------------------------
7
<PAGE> 8
STATE OF North Carolina
--------------
County of Gaston, to wit:
------- ---------
The foregoing instrument was duly acknowledged before me in the County of
------
Gaston this 3 day of Dec., 1996, by , as Vice President
- --------------, --- --- -------- --------------
of FIRST UNION NATIONAL BANK OF MARYLAND, a national banking association, on
behalf of the association.
/s/ PATRICIA H. BRYANT
----------------------
Notary Public
My commission expires: 4/22/2000
--------------------
STATE OF Virginia
-------------------
County of Fairfax to wit:
- ------------ -----------------,
The foregoing instrument was duly acknowledged before me in the County
of Fairfax, this 26th day of November, 1996, by Webb Hayes, as President ------
- ------- --- -------- ---------- --------- of THE
GEORGE MASON BANK, N.A., a national banking association, on behalf of the
association.
[SIG]
------------------------
Notary Public
My commission expires: 2/28/99
--------------
UNITED STATES OF AMERICA
DISTRICT of COLUMBIA, to wit:
The foregoing instrument was duly acknowledged before me in the District
---------
of Columbia, this 10th day of December, 1996, by Ralph S. Dweck ,
-------- ---- -------- ----------------
as General Partner of PIKE SHOPPING CENTER LIMITED PARTNERSHIP, a Maryland
limited partnership, on behalf of the partnership.
[SIG]
--------------------------
Notary Public
My commission expires: July 31, 1997
---------------------
8
<PAGE> 9
LEASE AGREEMENT
PIKE SHOPPING CENTER
LANDLORD: PIKE SHOPPING CENTER LIMITED PARTNERSHIP
TENANT: The Bank of Baltimore
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C> <C>
1. Data Sheet .................................... 1
2. Demised Premises .............................. 1
3. Ingress and Parking ........................... 2
4. Condition of Premises ......................... 2
5. Lease Term and Surrender; Renewal Option ...... 2
6. Fixed Minimum Rent ............................ 3
[7. Percentage Rent]............................... 4
[8. Gross Revenue Reports]......................... 5
[9. Audit]......................................... 5
[10. Definition of Gross Revenues; Record Keeping].. 5
11. Taxes and Assessments ......................... 7
12. Laws and Ordinances ........................... 9
13. Furniture; Fixtures ........................... 9
14. Repairs; HVAC Contract ........................ 10
15. Tenant Alterations ............................ 10
16. Damage ........................................ 11
17. Eminent Domain ................................ 12
18. Roof Rights ................................... 13
19. Store Purpose; Trade Name ..................... 13
20. Signs ......................................... 13
21. Hours of Lighting ............................. 14
22. Parking and Common Use Area ................... 14
23. Utilities ..................................... 15
24. Trash ......................................... 15
25. Keep Clean .................................... 15
26. Hold Harmless ................................. 15
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C>
27. Property at Tenant's Risk ............................... 16
28. Insurance Risk .......................................... 16
29. Landlord's Access ....................................... 16
30. Bankruptcy .............................................. 16
31. Default of Tenant ....................................... 17
32. Reletting ............................................... 18
33. Hold Over ............................................... 20
34. Subordination and Attornment ............................ 20
35. Notices ................................................. 21
36. Successors and Assigns .................................. 21
37. Subletting and Assignment ............................... 21
38. Not Partners ............................................ 22
39. Continuous Occupancy .................................... 22
40. Maintenance and Operation of Common Areas ............... 23
41. Cost of Maintenance and Operation of Common Areas ....... 23
42. Insurance ............................................... 24
43. Additional Rent; Late Charges ........................... 25
44. Quiet Enjoyment ......................................... 26
45. Transfer of Landlord's Interest; Landlord's Liability.... 26
46. No Waiver ............................................... 26
47. Partial Invalidity ...................................... 26
48. Rules and Regulations ................................... 27
49. Modification ............................................ 27
50. Estoppel Certificate .................................... 27
51. Waiver of Jury Trial .................................... 27
[52. Security Deposit]........................................ 27
53. Miscellaneous ........................................... 28
54. Hazardous Materials ..................................... 28
</TABLE>
<PAGE> 11
LIST OF EXHIBITS
Exhibit "A": Common Area Maintenance Costs (See Section 41).
Exhibit "B": Rules and Regulations (See Section 48).
Exhibit "C": Declaration of Tender of Possession (See Section 4B).
<PAGE> 12
LEASE AGREEMENT
(Store Space in Pike Shopping Center)
THIS LEASE AGREEMENT (the "Lease") made this ____ day of ________________,
199__ , by and between PIKE SHOPPING CENTER LIMITED PARTNERSHIP, a Maryland
limited partnership, whose address is 1730 M Street, NW, Suite 408, Washington,
D.C. 20036 hereinafter designated "Landlord"); and The Bank of Baltimore, a
Financial Institution organized and existing under the laws of Maryland
(hereinafter designated "Tenant").
WITNESSETH
1. Data Sheet. This Article 1 is an integral part of this Lease and all of
the terms, dates and requirements set forth in this Article 1 are incorporated
in this Lease in all respects. In addition to the other provisions which are
elsewhere defined in this Lease, the following terms, whenever used in this
Lease, shall have the meanings set forth in this Article 1, subject to
adjustments thereto or more detailed definitions set forth elsewhere in this
Lease. If there is any conflict between any of the Lease provisions set forth in
this Article 1 and any other provisions of this Lease, the latter shall control.
(a) Leased Premises: The existing store premises known by street address of
12101 Rockville Pike, in Pike Shopping Center, Rockville, Maryland.
(b) Square Feet of Premises: Approximately 2,000 gross square feet of space.
(c) Tenant's Percentage Share of Real Estate Taxes: 2.69%.
(d) Tenant's Percentage Share of C.A.M. Costs: 2.69%.
(e) Lease Dates:
(1) Commencing: February 1, 1994
(2) Ending: January 31, 2004
(3) Renewal term: 1-5 Year Term
[(g) Percentage Rent Rate: _____paid quarter annually.]
[(h) Percentage Rent Base: As provided in Article 7(A) hereof.]
[(i) Dates quarter annual Reports are Due: the_____day of each_____,
__________, _________and_______, covering respectively the
immediately preceding calendar quarter, commencing for the first
such quarterly report on______________.]
[(j) Date Certified Annual Report is Due: The _____day of each______,
commencing_________________.]
[(k) Prepaid Sum, Upon Lease Execution:_____________.]
[(l) Lease Year: January 1, 1994 through the following December 31, 1994.]
(m) Minimum Annual Rent: As provided in Article 6(A).
[(n) Security Deposit:________________________.]
(o) Tenant's Trade Name: The Bank of Baltimore.
(p) Permitted Uses: Financial Services
2. Demised Premises. In consideration of all Tenant's undertakings
hereinafter set forth, including payment of rent as hereinafter specified,
Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the
existing store premises now known by street address of 12101 Rockville Pike (the
"Leased Premises" mentioned above, also herein called the "demised premises" or
the "premises"), being one of a group of stores in the shopping center
development now known as PIKE SHOPPING CENTER (herein called the "Shopping
Center") situated at Bou Avenue and Rockville Pike in Montgomery County,
Maryland, said demised premises containing a mutually agreed area of
approximately 2,000 gross square feet of space.
3. Ingress and Parking. Landlord grants to the Tenant during the term
hereof a nonexclusive right of ingress and egress and free parking of vehicles
of the Tenant's customers in the Shopping Center parking areas, and including a
right for ingress and egress to and from the adjoining public streets, highways
and/or service area; subject to the provisions of Article 22 hereof.
Not withstanding the foregoing, tenant and its customers will continue to
be granted the exclusive right of parking in those spaces currently designated
as bank parking.
1
<PAGE> 13
4. Condition of Premises. (A) Tenant hereby accepts possession of the
premises in "as-is" condition, without the requirement or necessity of Landlord
to perform, pay for or provide any work, materials or services whatsoever.
Tenant has inspected the premises, and is fully satisfied with the condition of
the premises.
(B) Upon execution of this Lease, the parties shall join in
executing a Declaration in the form of Exhibit "C" annexed hereto, with all
blanks therein properly completed.
(C) When so notified by Landlord to do so, Tenant shall commence
performance of the work necessary to fully fixture, furnish and outfit the
premises for use and occupancy by Tenant for the purposes herein permitted; such
work ("Tenant's Work") to be performed by and at the sole expense of Tenant and
at no cost to Landlord, and in compliance with Section 15 and all other
provisions of this Lease. Tenant shall not commence performance of Tenant's Work
until notified in writing by Landlord to do so. Tenant shall complete Tenant's
Work and open for business at the premises, fully stocked and staffed and with a
complete line of Tenant's merchandise, within sixty (60) days after the date
Landlord tenders to Tenant possession of the demised premises.
(D) Landlord shall not be obligated to perform, provide or pay for
any work to prepare the premises for use or occupancy by Tenant or for conduct
of Tenant's business; it being agreed that all such work shall be done solely by
and at the expense of Tenant.
5. Lease Term and Surrender; Renewal Option. (A) The term of this Lease
shall be ten (10) years, commencing on February 1, 1994, and fully expiring
without notice of any kind at midnight on January 31, 2004. Tenant hereby
irrevocably waives all rights, under existing or future laws, to be notified by
Landlord that Landlord desires surrender of possession of the premises at the
aforesaid stated expiration date of the term hereof, and Tenant shall surrender
possession of the entire premises free of subleases and occupants and with all
of its merchandise and personal property removed therefrom by said expiration
date, and in good condition and repair, reasonable wear excepted, and with all
alterations made by Tenant removed unless otherwise directed in writing by
Landlord (the "Surrender Condition").
(B) Notwithstanding the aforesaid stated term of this Lease, it is
agreed that if Landlord or any successor in interest to Landlord hereunder
desires to demolish or perform major alterations to the Shopping Center
improvements or any substantial portion thereof (i.e., 50% or more of said
improvements) for the purpose of developing new improvements or renovations of
existing improvements, then in any such event Landlord shall have the right, at
its exclusive option and absolute discretion, to terminate this lease effective
as of the end of the ninth (9th) Lease Year (i.e., as of the 30th day of
March, 2002), or effective as of any date thereafter, as selected by Landlord,
by sending Tenant written notice (the "Termination Notice") at least two hundred
seventy (270) days before the date such termination hereof is to become
effective (the "Effective Termination Date"). The Termination Notice may be
given by Landlord at any time, provided same is given at least 270 days before
the Effective Termination Date. If Landlord gives the Termination Notice, then
(i) this Lease shall fully expire on the Effective Termination Date, and (ii)
Tenant shall continue to pay all Basic Rent, Percentage Rent and other sums
hereunder through and including the later to occur of (a) the Effective
Termination Date, or (b) the date Tenant surrenders to Landlord possession of
the premises in the Surrender Condition called for in Article 5(A) hereof, and
(iii) Tenant will surrender to Landlord exclusive possession of the premises in
the Surrender Condition by the Effective Termination Date.
(C) Provided that Tenant is not in Default under this Lease (as
defined in Section 31 hereof) not subject to any "Events of Bankruptcy" (as
defined in Section 30 hereof) either at the time of exercise of the renewal
option or at the commencement date of the renewal term, and that this Lease is
then in force, Tenant shall have the option to renew the term of this Lease for
one (1) renewal term of five (5) consecutive years, such renewal term to
commence on the day next following the last day of the initial term hereof;
subject to the following conditions. Tenant may exercise the renewal option only
by giving to Landlord written notice
2
<PAGE> 14
of such exercise at least two hundred seventy (270) days before the end of the
initial term. If Tenant fails to timely exercise the renewal option or is
precluded pursuant to the provisions hereof from doing so, then said renewal
option shall forever lapse. Except as otherwise expressly herein provided, the
renewal term shall be upon all terms and conditions of this Lease, except that
(i) the basic annual rental payable during the renewal term shall be as
specified therefor in Section 6(B) hereof for said renewal term, and (ii) Tenant
shall be limited to the one (1) aforesaid renewal option of five (5) years, and
(iii) Landlord shall not be required to perform or pay for or grant Tenant any
credits or allowances for any Landlord's Work or other work for the demised
premises during or in respect of the renewal term.
6. Fixed Minimum Rent. (A) Commencing with the Rent Commencement Date,
Tenant shall pay as fixed minimum annual rental for the premises during the term
hereof the following sums during the respective Lease Year indicated in the
following table (the "fixed minimum annual rental", the "Minimum Annual Rent",
or "Minimum Annual Base Rent"), such sums to be due and payable in equal monthly
installments during the respective Lease Year as specified below, namely:
<TABLE>
<CAPTION>
Minimum Annual
Lease Year: Base Rent Monthly Installment
- ----------- --------- -------------------
(A) Initial Term 2/1/94 - 1/31/2004
<S> <C> <C> <C>
2/94 - 1/95 1 $ 87,500.00 $ 7,291.66
2/95 - 1/96 2 90,125.00 7,510.41
2/96 - 1/97 3 92,828.75 7,735.72
2/97 - 1/98 4 95,613.60 7,967.80
2/98 - 1/99 5 98,482.01 8,206.83
2/99 - 1/2000 6 101,436.46 8,453.03
2/2000 - 1/2001 7 104,479.55 8,706.62
2/2001 - 1/2002 8 107,613.93 8,967.82
2/2002 - 1/2003 9 110,842.34 9,236.86
2/2003 - 1/2004 10 114,167.61 9,513.96
<CAPTION>
(B)Renewal Term
11 117,592.63 9,799.38
12 121,120.40 10,093.36
13 124,754.01 10,396.16
14 128,496.62 10,708.05
15 132,351.51 11,029.29
</TABLE>
All such monthly installments of the fixed minimum rental shall be paid by
Tenant at the offices of Landlord's management agent, Gates Hudson & Associates,
Inc. at Prosperity Plaza, 3020 Hammaker Court, Suite 301, Fairfax, Virginia
22031, or payable to such other person or party which may be hereafter
designated in writing by Landlord; such sums to be paid in advance and without
deduction, set-off or demand therefor, with the first monthly installment to be
due and payable upon execution hereof, and each subsequent monthly installment
to be due and payable on the first day of each and every month following the
Rent Commencement Date during the term hereof. The covenants of Tenant herein to
pay fixed minimum annual rental, Percentage Rent and any additional rents or
other sums hereunder are separate and distinct covenants, and are not dependent
on any other provisions hereof; it being agreed that Tenant shall have no right
to set-off or deduct from said sums any claims or defenses it may allege or have
against Landlord.
(B) Except as may otherwise be specifically provided herein, all
installments of rent and all other sums hereinafter provided for as additional
rent shall be payable without notice or demand and without set-off, allowance,
counterclaim, abatement or reductions.
3
<PAGE> 15
(C) No payment by Tenant or receipt by Landlord of a lesser amount
than the monthly installment of Minimum Annual Rent or other charges herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent or other charges, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent or other sums be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
other sums or to pursue any other remedy provided hereunder and/or at law or in
equity.
4
<PAGE> 16
11. Taxes and Assessments. (A) For the purposes of this Lease, the term
"Real Estate Taxes" means all taxes, rates and assessments, general and
special, levied or imposed with respect to the land, buildings, and improvements
located or built within the Shopping Center, including all taxes, rates and
assessments, general and special, and front foot benefit charges, levied or
imposed for school, public betterment, general or local improvements and
operations and taxes imposed in connection with any special taxing district. If
the system of real estate taxation shall be altered or varied and any new tax or
levy shall be levied or imposed on said land, buildings and improvements and/or
on Landlord in substitution for real estate taxes presently levied or imposed on
immovables in the jurisdiction where the leased premises is located, then any
such new tax or levy shall be included within the term "Real Estate Taxes".
Should any governmental taxing authority levy, assess or impose a tax, excise
and/or assessment, however described (other than an income or franchise tax)
upon, against, on account of, or measured by, in whole or in part, the rent
expressly reserved hereunder, or upon the rent expressly reserved under any
other leases or leasehold interests in the Shopping Center, as a substitute for
(in whole or in part) or in addition to any existing Real Estate Taxes on land
and buildings and otherwise, such tax or excise on rents shall be included
within the term "Real Estate Taxes".
(B) Landlord shall, in the first instance, be obligated to pay all
Real Estate Taxes. Tenant shall reimburse Landlord, in the manner provided in
paragraph (C) of this Article 11, as additional rent and in addition to Minimum
Annual Rent, Percentage Rent, and all other payments provided for herein, that
portion of the Real Estate Taxes equal to the product obtained by multiplying
such Real Estate Taxes by "Tenant's Percentage Share of Real Estate Taxes" as
set forth in the next sentence. The term "Tenant's Percentage Share of Real
Estate Taxes", for all purposes of this Lease, is hereby defined to be that
percentage set forth in Article 1(c) of the Data Sheet, which represents the
stipulated and agreed proportion that the total gross rentable square feet
contained within the leased premises bears to the total gross rentable square
feet contained within the Shopping Center.
(C) Landlord may notify the Tenant from time to time (and more
frequently than once in any one lease year, if necessary), in advance of the
amount of the actual or Landlord's estimate of Tenant's Percentage Share of
Real Estate Taxes for the next succeeding tax fiscal year, and Tenant shall
deposit monthly, at the same time and place as the payment of monthly
installments of Minimum Annual Rent, an amount equal to one-twelfth (1/12) of
such amount, such monthly deposits to be made in advance on the first (1st) day
of each month commencing with the Commencement Date. Any overpayment of Tenant's
[Percentage Rent] Share of Real Estate Taxes for any fiscal tax year shall be
credited to rent thereafter due and payable (or be refunded to Tenant at the
expiration of this Lease) and any balance of Tenant's Percentage Share not
covered by the accumulation of monthly deposits shall be paid by Tenant within
fifteen (15) days after Landlord's written demand. Landlord shall not be
required to keep said escrow deposits separate from its general accounts, and
any interest earned on said escrow deposits shall be and remain the property of
Landlord. To the extent that all or any portion of Real Estate Taxes are paid in
advance in the jurisdiction in which the Shopping Center is located, Tenant
shall also, on the Rent Commencement Date, reimburse Landlord for Tenant's
Percentage Share of that portion of the then current tax fiscal year's Real
Estate Taxes accruing after the Rent Commencement Date which have been paid by
the Landlord as of the Rent Commencement Date, together with an amount [equal to
the number of whole or partial months that have elapsed since the last due date
of Real Estate Taxes times one-twelfth (1/12) of Tenant's Percentage Share of
Real Estate Taxes] sufficient to bring current its Real Estate Tax escrow fund
as aforesaid.
(D) Reasonable expenses, including attorneys' fees, expert witness
fees and similar costs, incurred by Landlord in obtaining or attempting to
obtain a reduction of any Real Estate Taxes shall be added to and included in
the amount of any such Real Estate Taxes. Real Estate Taxes which are being
contested by Landlord shall nevertheless be included for purposes
7
<PAGE> 17
of the computation of the liability of Tenant under the above paragraph;
provided, however, that in the event that Tenant shall have paid any amount of
increased rent pursuant to this Article 11 and the Landlord shall thereafter
receive a refund of any portion of any Real Estate Taxes on which such payment
shall have been based, Landlord shall pay to Tenant the appropriate portion of
the net amount of such refund (i.e., net of all attorneys' fees and other
expenses incurred by Landlord to obtain such refund) provided that Tenant is not
in default under this Lease. Landlord shall have no obligation to contest,
object to or litigate the levying or imposition of any Real Estate Taxes, and
Landlord at its exclusive discretion and may settle, compromise, consent to,
waive or otherwise determine in its discretion to abandon any contest with
respect to the amount of any Real Estate Taxes without consent or approval of
the Tenant.
(E) Tenant will pay all property taxes and assessments on its
personalty, fixtures, equipment and other property installed or place in or upon
the demised premises and on improvements therein made by Tenant. If any of the
foregoing are assessed as part of the land or improvements situated within the
Shopping Center, Tenant shall pay to Landlord, within ten (10) days after
demand, the amounts of taxes levied thereon.
(F) If the expiration or termination date of this Lease shall not
coincide with the end of a Real Estate Tax fiscal year, then in computing the
amount payable under this Article 11 for the period between the commencement of
the applicable Real Estate Tax fiscal year in question and the expiration or
termination date of this Lease, Tenant's Percentage Share of Real Estate Taxes
for the applicable Real Estate Tax fiscal year shall be equitably apportioned
(on a per diem basis) so that Tenant shall pay only such portion of such Real
Estate Taxes as is attributable to the portion of such Real Estate Tax fiscal
year occurring during the term of this Lease. Tenant's obligation to pay Real
Estate Taxes under this Article 11 for periods within the term hereof or any
renewal or hold-over term shall survive the expiration and/or termination of the
term of this Lease.
(G) A tax bill or true copy thereof, together with any explanatory
statement of the area or property covered thereby, submitted by Landlord to
Tenant shall be conclusive evidence of the amount of taxes assessed or levied,
as well as of the items taxed.
12. Laws and Ordinances. Tenant will, at its own cost, promptly comply
with and carry out all orders, requirements and conditions now or hereafter
imposed upon it by the ordinances, laws and/or regulations of the federal
government and of the municipality, county and/or state in which the premises
are located (collectively, "Governmental Authorities"), whether required of the
Landlord or otherwise, and whether or not due to the conduct of Tenant's
business or otherwise (collectively, "Laws"). However, Landlord shall comply
with any orders affecting structural walls and columns (unless due to Tenant's
particular business or use of the premises or to any acts, omissions or
negligence of Tenant, its contractors, agents or employees; in any of which
latter events Tenant at its own expense will comply with Laws affecting such
elements). Tenant will defend, indemnify and save Landlord harmless from all
penalties, claims, and demands resulting from Tenant's defaults or negligence.
13. Furniture; Fixtures. Tenant shall have the privilege of installing,
subject to the written approval of the Landlord, which shall not be unreasonably
withheld, any furniture, fixtures and machinery necessary to the conduct of its
business and the same shall remain the property of the Tenant, provided the same
shall be removed by the Tenant before the expiration of its tenancy, and further
provided that in the event any damage is done to said premises or to other
elements of the Shopping Center in the installation, repair, use, operation or
removal of said furniture, fixtures or machinery, Tenant will promptly reimburse
Landlord for the cost of such repairs as are necessary to restore said premises
and improvements to their original condition, less ordinary wear and tear. In
the event of failure of Tenant to remove said furniture, fixtures and machinery
from said premises before expiration or termination of this Lease, it is agreed
that Tenant is abandoning said furniture, fixtures and machinery and same shall
become the property of Landlord, who shall have the right to use, remove or
dispose of said furniture, fixtures and machinery at the Tenant's risk and
expense.
8
<PAGE> 18
14. Repairs; HVAC Contract. (A) Tenant, at its own expense, shall at all
times keep the demised premises (including but not limited to maintenance of
exterior entrances, all glass and show window moldings) and all partitions,
doors, floors, walls, ceilings, fixtures, equipment and appurtenances thereof
(including but not limited to heating, ventilating and air conditioning
equipment, herein sometimes called "HVAC", and all electrical lines and
equipment, lighting equipment and plumbing lines, fixtures and equipment) and
all other elements of the demised premises, in good condition and repair and
including all maintenance, repairs and replacements of all such items and
elements promptly when and as necessary; except only for structural portions of
the premises which shall be maintained by Landlord, but if Landlord is required
to make repairs, maintenance or replacements to structural portions by reason of
Tenant's or Tenant's Permitees' unlawful or negligent acts or omissions to act,
Landlord may charge Tenant for and Tenant shall pay within five (5) days after
demand the cost of such structural repairs, replacements or maintenance as
additional rent. Tenant also agrees, at its own expense, to replace, with glass
of like kind and quality, all plate glass in the demised premises which shall be
damaged or broken from any cause, except where due to building settlement, and
to maintain at the sole cost of Tenant its exterior sign face, sign box and sign
lighting. The Tenant further agrees at its own cost and expense to keep in
effect during the Lease Term and any extensions or renewals thereof a full parts
and labor maintenance contract on the heating, ventilating and air conditioning
equipment, serving the demised premises, with a contractor licensed in this
area, such contract and contractor to be subject to Landlord's approval, which
shall not be unreasonably withheld. The Tenant agrees to provide the Landlord
with a copy of said contract within thirty (30) days after the Rent Commencement
Date, and thereafter before any such contract shall expire (but at least
annually). If Tenant shall refuse or fail to make or to complete with reasonable
dispatch any repairs required to be made by it or shall fail to maintain such
HVAC service contract, Landlord may make such repairs or cause them to be made
and/or obtain and maintain such contract, all at tenant's expense, and upon
demand Tenant shall pay the cost thereof to Landlord as additional rent.
(B) Landlord shall, at its expense, within a reasonable time after
receipt of written notice from Tenant, make all necessary repairs to the
structural portions of the premises, the roof and the exterior of the building,
excluding doors, windows and store front. Any such repairs necessitated by acts,
omissions or negligence of Tenant or its Permitees shall be promptly paid for by
Tenant to Landlord on demand. Tenant agrees to promptly notify Landlord of any
condition respecting such structure, roof or exterior that requires repair.
Landlord's obligation with respect to repairs to the demised premises shall be
only as expressly set forth in this Article 14.
15. Tenant Alterations. (A) Tenant shall not make any alterations,
modifications or changes to all or any part of the demised premises, either
exterior or interior, without Landlord's written consent. The consent of
Landlord to any proposed modification, alteration or changes shall not be
unreasonably withheld in the event they shall (i) be performed only within the
interior of the premises, and (ii) be non-structural, and (iii) not affect any
system serving other occupants within the Shopping Center. Landlord may
condition its consent upon Tenant's delivery to Landlord of a policy or policies
of worker's compensation, liability and property damage insurance, naming
Landlord and its management agent as additional insureds, in limits and with
coverage amounts and in companies acceptable to the Landlord. In the event of
any such approved work or changes, Tenant shall have all work done at its own
expense, and performed in a good and workmanlike manner, and such work shall in
no way be harmful to the structure or overload the electrical, plumbing, heating
or air conditioning or other facilities of the demised premises or the Shopping
Center. Requests for such consent shall be accompanied by plans stating in
detail precisely what is to be done. Tenant and Tenant's contractors (who shall
be licensed) shall comply with the building codes, regulations and laws now or
hereafter to be made or enforced in the municipality, county and/or state in
which said premises relocated and which pertain to such work. Any additions,
improvements, alterations and/or installations made by Tenant (except only
movable store and office furniture and fixtures) shall become and remain a part
of the building and be and remain Landlord's property upon the termination of
Tenant's occupancy of said premises; provided, however, that if Landlord gives
written notice to Tenant prior to the expiration or prior termination of this
Lease to such effect, it may require Tenant to restore said premises to their
original condition at Tenant's expense. Tenant shall save
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<PAGE> 19
Landlord harmless from and against all expenses, liens, claims or damages to
either property or person which may or might arise by reason of the making of
any such additions, improvements, alterations and/or installations.
(B) Mechanic's Liens. In the event any mechanic's lien shall at any
time, whether before, during or after the Lease term, be filed against any part
of the Shopping Center by reason of work, labor, services or materials performed
or furnished to Tenant, or its subtenants, licensees or concessionaires, Tenant
shall forthwith cause the lien to be discharged of record or bonded in
compliance with law and to the satisfaction of Landlord. If Tenant shall fail to
cause such lien to be so discharged or bonded with security acceptable to
Landlord within five (5) days after being notified of the filing thereof, then,
in addition to any other right or remedy of Landlord, Landlord may discharge the
lien by paying the amount claimed to be due. The amount paid by Landlord, and
all costs and expenses, including reasonable attorney's fees incurred by
Landlord in procuring the discharge of the lien, shall be due and payable by
Tenant to Landlord within five (5) days after demand.
16. Damage. If the demised premises shall be partially or totally damaged
or destroyed by any risk covered by Landlord's insurance as provided for in the
Insurance provisions of this Lease, then Landlord shall diligently and as soon
as practicable after such damage occurs (taking into account the time necessary
to effectuate a satisfactory settlement with any insurance company, and to
obtain permits for the work, and reasonable delay on account of "labor troubles"
or any other cause beyond Landlord's reasonable control) repair or rebuild the
demised premises, provided, however, that in no event shall Landlord be
obligated to expend in such repair or rebuilding any sums in excess of the
amount of insurance proceeds paid to Landlord in connection therewith. The
foregoing notwithstanding, in no event shall Landlord be required to repair,
restore or rebuild any portions of the demised premises constituting a part of
Tenant's leasehold improvements or other tenant work, trade fixtures, equipment
and personal property; the Tenant at its own expense to perform such repairs and
replacements when required by Landlord. If the demised premises are rendered
wholly or partially untenantable by such damage or destruction, and if such
damage and destruction was without the fault or neglect of the Tenant, its
servants, employees, agents or licensees, then the Minimum Annual Rent payable
by Tenant under the Lease during the period in which the demised premises are
so untenantable shall be equitably abated by the percentage that the unusable
floor area of the demised premises bears to the total floor are thereof, but
Percentage Rent, if applicable, shall not be abated. Landlord shall not be
liable for any damages (including, without limitation, business interruption)
that may be suffered by Tenant by reason of any casualty to the demised premises
and/or Landlord's repairing or rebuilding thereof and/or the deprivation of
Tenant's use and possession of the demised premises. All of the foregoing
provisions of this Article notwithstanding, if the demised premises are
rendered wholly untenantable by fire or other cause, and the Landlord shall
decide not to rebuild the same, or if the Shopping Center shall be so damaged
that the Landlord shall decide to demolish it or not to rebuild it, then, and in
any of such events, the Landlord may, at its option, cancel and terminate this
Lease by giving to the Tenant, within ninety (90) days from the date of such
damage, notice in writing of its intention to cancel this Lease, whereupon the
term of this Lease shall cease and determine upon the tenth day after such
notice is given, and the Tenant shall vacate the leased premises and surrender
the same to the Landlord. Further, in the event the premises shall be rendered
untenantable by reason of fire or other casualty, and it shall require Landlord
more than one hundred eighty (180) days to substantially complete the repairs
required of it hereunder, then and in such event provided Tenant is not in
default hereunder, and that the damage was not caused by wrongful or intentional
act of Tenant or any of its Permitees, Tenant shall be entitled to terminate
this Lease, by written notice delivered to Landlord within ten (10) days after
the end of said 180 days period.
17. Eminent Domain. If the Shopping Center or any part hereof shall be
taken by any governmental or quasi-governmental authority pursuant to the power
of eminent domain or deed in lieu thereof, Tenant agrees, except as set forth in
the next sentence, to make no claim for compensation in the proceedings for its
leasehold or any other item, and hereby assigns to Landlord any rights which
Tenant may have to any portion of any award made as a result of such taking. The
foregoing notwithstanding, Tenant shall be entitled to claim, prove and receive
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in the condemnation proceedings such awards as may be allowed for relocation
expenses and for fixtures and other equipment installed by it which shall not,
under the terms of this Lease, be or become the property of Landlord at the
termination hereof, but only if such awards shall be made by the condemnation
court in addition to and stated separately from and without reducing the awards
made by it for the land and the building or part thereof so taken, or the value
of or awards for taking of Landlord's leasehold interests therein or its
interests in this Lease. If less than the whole of the demised premises is so
taken, and such partial taking materially and adversely affects the continuance
of Tenant's business, the Lease Term may, at the election of either party,
terminate upon notice to the other party within sixty (60) days after surrender
of possession pursuant to such taking. If neither party so elects, the Lease
Term shall terminate as to the part taken and shall continue as to the part
not taken, and the Minimum Annual Rent shall be reduced by the percentage that
the rentable area of the part taken bears to the whole of the demised premises
and be adjusted to the date of taking. If the nature, location or extent of any
proposed condemnation affecting the Shopping Center is such that the Landlord
elects in good faith to demolish all or substantially all of the buildings in
the Shopping Center, then the Landlord may terminate this Lease by giving at
least sixty (60) days written notice of termination to the Tenant at any time
after such condemnation and this Lease shall terminate on the date specified in
such notice.
18. Roof Rights. Landlord shall have the exclusive right to use all or any
portion of the roof of the demised premises for any purposes, and shall have the
right to erect additional stories or other structures over all or any part of
said premises.
19. Store Purpose: Trade Name. (A) The leased premises shall be used
solely for the purpose of conducting therein the business or use set forth in
Article 1(p) of the Data Sheet (hereinafter referred to as the "Specified Use").
Tenant shall not use all or any portion of the demised premises for any other
purpose. No deviation whatsoever from the Specified Use herein shall be allowed
for all or any portion of the demised premises without the prior written consent
of Landlord.
(B) Tenant agrees not to commit waste in the demised premises, or to
permit any objectionable noise or odor to emit therefrom, and not to use the
demised premises for any unlawful purpose, or in violation of any certificate of
occupancy, nor suffer any dangerous article to be brought on the demised
premises unless safeguarded as required by law. Moreover, no nuisances, public
or private, shall be allowed on the demised premises nor shall any use be
allowed which is a source of annoyance or embarrassment to Landlord or the other
tenants of the Shopping Center, or which is deemed by Landlord as not in keeping
with the character of the Shopping Center or neighborhood, nor shall the demised
premises be used for any immoral or improper use.
(C) The trade name or advertised name of the business operated in
the demised premises is set forth in the Article 1(o) of the Data Sheet. Tenant
agrees not to change said name without the written permission of Landlord.
However, if Tenant changes its trade name used at a majority of its other
locations, then if so requested by Landlord, the Tenant will change its trade
name and signs at the premises to such new trade name.
(D) Tenant will not, directly or indirectly, itself or through one
or more affiliate(s), engage in or conduct at any other location within a one
(1) mile radius of the boundaries of the Shopping Center, any business similar
to the Specified Use.
(E) Tenant shall not use or install or store in or about the
premises, any asbestos, urea formaldehyde, PCB's or other hazardous or toxic
substances, or any materials in violation of any federal, state, county or
local environmental laws, codes or regulations, nor allow its Permitees to do
so. Tenant shall indemnify, defend and hold harmless Landlord from all
litigation, judgments, fines, prosecutions, costs, damages and claims arising
from any violation or breach of the provisions of this Article 19.
20. Signs. Tenant shall not furnish or install any sign or signs within
the premises or Shopping Center visible from the exterior of the premises
without the prior written
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consent of Landlord first had and obtained. Tenant shall obtain and pay for
all permits and licenses required in connection with any sign installed by or on
behalf of Tenant, and shall be responsible for the proper installation thereof.
It is further understood that all signs placed by Tenant on the demised
premises shall be erected and maintained and removed in accordance with the
county, state and/or other ordinances in force or effect at the time, and at the
sole cost and expense of Tenant, and be removed by Tenant by the expiration of
termination of this Lease. Tenant agrees to maintain all signs in good condition
and repair at all times to the reasonable satisfaction of Landlord. If Tenant
fails to repair or maintain or remove as aforesaid its signs after receiving at
least ten (10) days written notice from Landlord, Landlord may (but shall not be
obligated to) repair or arrange to have repaired or removed, Tenant's signs.
Landlord may also submit an invoice to the Tenant for the cost of repairs to or
removal of the signs, which shall be paid to Landlord no later than ten (10)
days after demand therefor. Except as expressly permitted by Landlord, no other
signs, lights, lettering or other forms of inscription or advertising or display
devices shall be displayed on the exterior of the demised premises or on the
immediate proximity to the inner or outer face of the show windows, entrances,
doors or transoms nor shall the same be displayed in any other location within
the demised premises from which said signs, lights, or other forms of
inscription or advertising or display devices may readily be seen from outside
the demised premises without prior written approval of Landlord as to size,
color, lighting, appearance, material, design, quality and neatness thereof. It
is further agreed that Tenant shall not use sidewalks, parking areas, and alleys
for displays, wares, or signs of any kind. The Landlord shall determine during
what hours the Shopping Center any signs shall be lit.
21. Hours of Lighting. If requested by Landlord, Tenant shall keep the
display windows in the demised premises adequately lighted from dusk until
10:00 p.m. or such other reasonable time as determined by Landlord, during each
and every day.
22. Parking and Common Use Area. (A) All automobile parking areas,
driveways, entrances and exits, and other facilities furnished by Landlord in or
near the Shopping Center, including employee parking areas, the truckway or
truckways, loading docks, package pick-up stations, pedestrian sidewalks and
ramps, landscaped areas, exterior stairways and other areas and improvements
provided by Landlord for the general use, in common, of tenants, their officers,
agents, employees and customers, shall at all times be subject to the exclusive
control and management of the Landlord, and Landlord shall have the right from
time to time to establish, modify and enforce reasonable rules and regulations
with respect to all facilities and areas, the right to construct, maintain and
operate lighting facilities on all said areas and improvements, the right to
change the area, level, location and arrangement of parking areas and other
facilities hereinabove referred to and the right to restrict parking by tenants,
their officers, agents and employees to employee parking areas. Landlord shall
not, however, have any duty to police the traffic in the parking areas. However,
if a parking lot attendant shall be required as determined by the Landlord or by
ordinance, regulation or law, Landlord shall provide same, and the cost of such
attendant shall be considered part of the cost of maintenance and operation of
common areas as otherwise provided for in this Lease.
(B) Any areas of the Shopping Center that may be set aside by Landlord for
parking of automobiles may be used by Tenant and its customers while engaged in
business in the demised premises, in common with like use by other lessees of
the Shopping Center, but subject to any reasonable conditions the Landlord may
impose from time to time. The use of said exterior automobile parking areas by
Tenant and Tenant's customers shall be at their sole risk and expense, and in no
event shall Landlord have any liability for damage to, theft or loss of property
of the Tenant or of Tenant's employees, visitors, licensees or invitees suffered
or sustained in or about said parking areas. Tenant agrees to keep, observe and
comply with all such rules and regulations established by Landlord, and will
direct and require its employees to comply therewith. No employee of Landlord is
authorized to accept possession of any vehicle from the Tenant or from Tenant's
employees, licensees, visitors or invitees, nor to accept custody of any article
from Tenant. Landlord, at its option and exclusive discretion may modify or
erect additional buildings in the existing parking area from time to time,
provided the automobile parking area remaining following such additional
construction shall not be below that required under applicable laws governing
shopping center automobile parking. Tenant will not
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<PAGE> 22
park its automobiles, and will require its employees not to park their vehicles,
in any part of the customer parking areas, other than such as from time to time
may be established by Landlord for such purposes. Tenant agrees not to permit
deliveries of merchandise to the premises to be made other than through the rear
of the premises. Landlord agrees to keep the common areas in reasonably good
condition.
23. Utilities. Tenant shall be solely responsible for and promptly pay all
charges for HVAC, water, gas, electricity, telephones and any other utility used
or consumed in or on the premises. Should Landlord elect to supply any of same,
Tenant shall pay to Landlord as additional rent the charge or cost thereafter
levied by Landlord in accordance with rules filed by Landlord with the
proper regulatory agency. In no event shall Landlord be liable for an
interruption or failure in the supply of any such utilities to the demised
premises.
24. Trash. Tenant will keep the premises in a clean, orderly and sanitary
condition and free of insects, rodent, vermin, other pests and trash and dirt
accumulations, and shall furnish and use adequate and proper receptacles inside
the demised premises for trash and garbage. Landlord shall maintain and keep in
good repair the parking lot, pedestrian walkways and driveways, keeping them
clean, free of snow and ice, orderly, properly lighted and marked. Landlord may,
at its sole discretion, provide dumpster service deemed adequate by Landlord for
the normal trash collection needs of the typical tenant of the Shopping Center,
in which event Tenant shall cooperate with Landlord in the scheduling of such
collection service. The costs of any such service shall be included in the
Landlord's common area costs or shall be separately billed to Tenant monthly,
based on the ratio of the floor area of the demised premises to the aggregate
floor area of all tenants to whom Landlord furnishes such service. Landlord may
at any time change such collection methods, and will give reasonable notice to
Tenant. If Tenant requires additional dumpster service beyond that provided by
Landlord, Tenant shall provide same at its own expense, provided that the
selection and location of Tenant's dumpsters shall be subject to Landlord's
prior written approval.
25. Keep Clean. Tenant agrees to keep the sidewalks abutting the demised
premises in a clean and orderly fashion, and agrees not to use any space, other
than within the walls of the demised premises, for the sale or storage of
merchandise or for service of any kind.
26. Hold Harmless. Tenant agrees that it will indemnify, defend and save
the Landlord harmless from any and all liabilities, damages, causes of action,
suits, claims, judgments, costs and expenses of any kind (including but not
limited to reasonable attorneys' fees) (i) relating to or arising from or in
connection with the possession, use, occupancy, management, repair, maintenance
or control of the demised premises, or any portion thereof, or (ii) arising from
or in connection with any act or omission of Tenant or Tenant's Permitees, or
(iii) resulting from any default, violation or nonperformance of this Lease by
Tenant, or (iv) resulting in injury to person or property or loss of life
sustained in or about the demised premises. To assure such indemnity, Tenant
shall carry and keep in full force and effect at all times during the term of
this Lease, for the protection of the Landlord and Tenant herein, public
liability and property damage insurance with respect to the demised premises in
which the combined single limit of such public liability and property damage
shall be at least Three Million Dollars ($3,000,000.00). The policy shall name
Landlord, any person or entity designated by Landlord, and the Tenant as
insureds, and shall contain a clause that the insurer shall not cancel or change
the insurance without first giving Landlord and all other named insureds at
least thirty (30) days prior written notice. The insurance shall be in an
insurance company approved by Landlord, and a copy of the policy or a
certificate of insurance shall be delivered to Landlord or Landlord's agent
within ten (10) days after execution of this Lease by Landlord, and renewal
certificates shall be delivered to Landlord at least fifteen (15) days before
any such policy expires. If Tenant fails to maintain such policy of insurance,
Landlord may (but shall not be required to), obtain such policy and pay the
premiums thereon, and the amounts so paid shall be reimbursed by Tenant to
Landlord within five (5) days after demand.
27. Property at Tenant's Risk. All personal property, goods, and
merchandise in said premises shall be and remain at the Tenant's sole risk, and
Landlord shall not be liable for any damage to or loss of such personal
property, goods and merchandise arising from the bursting,
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overflowing or leaking of the roof, or water, sewer or steam pipes, or from
heating or of plumbing fixtures, or from the handling of electric wires or
fixtures, or from any other cause whatsoever.
28. Insurance Risk. Tenant shall not keep gasoline or other inflammable
material or any other explosives in the demised premises or in the building or
use the demised premises or any part thereof, in a manner which may make void
or voidable any insurance on the demised premises or Shopping Center, and the
Tenant shall conform to all rules and regulations from time to time established
by any Insurance Rating Bureau or similar agency.
29. Landlord's Access. The Landlord and its agents shall have access to
the demised premises at any and all reasonable times for the purpose of
protecting said premises against fire, for the prevention of damage and injury
to the demised premises, for repairs, improvements or replacements, or for the
purpose of connecting utility lines or for the purpose of inspecting the same.
Landlord and its agents shall also have the right to enter the demised premises
for the purpose of exhibiting the same to prospective purchasers, mortgagees, or
tenants. Landlord's entry upon the demised premises for any of the foregoing
purposes shall not be deemed an eviction or disturbance of Tenant's use or
possession of the premises, and shall not render Landlord liable in any manner
to Tenant or any other person.
30. Bankruptcy. (A) For purposes of this Lease, the following
shall be deemed "Events of Bankruptcy" of Tenant: (i) if Tenant becomes
"insolvent", as defined in Title 11 of the United States Code, entitled
"Bankruptcy", 11 U.S.C. Section 101 et seq. (hereinafter called the "Bankruptcy
Code"), or under the insolvency laws of any state, district, commonwealth or
territory of the United States of America ("Insolvency Laws"); of (ii) if a
receiver or custodian is appointed for any or all of Tenant's property or
assets, or if there is instituted a foreclosure action on any of Tenant's
property; or (iii) if Tenant files a voluntary petition under the Bankruptcy
Code or Insolvency Laws;, or (iv) if there is filed an involuntary petition
against Tenant as the subject debtor under the Bankruptcy Code or Insolvency
Laws, which is not dismissed within thirty (30) days of filing, or results in
issuance of an order for relief against the debtor; or (v) if Tenant makes or
consents to an assignment of its assets, in whole or in part, for the benefit of
creditors, or a common law composition of creditors.
(B) Upon the occurrence of an Event of Bankruptcy, or if Tenant takes
advantage of any Insolvency Laws, then in any such event Landlord at its option
and sole discretion may terminate this Lease by written notice to Tenant
(subject, however, to applicable provisions of the Bankruptcy Code or Insolvency
Laws during the pendency of any action thereunder involving Tenant as the
subject debtor). If this Lease is terminated under this paragraph, Tenant shall
immediately surrender and vacate the demised premises, waives all statutory or
other notice to quit, and agrees that Landlord's obligations under this Lease
shall cease from such termination date, and Landlord may recover possession by
process of law or in any other lawful manner. Furthermore, if this Lease
terminates under this paragraph, Landlord shall have all rights and remedies
against Tenant provided in case of defaults of Tenant in payment of rent.
(C) If Tenant becomes the subject debtor in a case pending under the
Bankruptcy Code, Landlord's right to terminate this Lease under this paragraph
shall be subject to the applicable rights (if any) of the Trustee in Bankruptcy
to assume or assign this Lease as then provided for in the Bankruptcy Code.
However, the Trustee in Bankruptcy must give to Landlord and Landlord must
receive proper written notice of the Trustee's assumption or rejection of this
Lease, within thirty (30) days or other period specified by applicable law (the
"Decision Period") after the date of the Trustee's appointment; it being agreed
that failure of the Trustee to give notice of such assumption hereof within said
Decision Period shall conclusively and irrevocably constitute the Trustee's
rejection of this Lease and waiver of any rights of the Trustee to assume or
assign this Lease. The Trustee shall not have the right to assume or assign this
Lease unless said Trustee (i) promptly and fully cures all defaults of Tenant
under this Lease, (ii) promptly and fully compensates Landlord for all monetary
damages incurred as a result of such default, and (iii) provides to Landlord
"adequate assurance of future performance" (as defined hereinbelow). Landlord
and Tenant hereby agree in advance that "adequate
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assurance of future performance", as used in this paragraph, shall mean
that all of the following minimum criteria must be met: (a) Tenant's gross
receipts in the ordinary course of its business during the thirty (30) days
immediately preceding the initiation of the case under the Bankruptcy Code must
be at least twenty (20) times greater than the next payment of rent due under
this Lease, (b) both the average and median of Tenant's monthly gross receipts
in the ordinary course of its business during the six (6) months immediately
preceding initiation of the case under the Bankruptcy Code must be at least
twenty (20) times greater than the next payment of rent due under this Lease,
(c) Tenant must pay to Landlord all rentals and other sums payable by Tenant
hereunder including also therein its share (as estimated by Landlord) of the
cost of all services provided by Landlord (whether directly or through agents or
contractors, and whether or not the cost of such services to be passed through
to Tenant), in advance of the performance of provision of such services, and (d)
the Tenant must agree (by writing delivered to Landlord) that the Tenant's
business shall be conducted in a first class manner, and that no liquidating
sales, auctions, or other non-first class business operations shall be conducted
on the demised premises, and that the use of the demised premises as stated in
this Lease will remain unchanged, and that the assumption or assignment of this
Lease will not violate or affect the rights of other lessees in the building. In
the event Tenant is unable to: (i) cure its defaults, (ii) reimburse Landlord
for its monetary damages, (iii) pay the rents due under this Lease or any other
payments required of Tenant under this Lease on time, or (iv) meet the criteria
and obligations imposed by (a) through (d) above in this Article, then Tenant
hereby agrees in advance that it has not met its burden to provide adequate
assurance of future performance, and this Lease may be terminated by Landlord in
accordance with the above provisions contained in this Article.
(D) Damages. It is further stipulated and agreed that, in the event of
the termination of this Lease by the happening of any such event described in
this Article 30, Landlord shall forthwith, upon such termination, and any other
provisions of this Lease to the contrary notwithstanding, become entitled to
recover as and for damages caused by such breach of the provisions of this Lease
and by such termination all amounts permitted by applicable law.
31. Default of Tenant. This Lease is subject to the limitation that if
at any time any of the following events (herein called a "Default") shall occur:
(i) if Tenant shall fail to pay any installment of rent or any
other charge required to be paid by Tenant hereunder, when the same shall become
due and payable (it being specifically understood and agreed that the term
"rent" includes the Minimum Annual Rent, the Percentage Rent, the share of real
estate or other taxes and the share of cost of maintenance and operation of
common areas, as referred to in this Lease and any other consideration under the
Lease, that is identified as rent in this Lease), if such failure shall continue
for five (5) days following written notice thereof to Tenant (or if more than
two (2) monetary defaults occur in a given Lease Year, then no further notice of
monetary defaults need be given to Tenant in that Lease Year); or
(ii) if Tenant abandons or vacates the premises; or
(iii) if Tenant fails to either (a) be open for business to
the public for more than three (3) days in any one Lease Year (excluding,
however, Thanksgiving Day, Christmas Day and New Years Day, during which three
(3) days Tenant shall be entitled to close), or (b) be open for less than the
minimum hours as required under Article 39 for more than an aggregate of five
(5) days in any one Lease Year; or
(iv) if Tenant shall violate or fail to perform or observe any
other term, provision, covenant, condition or requirement of this Lease on the
part of Tenant to be performed or observed, and if such failure shall continue
for ten (10) days after written notice from Landlord; or
(v) if Tenant fails to keep in force any insurance required of
it hereunder (whether or not notice of such failure is given by Landlord to
Tenant);
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(vi) then upon the happening of any of the aforementioned
Defaults, in addition to the right of injunction and any other rights or
remedies of Landlord at law or at equity, (1) this Lease shall, at Landlord's
option, cease and terminate and shall operate as Notice to Quit, any statutory
or other requirements for notice to quit being hereby expressly waived by
Tenant, or (2) with or without terminating this Lease, Landlord may (and, if
necessary and lawful, forcibly) re-enter the premises, remove all persons and
property therefrom (and remove and/or store Tenant's property at Tenant's risk
and expense), and otherwise proceed to recover possession of said premises
either without service of notice or resort to legal process (if lawful) or by
virtue of any legal process as may at the time be in operation and force in like
cases relating to proceedings between Landlord and Tenant, and Tenant shall pay
for any court costs relating to such proceedings and reasonable attorneys' fees,
and/or (3) Landlord may, at its option, re-enter and re-rent the demised
premises for the account of Tenant, and, in such event, Tenant shall remain
liable to Landlord for any and all deficiencies in the rent and other charges
due under this Lease, and/or (4) in the event of a default under clause (iv) of
this Article, Landlord (at its option but without obligation to do so) may cure
such default for the account of Tenant, and any sums reasonably expended by
Landlord in connection therewith shall be paid by Tenant to Landlord upon
written demand and if not immediately paid shall be deemed to be additional
rent, payable on demand with the next due installment of Minimum Annual Rent. In
exercising its remedies under this Article, Landlord shall not be deemed guilty
of trespass or become liable for any loss or damage which may be occasioned
thereby.
32. Reletting. Should Landlord elect to re-enter, as herein provided,
or should Landlord take possession pursuant to legal proceedings or pursuant to
any notice provided by law, Landlord may either terminate this Lease or it may
from time to time without terminating this lease, make such reasonable
alterations and reasonable repairs as may be necessary in order to rent the
premises, and relet said premises or any part thereof for such term or terms
(which may but need not necessarily be for a term extending beyond the term of
this Lease) and at such rental or rentals and upon other terms and conditions as
Landlord in its exclusive discretion may deem advisable; and upon each such
reletting all rentals received by the Landlord from such reletting shall be
applied first, to the payment of any indebtedness other than rent due hereunder
from Tenant to Landlord; second, to the payment of any costs and expenses of
recovering and reletting the premises; third, to the payment of rent and other
charges due and unpaid hereunder; and the residue, if any, shall be held by the
Landlord and applied in payment of future rent and other charges as same may
become due and payable hereunder. If such rentals received from such reletting
during any months shall be less than that to be paid during that month by Tenant
hereunder, Tenant shall pay any such deficiency to landlord. Such deficiency
shall be calculated and paid monthly. No such re-entry or taking possession of
said premises by Landlord shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any such reletting without termination, Landlord
may at any time thereafter elect to terminate this Lease for any such previous
breach. Should Landlord at any time terminate this Lease for any breach, in
addition to any other remedies it may have, it may recover from Tenant damages
it may incur by reason of such breach, including any unpaid rent and other
charges or amounts due under this Lease which are due and owing at the time of
termination, and reasonable attorneys' fees and other costs of recovering,
repairing and redecorating the premises to a condition sufficient for reletting
same. In addition, in the event of termination by Landlord as aforesaid if
Landlord at its option and exclusive discretion so elects, Tenant shall pay to
Landlord, on demand, as liquidated, agreed damages, the following:
The sum of (i) the difference between:
(a) the rent and other charges which would have been payable
from the date of such demand to the date when this Lease would have expired if
it had not been terminated as aforesaid, and
(b) the fair rental value of the demised premises for the same
period.
with said difference being discounted at the rate of eight percent (8%) per
annum to present worth; and
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(ii) commissions, advertising, cost of repairs and other expenses
incidental to recovering and reletting the demised premises.
For all purposes of this Article, the term "rent and other charges" shall
include Minimum Annual Rent, [Percentage Rent], Tenant's Proportionate Share of
real estate taxes and common area maintenance costs, and all other charges and
pass-throughs provided herein. [For the purpose of computing Percentage Rent
after a Default, the monthly percentage rent shall be deemed to be equal to the
average monthly Percentage Rent paid hereunder for the twenty-four (24) months
during the term preceding such termination (or if less than twenty-four (24)
months, the average Percentage Rent, if any paid hereunder during such elapsed
period).]
In addition to the foregoing, Tenant shall pay all reasonable
attorneys' fees and other expenses incurred by Landlord as a result of any
default of Tenant under this Lease, whether or not suit is brought.
33. Hold Over. If Tenant shall not immediately surrender to Landlord
exclusive possession of the premises on the expiration date of the Lease Term
hereby created, then Tenant shall, by virtue of this Agreement, become a tenant
by the month at twice the Minimum Annual Rent, plus [Percentage Rent],
additional rent and other charges provided for in this Lease, commencing said
monthly tenancy with the first day next after the end of the term above demised;
and said Tenant, as a monthly tenant, shall be subject to all of the conditions
and covenants of this Lease as though the same had originally been a monthly
tenancy; and Tenant shall give to Landlord at least thirty (30) days prior
written notice to quit said premises, and Tenant shall be entitled to at least
thirty (30) days prior written notice from Landlord to quit said premises,
except in the event of non-payment of Minimum Annual Rent in advance or of
[Percentage Rent] when due or of any other additional rents as provided for in
this Lease, when due, or of the breach of any other covenant by Tenant, in which
event Tenant shall not be entitled to any notice to quit, the usual thirty (30)
days notice to quit being expressly waived by Tenant. However, if Tenant shall
hold over after the expiration of the term hereby created, and if Landlord shall
desire to regain possession of said premises promptly at the expiration of the
term aforesaid, then at any time prior to the acceptance of the Minimum Annual
Rent by Landlord from Tenant as a monthly tenant hereunder, Landlord, at its
election and option, may re-enter and take possession of said premises
forthwith, without process, or by any legal action or process in force in the
State of Maryland. Tenant's failure to give notice as required in this Article
shall obligate Tenant to pay rent calculated as aforesaid for one (1) full
calendar month following the month in which it vacated the premises and monthly
thereafter as a hold-over tenant aforesaid. Tenant hereby expressly waives the
right to any notice required to be given by Landlord pursuant to Section 8-402
of the Real Property Article of the Annotated Code of the State of Maryland, as
amended.
34. Subordination and Attornment. (A) This Lease is, and shall be,
subject and subordinate to all ground or underlying leases and to all present
and future mortgages and/or deeds of trust which may now or hereafter affect
such leases or the real property of which the demised premises form a part, and
to all renewals, modifications, consolidations, replacements and extensions
thereof. This clause shall be self-operative and no further instrument of
subordination need be required by any ground instrument of subordination need be
required by any ground lessor, mortgagee or trustee. However, in confirmation of
such subordination, Tenant shall execute, acknowledge and deliver to Landlord
within ten (10) days after Landlord's request, any certificate that Landlord may
request. Tenant hereby irrevocably constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such certificate or certificates for and on
behalf of Tenant. Provided, however that notwithstanding the foregoing, the
party secured by any such deed of trust shall have the right to recognize this
Lease and, in the event of any foreclosure sale under such deed of trust, this
Lease shall continue in full force and effect at the option of the party secured
by such deed of trust or the purchaser at any such foreclosure sale. Tenant
covenants and agrees that it will, at the written request of the party secured
by any such deed of trust, execute, acknowledge and deliver any instrument that
has for its purpose and effect the subordination of said deed of trust to the
lien of this Lease. Tenant agrees that neither the cancellation nor termination
of any ground or underlying lease to which either this Lease is now or may
hereafter be subject or subordinate shall, by operation of law or otherwise,
result
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in cancellation or termination of this Lease or the obligations of Tenant
hereunder, unless otherwise directed by the ground lessor.
(B) Attornment. Tenant further covenants and agrees to attorn
to and recognize as its landlord hereunder any successor to Landlord's interest
in this Lease as result of foreclosure or conveyance in lieu thereof under any
deed of trust or ground or underlying lease, and in that event, this Lease shall
continue as a direct lease between the Tenant herein and such successor landlord
or its successor. In such case, the successor to Landlord's interest hereunder
as a result of foreclosure or conveyance under such deed of trust or termination
of ground or underlying lease (the "Successor") shall not (i) be bound by any
prepayment of rent or additional rent for more than one (1) month in advance, so
that rent shall be payable under this Lease in accordance with its terms, from
the date of the date of the foreclosure of such deed of trust, or termination of
the ground or underlying lease, as if such prepayment had not been made, nor
(ii) be bound by any amendment or modification of this Lease or by any waiver or
forbearance by any prior lessor (including Landlord) made or given without the
prior written consent of such Successor, nor (iii) be subject to any offsets or
defenses which Tenant may have against any prior lessor (including Landlord),
nor (iv) be liable for any defaults of any prior lessor (including Landlord).
Furthermore, Landlord's mortgagees shall be discharged of any responsibility
hereunder to Tenant which may have arisen (by reason of the mortgagee becoming a
mortgagee in possession, a lessor or otherwise) after such mortgagee disposes of
its interest in the building of which the demised premises forms a part. Tenant
hereby agrees not to look to Landlord's mortgagees, as mortgagees, mortgagees in
possession, or successor in title to the building or to any leasehold interest
in the land for accountability for any security deposit required or held by
Landlord hereunder, unless and to the extent that such sums have actually been
received by said mortgagees as security for Tenant's performance of or under
this Lease.
35. Notices. All notices, demands, requests, approval, consents or
other instruments required or desired to be given hereunder by either party to
the other shall be given in writing by certified or registered mail, return
receipt requested, postage prepaid, addressed as follows: If to Landlord, c/o
Mr. Ralph S. Dweck, 1730 M Street, NW, Suite 408, Washington, D.C. 20036; and if
to Tenant at One East Baltimore Street, Baltimore, Maryland 21202. Either
party may change its address for purposes of this paragraph by written notice to
the other party given at least ten (10) days before such change becomes
effective. All rents or other payments due Landlord hereunder shall be paid by
good check to Landlord at such place as Landlord shall designate by written
notice given to Tenant.
36. Successors and Assigns. Feminine or neuter pronouns shall be
substituted for those of the masculine form, and the plural may be substituted
for the singular number, in any place or places herein in which the context may
require such substitution or substitutions; and the covenants and agreements
herein contained shall, wherever appropriate, be binding upon and inure to the
benefit of the heirs, administrators, executors, personal representatives,
successors and assigns or the parties hereto.
37. Subletting and Assignment. Tenant will not sublet the demised
premises or any part thereof, or transfer, assign or encumber this Lease or any
interest of Tenant herein, without Landlord's prior written consent, which
consent may be granted or withheld in Landlord's absolute discretion or
conditioned upon such terms and conditions as Landlord shall determine. In the
event Tenant shall desire to assign this Lease or sublet all or any portion of
the premises, Tenant shall give Landlord at least ninety (90) days prior written
notice thereof. Landlord shall be entitled in such event to terminate this
Lease, effective as of the date of such proposed subletting or assignment and
exercisable only by written notice from Landlord given within sixty (60) days
following receipt by Landlord of such notice from Tenant*. If, without
Landlord's prior written consent, there shall be an attempted assignment or
subletting, or if the demised
* If in the event of an assignment of this Lease as a result of the transfer of
Corporate Stock or to another financial institution of the same caliber and
integrity of the Bank of Baltimore, then in those cases Landlord will not
unreasonably hold or delay any assignment, nor in the event he chooses not to
approve such assignment will he have the right to terminate this Lease.
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premises shall be occupied by any party other than Tenant, whether as a result
of act or omission by Tenant or by operation of law or otherwise, Landlord may,
in addition to and not in diminution of or substitution for any other rights and
remedies under this Lease or pursuant to law to which Landlord may be entitled
as a result thereof, collect rent from the proposed assignee, subtenant or
occupant and apply the net amount collected to the rent herein reserved, but no
such assignment, subletting, occupancy or collection shall be deemed a waiver of
this covenant or the acceptance of the assignee, subtenant or occupant as a
tenant, or a release of Tenant hereunder from the further performance by Tenant
of the covenants on the part of Tenant herein contained.
If Landlord shall consent to any requested transfer, assignment,
encumbrance, subletting, license and/or concession, such consent shall be deemed
consent to that particular transaction only and shall not be deemed consent to
any other or future transfer, assignment, encumbrance, subletting, license
and/or concession, as the case may be. Any permitted transfer, assignment,
encumbrance, subletting, license and/or concession shall be expressly subject to
each and every term, covenant and condition of this Lease, unless otherwise
specifically provided in writing executed by Landlord. Further, Tenant and any
guarantor hereunder shall remain fully liable and obligated under and
unconditionally notwithstanding such transfer or assignment.
If Tenant is a corporation, unincorporated association or partnership,
and Tenant shall desire to transfer, assign or hypothecate any stock or other
ownership interest in such corporation, association or partnership so as to
result in a change in the control thereof by the person, persons or entities
owning a controlling interest therein as of the date of this Lease, such
transfer, assignment or hypothecation shall be deemed a transfer of this Lease
for all purposes of this Article 37. Any transfer of this Lease or subletting of
all or any part of the premises made without prior written consent of the
Landlord shall entitle Landlord to terminate this Lease at any time after actual
notice of such change by giving tenant at least ninety (90) days prior written
notice and, on the date fixed in such notice from Landlord for termination of
this Lease, this Lease shall expire and come to an end with the same effect as
if said date were originally set forth in this Lease for expiration of the term.
The mere receipt by Landlord of rent from a party other than Tenant shall not be
deemed actual notice of any change in control or ownership of Tenant.
38. Not Partners. The parties hereto by this agreement expressly do not
intend as a matter of fact or law to create or constitute a partnership; and
instead the only relationship hereunder of Landlord and Tenant shall be deemed
that of lessor and lessee, respectively.
39. Continuous Occupancy. Throughout the term, Tenant shall
continuously conduct in the premises, with a full stock of merchandise and a
full staff trained, courteous and competent of personnel, the business permitted
under this Lease on all business days and during such hours as are kept by a
majority of the other lessees in the Shopping Center. Regardless of the minimum
number of hours per week Tenant is open for business, and regardless of which
additional hours Tenant is open, Tenant shall in all events remain open for
business during the hours of 9:00 a.m. to 5:00 p.m. Mondays through Saturdays.
Tenant acknowledges that its obligation to continuously and actively conduct
business in the premises in the manner prescribed in this Article is for the
purpose of enhancing the business activity and public patronage of all stores in
the Shopping Center, in order to produce for Landlord the maximum possible
percentage rents from all stores in the Shopping Center as well as from the
premises and to enhance the leasability of floor space in the Shopping Center.
40. Maintenance and Operation of Common Areas. Landlord agrees to
keep the parking areas in the Shopping Center and the other common areas
reasonably free of snow, ice and debris, and to keep the same lighted during
the business hours of a majority of the tenants in the Shopping Center. Landlord
further agrees to keep the parking areas in the Shopping Center and other common
areas in reasonably good repair and order.
41. Cost of Maintenance and Operation of Common Areas. (A) Common area
maintenance costs are defined as the total costs and expenses incurred by
Landlord, or others on Landlord's behalf, in operating, maintaining and
repairing those areas and facilities common
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to the entire Shopping Center, for the benefit of the entire Shopping Center.
Common area maintenance costs shall include those items set forth in Exhibit "A"
hereto. Common area maintenance costs shall also include a fee of twenty percent
(20%) of all of such costs in order to compensate Landlord for its
administration and overhead expenses. Common areas are defined as all areas,
facilities and improvements provided from time to time in the Shopping Center
(except those within any stores premises) for the mutual convenience and use of
commercial tenants or other occupants of the Shopping Center, their respective
agents, employees, customers and invitees, and shall include (if provided) but
not be limited to parking areas and facilities, including, without limitation,
roadways, entrances, sidewalks, stairways, canopies, service corridors,
truckways, ramps, loading docks, delivery areas, landscaped areas, package
pickup stations, public restrooms and comfort stations, access and interior
roads, retaining walls and lighting facilities.
(B) For purposes of this Lease, Tenant's Percentage Share of
common area maintenance costs shall be that percentage set forth in Article 1(d)
of the Data Sheet, representing the proportion that the total gross rentable
square feet contained within the demised premises bears to the total gross
rentable square feet contained within the Shopping Center. Subject to adjustment
as herein provided, Tenant shall pay Landlord on the Rent Commencement Date and
on the first day of each calendar month during the term hereof an amount
estimated by Landlord to be Tenant's monthly Percentage Share of the common area
maintenance costs, and Landlord may adjust said amount at the end of any
calendar month on the basis of Landlord's experience and reasonably anticipated
cost.
(C) Within ninety (90) days following the end of each calendar
year, or as soon thereafter as may be practicable, Landlord shall furnish Tenant
a statement covering such calendar year just expired showing the common area
maintenance cost and the amount of Tenant's Percentage Share of such costs for
such year computed in accordance with this Article 41, and the payments made by
Tenant with respect to such year as set forth hereinabove. If Tenant's
Percentage Share of such costs is less than Tenant's payments so made, Tenant
shall be entitled to a credit of the difference, without interest, or if such
share is greater than Tenant's said payments, Tenant shall pay Landlord the
difference, without interest. Tenant and Landlord shall adjust and make refunds
or pay the deficiency, as the case may be, within thirty (30) days after receipt
of such statement. Tenant's Percentage Share of the common area costs shall be
adjusted proportionately for any partial lease year.
(D) Landlord may, at its option, elect to bill Tenant on a
basis less frequently than monthly for common area maintenance costs, and in
such event, Tenant shall pay to Landlord within twenty (20) days following
written demand therefor, any amounts so billed.
(E) Tenant's obligations for payments under this Article 41
covering any periods within the term of this Lease or any renewal, extension or
hold-over term shall survive this expiration or termination of this Lease.
42. Insurance. (A) Landlord shall obtain and maintain in effect during
the term of this Lease a policy or policies of insurance (i) covering the
improvements constituting the Shopping Center (including the Common Areas, but
excluding Tenant's leasehold improvements, trade fixtures and other property
required to be insured by Tenant) in an amount not less than eighty percent
(80%) of the full replacement cost (exclusive of the cost of excavations,
foundations, and footings), as determined from time to time, providing
protection against perils included within the standard Maryland form of fire and
extended coverage insurance policy, together with such other risks, and with
such deductibles, as Landlord may from time to time determine, and (ii) public
liability insurance covering the parking areas and other Common Areas with a
combined single limit of at least One Million Dollars ($1,000,000.00); or in
such greater coverage amounts and for such additional risks as Landlord in its
exclusive discretion may determine from time to time. The cost of the premiums
for any such policies shall be included in the Landlord's Common Area
Maintenance costs. Any such insurance may be effected by a separate policy or
policies, or a policy or policies of blanket insurance covering additional items
or locations or insured, at Landlord's option and discretion. Tenant shall have
no rights in any policy maintained by Landlord, nor to any insurance proceeds or
refunds
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thereunder, and shall not, by reason of payment by Tenant as part of Common Area
Maintenance costs of its pro rata share of Landlord's premiums therefor, be
entitled to be a named insured thereunder.
(B) Tenant, at Tenant's sole cost and expense, shall obtain
and maintain in effect at all times during the term of this Lease, policies
providing at least the following coverages:
(i) a comprehensive policy of general liability insurance
covering the leased premises and Tenant's use thereof against claims for
personal injury or death or property damage occurring upon, in or about the
leased premises, in at least the limits stipulated in Article 26;
(ii) insurance covering Tenant's leasehold improvements, trade
fixtures, equipment, and personal property from time to time in, on or upon the
leased premises, in an amount of not less than eighty percent (80%) of the full
replacement value of said items, providing protection against perils included
within the standard Maryland form of fire and extended coverage insurance
policy, together with insurance against sprinkler damage, vandalism and
malicious mischief. Any policy proceeds from such insurance, so long as this
Lease shall remain in effect, shall be held in trust by Tenant's insurance
company first to pay for the repair, reconstruction, restoration or replacement
of the property damaged or destroyed; and
(iii) plate glass insurance covering all plate glass in the
leased premises. Tenant shall be and remain liable for the repair and
restoration of all such plate glass, and will repair or replace same promptly
when and as necessary.
(C) All insurance policies herein required to be procured by
Tenant (i) shall be issued in form acceptable to Landlord by good and solvent
insurance companies qualified to do business in the State of Maryland and
reasonably satisfactory to Landlord, (ii) shall be issued in the names of
Landlord, Tenant and any other parties in interest from time to time designated
in writing by notice from Landlord to Tenant, (iii) shall be written as primary
policy coverage and not contributing with or in excess of any coverage which
Landlord may carry, and (iv) shall contain an express waiver of any right of
subrogation by the insurance company against Landlord. Neither the issuance of
any insurance policy required hereunder, nor the minimum limits specified herein
with respect to Tenant's insurance coverage, shall be deemed to limit or
restrict in any way Tenant's liability arising under or out of this Lease. With
respect to each and every one of the insurance policies herein required to be
procured by Tenant, on or before the Rent Commencement Date and at least fifteen
(15) days before any such insurance policy shall expire, Tenant shall deliver to
Landlord either (i) certificates of insurance for, or (ii) certified copies of,
or (iii) duplicate originals of, each such policy or renewal thereof, as the
case may be, together with evidence of payment of all applicable premiums. Any
insurance required to be carried hereunder may be carried under a blanket policy
covering the demised premises and other locations of Tenant (provided same
includes allocated amounts for the demised premises at least equal to those
herein required), and if Tenant includes the demised premises in such blanket
coverage Tenant shall deliver to Landlord, as aforesaid, a duplicate original or
certified copy of each such insurance policy or a certificate evidencing such
insurance. Each and every insurance policy required to be carried hereunder by
or on behalf of Tenant shall provide that, unless Landlord shall first have been
given at least fifteen (15) days prior written notice thereof; (i) such
insurance policy shall not be canceled and shall continue in full force and
effect, (ii) the insurance carrier shall not, for any reason whatsoever, fail to
renew such insurance policy, and (iii) no material change may be made in such
insurance policy. In the event that Tenant shall fail promptly to furnish any
insurance coverage herein required to be procured by Tenant, Landlord, at its
option and discretion (but without obligation to do so) shall have the right to
obtain the same and pay the premiums therefore for a period not exceeding one
(1) year in advance in each instance, and the premiums so paid by Landlord shall
be immediately payable by Tenant to Landlord as additional rent.
(D) Notwithstanding any contrary provision of this Lease, each
party hereby releases the other party from any liability or responsibility for
any loss or damage to the
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releasing party's property insured under valid and collectible insurance,
subject to the limitation that this release shall only apply when permitted by
the applicable policy of insurance pursuant to a waiver of subrogation clause.
It is the intention of this paragraph (D) that neither party shall be liable to
the other party or to any insurance company (by way of subrogation or otherwise)
insuring the other party for any lost or damage to the other party's property
where such waiver is permitted by the applicable insurance policy. Each party
shall obtain policies containing an express waiver of any right of subrogation
by the insurance company against the other party if same is available. The
release set forth in the first sentence of this paragraph (D) shall apply even
if the loss or damage shall have been caused by the negligence of the other
party, the other party shall furnish the requesting party with evidence of the
inclusion of such waiver of subrogation clause or endorsement in such policies,
and either party shall notify the other party if such clause or endorsement is
thereafter deleted from such policies or any renewals thereof.
43. Additional Rent: Late Charges. (A) If Landlord shall incur any
charge or expense on behalf of Tenant under the terms of this Lease, or if
Landlord elects to cure any default of Tenant under this Lease, or incurs any
other expense arising from a default by Tenant (including, without limitation,
court costs and reasonable attorney's fees and disbursements instituting,
prosecuting or defending any suits, actions or proceedings (including any
bankruptcy or insolvency proceedings) to enforce Landlord's right sunder this or
any other Article of this Lease or otherwise), the sums so paid by Landlord with
all interest, costs and damages shall be paid by Tenant to Landlord upon written
demand, whether or not suit is brought.
(B) If Tenant shall fail to pay within five (5) days from the due date
thereof any installment of Minimum Annual Rent, [Percentage Rent] or additional
rent or any other sums due hereunder, then and in such event Landlord shall be
entitled, in addition to any other legal or equitable remedies to which it may
be entitled, to a late payment charge in an amount equal to ten percent (10%) of
each such rent installment or other payment overdue (the "Late Charge"), and
Tenant shall pay to Landlord the Late Charge and the installment overdue within
five (5) days after demand. Further, if Tenant is in default in any installments
of Minimum Annual Rent, Percentage Rent and/or any payments of additional rent
hereunder, more than twice during any Lease Year, then Landlord at its option
may require that all future payments of Minimum Annual Rent, Percentage Rent,
and additional rentals and other sums thereafter payable hereunder by Tenant for
the twelve (12) month period following the second of such defaults, be made by
certified or cashier's check (in addition to and not in limitation of any other
remedies available to Landlord under this Lease).
44. Quiet Enjoyment. Landlord covenants that if Tenant pays the rent
and all other charges provided for herein, performs all of its obligations
provided for hereunder, and observes all of the other provisions hereof, Tenant
shall at all times during the term hereof peaceably and quietly have, hold and
enjoy the demised premises, without any interruption or disturbance from
Landlord, subject to the terms hereof.
45. Transfer of Landlord's Interest; Landlord's Liability.
Notwithstanding any provision of this Lease to the contrary, in the event of the
sale or other transfer of Landlord's interest in the demised premises or the
Shopping Center, (i) Landlord shall thereupon and without further act by either
party hereto be released and discharged of all covenants and obligations of
Landlord hereunder thereafter accruing, and (ii) it shall be deemed and
construed conclusively, without further agreement between the parties, that the
purchaser or other transferee or assignee has assumed and agreed to perform the
obligations of Landlord hereunder thereafter accruing. The liability of Landlord
hereunder shall be limited to the assets and properties of the ownership entity
owning the Shopping Center. In no event shall any general partners of Landlord
have any personal liability under this Lease.
46. No Waiver. No waiver by Landlord of any breach of any covenant,
condition or agreement herein contained shall operate as a waiver of the
covenant, condition or agreement itself, or of any subsequent breach thereof.
The acceptance by Landlord of rent, with knowledge of any breach by Tenant of
any condition or covenant of this Lease, shall not be deemed a waiver of such
breach, nor shall the acceptance by Landlord of rent after the termination in
any
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way of this Lease or after giving any notice by Landlord operate to reinstate,
continue, or extend the Lease Term, or affect any notice. No receipt of any rent
after the commencement of suit, or after final judgement for possession of the
demised premises, shall reinstate, continue, or extend the Lease Term or affect
said suit or said judgement. No waiver with respect to another tenant shall
constitute a waiver in favor of Tenant. No waiver by Landlord of any provision
of this Lease shall be deemed to have been made unless such waiver be signed in
writing by Landlord.
47. Partial Invalidity. If any term, covenant or condition of this
Lease or the application thereof to any person or circumstances shall to any
extent be invalid or unenforceable, the remainder of this Lease or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable shall not be
affected thereby, and each term, covenant and condition of this Lease shall be
valid and enforced to the fullest extent permitted by law.
48. Rules and Regulations. Tenant shall at all times comply with the
rules and regulations set forth on Exhibit "B" attached hereto, and with any
additions thereto and modifications thereof adopted from time to time by
Landlord, and each rule or regulation shall be deemed as a covenant of this
Lease to be performed and observed by Tenant.
49. Modification. This writing is intended by the parties as the final
expression of their agreement and as a complete and exclusive statement of the
terms thereof, all negotiations, considerations and representations between the
parties having been incorporated herein. No course of prior dealings between the
parties or their affiliates shall be relevant or admissible to supplement,
explain or vary any of the terms of this Lease. Acceptance of, or acquiescence
in, a course of performance rendered under this or any prior agreement between
the parties or their affiliates shall not be relevant or admissible to
determine the meaning of any of the terms of this Lease. No representations,
understandings or agreements have been made or relied upon in the making of this
Lease other than those specifically set forth herein. This Lease can only be
modified by a writing signed by all of the parties or their duly authorized
agents.
50. Estoppel Certificate. Tenant agrees, at any time and from time to
time, upon not less than five (5) days prior written notice from Landlord, to
execute, acknowledge and deliver to, Landlord, or to such person(s) as may be
designated by Landlord, a statement in writing (i) certifying that Tenant is in
possession of the demised premises, has unconditionally accepted the same and is
currently paying the rents reserved hereunder, (ii) certifying that this Lease
is unmodified and in full force and effect (or if there have been
modifications, that the Lease is in full force and effect as modified and
stating the modifications), (iii) stating the dates to which the rent and other
charges hereunder have been paid by Tenant, (iv) stating whether or not, to the
best knowledge of Tenant Landlord is in default in the performance of any
covenant, agreement or condition contained in this Lease, and, if so, specifying
each such default of which notices to Tenant should be sent or which is known to
Tenant, and (v) giving such other information concerning this Lease and the
leased premises as Landlord, or the addressee of the statement, shall reasonably
request, including, without limitation, the above information with variations in
style or wording. Any such statement delivered pursuant hereto may be relied
upon by any owner of the Shopping Center, any prospective purchase of the
Shopping Center, any mortgagee or prospective mortgagee of the Shopping Center,
or any interest therein, or any prospective assignee of any such mortgagee.
51. Waiver of Jury Trial. Tenant hereby waives all right to trial by
jury in any claim, action, proceeding or counterclaim by either Landlord or
Tenant against the other, or any matters arising out of or in any way connected
with this Lease, the relationship of Landlord and Tenant and/or Tenant's use or
occupancy of the leased premises.
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53. Miscellaneous.
(A) Any party may act under this Lease by its attorney or agent
appointed by an instrument executed by such party.
(B) Whenever the word "including" is used herein, it shall be
deemed to mean "including but not limited to".
(C) The words "re-enter" and "re-entry" as used herein shall not be
restricted to their technical legal meaning.
(D) This Lease has been executed in several counterparts; but the
counterparts shall constitute but one and the same instrument.
(E) This Lease shall be construed under the laws of the State of
Maryland.
(F) The paragraph captions and heading hereof are for convenience
of reference only and shall not be deemed to limit, affect or interpret the
provisions of this Lease.
(G) All power of approval and consent herein conferred on Landlord,
and any exercise thereof and conditions imposed in granting same, are solely
for Landlord's protection and benefit, and shall not constitute a representation
or warranty of any kind from Landlord or its agents or representations as to the
legality , technical sufficiency, accuracy, compliance with life-health-safety
requirements or any other matter concerning any plans, specifications, assignee,
sublessee, instruments, financial statements, insurance policies or other
matters to which such consent, approval or conditions apply.
(H) Regarding all covenants, agreements, obligations, performance
and undertakings of Tenant under this Lease, time is hereby agreed to be of the
essence.
54. Hazardous Materials. Tenant shall not install in, on or about the
premises any hazardous materials, including but not limited to asbestos, PCB'S,
UREA formaldehyde insulation, lead-based paint or any other toxic or hazardous
materials or substances of any kind; or any other materials which violate laws
or may be required to be removed from the demised premises by applicable laws.
Tenant at its own expense shall remove such items promptly on Landlord's request
and shall indemnify, defend and hold harmless Landlord and its agents, partners
and mortgagees therefrom and from all loss, cost, damage, liability and expense
arising therefrom.
(Signature Page to Follow)
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IN WITNESS WHEREOF, the parties hereto have duly signed these presents
and affixed their respective seals on the date first above written.
WITNESS: LANDLORD:
PIKE SHOPPING CENTER LIMITED PARTNERSHIP
By: /s/ RALPH S. DWECK (SEAL)
- -------------------- ---------------------------
Ralph S. Dweck, General Partner
By: DWECK MANAGEMENT, INC.
(General Partner)
By: /s/ RALPH S. DWECK
--------------------------
Ralph S. Dweck, President
ATTEST: TENANT:
/s/ LAURIE ANN LEE By: /s/ CAROL L. RIGG (SEAL)
- -------------------- --------------------------
Laurie Ann Lee Bank of Baltimore Carol L. Rigg
Vice President Title: Senior Vice President
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EXHIBIT "A"
Common Area Maintenance Costs
Common area maintenance costs shall include all costs and expenses of
every kind and nature as may be paid or incurred by Landlord in operating,
policing, protecting, managing, equipping, lighting, repairing, replacing and
maintaining the common areas and facilities, including, but not limited to, the
cost and expense of:
(i) operating, maintaining, repairing, replacing, lighting,
cleaning, sweeping, painting and resurfacing of the common areas and facilities,
including, but not limited to: parking lots, curbs, gutters, sidewalks, paving,
vehicle area lighting facilities, lighting and sound facilities, storm and
sanitary drainage systems and other utility conduits, systems, ducts and similar
items, fire protection systems, sprinkler systems, utility sprinkler and
security alarm systems, Shopping Center signs on and off the Shopping Center
site, retaining walls, curbs, gutters, fences, sidewalks, canopies, steps, and
ramps in the common areas, exclusive of casualty loss replacement covered by
insurance;
(ii) a reserve for resurfacing the parking lot, curbs, gutters
and sidewalks calculated on a 10-year life (which reserve will be maintained in
a separate interest-bearing account for the purpose of paying said expenditures
when they occur);
(iii) gardening, landscaping and maintenance of grass, trees
and shrubbery;
(iv) all premiums for all insurance maintained by Landlord in
connection with the Shopping Center, including, without limitation: liability
for bodily injury, death and property damage; insurance on the Shopping Center
(including the common areas) against fire, extended coverage, theft or other
casualties; workman's compensation; plate glass insurance for glass exclusively
serving the common areas; sign insurance; and (if available and deemed advisable
by Landlord) loss of rent insurance for up to a 12-months period;
(v) security;
(vi) personal property taxes on equipment and system in,
pertaining to, or used in maintaining and operating the common areas and outdoor
areas;
(vii) utility charges and other costs of lighting the common
areas, the vehicle areas, Shopping Center signs and other like facilities;
(viii) vehicle area line painting, and removal of snow and
ice;
(ix) collection and removal of trash from all outdoor arms in
the Shopping Center;
(x) equipment, machinery and supplies used in the operation
and maintenance of the common areas (including cleaning and snow removal
equipment) and of Shopping Center signs, fixtures and furnishings (including the
cost of inspection and depreciation thereof unless the original cost was
included in the common area maintenance costs, which depreciation shall be
calculated on a straight-line basis and on lives based upon the Internal Revenue
Service guidelines from time to time extant);
(xi) power and fuel for operating common area equipment and
systems, and for operating vehicles and equipment used for cleaning, maintenance
and snow removal; and
(xii) salaries of personnel directly engaged in operating,
cleaning and maintaining the common areas (including security personnel and
parking attendants), and all related payroll charges, benefits and taxes.
(xiii) real estate taxes and assessments pertaining, to the
common areas, to the extent not included in Article 11 of the Lease.
<PAGE> 36
EXHIBIT "B"
RULES AND REGULATIONS
Tenant shall, at all times during the term of the Lease:
1. Use, maintain and occupy the premises in a careful, safe, proper and
lawful manner, and keep the premises and its appurtences in a clean and safe
condition;
2. Keep all glass in the doors and windows of the premises clean and in
good repair;
3. Not place, maintain or sell any merchandise in any vestibule or
entry to the premises, on the sidewalks or mall areas adjacent to the premises,
or elsewhere on the outside of the premises without the prior written consent of
Landlord;
4. Keep the premises in a clean, orderly and sanitary condition, free
of insects, rodents, vermin and other pests;
5. Not permit undue accumulations of garbage, trash, rubbish and other
refuse; and will keep such items in closed containers within the interior of
the premises until removed;
6. Not use, permit or suffer the use of any apparatus or instruments
for musical or other sound reproduction or transmission in such manner that the
sound emanating therefrom or caused thereby shall be audible beyond the interior
of the premises;
7. Light the show windows and exterior signs of the premises to the
extent required in the Lease;
8. Keep all mechanical apparatus free of vibration and noise which may
be transmitted beyond the confines of the premises;
9. Not cause or permit objectionable odors to emanate or be dispelled
from the premises;
10. Not overload the floors or electrical wiring, and not install any
additional electrical wiring or plumbing, without Landlord's prior written
consent;
11. Not use show windows in the premises for any purpose other than
display of merchandise for sale in a neat and attractive manner;
12. Not conduct or permit any public or private auction to be conducted
on or from the premises; and
13. Not solicit business in the common areas of the Center or
distribute handbills or other advertising materials in the common areas, and
if this provision is violated, Tenant shall pay Landlord the cost of collecting
same from the common areas for trash disposal.
14. All loading and unloading of goods shall be done in Tenant's
loading area, except for customer pick up and deliveries.
15. No aerial shall be erected on the roof or exterior walls of the
premises, or on the grounds, without in each instance, the written consent of
Landlord. Any aerial so installed without such written consent shall be subject
to removal without notice at any time.
16. No loud speakers, televisions, phonographs, radios or other devices
shall be used in a manner so as to be heard or seen outside the premises without
the prior written consent of Landlord.
17. If the leased premises are equipped with heating facilities
Separate from those in the remainder of the Shopping Center. Tenant shall keep
the leased premises at a temperature sufficiently high to prevent freezing of
water pipes and fixtures.
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18. The plumbing facilities shall not be used for any other purpose
than that for which they are constructed, and no foreign substance of any kind
shall be thrown therein, and the expense of any breakage, stoppage or damage
resulting from a violation of this provision shall be borne by Tenant, who
shall, or whose employees, agents or invitees shall, have caused it.
19. Tenant shall not burn any trash or garbage of any kind in or about
the leased premises, the Shopping Center, or within one mile of the outside
property lines of the Shopping Center.
<PAGE> 1
EXHIBIT 10 AQ
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the l8th day of March, 1996, by and
among George Mason Bankshares, Inc., a Virginia corporation (the
"Corporation"), and Webb C. Hayes, IV of Bethesda, Maryland (the "Executive")
and The Palmer National Bank, a national bank.
WITNESSETH
WHEREAS, the Corporation and Mason Holdings Corporation, a
Virginia corporation and wholly owned subsidiary of the Corporation ("MHC"),
have entered into an Agreement and Plan of Reorganization, dated as of October
19, 1995, among the Corporation, MHC, The Palmer National Bancorp, Inc.
("PNBI"), a Delaware corporation, The Palmer National Bank, a national bank
(the "Bank") and Palmer National Mortgage, Inc., a Delaware corporation
("PNMI"), both the Bank and PNMI being wholly owned subsidiaries of PNBI (the
"Agreement and Plan"), pursuant to which PNBI will be merged with and into MHC
(the "Merger");
WHEREAS, the Executive currently serves as President and Chief
Executive Officer of PNBI and Chaimnan, President and Chief Executive Officer
of the Bank;
WHEREAS, the Executive is currently subject to an Executive
Compensation Agreement made as of January 31, 1988 by and between the Executive
and the Bank (the "Palmer Employment Agreement");
WHEREAS, it is a condition to the parties obligations under
the Agreemnent and Plan to Consummate the Merger that Executive enter into an
employment agreement with
<PAGE> 2
the Corporation at or prior to the Effective Time of the Merger (as such term
is defined in Section 1.3 of the Agreement and Plan);
WHEREAS, the Corporation, the Executive and the Bank desire
that the Palmer Employment Agreement be terminated at the Effective Time of the
Merger; and
WHEREAS, the Corporation desires to emplov Executive, and the
Executive desires to become an employee of the Corporation, on the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the mutual covenants
contained herein, the Corporation and the Executive agree as follows:
1. Employment. Effective on the Effective Date, the
Corporation and the Bank agree to employ the Executive and Executive agrees to
be employed by the Corporation and the Bank on the terms and conditions
hereinafter set forth.
2. Capacity. Effective on the Effective Date, the
Executive shall be appointed and serve as Executive Vice President of the
Corporation and shall be appointed and serve initially as President and Chief
Executive Officer of the Bank and shall perform services for the Corporation
and the Bank consistent with such positions (or such other positions if
appointed), including, initially, his continuing to manage marketing, service
and business development activities for the customers and prospects of the Bank
or any successor bank or business division of the Bank or the Corporation.
Executive's title, duties and responsibilities may be changed or expanded
during the term of Executive's employment hereunder and Executive's reporting
relationships to other officers of the Corporation, MHC and the Bank may also
be modified by the Chief Executive Officer of the Corporation; however, there
will be no material decrease in Executive's duties and responsibilities
hereunder as an executive officer of the Corporation.
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<PAGE> 3
3. Effective Date and Term. The commencement date
(the "Effective Date") of this Agreement shall be the day in which the
Effective Time of the Merger occurs. Effective on the Effective Date, the
Palmer Employment Agreement shall be terminated and be of no further force and
effect. Subject to the provisions of Sections 6, 7 and 13(b), the term of the
Executive's employment hereunder shall be for one year from the Effective Date;
and the term shall be automatically extended from day to day so that on any day
the remaining term shall be one year.
4. Compensation and Benefits. This Agreement does
not affect any compensation or benefits earned by the Executive, that remain
unpaid on the Effective Date, pursuant to the Palmer Employment Agreement. The
compensation and benefits payable to the Executive under this Agreement shall
be as follows:
(a) Base Salary. The Bank shall pay the
Executive a Base Salary of One Hundred Ninety Five Thousand Dollars
($195,000.00) per year, which shall be inclusive of all meeting and directors'
fees and shall be the sole compensation for all services rendered by the
Executive except as otherwise provided in this Agreement. The Executive's
Base Salary could be subject to merit based increase from time to time in
accordance with the usual practice of the Corporation with respect to the
review of compensation of its senior executives. The Executive's Base Salary
shall be payable in periodic installments in accordance with the Bank's and the
Corporation's usual practice for their senior executives.
(b) Bonus Compensation. In addition to Base
Salary, the Executive will be eligible to be paid an incentive bonus by the
Bank under the Corporation's annual incentive bonus plan offered by the
Corporation for its senior executives, in which annual bonuses will be
determined by the Compensation Committee of the Board of the Corporation based
upon (i) the Executive satisfying performance goals for the Bank agreed to in
writing by the Executive, the Chief Executive Officer of the Corporation, and
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<PAGE> 4
the Compensation Committee of the Board and (ii) the overall financial results
of the Corporation for such year.
(c) Executive's Individual Benefits. After
the Effective Date, the Bank will make every reasonable effort to continue in
force and pay the premiums on the two individual long term disability insurance
policies being maintained by the Bank for the benefit of Executive as in effect
on October 19, 1995. The Bank shall also continue to pay all premiums with
respect to the policy insuring the Executive's life which is owned by the
trustee of that trust agreement as in effect on October 19, 1995 which has been
established to provide for benefits under certain supplemental retirement
benefits agreements between the Bank and certain of its executives. The Bank
shall also continue to pay premiums on the two policies insuring the
Executive's life, purchased pursuant to certain split-dollar life insurance
plan ageements as in effect on October 19, 1995. Notwithstanding the above,
the Executive acknowledges and agrees that after the Effective Date the above
described individual benefits presently maintained by the Bank for him may be
converted into substantially equivalent benefits which are not materially less
favorable for Executive under substantially similar benefit plans adopted by
the Corporation or its subsidiaries' for the benefit of senior executives.
(d) Regular Benefits. The Executive also
shall be entitled to participate in any and all employee benefit plans, medical
insurance and health plans, retirement plans, and other benefit plans from time
to time in effect for senior executives of the Bank. Such participation shall
be subject to (i) the terms of the applicable plan documents, (ii) generally
applied policies of the Bank and (iii) the termination rights of the
Corporation and its subsidiaries after the Effective Date (pursuant to Section
7.4(a) of the Agreement and Plan) with respect to Bank employee benefit plans.
Executive shall be eligible to receive stock options awarded through
participation in Stock Option Plans administered by the Corporation's
Compensation Committee of the Board and entitled to participate in any
Employee Stock Purchase Plans maintained by the Corporation in accordance with
their terms.
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<PAGE> 5
(e) Business Expenses. The Bank shall
reimburse the Executive for all reasonable travel, entertainment and other
business expenses incurred by him in the performance of his duties and
responsibilities hereunder, subject to audit as necessary and to such
reasonable requirements with respect to substantiation and documentation as
may be specified by the Corporation.
(f) Vacation. The Executive shall be entitled
to the same vacation benefits which is currently three (3) weeks of vacation
per year, including unused vacation carry over rights for one (1) week, as
other executives of the Corporation based on years of service (including years
of service at the Bank) to be taken at such times and intervals as shall be
determined by the Executive with the approval of the Corporation (which may act
through its Chief Executive Officer or Compensation Committee), which approval
shall not be unreasonably withheld.
(g) Automobile. The Bank at its sole cost
shall during the term of this Agreement provide the Executive with the use of
an appropriate automobile that shall be selected by the Executive with the
approval of the Corporation, which shall not be unreasonably withheld, so long
as such selection is consistent with prior Bank practices.
5. Extent of Service. During his employment
hereunder, the Executive shall, subject to the direction and supervision of the
Chief Executive Officer of the Corporation, devote his full business time, best
efforts and business judgment, skill and knowledge to the advancement of the
Bank's and the Corporation's interests and to the discharge of his duties and
responsibilities hereunder. He shall not engage in any other business activity,
except as may be approved by the Chief Executive Officer of the Corporation;
provided, however, that nothing herein shall be construed as preventing the
Executive from:
(a) investing his assets in a manner not
prohibited by Section 8, and in such form or manner as shall not require any
material srvices on his part in the operations or affairs of the companies or
other entities in which such investments are made;
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<PAGE> 6
(b) serving on the board of directors or
governing board of any entity subject to the prohibitions set forth in Section
8 and provided that he shall not be required to render any material services
with respect to the operations or affairs of any such entity and subject to
disclosure and advance approval by the Chief Executive Officer and the Board of
Directors of the Corporation, which approval will not be unreasonably withheld,
as well as annual notification to the Chief Executive Officer and Board of
Directors of the Corporation as to all boards on which Executive serves; or
(c) engaging in religious, charitable or other
community or non-profit activities which do not impair his ability to fulfill
his duties and responsibilities under this Agreement.
6. Termination and Termination Benefits.
Notwithstanding the provisions of Section 3, the Executive's employment
hereunder shall terminate under the following circumstances:
(a) Death. In the event of the Executive's
death while he is actively employed by the Corporation, the Executive's
employment shall terminate on the date of his death; all compensation and
benefits earned by the Executive but unpaid at the time of his death shall be
paid to the Executive's estate.
(b) Termination by the Corporation for Cause.
The Executive's employment hereunder may be terminated for "Cause" by the
Corporation, which shall mean termination because of the Executive's breach of
fiduciary duty involving personal profit, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or entry of a
final cease-and-desist order relating to the Bank, or acts or omissions
constituting dishonesty, fraud, or disreputable conduct, or gross negligence in
the course of his employment, or willful misconduct in the performance of his
duties hereunder, including willful failure to perform such duties as may
properly be assigned to him hereunder, provided however, that such
determination of termination for Cause shall require the affirmative vote of a
majority of the members of the Corporation's Board of Directors. For purposes
of this paragraph, no act or failure to act on the Executive's part
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<PAGE> 7
shall be considered "willful" unless done, or omittcd to be done, by the
Executive not in good faith and without reasonable belief that the Executive's
action or omission was in the best interests of the Corporation.
In the event of termination for Cause, all obligations of the
Corporation and the Bank under this Agreement shall terminate as of the date
the Executive's employment is terminated, except that all compensation and
benefits earned by the Executive but unpaid at the time of his termination will
be paid to Executive.
(c) Termination by the Corporation Without
Cause. The Executive's employment with the Corporation may be terminated
without Cause upon written notice by the Chief Executive Officer of the
Corporation to Executive. Termination without Cause is defined as termination
for any reason other than the terminations specified in other lettered
paragraphs of this Section 6, all as defined in this Agreement.
In the event of termination without Cause, all obligations of
the Corporation and its subsidiaries under this Agreement shall terminate as of
the date the Executive's employment is terminated, except that:
(i) the Bank shall continue to pay the
Executive his Base Salary at the rate in effect on the date of termination for
a period of twelve (12) months from the date of such termination. Neither the
Bank, nor the Corporation, nor any of their subsidiaries shall have any
obligation to pay Executive any portion of a bonus that might otherwise have
been earned during such period had Executive remained an employee;
(ii) all compensation and benefits earned by
the Executive but unpaid at the date of his termination will be paid to
Executive;
(iii) unless earlier terminated, the Bank will
continue to pay premiums on the long term disability insurance policies and the
life insurance policy funding the supplemental retirement benefits agreement
referenced in Section 4(c) for twelve (12) months from the date of termination.
Thereafter, responsibility for premium payments with respect to the long term
disability insurance policies will be transferred to
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<PAGE> 8
the Executive and payment will be commenced under the supplemental retirement
benefits agreement only if payment is due under the terms thereof. Unless
earlier terminated, the Bank will continue to pay premiums on the life
insurance policies funding the split-dollar agreements referenced in Section
4(c) for a period of twelve (12) months from the date of termination, at which
time the policies shall be permitted to lapse or transferred in accordance
with the provisions of the split-dollar agreements; and
(iv) the Bank will use reasonable commercial efforts to
provide the Executive with continued coverage or twelve (12) months from the
date of termination under the Bank's employee group plans for health, life and
disability at the same level of participation enjoyed by Executive on the date
of termination. The health coverage provided hereunder shall count towards the
Executive's right to continuation coverage under the federal law known as
COBRA, to the extent permitted by law. Executive acknowledges and agrees that
his participation in stock option or stock purchase plans, bonus plans and any
retirement plans which are "qualified" under Section 401(a) of the Internal
Revenue Code will cease on the date of termination.
(d) Termination by Operation of Law. The Executive's employment
shall terminate:
(i) if the Executive is removed and/or permanently prohibited
from participating in the conduct of the affairs of the Corporation or its
subsidiaries by a final order issued by any financial institution regulatory
body, including but not limited to the Federal Reserve Board, the Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation or any
state financial institution regulator as of the effective date of the order; or
(ii) if the Executive is removed and/or permanently
prohibited from participating in the conduct of the affairs of the Corporation
or its subsidiaries under, or such removal is required to comply with, any
final judicial decree or order.
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<PAGE> 9
In the event of termination by Operation of Law, all obligations of the
Corporation or its subsidiaries under this Agreement shall terminate as of the
date indicated, except that all compensation and benefits earned by the
Executive but unpaid at the time of his termination will be paid to Executive.
(e) Termination by Disability. The Executive's employment may be
terminated in the event that he is unable to perform the essential duties of
his position due to any mental, physical or other disability. The Executive may
only be terminated under this provision if he remains unable to perform the
essential functions of his position following a leave of absence because of
disability for a period of twenty six (26) weeks and either (i) the Board of
Directors of the Corporation thereafter concludes, based upon medical and other
evidence satisfactory to it, that the Executive is disabled within the meaning
of this provision or (ii) the issuing carrier under any group or individual
long term disability plan or policy paid for or maintained by the
Corporation or its subsidiaries determines that the Executive is disabled under
the terms of such plan or policy. During the twenty-six (26) week period prior
to termination for disability, the Executive will receive full Base Salary
reduced by the amount of disability benefits provided under any disability
insurance paid for or maintained by the Corporation or its subsidiaries. If
disability benefits have not commenced at the time of termination for
disability under any such long term disability insurance, such full Base Salary
shall continue until the time any such disability benefits commence. The
Corporation will make reasonable accommodation to the known physical and mental
limitations of the Executive unless to do so would cause the Corporation undue
hardship. The Executive may, and at the request of the Corporation will. submit
to the Corporation a certification of his medical condition and prognosis, in
reasonable detail by a physician or physicians satisfactory to the
Corporation. All obligations of the Corporation or its subsidiaries under this
Agreement, except for the Base Salary continuation provided under this
paragraph, shall terminate as of the date the Executive's employment is
terminated under this provision, except that all compensation and benefits
earned by the Executive but unpaid at the time of his termination will be paid
to Executive.
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<PAGE> 10
(f) Termination by Reason of Retirement or Voluntary
Resignation. In the event of the Executive's retirement or his voluntary
resignation, this Agreement will terminate on the date Executive retires or
voluntarily resigns from employment and all obligations of the Corporation or
its subsidiaries under this Agreement will terminate as of that date; provided,
however, that Executive will be entitled to receive any salary and benefits
earned but unpaid as of the date of his retirement or resignation.
(g) Resignation by Reason of Corporation's Material Breach. In
the event of Executive's resignation due to a material breach of this Agreement
by the Corporation (determined by arbitration pursuant to Section 12), then the
Corporation's obligations under this Agreement are the same as those for a
Termination Without Cause under Section 6(c). Executive's letter of
resignation: shall set forth in specific detail the material breach alleged to
have compelled his resignation in order for this subparagraph to apply to any
resignation.
(h) Resignation as Director. Upon notice to Executive that
Executive's employment with the Corporation is terminated hereunder for any
reason, he hereby agrees to resign immediately as director of the Corporation,
the Bank, or any subsidiary or entity affiliated with either upon whose board
of directors he is a member, effective upon the date of termination of
employment. The Executive hereby agrees that the Corporation shall have the
right to suspend any payments to or on behalf of Executive under this Agreement
until this provision is complied with by Executive.
7. Suspension of Agreement. Notwithstanding the provisions of Section
3, the Executive's employment hereunder and the Corporation's obligations under
this Agreement shall be suspended if the Executive is suspended and/or
temporarily prohibited from participating in the conduct of the Corporation's
or any subsidiary's affairs by a notice served by any financial institution
regulatory body including but not limited to the Federal Reserve Board, the
Office of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation or any state financial institution regulator or any other judicial,
executive or agency decree, order, judgment or ruling as of the date of
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<PAGE> 11
service thereof unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Corporation shall (i) pay the Executive the
compensation withheld while the Agreement was suspended pursuant to this
Section and (ii) reinstate any of its obligations which were suspended.
8. Noncompetition and Confidential Information.
(a) Noncompetition. For a period of twelve (12) months following
the termination of his employment under this Agreement for any reason, the
Executive will not, directly or indirectly, whether as owner, partner,
shareholder, consultant, agent, employee, co-venturer or otherwise, or through
any Person (as such term is defined in Section 10 hereof), compete in any city
or county in the Commonwealth of Virginia, any city or county in Maryland or in
the District of Columbia where the Corporation and its subsidiaries maintain
(or have applied for) offices or branches at the time of the Executive's
termination and at any time during the period this Noncompetition provision is
in effect, with the banking or any other business conducted by the Corporation
and its subsidiaries during the period of his employment hereunder, nor will he
attempt to hire any employee of the Corporation or its subsidiaries, assist in
such hiring by any other Person, encourage any such employee to terminate his
or her relationship with the Corporation or its subsidiaries or solicit or
encourage any customer of the Corporation or its subsidiaries to terminate its
relationship with the Corporation or any subsidiary or to conduct with any
other Person any business or activity which such customer conducts with the
Corporation or its subsidiaries. Notwithstanding anything to the contrary
contained herein, the Executive shall be permitted to invest his assets in any
corporation, firm or entity which may be deemed to compete with the
Corporation, and/or its subsidiaries, within the meaning of this Section 8(a),
provided that the Executive does not become the beneficial owner (as such term
is defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934)
of more than five percent (5%) of the outstanding voting stock of any such
corporation, firm or entity.
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<PAGE> 12
(b) Confidential Information. The Executive will not at any time
disclose to any other Person (except as required by applicable law or in
connection with the performance of his duties and responsibilities hereunder),
or use for his own benefit or gain, any confidential information of the
Corporation and its subsidiaries obtained by him incident to his employment.
The term "confidential information" includes, without limitation, financial
information, trade secrets, business plans and opportunities (such as lending
relationships, financial product developments or possible acquisitions or
dispositions of businesses or facilities) which have been discussed or
considered by the management of the Corporation and its subsidiaries but does
not include any information which has become part of the public domain by means
other than the Executive's nonobservance of his obligations hereunder. Upon the
effective date of any notice by the Executive or the Corporation to terminate
this Agreement, or at any time upon the request of the Corporation, the
Executive (or his heirs or personal representatives) shall deliver to the
Corporation (i) all documents and materials containing confidential information
and (ii) all documents, materials or other property belonging to the
Corporation or its subsidiaries, which in either case are in the possession or
under the control of the Executive (or his heirs or personal representatives.)
(c) Relief Interpretation. The Executive agrees that a breach of
this Section 8 will irreparably and continually damage the Corporation and that
the Corporation shall be entitled to injunctive relief for any breach by him of
the covenants contained in this Section 8, in addition to any other remedy
provided by law. Breach of this Section 8 by the Executive will result in the
cessation of any payments to or on behalf of Executive under Section 6 of this
Agreement, and the Corporation may elect to suspend such payments in the event
of breach, pending final determination of the merits of the dispute by a court
of competent jurisdiction. The parties agree that the prevailing party will be
entitled to recover the reasonable attorneys' fees and court costs incurred by
such party in the course of prosecuting or defending any lawsuit brought under
Section 8 of this Agreement.
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<PAGE> 13
(d) Modification of Agreement. This Section 8 is intended to limit
the Executive's right to compete only to the extent necessary to protect the
Corporation and its subsidiaries from unfair competition. The Executive
acknowledges that the above covenants are manifestly reasonable on their face,
and the parties expressly agree that such restrictions have been designed to be
reasonable and no greater than is required for the protection of the
Corporation and its subsidiaries. In the event that any provision of this
Section 8 shall be determined by a court of competent jurisdiction to be
unenforceable for any reason, a court or other trier of fact may modify and
enforce the covenant to the extent it is reasonable under the law and the
circumstances existing at that time.
(e) Survival of Restrictions. The provisions of this Section 8
will survive the termination of this Agreement and the termination of
Executive's employment with the Corporation, regardless of the reasons for
termination.
9. Conflicting Agreements. The Executive hereby represents and warrants
that except for the Palmer Employment Agreement, he is not a party to any
other employment or compensation agreement, that performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which
he is a party or is bound, and that he is not subject to any covenants
against competition or similar covenants which would affect the performance of
his obligations hereunder.
10. Definition of "Person." For purposes of this Agreement, the term
"Person" shall mean an individual, a corporation, an association, a
partnership, an estate, a limited liability company, a trust and any other
entity or organization.
11. Withholding. All payments made by the Corporation or its
subsidiaries under this Agreement to Executive or on Executive's behalf shall
be reduced by any tax or other amounts required to be withheld under applicable
law.
12. Arbitration of Disputes. With the exception of any dispute arising
under Section 8 of this Agreement, any controversy or claim arising out of or
relating to this
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Agreement or the breach thereof shall be settled by arbitration in accordance
with the laws of the Commonwealth of Virginia by three arbitrators, one of whom
shall be appointed by the Corporation, one of whom shall be appointed by the
Executive, and the third of whom shall be appointed by the first two
arbitrators. 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 the County of
Fairfax, Virginia, or in such other locations as the parties may agree, 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
Section 12. The decision of the arbitrators will be final and binding. Judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
13. Assignment; Binding Agreement; Successors.
(a) Neither the Corporation nor the Executive may make an
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other party hereto, and
without such consent, any attempted transfer or assignment shall be null and of
no effect. This Agreement shall inure to the benefit of and be binding upon the
Corporation and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns. In the event of the Executive's
death prior to the completion by the Corporation of all payments due him under
this Agreement, the Corporation shall continue such payments to the Executive's
beneficiary or to his estate, as appropriate.
(b) This Agreement will remain binding upon any successor Person
who acquires all or substantially all of the business or assets of the
Corporation (whether by merger, reorganization, consolidation, liquidation,
sale of substantially all of its assets or otherwise). The Corporation will
require and such successor Person, to expressly assume and agree in writing to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required perform it if no succession had taken place.
Failure of the Corporation to obtain such assumption in writing, shall be
14
<PAGE> 15
treated for purposes of this Agreement as a Termination Without Cause under
Section 6(c). Failure of the Executive to consent to the assumption of this
Agreement by such successor Person shall be treated for purposes of this
Agreement as a voluntary resignation under Section 6(f). In either event, the
date on which any such succession becomes effective will be deemed the date of
termination of employment.
14. Exclusivity of Benefits. The specific arrangements referred to
herein are not intended to exclude any other benefits which may be available
to the Executive upon a termination of employment with the Corporation pursuant
to employee benefit plans generally available to all employees of the
Corporation or its subsidiaries; notwithstanding this provision, however, the
parties agree that there will be no duplication of benefits in the case of
salary continuation or severance plans. ConsequentlY, any compensation or
benefits to which Executive is entitled upon termination under any generally
available salary continuation or severance benefit plan, policy or practice
will be offset against the specific compensation and benefits payable under
this Agreement.
15. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the applications of such
portion or provision in circumstances other than those as to which it is
so declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
16. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
17. Notices. Any notices, requests, demands and other communications
required by this Agreement shall be sufficient if in writing and delivered in
person, by
15
<PAGE> 16
overnight delivery, or sent by registered or certified mail, postage prepaid,
to the Executive at the last address the Executive has filed in writing with
the Corporation or, in the case of the Corporation or the Bank, at their
respective main offices, to the attention of their Chief Executive Officer.
18. Indemnification. To the extent consistent with any general liability
or directors' and officers' insurance policies in effect during the term of
this Agreement, and as permitted by applicable law, the Corporation shall
indemnify, hold harmless and defend the Executive for all acts or omissions
taken or not taken by him in good faith while performing services for the
Corporation or its subsidiaries to no lesser extent than, and upon the same
terms and conditions as, other similarly situated officers of the Corporation.
If and to the extent that the Corporation maintains, at any time during the
term of this Agreement, a liability insurance policy covering the other
officers and directors of the Corporation, the Corporation shall use its best
effects to cause the Executive to be covered under such policy upon the same
terms and conditions as other similarly situated officers and directors.
19. Regulatory Prohibition. Notwithstanding any other provision of this
Agreement to the contrary, any payments made to the Executive pursuant to this
Agreement, or otherwise, will not be made or shall be returned promptly by the
Executive, if required, if the Federal Deposit Insurance Corporation (FDIC) or
any other enforcement authority, finds that the payments violate Section 18(k)
of the Federal Deposit Insurance Act, as amended (12 U.S.C. Section 1828 (k))
and any final rules and regulations promulgated thereunder.
20. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by duly authorized
representatives of the Corporation.
16
<PAGE> 17
21. Governing Law. This Agreement shall be construed under and be
governed in all respects by the laws of the Commonwealth of Virginia, to the
extent not preempted by Federal law.
17
<PAGE> 18
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Corporation and the Bank, by their respective duly authorized officers,
and by the Executive, as of the date first above written.
ATTEST: GEORGE MASON BANKSHARES, INC.
[SIG] By: Bernard H. Clineburg
- ------------------------ -----------------------------------
Secretary Title: President
--------------------------------
[Seal]
WITNESS: WEBB C. HAYES, IV
[SIG] [SIG]
- ------------------------ --------------------------------------
Name
ATTEST: THE PALMER NATIONAL BANK
[SIG] By: [SIG]
- ------------------------ ----------------------------------
Secretary Title: S.V.P
-------------------------------
[Seal]
18
<PAGE> 1
EXHIBIT 10AR
GEORGE MASON BANKSHARES, INC.
1994 STOCK OPTION PLAN
1. Purpose of the Plan.
The purpose of the 1994 Stock Option Plan (the "Plan") of George Mason
Bankshares, Inc. (the "Company") is to give the Company a significant advantage
in attracting, retaining and motivating officers and key employees and to
provide the Company and its Subsidiaries and Affiliates with the ability to
provide incentives more directly linked to the profitability of the Company's
businesses and increases in stockholder value.
2. Definitions.
(a) "Affiliate" means a corporation or other entity controlled by
the Company and designated by the Compensation Committee as
such.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" has the meaning set forth in the optionee's Option
agreement.
(d) "Change in Control" has the meaning set forth in Sections
8(b).
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(f) "Commission" means the Securities and Exchange Commission or
any successor agency.
(g) "Common Stock" means the common shares, $0.01 par value per
share, of the Company.
(h) "Company" means George Mason Bankshares, Inc.
(i) "Compensation Committee" means the Compensation Committee
referred to in Section 4.
(j) "Date of Grant" means the date on which an Option is approved
by the Compensation Committee.
(k) "Director" means a member of the Company's Board of Directors.
(l) "Disinterested Person" means a Director who was not granted
during the one (1) year immediately preceding the Director's
appointment to the committee, and is not granted while a
member of the committee, equity securities under the Plan or
any other plan of the Company or an affiliate of the Company,
except as may be otherwise permitted by Rule 16b-3(c)(2)
promulgated under the Exchange Act.
<PAGE> 2
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
(n) "Fair Market Value" shall mean, with respect to a share of
Common Stock, (i) if the Common Stock is listed on a national
securities exchange or traded on the National Market System,
the closing price of the Common Stock on the determination
date or if there are no sales on such date, then on the next
preceding date on which there were sales of Common Stock, all
as published in the Eastern Edition of The Wall Street
Journal, (ii) if the Common Stock is not listed on a national
securities exchange or traded on the National Market System,
the mean between the high and low selling prices last reported
by the National Association of Securities Dealers, Inc. for
the over-the-counter market on the determination date or, if
no sales are reported on such date, then on the next preceding
date on which there were such quotations, or (iii) if the
Common Stock is not listed on a national securities exchange
or traded on the National Market System and quotations for the
Common Stock are not reported by the National Association of
Securities Dealers, Inc., the Fair Market Value determined by
the Compensation Committee on the basis of available prices
for the Common Stock or in such manner as the Compensation
Committee shall agree.
Notwithstanding the preceding, the Fair Market Value on a
given determination date of Common Stock subject to Incentive
Stock Options or Common Stock valued in connection with the
exercise of Incentive Stock Options shall be an amount which
is equal to the Compensation Committee's good faith
determination of the Common Stock's value on the given
determination date and the Compensation Committee shall for
all purposes of this Plan have the authority to determine Fair
Market Value using methods other than those described in this
Section, if the Compensation Committee determines that such
alternative methods more properly reflect the Fair Market
Value of the Common Stock.
(o) "Incentive Stock Option" means an Option qualifying for
special tax treatment under Section 422 of the Code.
(p) "Insider" means any person subject to the provisions of
section 16 of the Exchange Act, including an "officer" of the
Company within the meaning of section 16 of the Exchange Act,
a "director" within the meaning of section 3(a)(7) of the
Exchange Act, and a beneficial owner" of more than ten percent
(10%) of any class of the equity securities of the Company
within the meaning of section 16 of the Exchange Act.
(q) "Key Employee" means any employee, including employees who are
also officers or directors, but not including directors who
are not also employees, of the Company or any Subsidiary
Company who have substantial responsibility in the direction
and management of the Company or a Subsidiary Company as
determined by the Compensation Committee.
(r) "Nonqualified Stock Option" means an Option that is not an
Incentive Stock Option.
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<PAGE> 3
(s) "Option" means an Incentive Stock Option or a Nonqualified
Stock Option granted under this Plan.
(t) "Parent Company" has the same meaning used in Section 424(e)
of the Code.
(u) "Plan" means the George Mason Bankshares, Inc. 1994 Stock
Option Plan as set forth herein, which may be amended from
time to time.
(v) "Rule 16b-3" means Rule 16b-3, as promulgated by the
Commission under Section 16(b) of the Exchange Act, as amended
from time to time.
(w) "Subsidiary" or "Subsidiary Company" has the same meaning used
in Section 424(f) of the Code.
(x) "Termination of Employment" means the termination of the
Participant's employment with the Company or any Subsidiary or
Affiliate.
In addition, certain other terms used herein have definitions
given to them in the first place in which they are used.
3. Shares of Common Stock Subject to the Plan.
Subject to the provisions of Section 10 of the Plan, the aggregate
number of authorized but unissued shares of Common Stock that may be issued
pursuant to Options granted under the Plan will not exceed one hundred thousand
(100,000) shares. Shares that by reason of expiration of an Option or
otherwise are no longer subject to purchase pursuant to an Option granted under
the Plan may again be available for issuance pursuant to Options under the
Plan.
4. Administration of the Plan.
The Plan shall be administered by the Compensation Committee of the
Board unless the Compensation Committee is composed of less than three
Disinterested Persons. The Board may, from time to time, remove members from
or add members to the Compensation Committee. Vacancies, however caused, shall
be filled by the Board. The Compensation Committee shall select one of its
members as chairperson and shall hold meetings at such times and places as it
may desire. If the Compensation Committee is composed of less than three
Disinterested Persons, the Plan shall be administered by such other committee
of the Board, composed of not less than two Disinterested Persons, each of whom
shall be appointed by and serve at the pleasure of the Board. If at any time
no Compensation Committee shall be in office, the functions of the Compensation
Committee specified in the Plan shall be exercised by the Board.
The Compensation Committee shall have authority to grant awards
pursuant to the terms of the Plan to officers and employees of the Company and
its Subsidiaries and Affiliates.
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<PAGE> 4
Among other things, the Compensation Committee shall have the
authority, subject to the terms of the Plan:
(a) to select the eligible employees to whom awards may from time
to time be granted;
(b) to determine whether and to what extent Incentive Stock
Options and Nonqualified Stock Options or any combination
thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be
covered by each award granted hereunder;
(d) to determine the terms and conditions of any award granted
hereunder (including, but not limited to, subject to Section
6, the option price, any vesting restrictions or limitation
and any vesting acceleration or forfeiture waiver regarding
any award and the shares of Common Stock relating thereto,
based on such factors as the Compensation Committee shall
determine); and
(e) to modify, amend or adjust the terms and conditions of any
award, at any time or from time to time, including, but not
limited to, with respect to performance goals and measurements
applicable to performance-based awards pursuant to the terms
of the Plan.
The Compensation Committee shall have the authority to adopt, alter
and repeal such administrative rules, guidelines and practices governing the
Plan as it shall from time to time deem advisable, to interpret the terms and
provisions of the Plan and any award issued under the Plan (and any agreement
relating thereto), and to otherwise supervise the administration of the Plan.
The Compensation Committee may act with respect to the Plan only by a
majority of its members then in office, except that the members thereof may
authorize any one or more of their number or any officer of the Company to
execute and deliver documents on behalf of the Compensation Committee.
Any determination made by the Compensation Committee or pursuant to
delegated authority pursuant to the provisions of the Plan with respect to any
award shall be made in the sole discretion of the Compensation Committee at the
time of the grant of the award or, unless in contravention of any express term
of the Plan, at any time thereafter. All decisions made by the Compensation
Committee pursuant to the provisions of the Plan shall be final and binding on
all persons, including the Company and Plan participants.
5. Eligibility.
Key Employees of the Company and any Subsidiary Company will be
eligible to participate in the Plan, as approved by the Compensation Committee.
No Employee shall be eligible to receive Options under the Plan
relating to more than 10,000 shares of Common Stock in any one calendar year.
Incentive and Nonqualified Stock Options issued to a Key Employee in the same
year shall be aggregated for purposes of applying this limit.
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<PAGE> 5
6. Terms and Conditions of Options.
Options granted under the Plan may be of two types: Incentive Stock
Options and Nonqualified Stock Options. Any Option granted under the Plan
shall be in such form as the Compensation Committee may from time to time
approve.
The Compensation Committee shall have the authority to grant any
optionee Incentive Stock Options, Nonqualified Stock Options, or both types of
Options. Incentive Stock Options may be granted only to employees of the
Company and its Subsidiaries (within the meaning of Section 424(f) of the
Code). To the extent that any Option is not designated as an Incentive Stock
Option, or even if so designated does not qualify as an Incentive Stock Option,
it shall constitute a Nonqualified Stock Option.
Each Option granted under this Plan will be evidenced by an Option
agreement between the Company and the recipient which sets forth the exercise
price of the Option, the vesting schedule (if any) of the Option, the
expiration date of the Option, and any other terms or conditions approved by
the Compensation Committee subject to the following terms and conditions:
(a) Option Price.
(1) Nonqualified Options. The exercise price per share
for the shares subject to a Nonqualified Stock Option
will be no less than one hundred percent (100%) of
the Fair Market Value of the Common Stock on the Date
of Grant.
(2) Incentive Options. The exercise price per share for
the shares subject to an Incentive Stock Option will
be no less than one hundred percent (100%) of the
Fair Market Value of the Common Stock on the Date of
Grant. However, the exercise price per share for
shares subject to an Incentive Stock Option granted
to an individual who on the Date of Grant owns more
than ten percent (10%) of the total combined voting
power of all classes of stock of the Company (or of a
Parent Company or a Subsidiary Company) will not be
less than one hundred and ten percent (110%) of the
Fair Market Value of the Common Stock on the Date of
Grant.
(b) Term of Options. Notwithstanding any other provisions of the
Plan or any option agreement, no Option will be exercisable
after the expiration of ten (10) years from the Date of Grant.
Furthermore, no Incentive Stock Option granted to an
individual who on the Date of Grant owns more than ten percent
(10%) of the total combined voting power of all classes of
stock of the Company (or of a Parent Company or a Subsidiary
Company) will be exercisable after the expiration of five (5)
years from the Date of Grant.
(c) Maximum Value of Options which are Incentive Options. To the
extent that the aggregate Fair Market Value of the Common
Stock with respect to which Incentive Stock Options granted to
any person are exercisable for the first time during any
calendar year (under all stock option plans of the Company, a
Parent Company and any Subsidiary Company) exceeds $100,000,
the options are not Incentive Stock Options. For purposes of
this paragraph, the
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<PAGE> 6
Fair Market Value of the Common Stock will be determined as of
the time the Incentive Stock Option with respect to the Common
Stock is granted. This paragraph will be applied by taking
Incentive Stock Options into account in the order in which
they are granted.
(d) Vesting of Options and Termination of Employment. An Option
will be exercisable only to the extent that it is vested on
the date of exercise. Unless provided otherwise in the
agreement, Options shall vest one (1) year from the Date of
Grant. Vesting of an Option will cease on the date that an
optionee is no longer an employee of the Company or a Parent
Company or Subsidiary Company (the "date of termination"), and
the Option will be exercisable only to the extent the Option
is vested on the date of termination.
(1) Termination by Death. If an optionee's employment
terminates by reason of death or the optionee's death
occurs within three (3) months after termination of
employment (provided the option is exercisable during
such three (3) month period), any Option held by such
optionee may thereafter be exercised, to the extent
then exercisable, or on such accelerated basis as the
Compensation Committee may determine, for a period of
one year (or such other period as the Compensation
Committee may specify in the option agreement) from
the date of such death or until the expiration of the
stated term of such Option, whichever period is the
shorter. In the event of termination of employment
due to death, if an Incentive Stock Option is
exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the
Code, such Option will thereafter be treated as a
Nonqualified Stock Option.
(2) Other Termination. Unless otherwise determined by
the Compensation Committee, IF there occurs a
Termination of Employment for any reason other than
death, Cause or in violation of an employment
agreement, any Option held by such Optionee may
thereafter be exercised by the optionee, to the
extent it was exercisable at the time of such
termination or on such accelerated basis as the
Compensation Committee may determine, for a period of
three months (or such shorter period as the
Compensation Committee may specify in the option
agreement) from the date of such termination of
employment or until the expiration of the stated term
of such Option, whichever period is the shorter.
In the event of Termination of employment for Cause
or in violation of an employment agreement, any
unexercised Option held by such optionee shall expire
immediately upon the giving to the optionee of notice
of such Termination of Employment.
(e) Exercise. Except as otherwise provided herein, Options shall
be exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Compensation
Committee. No Option shall be exercisable until held by the
optionee for at least six (6) months from the Date of Grant.
If the Compensation Committee provides that any Option is
exercisable only in installments, the Compensation Committee
may at any time
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<PAGE> 7
waive such installment exercise provisions, in whole or in
part, based on such factors as the Compensation Committee may
determine. In addition, the Compensation Committee may at any
time, in whole or in part, accelerate the exercisability of
any Option.
Subject to the provisions of this Section 6, Options may be
exercised, in whole or in part, at any time during the option
term by giving written notice of exercise to the secretary of
the Company at its principal office specifying the number of
shares of Common Stock subject to the Option to be purchased.
(f) Payment
(1) Cash Payment. Options may be exercised by the
optionee's written notice to the secretary of the
Company (the "exercise notice") and only if the
exercise notice is accompanied by payment in cash, by
certified or bank check or such other instrument as
the Company may accept of the full exercise price for
the shares with respect to which the Option is
exercised, except as otherwise provided herein.
(2) Noncash Payment. The Compensation Committee may
approve payment of the exercise price in the form of
(i) Common Stock of the Company other than stock
acquired upon exercise of the Option, (ii) a
combination of cash and such Common Stock, or (iii)
Common Stock acquired upon exercise of the Option,
provided that the requirements of Rule 16b-3
promulgated under the Exchange Act are met. The
value of any Common Stock used to pay the exercise
price or any portion thereof will be the Fair Market
Value of Common Stock on the date of exercise.
(3) Broker-Dealer Payment. The Compensation Committee
may approve payment of the unpaid exercise price by a
broker-dealer or by the optionee with cash advanced
by the broker-dealer, if the exercise notice is
accompanied by the optionee's written irrevocable
instructions to deliver the Common Stock acquired
upon exercise of the Option to the broker-dealer.
(4) Full Payment. No shares of Common Stock shall be
issued until full payment therefor has been made. An
optionee shall have all of the rights of a
stockholder of the Company holding the Common Stock
that is subject to such Option (including, if
applicable, the right to vote the shares and the
right to receive dividends), when the optionee has
given written notice of exercise, has paid in full
for such shares, and, if requested, has given the
representation described in Section 13(a)
(g) Nontransferability. No Option granted under the Plan,
contingent or otherwise, will be transferable, assignable or
subject to any encumbrance, pledge, or charge of any nature,
except by will or the laws of descent and distribution.
During the lifetime of an optionee, an Option will be
exercisable only by the optionee or by the optionee's legal
representative. The executor or
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<PAGE> 8
administrator of the estate of the optionee may transfer any
rights with respect to such Option to the person or persons or
entity (including a trust) entitled thereto under the will of
the optionee or under the laws of intestacy.
7. Stock Legend.
The Company may require that certificates evidencing shares of Common
Stock purchased upon the exercise of Incentive Stock Options issued under the
Plan be endorsed with a legend in substantially the following form:
The shares evidenced by this certificate may not be sold or
transferred prior to ____________, 19___, in the absence of
a written statement from George Mason Bankshares, Inc. to the
effect that the Company is aware of the fact of such sale or
transfer.
The blank contained in such legend shall be filled in with the date
that is the later of: (i) one year and one day after the date of exercise of
such Incentive Stock Option or (ii) two years and one day after the date of
grant of such Incentive Stock Option. Upon delivery to the Company, at its
principal executive office, of a written statement to the effect that such
shares have been sold or transferred prior to such date, the Company does
hereby agree to promptly deliver to the transfer agent for such shares a
written statement to the effect that the Company is aware of the fact of such
sale or transfer. The Company may also require the inclusion of any additional
legend which may be necessary or appropriate.
8. Change in Control Provisions.
(a) Impact of Event. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change in Control, any
Options outstanding as of the date such Change in Control is
determined to have occurred and not then exercisable and
vested shall become fully exercisable and vested to the full
extent of the original grant unless such Option has already
lapsed.
(b) Definition of Change in Control. For purposes of the Plan,
"Change in Control" means the sale of substantially all of the
Corporation's assets or the acquisition, whether directly,
indirectly, beneficially (within the meaning of Rule 13d-3 of
the Act), or of record, of securities of the Corporation
representing twenty-five percent (25%) or more in the
aggregate voting power of the Corporation's then-outstanding
Common Stock by any "person" (within the meaning of Sections
13(d) and 14(d) of the Act), including any corporation or
group of associated persons acting in concert, other than (i)
the Corporation or its subsidiaries and/or (ii) any employee
pension benefit plan (within the meaning of Section 3(2) of
the Employee Retirement Income Security Act of 1974) of the
Corporation or of its subsidiaries, including a trust
established pursuant to any such plan.
9. Termination and Amendment of the Plan and
The Board may terminate the Plan at any time except with respect to
any outstanding Options. The Board may amend the Plan in any manner with
respect to future grants
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<PAGE> 9
of Options and may amend outstanding Options in any manner consistent with the
Plan subject to the following limitations:
(a) Except as provided in Section 10 of the Plan, no amendment
will be effective without the approval of the shareholders of
the Company if that amendment (i) materially increases the
benefits accruing to participants under the Plan, (ii)
materially increases the number of securities which may be
issued under the Plan, (iii) materially modifies the
requirements as to eligibility to participate in the Plan,
(iv) changes the class of eligible persons, (v) withdraws
administration of the Plan from a committee of Disinterested
Persons, or (vi) extends the term of the Plan.
(b) No amendment will be effective if the amendment changes the
manner of determining the exercise price of Incentive Stock
Options, makes individuals who are not employees of the
Company or of any Parent or Subsidiary Company eligible to be
granted Incentive Stock Options, changes the
nontransferability of the Options, or alters or impairs any
rights or obligations of any outstanding Option without the
written consent of the optionee.
10. Change in Capital Structure.
(a) The existence of outstanding Options shall not affect in any
way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Common Stock
or the rights thereof, or the dissolution or liquidation of
the Company, or any sale or transfer of an or any part of its
assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
(b) If the Company shall effect a subdivision or consolidation of
shares or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding, without receiving
compensation therefore in money, services or property, then
(i) the number, class, and per share price of shares of Common
Stock subject to outstanding Options hereunder shall be
appropriately adjusted in such a manner as to entitle an
optionee to receive upon exercise of an Option, for the same
aggregate cash consideration, the same total number and class
of shares as he would have received had the optionee exercised
his or her option in full immediately prior to the event
requiring the adjustment; and (ii) the number and class of
shares then reserved for issuance under the Plan shall be
adjusted by substituting for the total number and class of
shares of Common Stock then reserved that number and class of
shares of Common Stock that would have been received by the
owner of an equal number of outstanding shares of each class
of Common Stock as the result of the event requiring the
adjustment.
(c) After a merger of one or more corporations into the Company or
after a consolidation of the Company and one or more
corporations in which the Company shall be the surviving
corporation, each optionee shall, at no
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<PAGE> 10
additional cost, be entitled upon exercise of such Option to
receive (subject to any required action by stockholders) in
lieu of the number and class of shares as to which such Option
shall then be so exercisable, the number and class of shares
of stock or other securities to which such optionee would have
been entitled pursuant to the terms of the agreement of merger
or consolidation if, immediately prior to such merger or
consolidation, such optionee had been the holder of record of
the number and class of shares of Common Stock equal to the
number and class of shares as to which such Option shall be so
exercised.
(d) If the Company is merged into or consolidated with another
corporation under circumstances where the Company is not the
surviving corporation, or if the Company is liquidated, or
sells or otherwise disposes of substantially all of its assets
to another corporation while unexercised Options remain
outstanding under the Plan, unless provisions are made in
connection with such transaction for the continuance of the
Plan and/or the assumption or substitution of such Options
with new options covering the stock of the successor
corporation, or parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices,
then all outstanding Options shall be cancelled as of the
effective date of any such merger, consolidation or sale
provided that (i) notice of such cancellation shall be given
to each optionee and (ii) each optionee shall have the right
to exercise such Option in full (without regard to any vesting
or other limitations on exercise imposed on such Option)
during the 30-day period preceding the effective date of such
merger, consolidation, liquidation, or sale (the "corporate
event"). Notwithstanding the preceding provisions if in the
opinion of counsel to the Company the immediate exercisability
of such Options (or cash payment), when taken into
consideration with all other "parachute payments" as defined
in Section 280G of the Code, would result in an "excess
parachute payment" as defined in such section, such Option
shall not become immediately exercisable and shall be
cancelled as of the effective date of the corporate event,
except and to the extent the Compensation Committee in its
discretion shall otherwise determine.
(e) Except as hereinbefore expressly provided, the issue by the
Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or
property, or for labor or services either upon direct sale or
upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with
respect to, the number, class or price of shares of Common
Stock then subject to outstanding Options.
(f) Adjustment under the preceding provisions of this section will
be made by the Compensation Committee, whose determination as
to what adjustments will be made and the extent thereof will
be final, binding, and conclusive. No fractional interest
will be issued under the Plan on account of any such
adjustment. No adjustment will be made in a manner that
causes an Incentive Stock Option to fail to continue to
qualify as an Incentive Stock Option under the Code.
-10-
<PAGE> 11
11. Holding Period.
Notwithstanding anything to the contrary in the Plan, Common Stock
acquired through exercise of an Option granted to an Insider may not be
disposed of by the Insider during the six-month period beginning on the Date of
Grant.
12. Taxes.
(a) Automatic Withholding. When any portion of a Nonqualified
Stock Option is exercised, the Company either shall require
the Optionee to pay cash or the Company shall withhold from
the Common Stock acquired upon such exercise the number of
shares sufficient to satisfy the Company's obligations, if
any, to withhold taxes under Federal, state, or local law as a
result of such exercise. The Fair Market Value of the Common
Stock withheld must, as of the date the Nonqualified Stock
Option is exercised, at least equal the aggregate unsatisfied
withholding obligations for the portion of the Option that is
exercised.
(b) Tax Qualification. Incentive Stock Options granted under the
Plan are intended to qualify as Incentive Stock Options within
the meaning of Section 422 of the Code, and the terms of the
Plan and Options granted hereunder shall be so construed.
Notwithstanding the foregoing, nothing in the Plan shall be
interpreted as a representation, guarantee or other
undertaking on the part of the Company that any Options are,
or will be, determined to qualify as incentive stock options
within the meaning of the Code.
13. General Provisions.
(a) The Company shall not be required to sell or issue any shares
under any Option if the issuance of such shares shall
constitute a violation by the optionee or the Company of any
provision of any law, statute, or regulation of any stock
exchange upon which the Common Stock may be listed or any
governmental authority whether it be Federal or State. Unless
a registration statement is in effect under the Securities Act
of 1933, as amended (the "Securities Act") with respect to the
shares of Common Stock covered by an Option, the Company shall
not be required to issue shares upon exercise of any Option
(i) unless the Compensation Committee has received evidence
satisfactory to it to the effect that the optionee is
acquiring such shares for investment and not with a view to
the distribution thereof or (ii) unless an opinion of counsel
to the Company has been received by the Company, in a form and
substance which is deemed acceptable by the Compensation
Committee, to the effect that a registration statement is not
required. Any determination in this connection by the
Compensation Committee shall be final, binding and conclusive.
In the event the shares issuable on exercise of an Option are
not registered under the Securities Act, the Company may
imprint the following legend or any other legend which counsel
for the Company considers necessary or advisable to comply
with the Securities Act:
"The shares of stock represented by this certificate
have not been registered under the Securities Act of
1933 or under the securities laws of any State and
may not be sold or transferred
-11-
<PAGE> 12
except pursuant to an effective registration
statement or upon receipt by the Company of any
opinion of counsel, in form and substance
satisfactory to the Company, that registration is not
required for such sale or transfer."
The Company may, but shall in no event be obligated to,
register any securities covered hereby pursuant to the
Securities Act and, in the event any shares are so registered,
the Company may remove any legend on certificates representing
such shares. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of an Option
or the issuance of shares pursuant thereto to comply with any
law or regulation of any governmental authority.
(b) No optionee and no beneficiary or other person claiming under
or through an optionee will have any right, title or interest
in or to any shares of Common Stock allocated or reserved
under the Plan or subject to any Option except as to such
shares of Common Stock, if any, that have been issued or
transferred to such optionee or beneficiary.
(c) The Plan and all determinations made and actions taken
pursuant thereto will be governed by the laws of the
Commonwealth of Virginia and construed in accordance therewith.
(d) The Plan is intended to comply in all respects with Rule 16b-3
promulgated under the Exchange Act (the "exemption"). If the
Plan is found not to qualify for the exemption, any
disqualifying Plan provision will be deemed replaced by a
provision that most nearly accomplishes the intent of the
Board at the time the Plan was adopted and that results in the
Plan's qualification for the exemption. If the Board's intent
cannot be accomplished through a substitute provision that
results in the Plan's qualification for the exemption, the
Plan will continue in full force and effect in the form
adopted by the Board notwithstanding the Plan's failure to
qualify for the exemption.
(e) Options may be granted under this Plan from time to time in
substitution for stock options held by employees of other
corporations who become employees of the Company or a
Subsidiary Company as a result of a merger or consolidation of
the employing corporation with the Company or a Subsidiary
Company or the acquisition by the Company or a Subsidiary
Company of the assets of the employing corporation, or the
acquisition by the Company or a Subsidiary Company of at least
50% of the issued and outstanding stock of the employing
corporation as the result of which it becomes a Subsidiary
Company of the Company. The terms and conditions of the
substitute options so granted may vary from the terms and
conditions set forth in this Plan to such extent as the
Compensation Committee at the time of grant may deem
appropriate to conform, in whole or in part, to the provisions
of the stock options in substitution for which they are
granted, but with respect to stock options which are Incentive
Stock Options, no such variation shall be such as to affect
the status of any such substitute option as an "incentive
stock option" under Section 422 of the Code.
-12-
<PAGE> 13
(f) At the time of grant, the Compensation Committee may provide
in connection with any grant made under the Plan that the
shares of Common Stock received as a result of such grant
shall be subject to a right of first refusal pursuant to which
the optionee shall be required to offer to the Company any
shares that the optionee wishes to sell at the then Fair
Market Value of the Common Stock, subject to such other terms
and conditions as the Compensation Committee may specify at
the time of grant.
(g) All headings in this Plan are for convenience of reference
only and are to be ignored in construing the Plan. Any
masculine pronoun shall include the feminine and the singular
shall include the plural, and vice versa.
14. Indemnification of Board and Compensation Committees
The members of the Board of Directors and the Compensation Committee
will be indemnified by the Company against the reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or Option
agreements, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by legal counsel selected by the Company)
or paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it is adjudged in such
action, suit or proceeding that the member is liable for negligence or
misconduct in the performance of the member's duties; provided that within
sixty (60) days after institution of any such action, suit or proceeding a
member will in writing offer the Company the opportunity, at its own expense,
to defend the same. The foregoing right of indemnification shall inure to the
benefit of the heirs, executors or administrators of each such member of the
Board of Directors and the Compensation Committee and shall be in addition to
any and all other rights of indemnification to which such members may be
entitled to as a matter of law, contract, or otherwise.
15. Limitation of Rights
Neither the adoption and maintenance of the Plan nor the grant of
Options will:
(a) limit the right of the Company, Parent Company or Subsidiary
Company to discharge or discipline any employee, or otherwise
terminate or modify the terms of any employment agreement, or
(b) confer upon any optionee any contract or other right or
interest other than as specifically provided in the Plan and
the Option agreement.
16. Effective Date of the Plan, Duration of the Plan.
(a) On February _, 1994, the Board adopted this Plan subject to
approval by the Shareholders. The Plan shall become effective
at the next Annual Meeting of Shareholders, provided that it
is approved by a majority of the Shareholders of the Company
at that time or within one year of the Board's approval,
whichever is shorter. No Options granted prior to Shareholder
approval
-13-
<PAGE> 14
shall be exercisable unless and until the Shareholders of the
Company approve this Plan and the Options granted prior to
such approval.
(b) Unless previously terminated, the Plan will terminate ten (10)
years after the earlier of (i) the date the Plan is adopted by
the Board, or (ii) the date the Plan is approved by the
shareholders, except that Options that are granted under the
Plan before its termination will continue to be administered
under the terms of the Plan until the Options terminate or are
exercised.
-14-
<PAGE> 1
EXHIBIT 11. EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
------ ------ ------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
PRIMARY NET INCOME PER SHARE:
Net income....................................................... $6,883 $6,292 $4,972
Stock and stock equivalents (average shares):
Common shares outstanding...................................... 4,980 4,835 4,717
Stock options (a).............................................. 157 87 77
------ ------ ------
Total stock and stock equivalents................................ 5,137 4,922 4,794
------ ------ ------
PRIMARY NET INCOME PER SHARE..................................... $ 1.34 $ 1.28 $ 1.04
====== ====== ======
FULLY DILUTED NET INCOME PER SHARE:
Net income....................................................... $6,883 $6,292 $4,972
Stock and stock equivalents (average shares):
Common shares outstanding...................................... 4,980 4,835 4,717
Stock options (b).............................................. 185 161 77
------ ------ ------
Total stock and stock equivalents................................ 5,165 4,996 4,794
------ ------ ------
FULLY DILUTED NET INCOME PER SHARE............................... $ 1.33 $ 1.26 $ 1.04
====== ====== ======
</TABLE>
- ---------------
(a) Shares were assumed to be repurchased at the average closing stock prices
for the years ended December 31, 1996, 1995, and 1994.
(b) Shares were assumed to be repurchased at the December 31, 1996, 1995, and
1994 closing prices, respectively.
<PAGE> 1
EXHIBIT 13
GEORGE MASON BANKSHARES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
PERIOD ENDED DECEMBER 31, 1996
CONTENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.................................... 1
Audited Financial Statements
Consolidated Balance Sheets........................................................ 2
Consolidated Statements of Income.................................................. 3
Consolidated Statements of Shareholders' Equity.................................... 4
Consolidated Statements of Cash Flows.............................................. 5
Notes to Consolidated Financial Statements......................................... 6-25
</TABLE>
<PAGE> 2
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
George Mason Bankshares, Inc.
We have audited the accompanying consolidated balance sheets of George
Mason Bankshares, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of The Palmer National
Bancorp, Inc., which statements reflect total assets constituting 15% of the
related consolidated total assets as of December 31, 1995, and net interest
income constituting 16% and 17% of the related consolidated net interest income
for the years ended December 31, 1995 and 1994, respectively. Those statements
were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for The Palmer National Bancorp,
Inc., is based solely on the reports of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of George Mason Bankshares, Inc. at December
31, 1996 and 1995, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Washington, D.C.
January 23, 1997
1
<PAGE> 3
GEORGE MASON BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks................................................. $ 41,158 $ 34,639
Federal funds sold...................................................... 23,800 15,000
-------- --------
Total cash and cash equivalents............................... 64,958 49,639
Trading securities...................................................... 0 5,693
Securities available-for-sale........................................... 280,859 187,581
Securities held-to-maturity............................................. 64,574 68,660
Mortgage loans held for resale.......................................... 72,983 55,482
Loans, net of deferred loan fees and unearned discount.................. 373,613 299,558
Less: Allowance for loan losses......................................... (5,659) (5,529)
-------- --------
Loans, net.............................................................. 367,954 294,029
Bank premises and equipment, net........................................ 10,019 9,841
Accrued income receivable............................................... 4,480 4,406
Prepaid expenses and other assets....................................... 4,186 2,791
Deferred income taxes................................................... 2,059 1,365
Other real estate....................................................... 398 109
-------- --------
TOTAL ASSETS.................................................. $872,470 $679,596
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand............................................................. $132,415 $116,699
Interest checking.................................................. 49,002 48,300
Savings............................................................ 162,414 146,413
Time............................................................... 349,763 243,052
-------- --------
Total deposits................................................ 693,594 554,464
Securities sold under agreements to repurchase and other borrowed
funds.............................................................. 105,898 60,747
Accrued expenses and other liabilities................................ 7,979 6,060
Dividends payable..................................................... 655 398
-------- --------
TOTAL LIABILITIES............................................. 808,126 621,669
SHAREHOLDERS' EQUITY
Preferred stock, par value $.01; authorized 1,000,000 shares; no
shares issued or outstanding....................................... 0 0
Common stock, par value $1.11; authorized 9,000,000 shares; issued and
outstanding 5,028,000 shares in 1996 and 4,755,000 shares in
1995............................................................... 5,581 5,278
Surplus............................................................... 38,472 35,523
Retained earnings..................................................... 21,094 16,416
Treasury stock and unearned ESOP...................................... 0 (42)
Unrealized holding (loss) gain on securities available-for-sale....... (803) 752
-------- --------
TOTAL SHAREHOLDERS' EQUITY.................................... 64,344 57,927
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................... $872,470 $679,596
======== ========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
GEORGE MASON BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans....................................... $33,594 $27,676 $22,569
Interest on Federal funds sold and repurchase agreements......... 863 1,006 626
Interest on securities:
Taxable........................................................ 18,120 14,384 9,704
Tax-exempt..................................................... 1,150 1,053 760
------- ------- -------
TOTAL INTEREST INCOME.................................. 53,727 44,119 33,659
INTEREST EXPENSE
Interest on deposits............................................. 22,496 17,870 10,773
Interest on securities sold under agreements to repurchase and
other borrowed funds........................................... 3,768 2,079 854
------- ------- -------
TOTAL INTEREST EXPENSE................................. 26,264 19,949 11,627
------- ------- -------
NET INTEREST INCOME............................................ 27,463 24,170 22,032
PROVISION FOR LOAN LOSSES........................................ 181 18 167
------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES............ 27,282 24,152 21,865
OTHER INCOME
Service charges................................................ 2,927 2,124 1,564
Gain (loss) on sales of trading securities..................... 66 180 (13)
Gain on sales of securities available-for-sale................. 560 653 59
Gain on sales of mortgage loans held for resale................ 9,836 6,366 2,674
Other.......................................................... 1,463 1,036 1,106
------- ------- -------
TOTAL OTHER INCOME..................................... 14,852 10,359 5,390
OTHER EXPENSES
Salaries and employee benefits................................. 18,550 14,353 11,116
Occupancy...................................................... 3,064 2,436 1,905
Equipment...................................................... 2,180 1,817 1,289
Other operating expenses....................................... 8,385 7,518 6,143
------- ------- -------
TOTAL OTHER EXPENSES................................... 32,179 26,124 20,453
------- ------- -------
INCOME BEFORE APPLICABLE INCOME TAXES............................ 9,955 8,387 6,802
INCOME TAXES..................................................... 3,072 2,095 1,830
------- ------- -------
NET INCOME............................................. $ 6,883 $ 6,292 $ 4,972
======= ======= =======
NET INCOME PER COMMON SHARE...................................... $ 1.34 $ 1.28 $ 1.04
======= ======= =======
CASH DIVIDENDS DECLARED PER SHARE................................ $ 0.46 $ 0.38 $ 0.29
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
GEORGE MASON BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
TREASURY
COMMON STOCK UNREALIZED
STOCK AND GAIN (LOSS)
SHARES COMMON RETAINED UNEARNED ON
OUTSTANDING STOCK SURPLUS EARNINGS ESOP SECURITIES TOTAL
----------- ------ ------- -------- -------- ----------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993............. 4,553 $5,053 $33,666 $ 7,758 $ (165) $ 521 $46,833
Net income........................... 4,972 4,972
Common stock issuance................ 41 46 406 452
Purchase of treasury stock........... (18) (18)
ESOP shares earned................... 81 81
Cash dividends....................... (1,114) (1,114)
Change in unrealized holding gain
(loss) on available-for-sale
securities......................... (4,430) (4,430)
-------- ----- ------- -------- -------- ---------- -------
Balance, December 31, 1994............. 4,594 5,099 34,072 11,616 (102) (3,909) 46,776
Net income........................... 6,292 6,292
Common stock issuance................ 161 179 1,451 1,630
Purchase of treasury stock........... (21) (21)
ESOP shares earned................... 81 81
Cash dividends....................... (1,492) (1,492)
Change in unrealized holding gain
(loss) on available-for-sale
securities......................... 4,661 4,661
-------- ----- ------- -------- -------- --------- -------
Balance, December 31, 1995............. 4,755 5,278 35,523 16,416 (42) 752 57,927
Net income........................... 6,883 6,883
Common stock issuance................ 276 306 2,988 3,294
Retirement of treasury stock......... (3) (3) (39) 42
Cash dividends....................... (2,205) (2,205)
Change in unrealized holding gain
(loss) on available-for-sale
securities......................... (1,555) (1,555)
----------- ------ ------- -------- ------- ---------- -------
BALANCE, DECEMBER 31, 1996............. 5,028 $5,581 $38,472 $ 21,094 $-- $ (803) $64,344
========= ====== ======= ======== ======= ========== =======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
GEORGE MASON BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1996 1995 1994
--------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 6,883 $ 6,292 $ 4,972
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Net discount (accretion) amortization of securities.... (62) (81) 179
Depreciation........................................... 1,610 1,132 718
Provision for loan losses.............................. 181 18 167
Gain on sales of securities available-for-sale......... (560) (653) (59)
Provision (benefit) for deferred income taxes.......... (130) (420) 72
Change in assets and liabilities:
(Increase) decrease in trading securities.............. 5,693 (394) (156)
(Increase) decrease in mortgage loans held for
resale............................................... (17,501) (36,976) 3,036
Increase in other assets............................... (1,758) (896) (1,352)
Increase in other liabilities.......................... 1,919 3,226 824
--------- --------- --------
Net cash (used in) provided by operating
activities........................................ (3,725) (28,752) 8,401
INVESTING ACTIVITIES
Proceeds from sales and maturities of available-for-sale
securities............................................. 153,061 106,293 41,248
Proceeds from maturities of held-to-maturity securities... 6,949 18,549 21,276
Purchase of available-for-sale securities................. (247,738) (145,446) (36,581)
Purchase of held-to-maturity securities................... (2,831) (10,376) (74,193)
Net increase in loans..................................... (74,236) (53,474) (25,417)
Purchase of property and equipment........................ (1,788) (3,460) (3,188)
--------- --------- --------
Net cash used in investing activities................ (166,583) (87,914) (76,855)
FINANCING ACTIVITIES
Net increase in deposits.................................. 139,130 93,662 87,913
Net increase in borrowed funds............................ 45,151 20,618 703
Repayment of ESOP debt.................................... (81) (81)
Net proceeds from sales of common stock................... 3,214 1,630 452
Purchase of treasury stock................................ (21) (18)
ESOP shares earned........................................ 81 81
Dividends paid............................................ (1,868) (1,413) (1,061)
--------- --------- --------
Net cash provided by financing activities............ 185,627 114,476 87,989
--------- --------- --------
Net increase (decrease) in cash and cash equivalents........ 15,319 (2,190) 19,535
Cash and cash equivalents at beginning of year.............. 49,639 51,829 32,294
--------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 64,958 $ 49,639 $ 51,829
========= ========= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid............................................. $ 25,625 $ 19,134 $ 11,199
========= ========= ========
Income taxes paid......................................... $ 3,229 $ 2,210 $ 2,336
========= ========= ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 7
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Organization
George Mason Bankshares, Inc. (the Corporation) is a bank holding company
headquartered in Fairfax, Virginia. The Corporation owns all of the outstanding
stock of its subsidiaries, George Mason Bank and Mason Holding Corporation
(referred to collectively hereafter as "the Bank"). The Bank operates banking
sites throughout Northern Virginia, Washington, D.C., and Maryland.
Consolidation Policy
The consolidated financial statements include the accounts of the
Corporation, the Bank, and the Bank's subsidiaries, George Mason Bank, N.A.,
George Mason Mortgage Corporation, and Mason Advertising, Inc. Significant
intercompany accounts and transactions have been eliminated in consolidation.
Presentation of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, certificates of deposit held for
investment with an original maturity date of three months or less, and federal
funds sold. Generally, federal funds are purchased and sold for one-day periods.
Cash flows from loans not acquired for resale, demand, interest checking,
savings and time deposits are reported net. Cash flows from loans acquired for
resale are shown net, as an operating cash flow.
Cash and Cash Equivalents
For the purpose of presentation in the consolidated statements of cash
flows, cash and cash equivalents include cash and other liquid financial
instruments with an original maturity of three months or less.
Securities
Trading securities are held for resale in anticipation of short-term market
movements. Trading securities, consisting of debt securities, are stated at fair
value. Gains and losses, both realized and unrealized, are included in earnings.
Management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when the Corporation
has the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost.
Debt securities not classified as held-to-maturity or trading and
marketable equity securities not classified as trading are classified as
available-for-sale. Available-for-sale securities are stated at fair value, with
unrealized gains and losses, net of tax, reported as a separate component of
shareholders' equity.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or in the case of mortgage-backed securities, over the
estimated life of the security using methods which approximate level yields.
Such amortization or accretion is included in interest income from investments.
Interest and dividends are included in interest income from investments.
Realized gains and losses are included in gain on sales of securities
available-for-sale. The cost of securities sold is based on the specific
identification method.
6
<PAGE> 8
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Mortgage Loans Held for Resale
Mortgage loans held for resale to investors are carried at the lower of
cost or market as determined by investors' commitment prices. Loan origination
and commitment fees and certain direct loan origination costs are deferred until
the time of sale.
Loans
Unearned interest on discounted loans is amortized to income over the life
of the loans. For all other loans, interest is accrued daily on the outstanding
balances. Interest is not accrued on loans if the collection of such interest is
doubtful.
Loan fees are amortized over the life of the loans, using methods which
approximate level yields. The Corporation is generally amortizing these amounts
over the contractual life.
Allowance for Loan Losses
The allowance for loan losses represents management's judgment as to the
amount necessary to adequately provide for the risk of future losses in the loan
portfolio. While it is the Corporation's policy to write off in the current
period those loans or portions of loans on which a loss is considered probable,
there continues to exist the risk of future losses which cannot be quantified
precisely or attributed to specific loans. In assessing the adequacy of the
allowance for loan losses, management relies on its ongoing review of the loan
portfolio, general economic conditions, and specific client composition within
the loan portfolio. This review takes into consideration the judgments not only
of the responsible lending officers and senior management, but in addition, bank
regulatory agencies that review the loan portfolio as a part of the regular bank
examination process.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation of property and equipment is computed principally by
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Building and improvements on leased property................. 8-50
Furniture and equipment...................................... 3-30
</TABLE>
Improvements to leased property are amortized over the lesser of the life
of the lease or life of the improvements. Maintenance and repairs of property
and equipment are charged to operations and major improvements are capitalized.
Upon retirement, sale or other disposition of property and equipment, the cost
and accumulated depreciation are eliminated from the accounts and gain or loss
is included in operations.
Other Real Estate
Other real estate acquired through, or in lieu of, loan foreclosure are to
be sold and are initially recorded at fair value at the date of foreclosure
establishing a new cost basis. After foreclosure, valuations are periodically
performed by management and the real estate is carried at the lower of carrying
amount or fair value less cost to sell.
7
<PAGE> 9
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Earnings Per Common Share
Earnings per common share were computed based on the weighted average
number of common and common equivalent shares outstanding.
Income Taxes
The Corporation uses the liability method of accounting for income taxes.
Deferred tax assets and liabilities are determined based on differences between
the financial statement carrying amounts and the tax basis of existing assets
and liabilities (i.e., temporary differences) and are measured at the enacted
rates that will be in effect when these differences reverse.
New Accounting Pronouncements
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), was issued. SFAS 123
requires entities that have followed Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
to either adopt a fair value method of accounting for stock-based compensation
(as described by SFAS 123) or continue to follow APB 25 and provide additional
pro forma disclosures in the footnotes to the financial statements.
The Corporation has elected to follow APB 25 and related Interpretations in
accounting for its employee stock options because, as discussed in Note 14, the
alternative fair value accounting provided for under SFAS 123, requires the use
of option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Corporation's
employee stock options approximates the market price of the underlying stock on
the date of grant, no compensation expense is recognized.
In May 1993, Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," (SFAS 114) was issued. SFAS
114, as amended by SFAS 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures," requires that impaired loans be
measured at the present value of expected future cash flows discounted at the
loan's effective interest rate. The statements also permit a creditor to measure
impaired loans at the fair value of the collateral if the loan is collateral
dependent. The statements were adopted in 1995 and did not have a material
effect on the Corporation's financial statements.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications were made to the prior year financial statements
to conform to current year presentation.
2. RESTRICTIONS ON CASH BALANCES
The Corporation is required by the Federal Reserve Board and by state
banking laws to maintain certain minimum cash balances consisting of vault cash
and deposits in the Federal Reserve Bank or in other commercial banks. Such
restricted balances totaled $11,007,000 as of December 31, 1996.
8
<PAGE> 10
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SECURITIES
The amortized cost, gross unrealized gains and losses, and fair value of
the securities portfolio were as follows:
SECURITIES AVAILABLE-FOR-SALE
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1996:
U.S. Treasury..................................... $ 10,010 $ 12 $ (11) $ 10,011
U.S. government agencies and corporations......... 24,247 54 (49) 24,252
States and political subdivisions................. 1,316 14 (6) 1,324
Mortgage-backed securities........................ 243,274 646 (1,420) 242,500
Other securities.................................. 2,772 2,772
--------- -------- --------- --------
TOTAL..................................... $ 281,619 $ 726 $ (1,486) $280,859
======== ======== ======== ========
December 31, 1995:
U.S. Treasury..................................... $ 34,022 $ 275 $ (16) $ 34,281
U.S. government agencies and corporations......... 15,172 133 (7) 15,298
States and political subdivisions................. 8,161 358 (7) 8,512
Mortgage-backed securities........................ 125,526 1,173 (106) 126,593
Other securities.................................. 2,811 90 (4) 2,897
--------- -------- --------- --------
Total..................................... $ 185,692 $2,029 $ (140) $187,581
======== ======== ======== ========
December 31, 1994:
U.S. Treasury..................................... $ 38,494 $ (1,054) $ 37,440
U.S. government agencies and corporations......... 16,784 $ 8 (530) 16,262
States and political subdivisions................. 1,921 (11) 1,910
Mortgage-backed securities........................ 67,606 11 (3,260) 64,357
Other securities.................................. 2,898 211 (6) 3,103
--------- -------- -------- --------
Total..................................... $ 127,703 $ 230 $ (4,861) $123,072
======== ======== ======== ========
</TABLE>
9
<PAGE> 11
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SECURITIES -- (CONTINUED)
SECURITIES HELD-TO-MATURITY
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1996:
U.S. government agencies and corporations........... $ 4,671 $ 56 $ 4,727
States and political subdivisions................... 18,818 448 $ (68) 19,198
Mortgage-backed securities.......................... 41,085 523 (176) 41,432
------- -------- -------- -------
TOTAL....................................... $64,574 $1,027 $ (244) $65,357
======= ======== ======== =======
December 31, 1995:
U.S. government agencies and corporations........... $ 8,471 $ 152 $ 8,623
States and political subdivisions................... 15,027 533 $ (27) 15,533
Mortgage-backed securities.......................... 45,162 903 (123) 45,942
------- -------- -------- -------
Total....................................... $68,660 $1,588 $ (150) $70,098
======= ======== ======== =======
December 31, 1994:
U.S. Treasury....................................... $ 8,916 $ (310) $ 8,606
U.S. government agencies and corporations........... 20,763 $ 4 (457) 20,310
States and political subdivisions................... 13,517 134 (432) 13,219
Mortgage-backed securities.......................... 50,492 16 (2,988) 47,520
Other securities.................................... 855 (28) 827
------- -------- -------- -------
Total....................................... $94,543 $ 154 $ (4,215) $90,482
======= ======== ======== =======
</TABLE>
The amortized cost and estimated fair value of securities at December 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties:
SECURITIES AVAILABLE-FOR-SALE
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
(IN THOUSANDS)
<CAPTION>
<S> <C> <C>
Due in one year or less................................. $ 5,016 $ 4,994
Due after one year through five years................... 15,933 15,963
Due after five years through ten years.................. 13,643 13,657
Due after ten years..................................... 1,231 1,223
Mortgage-backed securities.............................. 243,274 242,500
Equity securities....................................... 2,522 2,522
--------- ---------
TOTAL......................................... $ 281,619 $ 280,859
========= =========
</TABLE>
10
<PAGE> 12
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SECURITIES -- (CONTINUED)
SECURITIES HELD-TO-MATURITY
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less................................. $ 3,473 $ 3,231
Due after one year through five years................... 4,553 4,820
Due after five years through ten years.................. 5,417 5,368
Due after ten years..................................... 10,046 10,506
Mortgage-backed securities.............................. 41,085 41,432
------- --------
TOTAL......................................... $64,574 $ 65,357
======= ========
</TABLE>
Gross gains of $728,000 and gross losses of $168,000 were realized in 1996.
Gross gains of $773,000 and gross losses of $120,000 were realized in 1995.
Gross gains of $196,000 and gross losses of $137,000 were realized in 1994.
In connection with the business combination described in Note 21, the
Corporation changed its date of adoption of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," (SFAS 115) to the year ended December 31, 1993 to conform to that
of the combining company. As a result, the unrealized holding gain (loss) on
securities available-for-sale as of December 31, 1993 has been increased by
$353,000.
On December 31, 1995 (pursuant to the transition provisions of the
Financial Accounting Standards Board staff's Special Report on SFAS 115), the
Corporation transferred securities with amortized cost of $15,695,000 from the
held-to-maturity category to the available-for-sale category. The unrealized
gains associated with securities transferred were $357,000.
4. LOANS
The composition of loans was as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Commercial.............................................. $100,986 $ 91,268
Real estate -- construction............................. 32,203 32,614
Real estate -- other.................................... 201,099 163,751
Consumer................................................ 40,083 12,874
-------- --------
Total loans................................... 374,371 300,507
Less: Deferred loan fees and unearned discounts......... (758) (949)
-------- --------
Loans, net of deferred loan fees and unearned
discounts.......................................... 373,613 299,558
Less: Allowance for loan losses......................... (5,659) (5,529)
-------- --------
LOANS, NET.................................... $367,954 $294,029
======== ========
</TABLE>
11
<PAGE> 13
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LOANS -- (CONTINUED)
Loans on which interest is not being accrued or whose terms have been
modified to provide for a reduced rate of interest because of financial
conditions of borrowers were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1996 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Nonaccruing loans........................................... $1,487 $3,024
Restructured loans.......................................... 95 744
------ ------
TOTAL............................................. $1,582 $3,768
====== ======
Allocation of general reserve to nonaccruing loans.......... $ 223 $ 469
====== ======
</TABLE>
The average nonaccruing loan balances and interest income earned with
respect to nonaccruing and restructured loans were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Average nonaccruing loans........................... $2,067 $2,342 $2,466
Income anticipated under original loan agreements... 194 563 204
Income recorded..................................... 160 297 171
</TABLE>
5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year.......................... $5,529 $5,805 $5,641
Provision for loan losses........................... 181 18 167
Amounts charged off................................. (174) (491) (533)
Recovery of amounts charged off..................... 123 197 530
------ ------ ------
BALANCE, END OF YEAR...................... $5,659 $5,529 $5,805
====== ====== ======
</TABLE>
6. BANK PREMISES AND EQUIPMENT
The major classes of bank premises and equipment and accumulated
depreciation and amortization were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land...................................................... $ 1,240 $ 1,240
Building and improvements on leased property.............. 5,848 5,190
Furniture and equipment................................... 9,097 8,308
------- -------
Total..................................................... 16,185 14,738
Less accumulated depreciation and amortization............ (6,166) (4,897)
------- -------
BANK PREMISES AND EQUIPMENT, NET................ $10,019 $ 9,841
======= =======
</TABLE>
12
<PAGE> 14
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. DEPOSITS
The Corporation held time deposits in denominations of $100,000 or more
totaling $81,877,000 and $64,563,000 at December 31, 1996 and 1995,
respectively.
As of December 31, 1996, the scheduled maturities of certificates of
deposit were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
--------------------------------
<S> <C>
1997............................................... $282,484
1998............................................... 29,175
1999............................................... 16,935
2000............................................... 10,456
2001............................................... 10,713
--------
TOTAL......................................... $349,763
========
</TABLE>
8. INDEBTEDNESS
The Corporation's indebtedness was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1996 1995 1994
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Securities sold under agreements to repurchase.......... $ 97,469 $53,391 $33,179
Advances from the Federal Home Loan Bank of Atlanta..... 4,000 5,000 4,500
Other borrowings........................................ 4,429 2,356 2,450
-------- ------- -------
TOTAL......................................... $105,898 $60,747 $40,129
======== ======= =======
</TABLE>
Securities sold under agreements to repurchase are entered into principally
as accommodations to customers. As of December 31, 1996 and 1995, the securities
sold under agreements to repurchase had weighted average interest rates of 4.65%
and 4.09%, respectively, and matured overnight.
Information concerning securities sold under agreements to repurchase is
summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Average daily balance during the year................... $59,710 $34,479
Average interest rate during the year................... 4.38% 4.08%
Maximum month-end balance during the year............... 97,469 53,390
Securities underlying the agreements at year-end:
Carrying value........................................ 103,298 52,247
Estimated fair value.................................. 103,375 53,699
</TABLE>
The Corporation has a line of credit with the Federal Home Loan Bank of
Atlanta (FHLB of Atlanta) totaling $95 million with $4 million drawn against it
as of December 31, 1996. The line of credit expires during the year ending
December 31, 2004, and the advance currently drawn bears interest at 6.11% with
principal payments of $500,000 due every six months with the final payment due
during the year ending December 31, 2000. Securities and loans with carrying
values of $20,881,000 and $15,897,000, respectively, at December 31, 1996 were
pledged as collateral for the line of credit with the FHLB of Atlanta.
13
<PAGE> 15
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INDEBTEDNESS -- (CONTINUED)
The Corporation maintains Federal funds lines with a number of larger
regional and money-center banking institutions. As of December 31, 1996, the
Corporation had lines of credit available totaling $84,584,000.
9. INCOME TAXES
The Corporation's deferred tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Securities available-for-sale............................... $ 415
Allowance for loan losses................................... 1,572 $1,421
Deferred compensation....................................... 303 304
Other....................................................... 364 521
------ ------
Total deferred tax asset............................... 2,654 2,246
Securities available-for-sale............................... 409
Depreciation................................................ 451 304
Other....................................................... 144 168
------ ------
Total deferred tax liabilities......................... 595 881
------ ------
NET DEFERRED TAX ASSET............................ $2,059 $1,365
====== ======
</TABLE>
Income taxes were composed of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current............................................. $3,202 $2,515 $1,758
Deferred............................................ (130) (8) 332
Change in valuation allowance....................... (412) (260)
------ ------ ------
PROVISION FOR INCOME TAXES................ $3,072 $2,095 $1,830
====== ====== ======
</TABLE>
Current income taxes are primarily related to Federal income taxes.
A reconciliation between the amount of reported income taxes and the amount
computed by multiplying the applicable statutory Federal income tax rate was as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income taxes at statutory rates............. $3,385 $2,852 $2,313
Adjustments to Federal income tax resulting from:
Tax-exempt income................................. (391) (358) (258)
Change in valuation allowance..................... (412) (260)
Other............................................. 78 13 35
------ ------ ------
PROVISION FOR INCOME TAXES................ $3,072 $2,095 $1,830
====== ====== ======
</TABLE>
14
<PAGE> 16
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES -- (CONTINUED)
The income taxes applicable to securities transactions for 1996, 1995, and
1994 were $190,000, $283,000, and $16,000, respectively. The Corporation's
effective tax rates were 30.9%, 25.0%, and 26.9%, for the years ended December
31, 1996, 1995, and 1994, respectively.
10. COMMITMENTS AND CONTINGENCIES
The Corporation's original headquarters building was constructed on land
leased for an initial term of twenty-five years ending July 31, 2003. The
Corporation has the option to renew the lease and extend the term for three
successive terms of ten years each. The building and any improvements on the
land become the property of the lessor at the termination of the lease and any
renewals thereof, without any compensation being paid to the Corporation. During
the term of the lease and any renewals thereof, the Corporation must pay all
real estate taxes as additional rent. The rent for the initial twenty-five year
term and any renewal terms is adjusted on each fifth anniversary of the lease by
the percentage increase or decrease in the Consumer Price Index for urban
Washington, D.C., over the preceding five years.
The Corporation has leased office space for nineteen branches. These leases
have various expiration dates, and require minimum annual rentals. Many of the
leases have one or more renewal options.
The total minimum future rental commitment at December 31, 1996, under the
leases mentioned above was due as follows (In thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
--------------------------
<S> <C>
1997................................................ $ 2,157
1998................................................ 2,019
1999................................................ 1,267
2000................................................ 1,217
2001................................................ 1,133
Thereafter.......................................... 2,628
-------
TOTAL.......................................... $10,421
=======
</TABLE>
The total rental expense for the years ended December 31, 1996, 1995, and
1994 was $2,044,000, $1,551,000, and $1,340,000, respectively.
The Corporation, in the normal course of its business, is the subject of
legal proceedings instituted by customers and others. In the opinion of the
Corporation's management, there were no legal matters pending as of December 31,
1996, which would have a material effect on its financial statements.
11. TRANSACTIONS WITH DIRECTORS AND OFFICERS
The Corporation has banking transactions in the ordinary course of business
with directors, principal officers, and their affiliated companies (commonly
referred to as related parties) on the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
others. All loans with directors and officers are performing in accordance with
their original terms.
15
<PAGE> 17
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. TRANSACTIONS WITH DIRECTORS AND OFFICERS -- (CONTINUED)
Aggregate loan transactions with related parties were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Balance, beginning of year............................. $16,015 $12,100
New loans.............................................. 5,954 7,284
Repayments............................................. (6,079) (3,369)
------- -------
BALANCE, END OF YEAR......................... $15,890 $16,015
======= =======
</TABLE>
These related parties had deposits with the Bank totaling $8,708,000 and
$9,830,000 at December 31, 1996 and 1995, respectively.
12. CAPITAL ACCOUNTS
Earnings per share were computed using the weighted average number of
shares outstanding (including common stock equivalents) of 5,137,000, 4,922,000,
and 4,794,000 for the years ended December 31, 1996, 1995, and 1994,
respectively.
On December 14, 1995, the Corporation ratified a three-for-two stock split
effective January 31, 1996 and payable February 9, 1996. This three-for-two
stock split effected an increase in authorized shares to 9,000,000. The effect
of this three-for-two stock split has been reflected in all years presented.
Virginia state banking laws restrict the availability of surplus for the
payment of dividends. At December 31, 1996, $34,308,000 was so restricted for
George Mason Bank.
13. PROFIT-SHARING PLANS
For the two years ended December 31, 1995 and 1994 and the period ended
July 31, 1996, the Corporation had a profit-sharing plan for those employees who
met the eligibility requirements set forth in the plan. The amount of the
contribution to the plan was at the discretion of the Corporation's Board of
Directors. The Corporation contributed $221,000 and $222,000 to the plan for the
years ended December 31, 1995, and 1994, respectively.
For the two years ended December 31, 1995 and 1994 and the period ended
July 31, 1996, the Corporation had a 401(k) plan which covered all employees who
had completed at least one full year of continuous service and were at least 21
years old. The participants contributed up to 13% of their annual compensation.
The Corporation matched the employees' contributions to a maximum of 4.5% of
annual compensation. For the years ended December 31, 1995, and 1994, the
Corporation contributed $191,000 and $136,000, respectively.
As of August 1, 1996, the Corporation combined the profit sharing and
401(k) plans. The combined plan covers all employees who have completed at least
1,000 hours of service. The participants may contribute up to 13% of their
annual compensation. The Corporation contributes 2% of all eligible employees'
annual compensation and matches the employees' contributions to a maximum of 3%
of compensation. The Corporation may contribute additional amounts to the plan
at the discretion of the Board of Directors. For the year ended December 31,
1996, the Corporation contributed $595,000 to the combined plan.
As of September 1, 1996, the Corporation adopted an executive deferred
compensation plan. The plan covers the chief executive officer and certain other
executives of the Corporation. Each participant may defer any or all of his
salary and bonus remaining after such participant has deferred at least 3% of
his salary under
16
<PAGE> 18
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. PROFIT-SHARING PLANS -- (CONTINUED)
the combined profit sharing and 401(k) plan. The Corporation provides a matching
contribution to the plan equal to 50% of the participants' contribution up to
10% of the participants' annual salary. For the year ended December 31, 1996,
the Corporation contributed $7,000.
14. STOCK OPTION AND PURCHASE PLANS
The Corporation's various stock option plans provide for the issuance of
options to purchase shares of common stock at an exercise price no less than the
market value on the date of grant. The options generally vest six months after
the grant date and expire ten years after the grant date. The Corporation has
authorized and reserved 163,500 shares of its common stock for future grants
under these plans.
The Corporation's employee stock purchase plan provides for the issuance of
options to purchase shares of common stock at 90% of the market value on the
date of grant. The options vest immediately and expire one year after the grant
date. The Corporation has authorized and reserved 54,875 shares of its common
stock for future grants under this plan.
The Corporation granted certain directors, in lieu of director fees, rights
to shares of the Corporation's common stock. The director stock options are
issued with no exercise price and are fully vested six months after the grant
date. The weighted-average grant-date fair value and the expense recognized for
the director stock options were $85,000, $76,000, and $31,000, for the years
ended December 31, 1996, 1995, and 1994, respectively.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be determined as
if the Corporation has accounted for its employee stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1996 and 1995: risk-free interest rate of 6.62%; dividend yield
of 2.5%; volatility factors of the expected market price of the Corporation's
common stock of 0.233; and a weighted-average expected life of the option of
three years for options issued at market and one year for options issued at a
discount.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Corporation's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options was amortized to expense over the options' vesting periods. The effects
of applying SFAS 123 for providing pro forma disclosures are not likely to be
representative of the effects on reported net income for future years. The
Corporation's pro forma net income (In thousands) and pro forma earnings per
share based on options issued during 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
------------------
1996 1995
------ ------
<S> <C> <C>
Pro forma net income............................. $6,596 $6,080
Pro forma earnings per share..................... $ 1.29 $ 1.24
</TABLE>
17
<PAGE> 19
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. STOCK OPTION AND PURCHASE PLANS -- (CONTINUED)
A summary of activity for the Corporation's stock options with exercise
prices equal to the grant-date market values for the three years ended December
31 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
SHARES WEIGHTED- SHARES WEIGHTED- SHARES WEIGHTED-
UNDER AVERAGE UNDER AVERAGE UNDER AVERAGE
OPTION EXERCISE OPTION EXERCISE OPTION EXERCISE
(IN 000S) PRICE (IN 000S) PRICE (IN 000S) PRICE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.... 551 $ 11.49 590 $ 10.86 405 $ 10.51
Granted............................. 77 18.47 74 13.76 208 11.60
Exercised........................... (230) 11.08 (112) 9.71 (14) 11.38
Forfeited........................... (3) 13.14 (1) 12.96 (9) 11.15
------- ------- ---
OUTSTANDING AT END OF YEAR.......... 395 13.06 551 11.49 590 10.86
======= ======= ======
EXERCISABLE AT END OF YEAR.......... 388 12.94 515 11.26 518 10.51
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Range of exercise prices for the year............................. $9.73-21.13 $9.73-14.92
Weighted-average remaining contractual life at end of year........ 7.29 YEARS 7.74 years
Weighted-average fair values of options granted during the year... $3.64 $2.92
</TABLE>
A summary of activity for the Corporation's stock options with exercise
prices at 90% of the grant-date market values for the three years ended December
31 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
SHARES WEIGHTED- SHARES WEIGHTED- SHARES WEIGHTED-
UNDER AVERAGE UNDER AVERAGE UNDER AVERAGE
OPTION EXERCISE OPTION EXERCISE OPTION EXERCISE
(IN 000S) PRICE (IN 000S) PRICE (IN 000S) PRICE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.... 22 $ 12.74 24 $ 11.67 25 $ 9.65
Granted............................. 27 17.75 30 12.51 25 11.64
Exercised........................... (21) 13.23 (25) 11.64 (17) 9.81
Forfeited........................... (4) 14.69 (7) 11.99 (9) 9.47
--- --- ---
OUTSTANDING AT END OF YEAR.......... 24 17.66 22 12.74 24 11.67
====== ====== ======
EXERCISABLE AT END OF YEAR.......... 24 17.66 22 12.74 24 11.67
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Range of exercise prices for the year........................... $16.65-18.68 $11.85-13.80
Weighted-average remaining contractual life at end of year...... .54 YEARS .52 years
Weighted-average fair values of options granted during the
year.......................................................... $3.26 $2.30
</TABLE>
18
<PAGE> 20
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. STOCK OPTION AND PURCHASE PLANS -- (CONTINUED)
A summary of activity for the Corporation's director stock options for the
three years ended December 31 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Outstanding at beginning of year........................... 8 3
Granted.................................................... 4 5 3
Exercised.................................................. (1)
- -
----
OUTSTANDING AT END OF YEAR............................ 11 8 3
==== ==== ====
EXERCISABLE AT END OF YEAR............................ 10 5
==== ==== ====
</TABLE>
15. DEFERRED COMPENSATION PLANS
The Corporation has a deferred compensation plan for two former key
employees which provides that benefits are to be paid in monthly installments
for a period of 10 years beginning in January 1995. The accrued benefit
obligation related to the plan totaled $655,000 and $712,000 as of December 31,
1996 and 1995, respectively. The accrued benefit obligation was computed using a
7.85% discount rate.
As a result of the Palmer National Bancorp, Inc. merger (See Note 21), the
Corporation entered into supplemental postretirement agreements with five key
officers under which the officers are entitled to either a postretirement
benefit payable in equal monthly installments over fifteen years beginning at
age 65, or a death benefit, payable to the officer's beneficiary in the event of
death of the officer in equal monthly installments over fifteen years. The total
benefit amount is preestablished for each officer; however, if the key officer
elects early retirement at age 55 with ten years of service, the officer is
entitled to a reduced post-retirement benefit amount. The Corporation is
accruing the liability related to the post retirement benefits over the
estimated service period of each of the officers. As of December 31, 1996 and
1995, the Corporation has accrued $182,000 and $142,000, respectively, related
to those postretirement benefit agreements. The accrued benefit obligation was
calculated using a 7.5% discount rate. The Corporation has purchased life
insurance policies to fund these postretirement benefits.
16. REGULATORY MATTERS
The Corporation is subject to various regulatory capital requirements
administered by the Federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory -- and possibly additional
discretionary -- actions by regulators that, if undertaken, could have a direct
material effect on the Corporation's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Corporation must meet specific capital guidelines that involve quantitative
measures of the Corporation's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Corporation's
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
The Corporation is required to maintain minimum risk-based and leverage
capital as defined by the Federal banking agencies. The measurement of
risk-based capital takes into account the credit risk of both the balance sheet
assets and off-balance sheet exposures. The regulatory guidelines require
minimum risk-based capital ratios of 4% for Tier 1 capital and 8% for total
capital. In addition, a minimum leverage ratio of Tier 1 capital to quarterly
average assets of 3% is required for strong banking organizations. A bank is
considered "well capitalized," the highest regulatory category, if it has the
following minimum ratios, Tier 1 capital of 6%,
19
<PAGE> 21
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. REGULATORY MATTERS -- (CONTINUED)
total risk-based capital of 10% and Tier 1 leverage ratio of 5%. The capital
ratios of the Corporation were as follows:
<TABLE>
<CAPTION>
WELL
DECEMBER 31 CAPITALIZED
-------------------- REGULATORY
1996 1995 MINIMUMS
-------- -------- -----------
<S> <C> <C> <C>
CAPITAL:
Tier 1 capital.............................. $ 64,943 $ 56,919
Tier 2 capital.............................. 5,659 5,195
-------- --------
Total capital....................... $ 70,602 $ 62,114
======== ========
ASSETS:
Risk-weighted assets........................ $527,449 $415,559
Average assets (fourth quarter)............. 849,883 649,504
RATIOS:
Tier I capital to risk-weighted assets...... 12.3% 13.7% 6.0%
Total capital to risk-weighted assets....... 13.4% 14.9% 10.0%
Tier I leverage to average assets........... 7.6% 8.8% 5.0%
</TABLE>
The capital ratios of George Mason Bank, the Corporation's largest banking
subsidiary, were as follows:
<TABLE>
<CAPTION>
WELL
DECEMBER 31 CAPITALIZED
-------------------- REGULATORY
1996 1995 MINIMUMS
-------- -------- -----------
<S> <C> <C> <C>
CAPITAL:
Tier 1 capital.............................. $ 48,104 $ 41,820
Tier 2 capital.............................. 4,180 4,040
-------- --------
Total capital....................... $ 52,284 $ 45,860
======== ========
ASSETS:
Risk-weighted assets........................ $462,622 $355,882
Average assets (fourth quarter)............. 757,147 543,474
RATIOS:
Tier I capital to risk-weighted assets...... 10.4% 11.8% 6.0%
Total capital to risk-weighted assets....... 11.3% 12.9% 10.0%
Tier I leverage to average assets........... 6.4% 7.7% 5.0%
</TABLE>
17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Corporation is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financial needs of its
customers. These financial instruments include commitments to extend credit and
standby letters of credit. Those instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the balance sheet. The contract or notional amounts of those instruments reflect
the extent of involvement the Corporation has in particular classes of financial
instruments. The Corporation's exposure to credit loss in the event of
nonperformance by the other parties to the financial instruments for commitments
to extend credit and standby letters of credit is represented by the contractual
notional amount of those instruments. The Corporation uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
20
<PAGE> 22
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK -- (CONTINUED)
Commitments to lend were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Financial instruments whose contract amounts represent
credit risk:
Commitments to extend credit.......................... $197,030 $184,189
Standby letters of credit............................. 18,994 15,834
-------- --------
TOTAL......................................... $216,024 $200,023
======== ========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of conditions established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Standby letters of credit are conditional
commitments issued by the Corporation to guarantee the performance of a customer
to a third party. The Corporation uses the same credit standards on a
case-by-case basis in evaluating commitments to extend credit and standby
letters of credit as it does when funding loans, including the determination of
the type and amount of collateral, if required.
As of December 31, 1996, all mortgage loans held for resale were
identically matched with commitments from outside investors to purchase such
loans. These investors are national and regional mortgage bankers and savings
and loan institutions whose credit worthiness is evaluated annually. The terms
of these commitments are generally 60 to 90 days and are entered into in an
effort to limit the Corporation's exposure to interest rate fluctuations.
18. SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
The portfolio is well diversified among industries. Generally, the loans
are secured by assets or stock. The loans are expected to be repaid from cash
flow or proceeds from the sale of selected assets of the borrowers. The
Corporation evaluates each customer's creditworthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Corporation upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include cash, securities, accounts
receivable, inventory, property, plant, and equipment, and income-producing
commercial properties and residential properties.
21
<PAGE> 23
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19. CONDENSED FINANCIAL STATEMENTS -- PARENT COMPANY ONLY
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks................................................... $ 163 $ 469
Deposits at bank subsidiaries............................................. 5,400 4,000
------- -------
Cash and cash equivalents................................................. 5,563 4,469
Securities available-for-sale............................................. 1,138
Investment in bank subsidiaries........................................... 59,067 52,266
Accrued income receivable and other assets................................ 17 483
Income tax receivable..................................................... 441 165
------- -------
TOTAL ASSETS.................................................... $65,088 $58,521
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Dividends payable....................................................... $ 656 $ 398
Accrued expenses........................................................ 88 196
------- -------
Total liabilities............................................... 744 594
SHAREHOLDERS' EQUITY
Common stock............................................................ 5,581 5,278
Surplus................................................................. 38,472 35,523
Retained earnings....................................................... 21,094 16,416
Treasury stock.......................................................... (42)
Unrealized gain (loss) on available-for-sale securities................. (803) 752
------- -------
TOTAL SHAREHOLDERS' EQUITY...................................... 64,344 57,927
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................... $65,088 $58,521
======= =======
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Dividend income..................................................... $ 331 $1,191 $1,199
Interest and other income........................................... 359 382 159
Operating expenses.................................................. 541 435 278
------ ------ ------
Income before income tax benefit and equity in undistributed
earnings of bank subsidiaries..................................... 149 1,138 1,080
Income tax benefit.................................................. 94 56 102
------ ------ ------
Income before equity in undistributed earnings of bank
subsidiaries...................................................... 243 1,194 1,182
Equity in undistributed earnings of bank subsidiaries............... 6,640 5,098 3,790
------ ------ ------
NET INCOME................................................ $6,883 $6,292 $4,972
====== ====== ======
</TABLE>
22
<PAGE> 24
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19. CONDENSED FINANCIAL STATEMENTS -- PARENT COMPANY ONLY -- (CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income....................................................... $ 6,883 $ 6,292 $ 4,972
Undistributed earnings of bank subsidiaries...................... (6,640) (5,098) (3,790)
Gain on sale of securities available-for-sale.................... (84) (198) --
Change in assets and liabilities:
Decrease (increase) in other assets............................ 190 292 (744)
(Decrease) increase in accounts payable........................ (108) 155 6
------- ------- -------
Net cash provided by operating activities.............. 241 1,443 444
INVESTING ACTIVITIES
Proceeds from sales and maturities of securities................. 1,154 1,248 600
------- ------- -------
Net cash provided by investing activities.............. 1,154 1,248 600
FINANCING ACTIVITIES
Net proceeds from issuance of common stock....................... 1,647 1,628 452
Dividends paid................................................... (1,948) (1,413) (1,061)
------- ------- -------
Net cash provided by (used in) financing activities.... (301) 215 (609)
------- ------- -------
Net increase in cash and cash equivalents.............. 1,094 2,906 435
Cash and cash equivalents at beginning of year................... 4,469 1,563 1,128
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR......................... $ 5,563 $ 4,469 $ 1,563
======= ======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes refund............................................ $ 34 $ 423 $ 66
======= ======= =======
</TABLE>
20. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS: The carrying amount of cash and cash
equivalents is a reasonable estimate of fair value.
SECURITIES: Fair values are based on quoted market prices or dealer
quotes. If a quoted market price is not available, fair value is estimated using
quoted market prices for similar securities.
LOANS: For certain homogeneous categories of loans, such as some
residential mortgages and other consumer loans, fair value is estimated using
the quoted market prices for securities backed by similar loans, adjusted for
differences in loan characteristics. The fair value of other types of loans is
estimated by discounting the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings and for the
same remaining maturities.
ACCRUED INCOME RECEIVABLE: The carrying amount of accrued income
receivable is a reasonable estimate of fair value.
23
<PAGE> 25
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS -- PARENT COMPANY
ONLY -- (CONTINUED)
DEPOSITS: The fair value of demand deposits, savings accounts, and certain
money market deposits is the amount payable on demand at the reporting date. The
fair value of fixed-maturity certificates of deposit is estimated using the
rates currently offered for deposits of similar remaining maturities.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED
FUNDS: The carrying amount of securities sold under agreements to repurchase
and other borrowed funds is a reasonable estimate of fair value.
ACCRUED EXPENSES AND OTHER LIABILITIES: The carrying amount of accrued
expenses and other liabilities is a reasonable estimate of fair value.
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT, AND FINANCIAL
GUARANTEES WRITTEN: The fair value of commitments is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed-rate loan commitments, fair value also considers the
difference between current levels of interest rates and the committed rates. The
fair value of guarantees and letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate them or
otherwise settle the obligations with the counterparties at the reporting date.
Unrecognized financial instrument accrual and deferral fees were not considered
material.
The estimated fair values of the Corporation's financial instruments were
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------------
1996 1995
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents......................... $ 64,958 $ 64,958 $ 49,639 $ 49,639
Securities........................................ 345,433 346,216 261,934 263,156
Loans............................................. 446,596 448,332 355,040 355,581
Less allowance for loan losses.................... 5,659 5,659 5,529 5,529
-------- -------- -------- --------
Net loans......................................... 440,937 442,673 349,511 350,052
Other............................................. 4,480 4,480 4,406 4,406
-------- -------- -------- --------
TOTAL FINANCIAL ASSETS.................... $855,808 $858,327 $665,490 $667,253
======== ======== ======== ========
Financial liabilities:
Deposits.......................................... $693,594 $694,256 $554,464 $556,124
Securities sold under agreements to repurchase and
other borrowed funds........................... 105,898 105,866 60,747 60,747
Other............................................. 8,634 8,634 6,458 6,458
-------- -------- -------- --------
TOTAL FINANCIAL LIABILITIES............... $808,126 $808,756 $621,669 $623,329
======== ======== ======== ========
</TABLE>
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. The disclosures also do not
include deposit base intangibles. Accordingly, the aggregate fair value amount
presented should not be interpreted as representing the underlying value of the
Corporation.
21. BUSINESS COMBINATION
On May 17, 1996, the Corporation merged with The Palmer National Bancorp,
Inc. (Palmer). Palmer was a bank holding company with banking facilities in the
District of Columbia and a mortgage banking office
24
<PAGE> 26
GEORGE MASON BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
21. BUSINESS COMBINATION -- (CONTINUED)
in Montgomery County, Maryland. The business combination was accounted for using
the pooling of interests method. The Corporation issued 924,599 shares of its
common stock to the Palmer shareholders.
The operating results for the period from January 1, 1996 to May 17, 1996,
for each of the entities combined were as follows (in thousands, except for per
share data):
<TABLE>
<CAPTION>
GMBI PALMER
------- ------
<S> <C> <C>
Net interest income........................................ $ 8,231 $1,654
Net income................................................. 2,149 70
Proceeds from the sale of common stock..................... 925 1,651
Unrealized holding loss on available-for-sale securities... (3,205) (96)
Dividends declared......................................... 401 0
Dividends per share........................................ .10 0
</TABLE>
The net interest income and net income for the years ended December 31,
1995 and 1994, for each of the entities combined were as follows (in thousands):
<TABLE>
<CAPTION>
COMBINED
GMBI PALMER CORPORATION
------- ------ -----------
<S> <C> <C> <C>
For the year ended December 31, 1995:
Net interest income........................... $19,837 $4,333 $24,170
Net income.................................... 5,423 869 6,292
For the year ended December 31, 1994:
Net interest income........................... 18,031 4,001 22,032
Net income.................................... 4,380 592 4,972
</TABLE>
25
<PAGE> 27
STOCK PRICE
The common stock of the Corporation is traded over-the-counter under the
NASDAQ National Market System symbol GMBS. The high and low sales price for
common shares traded during the last two years were (1995 prices were adjusted
for the three-for-two stock split):
<TABLE>
<CAPTION>
DURING THE QUARTER ENDED LOW PRICE HIGH PRICE
-------------------------------------------------------- --------- ----------
<S> <C> <C>
December 31, 1996....................................... $ 18.50 $23.25
September 30, 1996...................................... 18.50 20.63
June 30, 1996........................................... 19.00 22.25
March 31, 1996.......................................... 17.83 23.25
December 31, 1995....................................... 15.33 19.33
September 30, 1995...................................... 13.17 15.83
June 30, 1995........................................... 12.33 13.67
March 31, 1995.......................................... 11.33 13.17
</TABLE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED -- IN THOUSANDS, EXCEPT PER SHARE
DATA)(1)
<TABLE>
<CAPTION>
1996 1995
------------------------------------- -------------------------------------
DEC 31 SEP 30 JUN 30 MAR 31 DEC 31 SEP 30 JUN 30 MAR 31
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income......... $14,905 $14,256 $12,498 $12,068 $11,779 $11,293 $10,857 $10,190
Interest expense........ 7,754 7,060 5,871 5,579 5,652 5,325 4,877 4,095
------- ------- ------- ------- ------- ------- ------- -------
Net interest income..... 7,151 7,196 6,627 6,489 6,127 5,968 5,980 6,095
Provision for loan
losses................ 0 0 0 181 115 (50) (82) 35
Gain on sales of
securities............ 232 8 68 318 612 89 115 17
Other income............ 3,459 3,527 3,567 3,673 3,110 3,100 2,085 1,231
Other expense........... 7,855 8,107 7,973 8,244 7,280 7,071 6,289 5,484
Income taxes............ 954 815 667 636 389 608 574 524
------- ------- ------- ------- ------- ------- ------- -------
NET INCOME......... $ 2,033 $ 1,809 $ 1,622 $ 1,419 $ 2,065 $ 1,528 $ 1,399 $ 1,300
======= ======= ======= ======= ======= ======= ======= =======
NET INCOME PER COMMON
SHARE................. $ 0.39 $ 0.35 $ 0.32 $ 0.28 $ 0.41 $ 0.31 $ 0.29 $ 0.27
======= ======= ======= ======= ======= ======= ======= =======
CASH DIVIDENDS DECLARED
PER COMMON SHARE...... $ 0.13 $ 0.12 $ 0.11 $ 0.10 $ 0.11 $ 0.09 $ 0.09 $ 0.09
======= ======= ======= ======= ======= ======= ======= =======
WEIGHTED AVERAGE SHARES
OUTSTANDING........... 5,197 5,148 5,138 5,076 5,032 4,959 4,878 4,788
</TABLE>
- ---------------
(1) On May 17, 1996, the Corporation merged with The Palmer National Bancorp,
Inc. All financial data for the current and prior periods has been restated
to reflect the results of operations on a combined basis from the earliest
period presented.
26
<PAGE> 1
EXHIBIT 13A
ARTHUR ANDERSEN LLP
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994, AND
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993,
TOGETHER WITH AUDITORS' REPORT
<PAGE> 2
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
The Palmer National Bancorp, Inc.,
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of The Palmer
National Bancorp, Inc. ("Bancorp," a Delaware corporation), and Subsidiaries as
of December 31, 1995 and 1994, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. These consolidated financial
statements are the responsibility of Bancorp's management. Our responsibility
is to express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Palmer National Bancorp,
Inc., and Subsidiaries as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As explained in Note 1 of the notes to the financial statements, effective
January 1, 1993, Bancorp changed its method of accounting for income taxes and,
effective December 31, 1993, changed its method of accounting for securities.
ARTHUR ANDERSEN LLP
Washington, D.C.,
February 14, 1996, except
with respect to the matter
discussed in Note 20, as to
which the date is May 17, 1996.
<PAGE> 3
THIS PAGE LEFT BLANK INTENTIONALLY
<PAGE> 4
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
------------ -------------
<S> <C> <C>
CASH AND DUE FROM BANKS $ 5,364,481 $ 4,476,667
FEDERAL FUNDS SOLD 6,000,000 13,900,000
------------ -------------
Total cash and cash equivalents 11,364,481 18,376,667
TRADING SECURITIES 5,693,474 5,299,172
INVESTMENT SECURITIES 19,806,781 18,066,247
FEDERAL RESERVE BANK STOCK 215,900 215,900
LOANS RECEIVABLE, net 61,058,642 48,962,953
ACCRUED INTEREST RECEIVABLE 631,292 482,544
PREMISES AND EQUIPMENT, net 604,264 615,612
OTHER REAL ESTATE OWNED, net 109,032 -
DEFERRED TAX ASSET, net 478,942 274,382
OTHER ASSETS 1,200,680 1,159,171
------------ -------------
Total assets $101,163,488 $93,452,648
============ =============
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
<PAGE> 5
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31,1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
DEPOSITS:
Demand deposits $ 16,367,033 $15,596,221
Savings and interest-bearing demand deposits 17,132,723 17,288,128
Money market demand deposits 30,882,271 29,131,077
Certificates of deposit-
Denominations less than $100,000 7,722,648 7,499,415
Denominations of $100,000 or more 6,799,472 4,935,581
------------ -----------
Total deposits 78,904,147 74,450,422
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE 11,884,940 10,811,350
ACCRUED INTEREST PAYABLE 190,018 110,674
DEBT OF EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP") - 81,252
OTHER LIABILITIES 601,031 218,916
------------ -----------
Total liabilities 91,580,136 85,672,614
------------ -----------
STOCKHOLDERS' EQUITY
CLASS B VOTING COMMON STOCK, $5 per share par value, 1,000,000
shares authorized, 509,114 shares issued 2,545,570 2,545,570
COMMON STOCK, $5 per share par value, 1,500,000 shares
authorized, 97,774 and 97,574 shares issued, respectively 488,870 487,870
NON-VOTING COMMON STOCK, $5 per share par value, 500,000
shares authorized, 115,605 shares issued and outstanding 578,025 578,025
PAID-IN CAPITAL 6,589,403 6,588,003
RETAINED DEFICIT (653,678) (1,522,764)
UNREALIZED GAIN (LOSS) ON AVAILABLE-FOR-SALE SECURITIES, net of tax 77,137 (794,846)
LESS- TREASURY STOCK, AT COST-
Class B voting common stock and common stock, 2,470 and
1,433 shares and 712 and 282 shares, respectively (41,975) (20,572)
------------ -----------
9,583,352 7,861,286
UNEARNED ESOP SHARES - (81,252)
------------ -----------
Total stockholders' equity 9,583,352 7,780,034
------------ -----------
Total liabilities and stockholders' equity $101,163,488 $93,452,648
============ ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
<PAGE> 6
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- ----------
<S> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $4,769,027 $4,116,390 $3,611,298
Trading account interest 230,687 179,007 137,979
Interest on investment securities 1,208,681 1,199,239 1,077,915
Federal funds sold 611,729 357,266 343,134
Federal Reserve Bank stock dividends 12,954 11,746 11,866
---------- ----------- -----------
Total interest and dividend income 6,833,078 5,863,648 5,182,192
---------- ----------- -----------
INTEREST EXPENSE:
Savings and interest-bearing demand deposits 368,713 404,714 395,239
Money market demand deposits 1,007,664 782,362 740,682
Certificates of deposit-
Denominations less than $100,000 437,164 306,670 329,736
Denominations of $100,000 or more 305,846 173,321 163,466
---------- ----------- -----------
Total interest on deposits 2,119,387 1,667,067 1,629,123
Securities sold under agreements to repurchase 373,339 195,651 173,367
Other 6,855 - 30,289
---------- ----------- -----------
Total interest expense 2,499,581 1,862,718 1,832,779
---------- ----------- -----------
Net interest income 4,333,497 4,000,930 3,349,413
RECOVERY OF PROVISION FOR LOAN LOSSES 221,000 163,000 180,354
---------- ----------- -----------
Net interest income after recovery of provision
for loan losses 4,554,497 4,163,930 3,529,767
---------- ----------- -----------
OTHER INCOME:
Fees for other customer services 323,531 218,009 225,984
Trading account gain (loss) 179,519 (13,629) 14,970
Investment securities gain (loss) 2,317 (24,716) 138,098
Other 236,070 244,958 212,898
---------- ----------- -----------
Total other income 741,437 424,622 591,950
---------- ----------- -----------
OPERATING EXPENSES:
Salaries and benefits 2,349,829 1,910,300 1,697,081
Occupancy expense of bank premises 814,833 790,339 767,455
Furniture and equipment 343,823 279,893 246,230
Other 1,051,265 1,041,143 1,062,363
---------- ----------- -----------
Total operating expenses 4,559,750 4,021,675 3,773,129
---------- ----------- -----------
INCOME BEFORE BENEFIT FOR INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 736,184 566,877 348,588
BENEFIT FOR INCOME TAXES 132,902 24,801 15,953
---------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 869,086 591,678 364,541
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE - - 216,710
---------- ----------- -----------
NET INCOME $ 869,086 $ 591,678 $ 581,241
========== =========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
<PAGE> 7
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31 1995, 1994 AND 1993
(CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
EARNINGS PER SHARE:
Primary-
Income before cumulative effect of change in
accounting principle $1.16 $.81 $.50
Cumulative effect of change in accounting principle - - .30
---------- ----------- -----------
Net income 1.16 .81 .80
---------- ----------- -----------
Fully diluted-
Income before cumulative effect of change in
accounting principle 1.12 .80 .50
Cumulative effect of change in accounting principle - - .30
---------- ----------- -----------
Net income $1.12 $.80 $.80
========== =========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
<PAGE> 8
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
CLASS B
VOTING NONVOTING RETAINED
COMMON COMMON COMMON PAID-IN (DEFICIT)
STOCK STOCK STOCK CAPITAL EARNINGS
---------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 $2,545,570 $487,870 $578,025 $6,588,003 $(2,695,693)
Purchase of Treasury stock - - - - -
ESOP note payment - - - - -
Unrealized gain on available-for-sale securities - - - - -
Net income - - - - 581,251
---------- -------- -------- ---------- ---------
BALANCE, December 31, 1993 2,545,570 487,870 578,025 6,588,003 (2,114,442)
Purchase of Treasury stock - - - - -
ESOP note payment - - - - -
Unrealized loss on available-for-sale securities - - - - -
Net income - - - - 591,678
---------- -------- -------- ---------- ---------
BALANCE, December 31, 1994 2,545,570 487,870 578,025 6,588,003 (1,522,764)
Exercise of stock options - 1,000 - 1,400 -
Purchase of Treasury stock - - - - -
ESOP note payment - - - - -
Unrealized gain on available-for-sale securities - - - - -
Net income - - - - 869,086
---------- -------- -------- ---------- ---------
BALANCE, December 31, 1995 $2,545,570 $488,870 $578,025 $6,589,403 $(653,678)
========== ======== ======== ========== =========
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
AVAILABLE-FOR-SALE TREASURY UNEARNED
SECURITIES STOCK ESOP SHARES TOTAL
------------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1992 $ - $ - $(243,757) $7,260,018
Purchase of Treasury stock - (3,104) - (3,104)
ESOP note payment - - 81,253 81,253
Unrealized gain on available-for-sale securities 168,453 - - 168,453
Net income - - - 581,251
-------- -------- --------- ----------
BALANCE, December 31, 1993 168,453 (3,104) (162,504) 8,087,871
Purchase of Treasury stock - (17,468) - (17,468)
ESOP note payment - - 81,252 81,252
Unrealized loss on available-for-sale securities (963,299) - - (963,299)
Net income - - - 591,678
-------- -------- --------- ----------
BALANCE, December 31, 1994 (794,846) (20,572) (81,252) 7,780,034
Exercise of stock options - - - 2,400
Purchase of Treasury stock - (21,403) - (21,403)
ESOP note payment - - 81,252 81,252
Unrealized gain on available-for-sale securities 871,983 - - 871,983
Net income - - - 869,086
-------- -------- --------- ----------
BALANCE, December 31, 1995 $ 77,137 $(41,975) $ - $9,583,352
======== ======== ========= ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
<PAGE> 9
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 869,086 $ 591,678 $ 581,251
Adjustments to reconcile net income to net cash provided by (used
in) operating activities-
Recovery of provision for loan losses (221,000) (163,000) (180,354)
(Gain) loss on sale of investment securities (2,317) 24,716 (138,098)
Gain on sale of property - (16,363) -
Amortization of premiums, discounts, and net deferred loan
fees 48,201 179,185 (253,700)
Unrealized gain on foreign currency - (5,300) -
Depreciation and amortization 191,859 161,708 126,326
Provision for deferred taxes (265,786) (40,719) -
Cumulative effect of change in accounting principle - - (216,710)
Net increase in trading securities (394,302) (155,946) (5,143,226)
(Increase) decrease in accrued interest receivable (148,748) (15,529) 48,351
Increase (decrease) in accrued interest payable 79,344 13,439 (71,819)
Increase in other assets (41,509) (363,889) (5,995)
Increase (decrease) in other liabilities 382,115 118,026 (3,775)
----------- ----------- -----------
Net cash provided by (used in) operating activities 496,943 328,006 (5,257,749)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities 1,047,069 1,318,160 2,795,508
Proceeds from maturities of investment securities 2,705,307 7,408,646 6,368,762
Purchases of investment securities (4,641,282) (5,950,355) (16,029,366)
Loan fundings, net of principal collections on loans (11,959,825) (7,819,733) 5,540,359
Capital expenditures, net of retirements (168,710) (243,145) (232,905)
(Purchase) retirement of Federal reserve bank stock - (26,650) 14,750
Proceeds from sale of real estate - 109,038 435,000
----------- ----------- -----------
Net cash used in investing activities (13,017,441) (5,204,039) (1,107,892)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, savings and interest-
bearing demand deposits, and money market demand deposits 2,366,601 5,087,919 (1,863,634)
Net increase (decrease) in certificates of deposit 2,087,124 1,762,414 (2,401,098)
Net increase in securities sold under agreements to repurchase 1,073,590 2,025,674 2,064,793
Principal payments on note payable - - (250,000)
Net principal payments on debt of ESOP (81,252) (81,252) (81,253)
Reduction in unearned ESOP shares 81,252 81,252 81,253
Proceeds from exercise of stock options 2,400 - -
Purchase of Treasury stock (21,403) (17,468) -
----------- ----------- -----------
Net cash provided by (used in) financing activities 5,508,312 8,858,539 (2,449,939)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,012,186) 3,982,506 (8,815,580)
CASH AND CASH EQUIVALENTS, beginning of year 18,376,667 14,394,161 23,209,741
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $11,364,481 $18,376,667 $14,394,161
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 2,309,563 $ 1,849,279 $ 1,904,598
=========== =========== ===========
Income taxes $ 1,644 $ - $ -
=========== =========== ===========
Charge-offs of loans receivable $ 302,541 $ 114,529 $ 536,521
=========== =========== ===========
Loans transferred to other real estate owned $ 116,000 $ - $ 117,000
=========== =========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
<PAGE> 10
THE PALMER NATIONAL BANCORP, INC.,
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31,1995 AND 1994, AND
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF ACCOUNTING POLICIES AND
OPERATIONS:
OPERATIONS
The Palmer National Bancorp, Inc. ("Bancorp"), was incorporated in the state of
Delaware on September 2, 1983. On September 14, 1983, Bancorp acquired all of
the outstanding shares of The Palmer National Bank (the "Bank," incorporated in
the District of Columbia on September 12,1982). The Bank's principal business
is attracting deposits from the general public and investing those funds in
loans. The Bank operates three branches located in northwest Washington, D.C.
On December 23, 1994, Palmer National Mortgage, Inc., was formed. Palmer
National Mortgage, Inc., is a wholly owned subsidiary of Bancorp, established
for the purpose of originating and selling single family residential mortgage
loans. Palmer National Mortgage, Inc., commenced operations in April 1995.
The accounting and reporting policies of Bancorp are in accordance with
generally accepted accounting principles ("GAAP") and conform to general
practices within the banking industry. The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. In
addition, it is reasonably possible that a change in certain of these
estimates, such as loan loss reserves, will occur in the near term. The
following is a summary of Bancorp's significant accounting policies.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Bancorp, the Bank, and Palmer National Mortgage, Inc., as of December 31, 1995
and 1994, and for the years ended December 31, 1995, 1994 and 1993. All
significant intercompany accounts and transactions have been eliminated.
CASH EQUIVALENTS
Cash equivalents include amounts due from depository institutions and highly
liquid investments with original maturities of three months or less.
<PAGE> 11
- 2 -
TRADING AND INVESTMENT SECURITIES
As of December 31, 1993, Bancorp adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." SFAS No. 115 establishes three categories of investments in
debt securities and the related accounting treatment for each, as follows.
- - Debt securities that Bancorp has the positive intent and ability to hold to
maturity are classified as held-to-maturity and reported at amortized cost.
- - Debt securities that are bought and held principally for the purpose of
selling in the near term are classified as trading securities and reported
at fair value, with unrealized holding gains and losses included in
earnings.
- - Debt securities not classified as either held-to-maturity or trading
securities are classified as available-for-sale securities and reported at
fair value, with unrealized holding gains and losses excluded from earnings
and reported in a separate component of shareholders' equity, net of the
related tax effect, until realized.
As of December 31, 1995 and 1994, securities classified as trading securities
are presented as such on the accompanying consolidated balance sheets (see Note
2). Securities classified as available-for-sale and held-to-maturity are
included in investment securities on the accompanying consolidated balance
sheets (see Note 3).
In late 1995, the Financial Accounting Standards Board ("FASB") published
implementation guidance related to SFAS No. 115 (the "Special Report"). The
report was designed to provide additional guidance and clarification on the
implementation of SFAS No. 115. The Special Report included a special
transition provision, allowing a reassessment of the initial classifications of
all securities and the ability to reclassify, after review of the guidance in
the Special Report, securities between the classifications of held-to-maturity
and available-for-sale. This transfer between portfolios can occur without the
prescribed accounting for transfers between portfolios under SFAS No. 115, for
transfers made on or before December 31, 1995. Upon review of the Special
Report, Bancorp transferred all of its securities classified as
held-to-maturity to available-for-sale.
LOANS RECEIVABLE
Loans are carried at amounts advanced, less payments collected, reduced by
unearned interest, the reserve for loan losses, and net deferred loan fees.
Interest on loans is accrued over the term of the loan, based on the principal
amount outstanding.
<PAGE> 12
- 3 -
Loans are generally placed on nonaccrual status when they are 90 days past due
as to either principal or interest. However, loans that are in the process of
renewal or that are well secured and in the process of collection may not be
placed on nonaccrual status, based on the judgment of management. When a loan
is placed on nonaccrual status, previously accrued and uncollected interest is
charged to interest on loans. Income is subsequently recognized only to the
extent that cash payments are received or until, in management's judgment, the
borrower's ability to make periodic payments has been restored, in which case
the loan is returned to accrual status.
IMPAIRED LOANS
Effective January 1, 1995, Bancorp adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditor
for Impairment of a Loan - Income Recognition and Disclosures," which defines
impaired loans as specifically reviewed loans for which it is probable that
Bancorp will be unable to collect all amounts due according to the terms of the
loan agreement. Bancorp's impaired loans are generally defined as nonaccrual
loans as detailed above (see Note 5).
LOAN FEES
Bancorp defers and amortizes loan fees, net of related costs, over the
anticipated lives of the loans originated. For each of the years presented in
the accompanying consolidated statements of income, the amortization of net
deferred loan fees is included with interest and fees on loans.
RESERVE FOR LOAN LOSSES
The reserve for loan losses is an estimate based upon loan loss experience,
adjusted for such factors as changes in the character of the loan portfolio and
current economic conditions. An evaluation of the loan portfolio is performed
periodically by management as a basis for maintaining an adequate reserve
balance, and adjustments, as they become necessary, are reported in earnings in
the periods in which they become known. In the opinion of management, the
reserve for loan losses is adequate to absorb estimated losses that have been
incurred in the present loan portfolio.
PREMISES AND EQUIPMENT
Premises and equipment includes furniture, equipment and leasehold
improvements. These assets are stated at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over the assets'
estimated useful lives (three to ten years).
OTHER REAL ESTATE OWNED
Other real estate owned is property acquired through foreclosure and is
recorded at the lower of cost or fair value, less estimated costs to sell. Any
write-downs to fair value on other real estate owned at the date of foreclosure
are charged to the reserve for loan losses. A reserve for other real estate
owned is maintained to recognize subsequent declines in fair value.
<PAGE> 13
- 4 -
INCOME TAXES
Effective January 1, 1993, Bancorp adopted SFAS No. 109, "Accounting for Income
Taxes." SFAS No. 109 requires a change from the deferred method to the
liability method of accounting for income taxes. Under the liability method,
deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax laws and rates applicable to
future years to differences between the financial statement carrying amounts
and the tax bases of existing assets and liabilities. Under this new standard,
the effect on deferred taxes of a change in tax rates is recognized in income
in the period that included the enactment date. Under the deferred method,
deferred taxes were recognized using the tax rate applicable in the year of the
calculation and were not adjusted for subsequent changes in tax rates. The
January 1, 1993, cumulative effect of change in accounting principle recognized
as income from the adoption of SFAS No. 109 was $216,710 (see Note 12).
EARNINGS PER COMMON SHARE
Earnings per common share are calculated by dividing net earnings by the
weighted average number of shares of common stock and common stock equivalents
outstanding during each period. Stock options are considered common stock
equivalents unless determined to be antidilutive. The weighted average number
of shares used to compute primary net income per share were 752,181 for 1995,
732,781 for 1994 and 722,284 for 1993. The weighted average number of shares
used to compute fully diluted net income per share were 773,529 for 1995,
743,604 for 1994 and 722,284 for 1993. The weighted average number of shares
have been adjusted to reflect the assumed exercise of outstanding options. The
adjustment made was based on the "treasury stock" method, as defined in
Accounting Principles Board ("APB") Opinion No. 15.
ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Such
recoverability is measured based on the estimated future cash flows expected to
result from the use of the asset as well as its eventual disposition. SFAS No.
121 excludes financial instruments, long-term customer relationships of
financial institutions, mortgage and other servicing rights and deferred tax
assets. SFAS No. 121 is effective for fiscal years beginning after December
15, 1995. Bancorp does not anticipate any material effect on its financial
position or results of operations from the implementation of SFAS No. 121.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 defines a "fair value based method" of accounting
for an employee stock option or similar equity instrument. Under the fair
value based method, compensation cost is measured at the grant date based on
the value of the award and is recognized over the service period. Prior to the
issuance of SFAS No. 123, employee stock options or similar equity instruments
were accounted for under the "intrinsic value method" as defined by APB Opinion
No. 25, "Accounting for Stock Issued to Employees." Under the intrinsic value
method,
<PAGE> 14
- 5 -
compensation cost is the excess, if any, of the quoted market price of the
stock at grant date or other measurement date over the amount an employee must
pay to acquire the stock.
SFAS No. 123 allows an entity to continue to use the intrinsic value method.
However, entities electing to remain with the accounting in Opinion No. 25 must
make pro forma disclosures of net income and earnings per share, as if the fair
value based method of accounting had been applied.
SFAS No. 123 is effective for transactions entered into in fiscal years that
begin after December 15, 1995. Management has not yet concluded if it will use
the fair value or the intrinsic value method. As such, the potential impact on
the results of operations or financial condition of the Bancorp cannot be
determined at this time.
RECLASSIFICATIONS
Certain reclassifications have been made to amounts in order to make them
consistent with the current-year presentation.
2. TRADING SECURITIES:
During 1993, Bancorp established a trading account for certain securities. As
discussed in Note 1, these securities are valued at estimated fair value. The
net unrealized gains or (losses) included in the consolidated statement of
income for the years ending December 31, 1995, 1994 and 1993 are $36,091,
$(50,842), and $(9,676), respectively.
3. INVESTMENT SECURITIES:
As discussed in Note 1, as of December 31,1993, Bancorp implemented SFAS No.
115. The gross unrealized gains and losses in Bancorp's investment securities
are as follows.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
-------------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED AGGREGATE
AMORTIZED HOLDING HOLDING FAIR
COST GAINS LOSSES VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Investments available-for-sale:
U.S. Treasury securities $ 5,563,793 $ 21,644 $(8,098) $5,577,339
U.S. government agency
securities 5,233,751 55,034 (7,304) 5,281,481
Mortgage-backed securities 8,114,275 93,051 (12,020) 8,195,306
Corporate securities 756,598 152 (4,095) 752,655
----------- -------- -------- -----------
Total investments
available-for-sale $19,668,417 $169,881 $(31,517) $19,806,781
=========== ======== ======== ===========
</TABLE>
<PAGE> 15
- 6 -
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
-------------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED AGGREGATE
AMORTIZED HOLDING HOLDING FAIR
COST GAINS LOSSES VALUE
------------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
Investments available-for-sale:
U.S. Treasury securities $ 6,446,844 $ - $(289,680) $ 6,157,164
U.S. government agency
securities 3,470,934 1,243 (225,776) 3,246,401
Mortgage-backed securities 6,890,834 11,257 (291,890) 6,610,201
------------ --------- --------- ------------
Total investments
available-for-sale $16,808,612 $12,500 $(807,346) $16,013,766
============ ========= ========= ============
Investments held-to-maturity:
U.S. Treasury security $ 499,540 $ - $ (3,290) $ 496,250
Mortgage-backed securities 793,054 15,649 (14,698) 794,005
CORPORATE securities 759,887 457 (28,469) 731,875
------------ --------- --------- ------------
Total investments
held-to-maturity $ 2,052,481 $16,106 $ (46,457) $ 2,022,130
============ ========= ========= ============
</TABLE>
Investments available-for-sale are included in investment securities at fair
value, with unrealized gains and losses, net of the effect of tax, included as
a separate component of stockholders' equity in the accompanying balance
sheets. The portfolio had net unrealized gains of $138,364 as of December 31,
1995, and net unrealized losses of $794,846 as of December 31, 1994.
Investments held-to-maturity are included in investment securities at cost,
adjusted for the amortization of premiums and the accretion of discounts. At
December 31, 1995, there were no securities held-to-maturity. The decrease
from December 31, 1994 was primarily due to the transfer of $1,909,965 in
held-to-maturity securities, with a corresponding unrealized net gain of
$27,086, to the available-for-sale portfolio in December 1995. This transfer
was made in connection with the issuances of the FASB's Special Report
discussed in Note 1.
A comparison of amortized cost and fair value for investment securities, along
with the contractual dates of maturity, by category of investment as of
December 31, 1995, is as follows.
<PAGE> 16
- 7 -
<TABLE>
<CAPTION>
AGGREGATE
AMORTIZED FAIR
COST VALUE
------------ ------------
<S> <C> <C>
Investments available-for-sale:
U.S. Treasury securities-
Maturing within one year $ 1,513,665 $ 1,512,108
Maturing after one year, but within five years 4,050,128 4,065,231
------------ ------------
Total U.S. Treasury securities 5,563,793 5,577,339
------------ ------------
U.S. government agency securities-
Maturing within one year 2,003,972 2,010,936
Maturing after one year, but within five years 3,229,779 3,270,545
------------ ------------
Total U.S. government agency securities 5,233,751 5,281,481
------------ ------------
Mortgage-backed securities 8,114,275 8,195,306
------------ ------------
Corporate securities-
Maturing within one year 250,000 249,453
Maturing after one year, but within five years 506,598 503,202
------------ ------------
Total corporate securities 756,598 752,655
------------ ------------
Total investments available-for-sale $19,668,417 $19,806,781
============ ============
</TABLE>
During 1995,1994 and 1993, investment securities with a book value of
approximately $1,045,000, $1,343,000 and $6,344,000, respectively, were sold,
resulting in total realized gains and (losses) of $2,317, $(24,716) and
$138,098, respectively, which are included in other income in the accompanying
financial statements. Specific identification of assets is used for purposes
of computing realized gains and losses.
The book value of investment securities pledged to secure deposits and
securities sold under agreements to repurchase amounted to approximately
$13,724,000 and $12,087,000 as of December 31, 1995 and 1994, respectively.
4. LOANS RECEIVABLE:
Loans receivable include the following as of December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Commercial $11,662,685 $ 7,397,133
Consumer 1,612,880 1,893,902
Real estate - mortgage 48,823,234 40,796,668
Real estate - construction - 538,143
All other loans 547,576 472,277
------------ ------------
Total loans receivable 62,646,375 51,098,123
Reserve for loan losses (1,489,141) (1,996,528)
Net deferred loan fees (98,592) (138,642)
------------ ------------
$61,058,642 $48,962,953
============ ============
</TABLE>
<PAGE> 17
- 8 -
Activity in the reserve for loan losses for the years ended December 31, 1995,
1994 and 1993, is as follows.
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year $1,996,528 $1,961,945 $2,558,093
Recovery of provision for loan losses (221,000) (163,000) (180,354)
Net recoveries (charge-offs) (286,387) 197,583 (415,794)
----------- ----------- -----------
Balance, end of year $1,489,141 $1,996,528 $1,961,945
=========== =========== ===========
</TABLE>
The effective yield on the loan portfolio was 8.4%, 9.0% and 8.9% as of
December 31, 1995, 1994 and 1993, respectively.
Net deferred loan fees totaled $98,592 and $138,642 as of December 31, 1995 and
1994, respectively. The amortization of net deferred loan fees amounted to
$55,837, $55,026 and $119,266, respectively, for the years ended December 31,
1995, 1994 and 1993.
5. IMPAIRED LOANS:
Effective January 1, 1995, Bancorp implemented SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Credit for
Impairment of a Loan-Income Recognition and Disclosures."
A loan is considered impaired when, based on all current information and
events, it is probable that Bancorp will be unable to collect all amounts due
according to the contractual terms of the agreement, including all scheduled
principal and interest payments. Such impaired loans are measured based on the
present value of expected future cash flows, discounted at the loan's effective
interest rate or, as a practical expedient, impairment may be measured based on
the loan's observable market price, or if the loan is collateral dependent, the
fair value of the collateral. When the measure of the impaired loan is less
than the recorded investment in the loan, the impairment is recorded through a
valuation allowance. Loans for which foreclosure is probable continue to be
accounted for as loans.
Income on impaired loans is subsequently recognized only to the extent that
cash payments are received or until, in management's judgment, the borrower's
ability to make periodic payments has been restored.
At December 31, 1995, Bancorp had impaired loans with carrying value of $31,216
before related allowance for loan losses of $20,000. The average recorded
investment in impaired loans for the year ended December 31, 1995 was $340,550.
Bancorp recognized no interest income on its impaired loans for the year ended
December 31, 1995.
<PAGE> 18
- 9 -
As of December 31, 1995 and 1994, Bancorp had $31,216 and $726,140,
respectively, of loans on nonaccrual status. Renegotiated loans are loans for
which terms have been renegotiated to provide a reduction or deferral of
interest or principal as a result of a deterioration in the financial position
of the borrower and are accounted for in accordance with SFAS No. 15,
"Accounting for Troubled Debt Restructurings." Extensions of loans, at market
terms, are not considered by Bancorp to be renegotiated. As of December 31,
1995 and 1994, Bancorp had $107,778 and $951,882, respectively, in renegotiated
loans.
6. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK:
Most of Bancorp's lending activity is with customers located within the
Washington, D.C., metropolitan area. As of December 31, 1995 and 1994, the
loan portfolio was secured by the following asset types.
<TABLE>
<CAPTION>
1995 1994
------------------------- ------------------------
PRINCIPAL PRINCIPAL
COLLATERAL TYPE BALANCE PERCENT BALANCE PERCENT
- ------------------------------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
Residential real estate:
First deed of trust $31,341,049 50% $25,030,464 49%
Other deed of trust 4,643,228 7 4,115,987 8
Commercial real estate:
First deed of trust 12,022,076 19 10,868,771 21
Other deed of trust 840,281 1 893,700 2
Partnership interest 151,958 1 422,032 1
General assets 5,700,844 9 2,383,751 5
Other 5,782,306 9 5,309,644 10
----------- ------- ------------ -------
Total secured loans 60,481,742 96 49,024,349 96
Unsecured loans 2,164,633 4 2,073,774 4
----------- ------- ------------ -------
Total loans $62,646,375 100% $51,098,123 100%
=========== ======= ============ =======
</TABLE>
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-
SHEET RISK:
In the normal course of business, Bancorp is a party to financial instruments
with off-balance-sheet risk in order to meet the financing needs of its
customers. These financial instruments primarily include commitments to extend
credit and standby letters of credit. Those instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amounts
recognized in the accompanying consolidated balance sheets. The contract
amounts of those instruments reflect the extent of involvement Bancorp has in
particular classes of financial instruments.
Bancorp's exposure to credit loss in the event of nonperformance by the other
party related to those financial instruments is represented by the contractual
amount of the instruments. Bancorp uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments. Bancorp requires collateral or other security to support certain
financial instruments with credit risk.
<PAGE> 19
- 10 -
<TABLE>
<CAPTION>
CONTRACT AMOUNT
AS OF
DECEMBER 31,
(IN THOUSANDS)
----------------------
1995 1994
------- ------
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit-
Commercial and consumer $15,136 $9,105
Home equity lines 5,738 2,130
Overdraft lines 1,257 902
Standby letters of credit 2,033 1,265
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses.
Because many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. Bancorp evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained (if deemed necessary by
Bancorp) upon extension of credit is based on management's credit evaluation of
the counterparty. Collateral held varies but may include cash, accounts
receivable, inventory, property, plant and equipment, and income-producing
commercial properties.
Standby letters of credit are conditional commitments issued by Bancorp to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. As of December 31,
1995 and 1994, Bancorp holds cash as collateral supporting standby letters of
credit in the amount of $1,355,000 and $589,000, respectively.
8. PREMISES AND EQUIPMENT:
The composition of premises and equipment as of December 31, 1995 and 1994, is
as follows.
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Furniture and equipment $ 1,019,198 $ 850,134
Leasehold improvements 1,213,433 1,208,141
------------ ------------
2,232,631 2,058,275
Less- Accumulated depreciation and amortization (1,628,367) (1,442,663)
------------ ------------
$ 604,264 $ 615,612
============ ============
</TABLE>
<PAGE> 20
- 11 -
9. OTHER ASSETS:
Bancorp's other assets consist primarily of the cash surrender value of certain
insurance policies. Bancorp purchased key man life insurance policies under
which Bancorp is the owner and beneficiary. In addition, Bancorp has purchased
four split-dollar life insurance policies under which Bancorp pays the premiums
and has endorsed the death benefit to four key executives. In the event of the
death of the insured, Bancorp will recover the cumulative amount of the
premiums paid. Bancorp has also purchased life insurance policies to fund
postretirement benefits of certain key executives (see Note 14).
Also included in other assets is the cumulative amount of premiums paid by
Bancorp for two split-dollar life insurance policies owned by one of Bancorp's
officers. The officer is to reimburse Bancorp for the cumulative amount of the
premiums paid. The policy has been assigned to Bancorp to secure the repayment
of the premiums upon the officer's termination, retirement or death.
10. CERTIFICATES OF DEPOSIT:
Certificates of deposit as of December 31, 1995 and 1994, mature as follows.
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Within one month $ 3,352,256 $ 3,008,510
One month to three months 2,903,397 2,345,999
Four months to six months 3,293,995 2,508,178
Over six months 4,972,472 4,572,309
------------ ------------
Total $14,522,120 $12,434,996
============ ============
</TABLE>
The rates on these deposits ranged from 4.1 to 6.5 percent as of December 31,
1995. The weighted-average rate for total certificates of deposit was 5.6 and
4.9 percent as of December 31, 1995 and 1994, respectively.
11. LINES OF CREDIT AND SECURITIES SOLD
UNDER AGREEMENTS TO REPURCHASE:
Bancorp has unused lines of credit with various banks, aggregating
approximately $4,300,000 as of December 31, 1995. The rates on borrowings
under these lines of credit approximate the respective banks' Federal funds
rates.
Securities sold under agreements to repurchase amounted to $11,884,940 and
$10,811,350 as of December 31, 1995 and 1994, respectively, and were at
weighted-average interest rates of 3.9 and 3.8 percent, respectively. As of
December 31, 1995 and 1994, Bancorp had pledged investment securities, with a
book value of approximately $12,868,000 and $11,213,000, respectively, as
collateral securing borrowings under repurchase agreements.
<PAGE> 21
- 12 -
12. INCOME TAXES:
As discussed in Note 1, effective January 1, 1993, Bancorp adopted SFAS No.
109. The cumulative effect of this change of $216,710 is included in the 1993
statement of income.
The benefit (provision) for income taxes consisted of the following.
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Current (provision) benefit:
Federal $(129,839) $(15,918) $(132,773)
District of Columbia (3,045) - 15,953
Deferred (provision) benefit:
Federal (148,567) (214,608) (25,834)
District of Columbia 2,137 (4,660) -
Change in valuation allowance for
deferred tax assets 412,216 259,987 158,607
---------- ---------- ---------
Total benefit $ 132,902 $ 24,801 $ 15,953
========== ========== =========
</TABLE>
A reconciliation of the statutory Federal income tax rate to Bancorp's
effective income tax rate follows.
<TABLE>
<CAPTION>
PERCENT OF PRETAX INCOME
---------------------------------
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
Statutory Federal income tax 34.0% 34.0% 34.0%
District of Columbia income tax, net of
Federal income tax benefit 6.8 6.8 6.9
Change in valuation allowance for
deferred tax assets (56.0) (45.9) (45.5)
Other (2.9) 0.7 -
--------- --------- --------
(18.1)% (4.4)% (4.6)%
========= ========= ========
</TABLE>
Temporary differences which give rise to deferred tax assets and liabilities as
of December 31, 1995 and 1994, are as follows.
<PAGE> 22
- 13 -
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax assets:
Tax credit carryforwards $ 81,697 $ 15,918
Operating loss carryforwards - 130,065
Reserve for loan losses 341,006 574,752
Deferred loan fees 35,913 47,885
Post-retirement benefits 62,393 13,275
Depreciation 46,279 33,004
Other 100,293 1,251
---------- ----------
Gross deferred tax assets 667,581 816,150
Valuation allowance - (412,216)
---------- ----------
Net deferred tax assets 667,581 403,934
---------- ----------
Deferred tax liabilities
Unrealized appreciation on debt securities 61,226 -
Other 127,413 129,552
---------- ----------
Deferred tax liabilities 188,639 129,552
---------- ----------
Net deferred tax asset $478,942 $274,382
========== ==========
</TABLE>
As of December 31, 1995 and 1994, Bancorp had established a valuation allowance
of $0 and $412,216, respectively. The decrease in the valuation allowance was
primarily due to the fact that management no longer believed an allowance is
necessary based on past and estimated future operating performance and the use
of all operating loss carryforwards. Realization of the deferred tax asset is
dependent on generating future taxable income. Although realization is not
assured, management believes it is more likely than not that all of the
deferred tax assets will be realized. The amount of deferred tax assets
considered realizable, however, could be reduced in the near term if estimates
of future taxable income are reduced.
13. STOCKHOLDERS' EQUITY:
COMMON STOCK
As of December 31, 1995 and 1994, Bancorp had three classes of common stock
with the following characteristics.
- - Common Stock ("Common") - One vote per share and receives 105 percent of
dividends granted on Class B Voting Common Stock and Non-Voting Common
Stock.
- - Class B Voting Common Stock ("Class B") - Ten votes per share and dividends
must equal Non-Voting Common Stock. Convertible into Common, on a
share-for-share basis, at the option of the holder.
<PAGE> 23
- 14 -
- - Non-Voting Common Stock ("Non-Voting") - No votes per share. Dividends are
equal to Class B Voting Common Stock. Convertible into Common, on a
share-for-share basis, at the option of the holder, at any time after a
"change of control." "Change of control" has been defined as approval of
such a change by the Board of Governors of the Federal Reserve Board.
STOCK OPTION PLAN
Bancorp has a stock option plan for certain officers and other key employees of
Bancorp and the Bank. Under the terms of the stock option plan, options for
the purchase of Bancorp's stock are granted generally at the greater of par
value or 100 percent of the fair market value of the stock at the date of the
grant, as determined by the Board of Directors of Bancorp, and are exercisable
upon granting over periods up to ten years.
As of December 31, 1995, there were 250,000 shares in the plan, of which
137,800 options to purchase Bancorp's Common Stock were outstanding. Option
prices range from $5.00 to $14.50 per option. During 1995, 19,000 options were
granted at the estimated fair market value of $14.50 per share. In addition,
200 options were exercised during the year at a price of $12.00 per share.
EMPLOYEE STOCK OWNERSHIP PLAN
During 1985, the Board of Directors of Bancorp established a trust to operate
an employee stock ownership plan (the "ESOP Plan"), which is provided to
employees of Bancorp and the Bank who meet certain age and service
requirements. In connection with the acquisition of these shares, the ESOP
Plan borrowed the funds to purchase the shares. Bancorp has guaranteed the
notes payable and, as such, has recorded the total outstanding balance as a
liability, with a like amount recorded as a reduction of stockholders' equity.
Certain of the ESOP Plan's shares collateralize the notes payable as of
December 31, 1994, and will be released into the Plan as Bancorp makes payments
on the notes payable. These notes payable are scheduled to be repaid in
installments of $81,252 per year, with the final installment due in 1995.
During 1995, the final installment on the notes was paid and all have been
released into the Plan.
Compensation expense related to the ESOP Plan of $81,252, $81,252 and $81,252,
for the years ended December 31, 1995, 1994 and 1993, respectively, is included
in salaries and benefits expense in the accompanying consolidated financial
statements.
<PAGE> 24
- 15 -
14. COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS
Bancorp's leases principally involve office space and equipment. In 1995, 1994
and 1993, rent expense for office space was approximately $760,000, $726,000
and $682,000, respectively. Minimum future annual rental payments under leases
that have initial or remaining noncancelable lease terms in excess of one year
are as follows.
<TABLE>
<CAPTION>
YEAR ENDED OPERATING
DECEMBER 31, LEASES
------------ ----------
<S> <C>
1996 $ 728,652
1997 692,838
1998 685,588
1999 242,101
2000 227,206
2001 and thereafter 374,682
----------
Total minimum lease payments $2,951,067
==========
</TABLE>
DATA PROCESSING CONTRACT
Bancorp entered into a five-year agreement with Electronic Data Systems ("EDS")
of Plano, Texas, on September 5, 1995, for data processing and bank operation
services. Services include loan accounting, deposit accounting, financial
management systems, statement rendering, and proof of deposit. Terms of the
contract provide for termination due to acquisition of 50 percent or more of
the stock or the assets of the EDS customer. An addendum to the contract
details the amount of termination charges resulting from an early termination
of the contract. Should termination occur within the first twelve months of
the contract, termination charges would be twelve times the average monthly
billing for the most recent three-month period, or ten times the proposed
monthly billing, whichever is greater. Subsequent periods would result in
lower termination charges. Estimated current monthly expense approximates
$14,000.
POST-RETIREMENT BENEFIT AGREEMENTS
Bancorp has entered into Supplemental Post-Retirement Benefit agreements with
five key executives under which the executive is entitled to either a
post-retirement benefit, payable in equal monthly installments over fifteen
years beginning at age 65, or a death benefit, payable to the executive's
beneficiary in the event of the death of the executive in equal monthly
installments over fifteen years. The total benefit amount is preestablished
for each executive; however, if the key executive elects early retirement at
age 55 with 10 years of service, the executive is entitled to a reduced
post-retirement benefit amount. Bancorp is accruing the liability related to
the post-retirement benefits over the estimated service period of each of the
executives. As of December 31, 1995, Bancorp has accrued $141,500 related to
these postretirement benefits agreements. As discussed in Note 9, Bancorp has
purchased life insurance policies to fund these post-retirement benefits.
<PAGE> 25
- 16 -
LITIGATION
In the normal course of business, Bancorp is involved in certain pending
litigation. In the opinion of management, the ultimate resolution of such
matters will not have a material impact on the financial condition or the
future results of operations of Bancorp.
15. RELATED-PARTY TRANSACTIONS:
Bancorp has had, and expects to have in the future, banking transactions with
directors, advisory directors, principal officers, and affiliated companies in
which the directors are officers and/or stockholders. In management's opinion,
such transactions are on the same terms, including interest rates and
collateral, as similar transactions with independent parties. These persons and
affiliated companies were indebted or contingently liable to Bancorp for loans
totaling $838,723 and $781,426 as of December 31, 1995 and 1994, respectively.
Bancorp also holds deposits for these individuals and affiliated companies.
The total amount of deposits held was $6,395,775 and $5,695,423 as of December
31, 1995 and 1994, respectively. Furthermore, the chief executive officer of
the investment company with which Bancorp established a trading account during
1993 resigned from the Board of Directors in October 1993 and currently serves
as an investment advisor to the Board of Directors.
In addition, an officer of Bancorp owns split-dollar, universal life insurance
policies for which Bancorp advances premiums. The officer is to reimburse
Bancorp for the cumulative amount of the premiums paid upon the officer's
termination, retirement, or death. The policy has been assigned to Bancorp to
secure the repayment of the premiums.
<PAGE> 26
- 17 -
16. CONDENSED FINANCIAL STATEMENTS
(PARENT COMPANY ONLY)
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
------- -------
<S> <C> <C>
Assets:
Cash and due from banks $ 4 $ 535
Investment in subsidiaries 8,694 6,740
Investment securities 509 500
Income tax receivable from subsidiary 380 85
Other - 2
------- -------
Total assets $9,587 $7,862
======= =======
Liabilities:
Accrued interest payable $ - $ 1
Debt of Employee Stock Ownership Plan (ESOP) - 81
Other 4 -
------- -------
Total liabilities 4 82
Stockholders' equity:
Common stock 3,613 3,612
Paid-in capital 6,589 6,588
Retained deficit (654) (1,523)
Unrealized gain (loss) on available-for-sale securities 77 (795)
Less- Treasury stock, at cost (42) (21)
Unearned ESOP shares - (81)
------- -------
Total stockholders' equity 9,583 7,780
------- -------
Total liabilities and stockholders' equity $9,587 $7,862
======= =======
</TABLE>
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Interest income $ 39 $ 42 $ 50
Noninterest expense 333 279 262
----- ----- -----
Loss before equity in net income of subsidiaries (294) (237) (212)
Equity in net income of subsidiaries 872 921 646
----- ----- -----
Income before income tax benefit (provision) 578 684 434
Income tax benefit (provision) 291 (92) 147
----- ----- -----
Net income $ 869 $ 592 $ 581
===== ===== =====
</TABLE>
<PAGE> 27
- 18 -
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
1995 1994 1993
------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 869 $ 592 $ 581
Adjustment to reconcile net income to net cash used
in operating activities-
Equity in net income of subsidiaries (872) (921) (646)
(Increase) decrease in income tax receivable from
subsidiary (295) 92 (151)
(Decrease) increase in accrued interest payable (1) 6 -
Other 3 - -
------ ------ ------
Net cash used in operating activities (296) (231) (216)
------ ------ ------
Cash flows from investing activities:
Investment in subsidiary (216) - -
Proceeds from investment securities - 461 -
Purchase of investment securities - - (248)
------ ------ ------
Net cash (used in) provided by investing
activities (216) 461 (248)
------ ------ ------
Cash flows from financing activities:
Net principal payments on debt of ESOP (81) (81) (81)
Reduction in unearned ESOP shares 81 81 81
Principal payments on note payable - - (250)
Proceeds from exercise of stock options 2 - -
Purchase of Treasury stock (21) (18) (3)
------ ------ ------
Net cash used in financing activities (19) (18) (253)
------ ------ ------
Net (decrease) increase in cash (531) 212 (717)
Cash and due from banks, beginning of year 535 323 1,040
------ ------ ------
Cash and due from banks, end of year $ 4 $ 535 $ 323
====== ====== ======
</TABLE>
The primary activity of Bancorp is that of a bank holding company. No cash
dividends have been received by the Bancorp from subsidiaries during the last
three years.
17. ESTIMATED FAIR VALUE OF FINANCIAL
INSTRUMENTS:
Bancorp adopted SFAS No. 107 "Disclosure About Fair Value of Financial
Instruments" as of December 31, 1995. SFAS No. 107 requires disclosure of the
fair value of assets and liabilities recognized and not recognized in the
balance sheet, when fair value is estimable. Fair value information that
pertains to Bancorp's financial instruments does not purport to represent the
aggregate net value of the entity. Much of the information used to determine
fair value is
<PAGE> 28
- 19 -
highly subjective and judgmental in nature, and therefore, the results may not
be precise. Since the fair value is estimated as of the balance sheet date,
the amount that will actually be realized or paid upon settlement or maturity
could be significantly different.
The estimated fair values of financial instruments at December 31, 1995, are
summarized as follows.
<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
VALUE VALUE
---------- -----------
(in thousands)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 11,364 $ 11,364
Trading securities 5,693 5,693
Investment securities 19,807 19,807
Loans receivable 61,059 60,028
Accrued interest receivable 631 631
LIABILITIES:
Deposits 78,904 78,979
Securities sold under agreements to repurchase 11,885 11,885
Accrued interest payable 190 190
OFF-BALANCE SHEET INSTRUMENTS:
Commitments to extend credit 22,131 -
Standby letters of credit 2,033 13
</TABLE>
The following methods and assumptions were used to estimate fair value.
- - CASH AND CASH EQUIVALENTS - The carrying amounts of cash and short-term
instruments approximate their fair value.
- - TRADING SECURITIES - Fair values for trading account securities, which also
are the amounts recognized in the consolidated balance sheets, are based on
quoted market prices.
- - INVESTMENT SECURITIES - Fair values for investment securities are based on
quoted market prices.
- - LOANS RECEIVABLE - For variable-rate loans that reprice frequently and have
no significant change in credit risk, fair values are based on carrying
values. Fair values for fixed-rate loans are estimated using discounted
cash flow analyses, using interest rates currently being offered for loans
with similar terms to borrowers of similar credit quality. Fair values for
impaired loans are estimated using discounted cash flow analyses or
underlying collateral values, where applicable.
- - DEPOSITS - The fair values disclosed for demand deposits are, by
definition, equal to the amount payable on demand at the reporting date.
The carrying amounts of variable-rate deposits approximate their fair
values at the reporting date. Fair values for fixed-rate
<PAGE> 29
- 20 -
certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on similar
certificates.
- - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - The carrying amounts of
repurchase agreements approximate their fair value due to the short
maturities of these instruments.
- - ACCRUED INTEREST - The carrying amounts of accrued interest approximate
their fair values.
- - OFF-BALANCE SHEET INSTRUMENTS - Fair values for off-balance sheet
instruments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and
the counterparties' credit standing.
18. MEMORANDUM OF UNDERSTANDING:
On March 11, 1992, the Board of Directors of the Bank entered into a formal
written agreement with the Office of the Comptroller of the Currency (the
"OCC"). This agreement prescribed certain corrective measures necessary to
address deficiencies in policies and procedures noted by the OCC in its
examination of the Bank. On December 13, 1993, this written agreement was
terminated and replaced by a Memorandum of Understanding ("MOU") between the
Board of Directors of the Bank and the OCC. The MOU prescribed certain
continuing monitoring activities that were to be performed by the Bank. On
September 22,1994, the OCC rescinded the MOU.
19. CAPITAL REQUIREMENTS:
Capital guidelines have been established by the Federal Financial Institutions
Examination Council (the "FFIEC") requiring banking organizations to meet
risk-weighted and other capital requirements. The risk-weighted capital
guidelines redefined the components of capital, categorized assets into
different risk classes, and included certain off-balance-sheet items in the
calculation of risk-weighted assets. Under these rules, the Bank's core and
total capital ratios were 15.2 and 16.4 percent and Bancorp's core and total
capital ratios were 17.10 and 18.35 percent, respectively, as of December 31,
1995.
An additional capital requirement is the leverage ratio, which measures the
ratio of core capital to total assets. The most highly rated banks will be
required to maintain a minimum leverage ratio of 3.0 percent. However, most
banks will be required to maintain an additional cushion of at least 100 to 200
basis points above the 3.0 percent minimum. As of December 31, 1995, the
Bank's leverage ratio was 8.4 percent and Bancorp's was 9.4 percent.
<PAGE> 30
- 21 -
20. BUSINESS COMBINATION:
In October 1995, Bancorp entered into a merger agreement with George Mason
Bankshares, Inc. ("George Mason"). Under the terms of the agreement holders of
Common, Class B and Non-Voting common stock will receive 1.08 shares of George
Mason common stock, adjusted to reflect a January 1996 three-for-two share
stock split, in exchange for each share of Bancorp common stock rendered. The
business combination closed on May 17, 1996.
<PAGE> 31
EXHIBIT II
THE PALMER NATIONAL BANCORP, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
THE PALMER THE PALMER
THE PALMER NATIONAL NATIONAL ELIMINATIONS/
NATIONAL BANK MORTGAGE INC. BANCORP, INC. CONSOLIDATION CONSOLIDATED
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INTEREST AND DIVIDEND REVENUE:
Interest and fees on loans $4,633,700 $135,327 $ - $ - $4,769,027
Trading account interest 230,687 - - - 230,687
Interest on investment securities 1,170,749 - 37,932 - 1,208,681
Federal funds sold 611,729 - - - 611,729
Federal Reserve Bank stock dividends 12,954 - - - 12,954
Other interest revenue - - 1,417 (1,417) -
Investment in Palmer National Bank - - 961,939 (961,939) -
Investment in Palmer National Mortgage - - (90,541) 90,541 -
----------- --------- --------- ---------- ---------
Total interest and dividend revenue 6,659,819 135,327 910,747 (872,815) 6,833,078
INTEREST EXPENSE:
Savings and interest-bearing demand deposits 368,713 - - - 368,713
Money market demand deposits 1,009,081 - - (1,417) 1,007,664
Certificates of deposit-
Denominations less than $100,000 437,164 - - - 437,164
Denominations of $100,000 or more 305,846 - - - 305,846
----------- --------- --------- ---------- ---------
Total interest on deposits 2,120,804 - - (1,417) 2,119,387
Securities sold under agreements to repurchase 373,339 - - - 373,339
Other 2,839 - 4,016 - 6,855
----------- --------- --------- ---------- ---------
Total interest expense 2,496,982 - 4,016 (1,417) 2,499,581
----------- --------- --------- ---------- ---------
Net interest revenue 4,162,837 135,327 906,731 (871,398) 4,333,497
----------- --------- --------- ---------- ---------
RECOVERY OF PROVISION FOR LOAN LOSSES 221,000 - - - 221,000
----------- --------- --------- ---------- ---------
Net interest revenue after recovery
of provision for loan losses 4,383,837 135,327 906,731 (871,398) 4,554,497
----------- --------- --------- ---------- ---------
OTHER REVENUE:
Fees for other customer services 323,531 - - - 323,531
Trading account gain 179,519 - - - 179,519
Investment securities gain 2,317 - - - 2,317
Other 236,070 59,200 - (59,200) 236,070
----------- --------- --------- ---------- ---------
Total other revenues 741,437 59,200 - (59,200) 741,437
OPERATING EXPENSES:
Salaries and benefits 1,977,536 238,720 192,773 (59,200) 2,349,829
Occupancy expense of bank premises 794,926 19,907 - - 814,833
Furniture and equipment 329,997 13,826 - - 343,823
Other 855,756 59,195 136,314 - 1,051,265
----------- --------- --------- ---------- ---------
Total operating expenses 3,958,215 331,648 329,087 (59,200) 4,559,750
----------- --------- --------- ---------- ---------
INCOME BEFORE BENEFIT FOR INCOME TAXES 1,167,059 (137,121) 577,644 (871,398) 736,184
BENEFIT (PROVISION) FOR INCOME TAXES (205,120) 46,580 291,442 - 132,902
----------- --------- --------- ---------- ---------
NET INCOME $ 961,939 $(90,541) $869,086 $(871,398) $869,086
=========== ========= ========= ========== =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
George Mason Bank
George Mason Mortgage Company
Mason Advertising, Inc.
Mason Holding Corporation
George Mason Bank, N.A.
<PAGE> 1
EXHIBIT 23A
Consent of Independent Auditors
We consent to the incorporation by reference in Registration Statement Number
33-74576 on Form S-3 dated January 28, 1994 and Registration Statement Number
33-71428 on Form S-8 dated November 9, 1993 of our report dated January 23,
1997, with respect to the consolidated financial statements of George Mason
Bankshares, Inc. incorporated by reference in the Annual Report (Form 10-K) for
the year ended December 31, 1996.
/s/ ERNST & YOUNG LLP
Washington, D.C.
March 28, 1997
