<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d) of The Securities Exchange Act
For the Fiscal Year ended December 31, 1995
Commission File Number 0-13741
INDUSTRIAL TRAINING CORPORATION
-------------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 52-1078263
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
13515 Dulles Technology Drive, Herndon, Virginia 22071
------------------------------------------------------
(Address of principal executive offices and zip code)
Issuer's telephone number (703)713-3335
(including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each Class which registered
------------------- ----------------
None None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
------------
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 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-B 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-KSB or any amendment to
this Form 10-KSB.
[_]
Issuer's revenues for the year ended December 31, 1995 were $22,768,664.
Aggregate market value of all voting stock outstanding at February 15, 1996 was
$25,290,815. Amount was computed using the average bid and ask price as of
February 15, 1996, which was $7.125. As of February 15, 1996, 3,549,588 shares
of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the proxy statement for the annual shareholders meeting to be held
May 7, 1996 are incorporated by reference into Part III.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
- ------ ----
<S> <C> <C>
Item 1 Description of Business 1
Item 2 Description of Properties 3
Item 3 Legal Proceedings 3
Item 4 Submission of Matters to a Vote of Security Holders 3
PART II
- -------
Item 5 Market for Common Equity and Related Stockholder Matters 4
Item 6 Management's Discussion and Analysis of Financial Condition
and Results of Operations 4
Item 7 Financial Statements 8
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 23
PART III
- --------
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 24
Item 10 Executive Compensation 26
Item 11 Security Ownership of Certain Beneficial Owners and Management 26
Item 12 Certain Relationships and Related Transactions 26
Item 13 Exhibits and Reports on Form 8-K 27
</TABLE>
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) General Development of Business
-------------------------------
Industrial Training Corporation (the "Company" or "ITC") was incorporated under
the laws of the State of Maryland on January 28, 1977. ITC develops, markets
and sells training materials in many media; however, the overwhelming majority
of the Company's products are delivered in multimedia platforms. ITC's
multimedia training courseware combines full-motion video, audio, animation,
graphics and text into a single training presentation.
During 1995, the Company concentrated its efforts on expanding product platforms
and development efforts and increasing distribution capabilities. The majority
of the company's product development efforts focused on improving ITC's core
multimedia training products, including converting its existing analog laserdisc
training programs into the digital CD-ROM format. The conversion, which is
scheduled to be completed in early 1996, is expected to provide ITC's customers
with a wide range of products in multiple formats. In addition to its internal
program development activities, on February 17, 1995, the Company acquired all
the rights, title and ownership interests in the INVOLVE(R) Instrumentation
series. With this acquisition, INVOLVE(R) became the fifth learning library
available under the ITC Activ(R) trademark.
On July 28, 1995, the Company filed a registration statement on Form SB-2 with
the Securities and Exchange Commission (SEC) for a public offering of 1,207,500
shares (including an over-allotment option) of its common stock ("the
Offering"). The Offering included 175,000 shares sold by ITC shareholders. The
registration statement was declared effective by the SEC on September 28, 1995.
On October 4, 1995, the Offering was completed and the Company's stock was sold
at $9.75 per share. The over-allotment option which was exercised on November
10, 1995 resulted in the sale of an additional 157,500 shares of the Company's
common stock. In aggregate, the net proceeds to the Company from the Offering
amounted to $9,048,000. A portion of the net proceeds, $1,763,000, was
immediately used to reduce the Company's long-term borrowings. The balance of
the net proceeds will be used to fund the conversion of the Company's existing
analog courseware training products into the digital CD-ROM format, fund the
Company's efforts to broaden and expand its training products by acquiring
companies or products, and for general working capital and corporate purposes.
On November 3, 1995, Activ Training, Ltd., a wholly owned subsidiary of the
Company, was incorporated as a private limited company of England and Wales.
Activ Training, Ltd. was created in order to expand the Company's sales,
marketing and distribution activities within the international marketplace.
Activ Training, Ltd. is headquartered in London, England.
(b) Narrative Description of Business
---------------------------------
ITC is a full-service training company specializing in the development,
production, marketing and sale of off-the-shelf training courseware for
corporate, educational and governmental organizations. ITC courseware uses the
power of full-motion video as a learning tool on a PC platform. These courses
combine high quality video and sound with the PC's capability for graphics and
automatic recordkeeping. Standard multimedia platforms for ITC products include
both laserdisc and CD-ROM. The Company's CD-ROM products are primarily delivered
using the MPEG digital video format. However, at various times the Company has
also used both the DVI and INDEO(R) digital video formats to deliver its
courseware. The majority of the Company's multimedia products are sold under the
1
<PAGE>
Company's registered trademark Activ(R). These products are focused in five
primary areas, as represented by the five Activ(R) Learning Libraries: the
"Activ(R) PC Skills Learning Library," the "Activ(R) Regulatory Training
Learning Library," the "Activ(R) Basic Skills Learning Library," the "Activ(R)
Technical Skills Learning Library," and the "Activ(R) INVOLVE(R) Instrumentation
Learning Library."
Distribution of the Company's products is managed through a number of channels.
Primarily, the Company employs a direct salesforce which is responsible for
sales of the Company's multimedia training products throughout North America,
with the exception of those territories which have been sold to ComSkill
Learning Center (ComSkill) franchises as exclusive territories for distribution
of the "Activ(R) PC Skills Learning Library." ComSkill franchisees in turn
employ sales persons to market and sell ITC's "PC Skills" products throughout
their protected territories. In certain other U.S. markets, the Company also
uses dealers to distribute its courseware products. In foreign markets other
than Canada and the United Kingdom, the Company markets its products primarily
through dealers and distributors.
All of the Company's training programs are proprietary and as a result they are
all protected by copyright. The Company's libraries of marketable off-the-shelf
products include in excess of 200 Activ(R) training programs, all of which were
produced by the Company. Certain of the Company's "Basic Skills" and "Technical
Skills" products are owned by limited partnerships in which the Company acts as
a general partner and, in some cases, the Company participates as a limited
partner.
In addition to selling multimedia training courseware, the Company sells related
hardware products. The Company uses many IBM compatible hardware systems for the
delivery of its products. In addition to being an authorized IBM Industry
Remarketer and a Value Added Reseller, the Company utilizes the products of
Compaq, Hewlett Packard, Gateway 2000 and other computer hardware manufacturers.
Such hardware is integrated with ITC's Activ(R) courseware to provide a full-
service solution to the training needs of ITC's clients.
All materials used in the Company's products are available from numerous sources
of supply. The Company does not foresee any shortage of such materials.
Further, ITC does not believe that the loss of any single supplier would have a
material adverse effect on the Company taken as a whole.
There are many companies engaged in the business of providing training and
instructional materials using various media. These companies include providers
of traditional instructor-led training, multimedia developers and sellers,
textbook publishers, and others, all of which compete for available training
funds. At present, there are several providers of interactive multimedia
training products and management believes that the number of companies providing
multimedia training products will continue to increase in the future. Some of
these companies are larger and have greater resources than ITC, while others
offer only specialized training materials. Considering all five of the
Company's "Learning Libraries" and the current conversion of the majority of the
Company's analog-based training products to the digital CD-ROM platform,
management believes that ITC offers the most broad array of multimedia training
products and services available.
2
<PAGE>
At December 31, 1995, the Company and its subsidiaries employed a total of 83
people, all of whom are full-time. This represents an increase of 8 employees
relative to December 31, 1994. The Company utilizes free-lance and temporary
personnel who are familiar with ITC's development and production process to
support increased personnel requirements that arise from time to time. The
Company is not a party to any collective bargaining agreements, and believes
that relations with its employees are good.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company currently occupies 28,431 square feet of office, warehouse and
production space in a commercial building located at 13515 Dulles Technology
Drive, Herndon, Virginia. This lease will expire in June of 1999. Prior to
February 1, 1996, the Company occupied approximately 6,450 square feet of office
space in a commercial building located at One Buckhead Plaza, Suite 1500, 3060
Peachtree Road, Atlanta, Georgia. This lease expired in January of 1996.
Effective February 1, 1996, the Company occupies 3,405 square feet of office
space in a commercial building located at 2000 RiverEdge Parkway, Atlanta,
Georgia. This lease will expire in January of 2001, and effectively replaces
the Peachtree Road office space. The Company also leases 950 square feet of
office space in a commercial building located at 2 Milliston Road, Suite 1C,
Millis, Massachusetts. This lease expires in March of 1996. All facilities are
in good condition and are adequate for the Company's use.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property the subject of, any
material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has not submitted any matters to a vote of security holders since
the May 1995 Annual Meeting.
3
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information
------------------
The Company's Common Stock is traded on the National Association of Security
Dealers Automated Quotation System (NASDAQ), National Market System (NMS).
The following table states the high and low quotation information by quarter for
the Company's Common Stock based on actual trading, as reported by NASDAQ/NMS.
<TABLE>
<CAPTION>
High Low
------ -----
<S> <C> <C> <C>
1st Quarter, 1994 5 1/4 4
2nd Quarter, 1994 4 1/2 3 5/8
3rd Quarter, 1994 8 1/2 3 5/8
4th Quarter, 1994 8 1/2 7 1/4
1st Quarter, 1995 10 1/2 6 1/4
2nd Quarter, 1995 10 1/2 8
3rd Quarter, 1995 11 1/4 9 5/8
4th Quarter, 1995 11 8 3/4
</TABLE>
(b) Holders
-------
As of December 31, 1995, there were 1,029 holders of record of the Company's
Common Stock, the Company's only class of stock.
(c) Dividends
---------
Shareholders of the Company's Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available. There has been no declaration of dividends since 1984.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Revenues
- --------
During 1995, revenues for ITC totaled $22,769,000 as compared to $22,337,000
achieved during fiscal 1994, representing a $432,000, or 2% increase. Revenues
were positively impacted by an 18% increase in the sales of ITC's off-the-shelf
ACTIV(R) courseware. At the same time however, revenues were negatively
impacted by several factors. These factors include reduced revenues from custom
courseware and consulting services, franchise fees and royalties, linear
products, and sales of multimedia hardware related products.
4
<PAGE>
Revenues from the Company's courseware products totaled $18,496,000, an increase
of $512,000 or 3% over 1994 levels. The Company's courseware product sales
include off-the-shelf courseware, custom courseware and consulting services,
fees and royalties and linear training products.
Revenues from off-the-shelf courseware products totaled $16,307,000 for the year
as compared to $13,784,000 achieved during fiscal 1994, an increase of
$2,523,000 (18%). The increase in off-the-shelf courseware sales resulted from
several factors, including: increased efforts used to market its core products,
a development schedule that resulted in the release of 85 new training courses
including converted products, and the Company's continued efforts to increase
additional third-party distribution channels. Furthermore, the Company believes
that significant increases in the acceptance of multimedia training tools has
fueled the growth in revenues of its core products.
Consistent with 1994, revenues from custom courseware and consulting services
declined as a result of the Company's continued decision to de-emphasize custom
courseware sales during 1995 and 1994. Revenues from custom courseware and
consulting services totaled $1,003,000, representing a $1,384,000 decrease as
compared to fiscal 1994. During the first quarter of 1996, the Company
organized a new multimedia services division and expects to emphasize service
related activities such as implementation support, hardware and network
integration, and instructional design.
Fees and royalties from the Company's franchise network, ComSkill Learning
Centers, Inc. (ComSkill) totaled $464,000 as compared to $565,000 achieved
during 1994. The decrease of $101,000 or 18% was primarily due to lower than
anticipated sales volume generated by the franchise network, resulting in lower
royalty income to the Company and a decline in the number of franchises sold
during 1995 as compared to 1994. During the year, the Company concentrated its
efforts on enhancing the performance of the existing franchise network as
opposed to selling additional territories, although such efforts did not result
in increased performance. Furthermore, during December of 1995, the Company
terminated the Indianapolis, Indiana and Chicago, Illinois franchise agreements
at a cost of $72,000. These territories had been sold during 1993 and 1994,
respectively.
Sales of the Company's linear training products, marketed under the label USA
Training, totaled $722,000, a decrease of $526,000 or 42% over 1994 amounts.
The decline in sales of these products is consistent with industry trends and
the Company's strategy to de-emphasize these products.
5
<PAGE>
Sales of the Company's hardware systems totaled $4,273,000 during 1995, as
compared to $4,353,000 during 1994, representing a decrease of 2%. The decrease
in hardware sales reflects the standardization of hardware requirements due to
the emergence of digital CD-ROM technology. The resulting impact was a
reduction in unit prices and, unlike the situation with laserdisc systems,
availability of required hardware through multiple channels, resulting in
increased competition to ITC.
INCOME BEFORE PROVISION FOR INCOME TAXES
- ----------------------------------------
Income before provision for income taxes totaled $2,555,000 in 1995. This
represents an increase of $590,000 or 30% over the corresponding result of
$1,965,000 achieved for fiscal 1994. The significant increase in earnings
before taxes in 1995 has resulted from several factors including the increase in
sales of the Company's off-the-shelf training products, the reduction in
royalty expense due to the Company's purchase of the involve/(R)/ series, and
the positive impact of net interest income resulting from the reduction in debt
and investment of net proceeds following the Company's public offering.
Cost of sales represented 57% and 61% of total revenues for the years ended 1995
and 1994, respectively. The decrease in cost of sales on a comparative basis is
principally attributable to a higher percentage of sales from off-the-shelf
courseware products which typically carry higher margins, and the increased
level of sales from products owned solely by the Company. Company owned product
sales accounted for 86% and 72% of total off-the-shelf multimedia courseware
sales in 1995 and 1994, respectively. The substantial increase in sales of
Company owned products was due primarily to the acquisition of the involve/(R)/
series during the first quarter of 1995.
Selling, general and administrative expenses totaled $7,531,000 in 1995, an
increase of $838,000 or 13% over the corresponding period of 1994. Significant
portions of the increase, $258,000 and $169,000, resulted from increased
marketing related activities and higher depreciation expense, respectively.
Furthermore, the Company expanded its capabilities for customer support by
providing additional staffing and resources in the customer assurance
department. This expansion is directly related to the Company's expanding
customer and product base.
TAXES
- -----
As a result of the Company's available tax loss carryforwards, the Company has
historically paid a minimal amount of income taxes. However, as a result of the
Company's increasing level of profitability, combined with the restrictions on
the utilization of certain of the Company's net operating losses, the Company
began to pay a larger amount of income taxes beginning in the second quarter of
1995. These increased levels of tax payments are expected to continue, provided
the Company continues to have profitable results.
6
<PAGE>
NET INCOME
- ----------
Net income for 1995 totaled $1,507,000 or $.54 per share as compared to
$1,160,000 or $.48 per share achieved in 1994. This represented increases of
$347,000 (30%) and $.06 per share (13%) respectively.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
Working capital at December 31, 1995 was $13,274,000 as compared to $4,095,000
at December 31, 1994, an increase of $9,179,000. The substantial increase in
working capital resulted primarily from the public offering of 1,207,500 shares
of the Company's common stock during the third quarter of 1995, of which
1,032,500 shares were sold by the Company. In total, the offering generated net
proceeds to the Company of $9,048,000.
For the year ended December 31, 1995, the Company's cash position increased to
$10,349,000 from $440,000 at December 31, 1994, an increase of $9,909,000.
During 1995, cash flow generated from operations totaled $6,132,000, resulting
primarily from increased profitability and a significant decrease in accounts
receivable which was partially offset by decreases in accounts payable and
accrued expenses. The Company invested a total of $4,636,000 in 1995 for the
development of new programs, the purchase of the INVOLVE(R) Series (described
below), and certain other capital expenditures.
On February 17, 1995, ITC purchased all rights, title and all other ownership
interests in the 51 videodiscs in the INVOLVE(R) Series ("INVOLVE(R)"). The
aggregate purchase price for this transaction was approximately $1,590,000. The
purchase price included the forgiveness of a receivable from ISA of
approximately $90,000 and approximately $180,000 of INVOLVE(R) inventory. The
Company borrowed $1,320,000 to finance the acquisition of the INVOLVE(R)
Series.
Due to the Company's strong operating performance during 1995 and the net
proceeds received from the public offering, the Company was also able to reduce
borrowings under the Company's line-of-credit and term loans of $80,000 and
$2,135,000, respectively. The amount of net proceeds from the offering which
were used to reduce its borrowings under two separate term loans was $1,763,000.
During 1995, the Company's borrowing capacity, under the terms and conditions of
its line-of-credit, was increased to $2,500,000. At December 31, 1995, there
are no amounts outstanding pursuant to the line-of-credit agreement.
Management believes that cash generated from operations combined with the
Company's existing resources and available line of credit are adequate to meet
ITC's working capital and other financing requirements for 1996.
7
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX PAGE NO.
- --------------------------------------------------------------------------------
<S> <C>
Report of Independent Auditors 9
Consolidated Statements of Income for the Years Ended
December 31, 1995 and 1994 10
Consolidated Balance Sheets as of December 31, 1995 and 1994 11-12
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1995 and 1994 13
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995 and 1994 14
Notes to Consolidated Financial Statements 15
</TABLE>
8
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
The Board of Directors and Stockholders
Industrial Training Corporation
We have audited the accompanying consolidated balance sheets of Industrial
Training Corporation as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Industrial Training Corporation at December 31, 1995 and 1994, and the
consolidated results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
Vienna, Virginia Ernst & Young LLP
February 16, 1996
9
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenues, net:
Courseware $18,495,997 $17,983,796
Hardware 4,272,667 4,353,219
----------- -----------
Total revenues, net (note 3) 22,768,664 22,337,015
Cost of sales:
Courseware 8,772,664 9,440,595
Hardware 4,098,232 4,187,960
----------- -----------
Total cost of sales 12,870,896 13,628,555
----------- -----------
Gross Margin 9,897,768 8,708,460
Selling, general and administrative expenses 7,530,771 6,693,221
Equity in earnings of affiliates (145,768) (136,012)
----------- -----------
Income before interest and provision for
income taxes 2,512,765 2,151,251
Interest (income) expense, net (42,343) 186,194
----------- -----------
Income before provision for income taxes 2,555,108 1,965,057
Income tax expense (note 8) 1,048,000 805,000
----------- -----------
Net income $ 1,507,108 $ 1,160,057
=========== ===========
Net income per common share (note 1) $.54 $.48
=========== ===========
Weighted average number of shares outstanding 2,793,958 2,427,707
=========== ===========
</TABLE>
See accompanying Notes.
10
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $10,348,762 $ 439,923
Accounts receivable, net (notes 2, 5 and 6) 4,802,054 7,293,477
Due from affiliates (note 3) 18,842 86,111
Inventories, net of reserve of $93,400
at December 31, 1995 and 1994 871,072 1,203,876
Prepaid expenses 253,061 118,446
----------- -----------
Total current assets 16,293,791 9,141,833
Property and equipment (note 6):
Video and computer equipment 3,221,982 2,510,841
Furniture and fixtures 1,037,404 1,032,563
Leasehold improvements 93,106 89,106
----------- -----------
4,352,492 3,632,510
Less accumulated depreciation and amortization (3,036,918) (2,507,393)
----------- -----------
Net property and equipment 1,315,574 1,125,117
Deferred program development costs, net
of accumulated amortization of $5,203,491 and
$3,006,689 at December 31, 1995 and 1994,
respectively 5,941,079 4,358,315
Goodwill, net of accumulated amortization of
$346,111 and $206,284 at December 31, 1995
and 1994, respectively 1,961,299 2,185,126
Investments in affiliates (note 3) 231,315 245,887
Other 31,089 73,769
----------- -----------
Total assets $25,774,147 $17,130,047
=========== ===========
</TABLE>
See accompanying notes.
11
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current liabilities:
Line of credit (note 5) $ -- $ 80,000
Current installments of long-term debt (note 6) 117,175 328,637
Accounts payable 1,621,543 2,112,271
Due to affiliates (note 3) 261,230 419,895
Accrued compensation and benefits 594,796 942,215
Other accrued expenses 319,798 1,164,219
Income taxes payable 105,000 --
------------- -------------
Total current liabilities 3,019,542 5,047,237
Deferred lease obligations 102,964 119,316
Deferred income taxes (note 8) 1,608,522 1,136,522
Long-term debt (note 6) 130,745 772,826
------------- -------------
Total liabilities 4,861,773 7,075,901
Commitments (note 9)
Stockholders' equity (notes 7 and 10):
Common stock, $.10 par value, 4,000,000 shares
authorized; 3,556,424 and 2,448,824 shares
issued and outstanding in 1995 and
1994, respectively 355,643 244,883
Additional paid-in capital 14,770,853 5,638,493
Note receivable from ESOP (250,177) (358,177)
Retained earnings 6,036,055 4,528,947
------------- -------------
Total stockholders' equity 20,912,374 10,054,146
------------- -------------
Total liabilities and stockholders' equity $ 25,774,147 $ 17,130,047
============= =============
</TABLE>
See accompanying notes.
12
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Common Stock Additional Total
----------------------
Paid-In Note Receivable Retained Stockholders'
Shares Par Value Capital From ESOP Earnings Equity
------ --------- ------- --------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 2,357,724 $235,773 $ 5,274,378 $(460,827) $3,368,890 $ 8,418,214
Note payments - - - 102,650 - 102,650
New shares issued:
Stock issuance 100,000 10,000 402,500 - - 412,500
Stock options exercised 5,700 570 17,955 - - 18,525
Common stock issued to employees 400 40 2,160 - - 2,200
Common stock acquired (15,000) (1,500) (58,500) - - (60,000)
Net income - - - - 1,160,057 1,160,057
--------- -------- ----------- --------- --------- ----------
Balance at December 31, 1994 2,448,824 244,883 5,638,493 (358,177) 4,528,947 10,054,146
Note payments - - - 108,000 - 108,000
New shares issued:
Stock issuance 1,032,500 103,250 8,945,353 - - 9,048,603
Stock options exercised 74,500 7,450 182,192 - - 189,642
Common stock issued to employees 600 60 4,815 - - 4,875
Net income - - - - 1,507,108 1,507,108
--------- -------- ----------- --------- --------- ----------
Balance at December 31, 1995 3,556,424 $355,643 $14,770,853 $(250,177) $6,036,055 $20,912,374
========= ======== =========== ========= ========== ===========
</TABLE>
See accompanying notes.
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,507,108 $ 1,160,057
Reconciling items:
Provision for deferred taxes 556,000 765,000
Depreciation and amortization 2,987,304 1,918,123
Salespeople awards of common shares 4,875 2,200
(Decrease) increase in allowance for doubtful accounts (90,667) 78,000
Increase in reserve for inventory obsolescence -- 10,000
Loss on sale of property and equipment 29,772 --
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 2,582,090 (2,441,390)
Decrease in inventories 332,804 74,061
(Increase) decrease in prepaid expenses (134,615) 63,932
(Decrease) increase in due to affiliates, net (91,396) 61,731
Decrease in other assets 42,680 24,846
(Decrease) increase in accounts payable (490,728) 556,612
(Decrease) increase in accrued expenses (1,086,840) 959,286
(Decrease) increase in deferred lease obligation (16,352) 7,586
----------- -----------
Net cash provided by operating activities 6,132,035 3,240,044
Cash flows from investing activities:
Deferred program development costs (3,779,566) (1,543,128)
Capital expenditures (755,707) (477,944)
Investment in affiliates (100,625) (38,268)
----------- -----------
Net cash used in investing activities (4,635,898) (2,059,340)
Cash flows from financing activities:
Repayments under line of credit (80,000) (570,000)
Proceeds from long-term debt 1,320,000 --
Principal payments under term loans (2,135,257) (742,204)
Payments under capital lease
obligations, net of deferred interest (38,286) (28,388)
Issuance of common stock 9,238,245 431,025
Acquisition of common stock -- (60,000)
Employee stock option note collections 108,000 102,650
----------- -----------
Net cash provided by (used in)
financing activities 8,412,702 (866,917)
----------- -----------
Net increase in cash 9,908,839 313,787
Cash and cash equivalents at beginning of year 439,923 126,136
----------- -----------
Cash and cash equivalents at end of year $10,348,762 $ 439,923
=========== ===========
</TABLE>
See accompanying notes.
14
<PAGE>
INDUSTRIAL TRAINING CORPORATION
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
a) Basis of Presentation
---------------------
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, ComSkill Learning Centers, Inc. ("ComSkill") and
Activ Training, Ltd. Significant intercompany accounts and transactions
have been eliminated in consolidation. ITC is a full-service training Company
specializing in the development, production, marketing and sale of both off-the-
shelf and custom multimedia training courseware for corporate, educational and
governmental organizations. ITC's multimedia training courseware combines full-
motion video, audio, animation, graphics and text into a single training
presentation.
b) Revenues and Cost
-----------------
Revenues from courseware include both off-the-shelf and custom courseware sales
and consulting service revenues. The Company recognizes revenues on off-the-
shelf product and hardware sales as units are shipped. The Company permits the
customer the right to return the courseware within 30 days of purchase. In the
event that sales returns are material, the Company adjusts revenue accordingly.
Revenues from sales of custom training programs that are developed and produced
under specific contracts with customers, including contracts with affiliated
joint ventures and limited partnerships, are recognized on the percentage of
completion basis as related costs are incurred during the production period.
Gross revenues from sales of affiliated joint venture and limited partnership
copyrighted courseware are included in the Company's financial statements, as
are related production, selling and distribution costs. Amounts due to co-owners
of the affiliated venture/partnerships related to such courseware sales are
reflected as royalties and included in cost of sales in the financial
statements.
The Company recognizes revenues from initial franchise fees when franchise
agreements have been fully executed, the Company has substantially fulfilled all
of its obligations to the franchisee under the agreement, and the non-refundable
franchise fee has been paid. During 1995 and 1994, the Company recognized
$210,000 and $450,000 of revenue from initial franchise fees. Such amounts have
been included in courseware revenues in the accompanying consolidated statements
of income.
Although the Company conducts certain of its business in foreign markets, the
Company mitigates its exposure to foreign currency risk by requiring payments in
U.S. dollars.
c) Deferred Program Development Costs
----------------------------------
Costs of developing and producing off-the-shelf courseware have been capitalized
as deferred program development costs. Capitalized costs include direct labor,
materials, product masters, subcontractors, consultants, and applicable
overhead. These capitalized costs are amortized on a straight-line basis over
the estimated useful lives of the related programs which range from 3 to 7
years. The net book value of the Company's deferred program development costs at
15
<PAGE>
December 31, 1995 amount to $1,715,000, $915,000, $231,000, $1,997,000, and
$1,083,000 for the Activ(R) "PC Skills Learning Library," the Activ(R)
"Regulatory Training Learning Library," the Activ(R) "Basic Skills Learning
Library" the Activ(R) "Technical Skills Learning Library," and the Activ(R)
"Involve Instrumentation Learning Library," respectively. Periodically, the
Company assesses the net realizable value of program development costs by
reviewing past sales performances, current and planned future marketing
activities, specific sales promotions and strategic distribution arrangements.
Based on this assessment, the Company determines each product's prospects for
future sales, and, if necessary, adjusts asset values to net realizable value.
The related amortization expense is included in the cost of sales and amounts to
approximately $2,197,000 and $1,325,000 in 1995 and 1994, respectively.
d) Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash and other highly liquid investments
having original maturities of less than three months.
e) Inventories
-----------
Inventories primarily consist of multimedia courseware and related computer
hardware, and are stated at the lower of cost or market. Cost is determined
using the average cost method.
f) Property and Equipment
----------------------
Property, equipment and leasehold improvements are stated at cost. Depreciation
on property and equipment is computed on a straight-line basis over estimated
useful lives of three to seven years. Leasehold improvements are amortized on a
straight-line basis over the shorter of the lease term or estimated useful lives
of the related assets. Depreciation and leasehold amortization expense amounted
to approximately $535,000 and $366,000 in 1995 and 1994, respectively.
g) Investments in Affiliates
-------------------------
Investments in affiliated joint ventures and limited partnerships are accounted
for using the equity method and, accordingly, the initial cost of the
investments are adjusted for the Company's proportionate share of joint venture
and partnership undistributed earnings or losses.
h) Income Taxes
------------
The Company provides for income taxes using the liability method in accordance
with SFAS No. 109, "Accounting for Income Taxes." Deferred income taxes result
primarily from differences between financial statement and income tax treatment
of program development costs and net operating loss carryforwards.
i) Net Income Per Common Share
---------------------------
16
<PAGE>
Earnings per common share are based on the weighted average number of common
shares actually outstanding plus the shares that would be outstanding assuming
the exercise of dilutive stock options and warrants, all of which are considered
to be common stock equivalents.
j) Goodwill
--------
The excess of purchase price over the fair value of net assets acquired related
to an acquisition has been recorded as goodwill. Goodwill is being amortized
using the straight-line method over an estimated useful life of fifteen years.
Amortization expense for 1995 and 1994 amounted to approximately $140,000 and
$166,000, respectively. During 1995 and 1994, the Company adjusted goodwill to
reflect the utilization of the acquired tax benefits (see Note 8) and in 1994 to
reflect adjustments to the value of net assets acquired. The net effect of
these two adjustments was to decrease the amount of goodwill originally recorded
by approximately $84,000 in 1995 and $27,000 in 1994. As part of its ongoing
review, management takes into consideration any events and circumstances which
might indicate an impairment to the carrying amount of goodwill. Factors that
management uses, among other things, to evaluate the continuing value of
goodwill include sales from the acquired product lines, development of the
related distribution network and the value of contracts and agreements that were
in place at the date of the acquisition.
k) Stock Option Plans
------------------
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which is effective for the Company's
December 31, 1996 financial statements. The adoption of SFAS No. 123 will
require additional footnote disclosures regarding the Company's stock-based
compensation, but will not impact the financial position or the results of
operations of the Company.
l) Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the associated amounts of revenues and expenses during
the reporting period; actual results could differ from the estimates.
m) Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2) ACCOUNTS RECEIVABLE
-------------------
Accounts receivable include the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Trade accounts receivable $ 4,619,145 $ 7,245,294
Unbilled contract receivables 291,311 242,279
Less allowance for doubtful accounts (190,047) (280,714)
------------ ------------
Trade accounts receivable, net 4,720,409 7,206,859
Other receivables 81,645 86,618
------------ ------------
$ 4,802,054 $ 7,293,477
============ ============
</TABLE>
17
<PAGE>
3) INVESTMENTS IN AND DUE TO AFFILIATES
------------------------------------
The Company is a participant in five separate limited partnerships with
Industrial Training Partners, Ltd. (the ITP partnerships) and a joint venture
with DynCorp. In all of the ITP partnerships, the Company is a 5% general
partner and in certain partnerships the Company has acquired limited partnership
interest as well. In the joint venture with DynCorp, the Company has a 50%
ownership interest. The ITP partnerships and the DynCorp joint venture were
formed to develop and produce various series of training programs. Under the
contracts to market the programs for the partnerships and joint venture, ITC
receives 50%-70% of the sales price for the costs of reproducing and marketing
the training materials. In the case of the joint venture agreement, the Company
also receives an additional 25% for its share of the joint venture profits.
Sales of programs related to these affiliates were approximately $2,103,000 and
$2,453,000 in 1995 and 1994, respectively. Additionally, in connection with the
development of new off-the-shelf partnership programs, the Company billed
certain of the ITP partnerships approximately $52,000 and $51,000 in 1995 and
1994, respectively. Amounts earned but not billed to the ITC partnerships
totaling $256,000 are included in unbilled receivables at December 31, 1995.
4) LEASES
------
The Company has several noncancelable operating leases, primarily for office
space and transportation equipment, that expire over the next five years and
include purchase or renewal options at fair value at the time of renewal.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Year ending December 31:
------------------------
<S> <C>
1996 $ 438,000
1997 384,000
1998 381,000
1999 220,000
2000 and beyond 116,000
----------
Total future minimum lease payments $1,539,000
==========
</TABLE>
Rental expenses for operating leases for the years ended December 31, 1995 and
1994 were approximately $532,000 and $489,000, respectively.
5) LINE OF CREDIT
--------------
18
<PAGE>
At December 31, 1995, the Company had no amounts outstanding relating to its
$2,500,000 revolving bank line of credit, which bears interest at prime plus
1/2% (9.0% at December 31, 1995). Borrowings under the line are collateralized
by the Company's accounts receivable and inventory.
The loan agreement includes certain covenants which limit borrowings and the
ability to merge or dispose of assets, and requires the maintenance of minimum
working capital and tangible net worth ratios.
6) LONG-TERM DEBT
--------------
<TABLE>
<CAPTION>
Long-term debt consists of the following at December 31: 1995 1994
---- ----
<S> <C> <C>
Prime plus 1% (9.5% at December 31, 1995) note payable $ - $ 705,000
to financial institution due in monthly installments
of $15,000 plus interest through November 1998;
repaid in October of 1995.
8.0% note payable to financial institution due in 247,920 358,177
monthly
principal and interest installments of
$11,278 through December 1997, collateralized
by the assignment of interest in the shares of
the Company's common stock held by the ESOP,
accounts receivable, inventory and property and
equipment.
Capital lease obligation - 38,286
----------- -----------
Total long-term debt 247,920 1,101,463
Less current installments (117,175) (328,637)
----------- -----------
Long-term debt, excluding current installments $ 130,745 $ 772,826
=========== ===========
</TABLE>
Interest paid on all debt amounted to approximately $154,000 and $191,000 in
1995 and 1994, respectively.
7) STOCK OPTIONS AND STOCK WARRANTS
--------------------------------
At December 31, 1995, the Company had outstanding options to purchase common
stock under three separate incentive stock option plans. Two of these plans,
the 1992 Director Incentive Stock Option Plan and the 1992 Key Employee
Incentive Stock Option Plan have effectively replaced the Company's 1982
Incentive Stock Option Plan. Options granted under the 1992 Director Incentive
Stock Option Plan are non-qualified. From time to time, the Company also has
granted other non-
19
<PAGE>
qualified options to certain individuals. The Company also has outstanding
14,572 warrants to purchase common stock. These warrants are exercisable at
$3.50 and expire in 1998.
The following table summarizes option activity:
<TABLE>
<CAPTION>
NON-QUALIFIED OPTIONS QUALIFIED OPTIONS
--------------------- -----------------
No. of Exercise No. of Exercise
Options Price Options Price
------- ----- ------- -----
<S> <C> <C> <C> <C>
Outstanding at January 1, 1994 31,400 $2.125-5.00 150,500 $1.994-6.75
Granted 30,000 30,000
Canceled or expired (10,400) (300)
Exercised -- (5,700)
-------- --------
Outstanding at December 31, 1994 51,000 $2.125-7.50 174,500 $1.994-6.75
Granted 75,000 20,000
Canceled or expired -- (2,000)
Exercised (9,000) (65,500)
-------- --------
Outstanding at December 31, 1995 117,000 $2.875-7.50 127,000 $2.875-10.05
========
==========================================
Exercisable at December 31, 1995 87,000 $2.875-6.50 65,000 $2.875-6.50
======== ========
</TABLE>
Qualified options outstanding under the Company's stock option plans expire as
follows: 26,000 options in 1996, 3,000 in 1997, and 98,000 in 1998 through
2002. There are 500 options available for additional grants. Outstanding non-
qualified options expire as follows: 6,000 options in 1996 and 111,000 between
1999 and 2001. There are 29,000 options available for additional grants.
8) INCOME TAXES
------------
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current:
Federal $ 438,500 $ 30,000
State 53,500 10,000
----------- ------------
492,000 40,000
Deferred:
Federal 477,500 659,300
State 78,500 105,700
----------- ------------
556,000 765,000
----------- ------------
$ 1,048,000 $ 805,000
=========== ============
</TABLE>
20
<PAGE>
The difference between income tax expense and the amount determined by applying
the federal statutory rate is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Federal statutory rate $ 869,000 $ 668,000
State income taxes, net of federal benefit 87,000 75,500
Amortization of goodwill 52,000 62,000
Benefit of graduated tax rates - (12,000)
Other 40,000 11,500
------------ ------------
$ 1,048,000 $ 805,000
============ ============
</TABLE>
The following temporary differences give rise to the provision for deferred
taxes at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred program development costs $ 286,000 $ 74,500
Depreciation (19,000) 16,000
Allowance for doubtful accounts 34,000 (29,000)
Inventory reserves - (9,000)
Net operating loss and tax credit carryforwards 222,000 630,500
Accrued compensation 4,000 67,500
Other 29,000 14,500
------------ ------------
$ 556,000 $ 765,000
============ ============
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31 are
presented below.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 71,000 $ 104,500
Inventory reserves 41,000 41,500
Accrued compensation 28,000 31,500
Net operating loss carryforwards 473,000 563,000
Alternative minimum tax and investment tax
credit carryforwards - 65,000
Deferred lease obligation 39,000 44,500
Difference in depreciation 17,000 68,000
Other 16,478 16,478
----------- -----------
Total deferred tax assets 685,478 934,478
Less valuation allowance (421,000) (505,000)
----------- -----------
Net deferred tax assets 264,478 429,478
----------- -----------
Deferred tax liabilities:
Product development costs, capitalized (1,873,000) (1,566,000)
----------- -----------
Total gross deferred tax liabilities (1,873,000) (1,566,000)
----------- -----------
Net deferred tax liabilities $(1,608,522) $(1,136,522)
=========== ===========
</TABLE>
21
<PAGE>
For the years ended December 31, 1995 and 1994, the Company utilized $370,000
and $1,550,000 respectively, of available net operating loss carryforwards. At
December 31, 1995, the Company had no net operating loss carryforwards available
for income tax purposes, other than the prior net operating losses acquired,
which are discussed below.
As a result of an acquisition, the Company has available approximately
$1,260,000 of additional net operating loss carryforwards that expire at varying
dates through 2007. Pursuant to Section 382 of the Internal Revenue Code (the
"Code"), the utilization of the net operating loss is limited to approximately
$245,000 per year. During 1995, the Company utilized an aggregate of $225,000
of the acquired net operating loss carryforwards to offset taxable income. As a
result, deferred taxes have been reduced by approximately $84,000. Due to the
limitation on uses and other uncertainties relating to the utilization of the
remaining tax benefit of these deductions, a valuation allowance has been
recorded to substantially offset the net deferred tax asset related to the
acquisition.
The Company paid federal and state income taxes of $466,000 and $8,000 in 1995
and 1994 respectively.
9) COMMITMENTS
-----------
The Company has entered into separate employment agreements with two of its
officers which are subject to termination upon death (with $5,000 death benefit)
or disability (as defined) or upon sixty days' notice by the Company (with 34
months of severance pay except where the Company is liquidating). In addition
to basic salary, each of these officers is eligible to receive salary increases,
bonuses, stock option grants, pension and profit-sharing arrangements, and other
employee benefits which may from time to time be awarded or made available. If
these officers resign, they must give the Company 12 months notice during which
they continue to receive salary. The contracts also provide certain payments
for other benefits. During October 1995, one of the officers gave notice of his
resignation in accordance with the terms of the employment agreement. He will
remain as an officer of the Company until October 1996.
10) STOCKHOLDERS' EQUITY
--------------------
During 1995, the Company completed a public offering of 1,207,500 shares of its
common stock including 175,000 shares being sold by certain Company
shareholders. The net proceeds to the Company from the offering amounted to
$9,048,000 (net of underwriters' commissions and approximately $314,000 of
expenses paid directly by the Company). The Company used $1,763,000 of the net
proceeds to reduce its long-term borrowing under two separate term loans. The
Company intends to use the remaining net proceeds received from the offering to
finance product development efforts, increase marketing efforts, finance
potential acquisitions of compatible businesses, products or technologies, or
for other working capital purposes.
During 1994, the Company hired a new President for its franchise operations. At
the date of hire, this executive executed a subscription agreement to purchase
100,000 shares of the Company's common stock at $4.125 per share, the fair
market value of the Company's common stock on the effective date of the
subscription agreement. As a result, during 1994, the Company issued 100,000
shares of Common Stock to the executive for an aggregate purchase price of
$412,500.
The Company instituted an Employee Stock Ownership Plan (ESOP) and Trust for the
benefit of substantially all employees effective January 1, 1992. To establish
the plan, ITC entered into a loan agreement with a bank and borrowed $637,500
for the purchase of 200,000 shares of ITC common stock from DynCorp. ITC
pledged this stock to the bank to collateralize the loan. The provisions of the
ESOP require that, on an annual basis, the greater of 33,334 shares or the
amount of shares
22
<PAGE>
equal to five percent of total compensation of eligible employees be allocated
to employee accounts. Each participant then receives shares based on their
relative annual compensation. The Company recognizes contribution expense which
was $106,000 and $108,000 for 1995 and 1994, respectively, based on the cost of
shares allocated for the period and any interest expense incurred. Contributions
to the ESOP amounted to approximately $135,000 in both 1995 and 1994, including
approximately $25,000 and $32,000 of interest in 1995 and 1994, respectively.
The fair market value of the 66,666 unearned shares at December 31, 1995
amounted to approximately $583,000.
11) EMPLOYEE 401(K) PLAN
--------------------
On January 1, 1991, the Company established a 401(k) Plan for the benefit of
substantially all of its employees. Employees can contribute from 1% to 15% of
their salary to the Plan subject to statutory limitations. At the discretion of
the Board of Directors, the Company can elect to make a contribution to the
Plan. During 1995, the Company made a $30,000 contribution to the 401(k) Plan.
No contribution had been made by the Company prior to 1995.
12) QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------
Financial data for the interim periods of 1995 and 1994 were as follows (amounts
in thousands except per share amounts):
<TABLE>
<CAPTION>
NET
Net Gross Net Income
Revenue Margin Income Per Share
<S> <C> <C> <C> <C>
1994 Quarters
First $ 4,168 $ 1,759 $ 111 $ .05
Second 5,266 2,090 290 .12
Third 5,497 2,009 262 .11
Fourth 7,406 2,850 497 .20
-------- -------- -------- --------
Total $ 22,337 $ 8,708 $ 1,160 $ .48
======== ======== ======== ========
1995 Quarters
First $ 4,970 $ 2,177 $ 265 $ .10
Second 6,286 2,626 461 .18
Third 6,038 2,533 464 .18
Fourth 5,475 2,562 317 .08
-------- -------- -------- --------
TOTAL $ 22,769 $ 9,898 $ 1,507 $ .54
======== ======== ======== ========
</TABLE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
- ----
23
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
(a) Identification of Directors
---------------------------
<TABLE>
<CAPTION>
Name Age Year First Elected Year of Expiration
---- --- ------------------ ------------------
<S> <C> <C> <C>
Daniel R. Bannister 65 1988 1996
Thomas M. Balderston 39 1993 1997
Philip J. Facchina 34 1995 1996
Steven L. Roden 45 1993 1997
John D. Sanders 57 1977 1998
Richard E. Thomas 69 1982 1998
James H. Walton 62 1977 1997
Chairman of the Board
</TABLE>
(b) Identification of Executive Officers
------------------------------------
<TABLE>
<CAPTION>
Name Age Year First Served As Officer
---- --- ----------------------------
<S> <C> <C>
Elaine H. Babcock 39 1984
Senior Vice President
Frank A. Carchedi 38 1995
Vice President, Treasurer and
Chief Financial Officer
Philip J. Facchina 34 1992
President and Chief Operating Officer
Anne J. Fletcher 33 1995
Secretary
Gerald H. Kaiz 57 1977
Executive Vice President
Steven L. Roden 45 1993
Executive Vice President
Elizabeth E. Tomaszewicz 49 1994
Vice President
Robert VanStry 45 1983
Vice President
James H. Walton 62 1977
Chief Executive Officer
</TABLE>
24
<PAGE>
(c) Business Experience
-------------------
ELAINE H. BABCOCK is Senior Vice President of ITC. Ms. Babcock is currently
responsible for the Company's newly formed Multimedia Services division. During
1995, Ms. Babcock was responsible for all distribution of off-the-shelf product
sales of the Company and its affiliates in North America, with the exception of
sales through the ComSkill franchise network. Prior to January 1994, Ms.
Babcock used her sales and management expertise to build ITC's Custom Services
Department. Ms. Babcock joined the Company in 1978 as a Video Production
Specialist with a Communications degree from the University of Maryland.
THOMAS M. BALDERSTON, a director since 1993, has been a partner of TDH, a
venture capital fund group, 1985 to present. He is also Director of Actronics,
Inc., Lifecore, Inc., and Pocono Springs Company. Prior to TDH, he was
Assistant Vice President of Middle Market Lending for the Bank of Boston. Mr.
Balderston holds an M.B.A. from the Anderson School of Management at UCLA and a
B.A. from Williams College.
DANIEL R. BANNISTER, a Director since 1988, has been President and Chief
Executive Officer of DynCorp, a leading professional and technical services
firm, since 1985. He was Executive Vice President and Senior Vice President of
its Technical Services Group from 1983 to 1984.
FRANK A. CARCHEDI is Vice President, Treasurer and Chief Financial Officer of
ITC. Prior to joining ITC in November of 1995, Mr. Carchedi was a consultant in
the Merger and Acquisition group of Ernst & Young LLP. Mr. Carchedi was with
Ernst & Young LLP for over 10 years, prior to which he held several other
positions in private industry and public accounting. Mr. Carchedi holds a B.S.
in Accounting from Wake Forest University and is a C.P.A.
PHILIP J. FACCHINA is President and Chief Operating Officer of ITC. Prior to
being named President and COO in October 1995, Mr. Facchina served as Vice
President, Treasurer and Chief Financial Officer of ITC from October 1992 to
October 1995. Prior to joining ITC in October 1992, Mr. Facchina served as
Treasurer and Chief Financial Officer of Facchina Construction Company, Inc.
Prior to then, Mr. Facchina served as Vice President of Finance and
Administration for E. C. Ernst, Inc. and Assistant Treasurer and Secretary for
The Philadelphia Bourse, Inc. Mr. Facchina holds an M.B.A. from the University
of Pennsylvania's Wharton Business School and a B.S. in Accounting from the
University of Maryland.
ANNE J. FLETCHER is Secretary of ITC. Ms. Fletcher joined ITC in December 1994
as the Company's General Counsel. Prior to joining ITC, she was engaged in the
private practice of law for six years in Fairfax, Virginia. Ms. Fletcher
received her J.D. from George Mason University School of Law and a B.A. from the
State University of New York, College at Oswego.
GERALD H. KAIZ serves as Executive Vice President of ITC. Mr. Kaiz, a former
director, has been an officer of ITC since 1977. Prior to the founding of ITC,
Mr. Kaiz was Manager of Training Consulting for NUS Corporation, an engineering
and consulting firm (1967-1977). Mr. Kaiz holds a B.S. degree in Physics and an
M.S. degree in Nuclear Engineering from the Massachusetts Institute of
Technology.
STEVEN L. RODEN is Chief Executive Officer of ComSkill, Executive Vice President
of ITC and Managing Director of Activ Training Ltd. Mr. Roden served as
President and Chief Executive Officer of Comsell from 1987 until its liquidation
into ITC in January 1995. Prior to Comsell, he was President of Digital
Controls Video, Inc., Vice President of Coloney, Inc., and Vice President of
First Florida
25
<PAGE>
Bank Corp. Mr. Roden holds an M.B.A. in Finance and Marketing and a B.S. from
Florida State University.
JOHN D. SANDERS, a Director since 1977, is Chairman of Tech News Inc.,
publishers of Washington Technology newspaper. He is also a registered
representative (inactive) with Wachtel & Co., Inc., an investment banking firm,
a position held since 1968. Mr. Sanders is a member of the Boards of Directors
of: Daedalus Enterprises, Inc., an electronics specialty consultant; and
Information Analysis, Inc., a supplier of computer software services. He holds
a B.E.E. from the University of Louisville, Kentucky, and an M.S. and Ph.D. in
Electrical Engineering from Carnegie-Mellon University.
RICHARD E. THOMAS, a Director since 1982, has been President of COMSAT RSI since
1994. Prior to that, he was Chairman of the Board, President and Chief
Executive Officer of Radiation Systems, Inc. (RSI), a communications systems
manufacturer, from 1978 until 1994, at which time RSI was merged into COMSAT
Corporation. Mr. Thomas was originally employed by RSI as Vice President,
Operations in 1966.
ELIZABETH E. TOMASZEWICZ is a Vice President of ITC and President of ComSkill.
Prior to joining the Company, Ms. Tomaszewicz served as Senior Vice President of
Sales and Marketing of TRO Learning, Inc. ("TRO"), 1989 to 1993. Prior to TRO,
she served as Executive Vice President, Marketing and Field Operations of
Applied Learning International, Inc. Ms. Tomaszewicz holds a B.S. from the
University of Massachusetts.
ROBERT F. VANSTRY is a Vice President of ITC. Currently, Mr. VanStry is in
charge of all of ITC's product and technology development. Mr. VanStry joined
the Company in May 1978 as Senior Training Associate and subsequently fulfilled
the responsibilities of Manager of Engineering Projects, Manager of Project
Development, and Vice President of Training Services.
JAMES H. WALTON is Chairman of the Board and Chief Executive Officer of ITC.
Mr. Walton has been a Director and officer of ITC since 1977. Prior to the
founding of ITC in 1977, he was responsible for audiovisual production at NUS
Corporation, an engineering and consulting firm (1973-1977). Mr. Walton holds a
B.S. and M.A. from the University of Nebraska.
ITEM 10. EXECUTIVE COMPENSATION
The information contained on pages 6, 7 and 8 of ITC's Proxy Statement dated
March 11, 1996, with respect to executive compensation and transactions, is
incorporated herein by reference in response to this item.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained on pages 2 and 3 of ITC's Proxy Statement dated March
11, 1996, with respect to security ownership of certain beneficial owners and
management, is incorporated herein by reference in response to this item.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on page 9 of ITC's Proxy Statement dated March 11,
1996, with respect to certain relationships and related transactions, is
incorporated herein by reference in response to this item.
26
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following are filed as part of this Form 10-KSB:
----------------------------------------------------
1. Financial Statements: See Part II, Item 7.
2. Exhibits: See exhibit index, which index is incorporated herein by
reference.
(b) Reports on Form 8-K:
--------------------
The Company did not file any reports on Form 8-K during 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INDUSTRIAL TRAINING CORPORATION
(Registrant)
BY /s/James H. Walton DATE March 15, 1996
--------------------------------- -------------------------
James H. Walton, Chairman of the
Board and Chief Executive Officer
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.
BY /s/Philip J. Facchina DATE March 15, 1996
--------------------------------- -------------------------
Philip J. Facchina, President,
Chief Operating Officer and Director
BY /s/Gerald H. Kaiz DATE March 15, 1996
--------------------------------- -------------------------
Gerald H. Kaiz, Executive Vice
President
BY /s/Steven L. Roden DATE March 15, 1996
-------------------------------- -------------------------
27
<PAGE>
Steven L. Roden, Executive Vice President
and Director
BY /s/Frank A. Carchedi DATE March 15, 1996
------------------------------------- -------------------------
Frank A. Carchedi, Vice President,
Treasurer and Chief Financial Officer
BY /s/Christopher E. Mack DATE March 15, 1996
------------------------------------- -------------------------
Christopher E. Mack, Controller
BY /s/Thomas M. Balderston DATE March 15, 1996
------------------------------------- -------------------------
Thomas M. Balderston, Director
BY /s/Daniel R. Bannister DATE March 15, 1996
------------------------------------- -------------------------
Daniel R. Bannister, Director
BY /s/John D. Sanders DATE March 15, 1996
------------------------------------- -------------------------
John D. Sanders, Director
BY /s/Richard E. Thomas DATE March 15, 1996
------------------------------------- -------------------------
Richard E. Thomas, Director
CORPORATE HEADQUARTERS STOCK REGISTRAR AND TRANSFER AGENT
Industrial Training Corporation American Securities Transfer
13515 Dulles Technology Drive 938 Quail Street
Herndon, VA 22071-3416 Suite 101
(800) 638-3757 Lakewood, CO 80215
(703) 713-3335
FAX: (703) 713-0065 STOCK LISTING
National Market System
NORTH AMERICAN SALES LOCATIONS NASDAQ/NMS Trading Symbol: ITCC
Atlanta, GA
(404) 264-8644 MARKET-MAKERS
Boston, MA Koonce Securities, Inc.
Ferris, Baker Watts, Incorporated
28
<PAGE>
(508) 376-8118
Charlotte, NC
(704) 364-1223 ANNUAL MEETING
Chicago, IL The Annual Meeting of shareholders will
(708) 205-2707 be held on May 7, 1996 at 4:00 pm at
the Sheraton Reston Hotel, 11810
Houston, TX Sunrise Valley Drive, Reston,
(713) 852-0601 Virginia 22091.
New York, NY
(212) 551-1400 SHAREHOLDER INQUIRIES
Ottawa, Ontario Communications concerning transfer
(613) 599-4646 requirements, lost certificates, and
changes in address should be directed
Pittsburgh, PA to the Stock Registrar and Transfer
(814) 643-4116 Agent. Other inquiries may be directed
to Frank A. Carchedi, CFO.
Tampa, FL
(813) 855-5201
PRINCIPAL BANK
Washington, DC
(301) 601-8799 Central Fidelity National Bank
Alexandria, VA
INTERNATIONAL SALES LOCATIONS
London, England GENERAL COUNSELS
44 123 435-2307
Ginsburg, Feldman and Bress, Chartered
Washington, DC
Kirkpatrick & Lockhart LLP
Washington, DC
INDEPENDENT AUDITORS
Ernst & Young LLP
Vienna, VA
29
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
No. Description No.
-----------------------------------------------------------------------------
3.1 Amended Articles of Incorporation of the Company, incorporated by
reference to the Company's Registration Statement on Form SB-2 filed
July 28, 1995 with the Securities and Exchange Commission ("SEC")
(Commission File No. 33-61393).
3.2 Restated By-Laws of the Company.
4.1 Specimen Certificate for ITC Common Stock, incorporated by reference
to the Company's Registration Statement on Form SB-2 filed July 28,
1995 with the SEC (Commission File No. 33-61393).
10.1 Agreement and Plan of Merger, each dated September 30, 1993, between
ITC and CI Acquisition Corporation, incorporated by reference to the
Company's Form 8-K filed October 21, 1993 with the SEC (Commission
File No. 0-13741).
10.2 Asset Purchase Agreement, Assignment and Bill of Sale, each dated
February 17, 1995 between ITC and the Instrument Society of America,
incorporated by reference to the Company's Registration Statement on
Form SB-2 filed July 28, 1995 with the SEC (Commission File No. 33-
61393).
10.3 1992 Director Incentive Stock Option Plan, incorporated by reference
to the Company's Form 10-KSB filed March 19, 1992 with the SEC
(Commission File No. 0-13741).
10.4 1992 Key Employee Incentive Stock Option Plan, incorporated by
reference to the Company's Form 10-KSB filed March 19, 1992 with the
SEC (Commission File No. 0-13741).
10.5 Employee Stock Ownership Plan, incorporated by reference to the
Company's Form 10-KSB filed March 19, 1992 with the SEC (Commission
File No. 0-13741).
10.6 Employment Agreements with Management
30
<PAGE>
(a) James H. Walton
(b) Gerald H. Kaiz
(c) Elaine H. Babcock
(d) Steven L. Roden
(e) Philip J. Facchina
(f) Robert F. VanStry
each incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement on Form SB-2, filed August 16, 1995 with the
SEC (Commission File No. 33-61393).
10.7 Lease dated October 21, 1993 for commercial office space in Herndon,
VA, as amended.
10.8 Lease dated November 30, 1995 for commercial office space in Atlanta,
GA.
10.9 Lease dated February 10, 1995 for commercial office space in Millis,
MA.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst and Young LLP, independent auditors.
31
<PAGE>
RESTATED BY-LAWS OF
INDUSTRIAL TRAINING CORPORATION
(effective as of, and with amendments through, January 4, 1996)
ARTICLE I - OFFICES
-------------------
The principal office of the corporation shall be located in the State of
Maryland. The Corporation may have such offices either within or without the
State of incorporation, as the Board of Directors may designate or as the
business of the corporation may from time to time require.
ARTICLE II - STOCKHOLDERS
-------------------------
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held on or before the 15th day
of June in each year, beginning with the year 1978 at 10:00 a.m., for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the day fixed for the annual meeting shall be a
legal holiday such meeting shall be held on the next succeeding business day.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called only as provided in the Articles
of Incorporation.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the State unless
otherwise prescribed by statute, as the place of meeting for any annual meeting
or for any special meeting called by the Directors. If no designation is made,
or if a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the meeting and, in
case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten (10) nor more than ninety (90) days
before the date of the meeting, either personally or by mail, by or at the
direction of the chairman and chief executive officer, or the secretary, or the
officer or persons calling the meeting, to each stockholder of record entitled
to vote at such meeting. If mailed, such notice shall be
1
<PAGE>
deemed to be delivered when deposited in the United States mail, addressed to
the stockholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or stockholders entitled
to receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the directors of the corporation may
provide that the stock transfer books shall be closed for a stated period but
not to exceed, in any case, ninety (90) days. If the stock transfer books shall
be closed for the purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders such books shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the directors may fix in advance a date as the record date for
any such determination of stockholders, such date in any case to be not more
than ninety (90) days and, in case of a meeting of stockholders, not less than
ten (10) days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or stockholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the directors declaring
such dividend is adopted, as the case may be shall be the record date for such
determination of stockholders. When a determination of stockholders entitled to
vote at any meeting of stockholders has been made as provided in this section,
such determination shall apply to any adjournment thereof.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares of the
corporation shall make, at least ten (10) days before each meeting of the
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order with the
address of and the number of shares held by each, which list, for a period of
ten (10) days prior to such meeting, shall be kept on file at the principal
office of the corporation and shall be subject to the inspection of any
stockholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any stockholder during the whole time of the meeting. The
original stock transfer book shall be prima facie evidence as to who are the
stockholders entitled to examine such list or transfer books or to vote at the
meeting of stockholders.
7. QUORUM.
2
<PAGE>
At any meeting of stockholders a majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than said number of
the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
8. PROXIES.
At all meetings of stockholders a stockholder may vote by proxy executed in
writing by the stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before or at the time
of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the terms and provisions of
the certificate of incorporation and these by-laws shall be entitled to one
vote, in person or by proxy, for each share of stock entitled to vote held by
such stockholders. Upon the demand of any stockholder, the vote for directors
and upon any question before the meeting shall be by ballot. All elections for
directors shall be decided by plurality vote: all other questions shall be
decided by majority vote except as otherwise provided by the Certificate of
Incorporation or the laws of this state.
10. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders, shall be as follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
1. GENERAL POWERS.
3
<PAGE>
The business and affairs of the corporation shall be managed by its board of
directors. The directors shall in all cases act as a board, and they may adopt
such rules and regulations for the conduct of their meetings and the management
of the corporation, as they may deem proper, not inconsistent with these by-laws
and the laws of this state.
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of directors of the corporation and the terms of office of the
directors shall be as provided in the Articles of Incorporation.
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other notice than this
by-law immediately after, and at the same place as, the annual meeting of
stockholders. The directors may provide, by resolution, the time and place for
the holding of additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of the
chairman and chief executive officer or any two directors. The person or
persons authorized to call special meetings of the directors may fix the place
for holding any special meeting of the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least 5 days previously thereto
by written notice delivered personally, or by telegram or mailed to each
director at his business address. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered to the telegraph company. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened.
6. QUORUM.
At any meeting of the directors a majority shall constitute a quorum for the
transaction of business, but if less then said number is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice.
7. MANNER OF ACTING.
4
<PAGE>
Except as otherwise provided in the Articles of Incorporation or these bylaws,
the act of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the directors.
8. INFORMAL ACTION BY DIRECTORS.
Unless otherwise provided by law, any action required to be taken at a meeting
of the directors, or any other action which may be taken at a meeting of the
directors, may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the directors entitled to vote
with respect to the subject matter thereof.
9. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the Board for any reason shall be filled
only as provided in the Articles of Incorporation.
10. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed only as provided in the Articles of
Incorporation.
11. RESIGNATION.
A director may resign at any time by giving written notice to the board, the
chairman and chief executive officer or the secretary of the corporation.
Unless otherwise specified in the notice, the resignation shall take effect upon
receipt thereof by the board or such officer, and the acceptance of the
resignation shall not be necessary to make it effective.
12. COMPENSATION.
Directors shall not receive any stated salary for their service but, by
resolution of the Board, outside directors may be allowed a quarterly retainer
fee and/or a fixed sum for attendance at each regular or special meeting of the
Board; provided that nothing containing herein shall be construed to preclude
any director from serving the corporation in any other capacity and receiving
compensation therefore.
13. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the directors at
which action on any corporate matter is taken shall be presumed to have assented
to the action
5
<PAGE>
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
14. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an executive
committee and other committees, each consisting of three or more directors.
Each such committee shall serve at the pleasure of the board.
15. INTERESTED DIRECTORS.
Actions of the Board shall not be invalidated or otherwise affected by the fact
that one or more of its members have a personal interest, beyond their role as
directors of this corporation, in the particular action being voted upon,
provided said interested directors disclose to the board their interests in the
transaction. Interested directors shall be counted in determining whether a
quorum exists at directors' meetings, may vote with the same effect as
disinterested directors (subject to their having made the disclosures provided
for herein), and shall be relieved from any liability that might otherwise arise
by reason of their contracting with this corporation for the benefit of
themselves or any firm or other corporation in which they are interested.
16. INDEMNIFICATION.
In the absence of fraud or bad faith, the corporation shall indemnify its
officers and directors, and every former officer and director, to the full
extent authorized or permitted by the laws of the state of incorporation,
against all liability and expenses (including, but not limited to, attorneys'
fees, amounts of any judgment, fine, and amounts paid in settlement) actually
and reasonably incurred by him in connection with or resulting from any action,
suit or proceeding in which such person may become involved as a party or
otherwise by reason of having been an officer or director of the corporation.
17. LIABILITY FOR DIVIDENDS ILLEGALLY DECLARED.
A director shall not be liable for dividends illegally declared, distributions
illegally made to shareholders, or any other action taken in reliance in good
faith upon financial statements of the corporation represented to him to be
correct by the president of the corporation or the officer having charge of its
books of account, or certified by an independent public or certified accountant
to fairly reflect the financial condition of the
6
<PAGE>
corporation; nor shall he be liable if in good faith in determining the amount
available for dividends or distributions he considers the assets to be of their
book value.
7
<PAGE>
ARTICLE IV - OFFICERS
---------------------
1. NUMBER.
The officers of the corporation shall be a chairman and chief executive officer,
the president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be elected by the directors. Such other officers and assistant
officers as may be deemed necessary may be elected or appointed by the
directors.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be elected
annually at the first meeting of the directors held after each annual meeting of
the stockholders. Each officer shall hold office until his successor shall have
been duly elected and shall have qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided.
3. REMOVAL.
Any officer or agent elected or appointed by the directors may be removed by the
directors whenever in their judgment the best interests of the corporation would
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation, removal, disqualification
or otherwise, may be filled by the directors for the unexpired portion of the
term.
5. CHAIRMAN AND CHIEF EXECUTIVE OFFICER.
The chairman and chief executive officer shall be the principal executive
officer of the corporation and, subject to the control of the directors, shall
in general supervise and control all of the business and affairs of the
corporation. He shall, when present, preside at all meetings of the
stockholders and of the directors. He may sign, with the secretary or any other
proper officer of the corporation thereunto authorized by the directors,
certificates for shares of the corporation, any deeds, mortgages, bonds,
contracts or other instruments which the directors have authorized to be
executed, except in cases where the signing and execution thereof shall be
expressly delegated by the directors or by these by-laws to some other officer
or agent of the corporation, or shall be required by law to be otherwise signed
or executed; and in general shall perform all duties incident to the office of
chairman and chief executive officer and such other duties as may be prescribed
by the directors from time to time.
8
<PAGE>
6. PRESIDENT.
The president shall be the principal operating officer of the corporation and,
subject to the control of the chairman and chief executive officer, shall in
general manage all of the day-to-day operations of the corporation. He shall,
in the absence of the chairman and chief operating officer, preside at all
meetings of the stockholders and of the directors. He may sign, with any other
proper officer of the corporation thereunto authorized by the directors, any
deeds, mortgages, bonds, contracts or other instruments which the directors have
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the directors or by these by-laws to
some other officer or agent of the corporation, or shall be required by law to
be otherwise signed or executed; and in general shall perform all duties
incident to the office of president and such other duties as may be prescribed
by the chairman and chief executive officer and directors from time to time.
7. VICE PRESIDENT.
In the absence of the president or in the event of his death, inability or
refusal to act, one of the vice presidents designated by the board of directors
shall perform the duties of the president, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the president. The
vice president shall perform such other duties as from time to time may be
assigned to him by the chairman and chief executive officer, the president or by
the directors.
8. SECRETARY.
The secretary shall keep the minutes of the stockholders' and of the directors'
meetings in one or more books provided for that purpose, see that all notices
are duly given in accordance with the provisions of these bylaws or as required,
be custodian of the corporate records and of the seal of the corporation and
keep a register of the post office address of each stockholder which shall be
furnished to the secretary by such stockholder, have general charge of the stock
transfer books of the corporation and in general perform all duties incident to
the office of secretary and such other duties as from time to time may be
assigned to him by the chairman and chief executive officer, president or by the
directors.
9. TREASURER.
If required by the directors, the treasurer shall give a bond for the faithful
discharge of his duties in such sum and with such surety or sureties as the
directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation receive and give
receipts for moneys due and payable to the
9
<PAGE>
corporation from any source whatsoever, and deposit all such moneys in the name
of the corporation in such banks, trust companies or other depositories as shall
be selected in accordance with these bylaws and in general perform all of the
duties as from time to time may be assigned to him by the chairman and chief
executive officer, president or by the directors.
10. SALARIES.
The salaries of the officers shall be fixed from time to time by the directors
and no officer shall be prevented from receiving such salary by reason of the
fact that he is also a director of the corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------------------
1. CONTRACTS.
Except as provided in the Articles of Incorporation, the directors may authorize
any officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances.
2. LOANS.
No loans shall be contracted on behalf of the corporation and no evidences of
indebtedness shall be issued in its name unless authorized by a resolution of
the directors. Such authority may be general or confined to specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation, shall be signed
by such officer or officers, agent or agents of the corporation and in such
manner as shall from time to time be determined by resolution of the directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited from time
to time to the credit of the corporation in such banks, trust companies or other
depositories as the directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
-------------------------------------------------------
1. CERTIFICATES FOR SHARES.
10
<PAGE>
Certificates representing shares of the corporation shall be in such form as
shall be determined by the directors. Such certificates shall be signed by the
chairman and chief executive officer and by the secretary or by such other
officers authorized by law and by the directors. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and address
of the stockholders, the number of shares and date of issue, shall be entered on
the stock transfer books of the corporation. All certificates surrendered to
the corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled; except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and indemnity to
the corporation as the directors may prescribe.
2. TRANSFERS OF SHARES.
a. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
shall be the duty of the corporation to issue a new certificate to the
person entitled thereto, and cancel the old certificate; every such
transfer shall be entered on the transfer book of the corporation which
shall be kept at its principal office.
b. The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such
share on the part of any other person whether or not it shall have
express or other notice thereof, except as expressly provided by the
laws of this state.
ARTICLE VII - FISCAL YEAR
-------------------------
The fiscal year of the corporation shall begin on such date as may be determined
by resolution of the Board of Directors.
ARTICLE VIII - DIVIDENDS
------------------------
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
-----------------
11
<PAGE>
The directors shall provide a corporate seal which shall be circular in form and
shall have inscribed thereon the name of the corporation, the state of
incorporation, year of incorporation and the words, "Corporate Seal".
ARTICLE X - WAIVER OF NOTICE
----------------------------
Unless otherwise provided by law, whenever any notice is required to be given to
any director of the corporation under the provisions of these by-laws or under
the provisions of the Articles of Incorporation, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
ARTICLE XI - AMENDMENTS
-----------------------
These by-laws may be altered, amended or repealed and new by-laws adopted only
by a vote of the directors representing a majority of the entire Board of
Directors.
12
<PAGE>
(REV. 9/21/93)
(REV. 10/1/93)
(REV. 10/8/93)
(REV. 10/19/93)
OFFICE LEASE
THIS LEASE is made as of the 21 day of October, 1993, by and between Landlord
and Tenant.
WITNESSETH:
----------
1. Terms and Definitions. For the purpose of this Lease, the following terms
---------------------
shall have the following definitions and meanings:
Annual Basic Rent: As of the Commencement Date, TWO HUNDRED TWENTY
-----------------
EIGHT THOUSAND FIVE HUNDRED FIFTY-THREE DOLLARS AND FIFTY CENTS ($228,553.50)
per annum, which is based on 21,767 rentable sq. ft. at the rate of $10.50 per
rentable sq. ft. full service net of electric.
Brokers: Landlord's Broker: Manekin/Virginia
-------
Properties, Inc.
Tenant's Broker: Julien J. Studley, Inc.
Building: A one story office building located at 13515 Dulles
--------
Technology Drive, Herndon, Virginia 22071, and known as Phase One, Building Two,
which Building is located within the project (the "Project") known as Phase One
consisting of three buildings, which is located within the office park (the
"Office Park") known as Dulles Technology Center.
Commencement Date: The Commencement Date of this
-----------------
Lease shall be September 1, 1993.
Land: The approximately two and six tenths (2.6)
----
acre site upon which the Building is situated.
Landlord: Dulles Tech Center I, Ltd., a Virginia
--------
Limited Partnership.
Landlord's Address: Manekin/Virginia Properties, Inc. 1875 Campus
------------------
Commons Drive, Suite 200, Reston, Virginia 22091-1521
Lease Year: A period of twelve (12) consecutive months, commencing on
----------
the first day of the month immediately following the month in which the
Commencement Date occurs, and each successive twelve (12) month period
thereafter; in addition, the first Lease Year shall also include the period from
Commencement Date until the first day of the following month.
Leasehold Improvements: Tenant accepts the Premises in "As Is", "Where
----------------------
Is" condition. Landlord is under no obligation to make any alterations,
decorations, improvements, or other changes in or to the Premises.
Premises: Those certain premises located on the first floor(s) of the
--------
Building. The Premises are outlined on the floor plan attached hereto as Exhibit
A. The Premises contain approximately 21,767 square feet of rentable area. The
Premises contains a common area electrical closet. The rentable area of the
electric closet shall be prorated based on all tenants making use of the closet
and the Tenant's total rentable square feet shall be adjusted accordingly.
Deposit: (Intentionally Deleted)
-------
Tenant: INDUSTRIAL TRAINING CORPORATION (ITC), a
------
Maryland Corporation
Tenant's Proportionate Share: That percentage which is equal to a
----------------------------
fraction, the numerator of which is the number of rentable square feet in the
Premises, and the denominator of which is the number of rentable square feet in
the Building, which shall be confirmed by Landlord's Architect pursuant to
"Premises" above. As of the Commencement Date, Tenant's Proportionate Share
shall be as defined herein, calculated to be 68.19% of the total square feet
area in the Building (31,923 SF);
1
<PAGE>
22.73% of the total area of the Project (Three Phase One Buildings totalling
95,769 sq. ft.); and 1.339% of the office park (1,625,000 sq. ft.)
2. Premises and Common Areas Leased.
--------------------------------
(a) Landlord hereby leases the Premises to Tenant, and Tenant hereby leases
the Premises from Landlord. It is agreed that, as of the Commencement Date, The
Premises contain approximately 21,767 square feet of rentable space.
(b) Tenant shall have the nonexclusive right, in common with other tenants
of the Building and members of the public, to use the common and public areas
within the Building and the Office Park, subject to the Rules and Regulations
referred to herein, but shall have no other rights no specifically set forth
herein. The Lease is also subject to all covenants, conditions and restrictions
of record.
3. Term. The term of this Lease (the "Lease Term") shall commence on the
----
Commencement Date and shall continue for a period of Seventy (70) consecutive
calendar months thereafter, unless the Lease Term shall be sooner terminated as
hereinafter provided. For the purpose of this Lease, the Lease Commencement Date
shall be September 1, 1993, and the Lease shall expire on June 30, 1999.
4. Possession. Tenant currently occupies the Premises. These Premises will be
----------
accepted by Tenant in "As Is" condition.
5. Rent.
-----
(a) Tenant agrees to pay to Landlord on an annual basis the Annual
Basic Rent designated in Section 1 (subject to adjustment as hereinafter
provided), in twelve (12) equal monthly installments, each in advance on the
first day of each and every calendar month during the Lease Term. In the event
the Lease Term commences on a day other than the first day of a calendar month
or ends on a day other than the last day of the calendar month, then the rental
for such periods shall be prorated in the proportion that the numbers of days
this Lease is in effect during such months bears to thirty (30).
(b) The Annual Basic Rent shall escalate during the Lease Term as indicated
on the following schedule:
<TABLE>
<CAPTION>
Lease Year Period Escalation Annual Basic Rent
- ---------- ------ ---------- ------ ----- ----
<S> <C> <C> <C>
1 9/1/93-8/31/94 N/A $10.50/SF, N.O.E.
2 9/1/94-8/31/95 $1.55/SF $12.05/SF, N.O.E.
3 9/1/95-8/31/96 3% 12.41/SF, N.O.E.
4 9/1/96-8/31/97 3% 12.78/SF, N.O.E.
5 9/1/97-8/31/98 3% 13.17/SF, N.O.E.
6 9/1/98-6/30/99 3% 13.56/SF, N.O.E.
</TABLE>
(c) All rent, additional rent and other sums payable by Tenant to Landlord
hereunder shall be paid to Landlord at the address designated in Section 1 above
or at such other address as Landlord may hereafter designate in writing. All
rent and other sums shall be paid to Landlord without any prior demand therefor
(except as expressly provided herein) and without any deduction or offset
whatsoever, in lawful money of the United States of America, which shall be
legal tender at the time of payment. Tenant shall have the right to offset rent
for tenant improvements, rental concessions, cash allowances, brokerage
commissions and other tenant obligations that Landlord has failed to perform
within a reasonable period. All charges to be paid by Tenant hereunder, shall be
considered additional rent for the purposes of the Lease, and the word "rent" in
this Lease shall include such additional rent unless the context specifically or
clearly implies that only the Annual Basic Rent is referenced.
6. Basic Operating Charges.
-----------------------
(a) As additional rent for the Premises, Tenant shall pay to Landlord Its
Proportionate Share of the amount by which the Basic Operating Charges incurred
by Landlord in operation of the
2
<PAGE>
Building and Land during any Lease Year exceed $4.40 per square foot (the "Base
Index"). The computation of Basic Operating Charges and Tenant's Proportionate
Share shall be computed on a calendar year (or portion thereof) and Tenant shall
pay Tenant's Proportionate Share of the amount by which the Basic Operating
Charges (averaged on a monthly basis in the case of a partial year) for the
calendar year exceed the Base Index.
(1) As used herein, the Basic Operating Charges shall mean the sum of
all reasonable costs, payable by Landlord that are directly attributable to the
owning, maintenance and operation of the Building, Land, and parking areas,
including but not limited to the following, water, sewer, insurance; legal and
accounting fees; Landlord's general and administrative expenses; management fees
which shall not exceed four percent (4%) of the gross income of the Building,
and personnel costs, including, but not limited to, salaries, wages, fringe
benefits and other direct and indirect costs of engineers, superintendents,
watchmen, security guards or services, porters and any other Building personnel;
the cost of all service and maintenance contracts, including, but not limited
to, chillers, boilers, controls, elevators, electrical components, mail chute,
windows, janitorial, security and management; landscaping maintenance, including
upgrades and replacements; all other maintenance and repair expenses and
supplies which are deducted by Landlord in computing its Federal income tax
liability; depreciation on a straight-line basis for capital expenditures made
by Landlord which result in verifiable reduction of operating expenses; Real
Estate Taxes (as hereinafter defined in Subsection 6(a)(2)); for non-capital
equipment, materials and tools; assessments or charges imposed by an association
now or hereafter established to maintain common areas of the Office Park;
charges of any kind imposed by any governmental authority in connection with the
use or occupancy of the Building, Land, or Premises, including any and all
license, permit and inspection fees; any other costs and expenses incurred by
Landlord in owning, maintaining or operating the Building; and the costs of any
additional services not provided by Landlord in the prudent management of the
Building. Basic Operating Charges shall not include: interest, amortization or
other payments on loans to Landlord or any cost associated with refinancing such
loans; depreciation except as specified otherwise herein; ground rents, if any;
leasing commissions; tenant improvements, including architectural and
engineering costs; advertising and marketing costs; services performed
specifically for other tenants in the building; wages, salary or other
compensation to any employees or officers, directly or indirectly, who are not
actively involved in the management of the building; expenditures which are
reimbursed or compensated by insurance or warranties; late charges incurred in
paying any real estate taxes or assessments; Landlord's income taxes; capital
expenditures, except to the extent such capital expenditures result in
verifiable reductions in the cost of operating the building, cost of major
structural repairs or of correction defects in initial design or construction;
costs or maintaining and operating specialty improvements; costs associated with
the operation of the business of the partnership or entity which constitutes the
Landlord, as the same are distinguished from the cost of the operation of the
building and other reasonable and customary exclusions. The Basic Operating
Charges shall be adjusted to reflect a on-hundred percent (100%) occupancy of
the Building during any period in which the Building is not at least one-hundred
percent (100%) occupied. The Basic Operating Charges shall not include
electricity being paid directly by the Tenant. These utilities will be
submetered and paid directly by the Tenant.
(2) The term "Real Estate Taxes" shall mean (A) all real estate
taxes, including general and specific assessments, if any, which are imposed
upon Landlord or assessed against the Building and/or the Land, and (B) any
other present or future taxes or governmental charges that are imposed upon
Landlord, or assessed against the Building and/or the Land, including, but not
limited to, any tax levied on or measured by the rents payable by tenants of the
Building, which are in the nature of, or in substitution for, real estate taxes.
Expenses (including attorney's fees, consulting and witness fees and similar
costs) incurred by Landlord in monitoring or seeking a reduction of Real Estate
Taxes, or in appealing any real estate tax assessment, whether or not such
efforts or appeals are successful, shall be included in the amount of Real
Estate Taxes. Real Estate taxes are to be projected as if fully assessed
including tenant improvements.
(3) Controllable operating expenses shall not increase more than
seven point five percent (7.5%) per annum. Increases in these expenses above
this cap shall not be passed through to Tenant for payment. Controllable
operating expenses shall include: janitorial, grounds maintenance,
extermination, irrigation, security, sprinkler service, and window cleaning.
3
<PAGE>
(4) Tenant shall have the right to audit its operating expenses. In
the event an audit shows operating expenses are overstated by more than three
percent (3%), Landlord shall reimburse Tenant for the actual and reasonable
costs associated with that audit. Reimbursements or refunds received by Landlord
shall be deducted from operating expenses in the year they are received.
(5) Any operating expenses which are attributable to services or
facilities benefitting or shared by tenants of other buildings (or buildings
built in subsequent phases), including personnel costs or employees whose time
is divided between the Building and other buildings, shall be equitable prorated
between this Building and the appropriate Buildings. Any reimbursements or
refunds received by Landlord shall be deducted from operating expenses in the
year the refunds are received.
(b) Tenant shall make estimated monthly payments to Landlord on account of
Tenant's Proportionate Share of the Basic Operating Charges during each calendar
year falling entirely or partly within the term of this Lease. At the beginning
of the Lease Term and at the beginning of each calendar year thereafter,
Landlord shall submit to Tenant a statement setting forth Landlord's reasonable
estimate of the amount of Tenant's Proportionate Share of the Basic Operating
Charges that are expected to be incurred during such calendar year.
(c) Within ninety (90) days after the expiration of each calendar year,
Landlord shall submit to Tenant a statement showing (A) Tenant's Proportionate
Share of the Basic Operating Charges actually incurred during the preceding
calendar year and how these charges were calculated and (B) the aggregate amount
of the estimated payments made by Tenant or abatement credited to Tenant
pursuant 5(b) above on account thereof. If the aggregate amount of such
estimated payments and abatement exceeds Tenant's actual liability for its
Proportionate Share of Basic Operating Charges, Tenant shall deduct the net
overpayment from its next estimated payment or payments on account of Tenant's
Proportionate Share of Basic Operating Charges for the then current year. If
Tenant's actual liability or such charges exceeds the estimated payments made by
Tenant and abatement credited to Tenant on account thereof, then Tenant shall,
within thirty (30) days after the presentment of a statement therefor, pay to
Landlord the total amount of such deficiency as additional rent due hereunder.
The failure by Landlord to submit to Tenant the statement required by this
Subsection within the time required herein shall not constitute a waiver of
Landlord's entitlement to seek and recover such amounts from Tenant.
(d) Any statement provided by Landlord to Tenant pursuant to Subsection(c)
above shall be conclusive and binding upon Tenant unless, within thirty (30)
days after receipt of the statement, Tenant notifies Landlord that it disputes
the correctness of the statement and specifies the respect in which the
statement is claimed to be incorrect. Pending determination of any dispute,
Tenant shall pay all amounts due pursuant to the disputed statement, but such
payments shall be without prejudice to Tenant's position. Tenant and/or its
representatives, upon at least ten (10) working days' notice to Landlord, during
normal business hours and at Tenant's expense, shall have reasonable access to
appropriate books and records of Landlord relating to the actual amount of any
expenses covered by the disputed statement, for the purpose of verifying the
statement.
(e) Tenant's liability for its Proportionate Share of the Basic Operating
Charges shall survive the expiration of the Lease Term. Similarly, Landlord's
obligation to refund to Tenant the excess, if any, of the amount of Tenant's
estimated payments on account of Tenant's actual liability therefor shall
survive the expiration of the Lease Term.
(f) In the event that any rental, sales, use, business or other taxes are
now or hereafter levied upon Tenant's use or occupancy of the Premises or
Tenant's business at the Premises or the rents payable under the Lease, and the
mode of collection of such taxes is such that Landlord is responsible for
collection or payment of such taxes, Tenant shall pay any and all such taxes to
Landlord upon written demand from Landlord.
(g) In the event the Lease Term commences on a day other than the first
day of a calendar year, and/or terminates on a day other than the last day of a
calendar year, Tenant's Proportionate
4
<PAGE>
Share of the increases in the Basic Operating Charges for such calendar year
shall be apportioned by multiplying the amount of Tenant's Proportionate Share
thereof for the full calendar year by a fraction, the numerator of which is the
number of days during such calendar year falling within the Lease Term, and the
denominator of which is 365.
7. Option to Renew. Landlord hereby grants to Tenant the conditional right,
---------------
exercisable at Tenant's option, to renew the term of this Lease for one (1)
successive term of three (3) years. If exercised, and if the conditions
applicable thereto have been satisfied, the first such renewal term (the
"Renewal Term") shall commence immediately following the end of the initial
Lease Term provided in Section 1 of this Lease. The rights of renewal herein
granted to Tenant shall be subject to, and shall be exercised in accordance
with, the following terms and conditions:
(a) Tenant shall exercise its right of renewal with respect to the
Renewal Term by giving Landlord written notice thereof not earlier than twelve
(12) months not later than six (6) months prior to the expiration of the term of
this Lease. The parties shall have one-hundred twenty (120) days after
Landlord's timely receipt of such notice in which to agree on the base rent and
escalation factor which shall be payable during the Renewal Term. For purpose
regarding the Renewal Term the market rate base rent shall be inclusive of a new
Base Index equal to base year actual operating expenses. The parties shall
attempt to agree on a base rent payable during the Renewal Term which would
equal ninety percent (90%) of the applicable market rate base rent. Among the
factors to be considered by the parties during such negotiations shall be the
general office R&D space market in Reston/Herndon, Virginia, the rental rate
(including tenant concessions and rent abatement) then being quoted by Landlord
to comparable tenants for comparable space in the Building, and the rents
(including tenant concessions and rent abatement) being charged similar tenants
for comparable space in multi-tenanted, first-class office R&D buildings. If
during such one-hundred twenty (120) day period the parties are unable, for any
reason whatsoever, to agree on such base rent and escalation factor payable,
then within five (5) days thereafter the parties shall each appoint a real
estate broker who shall be licensed in the Commonwealth of Virginia and who
specializes in the leasing of commercial office space in the Northern Virginia
market, has at least five (5) years of experience and is recognized within the
field as being reputable and ethical. If one party does not timely appoint a
broker, then the broker appointed by the other party shall promptly appoint a
broker for such party. Such two individuals shall each determine within ten (10)
days after their appointment such base rent and escalation factor (to be not
less than the minimums specified in this Section). If such individuals cannot
reach an agreement on such items, then the two individuals shall, within five
(5) days, render separate written reports of their determination and together
appoint a third similarly qualified individual having the qualifications
described above. If the Board of Realtors is no longer in existence, the third
broker shall be appointed by the President of its successor organization. If no
successor organization is in existence, the third broker shall be appointed by
the Chief Judge of the Circuit Court of Fairfax County, Virginia. The third
individual shall within ten (10) days after his or her appointment make a
determination of such base rent and escalation factor. The third individual
shall determine which of the determinations that shall be final and binding upon
the parties, and such determination may be enforced in any court of competent
jurisdiction. Landlord and Tenant shall each bear the cost of its broker and
shall share equally the cost of the third broker. Upon determination of the base
rent and escalation factor payable pursuant to this Section, the parties shall
promptly execute an amendment to this Lease stating the rent so determined.
(b) If any 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 term of this
Lease.
(d) Except as provided in Subsection 7(f) below, if at any time fifty
percent (50%) or more of the square feet of rentable area of the Premises has
been terminated, subleased or assigned, then Tenant's rights pursuant to this
Section shall lapse and be of no further force and effect.
5
<PAGE>
(e) Tenant's rights of renewal under this Section may be exercised
only by Tenant and may not be exercised by any transferee, sublessee or assignee
of Tenant; provided, however that a permissible sublessee or assignee under
Section 28 of this Lease of one hundred percent (100%) of the square footage of
the Premises shall have the right to exercise the renewal rights set forth in
this Section.
(f) Promptly after the commencement of the Renewal Term, Landlord
shall repaint and recarpet the Premises.
8. Use. Tenant shall use the Premises for general office purposes and other
---
purposes as are permitted under the present I-4 zoning of the Property, and
shall not use or permit the Premises to be used for any other purpose without
the prior written consent of Landlord. Tenant shall not use or occupy the
Premises in violation of any present or future applicable law, regulation or
ordinance, or of the certificate of occupancy issued for the building, and shall
immediately discontinue any use of the Premises which is declared by any
governmental authority having jurisdiction to be a violation of law of said
certificate or occupancy. Tenant shall comply with any direction of any
governmental authority having jurisdiction which shall, by reason of the nature
of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or occupation
of the Premises. Tenant shall not do or permit to be done anything which will
invalidate or increase the cost of any fire, extended coverage or any other
insurance policy covering the Building and/or property located therein. Tenant
shall promptly upon demand reimburse Landlord as additional rent for any
additional premium charged for such policy by reason of Tenant's failure to
comply with the provisions of this Section 9. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way obstruct or
interfere with the rights or other tenants or occupants of the Building. Tenant
shall not use or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit
any nuisance in, or about the Premises. Tenant shall not commit or suffer to be
committed any waste in or upon the Premises and shall keep the Premises in first
class repair and appearance. If any present or future law, ordinance, regulation
or order requires an occupancy permit for the Premises. Tenant shall obtain such
permit at Tenant's own expense and shall promptly deliver a copy thereof to
Landlord.
9. Notices. Any notice required or permitted to be given hereunder must be in
-------
writing and may be given by personal delivery or by mail, and if given by mail
shall be deemed sufficiently given if sent by registered or certified mail
addressed to Tenant at the Building, or to Landlord at its address designated in
Section 1. Either party may be written notice to the other specify a different
address for notice purposes, except the Landlord may in any event use the
Premises as Tenant's address for notice purposes. If more than one tenant is
named under this Lease, service of any notice upon any one of said tenant shall
be deemed to be service upon all of said tenants.
10. Brokers. The parties recognize that the brokers who negotiated this Lease
-------
are the brokers whose names are stated in Section 1, and agree that Landlord
shall be solely responsible for the payment of brokerage commissions to said
brokers, and that Tenant has not responsibility therefor. If Tenant has dealt
with any other person or real estate broker in respect of leasing or renting
space in the Building, Tenant shall be solely responsible for the payment of any
fee due said person or firm and Tenant shall hold Landlord free and harmless
against any liability in respect thereto.
11. Holding Over. If Tenant fails to surrender possession of the Premises upon
------------
the expiration or earlier termination of the Lease Term, Tenant shall become a
tenant at sufferance only, at a rental rate equal to 125% of the Annual Basic
Rent in effect on the date of the expiration of the Lease Term and otherwise
subject to the terms, covenants and conditions herein specified. Acceptance by
Landlord of rent after such expiration or earlier termination date shall not
constitute a holdover hereunder or result in a renewal of the Lease Term. If
Tenant fails to surrender the Premises upon the expiration of
6
<PAGE>
this Lease despite demand to do so by Landlord, Tenant shall indemnify and
hold Landlord harmless from all injury, loss, claims, expenses and liability,
including without limitation, any claim made by any succeeding tenant and any
attorney's fees, founded on or resulting from such failure to surrender.
12. Taxes on Tenant's Property.
--------------------------
(a) Tenant shall be liable for and shall pay before delinquency, all taxes
levied against any personal property or trade fixtures placed by Tenant in or
about the Premises. If any such taxes on Tenant's personal property or trade
fixtures are levied against Landlord or Landlord's property, or if the assessed
value of the Premises is increased by the inclusion therein of a value placed
upon such personal property or trade fixtures of Tenant, and if Landlord, after
written notice to Tenant, pays the taxes based upon such increased assessments
(which Landlord shall have the right to do regardless of the validity thereof,
but under protest if requested by Tenant). Tenant shall upon demand repay to
Landlord a sum equal to the taxes levied against Landlord or the portion of such
taxes resulting from such increase in the assessment; provided that, in any such
event, Tenant shall have the right, at Tenant's sole cost and expense, to bring
suit to recover the amount of any such taxes so paid under protest, and any
amount so recovered shall belong to Tenant.
(b) If the Leasehold Improvements, whether installed and/or paid for by
Landlord or Tenant and whether or not affixed to the real property so as to
become a part thereof, are assessed as real property at a valuation higher than
the valuation at which "Building Standard" improvements or typical office
improvements in other space in the Building are assessed, then the real property
taxes and assessments levied against Landlord or Landlord's property by reason
of such excess assessed valuation shall be deemed to be taxes levied against
personal property of Tenant and shall be governed by the provisions of
Subsection 13(a) above. If the records of the County Assessor are not available
or sufficiently detailed in Landlord's opinion to serve as a basis for making
said determination, the actual cost of construction shall be used.
13. No Representations. Tenant acknowledges that except to the extent set forth
------------------
in this Lease neither Landlord nor any agent or employee of Landlord has made
any representations or warranties with respect to the Premises, the Building or
the Office Park or with respect to the suitability of same for the conduct of
Tenant's business. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises and the Building were at such time in
good and sanitary order, condition and repair, and complete except as set forth
in a punch list mutually agreed upon by Landlord and Tenant.
14. Alterations.
-----------
(a) Tenant shall make no alternations, additions or improvements in or
to the Premises, structural or otherwise, without Landlord's written consent,
which consent shall not be unreasonably withheld, conditioned, or delayed. If
Landlord consents, Landlord may impose any conditions it deems appropriate,
including, without limitation, the prior approval by Landlord of plans and
specifications, the prior approval by Landlord of the contractor or other
persons who will perform the work, the obtaining of lien waivers from such
contractors and other persons and the obtaining of specified completion and lien
indemnity bonds and insurance. If any improvements are made without Landlord's
prior written consent, Landlord shall have the right to remove such improvements
and restore the Premises to their condition immediately prior thereto, and
Tenant shall be liable for all expenses incurred by Landlord in connection
therewith. All such work shall be done at such times and in such manner as
Landlord may from time to time designate. Tenant covenants and agrees that all
work done by Tenant shall be performed in full compliance with all laws,
ordinances, regulations and requirements of all governmental and quasi-
governmental authorities having jurisdiction. Tenant further covenants and
agrees that any mechanic's lien filed against the Premises or against the
Building for work claimed to have been done for, or materials claimed to have
been furnished to Tenant will be discharged by Tenant, by bond or otherwise,
within
7
<PAGE>
ten (10) days after the filing thereof, at the sole cost and expense of
Tenant. All alterations, decorations, additions or improvements upon the
Premises, made by either party, including (without limiting the generality of
the foregoing) all wallcovering, built-in cabinet work, paneling and the like,
shall unless Landlord elects otherwise, become the property of Landlord, and
shall remain upon and be surrendered with the Premises, as a part thereof, at
the end of the Lease Term.
(b) All articles of personal property and all business and trade fixtures,
machinery and equipment, furniture and movable partitions installed by Tenant in
the Premises at its sole expense shall be and remain the property of Tenant and
may be removed by Tenant at any time during the Lease Term. provided Tenant is
not in default hereunder, and provided further that Tenant shall repair any
damage caused by such removal. Tenant's obligation to repair any damage to the
Premises caused by such removal shall survive the expiration or earlier
termination of the Lease Term. If Tenant shall fail to remove all of its effects
from the Premises upon termination of this Lease for any cause whatsoever,
Landlord may, at its option, remove the same in any manner that Landlord shall
choose, and store said effects without liability to Tenant for loss thereof, and
Tenant agrees to pay Landlord upon demand any and all expenses incurred in such
removal, including court costs and attorneys' fees and storage charges on such
effects for any length of time that the same shall be in Landlord's possession,
or Landlord may, at its option, without notice, sell said effects, or any of the
same, at private sale and without legal process, for such price as Landlord may
obtain and apply the proceeds of such sale against any amounts due under this
Lease from Tenant to Landlord and against the expenses incidental to the removal
and sale of said effects .
(c) The initial Leasehold improvements in and to the Premises shall be
installed by Landlord in accordance with the Work Agreement. It is understood
that Landlord is under no obligation to make any structural or other
alterations, decorations, additions or improvements in or to the Premises,
except as provided in the Work Agreement or as otherwise expressly provided in
this Lease .
15. Repairs.
-------
(a) By entry thereunder, Tenant accepts the Premises as being in good and
sanitary order, condition and repair. Except for Landlord duties described
elsewhere in this Lease, Tenant shall, at Tenant's sole cost and expense,
maintain and preserve the Premises and all equipment located therein clean, safe
and in first class condition and repair. Tenant shall, upon the expiration or
sooner termination of the Lease Term, surrender the Premises to Landlord broom
clean and in the same condition as when received, ordinary wear and tear
excepted.
(b) Landlord shall make structural repairs to the Building necessary for
safety and tenant ability, and shall bear the cost thereof unless required by
any negligence or willful misconduct of Tenant, its agents, employees or
invitees. Landlord shall make such other repairs to the Premises and Building as
may be necessary or desirable to maintain the Premises in a professional manner
befitting a comparable first class office/R&D building in the Reston/Herndon
area, and the cost of such repairs shall be included in the Basic Operation
Charges. Landlord shall not be liable for any damage (including any
consequential damages or lost profits) caused to the person or property of
Tenant, its agents, employees or invitees, due to the Building or any part or
appurtenances thereof being improperly constructed or being or becoming out of
repair or arising from the leaking of gas, water, sewer or steam pipes, or from
electricity or from any other cause whatsoever. Tenant agrees to report
immediately in writing to Landlord any defection condition in or about the
Demised Premises known to Tenant which Landlord is required to repair, and a
failure to so report shall make Tenant liable to Landlord for any expense,
damage or liability directly resulting from such failure to report. Tenant
waives the right to make repairs at Landlord's expense under any law, statute or
ordinance now or hereafter in effect unless such damage is caused by the gross
negligence or willful misconduct of Landlord or its employees. If Tenant has
given Landlord written notice of a defective condition, and if Landlord has not
diligently pursued the repair such defective condition within thirty (30) days
of receipt of Tenant's written notice, then Tenant may make said repair and
Landlord will reimburse Tenant for its reasonable expenses incurred by such
repair.
8
<PAGE>
(c) Landlord reserves the right at any time and from time to time, as
often as Landlord deems desirable, without the same constituting an actual or
constructive eviction and without incurring any liability to Tenant or otherwise
affecting Tenant's obligations under this Lease, to make such changes,
alterations, additions, improvements, repairs, relocations or replacements in or
to the Building (including the Premises if required by any applicable law or
regulation) and the fixtures and equipment thereof, as well as in or to the
street entrances, halls, passages, stairways and other common facilities
thereof, and to change the name by which the Building is commonly known and/or
the Building's address. Unless such address change is beyond the control of the
Landlord, Landlord shall compensate Tenant for new letterhead, stationery,
business cards, and labels, if such changes occur without Tenant's prior written
agreement. Landlord reserves the right from time to time to install, use,
maintain, repair and replace pipes, ducts, conduits, wires and appurtenant
meters and equipment for service to other parts of the Building, above the
ceiling surfaces, below the floor surfaces, within the walls and in the central
core areas, and to relocate any pipes, ducts, conduits, wires and appurtenant
meters and equipment included in the Premises which are located elsewhere
outside the Premises, and to expand the Building. Nothing contained herein shall
be deemed to relieve Tenant of any duty, obligation or liability with respect to
making any repair, replacement or improvement or complying with any law, order
or requirement of any government or other authority and nothing contained herein
shall be deemed or construed to impose upon Landlord any obligation,
responsibility or liability whatsoever, for the care, supervision or repair of
the Building or any part thereof, other than as expressly provided in this
Lease. Landlord agrees to use reasonable efforts to schedule such work so as to
cause minimum disruption to Tenant's business.
(d) In the event that the Premises become unfit for use by Tenant because
of safety, health, eminent domain, or other reasons, due to Landlord's failure
to perform its obligations, Tenant may withhold from Landlord an amount of the
current rent due in the next rental payment until such time as any such
unfitness or defect is corrected. Other than Tenant's own business interruption
insurance, this shall be the exclusive recourse of Tenant.
16. Liens. Tenant shall not permit any mechanic's, materialmen's or other liens
-----
to be filed against the Building, the Premises, Tenant's leasehold interest in
the Premises or any equipment therein. Landlord shall have the right to post and
keep posted on the Premises any notices which it deems necessary for protection
from such liens. If any such liens are filed, Landlord may cause such liens to
be released by any means it deems proper, including payment in satisfaction of
the claim giving rise to such lien. Tenant shall pay to the Landlord, promptly
upon notice by Landlord, any sum paid by Landlord to remove such liens, together
with interest from the date of such payment by Landlord at the Default Rate (as
defined in Section 26).
17. Entry by Landlord. Landlord may upon reasonable notice to Tenant, enter the
-----------------
Premises as reasonably required to inspect the same, to supply janitor service
and any other service to be provided by Landlord to Tenant hereunder, to exhibit
the Premises to prospective lenders, purchasers and tenants, and to alter,
improve or repair the Premises or any other portion of the Building. Landlord
may, in order to carry any construction, maintenance or repair work deemed
necessary by Landlord to the Premises or the Building, erect scaffolding and
other structures where reasonable required by the character of the work to be
performed, provided that Landlord shall endeavor to perform its work in a manner
that will minimize any interference with the business of the Tenant. Tenant
shall furnish Landlord at all times with a key to unlock all of the doors in the
Premises, and Landlord shall have the right to use such keys or any other means
which Landlord may deem proper to open said doors in an emergency. No provision
of this Lease shall be construed as obligating Landlord to perform any repairs,
alterations or decoration, except as otherwise expressly agreed herein to be
performed by Landlord.
18. Utilities and Services. Except as noted in this Section and elsewhere in
----------------------
this Lease regarding Tenant-paid utilities, Landlord will operate and maintain
the building in a professional manner befitting a comparable first-class
Office/R&D building in the Reston/Herndon area. Landlord shall furnish cleaning,
lavatory supplies, and janitorial service after business hours. A separate
electric
9
<PAGE>
meter currently exists for the Premises. Tenant shall furnish its own
electric to the premises and shall pay the entire cost thereof, and Landlord
shall have no responsibility for providing any such electric utility.
19. Bankruptcy.
----------
(a) The following shall be Events of Bankruptcy under this Lease: (1)
Tenant's becoming insolvent, that term is defined in Title 11 of the United
States Code (the "Bankruptcy Code"), or under the insolvency laws of any state,
district, commonwealth or territory of the United States (the "Insolvency
Laws"); (2) The appointment of a receiver or custodian for any or all of
Tenant's property or assets, or the institution of a foreclosure action upon any
of Tenant's real or personal property and such action is not being defended by
Tenant; (3) The filing of a voluntary petition under the provisions of the
Bankruptcy Code or Insolvency Laws; (4) The filing of an involuntary petition
against Tenant as the subject debtor under the Bankruptcy Code or Insolvency
Laws, which either (A) is not dismissed within thirty (30) days of filing, or
(b) results in the issuance of an order for relief against the debtor; or (5)
Tenant's making or consenting to an assignment for the benefit of creditors or a
common law composition of creditors.
(b) Upon occurrence of an Event of Bankruptcy, Landlord shall have all
rights and remedies available to Landlord pursuant to Section 25; provided,
however that while a case in which Tenant is the subject debtor under the
Bankruptcy Code is pending, Landlord shall not exercise its rights and remedies
pursuant to Section 25 so long as (1) the Bankruptcy Code prohibits the exercise
of such rights and remedies, and (2) Tenant or its Trustee in Bankruptcy
(hereinafter referred to as "Trustee) (i) cures all defaults under this Lease,
(ii)compensates Landlord for monetary damages incurred as a result of such
defaults, (iii) provides adequate assurance of future performance on the part of
Tenant as debtor in possession or on the part of the assignee tenant, and (iv)
complies with all other requirements of the Bankruptcy Code.
20. Indemnification. Tenant shall indemnify Landlord and hold Landlord harmless
---------------
from and against any and all injury, loss, damage, claims and expenses,
including attorney's fees, arising from or related to Tenant's use of the
Premises, the conduct of Tenant's business therein, the making by Tenant of any
improvements thereto or any activity, work or thing done, permitted or suffered
by Tenant in or about the Premises, and shall further indemnify Landlord and
hold Landlord harmless from and against any and all injury, loss, damage, claims
and expenses, including attorneys' fees, arising from or related to any breach
or default in the performance of any of Tenant's obligations under this Lease,
or arising from any act, neglect, fault or omission of Tenant, or of its agents,
employees or invitees. Nowithstanding anything to the contrary contained in this
Lease, Landlord shall indemnify Tenant and hold Tenant harmless from and against
any injury, loss, damages, claims, and expenses, including attorneys' fees and
court costs, arising from or relating to any breach or default in the
performance of any of Landlord's obligations under this Lease, or arising from
any act, neglect fault or omission of Landlord or its agents, employees and
invitees.
21. Property at Tenant's Risk. Except as provided in this Lease to the
-------------------------
contrary, Landlord shall not be liable to Tenant or Tenant's employees, agents
or invitees for any damage, injury, loss or claim, including but not limited to
business interruption claims, based on or arising out of any cause whatsoever,
including but not limited to the following: Landlord's entry upon the Premises
to inspect or show the same; janitorial access to the Premises at any time;
repairs to, or interruption in the use of, the Premises, the Building or the
Land; any damage resulting from the use, operation or malfunction of elevators
or of the heating, cooling, electrical, plumbing or other equipment or systems;
fire, theft, disappearance or other casualty; and any leakage in any part of the
Building, or from water that may leak into, or flow from, any part of the
Building, or from drains, pipes or plumbing fixtures bursting, leaking or
overflowing in any part of the Building. Any property stored or placed by Tenant
or its employees, agents or invitees in or about the Premises or the Building
shall be at the sole risk of Tenant, and Landlord shall not in any manner be
held responsible therefor.
10
<PAGE>
22. Insurance.
---------
(a) Tenant shall at all times during the term hereof, at its sole cost and
expense, obtain, maintain and keep in full force and effect, with Tenant,
Landlord and the mortgagees of Landlord named as insureds therein as their
respective interests may appear, the following insurance:
(i) Fire insurance, including extended coverage, vandalism and
malicious mischief, upon property of every description and kind owned by Tenant
and located in the Building or for which Tenant is legally liable or installed
by or on behalf of Tenant including, without limitation, furniture, fittings,
installations, fixtures and any other personal property, in an amount not less
than ninety percent (90%) of the full replacement cost thereof. In the event
that there shall be a dispute as to the amount which comprises full replacement
cost, the decision of Landlord or the mortgagees of Landlord shall be
conclusive.
(ii) Comprehensive General Liability Insurance, coverage to include
personal injury, bodily injury, broad form property damage, operations hazard,
owner's protective coverage, contractual liability, products and completed
operations liability in limits not less than FIVE MILLION DOLLARS
($5,000,000.00) inclusive.
(iii) Business interruption insurance in such amounts will reimburse
Tenant for direct and indirect loss of earnings attributable to all perils
commonly insured against prudent tenants or attributable to prevention of access
to the Premises or to the Building as a result of such perils.
(iv) Workmen' s Compensation and Employer's Liability Insurance in
form and amount required by applicable law.
(v) Any other form or forms of insurance as Landlord or the
mortgagees of Landlord may reasonably require from time to time, and such other
insurance, in form, in amounts and for insurance risks, as a prudent Tenant
would maintain to protect itself, consistent with sound business practices.
(b) All policies shall be taken out with insurers reasonably acceptable to
Landlord and in form reasonably satisfactory from time to time to Landlord.
Tenant agrees that certificates of insurance on the Landlord's standard form,
or, if required by Landlord or the mortgagees of Landlord, certified copies of
each such insurance policy, will be delivered to Landlord as soon as practicable
after the placing of the required insurance, but in no event later than ten (10)
days after Tenant takes possession of or occupies all or any part of the
Premises. All policies shall contain an undertaking by the insurers to notify
Landlord and the mortgagees of Landlord in writing not less than thirty (30)
days prior to any material change, reduction in coverage, cancellation or other
termination thereof.
(c) Tenant agrees that it will not keep, use, sell or offer for sale in or
upon the Premises any article, or make any use of the Premises, which may be
prohibited by any insurance policy in force from time to time covering the
Building and Building Standard Work. In the event Tenant's occupancy or conduct
of business in or on the Premises, whether or not Landlord has consented to the
same, results in any increase in premiums for the insurance carried from time to
time by Landlord with respect to the Building, Tenant shall pay any such
increase in premiums as additional rent within ten (10) days after being billed
therefor by Landlord. In determining whether increased premiums are a result of
Tenant's use or occupancy of the Premises, a schedule issued by the organization
computing the insurance rate on the Building or the Leasehold Improvements
showing the various components of such rate shall be conclusive evidence of the
several items and charges which make up such rate. Tenant shall promptly comply
with all reasonable requirements of the insurance authority and of insurers now
or hereafter in effect relating to the Premises.
(d) If any insurance policy carried by Landlord shall be cancelled or
cancellation shall be threatened or the coverage thereunder reduced or
threatened to be reduced, in any way by reason of the use or occupation of the
Premises or any part thereof by Tenant or by an assignee or sub-tenant of
11
<PAGE>
Tenant or by anyone permitted by Tenant to be upon the Premises and, if Tenant
fails to remedy the condition giving rise to cancellation, threatened
cancellation or reduction of coverage within forty-eight (48) hours after notice
thereof, Landlord may, at its option, either terminate this Lease or enter upon
the Premises and attempt to remedy such condition, and Tenant shall forthwith
pay the cost thereof to Landlord as additional rent. Landlord shall not be
liable for any damage or injury caused as a result of such entry. in the event
that Landlord shall be unable to remedy such condition, then Landlord shall have
all of the remedies provided for in this Lease for a default by Tenant.
Nowithstanding the foregoing, if Tenant fails to remedy such conditions as
aforesaid, Tenant shall be in default of its obligation hereunder and Landlord
shall have no obligations to attempt to remedy such default.
(e) Any policy or policies of fire, extended coverage and other casualty
and other insurance, which Tenant obtains in connection with the Premises, shall
include a clause or endorsement whereby the insurer waives any rights or
subrogation against Tenant or Landlord. Tenant or Landlord hereby waive their
rights of recovery against each other to the extent any injury or loss either is
covered by insurance maintained by either party, or is required to be covered by
insurance.
23. Damage.
------
(a) If the Premises shall be damaged by fire or other cause, unless due to
the gross negligence or willful misconduct of Tenant, its servants, employees,
agents, visitors or licensees, the damage shall be diligently repaired within a
reasonable time not to exceed 180 days by and at the expense of Landlord and the
rent until such repairs shall have been made shall abate pro-rata according to
the part of the Premises which is unusable by Tenant. Due allowances shall be
made for reasonable delay which may arise by reason of adjustment of fire
insurance by Landlord and for personnel delay on account of strike or labor
disputes or any other cause beyond Landlord's control. If, however, the Premises
are rendered wholly untenantable by fire or other cause and Landlord shall
decide not to rebuild the same, or if the entire Building be so damaged that
Landlord shall decide to demolish it or not to rebuild it, then or in any of
such events, Landlord may, at its option, cancel and terminate this Lease by
giving Tenant notice in writing of its intention to cancel this Lease, whereupon
the term of this Lease shall terminate upon the thirtieth (30th) day after such
notice is given and Tenant shall vacate the Premises and surrender the same to
Landlord; provided however, all rent hereunder shall be abated from and after
the date of destruction. Except for the foregoing abatement of Rent, Landlord
shall not be liable to Tenant for any period during which the occupation of said
Premises by Tenant may not be possible because of the matters herein above
stated nor shall Landlord be liable for any damage incurred by Tenant other than
Landlord's obligation to repair the Premises as aforesaid. Without limiting the
foregoing, Landlord shall not be responsible for consequential damages, lost
profits or any damage to Tenant's personal property.
(b) Upon any termination of this Lease under any of the provisions of the
Section 23, the parties shall be released thereby without further obligation to
the other, from the date possession of the Premises is surrendered to Landlord,
except for items which have theretofore accrued and are then unpaid. In the
event the Premises are damage, Tenant shall pay to Landlord its insurance
proceeds relating to the Leasehold Improvements and alterations in the Premises.
(c) Notwithstanding anything to the contrary herein, if the Premises are
damaged as a result of the negligence or willful misconduct of Tenant or
Tenant's employees, agents or invitees, Landlord shall have no obligation to
restore the Building or the Premises, Tenant shall pay to Landlord, as
additional rent, the amount by which the cost of repairing any damage exceeds
the amount of insurance proceeds received by Landlord on account of such damage.
Notwithstanding anything to the contrary herein, if the Premises are damaged as
a result of the willful misconduct of Landlord or Landlord's employees, agents,
or invitees, Landlord shall restore and repair the Premises at Landlord's cost.
(d) In the event that (1) damage is due to any cause other than fire or
other peril fully covered by any extended coverage insurance maintained by
Landlord, (2) the holder of any mortgage
12
<PAGE>
secured by the Building fails or refuses to make insurance proceeds available
for repair, restoration and reconstruction, (3) zoning or other laws or
regulations applicable to the site upon which the Building was constructed do
not permit Landlord to repair, restore or reconstruct on such site a building
substantially similar to the Building, or (4) Landlord is delayed or prevented
from repairing or restoring any damage to the Building or the Premises within
one hundred eighty (180) days after the occurrence of such damage, by reason of
acts of God, war, governmental restrictions, inability to procure the necessary
labor or materials or other cause beyond the control of Landlord, Landlord or
Tenant may elect to terminate this Lease by written notice to the other.
(e) It is hereby understood that if Landlord is obligated or elects to
repair or restore as herein provided, Landlord shall be obligated to make
repairs or restoration only of those portions of the Building and the Premises
which were originally provided at Landlord's expense, or for which the Landlord
has received insurance proceeds and the repair and restoration of items not
provided at Landlord's expense shall be the obligation of Tenant. In no event
shall Landlord be obligated to repair or restore any trade fixtures,
furnishings, equipment or personal property belonging to Tenant.
(f) Notwithstanding anything to the contrary contained in this Section 23,
Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Section 23 occurs during the last twelve (12) months of the term of this
Lease or any extension thereof.
24. Eminent Domain. In the event the whole or a substantial part of the
--------------
Premises, the Building or the Land shall be taken for any public or quasi-public
purpose by any lawful power or authority by exercise of the right of
appropriation, condemnation or eminent domain, or sold to said authority to
prevent such taking (collectively referred to herein as a "taking"), Landlord or
Tenant (only with regard to a taking of the Premises), shall have the right to
terminate this Lease effective as of the date possession is required to be
surrendered to said authority, and rent shall be apportioned as of that date.
For purposes of this Section, a substantial part of the Premises, the Building
or the Land shall be considered to have been taken if, the taking shall render
it undesirable for this Lease to continue or for Landlord to continue operating
the Building. Tenant shall not assert any claim against Landlord or the taking
authority for any compensation arising out of or related to such taking, and
Landlord shall be entitled to receive the entire amount of any award without
deduction for any estate or interest of Tenant. If Landlord does not elect to
terminate this Lease, or if the taking is of less than a substantial part of the
Premises, the Building, or the Land, the Annual Basic Rent and additional rent
payable by Tenant pursuant to Sections 5 and 6 shall be adjusted (based on the
ratio that the number of square feet of rentable area taken bears to the number
of square feet in the Premises immediately prior to such taking) as of the date
possession is required to be surrendered to said authority and Landlord shall
repair actual damages resulting from the taking required to make the Premises
tenantable. Nothing contained in this Section shall be deemed to give Landlord
any interest in any award made to Tenant for the taking of personal property and
fixtures belonging to Tenant, and for relocation, as long as such award is made
in addition to and separately stated from any award made to Landlord for the
Premises, the Building and the Land. Landlord shall have no obligation to
contest any taking.
25. Defaults and Remedies.
---------------------
(a) The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant.
(i) The failure by Tenant to make any payment or rent or additional
rent or any other payment required to be made by Tenant hereunder, as and when
due, where such failure shall continue for a period of ten (10) days after
written notice from Landlord, provided however than after the 2nd such notice
during the Lease term, any such failure to make a payment shall constitute a
default by Tenant with no notice if payment is not received within ten (10) days
after the date on which such payment is due.
13
<PAGE>
(ii) The failure by Tenant to observe or perform any of the other
express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, where such failure shall continue for a period of thirty
(30) days after written notice thereof from Landlord to Tenant; provided,
however, that if the nature of Tenant's default is such that more than thirty
(30) days are reasonably required for its cure, then Tenant shall not be deemed
to be in default if Tenant shall commence such cure promptly and shall
thereafter diligently pursue such cure to completion, which completion shall
occur not later than ninety (90) days from the date of such notice from Landlord
unless Tenant is diligently pursing to cure to completion, but the pursuit has
been delayed beyond the control of the Tenant.
(iii) Tenant's abandonment of the Premises for a period in excess of
thirty (30) days, and failure to make rent payments due. Tenant's vacating and
diligent efforts to sublet shall not be considered abandonment as long as
Tenant's rental payments are current and Tenant continues to make rental
payments.
(iv) An Event of Bankruptcy as defined in Section 19.
(b) Upon the occurrence of a default by Tenant, Landlord shall have the
right, then or at any time thereafter:
(1) Without demand or notice, to reenter and take possession of all
or any part of the Premises, to expel Tenant and those claiming through Tenant
and to remove any property therein, either by summary proceedings or by any
other action at law, in equity or otherwise, with or without terminating this
Lease, without being deemed guilty of trespass and without prejudice to any
other remedies of Landlord for breach of this Lease, and/or
(2) To give Tenant written notice of Landlord's intent to terminate
this Lease, and on the date specified in Landlord's notice, Tenant's right to
possession of the Premises shall cease and this Lease shall terminate.
(c) In the event of any such default by Tenant, in addition to any other
remedies available to Landlord at law or in equity, Landlord shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder. In
the event that Landlord shall elect to so terminate this Lease then Landlord may
recover from Tenant:
(i) the worth at the time of award of any unpaid rent which had been
earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination until the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(iii) the worth at the time of award of the amount of by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; plus
(iv) any other amount necessary to compensate Landlord for all the
harm and damages proximately and directly caused by Tenant's failure to perform
its obligations under this Lease.
(v) As used in Subparagraphs 25(c)(i) and (ii) above, the "worth at
the time of award" is computed by allowing interest at the lesser of (i) the
prime rate of interest announced from time to time by The Riggs National Bank of
Washington, D.C., plus five percent (5%) per annum; or (ii) the maximum rate
permitted by law per annum. As used in Subparagraph 25(c)(iii) above, the "worth
at the time of award" is computed by discounting such amount at the discount
rate of the Federal Reserve Bank of Richmond at the time of award.
14
<PAGE>
(d) In the event of any such default by Tenant, Landlord shall also have
the right, with or without terminating this Lease, to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant. No re-entry or taking possession of the Premises by Landlord pursuant
to this Subparagraph 25 (d) shall be construed as an election 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.
(e) All rights, options and remedies of Landlord contained in this Lease
shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Landlord shall have the right to pursue any one or
all of such remedies or any other remedy or relief which may be provided by law,
whether or not stated in this Lease. No waiver or default of Tenant hereunder
shall be implied from any acceptance by Landlord of any rent or other payments
due hereunder or any omission by Landlord to take any action on account of such
default if such default persists or is repeated, and no express waiver shall
affect defaults other than as specified in said waiver. The consent or approval
of Landlord to or of any act by Tenant requiring Landlord's consent or approval
shall not be deemed to waive or render unnecessary Landlord's consent or
approval to or of any subsequent similar acts by Tenant.
26. Assignment and Subletting.
-------------------------
(a) Tenant shall have the right to fully assign or sublease all or any
part of the Premises, or allow any other person or entity to occupy or use all
or any part of the Premises, subject only to obtaining Landlord's prior written
consent of the Subtenant, which consent will not be unreasonably withheld,
conditioned, or delayed. Approval or consent shall not be required for a sublet
or assignment to any related entity or affiliate or successor of Tenant. Any
assignment, encumbrance or sublease without Landlord's prior written consent
shall be void and shall constitute a default. No consent to any assignment,
encumbrance or sublease shall constitute a waiver of the provision of this
Section with respect to any subsequent assignment, encumbrance or sublease.
Landlord shall have the right to require any subtenant which is not a Tenant
related entity or affiliate, to establish a reasonable Security Deposit prior to
Landlord consent.
(b) If for any proposed assignment or sublease approved by Landlord,
Tenant receives rent or other consideration, either initially or over the term
of the assignment or sublease, in excess of the rent called for hereunder, or,
in case of the sublease of a portion of the Premises, in excess of such rent
fairly allocable to such portion, after appropriate adjustments to assure that
all other payments called for hereunder are taken into account, Tenant shall pay
to Landlord as additional rent hereunder fifty percent (50%) of the profit or
other consideration received by Tenant promptly after its receipt, unless such
subtenant or assignee is a Tenant related entity or affiliate in which case
Tenant may keep one-hundred percent (100%) of the profit payments received by
Tenant. Profits shall be defined as sublet revenue less sublet expenses which
shall include by way of example and not limited to: rental abatement, operating
expenses, construction/renovation costs, architectural and design fees, legal
and accounting fees, brokerage commissions, marketing and advertising costs,
moving allowances, rental paid to Landlord while actively subletting the
Premises, cash payments or allowances, and other reasonable and customary
expenses.
(c) If Tenant is a corporation, then the sale, issuance or transfer of any
voting capital stock of Tenant, by the person, persons or entities owning a
majority interest therein as of the date of this Lease, which results in the
majority interest of Tenant, shall be deemed an assignment within the meaning of
this Section. If Tenant is a partnership, the sale or transfer of the
partnership share, or any portion thereof, of any general partner shall be
deemed an assignment of this Lease. Occupancy of all or part of the Premises by
parent, subsidiary, or affiliated companies of Tenant shall not be deemed an
assignment or subletting. Regarding this paragraph 26(c) and any change in
Tenant's controlling interest as stated herein as of the date of this Lease,
Tenant shall provide Landlord with financial or other reasonable information
requested by Landlord, regarding any such change in Tenant's interest.
Landlord's consent regarding any change in Tenant's controlling interest shall
not be unreasonably
15
<PAGE>
withheld, conditioned or delayed. Provided Tenant is not in
default, Landlord shall not have the ability to recapture any subleased space
during the initial or any extended term of the Lease.
27. Subordination.
-------------
(a) This Lease is subject and subordinate to all ground or underlying
leases and to all mortgages or deeds of trust which may now or hereafter affect
or encumber the Building or the Land and to all renewals, modifications,
consolidations, replacements or extensions thereof. This paragraph shall be
self-operative and no further instrument of subordination shall be required. In
confirmation of any such subordination, Tenant shall execute within ten (10)
calendar days after receipt, any certificate or agreement that Landlord may
reasonably request. Tenant covenants and agrees to attorn to Landlord or any
successors to Landlord's interest in the Demised Premises, whether by sale,
foreclosure or otherwise. Landlord and its mortgagee, New England Mutual Life
Insurance Company, will enter into a subordination, non-disturbance and
attornment agreement on mutually acceptable terms and conditions.
(b) Notwithstanding the foregoing, in the event any such ground lessor or
mortgagee shall elect to make the lien of this Lease prior to the lien of its
ground lease, mortgage or deed of trust, then, upon such party, together with
Landlord, giving Tenant written notice to such effect, this Lease shall be
deemed to be prior in lien to the lien of such ground lease, mortgage or deed of
trust, whether dated prior or subsequent thereto, and Tenant covenants and
agrees to execute and deliver, upon demand by Landlord and in the form requested
by Landlord, any additional documents evidencing the priority of this Lease with
respect to any ground leases or underlying leases or the lien of any mortgage or
deed of trust.
28. Estoppel Certificate.
--------------------
(a) Within ten (10) business days following any written request which
Landlord may make from time to time, Tenant shall execute and deliver to
Landlord a statement certifying: (i) the date of commencement of this Lease;
(ii) the fact that this Lease is unmodified and in full force and effect, (or,
if there have been modifications hereto, that this Lease is in full force and
effect, as modified, and stating the date and nature of such modifications);
(iii) the date to which the rental and other sums payable under this Lease have
been paid; (iv) the fact that there are not current defaults under this Lease by
either Landlord or Tenant, except as specified in Tenant's statement; and (v)
such other matters as may be requested by Landlord. Landlord and Tenant intend
that any statement delivered pursuant to this Section 28 may be relied upon by
any lender, prospective lender, purchaser or prospective purchaser with respect
to the Building or any interest therein.
(b) Tenant's failure to deliver such statement within such time shall
be conclusive upon Tenant (i) that this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) that there
are no uncured defaults in Landlord's performance hereunder, and (iii) that not
more than one (1) month's rental not including those months subject to rental
abatement has been paid in advance.
29. Rules and Regulations. Tenant shall faithfully observe and comply with the
---------------------
"Rules and Regulations," a copy of which is attached hereto, and all
modifications thereof and additions thereto from time to time adopted by
Landlord for the benefit of the operation of the Building. Landlord shall not be
responsible to Tenant for the violation or non-performance by any other tenant
or occupant of the Building or any of said Rules and Regulations. Landlord will
use reasonable diligence to have all tenants comply with Rules and Regulations.
30. Conflict of Laws. This Lease shall be governed by and construed pursuant to
----------------
the laws of the jurisdiction in which the Premises are located.
16
<PAGE>
31. Successors and Assigns. Except as otherwise provided in this Lease, all of
----------------------
the covenants, conditions and provisions of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
32. Surrender of Premises. The voluntary or other surrender of this Lease by
---------------------
Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Landlord, operate as an assignment to it or any or all subleases
or subtenancies.
33. Attorneys' Fees.
---------------
(a) In the event that any action or proceeding is brought to enforce any
term, covenant or condition of this Lease on the part of the Landlord or Tenant,
the prevailing party in such litigation shall be entitled to reasonable attorney
fees to be fixed by such action or proceeding.
(b) Should Landlord be named as a defendant in any suit brought in
connection with, arising out of, or related to Tenant's occupancy of the
Building or the Premises hereunder, Tenant shall pay to Landlord its costs and
expenses incurred in such suit, including reasonable and actual attorneys' fees,
except for costs and expenses incurred in connection with a suit brought by
Tenant against Landlord regarding Landlord's obligation under this Lease.
(c) Should Tenant be named as a defendant in any such suit brought in
connection with, arising out of, or related to Landlord's ownership of the
Building or Premises hereunder, Landlord shall pay to Tenant its cost and
expenses incurred in such suit, including reasonable and actual attorney's fees,
except for costs and expenses incurred in connection with a suit brought by
Landlord against Tenant regarding Tenant's obligation under this Lease.
34. Performance by Tenant. All covenants and agreements to be performed by
---------------------
Tenant under any of the terms of this Lease shall be performed by Tenant at
Tenant's sole cost and expense and without any abatement of rent. If Tenant
shall fail to pay any sum or money, other than Annual Basic Rent, required to be
paid by it hereunder or shall fail to perform any other act on its part to be
performed hereunder, Landlord may, without waiving or releasing Tenant from any
obligations of Tenant (and without waiving its rights against Tenant on account
of such default), but shall not be obligated to, make any such payment or
perform any such other act on Tenant's part to be made or performed as in this
Lease provided. All sums so paid by Landlord and all necessary incidental costs,
together with interest thereon at the maximum rate permissible by law, from the
date of such payment by Landlord, shall be payable to Landlord as additional
rent. For each payment of rent hereunder which is more than 10 days later Tenant
shall also pay to Landlord a service charge in the amount of three percent (3%)
of the outstanding arrearage. Further, following each second payment of rent
which is more than 10 days late in any six (6) month period, Landlord shall have
the option to require that, beginning with the first payment of rent due
following the date such late payment was due, rent shall be payable two (2)
months in advance.
35. Mortgage Protection. In the event of any default on the part of Landlord,
-------------------
Tenant will give notice by registered or certified mail to any beneficiary of a
deed of trust or mortgage covering the Premises whose address shall have been
furnished to Tenant, and shall offer such beneficiary or mortgagee a reasonable
opportunity to cure the default, not to exceed however, thirty (30) days unless
the nature of Landlord's default is such that more than thirty (30) days are
reasonably required for its cure, then Landlord shall not be deemed in default
if Landlord commenced such cure, promptly and thereafter diligently prosecuted
such cure to completion.
36. Definition of Landlord. The term "Landlord" shall be limited to mean only
----------------------
the owner at the time in question, of the fee title of the Premises. In the
event of any transfer, assignment or other
17
<PAGE>
conveyance or transfers of any such title, Landlord herein named (and in case of
subsequent transfers or conveyances, the then grantor) shall be automatically
freed and relieved from and after the date of such transfer, assignment or
conveyance of all liability as respects the performance of any covenants or
obligations on the part of Landlord continued in this Lease thereafter to be
performed in the event such transferee or assignee specifically assumes such
obligations in writing, to the extent permitted by law, without further
agreement, the transferee of such title shall be deemed to have assumed and
agreed to observe and perform any and all such future obligations of Landlord
hereunder during its ownership of the Premises. Landlord may transfer its
interest in the Premises without the consent of Tenant and such transfer or
subsequent transfer shall not be deemed in violation on Landlord's part of any
of the terms and conditions of this Lease.
37. Waiver. The waiver by Landlord of any breach of any term, covenant or
------
condition herein contained shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant or condition herein contained,
nor shall any custom or practice which may grow up between the parties in the
administration of the terms hereof be deemed a waiver of, or in any way affect,
the right of either party to insist upon the performance by the other in strict
accordance with said terms. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, other than the failure of Tenant
to pay the particular rent so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such rent.
38. Parking. Tenant shall have the right to utilize at no charge 78 (or 3.6 per
-------
1,000 rentable square feet) spaces in the Building parking facilities on a
nonexclusive basis with other tenants of the building upon such terms and
conditions as may from time to time be established by Landlord. Landlord
reserves the right in its absolute discretion to determine whether the parking
facilities are becoming crowded and to allocate and assign parking spaces among
Tenant and other tenants. It is understood and agreed that Landlord assumes no
responsibility, and shall not be held liable, for any damage or loss to any
automobiles parked in the parking facilities or to any personal property locate
therein, or for any injury sustained by any person in or about the parking
facilities. Landlord shall designate at Tenant's request visitor parking for
Tenant's customers and invitees.
39. Terms and Headings. The words "Landlord" and "Tenant" as used
------------------
herein shall include the plural as well as the singular. Words used in any
gender include other genders. The section headings of this Lease are not a part
of this Lease and shall have no effect upon the construction or interpretation
of any part hereof.
40. Time. Time is of the essence with respect to the performance of every
----
provision of this Lease in which time or performance is a factor.
41. Prior Agreements: Amendments. This Lease contains all of the
----------------------------
agreements of the parties hereto with respect to any matter covered or mentioned
in this Lease, and no prior agreement or understanding pertaining to any such
matter shall be effective for any purpose. This Lease may not be amended except
by an agreement in writing signed by the parties hereto or their respective
successors in interest.
42. Enforceability.
--------------
(a) If any term or provision of this Lease or the application thereof to
any person, entity or circumstance shall, to any extent, be held invalid or
enforceable, the remaining terms and provisions of this Lease, and the
application of such invalid or unenforceable term or provision to persons,
entities and circumstances other than those as to which it is held invalid or
enforceable, shall not be
18
<PAGE>
affected thereby. Each term and provision of this
Lease shall be valid and enforced to the fullest extend permitted by law.
(b) In any case where this Lease provides for a rate of interest that is
higher than the maximum rate permitted by law, the rate specified herein shall
be deemed to equal, and the party designated as recipient of such interest shall
be entitled to receive, the maximum rate of interest permitted by law.
43. Recording. Tenant shall not record this Lease or a short form memorandum
---------
thereof without the prior written consent of Landlord, which consent shall not
be unreasonably withheld, conditioned or delayed.
44. Limitation. In consideration of the benefits accruing hereunder, Tenant and
----------
all successors and assigns of Tenant covenant and agree that, in the event of
any actual or alleged failure, breach or default hereunder by Landlord: (a) The
sole and exclusive remedy shall be against the partnership and its partnership
assets; including the proceeds of any asset dispositions, insurance benefits or
condemantion awrds; (b) No partner of Landlord shall be sued or named as party
in any suit or action (except as may be necessary to secure jurisdiction of the
partnership); (c) No service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the partnership);
(d) Any judgment granted against any partner of Landlord may be vacated and set
aside at any time as if such judgment had never been granted; (e) No writ of
execution will ever be levied against the assets of any partner of Landlord; and
(f) These covenants and agreements are enforceable both by Landlord and also by
any partner of Landlord; and (g) These covenants and agreements are enforceable
both by Landlord and also by any partner of Landlord.
45. Riders. Clauses, plats and riders, if any, signed by Landlord and Tenant
------
and affixed to this Lease are a part hereof.
46. Signs. No sign, advertisement or notice shall be inscribed, painted,
-----
affixed or displayed on the windows or exterior walls of the Premises or on any
public area of the Building, except the directories and the office doors, and
then only in such places, numbers, sizes, color and style as are approved by
Landlord and which conform to all applicable laws and/or ordinances. Any and all
signage on, in or relating to the Premises shall be paid for by Tenant.
Landlord, at Landlord's sole cost and expense, shall install Tenant's name on
the existing monument sign, located on Fox Mill Road. In addition, Landlord
shall make improvements to Tenant's current monument signage in order to
reasonably improve the visibility of the Tenant's name from Dulles Technology
Drive. Landlord shall also provide all code-required signage for the Building.
Notwithstanding anything contained herein to the contrary, Landlord recognizes
Tenant's right to display the Building signage which is currently mounted above
the entrance to the Premises.
47. Modification for Lender. If, in connection with any construction, interim
-----------------------
or permanent financing for the Building, any lender shall request reasonable
modifications in this Lease as a condition to such financing, Tenant will not
withhold, delay or defer its consent thereto, provided that such modifications
do not: (1) materially increase the obligations of Tenant hereunder; (2)
materially adversely affect the leasehold interest hereby created or Tenant's
rights hereunder; or (3) increase Tenant's rental obligations.
48. Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a
-----------------------
lesser amount than the rent payment herein stipulated shall be deemed to be
other than on account of the rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment
19
<PAGE>
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy provided in this Lease.
49. Financial Statements. At any time during the term of this Lease, Tenant
--------------------
shall no less frequently than annually, upon ten (10) days prior written notice
from Landlord, provide Landlord with a current financial statement and if
available, the financial statements of the two (2) years prior to the current
financial statement year. Such statement shall be prepared in accordance with
generally accepted accounting principles and, if such is the normal practice of
Tenant, shall be audited by an independent certified public accountant.
50. Tenant Improvements. Landlord shall provide design, permitting, and
-------------------
construction of the Premises in accordance with Exhibit B based on the space
plan attached hereto as Exhibit B-1. Tenant shall comply with all code
requirements relating to Tenant's operations and shall provide Landlord with a
copy of any permits required by any federal, state or local government entity in
order to operate.
51. First Right of Refusal.
-----------------------
(a) If at any time during the term of this Lease, Landlord engages in
discussions for the lease of any or all available space within the building
which Landlord determines are "serious" in nature and may lead to the execution
of a letter of intent or lease agreement (a "Serious Proposal"), Landlord shall
provide Tenant notice of such Serious Proposal, such notice to consist of the
location and size of the space which is the subject of the Serious Proposal, the
rental rate for such space, the term of the lease, and any other information
which Landlord deems relevant. Tenant shall have the right to negotiate with
Landlord to lease all of the space which is the subject of the Serious Proposal
by giving written notice of the exercise of such right within three (3) business
days after receipt of the Landlord's notice by Tenant's authorized
representative. Landlord and Tenant shall have fifteen (15) days after
Landlord's receipt of Tenant's notice to negotiate a letter of intent setting
for the terms upon which Tenant would lease all of the space which is the
subject of the Serious Proposal provided however, the rental rate shall be the
then escalated rental rate. If Landlord and Tenant do not execute a letter of
intent setting forth the basic terms upon which Tenant would lease all of the
space which is the subject of the Serious Proposal during such fifteen (15) day
period, for any reason whatsoever, Landlord shall have no further obligation to
negotiate with Tenant for the leasing of the space which is the subject of the
Serious Proposal, and Tenant shall have no further obligation to lease such
space pursuant to this Section except as provided in Section 51(b) below. If
during such fifteen (15) day period Landlord and Tenant execute a letter of
intent, Landlord and Tenant shall have ten (10) business days to negotiate and
execute a lease for the space which is the subject of the Serious Proposal. If
Landlord and Tenant do not execute a lease within such ten (10) business day
period, for any reason whatsoever, Landlord shall have no further obligation to
negotiate with Tenant for the leasing of such space, and Tenant shall have no
further right to lease such space pursuant to this Section 51, except as
provided in Section 51(b) below. Nothing set forth herein shall bar or prevent
Landlord from continuing to market any portion of the Expansion Space while
Landlord is negotiating with Tenant pursuant to the provisions of this Section.
(b) Notwithstanding anything set forth in Section 51 (a) to the contrary,
in the event that Landlord does not execute a lease with the party with which
Landlord is negotiating a Serious Proposal, then Landlord shall again follow the
procedure set forth in Subsection 51 (a) if Landlord receives another Serious
Proposal for all or a portion of the space which was the subject to the previous
Serious Proposal.
(c) Tenant's rights under this Section are subject and subordinate to any
and all rights granted by Landlord to any purchaser of the Building. Landlord
shall notify Tenant of any sale of the building. If Tenant desires expansion
space which cannot be provided by Landlord or the prospective purchaser, and
Tenant informs Landlord in writing of its desire to expand with fifteen (15)
days of
20
<PAGE>
notice by Landlord to sell, the Tenant may cancel this Lease with one
hundred-eighty (180) days notice to Landlord.
(d) If Tenant is in default under this Lease on the date Landlord notifies
Tenant of a Serious Proposal for all or a portion of available space or at any
time thereafter prior to the date Tenant signs a lease for such space, then at
Landlord's option, Tenant's rights pursuant to this Section shall lapse and be
of no further force or effect.
(e) Tenant's rights under this Section may only be exercised by Tenant and
may not be exercised by any transferee, sublessee or assignee of Tenant
provided, however, that a permissible sublessee or assignee under Section 26 of
this Lease of one hundred percent (100%) of the square footage of the Premises
shall have the right to exercise the expansion rights set forth in this Section
51; and further, provided, that the rights of any permissible sublease or
assignee under Section 26 of this Lease of one hundred percent (100%) of the
square footage of the Premises shall be subject to the matters described in
Subsection 51(c).
(f) Except as provided in Subsection 51(e) above, if at any time fifty
percent (50%) or more of the square feet of rentable area of the Premises has
been terminated, subleased, or assigned, the Tenant's rights pursuant to this
Section shall lapse and be of no further force or effect.
52. Storage Space. Landlord will allow Tenant to use the area specified on
-------------
Exhibit D (the "Storage Space"), consisting of 2,117 square feet for storage of
records through March 31, 1994. Such Storage Space shall be made available to
Tenant on a month-to-month basis and shall be cancelable by the Landlord in the
event that the Storage Space has been leased to a third party, following ten
(10) days prior written notice to Tenant. From October 1, 1993, through March
31, 1994, Tenant shall be able to use the Storage Space at no cost. Commencing
April 1, 1994, Tenant may lease the Storage Space for one (1)-six (6) month term
at a monthly cost of five hundred and 00/100 dollars ($500.00) per month,
payable concurrently with Tenant's payments of Annual Basic Rent. Should Tenant
opt not to lease the Storage Space for a six (6) month term as specified above,
Tenant may continue to occupy the Storage Space on a month-to-month basis at a
cost of eight hundred fifty and 00/100 dollars ($850.00) per month, payable
concurrently with Tenant's payments of Annual Basic Rent.
53. Quiet Enjoyment. Landlord covenants that Tenant, upon paying the Basic Rent
---------------
and the Additional Rent provided for in this Lease, and upon performing and
observing all of the terms, covenants, conditions and provisions of this Lease
on Tenant's part to be kept, observed and performed, shall quietly hold, occupy
and enjoy the Leased Premises during the Term without hindrance, ejection or
molestation by Landlord or any party lawfully claiming through or under
Landlord.
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease the day and year
first above written.
<TABLE>
<CAPTION>
WITNESS/ATTEST: LANDLORD:
<S> <C>
DULLES TECH CENTER I, LTD.
By: DTC Associates I, L.P.
By: M.O.E./G.P., a Virginia Limited Partnership
By: /s/ By: /s/
--------------------------------------- ---------------------------------------
Title: Vice President Title: Vice President
-------------- --------------
Date: October 21, 1993 Date: October 21, 1993
---------------- ----------------
WITNESS/ATTEST: TENANT:
INDUSTRIAL TRAINING CORPORATION,
a Maryland Corporation
By: /s/ By: /s/
--------------------------------------- ---------------------------------------
Title: Vice President and Treasurer Title: Vice President and CFO
---------------------------- ----------------------
Date: October 20, 1993 Date: October 20, 1993
---------------- ----------------
</TABLE>
22
<PAGE>
EXHIBIT A
Floor Plan
Dulles Technology Center
Phase One, Building Two
13515 Dulles Technology Drive
Herndon, Virginia
23
<PAGE>
EXHIBIT B
WORK AGREEMENT
(INTENTIONALLY DELETED)
24
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
1. No sign, advertisement, name or notice shall be installed or displayed on
any part of the outside or inside of the Building except as noted elsewhere in
this Lease without the prior written consent of Landlord which shall not be
unreasonably withheld, conditioned or delayed.
2. No awning shall be permitted on any part of the Premises. Tenant shall not
place anything (including but not limited to blinds, shades, screens, or hanging
plants) against or near glass partitions or doors or windows which may appear
unsightly from outside the Premises.
3. Tenant shall not obstruct or interfere with the rights of others to use any
Building sidewalks, halls, exits, entrances, elevators or stairways. The common
areas of the Building are not for the general public, and Landlord retains the
right to control and prevent access thereto by all persons whose presence in the
reasonable judgment of Landlord would be prejudicial to the safety, character,
reputation and interests of the Building and its Tenants including any person
who appears to Landlord to be intoxicated or under the influence of liquor or
drugs; provided that nothing herein contained shall be construed to prevent such
access to persons with whom any Tenant is dealing in the ordinary course of its
business, unless such persons are engaged in illegal activities or unless such
persons violate the terms of the Lease or Landlord's rules and regulations. No
Tenant and no employee or invitee of any Tenant shall go upon the roof of the
Building without Landlord's consent which will not be unreasonably withheld.
4. All cleaning and janitorial services for the Building and Premises shall be
provided exclusively through Landlord.
5. Landlord will furnish Tenant, free of charge, with two keys to each door
lock in the Premises. Landlord may make a reasonable charge for any additional
keys. Tenant shall not alter any lock or install a new additional lock or bolt
on any door of its Premises without Landlord's consent which shall not be
unreasonably withheld. Tenant, upon the termination of its tenancy, shall
deliver to Landlord all keys for all doors.
6. Tenant shall not place a load upon any floor of the Premises which exceeds
the load per square foot which such floor was designed to carry. Landlord shall
have the right to prescribed the weight, size and position of all safes and
other heavy objects. Business machines and mechanical equipment 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 placed and maintained by Tenant, at
Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration.
7. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited quantities
necessary for the operation or maintenance of office equipment and in no event
shall any such combustible fluids be used for heating, warming or lighting.
Tenant shall not use or permit to be used in the Premises any foul or noxious
gas or substance, or permit or allow the Premises to be occupied or used in a
manner offensive or objectionable to Landlord or other occupants of the Building
by reason of noise, odors or vibrations, nor shall Tenant bring into or keep in
or about the Premises any birds or animals (except for seeing eye dogs).
8. Tenant shall not use any method of heating or air-conditioning other than
that supplied by Landlord, unless stated otherwise hearing, or with consent of
the Landlord which will not be unreasonably withheld.
9. Tenant shall cooperate with Landlord to assure the effective operation of
the Building's heating and air-conditioning systems and shall comply with any
governmental energy saving rules, laws or regulations of which Tenant has
notice. Tenant shall refrain from adjusting controls other
25
<PAGE>
than room thermostats installed for Tenant's use. Tenant shall keep corridor
doors closed, and shall close window coverings at the end of each business day.
10. Tenant shall close and lock the doors of the Premises and entirely shut off
all water faucets or other water apparatus and electricity, gas and air outlets
before Tenant and its employees leave the Premises. Tenant shall be responsible
for any damage or injuries sustained as a result of noncompliance with this
rule.
11. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were constructed and
no foreign substance of any kind whatsoever shall be thrown therein. The expense
of any breakage, stoppage or damage resulting from the violation of this rule
shall be borne by the Tenant who, or whose employees or invitees, shall have
caused it.
12. Tenant shall not sell or permit the sale at retail of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to the
general public in or on the Premises. Tenant shall not make any room-to-room
solicitation of business from other tenants in the Building and Tenant
acknowledges that canvassing and peddling of any kind in the Building are
prohibited.
13. Tenant shall not install any radio or television antenna, loudspeaker or
other device on the roof or exterior walls of the Building without Landlord'
prior written consent which shall not be unreasonably withheld, conditioned, or
delayed. Tenant shall not interfere with radio or television broadcasting or
reception from or in the Building.
14. Landlord reserves the right to reasonably approve where and how telephone
and telegraph wires are to be introduced to the Premises. Tenant shall not affix
any floor covering to the floor of the Premises in any manner except as approved
by Landlord. Tenant shall repair any damages resulting from holes cut or bored
for wires or other noncompliance with this rule.
15. Tenant shall store all its trash and garbage within the Premises. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage disposal.
All garbage and refuse disposal shall be made in accordance with directions
issued from time to time by Landlord.
16. The Premises shall not be used for the storage of merchandise held for sale
to the general public, for lodging or for manufacturing of any kind.
17. Tenant shall not use in any space or in the public halls of the Building
any hand trucks except those equipped with rubber tires and side guards or such
other material-handling equipment as Landlord may approve. Tenant shall not
bring any other vehicles of any kind into the Building without Landlord's
consent.
18. Without the prior written consent of Landlord, Tenant shall not use the
name of the Building in connection with or in promoting or advertising the
business of Tenant except as Tenant's address.
19. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency
having jurisdiction.
20. Tenant assumes reasonable responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
21. The requirements of Tenant will be attended to only upon appropriate
application to the Office of the Building by an authorized individual. Employees
of Landlord shall not perform any work or do anything outside their regular
duties unless under special instructions from Landlord, and no employee of
Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.
26
<PAGE>
22. Tenant shall not park its vehicles in any parking areas designated by
Landlord as areas for parking by visitors to the Building. Tenant shall not
leave vehicles in the Building parking areas other than vehicles, motorcycles,
motor-driven or non-motor-driving bicycles or four-wheeled trucks. Landlord
shall not be responsible or have any liability for vehicles left in the project
parking areas overnight.
23. Tenant shall be responsible for the observance of all the foregoing rules
by Tenant's employees, agents, clients, customers, invitees and guests.
Initials of:
/s/ /s/
- ------------------------- --------------
Landlord Tenant
27
<PAGE>
EXHIBIT D
Floor Plan
Indicating Storage Space
Dulles Technology Center
Phase One, Building Two
13515 Dulles Technology Drive
Herndon, Virginia
28
<PAGE>
FIRST AMENDMENT
to Lease
by and between
Dulles Tech Center I, Ltd., as Landlord
and
Industrial Training Corporation, as Tenant
THIS FIRST AMENDMENT TO LEASE ("First Amendment") is entered into this______day
of______________, 1994 by and between Dulles Tech Center I, Ltd., a California
limited partnership ("Landlord") and Industrial Training Corporation, a Maryland
corporation ("Tenant").
R E C I T A L S:
----------------
WHEREAS, Landlord and Tenant are parties to a Lease dated October 21, 1993 for
approximately 21,767 square feet of rentable area in an office building located
at 13515 Dulles Technology Drive, Herndon, Virginia in an office park known as
Dulles Technology Center; and
WHEREAS, Tenant desires to lease from Landlord and Landlord is willing to demise
and lease to Tenant approximately 4,457 additional rentable square feet, upon
the terms, conditions, covenants and agreements set forth in this Addendum.
W I T N E S S E T H:
--------------------
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid by each
party to the other, the mutual promises herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
and intending to be legally bound, the parties agree as follows.
1. The recitals contained above are true to the best of the parties' knowledge
and are incorporated by reference herein.
2. Any term used herein that is defined in the Lease shall have the same meaning
as specified in the Lease unless otherwise specifically provided herein.
3. (c) Section 2 of the Lease is hereby amended by adding the following new
Section 2(c):
"In addition to the Original Premises, upon the execution of this First
Amendment, Tenant shall have the right to use and occupy temporary storage space
located as set forth on Exhibit A-l attached hereto and incorporated herein for
all purposes (the "Temporary Space"). Tenant accepts the Temporary Space in its
"AS IS WITH ALL FAULTS" condition, and Landlord will not be obligated to make
any alterations, additions, changes or modifications to the Temporary Space. The
Temporary Space shall be deemed part of the Premises for all purposes of the
Lease until Tenant vacates and surrenders the Temporary Space to Landlord except
for the payment of Annual Basic Rent and Tenant's Proportionate Share of Basic
Operating Charges which shall be paid for the Temporary Space pursuant to this
Section. Commencing on June 1, 1994, Tenant shall pay $371.42 per month as
Annual Basic Rent for the Temporary Space and $1,385.38 per month for Basic
Operating Charges for the Temporary Space. In addition, Tenant shall pay all
costs of electricity for the Temporary Space which costs shall be deemed
additional rent. On the Expansion Space Lease Commencement Date, Tenant shall
vacate and surrender the Temporary Space and Tenant's failure to do so will be a
default under the Lease. Tenant shall surrender the Temporary Space and Tenant's
failure to do so will be a default under the Lease. Tenant shall surrender the
Temporary Space to Landlord in broom clean and in good condition and repair,
ordinary wear and tear excepted. Tenant shall indemnify and hold Landlord
harmless from any and all damages, claims, costs, expenses, liabilities or
causes of action (including attorneys' fees) arising from, connected to or
related to Tenant's failure to vacate and surrender the Temporary Space to
Landlord, including but not limited to any and all rent that Landlord might have
received from any existing or prospective tenant who might have executed a lease
for such Temporary Space with Landlord. In addition, Landlord and Tenant
acknowledge and agree that the Annual Basic Rent referred to in Section 1 of the
Lease and Tenant's Proportionate
29
<PAGE>
Share referred to in Section 1 of the Lease are calculated for only the Original
Premises and the Expansion Space, and therefore, in the event Tenant fails to
vacate and surrender the Temporary Space on the Expansion Space Lease
Commencement Date: (l) in addition to the Annual Basic Rent referred to in
Section 1, Tenant shall commence paying Annual Basic Rent for the Temporary
Space in the amount of Five and 75/100 Dollars ($5.75) per rentable square foot
of the Temporary Space as adjusted pursuant to Section 5(b) of the Lease until
the date Tenant vacates and surrenders the Temporary Space; and (2) Tenant's
Proportionate Share shall be revised to include the Temporary Space. On Tenant's
vacation and surrender of the Temporary Space to Landlord, the term "Premises"
shall no longer include the Temporary Space and shall only mean the Original
Premises and the Expansion Space."
4. Effective on the Expansion Space Lease Commencement Date, Tenant shall pay
$371.42 per month as Annual Basic Rent for the Expansion Space and $1,385.38 per
month for Basic Operating Charges for the Expansion Space up through October 31,
1994 and thereafter Tenant shall pay Annual Basic Rent for the Expansion Space
pursuant to Section 5(b) of the Lease and Basic Operating Charges pursuant to
Section 6 of the Lease.
5. Effective on the Expansion Space Lease Commencement Date, as hereinafter
defined, Section 1 (Annual Basic Rent) of the Lease is hereby amended by
------ ----- ----
deleting it in its entirety and substituting in lieu thereof the following new
Section 1 (Annual Basic Rent):
-----------------
"Annual Basic Rent: As of the Commencement Date, TWO HUNDRED TWENTY EIGHT
-----------------
THOUSAND FIVE HUNDRED FIFTY THREE AND 50/100 DOLLARS ($228,553.50) per annum,
for the Original Premises which is based on 21,767 rentable square feet at the
rate of $10.50 per rentable square feet full service net of electric which is
subject to the increases set forth in the schedule pursuant to Section 5(b).
As of the Expansion Space Lease Commencement Date, the Annual Basic Rent for the
Expansion Space shall be as provided in the schedule pursuant to Section 5(b)."
6. Effective on the Expansion Space Lease Commencement Date, as hereinafter
defined, Section 1 (Premises) of the Lease is hereby amended to provide that the
--------
Premises shall include approximately 4,457 additional rentable square feet
("Expansion Space") as described on Exhibit A attached hereto and incorporated
herein for all purposes. Effective on the Expansion Space Lease Commencement
Date, the term "Premises" shall mean a total of approximately 26,224 square feet
of space in the Building; the term "Original Premises" shall mean the original
21,767 square feet leased to Tenant, the term Temporary Space shall mean as
previously defined and the term "Expansion Space" shall mean as previously
defined.
7. The Expansion Space Lease Commencement Date shall be the date of Substantial
Completion (as hereinafter defined) of the tenant improvements pursuant to the
Plans as defined in Paragraph 12 of this First Amendment, whichever occurs
later. Substantial Completion shall be that date, as determined by Landlord or
Landlord's architect, when all the tenant improvements pursuant to the Plans
have been completed except for minor punch-list items. In the event Tenant
causes any delay due to (a) Tenant-initiated change orders to the Plans, (b)
Tenant's request for long-lead materials, finishes, installations or specialty
items, or (c) due to affirmative acts of Tenant, or any person, firm or
corporation employed by Tenant, such as causing damages during any inspection of
the tenant improvements (all of which are individually or collectively referred
to as "Tenant Delays") then Substantial Completion shall be the date the
Expansion Space would have been completed if such Tenant Delay had not occurred.
Landlord shall endeavor to deliver the Expansion Space by November 1, 1994. It
is understood and agreed that in the event that Landlord cannot deliver the
Expansion Space on November 1, 1994, this First Amendment shall not be void or
voidable, nor shall Landlord be liable to Tenant for any loss or damage
resulting therefrom.
8. On the Expansion Space Lease Commencement Date, the second sentence of
Section 1 (Tenant's Proportionate Share) of the Lease is hereby deleted and the
-------- ------------- -----
following new second sentence of Section 1 (Tenant's Proportionate Share) is
-------- ------------- -----
hereby substituted in lieu thereof:
30
<PAGE>
"As of the Expansion Space Lease Commencement Date, Tenant's Proportionate Share
for the Original Premises shall be as defined herein, calculated to be 68.19% of
the total square feet area in the Building (31,923 SF); 22.73% of the total area
of the Project (Three Phase One Building totaling 95,769 sq. ft.); and 1.339% of
the office park (1,625,000 sq. ft).
As of the Expansion Space Lease Commencement Date, Tenant's Proportionate Share
for the Expansion Space shall be as defined herein, calculated to be 13.96% of
the total square feet area in the Building (31,923 SF); 4.65% of the total area
of the Project (Three Phase One Buildings totaling 95,769 sq. ft.); and .274% of
the office park (1,625,000 sq. ft.)"
9. Section 5(b) of the Lease is hereby amended by deleting Section 5(b) in its
entirety and substituting in lieu thereof the following Section 5 (b):
"(b) The Annual Basic Rent for the Original Premises shall escalate during
the Lease Term as indicated on the following schedule:
<TABLE>
<CAPTION>
Lease Year Period Escalation Annual Basic Rent
<S> <C> <C> <C>
1 9/1/93-8/31/94 N/A $10.50/SF, N.O.E.
2 9/1/94-8/31/95 $1.55/SF $12.05/SF, N.O.E.
3 9/1/95-8/31/96 3% $12.41/SF, N.O.E.
4 9/1/96-8/31/97 3% $12.78/SF, N.O.E.
5 9/1/97-8/31/98 3% $13.17/SF, N.O.E.
6 9/1/98-6/30/99 3% $13.56/SF, N.O.E.
</TABLE>
Commencing on November 1, 1994, Tenant shall pay to Landlord Annual Basic Rent
for the Expansion Space in accordance with the following schedule:
<TABLE>
<CAPTION>
Period Annual Base Annual Base Monthly
Rent/SF Rent Installment
<S> <C> <C> <C>
11/1/94- $5.75 $21,356.46 $2,135.65
8/31/95*
9/1/95- $5.92 $26,385.44 $2,198.79
8/31/96
9/1/96- $6.10 $27,187.70 $2,265.64
8/31/97
9/1/97- $6.28 $27,989.96 $2,332.50
8/31/98
9/1/98- $6.47 $24,030.66 $2,403.07
6/30/99*
</TABLE>
*Period reflects ten (10) months.
In the event the Expansion Space Lease Commencement Date is on a day other
than the first day of a calendar month, then the rental for the month in which
the Expansion Space Lease Commencement Date occurs shall be prorated in the
proportion that the number of days this Lease is in effect during such month
bears to thirty (30) days.
Notwithstanding anything in this Section 5(b) to the contrary, Landlord
agrees to abate all of the Annual Basic Rent (but not the additional rent) for
the Expansion Space (but not the Original Premises) due for the first four (4)
full calendar months (for November 1, 1994, December 1, 1994, January 1, 1995
and February 1, 1995) for a total rent abatement equal to Eight Thousand Five
Hundred Forty-Two and 60/100 Dollars ($8,542.60)."
31
<PAGE>
10. Effective on the Expansion Space Lease Commencement Date, Section 6(a) of
the Lease is hereby amended by deleting the first two sentences and substituting
the following language in lieu thereof:
"(a) As additional rent for the Original Premises, Tenant shall pay to
Landlord its Proportionate Share for the Original Premises of the amount by
which the Basic Operating Charges incurred by Landlord in operation of the
Building and Land during any Lease Year exceed $4.40 per square foot (the "Base
Index"). The computation of Basic Operating Charges and Tenant's Proportionate
Share for the Original Premises shall be computed on a calendar year (or portion
thereof) and Tenant shall pay Tenant's Proportionate Share for the Original
Premises of the amount by which the Basic Operating Charges (averaged on a
monthly basis in the case of a partial year) for the calendar year exceed the
Base Index.
Commencing on November 1, 1994, as additional rent for the Expansion Space,
Tenant shall pay to Landlord its Proportionate Share for the Expansion Space of
the amount of Basic Operating Charges incurred by Landlord in operation of the
Building and Land during any calendar year."
11. Effective on the Expansion Space Lease commencement Date, Section 18 of the
Lease, Utilities and Services, is hereby amended by deleting it in its entirety
--------- --- --------
and substituting the new Section 18 in lieu thereof:
"18. Utilities and Services. Except as noted in this Section and elsewhere
--------- --- --------
in this Lease regarding Tenant paid utilities, Landlord will operate and
maintain the Building in a professional manner befitting a comparable first-
class office/R&D building in the Reston/Herndon area. A separate electric meter
currently exists for the Original Premises. Tenant shall furnish its own
electricity to the Original Premises and shall pay the entire cost thereof, and
Landlord shall have no responsibility for providing any such electric utility
for the Original Premises.
To the extent utilities for the Expansion Space are commonly metered,
Tenant shall pay Landlord as additional rent one hundred percent (100%) of its
Proportionate Share for such utilities. If Tenant's use of any such utilities is
other than for normal office use and/or disproportionate to other office tenants
of the Office Park, then Landlord and Tenant each have the right, at Tenant's
sole cost and expense, to have a separate meter installed upon the Expansion
Space. If a separate meter is installed upon the Expansion Space, Tenant will
pay to the utility company (or, at Landlord's request, to Landlord) all charges
for the Expansion Space on the basis of such meter readings.
To the extent utilities for the Expansion Space are not commonly metered,
Tenant agrees to pay promptly to the appropriate supplier all charges for water,
gas, steam, electricity or other power source, and all other utility services
used and/or supplied in connection with Tenant's use of the Expansion Space.
Tenant shall also pay on a timely basis to the appropriate supplier all charges
for telephone and all other communication services used, rendered and/or
supplied upon or in connection with the Expansion Space."
12. The following new Section 54 is hereby added to the Lease as follows:
"(a) Upon the execution of the First Amendment to Lease, Landlord agrees to
construct the improvements to the Expansion Space pursuant to plans and
specifications which shall be mutually agreed upon by Landlord and Tenant (the
"Plans"'). If there are any changes requested by Tenant after Tenant's and
Landlord's mutual approval of the Plans, then Tenant shall be responsible for
all costs and expenses resulting from such changes if such costs and expenses
exceed the Tenant Improvement Allowance (as hereinafter defined). No such
changes shall be made without: Landlord's prior written approval. Landlord shall
not responsible for delay in construction because of changes to the Plans after
the mutual approval by Landlord and Tenant. Upon the completion of any necessary
revised Plans, Landlord shall notify Tenant in writing of the cost which will be
chargeable to Tenant by reason of such change(s) and Landlord's Expansion Space
Lease Commencement Date due to such change, and Tenant shall, within five (5)
days, notify Landlord whether it desires to proceed with such changes. If Tenant
does not notify Landlord whether it desires such change within the aforesaid
five (5) day period, Landlord shall not be obligated to continue work on the
construction and may
32
<PAGE>
suspend work until such notice is given by Tenant. In addition, if Tenant fails
to pay Landlord the cost of such change if such cost shall exceed the Tenant
Improvement Allowance, the Landlord may suspend work until Landlord receives
Tenant's payment of such excess.
(b) Landlord hereby grants to Tenant an allowance toward the cost of the
tenant improvements to the Expansion Space in an amount not to exceed Twenty
Seven Thousand Seventy-Nine and 00/100 Dollars ($27,079.00) (the "Tenant
Improvement Allowance"). In the event that the cost of the tenant improvements
for the Expansion Space exceed the Tenant Improvement Allowance (any such excess
is hereby referred to as the "Allowance Excess"), then Tenant shall be liable
for the Allowance Excess and shall reimburse Landlord within seven (7) business
days of Tenant's receipt of Landlord's invoice for such Allowance Excess."
13. Except as amended hereby, all of the terms and provisions of the Lease shall
be and remain in full force and effect including but not limited to the renewal
option contained in Section 7.
33
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Amendment under seal on the date first above written.
WITNESS/ATTEST
LANDLORD:
DULLES TECH CENTER I, LTD.
By: DTC Associates I, LP.
By: M.O.R./G.P., a Virginia Limited Partnership
By: RA & VA, Inc.
By: /s/
------------------------------
TITLE: SENIOR V.P.
BY:
---------------------------------
(Corporate Seal)
WITNESS/ATTEST:
TENANT:
INDUSTRIAL TRAINING CORPORATION, a Maryland corporation
By: /s/
----------------------------------
Title: V.P. and CFO
(Corporate Seal)
BLP0107.94
5/16/94-10:27am
34
<PAGE>
Exhibit A
Floor Plan
(Expansion Space)
Dulles Technology Center
35
<PAGE>
Exhibit A-1
Floor Plan
(Temporary Space)
36
<PAGE>
JMB 102 (2/89)
Base Years
OFFICE LEASE
THIS LEASE made as of the 30th day of November, 1995 , between Carlyle Real
Estate Limited Partnership-XV an Illinois limited Partnership ("Landlord") and
Industrial Training Corporation a Maryland corporation whose address is 13515
Dulles Technology Drive, Herndon. VA 22071 ("Tenant").
WITNESSETH:
ARTICLE 1
PREMISES AND TERM
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord that
certain space known as Suite(s) 590 ("Premises") described or shown on Exhibit A
attached hereto, in the building known as the RiverEdge Place ("Building")
located at 2000 River Edge Parkway, Atlanta, GA 30328 ("Property", as further
described in Article 25), subject to the provisions herein contained. The term
("Term") of this Lease shall commence on the 1st day of February, 1996
("Commencement Date"), and end on the 31st day of January, 2001 ("Expiration
Date"), unless sooner terminated as provided herein. The Commencement Date shall
be subject to adjustment as provided in Article 4. Landlord and Tenant agree
that for purposes of this Lease the rentable area of the Premises is 3,405
square feet and the rentable area of the Property is 231,423 square feet.
ARTICLE 2
BASE RENT
Tenant shall pay Landlord monthly Base Rent of Four thousand eight hundred
twenty-three and 75/100 Dollars ($4,823.75), in advance on or before the first
day of each calendar month during the Term, except that Base Rent for the first
full calendar month for which Base Rent shall be due. shall be paid when Tenant
executes this Lease. If the Term commences on a day other than the first day of
a calendar month, or ends on a day other than the last day of a calendar month,
then the Base Rent for such month shall be prorated on the basis of 1/30th of
the monthly Base Rent for each day of such month.
ARTICLE 3
Additional Rent
(A) Taxes. Tenant shall pay Landlord an amount equal to Tenant's Prorata Share
of Taxes in excess of the amount of Taxes paid by Landlord during the calendar
year 1996 ("Base Tax Year"). The terms "Taxes" and "Tenant's Prorata Share"
shall have the meanings specified therefor in Article 25.
(B) OPERATING EXPENSES. Tenant shall pay Landlord an amount equal to Tenant's
Prorata Share of Operating Expenses in excess of the amount of Operating
Expenses paid by Landlord during the calendar year 1996 ("Base Expense Year").
1
<PAGE>
The terms "Operating Expenses" and "Tenant's Prorata Share" shall have the
meanings specified therefor in Article 25.
(D) MANNER OF PAYMENT. Taxes, and Operating Expenses shall be paid in the
following manner:
(i) Landlord may reasonably estimate in advance the amounts Tenant
shall owe for Taxes and Operating Expense for any full or partial calendar year
of the Term. In such event, Tenant shall pay such estimated amounts, on a
monthly basis, on or before the first day of each calendar month, together with
Tenant's payment of Base Rent. Such estimate may be reasonably adjusted from
time to time by Landlord.
(ii) Within 120 days after the end of each calendar year, or as soon
thereafter as practicable, Landlord shall provide a statement (the "Statement")
to Tenant showing: (a) the amount of actual Taxes and Operating Expenses for
such calendar year, with a listing of amounts for major categories of Operating
Expenses, and such amounts for the Base Years, (b) any amount paid by Tenant
towards Taxes and Operating Expenses during such calendar year on an estimated
basis, (c) any revised estimate of Tenant's obligations for Taxes and Operating
Expenses for the current calendar year.
(iii) If the Statement shows that Tenant's estimated payments were
less than Tenant's actual obligations for Taxes and Operating Expenses for such
year, Tenant shall pay the difference. If the Statement shows an increase in
Tenant's estimated payments for the current calendar year, Tenant shall pay the
difference between the new and former estimates, for the period from January 1
of the current calendar year through the month in which the Statement is sent.
Tenant shall make such payments within thirty (30) days after Landlord sends the
Statement.
(iv) If the Statement shows that Tenant's estimated payments exceeded
Tenant's actual obligations for Taxes and Operating Expenses, Tenant shall
receive a credit for the difference against payments of Rent next due. If the
Term shall have expired and no further Rent shall be due, Tenant shall receive a
refund of such difference, within thirty (30) days after Landlord sends the
Statement.
(vi) So long as Tenant's obligations hereunder are not materially
adversely affected thereby, Landlord reserves the right to reasonably change,
from time to time, the manner or timing of the foregoing payments. In lieu of
providing one Statement covering Taxes, Operating Expenses, Landlord may provide
separate statements at the same or different times. No delay by Landlord in
providing the Statement (or separate statements) shall be deemed a default by
Landlord or a waiver of Landlord's right to require payment of Tenant's
obligations for actual or estimated Taxes or Operating Expenses. In no event
shall a decrease in Taxes or Operating Expenses below the Base Year amounts, or
a decrease in the CPI, ever decrease the monthly Base Rent, or give rise to a
credit in favor of Tenant.
(E) PRORATION. If the Term commences other than on January 1, or ends other than
on December 31, Tenant's obligations to pay estimated and actual amounts towards
Taxes and Operating Expenses for such first or final calendar years shall be
prorated to reflect the portion of such years included in the Term. Such
proration shall be made by multiplying the total estimated or actual (as the
case may be) Taxes and Operating Expenses, for such calendar years. as well as
the Base Year amounts, by a fraction, the numerator of which shall be the number
of days of the Term during such calendar year, and the denominator of which
shall be 365.
2
<PAGE>
(F) LANDLORD'S RECORDS. Landlord shall maintain records respecting Taxes and
Operating Expenses and determine the same in accordance with sound accounting
and management practices, consistently applied. Although this Lease contemplates
the computation of Taxes and Operating Expenses on a cash basis, Landlord shall
make reasonable and appropriate accrual adjustments to ensure that each calendar
year, including the Base Years, includes substantially the same recurring items.
Landlord reserves the right to change to a full accrual system of accounting so
long as the same is consistently applied and Tenant's obligations are not
materially adversely affected. Tenant or its representative shall have the right
to examine such records upon reasonable prior notice specifying such records
Tenant desires to examine, during normal business hours at the place or places
where such records are normally kept by sending such notice no later than forty-
five (45) days following the furnishing of the Statement. Tenant may take
exception to matters included in Taxes or Operating Expenses, or Landlord's
computation of Tenant's Prorata Share of either, by sending notice specifying
such exception and the reasons therefor to Landlord no later than thirty (30)
days after Landlord makes such records available for examination. Such Statement
shall be considered final, except as to matters to which exception is taken
after examination of Landlord's records in the foregoing manner and within the
foregoing times. Tenant acknowledges that Landlord's ability to budget and incur
expenses depends on the finality of such Statement, and accordingly agrees that
time is of the essence of this Paragraph. If Tenant takes exception to any
matter contained in the Statement as provided herein, Landlord shall refer the
matter to an independent certified public accountant, whose certification as to
the proper amount shall be final and conclusive as between Landlord and Tenant.
Tenant shall promptly pay the cost of such certification unless such
certification determines that Tenant shall was overbilled by more than 2%.
Pending resolution of any such exceptions in the foregoing manner, Tenant shall
continue paying Tenant's Prorata Share of Taxes and Operating Expenses in the
amounts determined by Landlord, subject to adjustment after any such exceptions
are so resolved.
(G) RENT AND OTHER CHARGES. Base Rent, Taxes, Operating Expenses, and any other
amounts which Tenant is or becomes obligated to pay Landlord under this Lease or
other agreement entered in connection herewith, are sometimes herein referred to
collectively as "Rent,'' and all remedies applicable to the non-payment of Rent
shall be applicable thereto. Rent shall be paid at any office maintained by
Landlord or its agent at the Property, or at such other place as Landlord may
designate.
ARTICLE 4
Commencement of Term
The Commencement Date set forth in Article 1 shall be delayed and Rent shall be
abated to the extent that Landlord fails: (i) to substantially complete any
improvements to the Premises required to be performed by Landlord under any
separate agreement signed by both parties, or (ii) to deliver possession of the
Premises for any other reason, including but not limited to holding over by
prior occupants, except to the extent that Tenant, its contractors, agents or
employees in any way contribute to either such failures. If Landlord so fails
for a ninety (90) day initial grace period, or such additional time as may be
necessary due to fire or other casualty, strikes, lock-outs or other labor
troubles, shortages of equipment or materials, governmental requirements, power
shortages or outages, acts or omissions of Tenant or other Persons, or other
causes beyond Landlord's reasonable control, Tenant shall have the right to
terminate this Lease by written notice to Landlord any time thereafter up until
Landlord substantially
3
<PAGE>
completes any such improvements and delivers the Premises to Tenant. Any such
delay in the Commencement Date shall not subject Landlord to liability for loss
or damage resulting therefrom, and Tenant's sole recourse with respect thereto
shall be the abatement of Rent and right to terminate this Lease described
above. Upon any such termination, Landlord and Tenant shall be entirely relieved
of their obligations hereunder, and any Security Deposit and Rent payments shall
be returned to Tenant. If the Commencement Date is delayed, the Expiration Date
shall not be similarly extended, unless Landlord shall so elect (in which case,
the parties shall confirm the same in writing). During any period that Tenant
shall be permitted to enter the Premises prior to the Commencement Date other
than to occupy the same (e.g., to perform alterations or improvements). Tenant
shall comply with all terms and provisions of this Lease, except those
provisions requiring the payment of Rent. If Tenant shall be permitted to enter
the Premises prior to the Commencement Date for the purpose of occupying the
same, Rent shall commence on such date, and if Tenant shall commence occupying
only a portion of the Premises prior to the Commencement Date, Rent shall be
prorated based on the number of rentable square feet occupied by Tenant.
Landlord shall permit early entry, provided the Premises are legally available
and Landlord has completed any work required under this Lease or any separate
agreement entered in connection herewith.
ARTICLE 5
Condition of Premises
Tenant has inspected the Premises, Property, Systems and Equipment (as defined
in Article 25), or has had an opportunity to do so, and agrees to accept the
same "as is" without any agreements, representations, understandings or
obligations on the part of Landlord to perform any alterations, repairs or
improvements except as expressly provided in any separate agreement that may be
signed by the parties.
ARTICLE 6
Use and Rules
Tenant shall use the Premises for offices and no other purpose whatsoever, in
compliance with all applicable Laws, and without disturbing or interfering with
any other tenant or occupant of the Property. Tenant shall not use the Premises
in any manner so as to cause a cancellation of Landlord's insurance policies, or
an increase in the premiums thereunder. Tenant shall comply with all rules set
forth in Rider One attached hereto (the "Rules"). Landlord shall have the right
to reasonably amend such Rules and supplement the same with other reasonable
Rules (not expressly inconsistent with this Lease) relating to the Property, or
the promotion of safety, care, cleanliness or good order therein, and all such
amendments or new Rules shall be binding upon Tenant after five (5) days notice
thereof to Tenant. All Rules shall be applied on a non-discriminatory basis, but
nothing herein shall be construed to give Tenant or any other Person (as defined
in Article 25) any claim, demand or cause of action against Landlord arising out
of the violation of such Rules by any other tenant, occupant, or visitor of the
Property, or out of the enforcement or waiver of the Rules by Landlord In any
particular instance.
4
<PAGE>
ARTICLE 7
Services and Utilities
Landlord shall provide the following services and utilities (the cost of which
shall be included in Operating Expenses unless otherwise stated herein or in any
separate rider hereto):
(A) Electricity for standard office lighting fixtures, and equipment and
accessories customary for offices (up to 280 hours per month) where: (1) the
connected electrical load of all of the same does not exceed an average of 4
watts per square foot of the Premises (or such lesser amount as may be
available, based on the safe and lawful capacity of the existing electrical
circuit(s) and facilities serving the Premises), (2) the electricity will be at
nominal 120 volts, single phase (or 110 volts, depending on available service in
the Building), and (3) the safe and lawful capacity of the existing electrical
circuit(s) serving the Premises is not exceeded.
(B) Heat and air-conditioning to provide a temperature required, in Landlord's
reasonable opinion and in accordance with applicable Law, for occupancy of the
Premises under normal business operations, from 8:00 a.m. until 6:00 p.m. Monday
through Friday, except on Holidays (as defined in Article 25). Landlord shall
not be responsible for inadequate air-conditioning or ventilation to the extent
the same occurs because Tenant uses any item of equipment consuming more than
500 watts at rated capacity without providing adequate air-conditioning and
ventilation therefor.
(C) Water for drinking, lavatory and toilet purposes at those points of supply
provided for nonexclusive general use of other tenants at the Property.
(D) Customary office cleaning and trash removal service Monday through Friday or
Sunday through Thursday in and about the Premises.
(E) Operatorless passenger elevator service (if the Property has such equipment
serving the Premises) and freight elevator service (if the Property has such
equipment serving the Premises, and subject to scheduling by Landlord) In common
with Landlord and other tenants and their contractors, agents and visitors.
(F) Landlord shall seek to provide such extra utilities or services as Tenant
may from time to time request, if the same are reasonable and feasible for
Landlord to provide and do not involve modifications or additions to the
Property or existing Systems and Equipment (as defined in Article 25), and if
Landlord shall receive Tenant's request within a reasonable period prior to the
time such extra utilities or services are required. Landlord may comply with
written or oral requests by any officer or employee of Tenant, unless Tenant
shall notify Landlord of, or Landlord shall request, the names of authorized
individuals (up to 3 for each floor on which the Premises are located) and
procedures for written requests. Tenant shall, for such extra utilities or
services, pay such charges as Landlord shall from time to time reasonably
establish. All charges for such extra utilities or services shall be due at the
same time as the installment of Base Rent with which the same are billed, or if
billed separately, shall be due within twenty (20) days after such billing.
Landlord may install and operate meters or any other reasonable system for
monitoring or estimating any services or utilities used by Tenant in excess of
those required to be provided by Landlord under this Article (including a system
for Landlord's engineer to reasonably estimate any such excess usage). If such
system indicates such excess services or utilities, Tenant shall pay Landlord's
reasonable charges for installing and operating such system and any
supplementary air-conditioning, ventilation, heat, electrical or other systems
or equipment (or adjustments or modifications to the existing Systems and
Equipment), and Landlord's reasonable charges for such amount of excess services
or utilities used by Tenant.
5
<PAGE>
Landlord does not warrant that any services or utilities will be free from
shortages, failures, variations, or interruptions caused by repairs,
maintenance, replacements, improvements, alterations, changes of service,
strikes, lockouts, labor controversies, accidents, inability to obtain services,
fuel, steam, water or supplies, governmental requirements or requests, or other
causes beyond Landlord's reasonable control. None of the same shall be deemed an
eviction or disturbance of Tenant's use and possession of the Premises or any
part thereof, or render Landlord liable to Tenant for abatement of Rent, or
relieve Tenant from performance of Tenant's obligations under this Lease.
Landlord in no event shall be liable for damages by reason of loss of profits,
business interruption or other consequential damages.
ARTICLE 8
Alterations and Liens
Tenant shall make no additions, changes, alterations or improvements (the
"Work") to the Premises or the Systems and Equipment (as defined in Article 25)
pertaining to the Premises without the prior written consent of Landlord.
Landlord may impose reasonable requirements as a condition of such consent
including without limitation the submission of plans and specifications for
Landlord's prior written approval, obtaining necessary permits, posting bonds,
obtaining insurance, prior approval of contractors, subcontractors and
suppliers, prior receipt of copies of all contracts and subcontracts, contractor
and subcontractor lien waivers, affidavits listing all contractors,
subcontractors and suppliers, use of union labor (if Landlord uses union labor),
affidavits from engineers acceptable to Landlord stating that the Work will not
adversely affect the Systems and Equipment or the structure of the Property, and
requirements as to the manner and times in which such Work shall be done. All
Work shall be performed in a good and workmanlike manner and all materials used
shall be of a quality comparable to or better than those in the Premises and
Property and shall be in accordance with plans and specifications approved by
Landlord, and Landlord may require that all such Work be performed under
Landlord's supervision. If Landlord consents or supervises, the same shall not
be deemed a warranty as to the adequacy of the design, workmanship or quality of
materials, and Landlord hereby expressly disclaims any responsibility or
liability for the same. Landlord shall under no circumstances have any
obligation to repair, maintain or replace any portion of the Work.
Tenant shall keep the Property and Premises free from any mechanic's,
materialman's or similar liens or other such encumbrances in connection with any
Work on or respecting the Premises not performed by or at the request of
Landlord, and shall indemnify and hold Landlord harmless from and against any
claims, liabilities, judgments, or costs (including attorneys' fees) arising out
of the same or in connection therewith. Tenant shall give Landlord notice at
least twenty (20) days prior to the commencement of any Work on the Premises (or
such additional time as may be necessary under applicable Laws), to afford
Landlord the opportunity of posting and recording appropriate notices of non-
responsibility. Tenant shall remove any such lien or encumbrance by bond or
otherwise within thirty (30) days after written notice by Landlord, and if
Tenant shall fail to do so, Landlord may pay the amount necessary to remove such
lien or encumbrance, without being responsible for investigating the validity
thereof. The amount so paid shall be deemed additional Rent under this Lease
payable upon demand, without limitation as to other remedies available to
Landlord under this Lease. Nothing contained in this Lease shall authorize
Tenant to do any act which shall subject Landlord's title to the Property or
Premises to any liens or encumbrances whether claimed by operation of law or
express or implied contract. Any claim to a lien or encumbrance upon the
Property or Premises arising in connection with any Work on or respecting the
Premises not performed by or at the request of Landlord shall be null and void,
or at Landlord's option shall attach only
6
<PAGE>
against Tenant's interest in the Premises and shall in all respects be
subordinate to Landlord's title to the Property and Premises.
ARTICLE 9
Repairs
Except for customary cleaning and trash removal provided by Landlord under
Article 7, and damage covered under Article 10, Tenant shall keep the Premises
in good and sanitary condition, working order and repair (including without
limitation, carpet, wall-covering, doors, plumbing and other fixtures,
equipment, alterations and improvements whether installed by Landlord or
Tenant). In the event that any repairs, maintenance or replacements are
required, Tenant shall promptly arrange for the same either through Landlord for
such reasonable charges as Landlord may from time to time establish, or such
contractors as Landlord generally uses at the Property or such other contractors
as Landlord shall first approve in writing, and in a first class, workmanlike
manner approved by Landlord in advance in writing. If Tenant does not promptly
make such arrangements, Landlord may, but need not, make such repairs,
maintenance and replacements, and the costs paid or incurred by Landlord
therefor shall be reimbursed by Tenant promptly after request by Landlord.
Tenant shall indemnify Landlord and pay for any repairs, maintenance and
replacements to areas of the Property outside the Premises, caused, in whole or
in part, as a result of moving any furniture, fixtures, or other property to or
from the Premises, or by Tenant or its employees, agents, contractors, or
visitors (notwithstanding anything to the contrary contained in this Lease).
Except as provided in the preceding sentence, or for damage covered under
Article 10, Landlord shall keep the common areas of the Property in good and
sanitary condition. working order and repair (the cost of which shall be
included in Operating Expenses, as described in Article 25, except as limited
therein).
ARTICLE 10
Casualty Damage
If the Premises or any common areas of the Property providing access thereto
shall be damaged by fire or other casualty, Landlord shall use available
insurance proceeds to restore the same. Such restoration shall be to
substantiate the condition prior to the casualty, except for modifications
required by zoning and building codes and other Laws or by any Holder (as
defined in Article 25), any other modifications to the common areas, deemed
desirable by Landlord (provided access to the Premises is not materially
impaired), and except that Landlord shall not be required to repair or replace
any of Tenant's furniture, furnishings, fixtures or equipment, or any
alterations or improvements in excess of any work performed or paid for by
Landlord under any separate agreement signed by the parties in connection
herewith, Landlord shall not be liable for any inconvenience or annoyance to
Tenant or its visitors, or injury to Tenant's business resulting in any way from
such damage or the repair thereof. However, Landlord shall allow Tenant a
proportionate abatement of Rent during the time and to the extent the Premises
are unfit for occupancy for the purposes permitted under this Lease and not
occupied by Tenant as a result thereof (unless Tenant or its employees or agents
caused the damage). Notwithstanding the foregoing to the contrary, Landlord may
elect to terminate this Lease by notifying Tenant in writing of such termination
within sixty (60) days after the date of damage (such termination notice to
include a termination date providing at least ninety (90) days for Tenant to
vacate the Premises), if the Property shall be materially damaged by Tenant or
its employees or agents, or if the Property shall be damaged by fire or other
casualty or cause such that: (a) repairs to the Premises and access thereto
cannot reasonably be completed within 120 days after the
7
<PAGE>
casualty without the payment of overtime or other premiums, (b) more than 25% of
the Premises is affected by the damage, and fewer than 24 months remain in the
Term, or any material damage occurs to the Premises during the last 12 months of
the Term, (c) any Holder (as defined in Article 25) shall require that the
insurance proceeds or any portion thereof be used to retire the Mortgage debt
(or shall terminate the ground lease, as the case may be), or the damage is not
fully covered by Landlord's insurance policies, or (d) the cost of the repairs,
alterations, restoration or improvement work would exceed 25% of the replacement
value of the Building, or the nature of such work would make termination of this
Lease necessary or convenient. Tenant agrees that Landlord's obligation to
restore, and the abatement of Rent provided herein, shall be Tenant's sole
recourse in the event of such damage, and waives any other rights Tenant may
have under any applicable Law to terminate the Lease by reason of damage to the
Premises or Property. Tenant acknowledges that this Article represents the
entire agreement between the parties respecting damage to the Premises or
Property.
ARTICLE 11
Insurance, Subrogation, and Waiver of Claims
Tenant shall maintain during the Term comprehensive (or commercial) general
liability insurance, with limits of not less than $1,000,000 combined single
limit for personal injury, bodily injury or death, or property damage or
destruction (including loss of use thereof) for any one occurrence. Tenant shall
also maintain during the Term worker compensation insurance as required by
statute, and primary, non-contributory, "all-risks" property damage insurance
covering Tenant's personal property, business records, fixtures and equipment,
for damage or other loss caused by fire or other casualty or cause including,
but not limited to, vandalism and malicious mischief, theft, water damage of any
type, including sprinkler leakage, bursting or stoppage of pipes, explosion,
business interruption. and other insurable risks in amounts not less than the
full insurable replacement value of such property and full insurable value of
such other interests of Tenant (subject to reasonable deductible amounts).
Landlord shall, as part of Operating Expenses, maintain during the Term
comprehensive (or commercial) general liability insurance, with limits of not
less than $1,000,000 combined single limit for personal injury, bodily injury or
death, or property damage or destruction (including loss of use thereof) for any
one occurrence. Landlord shall also, as part of Operating Expenses, maintain
during the Term worker compensation insurance as required by statute, and
primary, non-contributory, extended coverage or "all-risks" property damage
insurance, in an amount equal to at least ninety percent (90%) of the full
insurable replacement value of the Property (exclusive of the costs of
excavation, foundations and footings, and such risks required to be covered by
Tenant's insurance, and subject to reasonable deductible amounts), or such other
amount necessary to prevent Landlord from being a co-insured, and such other
coverage as Landlord shall deem appropriate or that may be required by any
Holder (as defined in Article 25).
Tenant shall provide Landlord with certificates evidencing such coverage (and,
with respect to liability coverage, showing Landlord and such other parties as
Landlord may designate from time to time as additional insureds) prior to
Commencement Date, which shall state that such insurance coverage may not be
changed or cancelled without at least twenty (20) days' prior written notice to
Landlord, and shall provide renewal certificates to Landlord at least twenty
(20) days prior to expiration of such policies. Landlord may periodically, but
not more often than every five years, require that Tenant reasonably increase
the aforementioned coverage. Except as provided to the contrary herein, any
8
<PAGE>
insurance carried by Landlord or Tenant shall be for the sole benefit of the
party carrying such insurance. Any insurance policies hereunder may be "blanket
policies". All insurance required hereunder shall be provided by responsible
insurers and Tenant's insurer shall be reasonably accepted to Landlord. By this
Article, Landlord and Tenant intend that their respective property loss risks
shall be borne by responsible insurance carriers to the extent above provided,
and Landlord and Tenant hereby agree to look solely to, and seek recovery only
from, their respective insurance carriers in the event of a property loss to the
extent that such coverage is agreed to be provided hereunder. The parties each
hereby waive all rights and claims against each other for such losses, and waive
all rights of subrogation of their respective insurers, provided such waiver of
subrogation shall not affect the right of the insured to recover thereunder. The
parties agree that their respective insurance policies are now, or shall be,
endorsed such that said waiver of subrogation shall not affect the right of the
insured to recover thereunder, so long as no material additional premium is
charged therefor.
ARTICLE 12
CONDEMNATION
If the whole or any material part of the Premises or Property shall be taken by
power of eminent domain or condemned by any competent authority for any public
or quasi-public use or purpose, or if any adjacent property or street shall be
so taken or condemned, or reconfigured or vacated by such authority in such
manner as to require the use, reconstruction or remodeling of any part of the
Premises or Property, or if Landlord shall grant a deed or other instrument in
lieu of such taking by eminent domain or condemnation. Landlord shall have the
option to terminate this Lease upon ninety (90) days notice, provided such
notice is given no later than 180 days after the date of such taking,
condemnation, reconfiguration, vacation, deed or other instrument. Tenant shall
have reciprocal termination rights if the whole or any material part of the
Premises is permanently taken, or if access to the Premises is permanently
materially impaired. Landlord shall be entitled to receive the entire award or
payment in connection therewith, except that Tenant shall have the right to file
any separate claim available to Tenant for any taking of Tenant's personal
property and fixtures belonging to Tenant and removable by Tenant upon
expiration of the Term, and for moving expenses (so long as such claim does not
diminish the award available to Landlord or any Holder, and such claim is
payable separately to Tenant). All rent shall be apportioned as of the date of
such termination, or the date of such taking, whichever shall first occur. If
any part of the Premises shall be taken, and this Lease shall not be so
terminated, the Rent shall be proportionately abated.
9
<PAGE>
ARTICLE 13
RETURN OF POSSESSION
At the expiration or earlier termination of this Lease or Tenant's right of
possession, Tenant shall surrender possession of the Premises in the condition
required under Article 9, ordinary wear and tear excepted, and shall surrender
all keys, any key cards, and any parking stickers or cards, to Landlord, and
advise Landlord as to the combination of any locks or vaults then remaining in
the Premises, and shall remove all trade fixtures and personal property. All
improvements, fixtures and other items in or upon the Premises (except trade
fixtures and personal property belonging to Tenant) whether installed by Tenant
or Landlord, shall be Landlord's property and shall remain upon the Premises,
all without compensation, allowance or credit to Tenant. However, if prior to
such termination or within ten (10) days thereafter Landlord so directs by
notice, Tenant shall promptly remove such of the foregoing items as are
designated in such notice and restore the Premises to the condition prior to the
installation of such items; provided, Landlord shall not require removal of
customary office improvements installed pursuant to any separate agreement
signed by both parties in connection with entering this Lease (except as
expressly provided to the contrary therein), or installed by Tenant with
Landlord's written approval (except as expressly required by Landlord in
connection with granting such approval). If Tenant shall fail to perform any
repairs or restoration, or fail to remove any items from the Premises required
hereunder, Landlord may do so, and Tenant shall pay Landlord the cost thereof
upon demand. All property removed from the Premises by Landlord pursuant to any
provisions of this Lease or any Law may be handled or stored by Landlord at
Tenant's expense, and Landlord shall in no event be responsible for the value,
preservation or safekeeping thereof. All property not removed from the Premises
or retaken from storage by Tenant within thirty (30) days after expiration or
earlier termination of this Lease or Tenant's right to possession, shall at
Landlord's option be conclusively deemed to have been conveyed by Tenant to
Landlord as if by bill of sale without payment by Landlord. Unless prohibited by
applicable Law, Landlord shall have a lien against such property for the costs
incurred in removing and storing the same.
ARTICLE 14
Holding Over
Unless Landlord expressly agrees otherwise in writing, Tenant shall pay Landlord
150% of the amount of Rent then applicable (or the highest amount permitted by
Law, whichever shall be less) prorated on per diem basis for each day Tenant
shall retain possession of the Premises or any part thereof after expiration or
earlier termination of this Lease, together with all damages sustained by
Landlord on account thereof. The foregoing provisions shall not serve as
permission for Tenant to hold-over, nor serve to extend the Term (although
Tenant shall remain bound to comply with all provisions of this Lease until
Tenant vacates the Premises, and shall be subject to the provisions of Article
13). Notwithstanding the foregoing to the contrary, at any time before or after
expiration or earlier termination of the Lease, Landlord may serve notice
advising Tenant of the amount of Rent and other terms required, should Tenant
desire to enter a month-to-month tenancy (and if Tenant shall hold over more
than one full calendar month after such notice, Tenant shall thereafter be
deemed a month-to-month tenant, on the terms and provisions of this Lease then
in effect, as modified by Landlord's notice, and except that Tenant shall not be
entitled to any renewal or expansion rights contained in this Lease or any
amendments hereto).
10
<PAGE>
ARTICLE 15
No Waiver
No provision of this Lease will be deemed waived by either party unless
expressly waived in writing signed by the waiving party. No waiver shall be
implied by delay or any other act or omission of either party. No waiver by
either party of any provision of this Lease shall be deemed a waiver of such
provision with respect to any subsequent matter relating to such provision, and
Landlord's consent or approval respecting any action by Tenant shall not
constitute a waiver of the requirement for obtaining Landlord's consent or
approval respecting any subsequent action. Acceptance of Rent by Landlord shall
not constitute a waiver of any breach by Tenant of any term or provision of this
Lease. No acceptance of a lesser amount than the Rent herein stipulated shall be
deemed a waiver of Landlord's right to receive the full amount due, nor shall
any endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the full amount due. The acceptance of Rent or of the performance of any other
term or provision from any Person other than Tenant, including any Transferee,
shall not constitute a waiver of Landlord's right to approve any Transfer.
ARTICLE 16
Attorneys' Fees and Jury Trial
In the event of any litigation between the parties, the prevailing party shall
be entitled to obtain, as part of the judgment, all reasonable attorneys' fees,
costs and expenses incurred in connection with such litigation, except as may be
limited by applicable Law. In the interest of obtaining a speedier and less
costly hearing of any dispute, the parties hereby each irrevocably waive the
right to trial by jury.
ARTICLE 17
PERSONAL PROPERTY TAXES, RENT TAXES AND OTHER TAXES
Tenant shall pay prior to delinquency all taxes, charges or other governmental
impositions assessed against or levied upon Tenant's fixtures, furnishings,
equipment and personal property located in the Premises, and any Work to the
Premises under Article 8. Whenever possible, Tenant shall cause all such items
to be assessed and billed separately from the property of Landlord. In the event
any such items shall be assessed and billed with the property of Landlord,
Tenant shall pay Landlord its share of such taxes, charges or other governmental
impositions within thirty (30) days after Landlord delivers a statement and a
copy of the assessment or other documentation showing the amount of such
impositions applicable to Tenant's property. Tenant shall pay any rent tax or
sales tax, service tax, transfer tax or value added tax, or any other applicable
tax on the Rent or services herein or otherwise respecting this Lease.
11
<PAGE>
ARTICLE 18
Reasonable Approvals
Whenever Landlord's approval or consent is expressly required under this Lease
(including Article 21) or any other agreement between the parties, Landlord
shall not unreasonably withhold or delay such approval or consent
(reasonableness shall be a condition to Landlord's enforcement of such consent
or approval requirement, and not a covenant). except for matters affecting the
structure, safety or security of the Property, or the appearance of the Property
from any common or public areas.
ARTICLE 19
Subordination, Attornment and Mortgagee Protection
This Lease is subject and subordinate to all Mortgages (as defined in Article
25) now or hereafter placed upon the Property, and all other encumbrances and
matters of public record applicable to the Property. If any foreclosure
proceedings are initiated by any Holder or a deed in lieu is granted (or if any
ground lease is terminated), Tenant agrees, upon written request of any such
Holder or any purchaser at foreclosure sale, to attorn and pay Rent to such
party and to execute and deliver any instruments necessary or appropriate to
evidence or effectuate such attornment (provided such Holder or purchaser shall
agree to accept this Lease and not disturb Tenant's occupancy, so long as Tenant
does not default and fail to cure within the time permitted hereunder). However,
in the event of attornment, no Holder shall be: (i) liable for any act or
omission of Landlord, or subject to any offsets or defenses which Tenant might
have against Landlord (prior to such Holder becoming Landlord under such
attornment), (ii) liable for any security deposit or bound by any prepaid Rent
not actually received by such Holder, or (iii) bound by any future modification
of this Lease not consented to by such Holder. Any Holder (as defined in Article
25) may elect to make this Lease prior to the lien of its Mortgage, by written
notice to Tenant, and if the Holder of any prior Mortgage shall require, this
Lease shall be prior to any subordinate Mortgage. Tenant agrees to give any
Holder by certified mail, return receipt requested, a copy of any notice of
default served by Tenant upon Landlord, provided that prior to such notice
Tenant has been notified in writing (by way of service on Tenant of a copy of an
assignment of leases, or otherwise) of the address of such Holder. Tenant
further agrees that if Landlord shall have failed to cure such default within
the times permitted Landlord for cure under this Lease, any such Holder whose
address has been provided to Tenant shall have an additional period of thirty
(30) days in which to cure (or such additional time as may be required due to
causes beyond such Holder's control, including time to obtain possession of the
Property by power of sale or judicial action). Tenant shall execute such
documentation as Landlord may reasonably request from time to time, in order to
confirm the matters set forth in this Article in recordable form.
12
<PAGE>
ARTICLE 20
Estoppel Certificate
Tenant shall from time to time, within twenty (20) days after written request
from Landlord, execute, acknowledge and deliver a statement (i) certifying that
this Lease is unmodified and in full force and effect or, if modified, stating
the nature of such modification and certifying that this Lease as so modified,
is in full force and effect (or if this Lease is claimed not to be in force and
effect, specifying the ground therefor) and any dates to which the Rent has been
paid in advance, and the amount of any Security Deposit, (ii) acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder, or specifying such defaults if any are claimed, and (iii)
certifying such other matters as Landlord may reasonably request, or as may be
requested by Landlord's current or prospective Holders, insurance carriers,
auditors, and prospective purchasers. Any such statement may be relied upon by
any such parties. If Tenant shall fail to execute and return such statement
within the time required herein, Tenant shall be deemed to have agreed with the
matters set forth therein.
ARTICLE 21
Assignment and Subletting
(A) TRANSFERS. Tenant shall not, without the prior written consent of Landlord,
which consent shall not be unreasonably withheld, as further described below:
(i) assign, mortgage, pledge, hypothecate, encumber, or permit any lien to
attach to, or otherwise transfer, this Lease or any interest hereunder, by
operation of law or otherwise, (ii) sublet the Premises or any part thereof, or
(iii) permit the use of the Premises by any Persons (as defined in Article 25)
other than Tenant and its employees (all of the foregoing are hereinafter
sometimes referred to collectively as "Transfers" and any Person to whom any
Transfer is made or sought to be made is hereinafter sometimes referred to as a
"Transferee"). If Tenant shall desire Landlord's consent to any Transfer, Tenant
shall notify Landlord in writing, which notice shall include: (a) the proposed
effective date (which shall not be less than 30 nor more than 180 days after
Tenant's notice), (b) the portion of the Premises to be Transferred (herein
called the "Subject Space"), (c) the terms of the proposed Transfer and the
consideration therefor, the name and address of the proposed Transferee, and a
copy of all documentation pertaining to the proposed Transfer, and (d) current
financial statements of the proposed Transferee certified by an officer, partner
or owner thereof, and any other information to enable Landlord to determine the
financial responsibility, character, and reputation of the proposed Transferee,
nature of such Transferee's business and proposed use of the Subject Space, and
such other information as Landlord may reasonably require. Any Transfer made
without complying with this Article shall, at Landlord's option, be null, void
and of no effect, or shall constitute a Default under this Lease. Whether or not
Landlord shall grant consent, Tenant shall pay $300.00 towards Landlord's review
and processing expenses, within thirty (30) days after written request by
Landlord.
(B) APPROVAL. Landlord will not unreasonably withhold its consent (as provided
in Article 18) to any proposed Transfer of the Subject Space to the Transferee
on the terms specified in Tenant's notice. The parties hereby agree that it
shall be reasonable under this Lease and under any applicable Law for Landlord
to withhold consent to any proposed Transfer where one or more of the following
applies (without limitation as to other reasonable grounds for withholding
consent): (i) the Transferee is of a character or reputation or engaged in a
13
<PAGE>
business which is not consistent with the quality of the Property, or would be a
significantly less prestigious occupant of the Property than Tenant, (ii) the
Transferee intends to use the Subject Space for purposes which are not permitted
under this Lease, (iii) the Subject Space is not regular in shape with
appropriate means of ingress and egress suitable for normal renting purposes,
(iv) the Transferee is either a government (or agency or instrumentality
thereof) or an occupant of the Property, (v) the proposed Transferee does not
have a reasonable financial condition in relation to the obligations to be
assumed in connection with the Transfer. or (vi) Tenant has committed and failed
to cure a Default at the time Tenant requests consent to the proposed Transfer.
(C) TRANSFER PREMIUM. If Landlord consents to a Transfer, and as a condition
thereto which the parties hereby agree is reasonable, Tenant shall pay Landlord
fifty percent (50%) of any Transfer Premium derived by Tenant from such
Transfer. "Transfer Premium" shall mean all rent, additional rent or other
consideration paid by such Transferee in excess of the Rent payable by Tenant
under this Lease (on a monthly basis during the Term, and on a per rentable
square foot basis, if less than all of the Premises is transferred), after
deducting the reasonable expenses incurred by Tenant for any changes,
alterations and improvements to the Premises, any other economic concessions or
services provided to the Transferee, and any customary brokerage commissions
paid in connection with the Transfer. If part of the consideration for such
Transfer shall be payable other than in cash, Landlord's share of such non-cash
consideration shall be in such form as is reasonably satisfactory to Landlord.
The percentage of the Transfer Premium due Landlord hereunder shall be paid
within ten (10) days after Tenant receives any Transfer Premium from the
Transferee.
(D) RECAPTURE. Notwithstanding anything to the contrary contained in this
Article, Landlord shall have the option by giving written notice to Tenant
within fifteen (15) days after receipt of Tenant's notice of any proposed
Transfer, to recapture the Subject Space. Such recapture notice shall cancel and
terminate this Lease with respect to the Subject Space as of the date stated in
Tenant's notice as the effective date of the proposed Transfer (or at Landlord's
option, shall cause the Transfer to be made to Landlord or its agent, in which
case the parties shall execute the Transfer documentation promptly thereafter).
If this Lease shall be cancelled with respect to less than the entire Premises,
the Rent reserved herein shall be prorated on the basis of the number of
rentable square feet retained by Tenant in proportion to the number of rentable
square feet contained in the Premises, this Lease as so amended shall continue
thereafter in full force and effect, and upon request of either party, the
parties shall execute written confirmation of the same.
(E) TERMS OF CONSENT. If Landlord consents to a Transfer: (a) the terms and
conditions of this Lease, including among other things, Tenant's liability for
the Subject Space, shall in no way be deemed to have been waived or modified,
(b) such consent shall not be deemed consent to any further Transfer by either
Tenant or a Transferee, (c) no Transferee shall succeed to any rights provided
in this Lease or any amendment hereto to extend the Term of this Lease, expand
the Premises, or lease additional space, any such rights being deemed personal
to Tenant, (d) Tenant shall deliver to Landlord promptly after execution, an
original executed copy of all documentation pertaining to the Transfer in form
reasonably acceptable to Landlord, and (e) Tenant shall furnish upon Landlord's
request a complete statement, certified by an independent certified public
accountant, or Tenant's chief financial officer, setting forth in detail the
computation of any Transfer Premium Tenant has derived and shall derive from
such Transfer. Landlord or its authorized representatives shall have the right
at all reasonable times to audit the books, records and papers of Tenant
relating to any Transfer, and shall have the right to make copies thereof. If
the Transfer Premium
14
<PAGE>
respecting any Transfer shall be found understated, Tenant shall within thirty
(30) days after demand pay the deficiency, and if understated by more than 2%,
Tenant shall pay Landlord's costs of such audit. Any sublease hereunder shall be
subordinate and subject to the provisions of this Lease, and if this Lease shall
be terminated during the term of any sublease, Landlord shall have the right to:
(i) treat such sublease as cancelled and repossess the Subject Space by any
lawful means, or (ii) require that such subtenant attorn to and recognize
Landlord as its landlord under any such sublease. If Tenant shall Default and
fail to cure within the time permitted for cure under Article 23(A), Landlord is
hereby irrevocably authorized, as Tenant's agent and attorney-in-fact, to direct
any Transferee to make all payments under or in connection with the Transfer
directly to Landlord (which Landlord shall apply towards Tenant's obligations
under this Lease) until such Default is cured.
(F) CERTAIN TRANSFERS. For purposes of this Lease, the term "Transfer" shall
also include (a) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of a majority of the partners, or
a transfer of a majority of partnership interests, within a twelve month period,
or the dissolution of the partnership, and (b) if Tenant is a closely held
corporation (i.e., whose stock is not publicly held and not traded through an
exchange or over the counter), the dissolution, merger, consolidation or other
reorganization of Tenant, or within a twelve month period: (i) the sale or other
transfer of more than an aggregate of 50% of the voting shares of Tenant (other
than to immediate family members by reason of gift or death) or (ii) the sale,
mortgage, hypothecation or pledge of more than an aggregate of 50% of Tenant's
net assets.
ARTICLE 22
Rights Reserved By Landlord
Except to the extent expressly limited herein, Landlord reserves full rights to
control the Property (which rights may be exercised without subjecting Landlord
to claims for constructive eviction, abatement of Rent, damages or other claims
of any kind), including more particularly, but without limitation, the following
rights:
(A) To change the name or street address of the Property; install and maintain
signs on the exterior and interior of the Property; retain at all times, and use
in appropriate instances, keys to all doors within and into the Premises; grant
to any Person the right to conduct any business or render any service at the
Property, whether or not it is the same or similar to the use permitted Tenant
by this Lease; and have access for Landlord and other tenants of the Property to
any mail chutes located on the Premises according to the rules of the United
States Postal Service.
(B) To enter the Premises* at reasonable hours for reasonable purposes,
including inspection and supplying cleaning service or other services to be
provided Tenant hereunder, to show the Premises to current and prospective
mortgage lenders, ground lessors, insurers, and prospective purchasers, tenants
and brokers, at reasonable hours, and if Tenant shall abandon the Premises at
any time, or shall vacate the same during the last 3 months of the Term, to
decorate, remodel, repair, or alter the Premises.
(C) To limit or prevent access to the Property, shut down elevator service,
activate elevator emergency controls, or otherwise take such action or
preventative measures deemed necessary by Landlord for the safety of tenants or
other occupants of the Property or the protection of the Property and other
property located thereon or therein, in case of fire, invasion, insurrection,
riot, civil disorder, public excitement or other dangerous condition, or threat
thereof.
15
<PAGE>
(D) To decorate and to make alterations, additions and improvements, structural
or otherwise, in or to the Property or any part thereof, and any adjacent
building, structure, parking facility, land, street or alley (including without
limitation changes and reductions in corridors, lobbies, parking facilities and
other public areas and the installation of kiosks, planters, sculptures,
displays, escalators, mezzanines, and other structures, facilities, amenities
and features therein, and changes for the purpose of connection with or entrance
into or use of the Property in conjunction with any adjoining or adjacent
building or buildings, now existing or hereafter constructed). In connection
with such matters, or with any other repairs, maintenance, improvements or
alterations, in or about the Property, Landlord may erect scaffolding and other
structures reasonably required, and during such operations may enter upon the
Premises and take into and upon or through the Premises, all materials required
to make such repairs, maintenance, alterations or improvements, and may close
public entry ways, other public areas, restrooms, stairways or corridors.
(E) To substitute for the Premises other premises (herein referred to as the
"new premises") at the Property, provided: (i) the new premises shall be similar
to the Premises in area, (ii) Landlord shall give Tenant at least thirty (30)
days' written notice before making such change, and the parties shall execute an
amendment to the Lease confirming the change within thirty (30) days after
either party shall request the same; and iii) if Tenant shall already have taken
possession of the Premises: (a) Landlord shall pay the direct, out-of-pocket,
reasonable expenses of Tenant in moving from the Premises to the new premises
and improving the new premises so that they are substantially similar to the
Premises, and, (b) such move shall be made during evenings, weekends, or
otherwise so as to incur the least inconvenience to Tenant. **see below
In connection with entering the Premises to exercise any of the foregoing
rights, Landlord shall: (a) provide reasonable advance written or oral notice to
Tenant's on-site manager or other appropriate person (except in emergencies, or
for routine cleaning or other routine matters), and (b) take reasonable steps to
minimize any interference with Tenant's business.
* PROVIDED LANDLORD HAS GIVEN TENANT REASONABLE NOTICE (UNLESS IT IS FOR AN
EMERGENCY),
** If Tenant does not desire the new premises provided under this Article 22(E),
Tenant may cancel this Lease by giving Landlord written notice within 10 days
after Landlord's notice (with an effective date 60 days thereafter) unless
Landlord revokes the relocation in writing 30 days after receipt of Tenant's
cancellation notice.
16
<PAGE>
ARTICLE 23
Landlord's Remedies
(A) Default. The occurrence of any one or more of the following events shall
constitute a "Default" by Tenant, which if not cured within any applicable time
permitted for cure below, shall give rise to Landlord's remedies set forth in
Paragraph (B), below: (i) failure by Tenant to make when due any payment of
Rent, unless such failure is cured within ten (10) days after notice; (ii)
failure by Tenant to observe or perform any of the terms or conditions of this
Lease to be observed or performed by Tenant other than the payment of Rent, or
as provided below, unless such failure is cured within thirty (30) days after
notice, or such shorter period expressly provided elsewhere in this Lease
(provided, if the nature of Tenant's failure is such that more time is
reasonably required in order to cure, Tenant shall not be in Default if Tenant
commences to cure within such period and thereafter reasonably seeks to cure
such failure to completion): (iii) failure by Tenant to comply with the Rules,
unless such failure is cured within five (5) days after notice (provided, if the
nature of Tenant's failure is such that more than five (5) days time is
reasonably required in order to cure, Tenant shall not be in Default if Tenant
commences to cure within such period and thereafter reasonably seeks to cure
such failure to completion); (iv) vacation of all or a substantial portion of
the Premises for more than thirty (30) consecutive days, or the failure to take
possession of the Premises within sixty (60) days after the Commencement Date;
(v) (a) making by Tenant or any guarantor of this Lease ("Guarantor") of any
general assignment for the benefit of creditors, (b) filing by or against Tenant
or any Guarantor of a petition to have Tenant or such Guarantor adjudged a
bankrupt or a petition for reorganization or arrangement under any Law relating
to bankruptcy (unless, in the case of a petition filed against Tenant or such
Guarantor, the same is dismissed within sixty (60) days), (c) appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located on the Premises or of Tenant's interest in this Lease, where possession
is not restored to Tenant within thirty (30) days, (d) attachment, execution or
other judicial seizure of substantially all of Tenant's assets located on the
Premises or of Tenant's interest in this Lease, (e) Tenant's or any Guarantor's
convening of a meeting of its creditors or any class thereof for the purpose of
effecting a moratorium upon or composition of its debts, or (f) Tenant's or any
Guarantor's insolvency or admission of an inability to pay its debts as they
mature; (vi) any material misrepresentation herein, or material
misrepresentation or omission in any financial statements or other materials
provided by Tenant or any Guarantor in connection with negotiating or entering
this Lease or in connection with any Transfer under Article 21; (vii)
cancellation of any guaranty of this Lease by any Guarantor: (viii) failure by
Tenant to cure within any applicable times permitted thereunder any default
under any other lease for space at the Property or any other buildings owned or
managed by Landlord or its affiliates, now or hereafter entered by Tenant (and
any Default hereunder not cured within the times permitted for cure herein
shall, at Landlord's election constitute a default under any such other lease or
leases). Failure by Tenant to comply with the same term or condition of this
Lease on three occasions during any twelve month period shall cause any failure
to comply with such term or condition during the succeeding twelve month period,
at Landlord's option, to constitute an incurable Default, if Landlord has given
Tenant notice of each such failure within ten (10) days after each such failure
occurs. The notice and cure periods provided herein are in lieu of, and not in
addition to, any notice and cure periods provided by Law.
17
<PAGE>
(B) REMEDIES. If a Default occurs and is not cured within any applicable time
permitted under Paragraph (A), Landlord shall have the rights and remedies
hereinafter set forth, which shall be distinct, separate and cumulative with and
in addition to any other right or remedy allowed under any Law or other
provisions of this Lease:
(i) Landlord may terminate this Lease, repossess the Premises by
detainer suit, summary proceedings or other lawful means, and recover as damages
a sum of money equal to: (a) any unpaid Rent as of the termination date
including interest at the Default Rate (as defined in Article 25), (b) any
unpaid Rent which would have accrued after the termination date through the time
of award including interest at the Default Rate, less such loss of Rent that
Tenant proves could have been reasonably avoided, (c) any unpaid Rent which
would have accrued after the time of award during the balance of the Term, less
such loss of Rent that Tenant proves could be reasonably avoided, and (d) any
other amounts necessary to compensate Landlord for all damages proximately
caused by Tenant's failure to perform its obligations under this Lease,
including without limitation all Costs of Re-letting (as defined in Paragraph
F). For purposes of computing the amount of Rent herein that would have accrued
after the time of award, Tenant's Prorata Share of Taxes and Operating Expenses,
and CPI Escalation Amounts, shall be projected, based upon the average rate of
increase, if any, in such items from the Commencement Date through the time of
award.
(ii) If applicable Law permits, Landlord may terminate Tenant's right
of possession and repossess the Premises by detainer suit, summary proceedings
or other lawful means, without terminating this Lease (and if such Law permits,
and Landlord shall not have expressly terminated the Lease in writing, any
termination shall be deemed a termination of Tenant's right of possession only).
In such event, Landlord may recover: (a) any unpaid Rent as of the date
possession is terminated, including interest at the Default Rate, (b) any unpaid
Rent which accrues during the Term from the date possession is terminated
through the time of award (or which may have accrued from the time of any
earlier award obtained by Landlord through the time of award), including
interest at the Default Rate, less any Net Re-Letting Proceeds (as defined in
Paragraph F) received by Landlord during such period, and less such loss of Rent
that Tenant proves could have been reasonably avoided, and (c) any other amounts
necessary to compensate Landlord for all damages proximately caused by Tenant's
failure to perform its obligations under this Lease, including without
limitation, all Costs of Re-letting (as defined in Paragraph F). Landlord may
bring suits for such amounts or portions thereof, at any time or times as the
same accrue or after the same have accrued, and no suit or recovery of any
portion due hereunder shall be deemed a waiver of Landlord's right to collect
all amounts to which Landlord is entitled hereunder, nor shall the same serve as
any defense to any subsequent suit brought for any amount not theretofor reduced
to judgment.
(C) MITIGATION OF DAMAGES. If Landlord terminates this Lease or Tenant's right
to possession, Landlord shall use reasonable efforts to mitigate Landlord's
damages, and Tenant shall be entitled to submit such proof of such failure to
mitigate as a defense to Landlord's claims hereunder, if mitigation of damages
by Landlord is required by applicable Law. If Landlord has not terminated this
Lease or Tenant's right to possession, Landlord shall have no obligation to
mitigate, and may permit the Premises to remain vacant or abandoned; in such
case, Tenant may seek to mitigate damages by attempting to sublease the Premises
or assign this Lease (subject to Article 21).
18
<PAGE>
(D) SPECIFIC PERFORMANCE, COLLECTION OF RENT AND ACCELERATION. Landlord shall at
all times have the rights and remedies (which shall be cumulative with each
other and cumulative and in addition to those rights and remedies available
under Paragraph (B), above or any Law or other provision of this Lease), without
prior demand or notice except as required by applicable Law: (i) to seek any
declaratory, injunctive or other equitable relief, and specifically enforce this
Lease, or restrain or enjoin a violation or breach of any provision hereof, and
(ii) to sue for and collect any unpaid Rent which has accrued. Notwithstanding
anything to the contrary contained in this Lease, to the extent not expressly
prohibited by applicable Law, in the event of any Default by Tenant not cured
within any applicable time for cure hereunder, Landlord may terminate this Lease
or Tenant's right to possession and accelerate and declare that all Rent
reserved for the remainder of the Term shall be immediately due and payable (in
which event, Tenant's Prorata Share of Taxes and Operating Expenses, and CPI
Escalation Amounts for the remainder of the Term shall be projected based upon
the average rate of increase, if any, in such items from the Commencement Date
through the date of such declaration); provided, Landlord shall, after receiving
payment of the same from Tenant, be obligated to turn over to Tenant any actual
Net Re-Letting Proceeds thereafter received during the remainder of the Term, up
to the amount so received from Tenant pursuant to this provision.
(E) Late Charges and Interest. Tenant shall pay, as additional Rent, a service
charge of Two Hundred Dollars ($200.00) for bookkeeping and administrative
expenses, if Rent is not received within five (5) days after its due date. In
addition, any Rent paid more than five (5) days after due shall accrue interest
from the due date at the Default Rate (as defined in Article 25), until payment
is received by Landlord. Such service charge and interest payments shall not be
deemed consent by Landlord to late payments, nor a waiver of Landlord's right to
insist upon timely payments at any time, nor a waiver of any remedies to which
Landlord is entitled as a result of the late payment of Rent.
(F) CERTAIN DEFINITIONS. "Net Re-Letting Proceeds" shall mean the total amount
of rent and other consideration paid by any Replacement Tenants, less all Costs
of Re-Letting, during a given period of time. "Costs of Re-Letting" shall
include without limitation, all reasonable costs and expenses incurred by
Landlord for any repairs, maintenance, changes, alterations and improvements to
the Premises, brokerage commissions, advertising costs, attorneys' fees, any
customary free rent periods or credits, tenant improvement allowances, take-over
lease obligations and other customary, necessary or appropriate economic
incentives required to enter leases with Replacement Tenants, and costs of
collecting rent from Replacement Tenants. "Replacement Tenants" shall mean any
Persons (as defined in Article 25) to whom Landlord re-lets the Premises or any
portion thereof pursuant to this Article.
(G) Other Matters. No re-entry or repossession, repairs, changes, alterations
and additions, re-letting, acceptance of keys from Tenant, or any other action
or omission by Landlord shall be construed as an election by Landlord to
terminate this Lease or Tenant's right to possession, or accept a surrender of
the Premises, nor shall the same operate to release the Tenant in whole or in
part from any of Tenant's obligations hereunder, unless express written notice
of such intention is sent by Landlord or its agent to Tenant. To the fullest
extent permitted by Law, all rent and other consideration paid by any
Replacement Tenants shall be applied: first, to the Costs of Re-Letting, second,
to the payment of any Rent theretofore accrued, and the residue, if any, shall
be held by Landlord and applied to the payment of other obligations of Tenant to
Landlord as the same become due (with any remaining residue to be retained by
Landlord). Rent shall be paid without any prior demand or notice therefor
(except as expressly provided herein) and without any deduction, set-off or
counterclaim, or relief
19
<PAGE>
from any valuation or appraisement laws. Landlord may apply payments received
from Tenant to any obligations of Tenant then accrued, without regard to such
obligations as may be designated by Tenant. Landlord shall be under no
obligation to observe or perform any provision of this Lease on its part to be
observed or performed which accrues after the date of any Default by Tenant
hereunder not cured within the times permitted hereunder. The times set forth
herein for the curing of Defaults by Tenant are of the essence of this Lease.
Tenant hereby irrevocably waives any right otherwise available under any Law to
redeem or reinstate this Lease.
ARTICLE 24
Landlord's Right to Cure
If Landlord shall fail to perform any term or provision under this Lease
required to be performed by Landlord, Landlord shall not be deemed to be in
default hereunder nor subject to any claims for damages of any kind, unless such
failure shall have continued for a period of thirty (30) days after written
notice thereof by Tenant: provided, if the nature of Landlord's failure is such
that more than thirty (30) days are reasonably required in order to cure,
Landlord shall not be in default if Landlord commences to cure such failure
within such thirty (30) day period, and thereafter reasonably seeks to cure such
failure to completion. The aforementioned periods of time permitted for Landlord
to cure shall be extended for any period of time during which Landlord is
delayed in, or prevented from, curing due to fire or other casualty, strikes,
lock-outs or other labor troubles, shortages of equipment or materials,
governmental requirements, power shortages or outages, acts or omissions by
Tenant or other Persons, and other causes beyond Landlord's reasonable control.
If Landlord shall fail to cure within the times permitted for cure herein,
Landlord shall be subject to such remedies as may be available to Tenant
(subject to the other provisions of this Lease); provided, in recognition that
Landlord must receive timely payments of Rent and operate the Property, Tenant
shall have no right of self-help to perform repairs or any other obligation of
Landlord, and shall have no right to withhold, set-off, or abate Rent.
ARTICLE 25
Captions, Definitions and Severability
The captions of the Articles and Paragraphs of this Lease are for convenience of
reference only and shall not be considered or referred to in resolving questions
of interpretation. If any term or provision of this Lease shall be found
invalid, void, illegal, or unenforceable with respect to any particular Person
by a court of competent jurisdiction, it shall not affect, impair or invalidate
any other terms or provisions hereof, or its enforceability with respect to any
other Person, the parties hereto agreeing that they would have entered into the
remaining portion of this Lease notwithstanding the omission of the portion or
portions adjudged invalid, void, illegal, or unenforceable with respect to such
Person.
(A) "Building" shall mean the structure identified in Article I of this Lease.
(B) "CPI" shall mean the Consumer Price Index for All Urban Consumers, All Items
(Base year 1982-1984 = 100) published by the United States Department of Labor,
Bureau of Labor Statistics (or if a separate index is published by the Bureau of
Labor Statistics for a metropolitan area within 100 miles of the Property, then
such metropolitan index). If the Bureau of Labor Statistics substantially
revises the manner in which the CPI
20
<PAGE>
is determined, an adjustment shall be made in the revised index which would
produce results equivalent, as nearly as possible to those which would be
obtained hereunder if the CPI were not so revised. If the 1982-1984 average
shall no longer be used as an index of 100, such change shall constitute a
substantial revision. If the CPI becomes unavailable to the public because
publication is discontinued, or otherwise, Landlord shall substitute therefor a
comparable index based upon changes in the cost of living or purchasing power of
the consumer dollar published by a governmental agency, major bank, other
financial institution, university or recognized financial publisher. If the CPI
is available on a monthly (or alternating monthly) basis, the CPI for the months
in which (or immediately preceding, as the case may be) the Commencement Date
and Adjustment Date respectively occur shall be used.
(C) "Default Rate" shall mean eighteen percent (18%) per annum, or the highest
rate permitted by applicable Law, whichever shall be less.
(D) "Holder" shall mean the holder of any Mortgage at the time in question, and
where such Mortgage is a ground lease, such term shall refer to the ground
lessor.
(E) "Holidays" shall mean all federally observed holidays, including New Year's
Day, President's Day, Memorial Day, Independence Day, Labor Day, Veterans' Day,
Thanksgiving Day, Christmas Day, and to the extent of utilities or services
provided by union members engaged at the Property, such other holidays observed
by such unions.
(F) "Landlord" and "Tenant" shall be applicable to one or more Persons as the
case may be, and the singular shall include the plural, and the neuter shall
include the masculine and feminine; and if there be more than one, the
obligations thereof shall be joint and several. For purposes of any provisions
indemnifying or limiting the liability of Landlord, the term "Landlord" shall
include Landlord's present and future partners, beneficiaries, trustees,
officers, directors, employees, shareholders, principals, agents, affiliates,
successors and assigns.
(G) "Law" shall mean 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 considered binding precedents in the
state in which the Property is located, and decisions of federal courts applying
the Laws of such State.
(H) "Mortgage" shall mean all mortgages, deeds of trust, ground leases and other
such encumbrances now or hereafter placed upon the Property or Building, or any
part thereof, and all renewals, modifications, consolidations, replacements or
extensions thereof, and all indebtedness now or hereafter secured thereby and
all interest thereon.
(I) "Operating Expenses" shall mean all expenses, costs and amounts (other than
Taxes) of every kind and nature which Landlord shall pay during any calendar
year any portion of which occurs during the Term, because of or in connection
with the ownership, management, repair, maintenance, restoration and operation
of the Property, including without limitation, any amounts paid for: (a)
utilities for the Property, including but not limited to electricity, power,
gas, steam, oil or other fuel, water, sewer, lighting, heating, air conditioning
and ventilating, (b) permits, licenses and certificates necessary to operate,
manage and lease the Property, (c) insurance applicable to the Property, not
limited to the amount of coverage Landlord is required to provide under this
Lease, (d) supplies, tools, equipment and materials used in the operation,
repair and maintenance of the Property, (e) accounting, legal, inspection,
consulting, concierge and other services, (f) any equipment rental (or
installment equipment purchase or equipment financing agreements), or management
agreements (including the cost of any management fee actually paid thereunder
and the fair rental value of any office space provided thereunder, up to
customary and reasonable amounts), (g) wages, salaries and other compensation
and benefits (including the fair value of any parking privileges provided) for
all persons
21
<PAGE>
engaged in the operation, maintenance or security of the Property, and
employer's Social Security taxes, unemployment taxes or insurance, and any other
taxes which may be levied on such wages, salaries, compensation and benefits,
(h) payments under any easement, operating agreement, declaration, restrictive
covenant, or instrument pertaining to the sharing of costs in any planned
development, and (i) operation, repair, and maintenance of all Systems and
Equipment and components thereof (including replacement of components),
janitorial service, alarm and security service, window cleaning, trash removal,
elevator maintenance, cleaning of walks, parking facilities and building walls,
removal of ice and snow, replacement of wall and floor coverings, ceiling tiles
and fixtures in lobbies, corridors, restrooms and other common or public areas
or facilities, maintenance and replacement of shrubs, trees, grass, sod and
other landscaped items, irrigation systems, drainage facilities, fences, curbs,
and walkways, re-paving and re-striping parking facilities, and roof repairs. If
the Property is not fully occupied during all or a portion of any calendar year,
Landlord may, in accordance with sound accounting and management practices,
determine the amount of variable Operating Expenses (i.e. those items which vary
according to occupancy levels) that would have been paid had the Property been
fully occupied, and the amount so determined shall be deemed to have been the
amount of variable Operating Expenses for such year. If Landlord makes such an
adjustment, Landlord shall make a comparable adjustment for the Base Expense
Year. Notwithstanding the foregoing, Operating Expenses shall not, however,
include:
(i) depreciation, interest and amortization on Mortgages, and other
debt costs or ground lease payments if any; legal fees in connection with
leasing, tenant disputes or enforcement of leases; real estate brokers' leasing
commissions; improvements or alterations to tenant spaces; the cost of providing
any service directly to and paid directly by, any tenant; any costs expressly
excluded from Operating Expenses elsewhere in this Lease; costs of any items to
the extent Landlord receives reimbursement from insurance proceeds or from a
third party (such proceeds to be deducted from Operating Expenses in the year in
which received); and
(ii) capital expenditures, except those: (a) made primarily to reduce
Operating Expenses, or to comply with any Laws or other governmental
requirements, or (b) for replacements (as opposed to additions or new
improvements) of nonstructural items located in the common areas of the Property
required to keep such areas in good condition; provided, all such permitted
capital expenditures (together with reasonable financing charges) shall be
amortized for purposes of this Lease over the shorter of: (i) their useful
lives, (ii) the period during which the reasonably estimated savings in
Operating Expenses equals the expenditures, or (iii) three (3) years.
(J) "Person" shall mean an individual, trust, partnership, joint venture,
association, corporation, and any other entity.
(K) "Property" shall mean the Building, and any common or public areas or
facilities, easements, corridors, lobbies, sidewalks, loading areas, driveways,
landscaped areas, skywalks, parking garages and lots, and any and all other
structures or facilities operated or maintained in connection with or for the
benefit of the Building, and all parcels or tracts of land on which all or any
portion of the Building or any of the other foregoing items are located, and any
fixtures, machinery, equipment, apparatus, Systems and Equipment, furniture and
other personal property located thereon or therein and used in connection
therewith, whether title is held by Landlord or its affiliates. Possession of
areas necessary for utilities, services, safety and operation of the Property,
including the Systems and Equipment (as defined in Article 25), fire stairways,
perimeter walls, space between the finished ceiling of the Premises and the slab
of the floor or roof of the Property thereabove, and the use thereof together
with the right to install, maintain, operate, repair and replace the Systems and
Equipment, including any of the same in, through, under or above the Premises in
locations that will not materially interfere with
22
<PAGE>
Tenant's use of the Premises, are hereby excepted and reserved by Landlord, and
not demised to Tenant. If the Building shall be part of a complex, development
or group of buildings or structures collectively owned or managed by Landlord or
its affiliates or collectively managed by Landlord's managing agent, the
Property shall, at Landlord's option also be deemed to include such other of
those buildings or structures as Landlord shall from time to time designate, and
shall initially include such buildings and structures (and related facilities
and parcels on which the same are located) as Landlord shall have incorporated
by reference to the total square footage of the Property In Article 1.
(L) "Rent" shall have the meaning specified therefor in Article 3(G).
(M) "Systems and Equipment" shall mean any plant, machinery, transformers, duct
work, cable, wires, and other equipment, facilities, and systems designed to
supply heat, ventilation, air conditioning and humidity or any other services or
utilities, or comprising or serving as any component or portion of the
electrical, gas, steam, plumbing, sprinkler. communications, alarm, security, or
fire/life/safety systems or equipment, or any other mechanical, electrical,
electronic, computer or other systems or equipment for the Property.
(N) "Taxes" shall mean all federal, state, county, or local governmental or
municipal taxes, fees, charges or other impositions of every kind and nature,
whether general, special, ordinary or extraordinary (including without
limitation real estate taxes, general and special assessments, transit taxes,
water and sewer rents, taxes based upon the receipt of rent including gross
receipts or sales taxes applicable to the receipt of rent or service or value
added taxes (unless required to be paid by Tenant under Article 17), personal
property taxes imposed upon the fixtures, machinery, equipment, apparatus,
Systems and Equipment, appurtenances, furniture and other personal property used
in connection with the Property which Landlord shall pay during any calendar
year, any portion of which occurs during the Term (without regard to any
different fiscal year used by such government or municipal authority) because of
or in connection with the ownership, leasing and operation of the Property.
Notwithstanding the foregoing, there shall be excluded from Taxes all excess
profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other taxes
to the extent applicable to Landlord's general or net income (as opposed to
rents, receipts or income attributable to operations at the Property). If the
method of taxation of real estate prevailing at the time of execution hereof
shall be, or has been altered, so as to cause the whole or any part of the taxes
now, hereafter or heretofor levied, assessed or imposed on real estate to be
levied, assessed or imposed on Landlord, wholly or partially, as a capital levy
or otherwise, or on or measured by the rents received therefrom, then such new
or altered taxes attributable to the Property shall be included within the term
"Taxes," except that the same shall not include any enhancement of said tax
attributable to other income of Landlord. Any expenses incurred by Landlord in
attempting to protest, reduce or minimize Taxes shall be included in Taxes in
the calendar year such expenses are paid. Tax refunds shall be deducted from
Taxes in the year they are received by Landlord, but if such refund shall relate
to taxes paid in a prior year of the Term, and the Lease shall have expired,
Landlord shall mail Tenant's Prorata Share of such net refund (after deducting
expenses and attorneys' fees), up to the amount Tenant paid towards Taxes during
such year, to Tenant's last known address. If Taxes for the Base Tax Year are
reduced as the result of protest, or by means of agreement, or as the result of
legal proceedings or otherwise, Landlord may adjust Tenant's obligations for
Taxes in all years following the Tax Base Year, and Tenant shall pay Landlord
within 30 days after notice any additional amount required by such adjustment
for any such years or portions thereof that have theretofor occurred. If Taxes
for any period during the Term or any extension therof, shall be increased after
payment thereof by Landlord, for any reason including without limitation error
or reassessment by applicable governmental or municipal authorities, Tenant
shall pay Landlord upon demand Tenant's Prorate Share of such increased Taxes.
Tenant shall pay increased Taxes whether Taxes are increased as a result of
increases in the assessments or valuation of the Property (whether based on a
sale, change in ownership or refinancing of the Property or otherwise),
increases in the
23
<PAGE>
tax rates, reduction or elimination of any rollbacks or other deductions
available under current law, scheduled reductions of any tax abatement, as a
result of elimination, invalidity or withdrawal of any tax abatement, or for any
other cause whatsoever. Notwithstanding the foregoing, if any Taxes shall be
paid based on assessments or bills by a governmental or municipal authority
using a fiscal year other than a calendar year, Landlord may elect to average
the assessments or bills for the subject calendar year, based on the number of
months of such calendar year included in each such assessment or bill.
(O) "Tenant's Prorata Share" of Taxes and Operating Expenses shall be the
rentable area of the Premises divided by the rentable area of the Property on
the last day of the calendar year for which Taxes or Operating Expenses are
being determined, excluding any parking facilities. Tenant acknowledges that the
"rentable area of the Premises" under this Lease includes the usable area,
without deduction for columns or projections, multiplied by a load or conversion
factor, to reflect a share of certain areas, which may include lobbies,
corridors, mechanical, utility, janitorial, boiler and service rooms and
closets, restrooms, and other public, common and service areas. Except as
provided expressly to the contrary herein, the "rentable area of the Property"
shall include all rentable area of all space leased or available for lease at
the Property, which Landlord may reasonably re-determine from time to time, to
reflect re-configurations, additions or modifications to the Property. If the
Property or any development of which it is a part, shall contain non-office
uses, Landlord shall have the right to determine in accordance with sound
accounting and management principles, Tenant's Prorata Share of Taxes and
Operating Expenses for only the office portion of the Property or of such
development, in which event, Tenant's Prorata Share shall be based on the ratio
of the rentable area of the Premises to the rentable area of such office
portion. Similarly, if the Property shall contain tenants who do not participate
in all or certain categories of Taxes or Operating Expenses on a prorata basis,
Landlord may exclude the amount of Taxes or Operating Expenses, or such
categories of the same, as the case may be, attributable to such tenants, and
exclude the rentable area of their premises, in computing Tenant's Prorata
Share. If the Property shall be part of or shall include a complex, development
or group of buildings or structures collectively owned or managed by Landlord or
its affiliates or collectively managed by Landlord's managing agent, Landlord
may allocate Taxes and Operating Expenses within such complex, development or
group, and between such buildings and structures and the parcels on which they
are located, in accordance with sound accounting and management principles. In
the alternative, Landlord shall have the right to determine, in accordance with
sound accounting and management principles, Tenant's Prorata Share of Taxes and
Operating Expenses based upon the totals of each of the same for all such
buildings and structures, the land constituting parcels on which the same are
located, and all related facilities, including common areas and easements,
corridors, lobbies, sidewalks, elevators, loading areas, parking facilities and
driveways and other appurtenances and public areas, in which event Tenant's
Prorata Share shall be based on the ratio of the rentable area of the Premises
to the rentable area of all such buildings.
ARTICLE 26
Conveyance by Landlord and Liability
In case Landlord or any successor owner of the Property or the Building shall
convey or otherwise dispose of any portion thereof in which the Premises are
located, to another Person (and nothing herein shall be construed to restrict or
prevent such conveyance or disposition), such other Person shall thereupon be
and become landlord hereunder and shall be deemed to have fully assumed and be
liable for all obligations of this Lease to be performed by Landlord which first
arise after the date of conveyance, including the return of any Security
Deposit, and Tenant shall attorn to such other Person, and Landlord or such
successor owner shall, from and after the date of conveyance, be free of all
liabilities and obligations hereunder not then incurred. The liability of
Landlord to Tenant for
24
<PAGE>
any default by Landlord under this Lease or arising in connection herewith or
with Landlord's operation, management, leasing, repair, renovation, alteration,
or any other matter relating to the Property or the Premises, shall be limited
to the interest of Landlord in the Property (and the rental proceeds thereof).
Tenant agrees to look solely to Landlord's interest in the Property (and the
rental proceeds thereof) for the recovery of any judgment against Landlord, and
Landlord shall not be personally liable for any such judgment or deficiency
after execution thereon. The limitations of liability contained in this Article
shall apply equally and inure to the benefit of Landlord's present and future
partners, beneficiaries, officers, directors, trustees, shareholders, agents and
employees, and their respective partners, heirs, successors and assigns. Under
no circumstances shall any present or future general or limited partner of
Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord
or any partner of Landlord is a trust) have any liability for the performance of
Landlord's obligations under this Lease. Notwithstanding the foregoing to the
contrary, Landlord shall have personal liability for insured claims, beyond
Landlord's interest in the Property (and rental proceeds thereof), to the extent
of Landlord's liability insurance coverage available for such claims.
ARTICLE 27
Indemnification
Except to the extent arising from the intentional or grossly negligent acts of
Landlord or Landlord's agents or employees, Tenant shall defend, indemnify and
hold harmless Landlord from and against any and all claims, demands,
liabilities, damages, judgments, orders, decrees, actions, proceedings, fines,
penalties, costs and expenses, including without limitation, court costs and
attorneys' fees arising from or relating to any loss of life, damage or injury
to person property or business occurring in or from the Premises, or caused by
or in connection with any violation of this Lease or use of the Premises or
Property by, or any other act or omission of, Tenant, any other occupant of the
Premises, or any of their respective agents, employees, contractors or guests.
Without limiting the generality of the foregoing, Tenant specifically
acknowledges that the indemnity undertaking herein shall apply to claims in
connection with or arising out of any "Work" as described in Article 8, the
installation, maintenance, use or removal of any "Lines" located in or serving
the Premises as described in Article 29, and the transportation, use, storage,
maintenance, generation, manufacturing, handling, disposal, release or discharge
of any "Hazardous Material" as described in Article 30 (whether or not any of
such matters shall have been theretofor approved by Landlord), except to the
extent that any of the same arises from the intentional or grossly negligent
acts of Landlord or Landlord's agents or employees.
ARTICLE 28
Safety and Security Devices, Services and Programs
The parties acknowledge that safety and security devices, services and programs
provided by Landlord, if any, while intended to deter crime and ensure safety,
may not in given instances prevent theft or other criminal acts, or ensure
safety of persons or property. The risk that any safety or security device,
service or program may not be effective, or may malfunction, or be circumvented
by a criminal, is assumed by Tenant with respect to Tenant's property and
interests, and Tenant shall obtain insurance coverage to the extent Tenant
desires protection against such criminal acts and other losses, as further
described in Article 11. Tenant agrees to cooperate in any reasonable safety or
security program developed by Landlord or required by Law.
25
<PAGE>
ARTICLE 29
Communications and Computer Lines
Tenant may install, maintain, replace, remove or use any communications or
computer wires, cables and related devices (collectively the "Lines") at the
Property in or serving the Premises, provided: (a) Tenant shall obtain
Landlord's prior written consent, use an experienced and qualified contractor
approved in writing by Landlord, and comply with all of the other provisions of
Article 8. (b) any such installation, maintenance, replacement, removal or use
shall comply with all Laws applicable thereto and good work practices, and shall
not interfere with the use of any then existing Lines at the Property, (c) an
acceptable number of spare Lines and space for additional Lines shall be
maintained for existing and future occupants of the Property, as determined in
Landlord's reasonable opinion, (d) if Tenant at any time uses any equipment that
may create an electromagnetic field exceeding the normal insulation ratings of
ordinary twisted pair riser cable or cause radiation higher than normal
background radiation, the Lines therefor (including riser cables) shall be
appropriately insulated to prevent such excessive electromagnetic fields or
radiation, (e) as a condition to permitting the installation of new Lines,
Landlord may require that Tenant remove existing Lines located in or serving the
Premises, (f) Tenant's rights shall be subject to the rights of any regulated
telephone company, and (g) Tenant shall pay all costs in connection therewith.
Landlord reserves the right to require that Tenant remove any Lines located in
or serving the Premises which are installed in violation of these provisions, or
which are at any time in violation of any Laws or represent a dangerous or
potentially dangerous condition (whether such Lines were installed by Tenant or
any other party), within three (3) days after written notice.
Landlord may (but shall not have the obligation to): (i) install new Lines at
the Property (ii) create additional space for Lines at the Property, and (iii)
reasonably direct, monitor and/or supervise the installation, maintenance,
replacement and removal of, the allocation and periodic re-allocation of
available space (if any) for, and the allocation of excess capacity (if any) on,
any Lines now or hereafter installed at the Property by Landlord, Tenant or any
other party (but Landlord shall have no right to monitor or control the
information transmitted through such Lines). Such rights shall not be in
limitation of other rights that may be available to Landlord by Law or
otherwise. If Landlord exercises any such rights, Landlord may charge Tenant for
the costs attributable to Tenant, or may include those costs and all other costs
in Operating Expenses under Article 25 (including without limitation, costs for
acquiring and installing Lines and risers to accommodate new Lines and spare
Lines, any associated computerized system and software for maintaining records
of Line connections, and the fees of any consulting engineers and other
experts); provided, any capital expenditures included in Operating Expenses
hereunder shall be amortized (together with reasonable finance charges) over the
period of time prescribed by Article 25.
Notwithstanding anything to the contrary contained in Article 13, Landlord
reserves the right to require that Tenant remove any or all Lines installed by
or for Tenant within or serving the Premises upon termination of this Lease,
provided Landlord notifies Tenant prior to or within thirty (30) days following
such termination. Any Lines not required to be removed pursuant to this Article
shall, at Landlord's option, become the property of Landlord (without payment by
Landlord). If Tenant fails to remove such Lines as required by Landlord, or
violates any other provision of this Article Landlord may, after twenty (20)
days written notice to Tenant, remove such Lines or remedy such other violation,
at Tenant's expense (without limiting Landlord's other remedies available under
this Lease or applicable Law). Tenant shall not, without the prior written
consent of Landlord in each instance, grant to any third party a security
interest or lien in or on the
26
<PAGE>
Lines, and any such security interest or lien granted without Landlord's written
consent shall be null and void. Except to the extent arising from the
intentional or negligent acts of Landlord or Landlord's agents or employees
Landlord shall have no liability for damages arising from, and Landlord does not
warrant that the Tenant's use of any Lines will be free from the following
(collectively called "Line Problems"): (x) any eavesdropping or wire-tapping by
unauthorized parties, (y) any failure of any Lines to satisfy Tenant's
requirements, or (z) any shortages, failures, variations, interruptions,
disconnections, loss or damage caused by the installation, maintenance,
replacement, use or removal of Lines by or for other tenants or occupants at the
Property, by any failure of the environmental conditions or the power supply for
the Property to conform to any requirements for the Lines or any associated
equipment, or any other problems associated with any Lines by any other cause.
Under no circumstances shall any Line Problems be deemed an actual or
constructive eviction of Tenant, render Landlord liable to Tenant for abatement
of Rent, or relieve Tenant from performance of Tenant's obligations under this
Lease. Landlord in no event shall be liable for damages by reason of loss of
profits, business interruption or other consequential damage arising from any
Line Problems.
ARTICLE 30
HAZARDOUS MATERIALS
Tenant shall not transport, use, store, maintain, generate, manufacture, handle,
dispose, release or discharge any "Hazardous Material" (as defined below) upon
or about the Property, or permit Tenant's employees, agents, contractors. and
other occupants of the Premises to engage in such activities upon or about the
Property. However, the foregoing provisions shall not prohibit the
transportation to and from, and use, storage, maintenance and handling within,
the Premises of substances customarily used in offices (or such other business
or activity expressly permitted to be undertaken in the Premises under Article
6), provided: (a) such substances shall be used and maintained only in such
quantities as are reasonably necessary for such permitted use of the Premises,
strictly in accordance with applicable Law and the manufacturers' instructions
therefor, (b) such substances shall not be disposed of, released or discharged
on the Property, and shall be transported to and from the Premises in compliance
with all applicable Laws, and as Landlord shall reasonably require, (c) if any
applicable Law or Landlord's trash removal contractor requires that any such
substances be disposed of separately from ordinary trash, Tenant shall make
arrangements at Tenant's expense for such disposal directly with a qualified and
licensed disposal company at a lawful disposal site (subject to scheduling and
approval by Landlord), and shall ensure that disposal occurs frequently enough
to prevent unnecessary storage of such substances in the Premises, and (d) any
remaining such substances shall be completely, properly and lawfully removed
from the Property upon expiration or earlier termination of this Lease.
Tenant shall promptly notify Landlord of: (i) any enforcement, cleanup or other
regulatory action taken or threatened by any governmental or regulatory
authority with respect to the presence of any Hazardous Material on the Premises
or the migration thereof from or to other property, (ii) any demands or claims
made or threatened by any party against Tenant or the Premises relating to any
loss or injury resulting from any Hazardous Material, (iii) any release,
discharge or nonroutine, improper or unlawful disposal or transportation of any
Hazardous Material on or from the Premises. and (iv) any matters where Tenant is
required by Law to give a notice to any governmental or regulatory authority
respecting any Hazardous Material on the Premises. Landlord shall have the right
(but not the obligation) to join and participate as a party in any legal
proceedings or actions affecting the Premises initiated in connection with any
environmental, health or safety Law. At such times as Landlord may reasonably
request, Tenant shall provide Landlord with a written list identifying any
Hazardous Material then used, stored, or maintained upon the Premises, the use
and approximate quantity of each
27
<PAGE>
such material, a copy of any material safety data sheet ("MSDS") issued by the
manufacturer therefor, written information concerning the removal,
transportation and disposal of the same, and such other information as Landlord
may reasonably require or as may be required by Law. The term "Hazardous
Material" for purposes hereof shall mean any chemical, substance, material or
waste or component thereof which is now or hereafter listed, defined or
regulated as a hazardous or toxic chemical, substance, material or waste or
component thereof by any federal, state or local governing or regulatory body
having jurisdiction, or which would trigger any employee or community "right-to-
know" requirements adopted by any such body, or for which any such body has
adopted any requirements for the preparation or distribution of an MSDS.
If any Hazardous Material is released, discharged or disposed of by Tenant or
any other occupant of the Premises. or their employees, agents or contractors,
on or about the Property in violation of the foregoing provisions, Tenant shall
immediately, properly and in compliance with applicable Laws clean up and remove
the Hazardous Material from the Property and any other affected property and
clean or replace any affected personal property (whether or not owned by
Landlord), at Tenant's expense. Such clean up and removal work shall be subject
to Landlord's prior written approval (except in emergencies), and shall include,
without limitation, any testing, investigation, and the preparation and
implementation of any remedial action plan required by any governmental body
having jurisdiction or reasonably required by Landlord. If Tenant shall fail to
comply with the provisions of this Article within five (5) days after written
notice by Landlord, or such shorter time as may be required by Law or in order
to minimize any hazard to Persons or property, Landlord may (but shall not be
obligated to) arrange for such compliance directly or as Tenant's agent through
contractors or other parties selected by Landlord, at Tenant's expense (without
limiting Landlord's other remedies under this Lease or applicable Law). If any
Hazardous Material is released, discharged or disposed of on or about the
Property and such release, discharge or disposal is not caused by Tenant or
other occupants of the Premises, or their employees, agents or contractors, such
release, discharge or disposal shall be deemed casualty damage under Article 10
to the extent that the Premises or common areas serving the Premises are
affected thereby; in such case, Landlord and Tenant shall have the obligations
and rights respecting such casualty damage provided under Article 10.
ARTICLE 31
Miscellaneous
(A) Each of the terms and provisions of this Lease shall be binding upon and
inure to the benefit of the parties hereto, their respective heirs, executors,
administrators, guardians, custodians, successors and assigns, subject to the
provisions of Article 21 respecting Transfers.
(B) Neither this Lease nor any memorandum of lease or short form lease shall be
recorded by Tenant.
(C) This Lease shall be construed in accordance with the Laws of the state in
which Property is located.
(D) All obligations or rights of either party arising during or attributable to
the period ending upon expiration or earlier termination of this Lease shall
survive such expiration or earlier termination.
(E) Landlord agrees that, if Tenant timely pays the Rent and performs the terms
and provisions hereunder, and subject to all other terms and provisions of this
Lease, Tenant
28
<PAGE>
shall hold and enjoy the Premises during the Term, free of lawful claims by any
Person acting by or through Landlord.
(F) This Lease does not grant any legal rights to "light and air" outside the
Premises nor any particular view or cityscape visible from the Premises.
(G) If the Commencement Date is delayed in accordance with Article 4 for more
than one year, Landlord may declare this Lease null and void, and if the
Commencement Date is so delayed for more than seven years, this Lease shall
thereupon become null and void without further action by either party.
ARTICLE 32
Offer
The submission and negotiation of this Lease shall not be deemed an offer to
enter the same by Landlord, but the solicitation of such an offer by Tenant.
Tenant agrees that its execution of this Lease constitutes a firm offer to enter
the same which may not be withdrawn for a period of 30 days after delivery to
Landlord (or such other period as may be expressly provided in any other
agreement signed by the parties). During such period and in reliance on the
foregoing, Landlord may, at Landlord's option (and shall, if required by
applicable Law), deposit any security deposit and Rent, and proceed with any
plans, specifications, alterations or improvements, and permit Tenant to enter
the Premises, but such acts shall not be deemed an acceptance of Tenant's offer
to enter this Lease, and such acceptance shall be evidenced only by Landlord
signing and delivering this Lease to Tenant.
29
<PAGE>
ARTICLE 33
Notices
Except as expressly provided to the contrary in this Lease, every notice or
other communication to be given by either party to the other with respect hereto
or to the Premises or Property, shall be in writing and shall not be effective
for any purpose unless the same shall be served personally or by national air
courier service or United States certified mail, return receipt requested,
postage prepaid, addressed, if to Tenant, at the address first set forth in this
Lease, until the Commencement Date, and thereafter to the Tenant at the
Premises, and if to Landlord, at the address at which the last payment of Rent
was required to be made and to Heitman Properties, Ltd. at 180 North LaSalle
Street, Chicago, lllinois 60601, Attn: Property Management, and to IMB Realty
Corporation at 900 N. Michigan Ave., Chicago, lllinois 60611, Attn: Legal
Department, or such other address or addresses as Tenant or Landlord may from
time to time designate by notice as above provided. Every notice or other
communication hereunder shall be deemed to have been given as of the third
business day following the date of such mailing, (or as of any earlier date
evidenced by a receipt from such national air courier service or the United
States Postal Service) or immediately if personally delivered. Notices not sent
in accordance with the foregoing, shall be of no force or effect until received
by the foregoing parties at such addresses required herein.
ARTICLE 34
Real Estate Brokers
Tenant represents that Tenant has dealt only with Cushman & Wakefield
of Georgia, Inc. and Bullock, Terrell and Mannelly (whose commission, if
any, shall be paid by Landlord pursuant to separate agreement) as broker, agent
or tinder in connection with this Lease and agrees to indemnify and hold
Landlord harmless from all damages, judgments, liabilities and expenses
(including reasonable attorneys' fees) arising from any claims or demands of any
other broker, agent or finder with whom Tenant has dealt for any commission or
fee alleged to be due in connection with its participation in the procurement of
Tenant or the negotiation with Tenant of this Lease.
ARTICLE 35
Security Deposit
Tenant shall deposit with Landlord the amount of $4,823.75 ("Security Deposit"),
upon Tenant's execution and submission of this Lease. The Security Deposit shall
serve as security for the prompt, full and faithful performance by Tenant of the
terms and provisions of this Lease. In the event that Tenant is in Default
hereunder and fails to cure within any applicable time permitted under this
Lease, or in the event that Tenant owes any amounts to Landlord upon the
expiration of this Lease, Landlord may use or apply the whole or any part of the
Security Deposit for the payment of Tenant's obligations hereunder. The use or
application of the Security Deposit or any portion thereof shall not prevent
Landlord from exercising any other right or remedy provided hereunder or under
any Law and shall not, be construed as liquidated damages. In the event the
Security Deposit is reduced by such use or application, Tenant shall deposit
with Landlord within ten (10) days after written notice, an amount sufficient to
restore the full amount of the Security Deposit. Landlord shall not be required
to keep the Security Deposit separate from Landlord's general funds or pay
interest on the Security Deposit. Any remaining portion of the Security Deposit
shall be returned to Tenant within sixty (60) days after Tenant has vacated the
Premises in accordance with Article 13. If the Premises shall be expanded at
any time, or if
30
<PAGE>
the Term shall be extended at an increased rate of Rent, the Security Deposit
shall thereupon be proportionately increased.
ARTICLE 36
Entire Agreement
This Lease, together with Riders One through Two, and Exhibits A through ___ and
the documents captioned Work Agreement/Landlord Performance/Improvement
Allowance
(WHICH COLLECTIVELY ARE HEREBY INCORPORATED WHERE REFERRED TO HEREIN AND MADE A
PART HEREOF AS THOUGH FULLY SET FORTH), contains all the terms and provisions
between Landlord and Tenant relating to the matters set forth herein and no
prior or contemporaneous agreement or understanding pertaining to the same shall
be of any force or effect, except any such contemporaneous agreement
specifically referring to and modifying this Lease, signed by both parties.
Without limitation as to the generality of the foregoing, Tenant hereby
acknowledges and agrees that Landlord's leasing agents and field personnel are
only authorized to show the Premises and negotiate terms and conditions for
leases subject to Landlord's final approval, and are not authorized to make any
agreements, representations, understandings or obligations, binding upon
Landlord, respecting the condition of the Premises or Property, suitability of
the same for Tenant's business, or any other matter, and no such agreements.
representations, understandings or obligations not expressly contained herein or
in such contemporaneous agreement shall be of any force or effect. Neither this
Lease, nor any Riders or Exhibits referred to above may be modified, except in
writing signed by both parties.
WITNESSES; ATTESTATION LANDLORD: Carlyle Real
(TWO FOR EACH SIGNATORY Estate Limited
if Property is in Florida or Ohio): Partnership-XV, an Illinois
limited partnership
/s/
_________________________________ By: JMB Realty Corporation,
a Delaware corporation,
general partner
_________________________________
/s/
______________________________
______________________________
______________________________
/s/
_________________________________ TENANT: Industrial Training Corporation, A
Maryland corporation
BY: /s/
________________________
NAME TYPED: Frank A. Carchedi
TITLE: Vice President and
Chief Financial Officer
CERTIFICATE
31
<PAGE>
(IF TENANT IS A CORPORATION)
I, Anne J. Fletcher, Secretary Industrial Training Corporation, Tenant, hereby
certify that the officer(s) executing the foregoing Lease on behalf of Tenant
was duly authorized to act in his capacities as Vice President and Chief
Financial Officer, and his action(s) are the action of Tenant.
(Corporate Seal) Anne J. Fletcher
Secretary
IF TENANT PAYS FOR ALL ELECTRICITY IN PREMISES, OR FOR SEPARATE HVAC, E.G. BASED
---
ON SUB-METERS, USE JMB RIDER 112, 112A OR 112B.
RIDER ONE
RULES
(1) On Saturdays, Sundays and Holidays, and on other days between the hours of
6:00 P.M. and 8:00 A.M. the following day, or such other hours as Landlord shall
determine from time to time, access to the Property and/or to the passageways,
entrances, exits, shipping areas, halls, corridors, elevators or stairways and
other areas in the Property may be restricted and access gained by use of a key
to the outside doors of the Property, or pursuant to such security procedures
Landlord may from time to time impose. All such areas, and all roofs, are not
for use of the general public and Landlord shall in all cases retain the right
to control and prevent access thereto by all persons whose presence in the
judgment of Landlord shall be prejudicial to the safety, character, reputation
and interests of the Property and its tenants provided, however, that nothing
herein contained shall be construed to prevent such access to persons with whom
Tenant deals in the normal course of Tenant's business unless such persons are
engaged in activities which are illegal or violate these Rules. No Tenant and no
employee or invitee of Tenant shall enter into areas reserved for the exclusive
use of Landlord, its employees or invitees. Tenant shall keep doors to corridors
and lobbies closed except when persons are entering or leaving.
(2) Tenant shall not paint, display, inscribe, maintain or affix any sign,
placard, picture, advertisement, name, notice, lettering or direction on any
part of the outside or inside of the Property, or on any part of the inside of
the Premises which can be seen from the outside of the Premises without the
prior consent of Landlord, and then only such name or names or matter and in
such color, size, style, character and material as may be first approved by
Landlord in writing. Landlord shall prescribe the suite number and
identification sign for the Premises (which shall be prepared and installed by
Landlord at Tenant's expense). Landlord reserves the right to remove at Tenant's
expense all matter not so installed or approved without notice to Tenant.
(3) Tenant shall not in any manner use the name of the Property for any purpose
other than that of the business address of the Tenant, or use any picture or
likeness of the Property, in any letterheads, envelopes, circulars, notices,
advertisements, containers or wrapping material without Landlord's express
consent in writing.
(4) Tenant shall not place anything or allow anything to be placed in the
Premises near the glass of any door, partition, wall or window which may be
unsightly from outside the Premises, and Tenant shall not place or permit to be
placed any article of any kind on any window ledge or on the exterior walls.
Blinds, shades, awnings or other forms of inside or outside window ventilators
or similar devices, shall not be placed in or about the outside windows in the
Premises except to the extent, if any, that the character, shape, color,
material and make thereof is first approved by the Landlord.
32
<PAGE>
(5) Furniture, freight and other large or heavy articles, and all other
deliveries may be brought into the Property only at times and in the manner
designated by Landlord, and always at the Tenant's sole responsibility and risk.
Landlord may impose reasonable charges for use of freight elevators after or
before normal business hours. All damage done to the Property by moving or
maintaining such furniture, freight or articles shall be repaired by Landlord at
Tenant's expense. Landlord may inspect items brought into the Property or
Premises with respect to weight or dangerous nature. Landlord may require that
all furniture, equipment, cartons and similar articles removed from the Premises
or the Property be listed and a removal permit therefor first be obtained from
Landlord. Tenant shall not take or permit to b taken in or out of other
entrances or elevators of the Property, any item normally taken, or which
Landlord otherwise reasonably requires to be taken, in or out through service
doors or on freight elevators. Tenant shall not allow anything to remain in or
obstruct in any way, any lobby, corridor, sidewalk, passageway, entrance, exit,
hall, stairway, shipping area, or other such area. Tenant shall move all
supplies, furniture and equipment as soon as received directly to the Premises,
and shall move all such items and waste (other than waste customarily removed by
Property employees) that are at any time being taken from the Premises directly
to the areas designated for disposal. Any hand-carts used at the Property shall
have rubber wheels.
(6) Tenant shall not overload any floor or part thereof in the Premises, or
Property, including any public corridors or elevators therein bringing in or
removing any large or heavy articles, and Landlord may direct and control the
location of safes and all other heavy articles and require supplementary
supports at Tenant's expense of such material and dimensions as Landlord may
deem necessary to properly distribute the weight.
(7) Tenant shall not attach or permit to be attached additional locks or similar
devices to any door or window, change existing locks or the mechanism thereof,
or make or permit to be made any keys for any door other than those provided by
Landlord. If more than two keys for one lock are desired, Landlord will provide
them upon payment therefor by Tenant. Tenant, upon termination of its tenancy,
shall deliver to the landlord all keys of offices, rooms and toilet rooms which
have been furnished Tenant or which the Tenant shall have had made, and in the
event of loss of any keys so furnished shall pay Landlord therefor.
(8) If Tenant desires signal, communication, alarm or other utility or similar
service connections installed or changed. Tenant shall not install or change the
same without the prior approval of Landlord, and then only under Landlord's
direction at Tenant's expense. Tenant shall not install in the Premises any
equipment which requires more electric current than Landlord is required to
provide under this Lease, without Landlord's prior approval and Tenant shall
ascertain from Landlord the maximum amount of load or demand for or use of
electrical current which can safely be permitted in the Premises, taking into
account the capacity of electric wiring in the Property and the Premises and the
needs of tenants of the Property, and shall not in any event connect a greater
load than such safe capacity.
(9) Tenant shall not obtain for use upon the Premises ice, drinking water,
towel, janitor and other similar services, except from Persons approved by the
Landlord. Any Person engaged by Tenant to provide janitor or other services
shall be subject to direction by the manager or security personnel of the
Property.
(10) The toilet rooms, urinals, wash bowls and other such apparatus shall not be
used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein and the expense
of any breakage, stoppage or damage resulting from the violation of this Rule
shall be borne by the Tenant who, or whose employees or invitees shall have
caused it.
(11) The janitorial closets, utility closets, telephone closets, broom closets,
electrical closets, storage closets, and other such closets, rooms and areas
shall be used only for the purposes and in the manner designated by Landlord,
and may not be used by tenants, or
33
<PAGE>
their contractors, agents, employees, or other parties without Landlord's prior
written consent.
(12) Landlord reserves the right to exclude or expel from the Property any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of these
Rules. Tenant shall not at any time manufacture, sell, use or give away, any
spirituous, fermented, intoxicating or alcoholic liquors on the Premises, nor
permit any of the same to occur (except in connection with occasional social or
business events conducted in the Premises which do not violate any Laws nor
bother or annoy any other tenants). Tenant shall not at any time sell, purchase
or give away, food in any form by or to any of Tenant's agents or employees or
any other parties on the Premises nor permit any of the same to occur (other
than in lunch rooms or kitchens for employees as may be permitted or installed
by Landlord, which does not violate any Laws or bother or annoy any other
tenant).
(13) Tenant shall not make any room-to-room canvass to solicit business or
information or to distribute any article or material to or from other tenants or
occupants of the Property and shall not exhibit, sell or offer to sell, use,
rent or exchange any products or services in or from the Premises unless
ordinarily embraced within the Tenant's use of the Premises specified in the
Lease.
(14) Tenant shall not waste electricity, water, heat or air conditioning or
other utilities or services, and agrees to cooperate fully with Landlord to
assure the most effective and energy efficient operation of the Property and
shall not allow the adjustment (except by Landlord's authorized Property
personnel) of any controls. Tenant shall keep corridor doors closed and shall
not open any windows, except that if the air circulation shall not be in
operation, windows which are openable may be opened with Landlord's consent. As
a condition to claiming any deficiency in the air-conditioning or ventilation
services provided by Landlord, Tenant shall close any blinds or drapes in the
Premises to prevent or minimize direct sunlight.
(15) Tenant shall conduct no auction, fire or "going out of business sale" or
bankruptcy sale in or from the Premises, and such prohibition shall apply to
Tenant's creditors.
(16) Tenant shall cooperate and comply with any reasonable safety or security
programs, including fire drills and air raid drills, and the appointment of
"fire wardens" developed by Landlord for the Property, or required by Law.
Before leaving the Premises unattended, Tenant shall close and securely lock all
doors or other means of entry to the Premises and shut off all lights and water
faucets in the Premises (except heat to the extent necessary to prevent the
freezing or bursting of pipes).
(17) Tenant will comply with all municipal, county, state, federal or other
government laws, statutes, codes, regulations and other requirements, including
without limitation, environmental, health, safety and police requirements and
regulations respecting the Premises, now or hereinafter in force, at its sole
cost, and will not use the Premises for any immoral purposes.
(18) Tenant shall not (i) carry on any business, activity or service except
those ordinarily embraced within the permitted use of the Premises specified in
the Lease and more particularly, but without limiting the generality of the
foregoing, shall not (ii) install or operate any internal combustion engine,
boiler, machinery, refrigerating, heating or air conditioning equipment in or
about the Premises, (iii) use the Premises for housing, lodging or sleeping
purposes or for the washing of clothes, (iv) place any radio or television
antennae other than inside of the Premises, (v) operate or permit to be operated
any musical or sound producing instrument or device which may be heard outside
the Premises, (vi) use any source of power other than electricity, (vii) operate
any electrical or other device from which may emanate electrical or other waves
which may interfere with or impair radio television, microwave, or other
broadcasting or reception from or in the Property or elsewhere, (viii) bring or
permit any bicycle or other vehicle or dog (except in the company of a blind
person or except where specifically permitted) or other
34
<PAGE>
animal or bird in the Property, (ix) make or permit objectionable noise or odor
to emanate from the Premises, (x) do anything in or about the Premises tending
to create or maintain a nuisance or do any act tending to injure the reputation
of the Property, (xi) throw or permit to be thrown or dropped any article from
any window or other opening in the Property, (xii) use or permit upon the
Premises anything that will invalidate or increase the rate of insurance on any
policies of insurance now or hereafter carried on the Property or violate the
certificates of occupancy issued for the premises or the Property, (xiii) use
the Premises for any purpose, or permit upon the Premises anything, that may be
dangerous to persons or property (including but not limited to flammable oils,
fluids paints, chemicals, firearms or any explosive articles or materials) nor
(xiv) do or permit anything to be done upon the Premises in any way tending to
disturb any other tenant at the Property or the occupants of neighboring
property.
(19) If the Property shall now or hereafter contain a building garage, parking
structure or other parking area or facility, the following Rules shall apply in
such areas or facilities:
(i) Parking shall be available in areas designated generally for
tenant parking, provided to Tenant at no charge. In all cases, parking for
Tenant and its employees and visitors shall be on a "first come, first served,"
unassigned basis, with Landlord and other tenants at the Property, and their
employees and visitors, and other Persons (as defined in Article 25 of the
Lease) to whom Landlord shall grant the right or who shall otherwise have the
right to use the same. all subject to these Rules. as the same may be amended or
supplemented, and applied on a non-discriminatory basis. all as further
described in Article 6 of the Lease. Notwithstanding the foregoing to the
contrary, Landlord reserves the right to assign specific spaces, and to reserve
spaces for visitors, small cars, handicapped individuals, and other tenants
visitors of tenants or other Persons, and Tenant and its employees and visitors
shall not park in any such assigned or reserved spaces. Landlord may restrict or
prohibit full size vans and other large vehicles.
(ii) In case of any violation of these provisions, Landlord may refuse
to permit the violator to park. and may remove the vehicle owned or driven by
the violator from the Property without liability whatsoever, at such violator's
risk and expense. Landlord reserves the right to close all or a portion of the
parking areas or facilities in order to make repairs or perform maintenance
services, or to alter, modify, re-stripe or renovate the same, or if required by
casualty, strike, condemnation, act of God, Law or governmental requirement, or
any other reason beyond Landlord's reasonable control. In the event access is
denied for any reason, any monthly parking charges shall be abated to the extent
access is denied, as Tenant's sole recourse. Tenant acknowledges that such
parking areas or facilities may be operated by an independent contractor not
affiliated with Landlord, and Tenant acknowledges that in such event, Landlord
shall have no liability for claims arising through acts or omissions of such
independent contractor, if such contractor is reputable.
(iii) Hours shall be 6 A.M. to 8 P.M., Monday through Friday, and
10:00 A.M. to 1:00 P.M. on Saturdays, or such other hours as may be reasonably
established by Landlord or its parking operator from time to time; cars must be
parked entirely within the stall lines, and only small cars may be parked in
areas reserved for small cars; all directional signs and arrows must be
observed; the speed limit shall be 5 miles per hour: spaces reserved for
handicapped parking must be used only by vehicles properly designated; every
parker is required to park and lock his own car: washing, waxing, cleaning or
servicing of any vehicle is prohibited; parking spaces may be used only for
parking automobiles; parking is prohibited in areas: (a) not striped or
designated for parking, (b) aisles, (c) where "no parking" signs are posted, (d)
on ramps, and (e) loading areas and other specially designated areas. Delivery
trucks and vehicles shall use only those areas designated therefor.
35
<PAGE>
JMB 109 (2/89)
OFFICE RENT STEP-UPS
RIDER TWO
Notwithstanding anything to the contrary contained in the Lease. The parties
agree as follows: The term "Lease Year" herein means each twelve month period or
portion thereof during the Term commencing with the Commencement Date without
regard to calendar years.
A. Commencing with the second Lease Year, monthly Base Rent shall be increased
to $4,968.46
B. Commencing with the third Lease Year, monthly Base Rent shall be increased to
$5,117.52
C. Commencing with the fourth Lease Year, monthly Base Rent shall be increased
to $5,271.04
D. Commencing with the fifth Lease Year, monthly Base Rent shall be Increased to
$ 5,429.17
E. Commencing with the ____________Lease Year, monthly Base Rent shall be
increased to $ ________
F Commencing with the ____________ Lease Year, monthly Base Rent shall be
increased to $.________
G. Commencing with the _____________Lease Year, monthly Base Rent shall be
Increased to $_______
H. Commencing with the _____________Lease Year, monthly Base Rent shall be
increased to $________
I. Commencing with the _____________Lease Year, monthly Base Rent shall be
increased to $_________
J. Commencing with the ______________Lease Year, monthly Base Rent shall be
increased to $_________
LANDLORD: Carlyle Real Estate Limited Partnership-XV, an Illinois limited
partnership
By: JMB Realty Corporation a Delaware corporation, general partner
/s/
___________________________________________
TENANT: Industrial Training Corporation
By: /s/
_______________________________________
36
<PAGE>
EXHIBIT A
(Floor plan(s) showing Premises cross-hatched)
37
<PAGE>
(2/89)
WORK AGREEMENT
Landlord Performance
Improvement Allowance
WORK AGREEMENT
THIS AGREEMENT made as of the 30th day of November, 1995 between Carlyle Real
Estate Limited Partnership-XV ("Landlord") and Industrial Training Corporation
("Tenant").
Reference is made to the lease or tenant expansion agreement dated November 30,
1995 (the "Lease") for premises known as Suite(s) 590 (the "Premises"), located
in the property known as RiverEdge Place (the "Property").
The terms "Plans", "Work", "Space Plan", "Working Drawings", "Finish Selections"
and "Landlord's Space Planner" are defined in Section XIV, below.
I. BASIC TERMS.
A. Space Planner: Hendrick Associates
B. Date To Complete Planning: December 22, 1995 (including any Space Plan,
Working Drawings and Finish Selections)
C. Date To Substantially Complete Work: Commencement Date under the Lease.
D. Improvement Allowance Provided by Landlord: $5.00 per square foot of the
Premises.
E. Number of Space Plan Revisions (including revisions prior hereto) at
Landlord's Cost: one (1); provided, Landlord's cost for Space Plans shall not
exceed in the aggregate $______ per square foot of the Premises (including the
cost of the initial set of Space Plans and all revisions).
F. Number of Working Drawing Revisions (including revisions prior hereto) at
Landlord's Cost: one (1); provided, Landlord's cost for Working Drawings shall
not exceed in the aggregate $ N/A per square foot of the Premises (including the
cost of the initial set of Working Drawings and all revisions).
II. BASIC AGREEMENT. On or before the "Date To Complete Planning" described
above, Tenant shall: (a) provide Space Planner with all information concerning
Tenant's requirements in order for Space Planner to prepare the Plans, and (b)
arrange for Space Planner to prepare the Plans, and obtain Landlord's written
approval thereof. However, Tenant shall not be responsible for delays caused by
Landlord or Landlord's Space Planner, as further described in Section III,
below.
On or before the Commencement Date under the Lease, Landlord shall substantially
complete the Work shown on the final approved Plans. However, Landlord shall not
be responsible for delays caused by Tenant or Tenant's contractors, agents or
employees and as further described in Section IV, below and in Article 4 of the
Lease.
Landlord shall bear the cost of the Plans (including any engineering reports, or
other studies or tests in connection therewith, but excluding any furniture
planning) up to the amounts specified above (provided, such amounts shall be
reduced by ten (10%) if Tenant does not use Landlord's Space Planner to prepare
the Plans); Tenant shall bear any costs of the Plans over such amounts and all
costs in connection with designing non-building standard items.
38
<PAGE>
Landlord shall bear the cost of the Work (including the cost of building permits
and sales tax) up to the Improvement Allowance described above (if any), and
Tenant shall bear any costs over such amounts.
III. DELAYS IN PLANNING. The Commencement Date under the Lease shall be
postponed for each day that final Plans are not prepared and approved by the
"Date to Complete Planning" described above, including any revisions reasonably
required by Landlord pursuant to Section V and revisions by Tenant to reduce
Tenant's Cost pursuant to Section IX (collectively called "Delays in Planning").
However, the commencement of Rent shall be postponed only to the extent that
substantial completion of the Work is delayed beyond the Commencement Date as a
result of one or more of the following events (collectively called "Landlord
Delays"):
(a) Landlord takes more than seven (7) working days to approve or disapprove the
Plans or revisions thereof after receiving the same (or such longer time as may
be reasonably required in order to obtain any engineering or HVAC report or due
to other special or unusual features of the Work or Plans),
(b) Landlord's Space Planner takes more than seven (7) working days to meet with
Tenant after receiving a written request for a meeting, or takes more than seven
(7) working days to prepare or revise the Plans after meeting with Tenant and
receiving all information from Tenant required in order to do so (provided this
provision shall apply only if Tenant uses "Landlord's Space Planner" as
described in Section XIV below to prepare the Plans), or
(c) Landlord takes more than thirty (30) working days to provide Tenant with
cost estimates after receiving Plans sufficiently detailed for such purposes
(provided this provision (c) shall only apply if Landlord elects to provide cost
estimates under Section IX below).
IV. DELAYS IN CONSTRUCTION. The Commencement Date under the Lease shall be
postponed for each day that Landlord fails to substantially complete the Work
thereby as a result of strikes, acts of God, shortages of materials or labor,
governmental approvals or requirements, the various causes set forth below, or
any other causes beyond Landlord's reasonable control. In such case, the
commencement of Rent shall be similarly postponed, except to the extent that
delays occur as a result of one or more of the following (collectively called
"Tenant Delays"):
(a) Delays in Planning as described above (except for Landlord Delays), or
(b) Tenant's requests for changes to the Work or Change Orders under Section
Vll, or otherwise.
(c) Tenant's failure to furnish an amount equal to Landlord's reasonable
estimate of Tenant's Cost (if any) within 10 days, as described in Section IX
(which shall give Landlord the absolute right to postpone the Work until such
amount is furnished to Landlord),
39
<PAGE>
(d) any upgrades, special work or other non-building standard items, or items
not customarily provided by Landlord to office tenants, to the extent that the
same involve longer lead times, installation times, delays or difficulties in
obtaining building permits, requirements for any governmental approval, permit
or action beyond the issuance of normal building permits (as described in
Section Vl), or other delays not typically encountered in connection with
Landlord's standard office improvements,
(e) the performance by Tenant or Tenant's contractors, agents or employees of
any work at or about the Premises or Property, or
(f) any act or omission of Tenant or Tenant's contractors, agents or employees,
or any breach by the Tenant of any provisions contained in this Agreement or in
the Lease, or any failure of Tenant to cooperate with Landlord or otherwise act
in good faith in order to cause the Work to be designed and performed in a
timely manner.
V. LANDLORD'S APPROVAL OF PLANS. Landlord shall either approve any Plans or
revisions submitted pursuant to this Agreement or disapprove the same with
suggestions for making the same acceptable within the time required under
Section III. Landlord shall not unreasonably withhold approval, if the Plans
provide for a customary office layout, with finishes and materials generally
conforming to building standard finishes and materials currently being used by
Landlord at the Property, are compatible with the Property's shell and core
construction, and if no modifications will be required for the Property
electrical, heating, air-conditioning, ventilation, plumbing, fire protection,
life safety, or other systems or equipment, and will not require any structural
modifications to the Property, whether required by heavy loads or otherwise
Landlord may request that Tenant approve Landlord's suggested changes in writing
(such approval not be unreasonably withheld), or Landlord may arrange directly
with Space Planner for revised Plans to be prepared incorporating such
suggestions (in which case, Tenant shall sign or initial the revised Plans
and/or Landlord's notice concerning the suggested changes, if requested by
Landlord). Landlord's approval of the Plans shall not be deemed a warranty as to
the adequacy or legality of the design, and Landlord hereby disclaims any
responsibility or liability for the same.
VI. GOVERNMENTAL APPROVAL OF PLANS. Landlord shall apply for any normal building
permits required for the Work which are issued pursuant to a local building code
as a ministerial matter. If the Plans must be revised in order to obtain such
building permits, Landlord shall promptly notify Tenant. In such case, Tenant
shall promptly arrange for the Plans to be revised to satisfy the building
permit requirements and shall submit the revised Plans to Landlord for approval
as a Change Order under Section VII. Landlord shall have no obligation to apply
for any zoning, parking or sign code amendments, approvals, permits or
variances, or any other governmental approval, permit or action (except normal
building permits as described above). If any such other matters are required,
Tenant shall promptly seek to satisfy such requirements or revise the Plans to
eliminate such requirements. Delays in substantially completing the Work by the
Commencement Date as a result of requirements for building permits or other
governmental approvals, permits or actions shall affect the Commencement Date
and commencement of Rent to the extent provided in Section IV (except that any
delays in obtaining normal building permits as a result of errors or omissions
of Landlord's Space Planner in preparing the Plans shall postpone the
commencement of Rent to the extent that substantial completion of the Work is
delayed thereby beyond the Commencement Date, and Tenant shall not be obligated
to bear the cost of Plan revisions to correct the same, notwithstanding anything
to the contrary contained in this Agreement).
40
<PAGE>
VII. CHANGES AFTER PLANS ARE APPROVED. If Tenant shall desire any changes,
alterations, or additions to the final Plans after they have been approved by
Landlord. Tenant shall submit a detailed written request or revised Plans (the
"Change Order") to Landlord for approval. If reasonable and practicable and
generally consistent with the Plans thereto for approved, Landlord shall not
unreasonably withhold approval, but all costs in connection therewith, including
without limitation construction costs, permit fees, and any additional plans,
drawings and engineering reports or other studies or tests, or revisions of such
existing items, shall be paid for by Tenant as a Tenant's Cost under Section IX.
VIII. UNUSED IMPROVEMENT ALLOWANCE. If all or any portion of any Improvement
Allowance shall not be used, Landlord shall be entitled to the savings and
Tenant shall receive no credit therefor.*
IX. TENANT'S COST; ESTIMATES (IF APPLICABLE). Any amounts that Tenant is
required to pay under this Agreement shall be referred to as "Tenant's Cost"
herein. Tenant's Cost shall be deemed additional "Rent" under the Lease.
Landlord may at any time reasonable estimate Tenant's Cost in advance, in which
case, Tenant shall deposit such estimated amount with Landlord within 10 days
after requested by Landlord. If such estimated amounts exceeds the actual amount
of Tenant's Cost, Tenant shall receive a refund of the difference, and if the
actual amount shall exceed the estimated amount, Tenant shall pay the difference
to Landlord within 10 days after requested by Landlord.
*, except that Tenant may utilize any unused portion of the Improvement
Allowance (up to an aggregate total of $5,107.50) for directly related moving
expenses, provided Tenant submits to Landlord invoices from vendors detailing
such expense(s).
41
<PAGE>
In connection with submitting any Plans to Landlord for approval, Tenant may
request that Landlord obtain a written estimate from Landlord's contractor
concerning Tenant's Cost Landlord shall not have an obligation to obtain such
estimates. However, If Landlord elects to obtain such estimates, and if any such
estimates are unacceptable to Tenant, Tenant may eliminate or substitute items
in order to reduce the estimated Tenant's Cost in connection with preparing a
revised version of the Plans.
In connection with submitting any cost estimates to Tenant under this Section,
Landlord may request Tenant's written approval of such estimates. Tenant shall
not unreasonably withhold such approval, and shall approve or disapprove the
same in writing within five (5) days after requested by Landlord. If Tenant
reasonably disapproves any such estimate. Tenant shall meet with the Space
Planner and eliminate or substitute items in order to reduce Tenant's Cost as
described in the preceeding paragraph.
Any cost estimates based on a Space Plan or so-called "pricing plan" will be
preliminary in nature, and may not be relied on by Tenant. However, Landlord
agrees that any written estimate of Tenant's Cost based on the approved Working
Drawings will not be exceeded by more than twenty percent (20%), except to the
extent that: (a) Tenant thereafter makes changes in the Working Drawings or the
Work, (b) overtime labor is required in order to substantially complete the Work
by the Work Completion Date, (c) concealed conditions are encountered on the job
site, (d) new legal requirements become effective following preparation of the
estimate, or (e) there are strikes, acts of God, shortages of materials or
labor, or other causes beyond Landlord's reasonable control.
X. Completion.
A. Landlord shall be deemed to have "substantially completed" the Work for
purposes hereof if Landlord has caused all of the Work to be completed
substantially except for so-called "punchlist items," e.g. minor details of
construction or decoration or mechanical adjustments which do not substantially
interfere with Tenant's occupancy of the Premises, or Tenant's ability to
complete any improvements to the Premises to be made by Tenant. If there is any
dispute as to whether Landlord has substantially completed the Work, the good
faith decision of Landlord's Space Planner shall be final and binding on the
parties.
B. If Landlord notifies Tenant in writing that the Work is substantially
completed, and Tenant fails to object thereto in writing within seven (7) days
thereafter specifying in reasonable detail the items of work needed to be
performed in order for substantial completion, Tenant shall be deemed
conclusively to have agreed that the Work is substantially completed, for
purposes of commencing the Commencement Date and Rent under the Lease.
C. Substantial completion shall not prejudice Tenant's rights to require full
completion of any remaining items of Work. However, if Landlord notifies Tenant
in writing that the Work is fully completed, and Tenant fails to object thereto
In writing within fifteen (15) days thereafter specifying in reasonable detail
the items of work needed to be completed and the nature of work needed to
complete said items, Tenant shall be deemed conclusively to have accepted the
Work as fully completed (or such portions thereof as to which Tenant has not so
objected).
D. Landlord reserves the right to substitute comparable or better materials and
items for those shown in the Plans, so long as they do not materially and
adversely affect the appearance of the Premises.
XI. WORK PERFORMED BY TENANT. Landlord, at Landlord's discretion, may permit
Tenant and Tenant's agents and contractors to enter the Premises prior to
completion of the Work in order to make the Premises ready for Tenant's use and
occupancy. If Landlord permits such entry prior to completion of the Work, then
such permission is conditioned upon Tenant and Tenant's agents, contractors,
42
<PAGE>
workmen, mechanics, suppliers and invitees working in harmony and not
interfering with Landlord and Landlord's contractors in doing the Work or with
other tenants and occupants of the Building. If at any time such entry shall
cause or threaten to cause such disharmony or interference, Landlord shall have
the right to withdraw such permission upon twenty-four (24) hours oral or
written notice to Tenant. Tenant agrees that any such entry Into the Premises
shall be deemed to be under all of the terms, covenants, conditions and
provisions of the Lease (including, without limitation, all insurance
requirements), except as to the covenant to pay Rent thereunder, and further
agrees that Landlord shall not be liable in any way for any injury, loss or
damage which may occur to any items of work constructed by Tenant or to other
property of Tenant that may be placed in the Premises prior to completion of the
Work, the same being at Tenant's sole risk.
XII. Signage. Landlord shall cause signage of building standard material and
design to be placed on or adjacent to the door of the Premises and Tenant shall
pay the cost thereof to Landlord upon demand. The amount due from Tenant
therefor shall be deemed "Rent" under the Lease. Tenant shall promptly advise
Landlord in writing of the name or names Tenant wishes for said signage. The
content of all signage shall be subject to Landlord's prior approval.
XIII. LIABILITY. The parties acknowledge that Landlord is not an architect or
engineer, and that the Work will be designed and performed by independent
architects, engineers and contractors. Accordingly, Landlord does not guarantee
or warrant that the Plans will be free from errors or omissions, nor that the
Work will be free from defects, and Landlord shall have no liability therefor,
provided that such architects, engineers and contractors are licensed and
reputable (except as provided in Section VI). In the event of such errors,
omissions, or defects, Landlord shall cooperate In any action Tenant desires to
bring against such parties.
XIV. Certain Definitions.
A. "Work" herein means the construction of the improvements shown on the final
approved Plans, and any demolition, preparation or other work required in
connection therewith, including without limitation, any work required to be
performed outside the Premises in order to obtain building permits for the work
to be performed within the Premises (if Landlord elects to perform such work
outside the Premises).
B. "Landlord's Space Planner" herein means the space planner (if any) regularly
used by Landlord and with whom Landlord has a written contractual arrangement
for space planning services at the Property.
C. "Finish Selections" herein means the type and color of floor and wall-
coverings, wall paint and any other finishes.
D. "Plans" hereln means. collectively, any Space Plan, Working Drawings, or
other plans drawings or specifications and Finish Selections (and in the event
of any inconsistency between any of the same, or revisions thereto, the latest
dated item approved by Landlord shall control). The Plans shall be signed or
initialed by Tenant, If requested by Landlord and any Working Drawings shall
include at least three (3) mylar sepias (or such other quantity as Landlord may
reasonably require).
E. "Space Plan" herein means a preliminary floor plan, generally showing
demising walls, corridor doors, interior partition walls and interior doors. The
term "Space Plan" for purposes of this Agreement shall also refer to any so-
called pricing plan", i.e. a more detailed Space Plan, drawn to scale, showing:
(l) any special walls, glass partitions or corridor doors, (2) any restrooms,
kitchens, computer rooms, file rooms and other special
43
<PAGE>
purpose rooms, and any sinks or other plumbing facilities, or other special
facilities or equipment (3) communications system, indicating telephone and
computer outlet locations, and (4) any other details or features reasonably
required in order to obtain a preliminary cost estimate as described in Section
IX, above, or otherwise reasonably requested by Landlord or Landlord's Space
Planner.
F. "Working Drawings" herein means fully dimensioned architectural construction
drawings and specifications, and any required engineering drawings (including
mechanical, electrical, plumbing, air-conditioning, ventilation and heating).
and shall include any applicable items described above for the Space Plan, and
if applicable: (l) electrical outlet locations circuits and anticipated usage
therefor, (2) reflected ceiling plan, including lighting, switching, and any
special ceiling specifications, (3) duct locations for heating, ventilating and
air-conditioning equipment, (4) details of all millwork, (5) dimensions of all
equipment and cabinets to be built in, (6) furniture plan showing details of
space occupancy, (7) keying schedule, (8) lighting arrangement, (9) location of
print machines, equipment in lunch rooms, concentrated file and library loadings
and any other equipment or systems (with brand names wherever possible) which
require special consideration relative to air-conditioning, ventilation,
electrical, plumbing, structural, fire protection, life-fire-safety system, or
mechanical systems, (10) special heating, ventilating and air conditioning
equipment and requirements, (11) weight and location of heavy equipment, and
anticipated loads for special usage rooms, (12) demolition plan, (13) partition
construction plan, (14) Finish Selections, and any other details or features
reasonably required in order to obtain a more firm cost estimate as described in
Section IX, above, or otherwise reasonably requested by Landlord or Landlord's
Space Planner.
XV. Taxes. Tenant shall pay prior to delinquency all taxes, charges or other
governmental impositions (including without limitation, any real estate taxes or
assessments, sales tax or value added tax) assessed against or levied upon
Tenant's fixtures, furnishings, equipment and personal property located in the
Premises and the Work to the Premises under this Agreement. Whenever possible,
Tenant shall cause all such items to be assessed and billed separately from the
property of Landlord. In the event any such items shall be assessed and billed
with the property of Landlord, Tenant shall pay its share of such taxes, charges
or other governmental impositions to Landlord within thirty (30) days after
Landlord delivers a statement and a copy of the assessment or other
documentation showing the amount of such impositions applicable to Tenant.
44
<PAGE>
XVI. Incorporation Into Lease Default. THE PARTIES AGREE THAT THE PROVISIONS OF
THIS WORK AGREEMENT ARE HEREBY INCORPORATED BY THIS REFERENCE INTO THE LEASE
FULLY AS THOUGH SET FORTH THEREIN. In the event of any express inconsistencies
between the Lease and this Work Agreement, the latter shall govern and control.
Any default by a party hereunder shall constitute a default by that party under
the Lease and said party shall be subject to the remedies and other provisions
applicable thereto under the Lease.
LANDLORD: Carlyle Real Estate Limited Partnership-XV, an Illinois limited
partnership
By: JMB Realty Corporation, a Delaware corporation,
general partner
/s/
______________________________________________________
TENANT: Industrial Training Corporation
By: /s/
__________________________________________________
45
<PAGE>
STANDARD FORM COMMERCIAL LEASE
Member Greater Boston Real Estate Board
1. PARTIES:
Ellen Realty Trust
2 Milliston Road
Millis, MA 02054
LESSOR, which expression shall include its heirs, successors, and assigns where
the context so admits, does hereby lease to:
Industrial Training Corp.
13515 Dulles Technology Drive
Herndon, VA 22071
LESSEE, which expression shall include its successors, executors,
administrators, and assigns where the context so admits, and the LESSEE hereby
leases the following described premises:
2. PREMISES:
2 Milliston Road
Millis, MA 02054
Floor 1, Suite D
950+/- Square Feet
together with the right to use in common, with others entitled thereto, the
hallways, stairways, and elevators, necessary for access to said leased
premises, and lavatories nearest thereto.
3. TERM:
The term of this lease shall be for One (1)
Year commencing on April 1, 1995
and ending on March 31, 1996
4. RENT:
The LESSEE shall pay to the LESSOR rent at the rate of
$10,374.00 + 1,900.00 CAM ** dollars per year, payable in advance in monthly
installments of $864.50 + 158.33 = $1,022.83 .
5. SECURITY DEPOSIT:
Upon the execution of this lease, the LESSEE has paid to the
LESSOR the amount of $791.67 dollars, which has been held as a security for the
LESSEE's performance as herein provided and refunded to the LESSEE at the end of
this lease subject to the LESSEE's satisfactory compliance with the conditions
hereof.
6. RENT ADJUSTMENT:
Intentionally Deleted
A. TAX ESCALATION:
Intentionally Deleted
B. OPERATING COST ESCALATION:
Intentionally Deleted
C. CONSUMER PRICE ESCALATION:
Intentionally Deleted
1
<PAGE>
[THIS PAGE IS INTENTIONALLY BLANK]
2
<PAGE>
7. UTILITIES:
The LESSEE shall pay, as they become due, all bills for
electricity and other utilities (whether they are used for furnishing heat or
other purposes) that are furnished to the leased premises and presently
separately metered, and all bills for fuel furnished to a separate tank
servicing the leased premises exclusively. The LESSOR agrees to provide all
other utility service and to furnish reasonably hot and cold water and
reasonable heat and air conditioning* (except to the extent that the same are
furnished through separately metered utilities or separate fuel tanks as set
forth above) to the leased premises, the hallways, stairways, elevators, and
lavatories during normal business hours on regular business days of the heating
and air conditioning* seasons of each year, to furnish elevator service and to
light passageways and stairways during business hours, and to furnish such
cleaning service as is customary in similar buildings in said city or town, all
subject to interruption due to any accident, to the making of repairs,
alterations, or improvements, to labor difficulties, to trouble in obtaining
fuel electricity, service, or supplies from the sources from which they are
usually obtained for said building, or to any cause beyond the LESSOR's control.
LESSOR shall have no obligation to provide utilities or
equipment other than the utilities and equipment within the premises as of the
commencement date of this lease. In the event LESSEE requires additional
utilities or equipment, the installation and maintenance thereof shall be the
LESSEE's sole obligation, provided that such installation shall be subject to
the written consent of the LESSOR.
* delete "air conditioning" if not applicable
8. USE OF LEASED PREMISES:
The LESSEE shall use the leased premises only for the
purpose of Sales office for a full service training company
9. COMPLIANCE WITH LAWS:
The LESSEE acknowledges that no trade or occupation shall be
conducted in the leased premises or use made thereof which will be unlawful,
improper, noisy or offensive, or contrary to any law or any municipal by-law or
ordinance in force in the city or town in which the premises are situated.
10. FIRE INSURANCE:
The LESSEE shall not permit any use of the leased premises
which will make voidable any insurance on the property of which the leased
premises are a part, or on the contents of said property or which shall be
contrary to any law or regulation from time to time established by the New
England Fire Insurance Rating Association, or any similar body succeeding to its
powers. The LESSEE shall on demand reimburse the LESSOR, and all other tenants,
all extra insurance premiums caused by the LESSEE's use of the premises.
11. MAINTENANCE:
The LESSEE agrees to maintain the leased
A. LESSEE'S premises in good condition, damage by fire and
OBLIGATIONS other casualty only excepted, and whenever necessary, to
replace plate glass a nd other glass therein, acknowledging that the leased
premises are now in good order and the glass whole. The LESSEE shall not permit
the leased premises to be overloaded, damaged, stripped, or defaced, nor suffer
any waste. LESSEE shall obtain written consent of LESSOR before erecting any
sign on the premises.
B. LESSOR'S The LESSOR agrees to maintain the structure of
OBLIGATIONS the building of which the leased premises are a part in the
same condition as it is at the commencement of the term or as it may be put in
during
3
<PAGE>
the term of this lease, reasonable wear and tear, damage by fire and other
casualty only excepted, unless such maintenance is require because of the LESSEE
or those for whose conduct the LESSEE is legally responsible.
12. ALTERATIONS -- ADDITIONS:
The LESSEE shall not make structural alterations or
additions to the leased premises, but may make non-structural alterations
provided the LESSOR consents thereto in writing, which consent shall not be
unreasonably withheld or delayed. All such allowed alterations shall be at
LESSEE's expense and shall be in quality at least equal to the present
construction. LESSEE shall not permit any mechanics' liens, or similar liens, to
remain upon the leased premises for labor and material furnished to LESSEE or
claimed to have been furnished to LESSEE in connection with work of any
character performed or claimed to have been performed at the direction of LESSEE
and shall cause any such lien to be released of record forthwith without cost to
LESSOR. Any alterations or improvements made by the LESSEE shall become the
property of the LESSOR at the termination of occupancy as provided herein.
13. ASSIGNMENT -- SUBLEASING:
The LESSEE shall not assign or sublet the whole or any part
of the leased premises without LESSOR's prior written consent. Notwithstanding
such consent, LESSEE shall remain liable to LESSOR for the payment of all rent
and for the full performance of the covenants and conditions of this lease.
14. SUBORDINATION:
This lease shall be subject and subordinate to any and all
mortgages, deeds of trust and other instruments in the nature of a mortgage, now
or at any time hereafter, a lien or liens on the property of which the leased
premises are a part and the LESSEE shall, when requested, promptly execute and
deliver such written instruments as shall be necessary to show the subordination
of this lease to said mortgages, deeds of trust or other such instruments in the
nature of a mortgage.
15. LESSOR'S ACCESS:
The LESSOR or agents of the LESSOR may, at reasonable times,
enter to view the leased premises and may remove placards and signs not approved
and affixed as herein provided, and make repairs and alterations as LESSOR
should elect to do and may show the leased premises to others, and at any time
within three (3) months before the expiration of the term, may affix to any
suitable part of the leased premises a notice for letting or selling the leased
premises or property of which the leased premises are a part and keep the same
so affixed without hindrance or molestation.
16. INDEMNIFICATION AND LIABILITY:
The LESSEE shall save the LESSOR harmless from all loss and
damage occasioned by the use or escape of water or by the bursting of pipes, as
well as from any claim or damage resulting from neglect in not removing snow and
ice from the roof of the building or from the sidewalks bordering upon the
premises so leased, or by any nuisance made or suffered on the leased premises,
unless such loss is caused by the neglect of the LESSOR. The removal of snow and
ice from the sidewalks bordering upon the leased premises shall be Lessor's
responsibility.
4
<PAGE>
17. LESSEE'S LIABILITY INSURANCE:
The LESSEE shall maintain with respect to the leased
premises and the property of which the leased premises are a part comprehensive
public liability insurance in the amount of $500,000.00 with property damage
insurance in limits of $300,000.00 in responsible companies qualified to do
business in Massachusetts and in good standing therein insuring the LESSOR as
well as LESSEE against injury to persons or damage to property as provided. The
LESSEE shall deposit with the LESSOR certificates for such insurance at or prior
to the commencement of the term, and thereafter within thirty (30) days prior to
the expiration of any such policies. All such insurance certificates shall
provide that such policies shall not be canceled without at least ten (10) days
prior written notice to each assured named therein.
18. FIRE, CASUALTY -- EMINENT DOMAIN:
Should a substantial portion of the leased premises, or of
the property of which they are apart, be substantially damaged by fire or other
casualty, or be taken by eminent domain, the LESSOR may elect to terminate this
lease. When such fire, casualty, or taking renders the leased premises
substantially unsuitable for their intended use, a just and proportionate
abatement of rent shall be made, and the LESSEE may elect to terminate this
lease if:
(a) The LESSOR fails to give written notice within thirty (30) days of
intention to restore leased premises, or
(b) The LESSOR fails to restore the leased premises to a condition
substantially suitable for their intended use within ninety (90) days of said
fire, casualty or taking.
The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights which the
LESSEE may have for damages or injury to the leased premises for any taking by
eminent domain, except for damage to the LESSEE's fixtures, property, or
equipment.
19. DEFAULT AND BANKRUPTCY:
In the event that:
(a) The LESSEE shall default in the payment of any installment of rent or
other sum herein specified and such default shall continue for ten (10) days
after written notice thereof; or
(b) The LESSEE shall default in the observance or performance of any other
of the LESSEE's covenants, agreements, or obligations hereunder and such default
shall not be corrected within thirty (30) days after written notice thereof; or
(c) The LESSEE shall be declared bankrupt or insolvent according to law,
or, if any assignment shall be made of LESSEE's property for the benefit of
creditors, then the LESSOR shall have the right thereafter, while such default
continues, to re-enter and take complete possession of the leased premises, to
declare the term of this lease ended, and remove the LESSEE's effects, without
prejudice to any remedies which might be otherwise used for arrears of rent or
other default. The LESSEE shall indemnify the LESSOR against all loss of rent
and other payments which the LESSOR may incur by reason of such termination
during the residue of the term. If the LESSEE shall default, after reasonable
notice thereof, in the observance or performance of any conditions or covenants
on LESSEE's part to be observed or performed under or by virtue of any of the
provisions in any article of this lease, the LESSOR, without being under any
obligation to do so and without thereby waiving such default, may remedy such
default for the account and at the expense of the LESSEE. If the LESSOR makes
any expenditures or incurs any obligations for the payment of money in
connection therewith, including but not limited to, reasonable attorney's fees
in instituting, prosecuting or defending any action or proceeding, such sums
paid or obligations insured, with interest at the rate of _____ per cent per
annum and costs, shall be paid to the LESSOR by the LESSEE as additional rent.
20. NOTICE:
Any notice from the LESSOR to the LESSEE relating to the
leased premises or to the occupancy thereof, shall be deemed duly served, if
left at the leased premises addressed to the LESSEE, or if mailed to the leased
premises, registered
5
<PAGE>
or certified mail, return receipt requested, postage prepaid, addressed to the
LESSEE. Any notice from the LESSEE to the LESSOR relating to the leased premises
or to the occupancy thereof, shall be deemed duly served, if mailed to the
LESSOR by registered or certified mail, return receipt requested, postage
prepaid, addressed to the LESSOR at such address as the LESSOR may from time to
time advise in writing. All rent notices shall be paid and sent to the LESSOR at
2 Milliston Road, Millis, MA 02054
21. SURRENDER:
The LESSEE shall at the expiration or other termination of
this lease remove all LESSEE's goods and effects from the leased premises,
(including, without hereby limiting the generality of the foregoing, all signs
and lettering affixed or painted by the LESSEE, either inside or outside the
leased premises). LESSEE shall deliver to the LESSOR the leased premises and all
keys, locks thereto, and other fixtures connected therewith and all alterations
and additions made to or upon the leased premises, in good condition, damage by
fire or other casualty only excepted. In the event of the LESSEE's failure to
remove any of LESSEE's property from the premises, LESSOR is hereby authorized,
without liability to LESSEE for loss of damage thereto, and at the sole risk of
LESSEE, to remove and store any of the property at LESSEE's expense, or to
retain same under LESSOR's control or to sell at public or private sale, without
notice any or all of the property not so removed and to apply the net proceeds
of such sale to the payment of any sum due hereunder, or to destroy such
property.
22. BROKERAGE:
The Broker(s) named herein --NO BROKER--warrant(s) that he
(they) is (are) duly licensed as such by the Commonwealth of Massachusetts, and
join(s) in this agreement and become(s) a party hereto, insofar as any
provisions of this agreement expressly apply to him (them), and to any
amendments or modifications of such provisions to which he (they) agree(s) in
writing.
LESSOR agrees to pay the above-named Broker upon the term commencement date a
fee for professional services of or pursuant to Broker's attached commission
schedule.
23. OTHER PROVISIONS:
It is also understood and agreed that LESSOR is to provide
services and operating expenses that include but is not limited to the
following, which will be billed to the LESSEE monthly at $2.00/square foot.
- Real estate taxes - Landscaping
- Grounds maintenance - Cleaning
- Common utilities - Trash removal
- Snow removal - Maintenance
- Insurance. - Water/sewer
6
<PAGE>
24. Option:
Intentionally Deleted
IN WITNESS WHEREOF, the said parties hereunto set their hands and seals this
10th day of February, 1995.
/s/ /s/
________________________________ ___________________________
LESSEE Industrial Training Corp. LESSOR Ellen Realty Trust,
Ellen Rosenfeld Trustee
________________________________
BROKER(S)
7
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
The following lists all subsidiaries of Industrial Training Corporation as
required by Item 21.
Name State/Country of Incorporation
---- ------------------------------
1. ComSkill Learning Centers, Inc. Georgia
2. Activ Training, Ltd. England/Wales
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-45036) pertaining to the 1982 Incentive Stock Option Plan, the
Registration Statement (Form S-8 No. 33-60138) pertaining to the 1992 Director
Incentive Stock Option Plan and the Registration Statement (Form S-8 No. 33-
60128) pertaining to the 1992 Key Employee Stock Option Plan of Industrial
Training Corporation of our report dated February 16, 1996, with respect to the
consolidated financial statements of Industrial Training Corporation included in
the Annual Report (Form 10-KSB) for the year ended December 31, 1995.
Vienna, Virginia Ernst & Young LLP
February 27, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS 10-KSB AS FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,348,762
<SECURITIES> 0
<RECEIVABLES> 4,992,101
<ALLOWANCES> (190,047)
<INVENTORY> 871,072
<CURRENT-ASSETS> 16,293,791
<PP&E> 4,352,492
<DEPRECIATION> (3,036,918)
<TOTAL-ASSETS> 25,774,147
<CURRENT-LIABILITIES> 3,019,542
<BONDS> 130,745
0
0
<COMMON> 355,643
<OTHER-SE> 20,556,731
<TOTAL-LIABILITY-AND-EQUITY> 25,774,147
<SALES> 22,768,664
<TOTAL-REVENUES> 22,768,664
<CGS> 12,870,896
<TOTAL-COSTS> 12,870,896
<OTHER-EXPENSES> 7,342,660
<LOSS-PROVISION> (90,667)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,555,108
<INCOME-TAX> 1,048,000
<INCOME-CONTINUING> 1,507,108
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,507,108
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0
</TABLE>
