Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year Ended August 31, 1997 Commission File Number 0-15587
EA Engineering, Science, and Technology, Inc.
(Exact Name of registrant as specified in its charter)
Delaware 52-0991911
------------------------ -----------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11019 McCormick Road, Hunt Valley, MD 21031
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 584-7000
---------------
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 per share
----------------------------------------
(Title of class)
Indicate by check mark whether: the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of October 31, 1997, the aggregate market value of the outstanding
shares of the Registrant's Common Stock, par value $.01 per share, held by
non-affiliates was approximately $7,100,00 based on the closing price of the
Common Stock as provided by the National Association of Securities Dealers
through NASDAQ on October 31, 1997.
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock as of the latest practicable date.
Class Outstanding at October 31, 1997
------------------------------------ ----------------------------------
Common Stock, par value $.01 6,236,500 shares
DOCUMENTS INCORPORATED BY REFERENCE
1. Annual Report to Stockholders for the year ended August 31, 1997, portions
of which are incorporated by reference in Part II of this Report.
2. Proxy Statement for the Annual Meeting of Stockholders scheduled for
January 14, 1998, portions of which are incorporated by reference in Part
III of this Report.
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.
FORM 10-K
TABLE OF CONTENTS
<TABLE>
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Item Page
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<S> <C>
PART I
1 Business 1
2 Properties 10
3 Legal Proceedings 10
4 Submission of Matters to a Vote of Shareholders 10
PART II
5 Market for the Registrant's Common Stock and Related
Shareholder Matters 11
6 Selected Financial Data 12
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
8 Financial Statements and Supplementary Data 17
9 Disagreements on Accounting and Financial Disclosure 33
PART III
10 Directors and Executive Officers of the Registrant 34
11 Executive Compensation 34
12 Security Ownership of Certain Beneficial Owners and Management 34
13 Certain Relationships and Related Transactions 34
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 35
Signatures 39
Exhibit Index 40
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
General
EA Engineering, Science, and Technology, Inc. is an international consulting
firm specializing in the fields of energy, the environment, and health and
safety. Through its network of more than 20 branch and satellite offices and its
analytical and international operations, EA provides scientific, engineering,
economic, analytical, and management solutions to industrial, utility, and
government clients.
As of August 31, 1997, the Company's organizational structure consisted of the
parent company, EA Engineering, Science, and Technology, Inc. ("EA") and its
wholly-owned subsidiaries, EA International, Inc. and EA Financial, Inc., and EA
Financial's wholly-owned subsidiaries, EA Global, Inc. and EA Engineering,
Science, and Technology de Mexico, S.A. de C.V. EA International, Inc., a
Maryland corporation, was incorporated in fiscal 1997 to provide environmental
services on a fully diversified basis throughout the world. The entities are
collectively referred to herein as the "Company."
The Company was founded in 1973 and initially was engaged in environmental
assessment and permitting related to power plant siting and expansion. Since
that time, in response to market opportunities and conditions, the Company
expanded both its services and client base. Today, we provide services in areas
ranging from air permitting and process safety, to water quality and resources
management. Since its founding, EA has performed more than 65,000 projects for
clients in the United States and in more than 30 nations abroad.
Historically, the demand for EA's services was largely driven by the myriad of
federal, state and local environmental enactments and regulations impacting the
Company's clients. A great deal of cleanup activity and progress have been
generated as a result of those laws and regulations--in 1996 the U.S.
environmental market reported revenues of $181,000,000,000. However, as with all
regulatory-driven businesses, the industry, and in turn, the Company's
performance is inextricably linked to the pace and intensity with which the
regulations are written, promulgated, and enforced. During the past several
years, the regulatory pace has slowed resulting in an increasingly competitive
environmental market.
More recently, the demand for the Company's services have been stimulated by
new, more business-oriented factors, including the recognition that it is more
cost-effective to prevent pollution and minimize waste than to remediate it as a
toxic emission. Additionally, many clients now see environmental strategy as a
method of increasing global competitiveness and enhanced profitability. EA
believes that this strategic shift will stimulate opportunity for its
business-oriented consulting services in both the domestic and international
markets.
In our role as an advocate and strategic resource to our clients, EA provides
the management perspective and technical skills to anticipate, identify, address
and resolve those energy, environmental, health and safety issues affecting
their business performance and profitability.
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Services
EA provides consulting services to clients in the areas of energy, environment,
and health and safety. The Company's primary service areas are Air Quality
Management and Process Engineering, Analytical Laboratory Services,
Ecotoxicology and Bioassessment, Risk Sciences and Management, Sediment and
Dredging, Site Characterization and Remediation, Solid Waste, and Water Quality
and Water Resources Management, and Health and Safety Reviews, Energy Planning
and Audits, Due Diligence Reviews, and Strategic Planning of Environmental
Issues.
The multi-faceted nature of most environmental problems, however, requires a
cross-section of professionals to provide an integrated solution, and strict
classification by service area is not practical for most of the Company's
projects. In providing its services, EA has developed certain remedial and
analytical technologies and processes for the mitigation and control of
environmental damage and risks. In addition, we assist clients in responding to
issues raised by regulatory agencies and community groups. All of the service
areas are part of the vertically-integrated capabilities that the Company may
offer its clients.
The Company's services normally are performed by a team of scientists,
engineers, planners and economists and include a combination of the following:
<TABLE>
<S> <C>
o Consultation to determine the nature and scope, and development and
implementation of solutions to mitigate potential environmental, energy,
or health and safety problems.
o On-site collection of samples.
o On-site monitoring and measurement of discharges and emissions.
o Analysis of samples in the Company's laboratories or in its mobile testing units.
o Evaluation of environmental or human health risks.
o Development and engineering design of a system or facility for
monitoring, controlling or eliminating the problem.
o Preparation of reports for regulatory agencies.
o Participation and representation of clients in public and regulatory hearings.
o Engineering certification of design specifications.
o Implementation of remedial action.
</TABLE>
The Company's contracts are generally undertaken on a time and material, fixed
price, or cost plus fixed fee basis. Fixed price contracts and certain time and
material and cost plus contracts with upset limits require EA to bear the risk
of cost overruns. Most of the Company's contracts provide that the client may at
any time cancel any portion of the work not yet performed.
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The following table reflects the approximate percentage of net revenue derived
by contract type in each of the three years in the period ended August 31, 1997:
<TABLE>
<CAPTION>
Year Ended August 31,
- ---------------------------------------- ---------------------------------------
1997 1996 1995
- ---------------------------------------- ------------- ------------ -----------
<S> <C>
Time and materials 34% 33% 47%
Fixed price 44 41 26
Cost plus fixed fee 22 26 27
- ---------------------------------------- ------------- ------------ -----------
100% 100% 100%
======================================== ============= ============ ===========
</TABLE>
During fiscal 1997, the volume of the Company's work continued to be
predominately from fixed price and time and materials contracts. The Company
considers this to be an industry trend whereby clients transfer additional risk
to the prime contractor and, in turn, the Company transfers additional risk to
its subcontractors, when applicable.
In general, the Company's contracts vary in length from one month to ten years
and require performance of a particular project within the contractually
specified time frame. Although the Company holds certain federal contracts with
options for longer durations, most of these contracts require exercise of annual
renewals by the client. A substantial portion of EA's contracts represent the
provision of separate services required from time-to-time by ongoing clients.
Clients
EA provides services to industrial, utility, and government clients both
directly and indirectly through work performed for architects/engineers,
engineer/contractors, law firms, and financial institutions. The Company's goal
is to assist its clients in achieving their business and growth objectives as
costeffectively and dependably as possible.
During fiscal 1997, the Company provided services to more than 450 industrial,
utility, and government clients involving more than 1,500 projects in the
private sector and 460 projects in the federal government sector. Although more
private sector projects were performed, the portion of net revenue provided by
the federal government was 50%, 53%, and 64% for the fiscal year 1997, 1996 and
1995, respectively. The Company believes that a diversified mix of business
revenue derived from each of its client sectors will help ensure its continuing
financial success. To achieve this goal, the Company has established a business
development program focused on specific client sectors. Those sectors are:
federal government, state and local governments, industry (for example, pulp and
paper, oil and gas, chemical), and electric utility.
Although a significant portion of net revenue was derived from agencies of the
federal government, the Company's services are performed for many different
departments, and in many different regions of the country, thereby reducing the
financial risks associated with the delays or cancellation of any particular
contract. Therefore, in management's opinion, the loss of any one of the
Company's clients within its major revenue generating sector would not have a
material effect on operations or profitability.
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The following table reflects the approximate percentage of net revenue derived
from the Company's major client sectors for each of the three years in the
period ended August 31, 1997:
<TABLE>
<CAPTION>
Year Ended August 31,
- ---------------------------------------- ---------------------------------------
1997 1996 1995
- ---------------------------------------- ------------- ------------ -----------
<S> <C>
Federal government 50% 53% 64%
Industrial and other private sector 36 33 23
Utilities 5 6 7
State and local government 9 8 6
- ---------------------------------------- ------------- ------------ -----------
100% 100% 100%
======================================== ============= ============ ===========
</TABLE>
Sales and Marketing
The Company markets its services from its headquarters in Hunt Valley, Maryland
and through its network of branch and satellite offices located in and around
major metropolitan cities across the United States. The Company employs a
variety of business development and marketing techniques, including one-on-one
client meetings and presentations, hosting and participating in industry
seminars, responding to formal requests for proposals, initiating direct-mail
programs, and establishing an ongoing public relations/technical article program
within industry trade journals.
A significant portion of new business arises from prior client engagements.
Clients frequently expand the scope of work to include follow-on complementary
activities and new activities and often refer us to their colleagues at other
locations. Additionally, the Company has an active business development program
to identify new clients that have not yet engaged its services. The Company
often teams with other consulting firms, or provides its services as a
subcontractor to larger architect/engineer or engineer/contractor firms. The
Company tracks prospective business through an interactive opportunity pipeline
network.
The Company employs a matrix approach involving branch operations, Client
Sectors Directors, and National Technical Directors to maximize the
effectiveness of its sales and marketing organization. The Company's market
sectors are federal government, state and local governments, industry, and
electric utility. The Company's product lines are Air Quality Management
Services and Process Engineering, Alternative Fuels, Analytical Laboratory
Services, Ecotoxicology and Bioassessment, Process Safety and Risk Management,
Risk-Based Environmental Decision-Making, Sediment Management, Site
Characterization and Remediation, Solid Waste Management Services, and Water
Quality and Water Resources Management.
Backlog
At August 31, 1997, the Company's total contract backlog was approximately
$48,400,000 compared to contract backlog of $63,700,000 at August 31, 1996. The
Company's net contract backlog (total less estimated subcontractor costs) was
approximately $38,900,000 at the end of fiscal 1997 compared to approximately
$52,500,000 at the end of fiscal 1996. The Company expects that approximately
80% of
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this backlog will be completed in fiscal 1998. The Company's total contract
backlog attributable to federal government contracts as of August 31, 1997 was
$34,000,000 ($26,000,000, net) compared to $41,000,000 ($32,000,000, net) a year
earlier.
There can be no assurance, however, that work under any of these contracts will
be authorized or that work once authorized will not be cancelled. Generally,
these contracts provide for a fixed percentage of profit based on estimated
costs. In the event of cancellation, the Company is entitled to recover its
incurred costs and associated profit. Terminations and cancellations of
government contracts have not been material in the past. The level of backlog
may fluctuate during each year, and accordingly, the backlog at any point in
time does not necessarily reflect near-term anticipated operating results.
Reliance on major government contracts subjects the Company to risks associated
with public budgetary restrictions and uncertainties, discrepancies between
awarded contract amounts and actual revenues, and cancellation at the option of
the government. The Company attempts to mitigate these risks by staffing only to
meet reasonably anticipated average workloads, by using subcontractors to handle
peak work loads, and by obtaining termination benefit contract provisions.
Cancellation of any of the Company's major government contracts, however, could
have a material adverse effect on the Company.
As the amount of work available from federal agencies declines and becomes more
competitive, the Company is shifting its marketing efforts to the industrial,
utility, and state and local levels. Particular attention will be given to
expanding the overall management consulting practice in the energy and
environment areas with emphasis also on health and safety issues.
The Company also provides services on major long-term private sector contracts
under continuing service agreements that provide for work on a task basis. Upon
receipt of related authorizations, the work is included in contract backlog.
Because such specific authorizations are generally for periods considerably
shorter than the duration of the period the Company expects to perform services
for a particular client, management believes that its backlog figures are not
necessarily indicative of its future revenue.
Employees
As of August 31, 1997, the Company had approximately 560 full-time employees
compared to approximately 720 full-time employees at August 31, 1996. The
decrease in staff was a result of staff reductions in overhead positions and
excess capacity in technical staff. Most of the Company's employees are engaged
in performing scientific, engineering, remediation, and consulting services; the
remainder provide executive, administrative, and other support services. The
Company also hires part-time or temporary personnel to meet seasonal needs or
the requirements of a particular contract. EA's staff includes professional
engineers, biologists, chemists, geologists, industrial hygienists, public
health scientists, regulatory specialists, toxicologists, industrial planners,
computer scientists, and business managers.
The Company has reinvigorated and invested in training and mentoring programs to
facilitate a "continuing learning" process within the firm. In 1997, the Company
instituted several programs, including project manager training, sales
management seminars and technical development programs, and has established a
professional career ladder development program. Additionally, the Company offers
a tuition reimbursement program for all employees of the firm.
None of the Company's employees are represented by a union. The Company
considers its relationship with employees to be good.
5
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Competition
Nationwide, the environmental industry employs more than one million people,
working at over 100,000 firms, generating revenues in excess of
$181,000,000,000. However, the environmental engineering and consulting market
is becoming highly competitive and requires skilled and experienced
professional, technical, and management personnel. Today, the domestic market
for environmental services can be characterized as flat in revenue and income.
Over the past several years, in an effort to reduce costs and increase volume,
the environmental industry experienced an increase in merger and acquisition
activity, resulting in several mega-environmental firms with revenues greater
than $500,000,000.
Typical projects, especially those in excess of $100,000, are bid on by numerous
firms. The principal competitive factors are client relationships, pricing,
reputation, quality of services, expertise, and local presence. Increasingly,
multiple firms are deemed "technically qualified," resulting on the factors of
price and relationships to determine the winning bid.
EA believes that its favorable competitive factors are its multidisciplinary
capabilities, its reputation for quality of services, its certifications to
provide analytical and consulting services to a broad constituency, and its
geographical dispersion. In each market sector, EA competes with engineering and
consulting firms which are both larger and smaller than the Company, although
management believes no one firm currently dominates a significant portion of any
of the service areas.
Licensing and Certification
The Company's laboratory has been approved/validated to perform analyses for the
Naval Facility Engineering Service Center (NFESC), the Air Force Center for
Environmental Excellence (AFCEE), and the U.S. Army Corps of Engineers (Missouri
River Division). Regulatory authorities frequently will not accept analytical
evidence of compliance unless the analysis has been performed by a laboratory
with relevant certifications such as those described above.
The laboratory is also certified by 41 different states including Maryland, New
Jersey, New York, and California, and maintains certain local permits and
licenses. Additionally, the laboratory has been authorized to do work by the
District of Columbia and 9 states that do not have formal certification
programs. The laboratory has certifications and permits to operate in states and
jurisdictions where the Company performs its services. To support all of these
programs, the laboratory must be periodically audited by these regulatory
agencies and is required to participate in a variety of performance evaluations
such as those conducted by the EPA and U.S. Army Corps of Engineers.
The criteria necessary for obtaining and maintaining laboratory certifications
and permits varies significantly by agency and by state. Generally the criteria
include:
o Application for certification/permit
o Request and initial review for compliance with comprehensive rules and
regulations
o Periodic verification of compliance through proficiency samples
o Periodic onsite audits
o Payment of annual fees
Historically, the laboratory has experienced no significant audit problems.
While audits may result in certain "findings," these are usually procedural in
nature and prompt changes or other adjustments to bring the Company into
compliance with the auditor's request. The Company has been able to obtain and
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maintain its certifications and permits without interruption. However, if the
Company is unable to obtain and maintain such participation and certifications,
the operation of the laboratory and the Company's financial condition may be
adversely affected. Management believes that the Company currently possesses the
licenses or permits necessary to perform its engineering and consulting
services.
Regulatory Matters
Many environmental laws and regulations have been enacted by federal, state, and
local governments in response to growing public concern over activities and
substances deemed to have adverse effects on the environment and on human health
and safety. Historically, compliance with these environmental laws and
regulations by both private and public sector clients has been the primary force
in creating demand for the Company's services. Those laws include:
The Safe Drinking Water Act (SDWA) of 1974 directs the Environmental Protection
Agency to set drinking water standards for community water supply systems in the
United States. In 1996, Congress reauthorized the act, introducing substantive
changes to the regulation and financing of water systems. Those changes include
regulatory improvements with standards based on better science, risk assessment,
and prioritization of efforts, and stronger programs to prevent contamination of
drinking water sources. The act integrates watershed protection planning
programs to control non-point contaminants. A key provision of the reauthorized
act introduces new funding for states and community water systems through a
drinking water state revolving program. Nearly $9,600,000,000 through 2006 is
available for low interest loans.
The reauthorized SDWA will have a strong impact on the Company's state and local
government clients, all of whom are responsible for ensuring the quality and
quantity of their community drinking water supplies.
The Federal Water Pollution Control Act of 1972 (the "Clean Water Act" or CWA)
established a system of standards, permits and enforcement procedures for the
discharge of pollutants from industrial and municipal wastewater sources.
The CWA contains many regulations that impact the Company's industrial, federal,
and state and local clients and contribute to its new and ongoing work
assignments for those clients . Key areas for which regulations have been issued
include industrial wastewater pretreatment, surface water toxics control,
stormwater control, nonpoint source pollution control and compliance with the
National Permit Discharge Elimination System. For example, the surface water
toxics program requires states to identify waters adversely affected by toxics
and propose control strategies for both point and non-point sources. Regulations
governing stormwater permitting and management affect facilities as well as
communities, often requiring storm sewer analysis and design, flood control,
watershed planning, and pollution impacts from point and non-point sources.
Additionally, the evaluation and management of ecological habitats, watersheds
and wetlands, are often included in CWA-driven projects.
The Resource Conservation and Recovery Act of 1976 (RCRA) regulates the
management of existing and newly-generated hazardous waste from the time of
generation through final disposal. Every facility that treats, stores or
disposes of hazardous waste must obtain a RCRA permit, and must comply with
certain operating, financial responsibility and closure requirements. The Act
also regulates solid waste activities from household, commercial, and industrial
generators.
7
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Regulations issued pursuant to RCRA significantly affect the need for
environmental treatment and services in the following areas: municipal solid
waste disposal, land disposal of hazardous waste, remediation of environmental
contamination, and management of leaking underground storage tanks. The EPA is
now promoting a program that encourages RCRA corrective action facilities to
meet performance standards through self-implementing (voluntary) programs. The
Company expects this program will hasten the pace of cleanup action for its
clients.
The Clean Air Act (CAA), which was reauthorized in 1990, established a series of
programs to control airborne emissions from mobile and stationary sources. The
act designated many areas of the U.S. in "nonattainment," requiring them to
establish programs, and prepare and implement State Implementation Plans to
reduce emissions and meet federal ambient air quality standards.
The reauthorized CAA contains a sizeable provision for controlling hazardous air
pollutants and established a schedule for installing control technologies where
needed. The act also required thousands of emission sources to obtain
federally-enforceable permits in order to continue to operate. The Company
assists clients in attaining permits, and works with industrial, state and local
government clients to meet attainment goals from stationary and mobile sources,
the latter, through its Clean Fuel Vehicles group.
The Comprehensive Environmental Response, Compensation and Liability Act of 1980
("Superfund"), along with its amendments and reauthorizations, addresses the
uncontrolled releases from inactive or abandoned hazardous waste sites.
Industrial, federal, and state and local entities are all subject to the
requirements of CERCLA for geologic, hydrologic, engineering, risk, and
environmental evaluations. The Company assists its clients in both the
investigative and engineering aspects of CERCLA work, and in designing,
constructing and monitoring site remediation systems.
Brownfields Initiatives. The exodus of U.S. industry from our inner-city or
other industrial locations during the past thirty years has left behind
thousands of former manufacturing and commercial sites, many of which have been
abandoned because of contamination and associated liability to owners and/or
operators. These sites, known as "brownfields," number more than 500,000
nationwide.
The Clinton Administration introduced the Brownfields Initiative, which was
designed to encourage inner-city economic development and property reuse by
resolving the cleanup and liability issues associated with contaminated
industrial properties. Most states now have targeted efforts and voluntary
cleanup programs under this Initiative. The Company has participated in many
Brownfields projects and expects to continue work in this area in many states
where Brownfields programs are active.
Insurance
The Company maintains a full range of insurance coverage including professional
liability insurance and pollution liability coverage. There can be no assurance
that the Company will not incur liability with respect to the professional
services it renders or that such liability, if incurred, will not have a
material adverse effect upon the Company. However, these insurance policies will
provide limited protection and defense up to their stated amounts.
EA has endeavored to protect itself through contractual indemnification from
clients when possible and by intensifying its existing quality control and
assurance, and health and safety programs. Generally, indemnification is not
available under the Company's government contracts. The Company's quality
control and assurance program includes a control function to establish standards
and procedures for performance and documentation of performance of project
tasks, and an assurance function to audit the
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control function and to monitor compliance with procedures and quality
standards. An additional objective of this program has been to establish
practices and procedures to protect EA personnel from hazardous substance
situations. This is accomplished through a company-wide occupational safety and
health monitoring program managed by corporate health and safety professionals.
Equipment
The Company owns substantially all of the analytical, computer, monitoring,
testing and other equipment required to render its various consulting and
testing services. Additionally, the Company leases certain computer, office
furniture, and other equipment. Equipment and various other items which the
Company purchases on behalf of clients are available from several suppliers and
the Company is not dependent on any one supplier.
Environmental and Other Considerations
The Company does not believe that its compliance with federal, state and local
laws and regulations relating to the protection of the environment will have any
material effect on its capital expenditures, earnings, or competitive position.
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ITEM 2. PROPERTIES
The Company's headquarters, Baltimore regional office, and central laboratory
are located in approximately 92,600 square feet of leased space. Leases for
these facilities are with partnerships, whose partners include the Chairman of
the Board of EA and certain members of his family.
The Company's primary branch and satellite offices in the United States are
located in:
<TABLE>
<S> <C>
Baltimore, Maryland Boston, Massachusetts Lincoln, Nebraska
Silver Spring, Maryland Pensacola, Florida Dallas, Texas
New Castle, Delaware San Francisco, California San Antonio, Texas
Newburgh, New York Sacramento, California Anchorage, Alaska
Syracuse, New York Seattle, Washington Fairbanks, Alaska
Berkeley Heights, New Jersey Chicago, Illinois Honolulu, Hawaii
</TABLE>
In addition, the Company has established an office location in Mexico City,
Mexico.
The Company leases the office, laboratory, and storage facilities for each
regional office. Presently, the facilities are suitable, adequate, and are
generally utilized to capacity.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
On October 31, 1986, EA common stock began public trading in the
over-the-counter market under the symbol "EACO." The following table shows the
high and low closing sales price reported on the NASDAQ National Market System.
Such over-the-counter market quotations, however, reflect inter-dealer prices,
without retail markup, markdown, or commission and may not necessarily represent
actual transactions.
High Low
Fiscal 1996: First Quarter $5.25 $3.75
Second Quarter 4.13 3.50
Third Quarter 4.00 2.88
Fourth Quarter 3.50 2.25
Fiscal 1997: First Quarter $2.59 $1.50
Second Quarter 2.75 1.75
Third Quarter 2.25 1.63
Fourth Quarter 2.22 1.75
On October 31, 1997, the closing price of the common stock as reported by NASDAQ
was $2.00 per share. On that date, there were 1,126 holders of record.
To date the Company has not paid any cash dividends on its common stock and does
not anticipate paying such dividends in the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the periods indicated have been derived from the
audited consolidated financial statements of the Company after effecting for the
stock splits described in note (2). This data should be read in conjunction with
the consolidated financial statements and notes thereto included in Item 8.
<TABLE>
<CAPTION>
Year Ended August 31,
- ------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------------------------- -------------- -------------- ------------ ------------ -------------
(in thousands, except per share amounts)
<S> <C>
Operations data:
Total revenue $73,891 $88,308 $92,365 $76,873 $61,126
Net revenue(1) 52,455 64,354 72,471 63,748 52,941
Income (loss) from operations (8,022) (444) 4,141 3,305 2,111
Net income (loss) (5,408) (580) 2,227 1,823 1,004
Net income (loss) per share(2) $(0.87) $(0.09) $0.36 $0.30 $0.17
Weighted average number of shares
outstanding(2) 6,206 6,138 6,171 6,089 5,888
Balance sheet data:
Working capital $10,182 $15,955 $17,663 $14,317 $12,146
Total assets 26,642 33,329 36,368 31,575 28,471
Short-term borrowings -- -- -- -- --
Long-term debt, net of current portion 2,332 2,665 4,033 4,798 5,034
Stockholders' equity $13,257 $18,558 $18,880 $15,177 $12,721
</TABLE>
(1) Net revenue represents total revenue less subcontractor costs.
(2) Results have been restated to reflect the two 3 for 2 stock splits,
each effected in the form of a 50% stock dividend issued on
February 23, 1994 and July 5, 1994.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Company's results of operations are significantly affected by the timing of
the award of contracts, the timing of performance on contracts, and the extent
to which the Company's employees are performing billable tasks as opposed to
engaging in preparing contract proposals, bids, and other required non-billable
activities. Results of operations may also be affected to the extent that the
Company chooses not to reduce its professional staff during a period of reduced
demand for its services. Due to these factors, quarterly results of operations
are not necessarily indicative of the results of operations for longer periods.
The Company, in the course of providing its services, routinely subcontracts
such services as drilling, certain laboratory analyses, and other specialized
services. In addition, as described in the "General" section of Item 1, the use
of teaming partners for the performance of services similar to those of the
Company, is included in subcontracts. In accordance with industry practice and
contract terms that generally provide for the recovery of overhead costs, these
costs are passed directly through to clients and are included in total revenue.
Because subcontractor costs and direct charges can change significantly from
project to project, the change in total revenue is not necessarily a true
indication of business trends. Accordingly, the Company considers net revenue,
which is total revenue less subcontractor costs, as its primary measure of
revenue.
Results of Operations
The following table sets forth the percentage relationships of selected items in
the statement of operations to net revenue for the years indicated. It should be
noted that, for historical comparisons, operating costs in past years have been
adjusted to include sales and marketing related costs in sales, general, and
administrative costs. In previous years, these costs were included in direct
salaries and other operating expenses.
<TABLE>
<CAPTION>
Year Ended August 31,
------------------------------------------
1997 1996 1995
- ------------------------------------------------------------- ------------- ------------- --------------
Net revenue 100.0% 100.0% 100.0%
- ------------------------------------------------------------- ------------- ------------- --------------
<S> <C>
Operating expenses:
Direct salaries and other operating 95.4 89.8 82.4
Sales, general and administrative 14.2 10.9 11.9
Restructuring charges 5.7 -- --
- ------------------------------------------------------------- ------------- ------------- --------------
Total operating expenses 115.3 100.7 94.3
- ------------------------------------------------------------- ------------- ------------- --------------
Income (loss) from operations (15.3) (0.7) 5.7
Interest expense, net (0.7) (0.6) (0.6)
- ------------------------------------------------------------- ------------- ------------- --------------
Income (loss) before income taxes (16.0) (1.3) 5.1
(Benefit from) provision for income taxes (5.7) (0.4) 2.0
- ------------------------------------------------------------- ------------- ------------- --------------
Net income (loss) (10.3)% (0.9)% 3.1%
============================================================= ============= ============= ==============
</TABLE>
13
<PAGE>
Fiscal 1997 Compared to Fiscal 1996
Net revenue during fiscal 1997 decreased to $52,455,100 from $64,353,700. The
decrease was attributable to lower contract volume associated with the
Department of Defense, industrial, and federal non-DOD agency activities.
Additionally, price competition remains intense within the environmental
services industry, further supressing net revenue levels compared to the prior
year.
Direct salaries and other operating costs decreased 13.4% to $50,031,700 from
$57,799,000. As a percentage of net revenue, however, direct salaries and other
operating costs increased to 95.4% from 89.8% a year earlier. This increase was
primarily attributable to realized losses related to certain landfill projects
amounting to approximately $1,400,000 of costs in excess of contract values.
Additionally, lower staff utilization, especially in the second quarter,
attributable to the reduction in available work caused an increase in operating
costs relative to net revenue. In March 1997 the Company announced a major
organizational realignment to reposition itself in the marketplace. In
connection with the restructuring, the Company incurred charges of $3,000,100
during the third quarter related to severance, planned reduction in office
space, the suspension of the implementation of a new project/financial system,
and other related costs. This restructuring included a staff reduction of
approximately 125 employees.
Sales, general and administrative costs increased 6.4% to $7,445,400 in 1997
from $6,997,600 in 1996, or 14.2% and 10.9% of net revenue, respectively. The
increase was due primarily to bonus amounts paid to management as a result of
the Company's exceeding its profit targets for the final five months of the
year. No bonuses were paid in fiscal 1996.
As a result of the above factors, the loss from operations was $8,022,100
compared to a loss from operations of $443,600 in the prior year. Interest
expense, net, decreased slightly to $354,800 from $357,500. A net decrease in
interest expense from lower-than-average borrowings was offset by higher rates
and an interest payment made in connection with a state income tax settlement.
The benefit from income taxes was $2,969,300 for the year ended August 31, 1997,
compared to a benefit from income taxes of $221,000 for the year ended 1996,
representing effective rates of 35% and 28%, respectively. The difference in
effective tax rates between years is largely attributable to increases in
certain permanent differences between financial and income tax reporting, and to
the non-recognition of the future benefits attributable to a foreign loss for
the fiscal year ended 1996. It is the opinion of management that these recorded
benefits are more likely than not to be realized.
The net loss for the twelve months ended August 31, 1997, was $5,407,600, or
10.3% of net revenue, compared to net loss of $580,100, or 0.9% of net revenue
for the prior year.
Fiscal 1996 Compared to Fiscal 1995
Net revenue during fiscal 1996 decreased to $64,353,700 from $72,471,400. The
decrease was primarily attributed to federal regulatory uncertainties and
budgetary delays, partially offset by an increase in private industry revenues.
14
<PAGE>
Direct salaries and other operating costs decreased 3.3% to $57,799,700 from
$59,681,450. As a percentage of net revenue, however, direct salaries and other
operating costs increased to 89.8% from 82.4% a year earlier. This increase was
attributable to unrecoverable costs on certain projects and lower staff
billability related to the reduction in available work. The Company performed
staff reductions to the extent possible while keeping necessary staff
capabilities required throughout the country for both project and business
development purposes. Additionally, more time was devoted by staff to the
development of new business and the completion of proposals in an attempt to
maintain backlog at higher levels during a challenging economic period.
Sales, general, and administrative costs decreased 19.1% to $6,997,600 in 1996
from $8,649,250 in 1995, or 10.9% and 11.9% of net revenue, respectively. The
decrease was due to staff reductions and related overhead expense decreases.
As a result of the above factors, the loss from operations was $443,600 compared
to income from operations of $4,140,700 in the prior year. Interest expense,
net, decreased 16.5% to $357,500 from $428,200. The net decrease in interest
expense is primarily the result of lower interest rates and decreasing long-term
debt principal balances, partially offset by increased borrowings under the
revolving line of credit to fund federal subcontracting payment requirements on
certain projects.
The benefit from income taxes was $221,000 for the year ended August 31, 1996,
compared to a provision for income taxes of $1,485,100, representing effective
rates of 28% and 40%, respectively. The difference in effective tax rates
between years relate primarily to the non-recognition of the future benefits
attributable to a foreign loss and increases to certain permanent differences
between financial and income tax reporting.
The net loss for the twelve months ended August 31, 1996, was $580,100, or 0.9%
of net revenue, compared to net income of $2,227,400, or 3.1% of net revenue for
the prior year.
Fiscal 1995 Compared to Fiscal 1994
Net revenue during fiscal 1995 increased 13.7% to $72,471,400 from $63,748,100.
The increase reflects increased contract volume associated with federal agencies
with which EA holds indefinite deliveryindefinite quantity type contracts.
Additionally, increased use of team partners and subcontractors provided
increased recovery of overhead costs and fees which are reflected in the net
revenue increase.
Direct salaries and other operating expenses increased 13.5% to $59,681,450 from
$52,583,611, and remained relatively constant as a percentage of net revenue at
82.4% and 82.5%, respectively. Salary, general, and administrative costs
increased 10.1% to $8,649,250 from $7,859,289, but decreased as a percent of net
revenue to 11.9% from 12.3%. Management expects the percentage of selling,
general, and administrative expenses to net revenue to further decrease
reflecting a decrease in staff at the end of the fourth quarter.
Interest expense, net, increased 60.2% to $428,200 from $267,300, largely as a
result of increased interest rates and higher average monthly borrowings under
the Company's credit facility.
The provision for income taxes in fiscal 1995 was $1,485,100 compared to
$1,215,300 in fiscal 1994. The effective tax rate for both years was 40%.
For fiscal 1995, net income was $2,227,400, or 3.1% of net revenue, compared to
net income of $1,822,600 or 2.9% of net income for fiscal 1994.
15
<PAGE>
Inflation
Because of its ability to generally pass through increased costs to its clients,
as well as the generally low levels of inflation, the Company believes that
inflation has not had a material impact on its operations.
Liquidity and Capital Resources
Cash and cash equivalents (cash) increased by $1,024,700 in 1997 compared to
decreases of $2,505,300 in 1996 and $174,600 in 1995. The increase in 1997
principally resulted from decreases in accounts receivable and costs and
estimated earnings in excess of billings on uncompleted projects.
The Company's capital expenditures (consisting primarily of purchases of
equipment and leasehold improvements) of approximately $699,000, $1,008,500, and
$1,067,200 in 1997, 1996, and 1995, respectively, have been funded primarily
from cash flows.
The Company entered into a new bank credit arrangement with a regional bank near
the end of the fiscal year consisting of: (i) an $8,500,000 revolving line of
credit secured by receivables; (ii) a $500,000 term loan; and (iii) an equipment
line of credit of $1,500,000. Of the $8,500,000 revolving line of credit,
$2,500,000 is available for acquisitions, joint ventures and licensing
agreements. Borrowings from the revolving line of credit are limited to certain
percentages of accounts receivable and costs and estimated earnings in excess of
billings (up to a maximum of $4,000,000). The interest on all borrowings is
LIBOR +250 , which may be reduced to LIBOR +200 in the third quarter of fiscal
1998 and LIBOR +150 in the first quarter of fiscal 1999 if the Company achieves
certain financial ratios.
At August 31, 1997, the Company had outstanding long-term debt, including the
current portion, of $2,980,000, which represented a decrease of $329,000 from
the August 31, 1996 balance of $3,309,100. The Company had no short-term
borrowings under its line of credit at August 31, 1997 and 1996.
The Company's existing funds, cash from operations, and the available portion of
its $8,500,000 bank line of credit and $1,500,000 equipment line are expected to
be sufficient to meet the Company's present cash needs. The Company also
believes it has the ability to raise capital through placement of debt and will
pursue such options as the need arises to expand facilities, make acquisitions
or acquire equipment in conjunction with a review of the most cost-effective
means for the Company and its stockholders.
While the Company believes that there is sufficient demand for current operating
levels, there can be no assurance that this demand will exist or continue.
Although the Company has the ability to reduce its professional staff in periods
of reduced demand, it may choose not to make full reductions in such periods,
with resulting adverse effects on operations.
-------------------------------------------------------
Certain of the statements contained in this report are forward-looking
statements that involve risks and uncertainties, such as, among other things,
those related to the Company's contracts, demand for Company services, overall
government funding and spending for environmental projects, the Company's highly
competitive marketplace, and other business risks as detailed from time to time
in the Company's filings with the Securities and Exchange Commission.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements and Supplementary Financial Data
<TABLE>
<CAPTION>
Page
<S> <C> -----
Report of Independent Public Accountants 18
Consolidated Financial Statements:
Consolidated Balance Sheets as of August 31, 1997 and 1996 19
Consolidated Statements of Operations for the years ended
August 31, 1997, 1996, and 1995 21
Consolidated Statements of Changes in Stockholders' Equity for the years ended
August 31, 1997, 1996, and 1995 22
Consolidated Statements of Cash Flows for the years ended
August 31, 1997, 1996, and 1995 23
Notes to Consolidated Financial Statements for the years ended
August 31, 1997, 1996, and 1995 24
</TABLE>
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
EA Engineering, Science, and Technology, Inc.:
We have audited the accompanying consolidated balance sheets of EA Engineering,
Science, and Technology, Inc. (a Delaware corporation) and subsidiaries as of
August 31, 1997 and 1996, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for each of the three years in
the period ended August 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EA Engineering, Science, and
Technology, Inc. and subsidiaries as of August 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended August 31, 1997, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Baltimore, Maryland
November 14, 1997
18
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
August 31,
----------------------------------------
1997 1996
- --------------------------------------------------------------------- -------------------- -------------------
<S> <C>
Current Assets:
Cash and cash equivalents $ 2,333,300 $ 1,308,600
Accounts receivable, net 9,498,800 12,692,700
Costs and estimated earnings in excess
of billings on uncompleted contracts 5,653,800 12,482,200
Refundable income taxes 1,883,900 319,500
Prepaid expenses and other 1,865,500 1,257,400
- --------------------------------------------------------------------- -------------------- -------------------
Total Current Assets 21,235,300 28,060,400
- --------------------------------------------------------------------- -------------------- -------------------
Property and Equipment, at cost:
Furniture, fixtures, and equipment 12,599,200 12,784,500
Leasehold improvements 3,664,800 3,677,800
-------------------- -------------------
16,264,000 16,462,300
Less-Accumulated depreciation and amortization (13,867,200) (13,337,400)
- --------------------------------------------------------------------- -------------------- -------------------
Net Property and Equipment 2,396,800 3,124,900
- --------------------------------------------------------------------- -------------------- -------------------
Other Assets 3,009,800 2,143,200
- --------------------------------------------------------------------- -------------------- -------------------
Total Assets $26,641,900 $33,328,500
===================================================================== ==================== ===================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
19
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
August 31,
--------------------------------------
1997 1996
- -------------------------------------------------------------------------- ------------------- -----------------
<S> <C>
Current Liabilities:
Accounts payable $ 4,306,900 $ 6,061,000
Accrued expenses 2,694,600 1,019,200
Accrued salaries, wages and benefits 2,891,200 3,183,400
Current portion of long-term debt 648,300 644,600
Billings in excess of costs and estimated earnings
on uncompleted contracts 512,200 1,197,700
- -----------------------------------------------------------------------------------------------------------------
Total Current Liabilities 11,053,200 12,105,900
- -------------------------------------------------------------------------- ------------------- -----------------
Long-Term Debt, net of current portion 2,331,700 2,664,500
- -------------------------------------------------------------------------- ------------------- -----------------
Total Liabilities 13,384,900 14,770,400
- -------------------------------------------------------------------------- ------------------- -----------------
Commitments
- -------------------------------------------------------------------------- ------------------- -----------------
Stockholders' Equity:
Common stock, $.01 par value; voting;
10,000,000 shares authorized; 6,227,300
and 6,175,000 shares issued and outstanding 62,300 61,800
Preferred stock, $.01 par value;
8,000,000 shares authorized; none issued -- --
Capital in excess of par value 10,902,300 10,796,300
Retained earnings 2,292,400 7,700,000
- -------------------------------------------------------------------------- ------------------- -----------------
Total Stockholders' Equity 13,257,000 18,558,100
- -------------------------------------------------------------------------- ------------------- -----------------
Total Liabilities and Stockholders' Equity $26,641,900 $33,328,500
========================================================================== =================== =================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
20
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended August 31,
----------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------- ----------------------- -------------------- ------------------
<S> <C>
Total revenue $ 73,890,900 $ 88,307,800 $92,364,900
Less - Subcontractor costs (21,435,800) (23,954,100) (19,893,500)
- ------------------------------------------------- ----------------------- -------------------- ------------------
Net revenue 52,455,100 64,353,700 72,471,400
- ------------------------------------------------- ----------------------- -------------------- ------------------
Operating costs and expenses:
Direct salaries and other operating 50,031,700 57,799,700 59,681,450
Sales, general and administrative 7,445,400 6,997,600 8,649,250
Restructuring charges 3,000,100 -- --
- ------------------------------------------------- ----------------------- -------------------- ------------------
Total operating expenses 60,477,200 64,797,300 68,330,700
- ------------------------------------------------- ----------------------- -------------------- ------------------
Income (loss) from operations (8,022,100) (443,600) 4,140,700
- ------------------------------------------------- ----------------------- -------------------- ------------------
Interest expense (446,400) (464,900) (522,800)
Interest income 91,600 107,400 94,600
- ------------------------------------------------- ----------------------- -------------------- ------------------
Income (loss) before income taxes (8,376,900) (801,100) 3,712,500
- ------------------------------------------------- ----------------------- -------------------- ------------------
(Benefit from) provision for income taxes (2,969,300) (221,000) 1,485,100
- ------------------------------------------------- ----------------------- -------------------- ------------------
Net income (loss) $ (5,407,600) $(580,100) $2,227,400
================================================= ======================= ==================== ==================
Net income (loss) per share $ (0.87) $(0.09) $0.36
================================================= ======================= ==================== ==================
Weighted average shares outstanding 6,205,700 6,138,100 6,170,700
================================================= ======================= ==================== ==================
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED AUGUST 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
Capital in
Common Excess of Retained
Stock Par Value Earnings Total
- ------------------------------------------- ---------------- ------------------ ----------------- -----------------
<S> <C>
Balance, August 31, 1994 $57,700 $ 9,066,100 $ 6,052,700 $15,176,500
Issuance of Stock 3,200 821,700 -- 824,900
Tax Benefit from Stock Options
Exercised -- 650,900 -- 650,900
Net Income -- -- 2,227,400 2,227,400
- ------------------------------------------- ---------------- ------------------ ----------------- -----------------
Balance, August 31, 1995 60,900 10,538,700 8,280,100 18,879,700
Issuance of Stock 900 233,000 -- 233,900
Tax Benefit from Stock Options
Exercised -- 24,600 -- 24,600
Net Loss -- -- (580,100) (580,100)
- ------------------------------------------- ---------------- ------------------ ----------------- -----------------
Balance, August 31, 1996 61,800 10,796,300 7,700,000 18,558,100
Issuance of Stock 500 106,000 -- 106,500
Net Loss -- -- (5,407,600) (5,407,600)
- ------------------------------------------- ---------------- ------------------ ----------------- -----------------
Balance, August 31, 1997 $62,300 $10,902,300 $2,292,400 $13,257,000
=========================================== ================ ================== ================= =================
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended August 31,
1997 1996 1995
- ------------------------------------------------------------------ --------------------- ---------------------------------------
<S> <C>
Cash Flows From (Used For) Operating Activities:
Net income (loss) $ (5,407,600) $ (580,100) $2,227,400
Noncash expenses included in net income (loss)-
Depreciation and amortization 1,427,100 1,683,900 1,633,100
Deferred (benefit from) provision for income taxes (1,309,800) (198,300) (418,200)
Current (benefit from) provision for income taxes (1,659,500) (22,700) 1,903,300
Net (increase) decrease in noncash assets -
Accounts receivable, net 3,193,900 2,165,400 (2,714,300)
Costs and estimated earnings in excess of billings
on uncompleted contracts 6,828,400 (1,747,200) (2,747,600)
Prepaid expenses and other assets (314,000) (110,800) 179,400
Net increase (decrease) in nondebt liabilities -
Accounts payable and accrued expenses (370,900) (1,149,400) 1,702,700
Refunds of income taxes 400,400 14,700 50,200
Payments of income taxes (156,200) (445,500) (955,500)
Billings in excess of costs and estimated earnings
on uncompleted contracts (685,500) 148,400 47,100
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Net cash flows from (used for) operating activities 1,946,300 (241,600) 907,600
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Cash Flows From (Used For) Financing Activities:
Proceeds from issuance of common stock 106,500 233,900 824,900
Reduction of long-term debt (810,300) (4,489,100) (839,900)
Proceeds from issuance of long-term debt 481,200 3,000,000 --
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Net cash flows used for financing activities (222,600) (1,255,200) (15,000)
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Cash Flows Used For Investing Activities:
Purchase of property and equipment, net (699,000) (1,008,500) (1,067,200)
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Net cash flows used for investing activities (699,000) (1,008,500) (1,067,200)
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 1,024,700 (2,505,300) (174,600)
Cash and Cash Equivalents, beginning of year 1,308,600 3,813,900 3,988,500
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Cash and Cash Equivalents, end of year $2,333,300 $1,308,600 $3,813,900
================================================================== ===================== =======================================
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1997, 1996, AND 1995
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation--
The accompanying consolidated financial statements present the accounts of EA
Engineering, Science, and Technology, Inc. (EA) and its wholly-owned
subsidiaries, EA International, Inc. and EA Financial, Inc., and its
wholly-owned subsidiaries, EA Global, Inc. and EA Engineering, Science, and
Technology de Mexico, S.A. de C.V. During fiscal 1995, EA Remediation
Technologies, Inc., formerly a wholly-owned subsidiary, was merged into EA.
The entities are collectively referred to herein as the "Company." All
significant intercompany transactions have been eliminated in consolidation.
Revenue Recognition--
The Company is a multidisciplinary environmental services organization
providing a wide range of consulting, engineering, remediation, and analytical
services. These services are generally performed under time and material,
fixed price, and cost plus fixed fee contracts which vary in length from one
month to ten years.
The Company accounts for contract revenues and costs under fixed price
contracts using the percentage-ofcompletion method. The
percentage-of-completion is determined using the "cost-to-cost" method for
each contract cost component. Under this method, direct labor and other
contract costs incurred to date are compared to periodically revised estimates
of the total of each contract cost component at contract completion to
determine the percentage of revenues to be recognized. Revenues from time and
material and cost plus fixed fee contracts are recognized currently as the
work is performed. Provision for estimated losses on uncompleted contracts, to
the full extent of the loss, is made during the period in which the Company
first becomes aware that a loss on a contract is probable.
Contract costs and estimated earnings recognized in excess of amounts billed
are classified as current assets under "costs and estimated earnings in excess
of billings on uncompleted contracts." Billings in excess of contract costs
and estimated earnings are classified as current liabilities under "billings
in excess of costs and estimated earnings on uncompleted contracts."
Generally, contracts provide for the billing of costs incurred and estimated
fees on a monthly basis. Amounts included in "costs and estimated earnings in
excess of billings on uncompleted contracts" in the accompanying financial
statements will be billed within twelve months of the balance sheet date.
Major Clients--
Various agencies of the federal government accounted for approximately 50%,
53%, and 64% of the Company's net revenue for the years ended August 31, 1997,
1996, and 1995, respectively. Additionally,
24
<PAGE>
various agencies of the federal government accounted for approximately 40% and
48% of the Company's accounts receivable and costs and estimated earnings in
excess of billings on uncompleted contracts as of August 31, 1997 and 1996,
respectively.
Cash and Cash Equivalents--
Cash equivalents consist of money market instruments with a purchased original
maturity of three months or less, stated at cost, which approximates market.
Property and Equipment--
Property and equipment are depreciated using the straight-line method over
their estimated useful lives ranging from 3 to 10 years. Leasehold
improvements are amortized over the shorter of the estimated useful life or
the term of the lease.
Segment Information--
The Company operates within one industry segment, providing a wide range of
consulting, engineering, remediation, and analytical services.
Reclassifications--
Certain prior year balances have been reclassified to conform with current
year presentation.
Risks and Uncertainties--
Reliance on major government contracts subjects the Company to risks
associated with public budgetary restrictions and uncertainties, discrepancies
between awarded contract amounts and actual revenues, and cancellation at the
option of the government. The Company attempts to mitigate these risks by
staffing only to meet reasonably anticipated average workloads, by using
subcontractors to handle peak workloads, and by obtaining termination benefit
contract provisions. Cancellation of any of the Company's major government
contracts, however, could have a material adverse effect on the Company.
Use of Estimates--
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets, liabilities, revenues and expenses
in the financial statements and in the disclosures of contingent assets and
liabilities. While actual results could differ from these estimates,
management believes that actual results will not be materially different from
amounts provided in the accompanying consolidated financial statements.
Supplemental Disclosures of Cash Flow Information--
Cash paid during the years ended August 31, 1997, 1996, and 1995 for interest,
was $467,200, $474,200, and $521,700, respectively. Retirements of property
and equipment for the same periods were $897,200, $2,602,400, and $46,300,
respectively. The noncash tax benefit attributable to the exercise of non-
25
<PAGE>
qualified stock options was $24,600, and $650,900 for the years ended August
31, 1996 and 1995, respectively. There was no benefit for the year ended
August 31, 1997.
Accounting for Income Taxes--
Deferred income taxes are recorded to reflect the tax consequences on future
years for differences between the tax basis of assets and liabilities and
their financial reporting amounts.
Accounting Pronouncements--
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." This statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. This statement is
effective for fiscal years beginning after December 15, 1995. Management has
determined that adoption of this Standard has not resulted in any material
changes to its financial statements.
In March 1995, the FASB issued Statement No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation." Companies have the option of adopting the new
accounting provisions or may elect to provide pro forma disclosures of net
income and earnings per share as if the accounting had been adopted.
Management has elected to continue to account for its stock-based compensation
in accordance with APB Opinion No. 25 and has provided pro forma disclosures
(see Note 8).
In February 1997, the FASB issued Statement No. 128 (SFAS 128), "Earnings Per
Share," which establishes new standards for computing and presenting earnings
per share. SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods. Management has
determined that the implementation of SFAS 128 would have no impact on the
Company's earnings per share amounts.
In February 1997, the FASB issued Statement No. 129 (SFAS 129), "Disclosure of
Information about Capital Structure," which eliminates the exemption of
nonpublic entities from certain disclosure requirements of APB Opinion No. 15
as provided by FASB Statement No. 21. SFAS 129 is effective for periods ending
after December 15, 1997. Management has determined that the implementation of
SFAS 129 will have no impact on the Company's financial reporting.
In June 1997, the FASB issued Statement No. 130 (SFAS 130), "Reporting
Comprehensive Income," which establishes standards for reporting and display
of comprehensive income and its components in a full set of general purpose
financial statements. SFAS 130 is effective for fiscal years beginning after
December 15, 1997. Management has not yet determined whether the
implementation of SFAS 130 will have any impact of the Company's financial
reporting.
In July 1997, the FASB issued Statement No. 131 (SFAS 131), "Disclosures About
Segments of an Enterprise and Related Information," which establishes a new
approach for determining segments within a company and reporting information
on those segments. SFAS 131 is effective for fiscal years beginning after
December 15, 1997. Management has not yet determined whether the
implementation of SFAS 131 will have any impact on the Company's current
method of disclosing business segment information.
26
<PAGE>
Note 2. INCOME TAXES:
The (benefit from) provision for income taxes includes current and deferred
tax amounts summarized as follows:
<TABLE>
<CAPTION>
Year Ended August 31,
- ------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------- -------------------
<S> <C>
Current tax expense (benefit):
Federal $(1,659,500) $ (18,400) $1,602,400
State -- (4,300) 300,900
- ---------------------------------------------------------------------------------------------- -------------------
(1,659,500) (22,700) 1,903,300
- ---------------------------------------------------------------------------------------------- -------------------
Deferred tax expense (benefit):
Federal (1,309,800) (160,600) (352,100)
State -- (37,700) (66,100)
- ---------------------------------------------------------------------------------------------- -------------------
(1,309,800) (198,300) (418,200)
- ---------------------------------------------------------------------------------------------- -------------------
(Benefit from) provision for income taxes $(2,969,300) $(221,000) $1,485,100
============================================================================================== ===================
</TABLE>
Total deferred tax assets and liabilities as of August 31, 1997 and 1996 and
the sources of the differences between the tax and financial reporting basis
of the Company's assets and liabilities which give rise to the deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
Year Ended August 31,
- ----------------------------------------------------------- ---------------------------------------------
1997 1996
- ----------------------------------------------------------- ---------------------- ---------------------
<S> <C>
Deferred tax assets:
Property and equipment $ 929,600 $ 694,200
Accrued expenses and reserves 1,878,900 962,800
Net operating loss 398,200 46,700
- ----------------------------------------------------------- ---------------------- ---------------------
$3,206,700 $1,703,700
=========================================================== ====================== =====================
Deferred tax liabilities:
Prepaid expenses $ 99,300 $ 109,700
Miscellaneous 203,500 --
- ----------------------------------------------------------- ---------------------- ---------------------
$ 302,800 $ 109,700
=========================================================== ====================== =====================
</TABLE>
The net deferred tax assets of $2,903,900 and $1,594,000 as of August 31, 1997
and 1996 are included to the extent appropriate in Prepaid expenses and other
and Other Assets in the accompanying consolidated balance sheets.
27
<PAGE>
Reconciliation of the statutory federal income tax rate and the effective
income tax rate is summarized as follows:
<TABLE>
<CAPTION>
Year Ended August 31,
- --------------------------------------------------------------- ---------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------- --------------- ------------------- ---------------
<S> <C>
Statutory federal income tax (benefit) rate 34.0% 34.0% 34.0%
State income tax, net of federal income tax effect 5.3 5.3 5.3
Non-recognition of future benefit from foreign loss (0.4) (4.8) --
Other (3.5) (6.9) 0.7
- --------------------------------------------------------------- --------------- ------------------- ---------------
Effective income tax rate 35.4% 27.6% 40.0%
=============================================================== =============== =================== ===============
</TABLE>
Note 3. ACCOUNTS RECEIVABLE:
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
Year Ended August 31,
- ---------------------------------------------------------- -------------------------------------------
1997 1996
- ---------------------------------------------------------- ----------------------- ------------------
<S> <C>
Contract accounts receivable $ 8,802,400 $12,931,600
Retainage by clients 1,228,400 1,373,300
- ---------------------------------------------------------- ----------------------- ------------------
Total accounts receivable 10,030,800 14,304,900
Less-Allowance for doubtful accounts (532,000) (1,612,200)
- ---------------------------------------------------------- ----------------------- ------------------
Accounts receivable, net $ 9,498,800 $12,692,700
========================================================== ======================= ==================
</TABLE>
Management anticipates that substantially all retainages will be billed within
one year.
Note 4. BANK FINANCING ARRANGEMENTS:
The Company entered into a new credit arrangement with a regional bank during
fiscal year 1997 consisting of: (i) an $8,500,000 revolving line of credit
secured by receivables; (ii) a $500,000 term loan; and (iii) an equipment line
of credit of $1,500,000. Of the $8,500,000 revolving line of credit,
$2,500,000 is available for acquisitions, joint ventures and licensing
agreements. Borrowings under the revolving line of credit are limited to a
percentage of certain accounts receivable and costs and estimated earnings in
excess of billings on uncompleted contracts (up to a maximum of $4,000,000).
The agreement was effective August 22, 1997. During fiscal years 1997, 1996,
and 1995, the Company was either in compliance or had obtained waivers on all
covenants related to these and prior arrangements.
28
<PAGE>
Short-term borrowings information resulting from the financing arrangements is
as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
August 31, August 31, August 31,
----------------- ------------------- -----------------
1997 1996 1995
- ------------------------------------------------------------- ----------------- ------------------- -----------------
<S> <C>
Balance as of end of period $ -- $ -- $ --
Maximum outstanding month-end balance during
the period 3,615,300 5,490,900 3,711,300
Average outstanding month-end balance during
the period 564,000 598,800 293,600
Weighted average interest rate during the period 11.5% 8.4% 8.6%
Interest rate at the end of period 11.5% 8.3% 8.8%
============================================================= ================= =================== =================
</TABLE>
The weighted average interest rate has been calculated based upon the actual
daily interest expense and the daily average balance outstanding. For the year
ended August 31, 1997, the Company only maintained short-term borrowing
balances during the months of April through August. Prior to April and at the
end of August 1997, all borrowings were considered long term. For the year
ended August 31, 1996, short-term balances were for nine months through May
31, 1996.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
August 31,
- -------------------------------------------------------------------------- -----------------------------------------
1997 1996
- -------------------------------------------------------------------------- -------------------- -------------------
<S> <C>
Revolving credit facility payable to commercial bank effective August 22,
1997, interest charged at LIBOR plus 250;
facility expires September 1999 $1,827,700 $2,276,400
Note payable to a commercial bank payable in equal monthly
installments of $29,600, which includes interest at 9.1%,
through December 1999 secured by certain computer
equipment 720,500 --
Note payable to a commercial bank payable in equal monthly
installments of $43,651 through December 1997. There-
after, $21,429, plus interest charged at LIBOR plus 250;
secured by leasehold improvements and certain analytical
laboratory equipment 431,800 1,032,700
- -------------------------------------------------------------------------- -------------------- -------------------
Total long-term debt 2,980,000 3,309,100
Less-current portion (648,300) (644,600)
- -------------------------------------------------------------------------- -------------------- -------------------
Long-term portion $2,331,700 $2,664,500
========================================================================== ==================== ===================
</TABLE>
29
<PAGE>
The debt repayment schedule for the outstanding notes payable is as follows:
Year Ending
August 31,
- ------------------------------------------------ ------------------
1998.......................................... $ 648,300
1999.......................................... 416,500
2000.......................................... 1,915,200
2001 and thereafter........................... 0
- ------------------------------------------------ ------------------
Total notes payable........................... $2,980,000
================================================ ==================
The fair value of the Company's outstanding indebtedness approximated its
carrying value at August 31, 1997.
Note 5. LEASE COMMITMENTS:
The Company's central office, laboratory facilities, regional offices, and
certain furniture and equipment are held under operating leases. These leases
expire at various dates through fiscal 2007, and certain leases call for
annual proportionate increases due to property taxes and certain other
operating expenses. Lease expense amounted to $8,030,200, $8,912,300, and
$8,469,300 for the years ended August 31, 1997, 1996, and 1995, respectively.
Lease expense included payments of approximately $2,016,500, $2,054,900, and
$1,985,300 for years ended August 31, 1997, 1996, and 1995, respectively, to
partnerships consisting of the Chairman of the Board of EA and certain members
of his family for its central office, and Loveton, Maryland, regional office
and laboratory facility. These payments include reimbursements of
approximately $965,000 per year for pass-through taxes and operating expenses
incurred by the lessor which include local property taxes, janitorial and
mechanical equipment maintenance, and utility costs related to the operation
of both office and laboratory leased space. Management of the Company believes
the terms and conditions of the transactions between the Company and entities
with which the Chairman is affiliated, are at least as favorable to the
Company as could have been obtained from third parties and are in the best
interest of the Company.
The minimum lease commitments under noncancellable operating leases are as
follows:
Year Ending
August 31,
- ----------------------------------------------------------------
1998......................................... $ 4,396,700
1999......................................... 3,000,000
2000......................................... 2,189,100
2001 ........................................ 1,850,300
2002......................................... 1,771,500
2003 and thereafter.......................... 7,660,500
- ----------------------------------------------------------------
Total minimum payments....................... $20,868,100
================================================================
30
<PAGE>
Note 6. NET INCOME (LOSS) PER SHARE:
Net income (loss) per share is based on the weighted average number of shares
of common stock and common stock equivalents outstanding during the period,
and have been adjusted retroactively to reflect two 3 for 2 stock splits,
effected in the form of 50% stock dividends wherein, on February 23, 1994 and
July 5, 1994, 1 additional share of stock was issued for each 2 shares
outstanding as of the record dates of February 8, 1994 and June 28, 1994,
respectively. Common stock equivalents are calculated using the treasury stock
method. All disclosures with regard to the shares of common stock have been
adjusted to reflect these stock splits.
Note 7. PROFIT SHARING:
EA maintains a defined contribution plan in which all employees who are at
least 21 years of age and have completed six months of credited service, as
defined by the plan, are eligible to participate. The plan provides for
discretionary employer contributions for each fiscal year, in amounts
determined annually by the Board of Directors. The plan also includes a 401(k)
provision, allowing for Company matching contributions. For the years ended
August 31, 1997, 1996, and 1995, matching contributions to the plan made under
the 401(k) provisions of the plan, were $534,900, $729,200, and $710,400,
respectively. Certain officers and stockholders of the Company serve as
trustees to the plan, as appointed by the Board of Directors.
Note 8. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS:
The Company maintains a Stock Option Plan (the Plan), which provides for the
grant of nonqualified stock options and incentive stock options to certain key
employees and officers of the Company. The exercise price of an option granted
under the Plan may not be less than the fair market value of the under lying
shares of Common Stock on the date of the grant. A total of 580,200 options
are issued and outstanding as of August 31, 1997 having an average exercise
price of $2.34. Of the outstanding options, 200,000 were granted to Donald A.
Deieso on February 26, 1997 when he joined the Company as President and CEO.
The exercise amount of the 200,000 shares is $2.25, which was equal to the
market price on the grant date. There are 340,000 options available for
issuance as of August 31, 1997.
The Company maintains an Employee Stock Purchase Plan to provide eligible
employees with the opportunity to purchase shares of the Company's Common
Stock through voluntary payroll deductions. Under the Plan, eligible employees
may purchase shares through monthly payroll deductions at 95% of current
market value at the time of purchase. The Company pays all administrative
expenses related to employee purchases. A total of 155,400 shares remain
authorized for distribution under the Plan as of August 31, 1997.
The Company maintains two Non-Employee Director Stock Option Plans (1993 and
1995) which provide for the granting of nonqualified stock options to its
non-employee directors. The exercise price of the 36,000 options, which were
outstanding as of August 31, 1997 ranged between $2.375 and $6.125, which
equaled the fair market value at the dates of grant. A total of 41,500 options
remain reserved for the Director Stock Option Plans as of August 31, 1997.
31
<PAGE>
The Company accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for plans been
determined consistent with FASB Statement No. 123, the Company's net loss and
loss per share would have changed the following pro forma amounts:
<TABLE>
<CAPTION>
1997 1996
- --------------------- -------------------- ------------------------- --------------
<S> <C>
Net Loss: As Reported $5,407,600 $580,100
Pro Forma 5,470,200 580,100
Loss Per Share As Reported $0.87 $0.09
Pro Forma 0.88 0.09
</TABLE>
A summary of the status of the Company's Employee Stock Option Plan and
Non-Employee Director Stock Option Plans (1993 and 1995) follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------- --------------------------- ----------------------------
Shares Wgtd.Avg. Shares Wgtd.Avg. Shares Wgtd.Avg.
(000) Exer.Price (000) Exer.Price (000) Exer.Price
------------ --------------- ----------- --------------- ----------- ----------------
<S> <C>
Outstanding at beginning of year 180 $4.13 341 $4.30 477 $2.34
Granted 506 2.10 11 4.61 134 6.13
Exercised -- -- (28) 1.41 (265) 1.68
Forfeited (70) 4.96 (144) 5.08 (5) 4.37
Expired -- -- -- -- -- --
------------ --------------- ----------- --------------- ----------- ----------------
Outstanding at end of year 616 2.37 180 4.13 341 4.30
------------ --------------- ----------- --------------- ----------- ----------------
Exercisable at year end 164 $2.99 136 $3.40 128 $2.40
Weighted Average Fair Value of
Options Granted $0.96 $1.79 N/A
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997 and 1996: Riskfree interest rates ranging
from 5.19% to 6.68%; expected volatility is 62%.
Note 9. COMPANY RESTRUCTURING:
On March 25, 1997 the Company announced a major organizational realignment to
reposition itself in the marketplace. In connection with the restructuring,
the Company incurred charges of $3,000,100 during the third quarter related to
severance, planned reduction in office space, the suspension of the
implementation of a new project/financial system, and other related costs.
32
<PAGE>
This restructuring included a staff reduction of approximately 125 employees.
As of August 31, 1997, the Company had accruals of $880,100 included as other
current liabilities in the accompanying consolidated balance sheet for costs
to be incurred in future periods.
Note 10. RELATED PARTY TRANSACTIONS
At the request of its former primary lender and in order to maintain its
favorable relationship with that lender, the Company in December 1996
purchased from this lender the secured loans of three EA officers. These
interest-free demand loans, in the aggregate amount of $301,000, are secured
by pledges of the Company's common stock.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
33
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of the Registrant
Information on the Company's Directors is contained in the Company's Proxy
Statement for its 1997 Annual Meeting of Stockholders to be held on January
14, 1998, and such information is incorporated herein by reference.
(b) Executive Officers of the Registrant
Information on the Company's Executive Officers is contained in the Company's
Proxy Statement for its 1997 Annual Meeting of Stockholders to be held on
January 14, 1998, and such information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information on "Executive Compensation" is contained in the Company's Proxy
Statement for its Annual Meeting of Stockholders to be held on January 14,
1998, and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information on "Security Ownership of Certain Beneficial Owners and
Management" is contained in the Company's Proxy Statement for its Annual
Meeting of Stockholders to be held on January 14, 1998, and such information
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on "Certain Relationships and Related Transactions" is contained
in the Company's Proxy Statement for its Annual Meeting of Stockholders to be
held January 14, 1998, and such information is incorporated herein by
reference.
34
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
<TABLE>
<CAPTION>
A. Financial Statements and Schedule II Page
<S> <C>
1. The following financial statements are included in Item 8 of Part II of
this report:
Report of Independent Public Accountants 18
Consolidated Financial Statements:
Consolidated Balance Sheets as of August 31, 1996 and 1995 19
Consolidated Statements of Operations for the years ended
August 31, 1997, 1996, and 1995 21
Consolidated Statements of Changes in Stockholders' Equity for the years ended
August 31, 1997, 1996, and 1995 22
Consolidated Statements of Cash Flows for the years ended
August 31, 1997, 1996, and 1995 23
Notes to Consolidated Financial Statements for the years ended
August 31, 1997, 1996, and 1995 24
2. The following financial statement schedule for the years ended August 31,
1997, 1996, and 1995 is submitted herewith:
Report of Independent Public Accountants on Schedule 37
Schedule II - Valuation and Qualifying Accounts and Reserves 38
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
3. Exhibits
The following exhibits are filed herewith unless otherwise indicated:
Exhibit
No. Description
3.1 Certificate of Incorporation of the Company.(1)
3.2 By-laws of the Company.(1)
4.1 Article SIXTH of the Company's Certificate of
Incorporation.(1)
10.1 The Company's Profit Sharing Plan.(1)
10.2 The Company's Stock Option Plan.(2)
10.3 The Company's Employee Stock Purchase Plan.(3)
10.4 1993 Non-Employee Director Stock Option Plan.(4)
35
<PAGE>
10.5 The 1993 Stock Incentive Plan.(4)
10.6 The Amended and Restated Stock Option Plan.(5)
10.7 1995 Non-Employee Director Stock Option Plan.(5)
10.8 Employment Agreement dated March 17, 1997, between the
Company and Donald A. Deieso(6)
10.9 Lease, dated August 6, 1997, between ARE Sparks Limited
Partnership, as landlord, and the Company as tenant.
10.10 Lease, dated August 6, 1997, between Ecolair Limited
Partnership, as landlord, and the Company, as tenant.
10.11 Lease, dated August 6, 1997, between Merrymack Limited
Partnership, as landlord, and the Company, as tenant.
10.12 Loan Agreement, dated August 22, 1997, between the Company
and First National Bank of Maryland.
13 1997 Annual Report to Stockholders.
22 Subsidiaries of the Company.
27 Financial Data Schedule.
(1) Incorporated by reference to the Registrant's Registration Statement
on Form S-1, No. 33-8958, which was declared effective by the
Commission on October 31, 1986.
(2) Incorporated by reference to the Company's Registration Statement on
Form S-8, File Number 0-15587 filed on October 15, 1990.
(3) Incorporated by reference to the Registrant's Annual Report on Form
10-K, File Number 0-15587 filed on November 28, 1990.
(4) Incorporated by reference to the Registrant's Annual Report on Form
10-K, File Number 0-15587 filed on November 23, 1993.
(5) Incorporated by reference to the Registrant's Annual Report on Form
10-K, File Number 0-15587 filed on November 21, 1994.
(6) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q, File Number 0-15587 filed on April 18, 1997.
b. Reports on Form 8-K
The Company filed no reports on Form 8-K during the fourth quarter of
fiscal year 1997.
36
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Stockholders of
EA Engineering, Science, and Technology, Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements of EA Engineering, Science, and Technology, Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon
dated November 14, 1997. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule
listed in the foregoing index is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Baltimore, Maryland
November 14, 1997
37
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended August 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
Allowance Balance at
for Doubtful Beginning Charged to Balance at
Accounts of Period Cost and Expense Write-offs End of Period
-------- --------- ---------------- ---------- -------------
<S> <C>
1997 $1,612,200 $339,100 $1,419,300 $ 532,000
1996 1,385,700 328,000 101,500 1,612,200
1995 1,394,900 272,600 281,800 1,385,700
</TABLE>
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EA ENGINEERING, SCIENCE, AND
TECHNOLOGY, INC.
Date: November 17, 1997 By /s/ Loren D. Jensen
-----------------------
Loren D. Jensen
Chairman of the Board
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 Company
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C>
/s/ Loren D. Jensen Chairman of the Board November 17, 1997
------------------------------------
Loren D. Jensen
/s/ Donald A. Deieso President and Chief Executive Officer November 17, 1997
-----------------------------------
Donald A. Deieso (Principal Executive Officer)
/s/ Joseph A. Spadaro Executive Vice President, Chief November 17, 1997
-----------------------------------
Joseph A. Spadaro Financial Officer, Treasurer, and
Assistant Secretary (Principal
Financial and Accounting Officer)
/s/ Edmund J. Cashman, Jr. Director November 17, 1997
--------------------------------
Edmund J. Cashman, Jr.
s/ Rudolph P. Lamone Director November 17, 1997
---------------------------------
Rudolph P. Lamone
/s/ George G. Radcliffe Director November 17, 1997
----------------------------------
George G. Radcliffe
/s/ Cleaveland D. Miller Director November 17, 1997
----------------------------------
Cleaveland D. Miller
</TABLE>
39
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Page
--- ----------- ----
<S> <C>
3.1 Certification of Incorporation of the Company. 35
3.2 By-laws of the Company. 35
4.1 Article SIXTH of the Company's Certificate of Incorporation. 35
10.1 The Company's Profit Sharing Plan. 35
10.2 The Company's Stock Option Plan. 35
10.3 The Company's Employee Stock Purchase Plan. 35
10.4 1993 Non-Employee Director Stock Option Plan 35
10.5 The 1993 Stock Incentive Plan. 36
10.6 The Amended and Restated Stock Option Plan. 36
10.7 1995 Non-Employee Director Stock Option Plan. 36
10.8 Employment Agreement dated March 17, 1997 between the Company and
Donald A. Deieso. 36
10.9 Lease, dated August 6, 1997 between ARE Sparks Limited Partnership, as
Landlord, and the Company as tenant. 36
10.10 Lease, dated August 6, 1997, between Ecolair Limited Partnership, as landlord, and
the Company, as tenant. 36
10.11 Lease, dated August 6, 1997, between Merrymack Limited Partnership, as landlord,
and the Company, as tenant. 36
10.12 Loan Agreement, dated August 22, 1997, between the Company and First National
Bank of Maryland. 36
13 1996 Annual Report to Stockholders. 36
22 Subsidiaries of the Company. 36
27 Financial Data Schedule 36
</TABLE>
40
EXHIBIT 10.9
Ecolair Properties
OFFICE LEASE
Between
ARE Sparks Limited Partnership
as Landlord
and
EA Engineering, Science, and Technology, Inc.
as Tenant
For Premises in
19 Loveton Circle, Sparks, Maryland 21152
Dated: August 6, 1997
---------------------
<PAGE>
TABLE OF CONTENTS
1. Introductory Provisions............................................1
(a) Fundamental Lease Provisions.................................1
(b) References and Conflicts.....................................2
(c) Exhibits.....................................................2
(d) Addendums....................................................2
2. Premises...........................................................2
(a) Leased Premises..............................................2
(b) The Building.................................................2
(c) Tenant's Proportionate Share.................................2
3. Term...............................................................2
(a) Lease Term...................................................2
(b) Acceptance of Leased Premises................................3
4. Rent...............................................................3
(a) Minimum Annual Rent..........................................3
(b) Annual Adjustments to Minimum Annual Rent....................3
(c) Additional Rent..............................................3
(i) General..........................................3
(ii) Basic Operating Expenses.........................3
(iii) Increases in Basic Operating Expenses............4
(iv) Electrical Service...............................4
(v) Landlord's Enforcement Costs.....................4
(d) Additional Rent Estimates and Adjustments..................4
(e) Payment of Rent............................................6
5. Security Deposit...................................................6
6. Improvement of the Leased Premises.................................6
7. Alterations or Improvements by Tenant..............................7
8. Use of Leased Premises.............................................7
(a) Use........................................................7
(b) Compliance.................................................7
(i) Legal............................................7
(ii) Fire and Safety..................................7
(c) Environmental Protection...................................8
(d) Indemnification............................................8
(e) Moving and Deliveries......................................8
(f) Excessive Floor Load.......................................8
9. Taxes on Tenant's Property.........................................8
10. Rules and Regulations..............................................8
11. Utilities and Services.............................................9
(a) Building Standard Services and Utilities...................9
(b) Overtime Services..........................................9
(c) Interruption or Reduction of Service.......................9
(d) Excessive Electrical Usage.................................9
(e) Excessive Heat Generation.................................10
(f) Security..................................................10
<PAGE>
12. Landlord's Right of Entry.........................................10
13. Maintenance and Repairs...........................................10
(a) Landlord Responsibilities.................................10
(b) Tenant Responsibilities...................................11
14. Common Areas......................................................11
(a) Common Areas Defined......................................11
(b) Landlord's Control........................................11
(c) Changes and Additions to the Building, Additional
Construction............................................11
(d) Parking...................................................12
15. Surrender and Inspection..........................................12
(a) Surrender.................................................12
(b) Inspection................................................12
(c) Fixtures and Personal Property Remaining..................12
16. Tenant Holding Over...............................................12
17. Covenant Against Assignment and Subletting........................13
18. Bankruptcy........................................................13
19. Default...........................................................13
20. Landlord's Rights Upon Tenant's Default...........................14
(a) Re-Entry..................................................14
(b) Termination...............................................14
(c) Distress..................................................15
(d) Lien for Rent.............................................15
(e) No Future Lease Rights....................................15
(f) Utilities and Services....................................15
(g) Landlord's Remedies Cumulative............................15
21. Lender Requirements...............................................15
(a) Subordination.............................................15
(b) Attornment................................................16
(c) Financing.................................................16
(d) Financial Statements......................................16
22. Estoppel Certificates.............................................16
23. Damage by Fire or Other Casualty..................................17
24. Condemnation......................................................17
25. Landlord's Reserved Rights........................................18
26. Landlord and Tenant Liability.....................................18
(a) Landlord's Liability......................................18
(b) Tenant's Liability........................................18
(c) Indemnity.................................................18
(d) Criminal Acts of Third Parties............................19
27. Tenant's Insurance................................................19
(a) Coverages.................................................19
(b) Policy Requirements.......................................19
<PAGE>
(c) No Limitation of Liability................................19
(d) Notice of Fire and Accident...............................19
28. Waiver of Subrogation.............................................20
29. No Liens Permitted: Discharged....................................20
30. Signs and Advertisements..........................................20
31. Notices...........................................................20
32. Time..............................................................20
33. Postponement of Performance.......................................21
34. No Waiver.........................................................21
35. Limitation of Landlord's Liability................................21
36. Transfer of the Building..........................................21
37. Waiver of Counterclaim and Trial by Jury..........................21
38. Lease Recording...................................................22
39. Notice of Default to Landlord and Mortgagee and Right to Cure.....22
40. Miscellaneous Provisions..........................................22
(a) Governing Law.............................................22
(b) Covenants.................................................22
(c) No Representations by Landlord............................22
(d) Exhibits..................................................22
(e) Pronouns..................................................22
(f) Captions..................................................22
(g) Landlord's Approval.......................................22
(h) Separability..............................................22
(i) Counterparts..............................................23
(j) Authority.................................................23
(k) Examination of Lease......................................23
(l) Interpretation............................................23
(m) Entire Agreement; Modification............................23
(n) Termination...............................................23
(o) Corporate Approval........................................23
(p) Approval of Mortgage......................................23
(q) Zoning and Licensing Approvals............................24
41. Quiet Enjoyment...................................................24
42. Remedies Cumulative...............................................24
43. Binding Effect....................................................24
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OFFICE LEASE
THIS LEASE is made this 1st day of January, 1997, between ARE Sparks Limited
Partnership, a Maryland limited partnership ("Landlord"), and EA Engineering,
Science and Technology, Inc., a Delaware Corporation ("Tenant").
WITNESSETH:
For and in consideration of the covenants herein contained and upon the terms
and conditions herein set forth, the parties agree as follows:
1. Introductory Provisions.
(a) Fundamental Lease Provisions. Certain fundamental Lease provisions
are presented in this Section in summary form solely to facilitate convenient
reference by the parties hereto:
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1. Leased Premises 19 Loveton Circle [See Section 2(a)]
2. Building Address 19 Loveton Circle [See Section 2(a)]
Sparks, Maryland 21152
3. Rentable Area Of Leased
Premises 16,500 square feet [See Section 2(a)]
4. Gross Leasable Area of
Building* 16,500 square feet [See Section 2(b)]
5. Proportionate Share 100 Percent [See Section 2(c)]
6. Rent Commencement Date January 1, 1997 [See Section 3(a)]
7. Lease Term 8 years and 2 months [See Section 3(a)]
8. Minimum Annual Rent $280,500.00 [See Section 4(a)]
9. Basic Monthly Rent $23,375.00 [See Section 4(a)]
10. Annual Adjustment to
Minimum Annual Rent 3% [See Section 4(b)]
11. Use of Leased Premises Professional Laboratory [See Section 6]
and Consulting Business
12. Security Deposit $24,750 [See Section 5]
13. Base Operating Expense
Amount $6.63 (tax & operating) [See Section 4(c)]
14. Additional Rent [See Section 4(c)]
15. Standard Building
Operating Hours 8:00 a.m. to 6:00 p.m. [See Section 9(a)]
Monday-Friday
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16. Building Holidays New Year's Day, [See Section 9(a)]
Memorial Day, Independence Day,
Labor Day, Thanksgiving Day
Day after Thanksgiving, Christmas Day
17. Address for Notices 11019 McCormick Road [See Section 30(b)]
to Tenant Hunt Valley, Maryland 21031
18. Address for Notices 11019 McCormick Road [See Section 30(a)]
to Landlord Hunt Valley, Maryland 21031
Attn: Melanie Jensen-Ney
19. Leasing Broker(s) NONE [See Section 33]
20. Tenant's Resident Agent Barbara L. Posner
Vice President, Finance & Administration
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*Subject to adjustment pursuant to Section 2(b).
(b) References and Conflicts. References appearing in Section 1(a) are
intended to designate some of the other places in the Lease where additional
provisions are applicable to the particular fundamental Lease provisions appear.
These references are for convenience only and shall not be deemed all inclusive.
Each reference in the Lease to any of the fundamental Lease provisions contained
in Section 1(a) shall be construed to incorporate all of the terms provided for
under such provisions, and such provisions shall be read in conjunction with all
other provisions of the Lease applicable thereto. If there is any conflict
between any of the fundamental Lease provisions set forth in Section 1(a) and
any other provisions of the Lease, the latter shall control.
(c) Exhibits. The following drawings and special provisions are
attached hereto as exhibits and hereby made a part of this Lease:
Exhibit A. Floor Plan of Leased Premises
Exhibit B. Rules and Regulations
(d) Addendums. The following special provisions are attached hereto as
addendums and hereby made a part of this Lease.
Addendum 1 - Leased Premises.
2. Premises.
(a) Leased Premises. Landlord hereby leases to Tenant, and Tenant
hereby rents from Landlord, the Leased Premises as specified in Section 1(a)(1)
located in the building specified in Section 1(a)(2) (the "Building"). The
leased premises shall consist of approximately the square footage of rentable
floor space as specified in Section 1(a)(3), which included an agreed common
area factor of twelve percent (12%), and as outlined in red on the floor plan
attached hereto as Exhibit A. For the purposes of determining the square footage
of the Leased Premises, leasehold space is calculated by measuring from the
outside of any exterior walls of the Leased Premises to the center line of any
partitions constructed which separate the Leased Premises from the remaining or
adjacent premises of the Building.
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(b) The Building. Landlord and Tenant acknowledge that the gross
leasable area in the Building is specified in Section 1(a)(4) ("Gross Leasable
Area" or "GLA"). The GLA shall be used hereinafter for purposes of computing
Tenant's proportionate share of certain expenses payable to Landlord as
Additional Rent. Landlord reserves the right to modify the GLA of the Building
from time to time during the Lease Term as a result of construction of new
improvements or the demolition of existing improvements.
(c) Tenant's Proportionate Share. Tenant's proportionate share of
certain expenses hereinafter made payable to Landlord as additional rent is
specified in Section 1(a)(5). Said computation is based upon the ratio of the
total rentable area in the Leased Premises to the GLA of the Building. The
Proportionate Share shall be modified during the Lease Term in the event that
the GLA of the Building is modified as described in Section 2(b) above.
3. Term.
(a) Lease Term. The term of the Lease (sometimes herein called the
"Lease Term") shall commence on the "Rent Commencement Date," January 1, 1997,
and shall continue for a period of nine (9) years from the first day of the
calendar month next following the first day of the Term, unless sooner
terminated as herein provided.
(b) Acceptance of Leased Premises. Landlord shall deliver, and Tenant
agrees to accept, possession of the Leased Premises in an "as is" condition,
subject, however, to Landlord's performance of its agreed obligation to replace
at no charge to Tenant the carpet in the rear portion of the fourth floor. By
entering into possession, Tenant shall be deemed to have accepted the Leased
Premises, to have acknowledged that the same are in the condition called for
hereunder and to have agreed that the obligations of the Landlord imposed for
the delivery of the Premises have been fully performed. It is expressly
understood and agreed that Landlord has made no representations or warranties
with respect to the Leased Premises.
4. Rent.
(a) Minimum Annual Rent. The minimum Annual Rent reserved hereunder
shall be as specified in Section 1(a)(8) which shall be payable by Tenant to the
Landlord during each Lease Year of the Lease Term in twelve (12) equal monthly
installments of Basic Monthly Rent each as specified in Section (a)(9), due in
advance, without notice or demand, and without set-off, deduction or abatement
of any kind, on the first day of every calendar month thereafter during the
Term. Rent shall be paid to Landlord (or its agent) as specified in Section
1(a)(18), or to such other persons or at such other address as Landlord may
designate from time to time.
(b) Annual Adjustments to Minimum Annual Rent. On the first day of the
second Lease Year, and on the first day of each Lease Year thereafter during the
Lease Term, the Minimum Annual Rent (than in effect) shall be increased by 3
percent (3%).
(c) Additional Rent.
(i) General. Whenever it is provided by the terms of this Lease
that Tenant is required to make any payment to Landlord other than of Minimum
Annual Rent, such payment shall be deemed to be additional rent ("Additional
Rent").
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Unless otherwise expressly specified herein, Additional Rent shall be paid by
Tenant with the installment of Base Monthly Rent thereafter falling due.
Additional Rent shall include, but not be limited to:
(ii) Basic Operating Expenses. Tenant shall pay to Landlord, as
Additional Rent, its Proportionate Share as set forth in Section 1(a)(5) of any
increase in the Basic Operating Expenses incurred by Landlord in the operation
of the Building during any calendar year over the Base Operating Expense Amount
specified in Section 1(a)(13). As used herein, the "Basic Operating Expenses"
shall mean the sum of all costs of operating, policing, managing, maintaining
replacing and repairing the (A) the Building, (B) the personal property used in
conjunction therewith, and (C) the land upon which the Building is situated and
all curbs and sidewalks adjacent to same. Such costs shall include the
following: the charges (including surcharges) for electricity, gas, fuel, steam,
water and sewer and any other utilities supplied to the Building; the cost of
public liability insurance, casualty insurance, rent loss insurance, umbrella
liability insurance, owned and non-owned automobile insurance and all other
insurance coverage carried by Landlord in connection with the Building; legal,
accounting, engineering and other professional fees; management fees (equal to
fifteen percent (15%) of the total Basic Operating Expenses, excluding real
estate taxes and utilities) and personnel costs, including, but not limited to,
reasonable salaries, wages, taxes, fringe benefits and other direct and indirect
costs paid to or on behalf of persons employed in the operation, supervision,
maintenance, management and repair of the Building and Building Area or engaged
to provide any maintenance, operating, repair or upkeep service to the Building
or Building Area, and any other Building personnel; costs of inspecting, and
depreciation of machinery and equipment; costs to maintain and operate a
Building office; security guards or security services deemed necessary by
Landlord; the cost of all service and maintenance contracts; landscaping
maintenance, including reasonable upgrades and replacements; parking facility
maintenance, including repairs, restriping, resurfacing, rebuilding, as well as
removal of snow, ice and debris and depreciation of all machinery and equipment
used therein or thereon; traffic control; sanitary and drainage control; public
address system; holiday decorations; disposal of trash; maintenance, repair and
replacement of mechanical and electrical equipment including heating,
ventilation and air conditioning equipment; window cleaning, janitorial service
and pest control service; maintenance and repair of elevators, stairways, rest
rooms, lobbies, hallways and other common areas and facilities; repainting and
redecoration of all common areas and facilities; sales or use taxes on supplies
or services; and all other reasonable maintenance and repair expenses and
supplies which are deducted by Landlord in computing its Federal income tax
liability; the cost of any capital improvements or alterations made by Landlord
to the Building after the Rent commencement Date of the Lease Term, that reduce
total operating charges, or which are required under any governmental law or
regulation that was not applicable to the Building at the time it was
constructed, such cost to be amortized over such reasonable period as Landlord
shall determine, together with interest on the unamortized balance at the rate
actually paid by Landlord on funds borrowed for purposes of constructing said
capital improvements or alterations; the cost of tools and equipment, materials
and uniforms, supplies and sundries reasonably necessary for the operation and
maintenance of the Building; the Building's share of all costs to maintain,
repair and/or replace as necessary any common driveways, facilities and
structures pursuant to easements, covenants or similar agreements affecting the
Building; charges of any kind imposed by any governmental authority in
connection with the use or occupancy of the Building, including any and all
license, permit, and inspection fees; "Real Estate Taxes" (as
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hereinafter defined); and any other reasonable costs and expenses incurred by
Landlord in owning, maintaining, repairing or operating the Building or Building
Area. The Basic Operating Expenses shall not include: leasing commissions
payable by Landlord; the cost of capital improvements, as determined under sound
accounting principals, except to the extent set forth above; or the costs of
special services or utilities separately charged to individual tenants of the
Building.
The term "Real Estate Taxes" shall mean all taxes and assessments,
general and special, ordinary and extraordinary, foreseen and unforeseen, now or
hereafter assessed, levied or imposed upon the Building, and the land on which
it is built, whether or not now customary, including, without limitation, all
other government al impositions and levies, front foot benefit charges and
adequate public facility costs and assessments, together with (i) any tax,
assessment, or other imposition in the nature of a real estate tax, (ii) any ad
valorem tax on rent or any tax on income if imposed in lieu of or in addition to
real estate taxes and assessments, and (iii) any taxes and assessments which may
hereafter be substituted for real estate taxes, including by way of illustration
only, any tax, capital levy, assessment, imposition or otherwise (whether a
business rental or other tax) now or hereafter levied upon Landlord on the rents
or income received from the Building or for Tenant's use or occupancy of or
conduct of business at the Leased Premises, or Tenant's improvements to or
furniture, fixtures or equipment in the Leased Premises. "Real Estate Taxes"
shall further mean any advances or escrow deposits paid or made to any taxing
authority or third party such as a lender on account of any of the foregoing.
"Real Estate Taxes" shall also include all costs, including reasonable attorney
fees, incurred by Landlord in contesting the validity or amount, or in attempts
to restrict increases in, any such taxes. The Real Estate Taxes for any calendar
year shall mean the Real Estate Taxes actually paid or due to be paid during
such calendar year, whether such Real Estate Taxes relates to such calendar year
or a fiscal year.
(iii) Increases in Basic Operating Expenses. For each calendar year
during which any part of the Term falls, Tenant shall pay to Landlord Tenant's
Proportionate Share of the excess, if any, in Basic Operating Expenses for the
Leased Premises for such year (the "Excess Operating Expenses") over the Base
Operating Expense Amount. Such payment shall be prorated for any partial
calendar year during the Term.
(iv) Electrical Service. Tenant shall reimburse Landlord on a
monthly basis for all electrical service to the Leased Premises (other than the
electrical service necessary for Landlord to provide standard heating and air
conditioning, which shall be included in "Basic Operating Expenses".) Landlord
shall pay the monthly bills for such services and submit copies of those bills
to Tenant for reimbursement, with no markup or management fee, and Tenant agrees
to pay each bill promptly in accordance with its terms.
(v) Landlord's Enforcement Costs. Additional Rent shall include any
and all expenses incurred by Landlord, including reasonable attorneys' fees, for
the collection of monies due from Tenant and the enforcement of Tenant's
obligations under the provisions of this Lease. When Landlord, at Tenant's
expense, performs an obligation of Tenant pursuant to the terms of this Lease,
the actual out-of-pocket costs and expenses incurred by Landlord in performance
of such obligations shall be Additional Rent.
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(d) Additional Rent Estimates and Adjustments.
(i) On or before April 30 (or as soon thereafter as practicable)
of each calendar year, Landlord will submit to Tenant a comparative statement of
the actual increases incurred in Basic Operating Expenses for the preceding
calendar year over the Base Operating Expense Amount, setting forth in
reasonable detail: (i) a schedule of Basic Operating Expenses for the preceding
calendar year, and the amount of the Excess Operating Expenses for such
preceding year; (ii) the amount, if any, paid by Tenant to Landlord during the
preceding calendar year on account of the Excess Operating Expenses for such
preceding year; and (iii) the amount due from Tenant on account of the Excess
Operating Expenses for such preceding year, or the amount due from Landlord to
Tenant because of overpayment by Tenant on account of Excess Operating Expenses.
Landlord's comparative statement of Operating Expenses shall also include
Landlord's good faith estimate of Excess Operating Expenses for the then-current
calendar year and an estimated "Monthly Portion of Excess Operating Expenses"
equal to one-twelfth (1/12) of said good faith estimate of Excess Operating
Expenses.
(ii) Tenant shall pay Landlord, within thirty (30) days of
Tenant's receipt of such statement, as Additional Rent, any amounts due from
Tenant on account of Excess Operating Expenses for the preceding year. Tenant
shall also make payments to Landlord, on account of the Excess Operating
Expenses for the then current calendar year, as follows:
(A) On the first day of the first full month following
receipt by Tenant of the Landlord's comparative statement of Basic Operating
Expenses, Tenant shall pay to Landlord an amount equal to the Monthly Portion of
Excess Operating Expenses multiplied by the number of months elapsed in the
current calendar year (including the month in which the payment is made); and
(B) Commencing on the first day of the second full month
following receipt by Tenant of Landlord's comparative statement of Basic
Operating Expenses, and continuing until the receipt by Tenant of the next
annual comparative statement, the minimum monthly installments of rent due
hereunder shall be increased by an amount equal to the Monthly Portion of Excess
Operating Expenses.
(iii) Landlord shall refund any overpayment made by Tenant within
thirty (30) days after Landlord's submission to Tenant of the aforesaid
operating charge statement for such calendar year.
(iv) Contemporaneously with presentation of Landlord's statement
showing actual figures for the year, Landlord shall furnish to Tenant, in
writing, a detailed statement of Basic Operating Expenses and copies of Real
Estate Tax bills. If it shall be determined that there is an error in Landlord's
statement, Tenant shall be entitled to a credit for any overpayment, or, if
Landlord billed Tenant less than should have been billed to Tenant, Tenant shall
pay such difference to Landlord. Any payment, refund or credit made pursuant to
Section 4(c) or 4(d) shall be made without prejudice to any right of Tenant to
dispute, or of Landlord to correct, any item(s) as billed pursuant to the
provision hereof; provided, however, such right to correct or adjust rental
payments shall terminate at the expiration of two (2) years after the date any
payment shall have become due.
(v) Tenant's obligation to pay any Additional Rent accruing during
the Lease Term pursuant to this Section shall apply pro rata to the
proportionate part
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of the calendar year as to Basic Operating Expenses, in which this Lease begins
or ends, for the portion of each such year during which this Lease is in effect.
Such obligation to make payments of such Additional Rent shall survive the
expiration or sooner termination of the Lease Term, whether or not this Lease is
superseded by a subsequent lease of the Leased Premises or of any other space or
Tenant leaves the Building; any such superseding lease shall not serve to
supersede Tenant's obligation for any such additional rent unless it makes
express reference thereto and recites that such additional rent is abated in
consideration of the superseding lease.
(vi) If, during the Term of this Lease, there shall be a reduction
or elimination of any particular component of Basic Operating Expenses by reason
of the introduction of a labor-saving device, energy conservation device,
capital improvement or replacement installed by Landlord, the corresponding item
of expense in the Base Operating Expense shall be eliminated or reduced in the
same proportion as the reduction of that item in the Basic Operating Expense for
the purposes of calculating Tenant's share of Excess Operating Expenses.
(vii) In the event that Landlord shall make a capital expenditure
for an Essential Capital Improvement (as hereinafter defined) during the Term of
this Lease, the annual amortization of such expenditure (determined by dividing
the amount of the expenditure by the useful life of the improvement) plus
interest on the unamortized balance at the rate actually paid by Landlord for
funds borrowed by Landlord to construct or otherwise provide such Essential
Capital Improvement, shall be deemed an Operating Expense for each year of such
useful life. As used herein, an "Essential Capital Improvement" means any of the
following: (A) a labor saving device or other installation, improvement or
replacement which reduces Operating expenses; (B) an installation or improvement
required by reason of any law, ordinance or regulation of any governmental or
quasi-governmental body, which requirement did not exist (or was not applicable
to the Building) on the date of execution of this Lease; or (C) an installation
or improvement which directly enhances the safety of tenants in the Building
generally (as, for example, but without limitation, for fire safety or
security); provided, however, any expense treated as an Essential Capital
Improvement hereunder must, at Tenant's option and expense, be certified by
independent auditors for Landlord as constituting an Essential Capital
Improvement under generally accepted accounting principles.
(e) Payment of Rent. In the event Minimum Annual Rent or Additional Rent
is not paid within ten (10) days after the same is due, a late charge equal to
five percent (5%) of the delinquent amount shall be assessed as liquidated
damages for the additional administrative charges incurred by Landlord as a
result of such late payment. Tenant also agrees to pay all reasonable attorney
fees incurred by Landlord as a result of Tenant's delinquent payment of rent. No
payment by Tenant or receipt by Landlord of lesser amounts of rent than those
herein stipulated shall be deemed to be other than on account of the earliest
unpaid stipulated rent. No endorsement or statement on any check or any letter
accompanying any check or payment as rent shall be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
provided in this Lease. If Landlord shall pay any monies, or incur any expenses
in correction of violation of covenants herein set forth, the amount so paid or
incurred shall, at Landlord's option, and on written notice to Tenant, be
considered Additional Rent payable by Tenant with the first installment of
rental thereafter becoming due and payable. If Landlord receives from Tenant two
(2) or more returned or "bounced" checks in any twelve (12)
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month period, Landlord may require all future rent be paid by cashier's or
certified check.
5. Security Deposit. Tenant has deposited with Landlord the sum specified in
Section 1(a)(12). Said deposit shall constitute advance rental and shall be held
by Landlord as security for the faithful performance by Tenant of all the terms,
covenants and conditions of this Lease to be kept and performed by Tenant during
the Lease Term. If, at any time during the Lease Term, any payment of Minimum
Annual Rent or Additional Rent herein reserved shall be overdue and unpaid, the
Landlord may, at its option, appropriate and apply any portion of said security
deposit to the payment of any such overdue rent or other sum. Landlord shall
have the unrestricted right (but not the obligation) to apply any part of the
Security Deposit to cure any Default (as described in Section 20 hereof).
In the event of the failure of Tenant to keep and perform any other items,
covenants and conditions of the Lease to be kept and performed by Tenant, then
Landlord, at its option, may appropriate and apply the entire security deposit,
or so much thereof as may be necessary, to compensate Landlord for loss or
damage sustained or suffered by Landlord due to such breach by Tenant. Should
the entire security deposit, or any portion thereof, be appropriated and applied
by Landlord for the payment of overdue rent, to cure any default, or other sums
due and payable to Landlord by Tenant hereunder, then Tenant shall remit to
Landlord, within ten (10) days of the written demand of Landlord, a sufficient
amount in cash to restore the security deposit to the original sum. Tenant's
failure to do so shall constitute a breach of the Lease. Should Tenant comply
with all of said terms, covenants and conditions of the Lease and promptly pay
all Minimum Annual Rent and Additional Rent herein provided as it falls due,
then the security deposit shall be returned in full, without interest, to Tenant
within thirty (30) days of the Expiration Date or earlier termination of the
Term of this Lease. Tenant shall have no right to direct the application of any
part of the Security Deposit.
Landlord may deliver the funds deposited hereunder by Tenant to the
purchaser of Landlord's interest in the building and/or the Leased Premises in
the event that such interest is sold, and thereupon Landlord shall be discharged
from any further liability with respect to such security deposit.
6. Improvement of the Leased Premises. Intentionally deleted.
7. Alterations or Improvements by Tenant. Except for the incidental hanging of
pictures, installation of shelves, and other painting and decoration of the
Leased Premises which do not affect the structure of the Leased Premises, Tenant
shall not make any alterations, additions, or improvements, structural or
otherwise (collectively, "Alterations") in the Leased Premises (such as
carpeting, telephone installation, decoration and installation of specialized
equipment), without the prior written consent of Landlord, which consent shall
not be unreasonably withheld. Tenant shall not install any equipment of any
nature whatsoever which may affect the insurance rating of the Building, or
which may necessitate any changes, replacements or additions to the water
system, plumbing system, heating system, air-conditioning system, telephone
system or the electrical system of the Leased Premises, without the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
Tenant shall pay all costs to make such changes, replacements or additions.
Tenant hereby agrees that all Alterations made in, to, or on the Leased
Premises shall, unless otherwise provided by written agreement, be the property
of Landlord
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and shall remain upon and be surrendered with the Leased Premises on the
Expiration Date or other termination of this Lease, unless Landlord shall, prior
to such expiration or termination have given Tenant not less than 15 days prior
written notice to remove the same, in which event Tenant shall at its expense
forthwith remove such Alterations. Any or all wiring and cabling, such as
telephone, computer and data wires installed by Tenant shall be removed by
Tenant at its sole cost, and the Leased Premises shall be restored to their
original condition by the Expiration Date, ordinary wear and tear excepted. All
property permitted or required to be removed by Tenant at the end of the term
remaining in the Leased Premises after Tenant's removal shall be deemed
abandoned and may, at the election of Landlord, either be retained as Landlord's
property or may be removed from the premises by Landlord at Tenant's expense.
8. Use of Leased Premises.
(a) Use. Tenant shall use and occupy the Leased Premises for the singular
purpose specified in Section 1(a)(11) and for no other purpose. Tenant shall not
use or permit the Leased Premises to be used for any other purpose or purposes
without the prior written consent of Landlord, which consent may be granted or
withheld in its sole discretion.
(b) Compliance. Tenant, at its expense, shall comply with the laws, rules
and regulations of any federal, state or municipal authority, or the Maryland
Fire Underwriters Rating Bureau, or with any notice from any public officer
pursuant to law, or with any notice from any insurance company pertaining to
Tenant's occupancy or use of the Leased Premises, whether such notice shall be
served on Landlord or Tenant. In furtherance of the foregoing, and provided
Tenant shall first have obtained Landlord's prior written consent (which Tenant
agrees to promptly request), Tenant shall, at Tenant's sole cost and expense,
make such changes, alterations, renovations or modifications to the Leased
Premises (except for structural repairs) which are necessitated or required by
any such Law.
(i) Legal. Tenant shall not use or permit the Leased Premises or
any part thereof to be used in violation of any present or future applicable
law, regulation or ordinance, or of the certificate of occupancy issued for the
Building or the Leased Premises, and shall immediately discontinue any use of
the Leased Premises which is declared by any governmental authority having
jurisdiction to be in violation of law or said certificate of occupancy. Tenant
will not use or permit the Leased Premises to be used for any purposes that
interfere with the use and enjoyment of the Building by Landlord or the other
tenants, which will increase the existing rate of insurance on the Building or
which violate the requirements of any insurance company insuring the Building or
its contents, or which, in Landlord's sole discretion, impair the reputation of
the Building. Tenant shall refrain from and discontinue such use immediately
upon receipt of written notice from Landlord.
(ii) Fire and Safety. Tenant shall not do, or permit anything to
be done in the Leased Premises, or bring, use or keep anything therein, which
will in any way increase the rate of fire insurance on the Building, or
invalidate or conflict with fire insurance policies on the Building, fixtures or
on property kept therein. Tenant agrees that any increases of fire insurance
premiums on the Building or contents caused by the occupancy of Tenant and any
expense or cost incurred in consequence of negligence or the willful action of
Tenant, Tenant's employees, agents, servants, invitee, or licensees shall be
deemed Additional Rent and paid as accrued.
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(c) Environmental Protection. Tenant and Tenant's employees and agents
shall not dispose of any oil, petroleum or chemical liquids or solids, liquid or
gaseous products or any hazardous waste or hazardous substance including,
without limitation, asbestos (hereinafter collectively referred to as "hazardous
waste"), as those terms are used in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, or in any other federal, state or local
law governing hazardous substances (hereinafter referred to as the "Act"), as
such laws may be amended from time to time at, upon, under or within the Leased
Premises or the Building or the land on which it is built, or into the plumbing
or sewer or water system servicing the Leased Premises or the Building, nor
shall Tenant, its employees or agents cause or permit the discharge, spillage,
uncontrolled loss, seepage or filtration of any hazardous waste at, upon, under
or within the Leased Premises or the Building or the land or into the plumbing
or sewer or water system servicing the same. Tenant shall comply in all respects
with the requirements of the Act and related regulations, and shall notify
Landlord immediately in the event of its discovery of any hazardous waste at,
upon, under or within the Leased Premises or the Building or the land.
(d) Indemnification. Tenant shall indemnify Landlord against all costs,
expenses, liabilities, losses, damages, injunctions, suits, fines, penalties,
claims, and demands, including reasonable attorneys' fees, arising out of any
violation of or default in the covenants of this Section 8. The provisions of
Sections 8(b) and (c) and this Section 8(d) shall survive the expiration of the
Lease Term.
(e) Moving and Deliveries. No freight, furniture, heavy machinery, heavy
equipment, including computer equipment or other bulky matter or fixtures of any
description shall be transferred into or out of the Building or carried in the
elevators, without Landlord's prior written consent and approval. In obtaining
the Landlord's approval as required under this paragraph, Tenant agrees to
provide Landlord with all technical specifications concerning the equipment and
machinery and to pay the costs of any and all structural changes which in the
sole discretion of the Landlord are required to be made in order to safely and
efficiently accommodate such equipment or machinery. If such machinery or
equipment requires special handling, Tenant agrees to employ only persons
holding the proper licences to do said work, and that all work in connection
therewith shall comply with any applicable Federal, State, County or other
governing laws, rules or regulations. Tenant shall promptly remove from the
public areas within or adjacent to the Building any of Tenant's property
delivered or deposited there, and shall be liable for any damage to the Building
or the Leased Premises caused by its moving and deliveries.
(f) Excessive Floor Load. Landlord shall have the right to prescribe the
weight and method of installation and position of safes or other heavy fixtures
or equipment. Tenant will not, without Landlord's prior written approval,
install in the Leased Premises any fixtures, equipment or machinery that will
place a load upon the floor exceeding the designed floor load capacity. Tenant
shall be liable for all damage done to the Building by installing or removing a
safe or any other article of Tenant's office equipment, or due to its being in
the Leased Premises. Landlord shall repair any such damage at Tenant's expense,
and Tenant shall pay the cost therefor to Landlord upon demand, as Additional
Rent.
9. Taxes on Tenant's Property. Tenant shall be liable for, and shall pay at
least ten (10) days before delinquency, all taxes levied against any personal
property or trade fixtures placed by Tenant in or about the Leased Premises. If
any such taxes
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on Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property, or if the assessed value of the Leased 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 as Additional Rent 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.
10. Rules and Regulations. Tenant covenants on behalf of itself, its employees,
agents, licensees and invitees to comply with the rules and regulations set
forth in Exhibit B, which is attached hereto and made a part hereof (the "Rules
and Regulations"). Landlord shall have the right, in its sole discretion, to
make reasonable additions and amendments to the Rules and Regulations from time
to time and Tenant covenants that Tenant, its employees, agents, licensees and
invitees will comply with additions and amendments to the Rules and Regulations
upon Landlord's provision to Tenant of a written copy of the same. Any
unremedied default by Tenant, or any other party set forth above, of any of the
material provisions of the Rules and Regulations as set forth in Exhibit B, or
as amended from time to time, shall be considered to be a default under the
terms of this Lease. Nothing contained in this Lease shall be construed to
impose upon Landlord any duty or obligation to enforce the Rules and
Regulations, or any amendments or additions thereto, against any other tenant.
Landlord shall have no liability to Tenant or any other party for violations of
the Rules and Regulations by any party whatsoever. If there is any inconsistency
between this Lease and the Rules and Regulations, the Lease shall govern.
11. Utilities and Services.
(a) Building Standard Services and Utilities. As long as Tenant is not in
default under any of the covenants of this Lease, Landlord shall, if and insofar
as existing facilities permit, furnish sufficient electric current for routine
and normal requirements for lighting and typical office equipment and machinery,
such as typewriters, calculators, personal computers, small copiers and similar
items, subject to the limitations of Section 11(b). Landlord shall furnish hot
and cold water for lavatory and drinking purposes, lavatory supplies, and
Building standard fluorescent tube replacements and nightly cleaning and
janitorial services Monday through Friday. Landlord further agrees to furnish
heating and cooling during the appropriate seasons of the year, during the
Standard Building Operating Hours and on the days set forth in Section l(a)(15),
exclusive of the Building Holidays specified in Section l(a)(16), with holidays
falling on Saturday observed both on said day and on the preceding Friday, and
holidays falling on Sunday observed on the following Monday.
(b) Overtime Services. Landlord shall be under no obligation to furnish
electric power at any hours other than normal business hours, or for the
operation of any other electrical equipment or appliance, unless arrangements
for such after-hours operations, and for the installation of such electrical
equipment or appliance, shall have been made pursuant to terms and conditions
acceptable to Landlord and embodied in a separate written agreement between
Landlord and Tenant. In the event that Tenant uses electrical services in excess
of that required for normal office use or during periods other than normal
business hours or both, then
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such excess services shall be supplied at the expense of the Tenant, pursuant to
terms, conditions and costs established by the Landlord in its sole discretion.
Should Tenant require heating and cooling services beyond the hours stipulated
in Section 11(a), Landlord will furnish such additional service at the
then-prevailing hourly rate, as established by Landlord from time to time,
provided that Tenant gives Landlord no less than twenty-four (24) hours advance
written notice of the need therefor.
(c) Interruption or Reduction of Service. In no event shall Landlord be
liable to Tenant for any interruption or failure in the supply of any utilities
to the Leased Premises and the Building. Landlord reserves the right to
interrupt service of the heat, plumbing, air conditioning, cooling, electric,
and sewer and water systems, when necessary, by reason of accident, or of
repairs, alterations or improvements which in the judgment of Landlord are
desirable or necessary to be made, until such repairs, alterations or
improvements shall have been completed; and Landlord shall have no
responsibility or liability for failure to supply heat, plumbing, air
conditioning, cooling, electric, and sewer and water service, or other service
or act for the benefit of Tenant, when prevented from so doing by strikes,
accidents or by any other causes beyond Landlord's reasonable control, or by
orders or regulations of any federal, state, county, or municipal authority, or
by any failure to receive suitable fuel supply, or inability despite exercise of
reasonable diligence to obtain the regularly-used fuel or other suitable
substitute; and Tenant agrees that Tenant shall have no claim for damages nor
shall there be any abatement of Base Annual Rent in the event that any of said
systems or service shall be discontinued or shall fail to function for any
reason. If any public utility supplying any utility to the Building, or any law,
order or regulation of any federal, state, county or municipal authority
requires that Landlord or Tenant must reduce or maintain a certain level of
consumption of electricity or any other utility or interior temperature for the
Leased Premises or the Building, which affects the normal business hours or the
provision of any utility the Leased Premises or the Building, Landlord and
Tenant shall each adhere to and abide by such requirement without any reduction
in rent or in any of Tenant's other obligations hereunder. Landlord's obligation
to supply heat and air conditioning are subject to applicable laws and
regulations as to energy conservation and other restrictions.
(d) Excessive Electrical Usage.
(i) Tenant will not install or operate in the Leased Premises any
heavy duty electrical equipment or machinery, without obtaining the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
Landlord may require, as a condition of its consent to the installation of such
equipment or machinery, payment by Tenant, as Additional Rent, for such excess
consumption of electricity as may be occasioned by the operation of said
equipment or machinery. Landlord may make periodic inspections of the Leased
Premises at reasonable times to determine that Tenant's electrically operated
equipment and machinery complies with the provisions of this Section and Section
11(e).
(ii) Landlord shall have the right to require that one or more
separate meters or submeters be installed to record the consumption or use of
electricity, or to cause a reputable independent electrical engineer to survey
and determine the quantity of electricity consumed by such excessive use. The
cost of any such survey or meters and of installation, maintenance and repair
thereof shall be paid by Tenant. Tenant agrees to pay Landlord (or the utility
company, if direct service is provided by the utility company), promptly upon
demand therefor, for all such electricity consumption as shown by said meters,
or a flat monthly charge determined
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by the survey, as applicable, at the rates charged for such service by the local
public utility company.
(e) Excessive Heat Generation. Landlord shall not be liable for its
failure to maintain comfortable atmospheric conditions in all or any portion of
the Leased Premises, due to heat generated by any equipment or machinery
installed by Tenant (with or without Landlord's consent) that exceeds
generally-accepted engineering design practices for normal office purposes. If
Tenant desires additional cooling to offset excessive heat generated by such
equipment or machinery, Tenant shall pay for auxiliary cooling equipment and its
operating costs, including, without limitation, electricity, gas, oil and water,
or for excess electrical consumption by the existing cooling system, as
appropriate.
(f) Security. Any security measures that Landlord may undertake are for
protection of the Building only and shall not be relied upon by Tenant to
protect Tenant, its property, its employees and/or their property.
12. Landlord's Right of Entry. Landlord, its agents, employees and contractors
shall have the right to enter the Leased Premises at all reasonable times,
including emergencies determined by Landlord, (a) to make inspections or to make
repairs, replacements and improvements to Leased Premises or other premises as
Landlord may deem necessary or reasonably desirable to the Premises or to any
other portion of the Building or which Landlord may elect to perform; (b) to
perform nightly cleaning of the Leased Premises; (c) to exhibit the Leased
Premises to prospective purchasers at any reasonable time, or to prospective
tenants during the last one hundred and eighty (180) days of the Lease Term; and
(d) for any purpose whatsoever relating to the safety, protection or
preservation of the Building. Such entry by Landlord shall be, whenever
reasonably possible, during normally business hours, except in cases of
emergency. Landlord shall use reasonable best efforts to minimize interference
to Tenant's business when making repairs, but, unless otherwise agreed with
Tenant, Landlord shall not be required to perform the repairs at any time other
than during normal working hours. The right and authority hereby reserved do not
impose, no does the Landlord assume by reason thereof, any responsibility or
liability whatsoever for the care, maintenance or supervision of the Leased
Premises or any pipes, fixtures, appliances or appurtenances therein contained
or therewith in any manner connected.
13. Maintenance and Repairs.
(a) Landlord Responsibilities. Landlord shall make structural repairs to
the Leased Premises necessary for safety and tenantability, and shall maintain
and repair all Building equipment serving the Leased Premises and all exterior
plate glass in the Leased Premises, and the cost of all such repairs or
maintenance shall be included in Basic Operating Expenses. Tenant waives the
right to make repairs at Landlord's expense under any law, statute or ordinance
now or hereafter in effect. 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 changes, alterations, additions, improvements, repairs,
relocations or replacements in or to the Building and the fixtures and equipment
thereof. 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
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equipment included in the Leased Premises which are located in the Leased
Premises or located elsewhere outside the Leased Premises. Landlord shall use
reasonable efforts not to disturb Tenant's business operations when making
repairs to the Leased Premises or 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.
(b) Tenant Responsibilities. Tenant will keep the Leased Premises and the
fixtures and equipment therein in good order and condition, will take good care
thereof and will suffer no waste or damage thereto. Tenant will promptly repair
at its own expense any damage to the Leased Premises caused by bringing into the
premises any property for Tenant's use or by the installation or removal of such
property, regardless of fault or by who such damage shall be caused, unless
caused by Landlord, its agents, employees or contractors; and, in default of
such repairs by Tenant, Landlord shall make the same and Tenant agrees to pay
the costs thereof to Landlord promptly upon Landlord's demand therefor. At the
expiration or other termination of the Lease Term, Tenant will surrender the
Leased Premises broom clean and in the same order and condition in which they
were on the Rent Commencement Date, ordinary wear and tear excepted. All repairs
and maintenance required to be performed by Tenant shall be made or performed
immediately upon the occurrence of the necessity therefor, and shall be made or
performed in a first class manner, using first class materials, by a contractor
approved by Landlord and bonded unless waived by Landlord, and shall be made or
performed in accordance with (i) all laws and all applicable governmental codes
and requirements, and (ii) insurance requirements. Maintenance and repair of
equipment such as kitchen fixtures, auxiliary air-conditioning equipment,
private bathroom fixtures and any other type of special equipment, together with
related plumbing or electrical services, whether installed by Tenant or by
Landlord on behalf of Tenant, shall be the sole responsibility of Tenant, and
Landlord shall have no obligation in connection therewith. If Tenant refuses or
neglects to promptly commence and complete repairs or maintenance necessary to
satisfy the provisions of this Section, the Landlord may, but shall not be
required to, make and complete said repairs or maintenance and Tenant shall pay
the cost therefor (including overhead) to Landlord upon demand, as Additional
Rent.
14. Common Areas.
(a) Common Areas Defined. In this Lease, "common areas" means all areas,
facilities and improvements provided, from time to time, in the Building for the
mutual convenience and use of tenants or other occupants of the Building, their
respective agents, employees, and invitees and shall include, if provided, but
shall not be limited to, the lobbies and hallways, the public restrooms, the
parking areas and facilities, access roads, driveways, retaining walls,
sidewalks, walkways, landscaped areas, and exterior lighting facilities.
(b) Landlord's Control. Landlord shall, as between Landlord and Tenant, at
all times during the term of the Lease have the sole and exclusive control,
management and direction of the common areas, and may at any time and from time
to time during the term exclude and restrain any person from use or occupancy
thereof, excepting, however, Tenant and other tenants of Landlord and bona fide
invitee of either who make use of said areas in accordance with the rules and
regulations established by
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Landlord from time to time with respect thereto. The rights of Tenant in and to
the common areas shall at all times be subject to the rights of others to use
the same in common with Tenant, and it shall be the duty of Tenant to keep all
of said areas free and clear of any obstructions created or permitted by Tenant
or resulting from Tenant's operation. Landlord may at any time and from time to
time close all or any portion of the common areas to make repairs or changes or
to such extent as may, in the opinion of Landlord, be necessary to prevent a
dedication thereof or the accrual of any rights to any person or to the public
therein, to close temporarily any or all portions of the said areas to
discourage noncustomer parking, and to do and perform such other acts in and to
said areas as, in the exercise of good business judgment, Landlord shall
determine to be advisable with a view to the improvement of the convenience and
use thereof by tenants, their employees, agents, and invites.
(c) Changes and Additions to the Building, Additional Construction.
Landlord hereby reserves the right at any time to make alterations or additions
to the Building, as well as in or to the street entrances, halls, passages,
stairways and other common facilities thereof. Tenant agrees that Landlord shall
at all times have the right and privilege of determining the nature and extent
of the common areas, and of making such changes, rearrangements, additions or
reductions therein and thereto from time to time which in its opinion are deemed
to be desirable and for the best interest of all persons using the common areas
or which are as a result of any federal, state or local environmental protection
or other law, rule, regulation, guideline or order. The purpose of the floor
plan attached hereto as Exhibit A is to show the approximate locational
relationship of the Leased Premises to other units in the Building and the
common areas as of the Rent Commencement Date. Nothing described in Exhibit A
shall limit or prevent Landlord from effecting any change or alteration to the
Building or the land upon which it is built as described in this paragraph.
(d) Parking. Tenant shall have the right to utilize the Building's parking
facilities on a nonexclusive basis with other tenants of the Building, upon such
reasonable 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 the other tenants. Tenant shall not use parking
areas for the overnight storage of vehicles, other than Tenant-owned corporate
vehicles which Landlord and Tenant have previously agreed will be regularly
parked overnight at the Building. 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
located therein, or for any injury sustained by any person in or about the
parking facilities.
15. Surrender and Inspection.
(a) Surrender. Upon the Expiration Date or other termination of the term
of this Lease, Tenant shall quit and surrender the Leased Premises to the
Landlord in as good order and condition as when received, ordinary wear and tear
excepted, and Tenant shall remove all of its property from the Leased Premises
by the Expiration Date or other termination of this Lease, all to the reasonable
satisfaction of the Landlord. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this Lease.
(b) Inspection. Tenant shall have the right to be present at time of final
inspection of the Leased Premises to determine if any damages were done thereto,
if Tenant notifies Landlord by certified mail of its intention to move, date of
moving
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and new address. The notice of Tenant's desire to be present at the final
inspection of the Leased Premises shall be given at least fifteen (15) days
prior to the date of moving. Upon receipt of such notice, Landlord shall notify
Tenant of time and date when the Leased Premises are to be inspected. The
inspection shall occur within five (5) days before or five (5) days after
Tenant's date of moving, said inspection date to be designated by Landlord.
Tenant shall be deemed to have been advised of its rights under this paragraph
by execution of this Lease.
(c) Fixtures and Personal Property Remaining. If Tenant does not remove
Tenant's furniture, equipment, machinery, trade fixtures, floor coverings and
all other items of personal property of every kind and description from the
Leased Premises prior to the Expiration Date, then Tenant shall be conclusively
presumed to have conveyed the same to Landlord under this Lease as a bill of
sale without further payment or credit by Landlord to Tenant.
16. Tenant Holding Over. If Tenant holds possession of the Leased Premises after
the Expiration Date or other termination of this Lease, Landlord shall have the
option, exercisable in writing within thirty (30) days after the date of
termination of aforesaid, to treat Tenant as a trespasser, or as a tenant by the
month. If the Landlord fails to make such election then the Tenant shall be
deemed a tenant by the month, commencing with the first day after the
termination of the Lease at one hundred and fifty percent (150%) the Basic
Monthly Rent paid during the last month of the Term, and upon all the other
terms of this Lease, including the provisions of this paragraph. Said holdover
term shall terminate upon thirty (30) days notice from one party to the other.
Nothing contained herein shall be construed within said thirty (30) days after
the date of Lease termination as aforesaid as a consent by Landlord to the
occupancy or possession of the Leased Premises by Tenant after the termination
of the Lease, and Landlord, upon said termination, if Landlord elects to treat
Tenant as a trespasser, shall be entitled to the benefit of all public general
or public laws relating to the speedy recovery of the possession of land and
tenements held over by Tenant, whether now or hereafter in force and effect. If
Tenant fails to surrender the Leased Premises upon the expiration or other
termination of 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 attorneys' fees, founded on or resulting from such failure to surrender.
17. Covenant Against Assignment and Subletting. Tenant shall not assign,
mortgage or encumber this Lease, or any right hereunder, nor sublet the Leased
Premises or any part thereof, nor permit the Leased Premises to be used by
others without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, however, Tenant may sublet
this lease to an affiliate, parent or subsidiary of Tenant without Landlord's
consent. If Tenant, or any Guarantor, is a corporation, unincorporated
association or partnership, then the transfer, assignment or hypothecation of
any stock or interest in such corporation, association or partnership so as to
result in a change in the control thereof by the person, persons or entities
owning a controlling interest therein as of the date of this Lease, without the
prior written consent of Landlord as described above, shall be deemed an
assignment made in breach of this covenant. Landlord's consent in any specific
instance to any assignment, mortgage, encumbrance, subletting or use of the
Leased Premises and its collection and acceptance of rent from any such approved
assignee, subtenant or other occupant shall neither constitute a waiver of the
provisions of this paragraph, nor be construed as permission for any subsequent
assignment, mortgage, encumbrance, subletting or use without compliance with
this paragraph. Without the prior written consent of Landlord, this Lease and
the
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interest of Tenant, or any assignee of Tenant, shall not pass by operation of
law, nor shall it be subject to garnishment or sale under execution in any suit
or proceeding which may be brought against or by Tenant, or any assignee of
Tenant. No permitted assignment or sublease or collection of rent from an
approved assignee or subtenant shall relieve Tenant of its obligations
hereunder. Landlord shall have the right at any time to assign this Lease, in
whole or in part, to any third party.
18. Bankruptcy.
(a) The following shall be Events of Bankruptcy under this Lease: (1)
Tenant's or any guarantor of Tenant's obligations under this Lease ("Tenant's
Guarantor") becoming insolvent, as that term is defined in Title 11 of the
United States Code (the "Bankruptcy Code"), or under the insolvency laws of any
state, 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 or Tenant's Guarantor property or assets, or the institution of a
foreclosure action upon any of Tenant's or Tenant's Guarantor's real or personal
property; (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 or Tenant's Guarantor 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 or Tenant's Guarantor's making or consenting to an
assignment for the benefit of creditors or a common law composition of
creditors; or (6) if a corporate reorganization of Tenant or an agent with its
creditors shall be approved by a court under the Federal Bankruptcy Act.
(b) Upon occurrence of an Event of Bankruptcy, Tenant shall be deemed to
have breached a material covenant of this Lease and Landlord shall have all
rights and remedies available to Landlord pursuant to Section 20; 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 20 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.
19. Default. Each of the following shall be deemed a default by Tenant and a
breach of this Lease:
(a) An Event of Bankruptcy as defined in Section 18;
(b) An assignment or encumbrance of Tenant's interest in this Lease or the
Leased Premises or a subletting of any part of the Leased Premises in violation
of Section 17;
(c) The suspension of business by Tenant;
(d) The filing of a tax lien against any property of Tenant;
(e) Discontinuance by Tenant of the conduct of its business in the Leased
Premises, or an abandonment or vacation of the Leased Premises by Tenant for a
period of sixty (60) days or more;
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(f) A failure by Tenant to pay Minimum Annual Rent or Additional Rent when
due, where such failure continues for ten (10) days after notice thereof from
Landlord, provided, however, that Landlord need provide such notice no more than
three (3) times in any twelve (12) month period, and the fourth such default in
a twelve month period shall be deemed a default by Tenant without such notice
from Landlord;
(g) A failure by Tenant to observe and perform any other term, covenant,
agreement or condition of this Lease to be observed or performed by Tenant,
where such failure continues for ten (10) business days after notice thereof
from Landlord, provided, however, that if the nature of the default is such that
the same cannot be reasonably be cured within the ten (10) business day period
allowed, Tenant shall not be deemed to be in default if Tenant shall, within
such ten (10) business day period, commence to cure and there after diligently
prosecute the same to completion. Nonetheless, Tenant will be deemed to be in
default if the same default is not cured within sixty (60) days after that
reasonable effort commences. Landlord shall not, however, be required to give
such notice if Tenant's failure to perform constitutes a noncurable breach of
this Lease. The notice required by this Paragraph is intended to satisfy any and
all notice requirements imposed by law on Landlord and is not in addition to any
such requirement;
(h) Any material misrepresentation by Tenant to Landlord in connection
with the negotiation or execution of this Lease;
(i) A default by Tenant under any other lease or sublease for any other
space in the Building, which has resulted in the termination of said lease;
(j) Failure by any surety or guarantor of this Lease to comply with all
the provisions of the suretyship or guaranty agreement; or
(k) The merger of any corporate surety or corporate guarantor of this
Lease with another entity, or the liquidation or dissolution of such surety or
guarantor or the change of control of such surety or guarantor caused by the
transfer of stock of such surety or guarantor, except by reason of the death of
any shareholder thereof.
20. Landlord's Rights Upon Tenant's Default. Upon default by Tenant of any of
the terms or covenants of this Lease, then in addition to any other remedies
available to Landlord herein at law or in equity, Landlord shall be entitled to
remedy such default as follows:
(a) Re-Entry. Landlord shall have the right, immediately or at any time
thereafter, without further notice to Tenant (unless otherwise provided herein),
to enter the Leased Premises (breaking open locked doors, if necessary, and
using as much reasonable force as necessary to effect the manner thereof),
without terminating this Lease or being guilty of trespass, and do any and all
acts as Landlord may deem necessary, proper or convenient to cure such default,
for the account and at the expense of Tenant, and Tenant agrees to pay to
Landlord as Additional Rent all damage and/or expense incurred by Landlord in so
doing, including interest at the Penalty Rate, from the due date until the date
payment is received by Landlord. Landlord shall not be liable for any loss,
injury or damage resulting in any way from such action by Landlord.
(b) Termination. Landlord shall have the right to terminate this Lease and
Tenant's right to possession of the Leased Premises and, with or without legal
process, take possession of the Leased Premises and remove Tenant, any occupant
and
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any property therefrom, using such force as may be necessary, without being
guilty of trespass and without relinquishing any rights of Landlord against
Tenant. Landlord shall be entitled to recover damages from Tenant in an amount
equal to the amount herein covenanted to be paid as Minimum Annual Rent during
the remainder of the Lease Term, said Minimum Annual Rent and Additional Rent
for the full term then remaining having been fully accelerated at the option of
Landlord, together with (i) all expenses of any proceedings (including, but not
limited to, legal expenses and reasonable attorney's fees) which may be
necessary in order for Landlord to recover possession of the Leased Premises,
(ii) the expenses of the re-renting of the Leased Premises (including, but not
limited to, any commissions paid to any real estate agent, advertising expense
and the costs of such alterations, repairs, replacements and decoration or
re-decoration as Landlord, in its sole judgment, considers advisable and
necessary for the purpose of re-renting the Leased Premises), and (iii) interest
computed at the Penalty Rate from the due date until paid; provided, however,
that there shall be credited against the amount of such damages all amounts
received by Landlord from such re-renting of the Leased Premises and such
amounts shall be refunded to Tenant.
Landlord shall use its best efforts to re-rent the Premises, but Landlord
has no obligation to favor the Leased Premises over any other space available
for lease in the Building, and Landlord shall in no event be liable in any way
whatsoever for failure to re-rent the Leased Premises or, in the event that the
Leased Premises are re-rented, for failure to collect the rent thereof under
such re-renting. No act or thing done by Landlord shall be deemed to be an
acceptance of a surrender of the Leased Premises, unless Landlord shall execute
a written agreement of surrender with Tenant. Tenant's liability hereunder shall
not be terminated by the execution of a new lease of the Leased Premises by
Landlord. In the event Landlord does not exercise its option to accelerate the
payment of Minimum Annual Rent and Additional Rent as provided hereinabove, then
Tenant agrees to pay to Landlord, upon demand, the amount of damages herein
provided after the amount of such damages for any month shall have been
ascertained; provided, however, that any expenses incurred by Landlord shall be
deemed to be a part of the damages for the month in which they were incurred.
Separate actions may be maintained each month or at other times by Landlord
against Tenant to recover the damages then due, without waiting until the end of
the term of this Lease to determine the aggregate amount of such damages. Tenant
hereby expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or being
dispossessed for any cause, or in the event of Landlord obtaining possession of
the Leased Premises by reason of the violation by Tenant of any of the covenants
and conditions of this Lease.
(c) Distress. Upon any default by Tenant in the payment of Minimum Annual
Rent or Additional Rent, Landlord shall have the right, without notice, fifteen
(l5) days after payment of such sum was due, to institute an action of distress
therefor, and, upon distress, in Landlord's discretion, this tenancy shall
terminate. In the event of such termination, the provisions of Section 20(b)
shall be applicable.
(d) Lien for Rent. Upon any default by Tenant in the payment of Minimum
Annual Rent or Additional Rent, Landlord shall have a lien upon the property of
Tenant in the Leased Premises for the amount of any unpaid Minimum Annual Rent
or Additional Rent. In such event, Tenant shall not remove any of Tenant's
property from the Leased Premises except with the prior written consent of
Landlord, and Landlord shall have the right and privilege, at its option, to
take possession of all
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property of Tenant in the Leased Premises, to store the same on the Leased
Premises, or to remove it and store it in such place as may be selected by
Landlord, at Tenant's risk and expense.
(e) No Future Lease Rights. If at any time during the term of this Lease
Tenant has been in default beyond Tenant's right to cure period, then,
regardless of whether Tenant is in default at the time of any option or future
right, all of Tenant's present and future rights to this Lease are then
terminated when the default occurs.
(f) Utilities and Services. Upon any default by Tenant, Landlord may
immediately cease to provide all utilities and services to the Leased Premises
as provided under Section 11 herein.
(g) Landlord's Remedies Cumulative. All rights and remedies of Landlord
herein enumerated shall be cumulative, and none shall exclude any other right or
remedy allowed by law. For the purposes of any suit brought or based hereon,
this Lease shall be construed to be a divisible contract, to the end that
successive actions may be maintained on this Lease as successive periodic sums
mature hereunder.
21. Lender Requirements.
(a) Subordination. Tenant agrees that this Lease is subject and
subordinate to any and all ground or underlying leases and to the lien of any
first mortgages or deeds of trust now on or which at any time may be made a lien
upon the Building, or any part thereof, and to all advances made or hereafter to
be made upon the security thereof. This subordination provision shall be
self-operative and no further instrument of subordination shall be required.
Tenant agrees to execute and deliver, upon request, within five (5) days demand
by Landlord, such further instrument or instruments confirming this
subordination as shall be desired by Landlord or by any mortgagee or proposed
mortgagee; and Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such instrument or instruments. Upon Tenant's
written request, Landlord shall use its best efforts to acquire from any such
mortgagee an agreement that any proceeding to foreclose, sell or any other
action taken under the mortgage shall not affect Tenant's rights to continue to
occupy the Leased Premises and exercise and enjoy all of its rights hereunder so
long as Tenant complies with the terms and provisions of this Lease, and
continues to make the payments required here-under to the appropriate designated
party, provided, Landlord's failure to acquire such an agreement shall not
mitigate Tenant's obligations hereunder. Tenant further agrees that, at the
option of the holder of any first mortgage or of the trustee under any first
deed of trust, this Lease may be made superior to said first mortgage or first
deed of trust by the insertion therein of a declaration that this Lease is
superior thereto.
(b) Attornment. In the event any proceedings are brought for the
foreclosure of, or in the event of exercise of the power of sale under, any deed
to secure debt given by Landlord and covering the Leased Premises, Tenant shall
attorn to the purchaser upon any such foreclosure or sale and recognize such
purchaser as the owner and landlord under this Lease.
(c) Financing. This Lease is subject to the approval of the mortgage
lender(s) providing mortgage financing for the Building, and disapproval of this
Lease by any such mortgage lender shall result in termination of this Lease. In
the event that any mortgage lender providing mortgage financing for the Building
requires, as a condition of such financing, that modifications to this Lease be
obtained, and
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provided that such modifications (i) are reasonable, (ii) do not adversely
affect Tenant's use of the Leased Premises as herein permitted, (iii) do not
materially alter the approved plans for the Basic Work and Additional Work and
(iv) do not increase the rentals and other sums required to be paid by Tenant
hereunder, then Landlord may submit to Tenant a written amendment to this Lease
incorporating such required modifications, and, in the event Tenant does not
execute and return to Landlord such written amendment within ten (10) days after
the same has been submitted to Tenant, then Landlord shall thereafter have the
right, at its sole option, to terminate this Lease. Such option shall be
exercisable by Landlord giving Tenant written notice of termination, immediately
whereupon this Lease shall be terminated, and money or security therefor
deposited by Tenant with Landlord shall be returned to Tenant, and both Landlord
and Tenant shall thereupon be relieved from any and all further liability or
obligation hereunder.
(d) Financial Statements. Tenant agrees, not more often than once per
calendar year, upon written notice by Landlord, to deliver to Landlord such
financial statements detailing its profits and losses, certified by a duly
authorized officer of Tenants if Tenant.
22. Estoppel Certificates. Tenant agrees, at any time and from time to time,
upon not less than ten (10) days prior written notice by Landlord, to execute,
acknowledge and deliver to Landlord a written estoppel certificate (i)
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, stating the nature of same), (ii) stating the
Rent Commencement Date of the Lease Term, (iii) stating the amounts of Minimum
Annual Rent and Additional Rent and the dates to which the Minimum Annual Rent
and Additional Rent have been paid by Tenant, (iv) stating the amount of any
Security Deposit, (v) stating whether or not to the best knowledge of Tenant,
Landlord is in default in the performance of any covenant, agreement or
condition contained in this Lease, and, if so, specifying each such default of
which Tenant may have knowledge, (vi) stating that Tenant has no right to set
off and no defense against payment of the Minimum Annual Rent or Additional
Rent, (vii) address to which notices to Tenant should be sent. and (viii)
certifying such other matters as may be requested by Landlord. Any such
certificate delivered pursuant hereto may be relied upon by an owner of the
Building, any prospective purchaser of the Building, any mortgagee or
prospective mortgagee of the Building or of Landlord's interest therein, or any
prospective assignee of any such mortgage. Failure to deliver the aforesaid
certificate within the five (5) days shall be conclusive upon Tenant for the
benefit of Landlord and any successor to Landlord that this Lease is in full
force and effect and has not been modified except as may be represented by the
party requesting the certificate. Tenant shall be liable for any loss incurred
by Landlord resulting from Tenant's failure to timely execute and deliver any
estoppel certificate requested by Landlord, and shall reimburse Landlord for the
amount of any such loss upon demand, as Additional Rent.
23. Damage by Fire or Other Casualty. If the Leased Premises, or any other
portion of the Building shall, through no fault of Tenant or Tenant's agents,
servants, employees, customers, contractors, visitors or licensees, be damaged
by fire, the elements, unavoidable accident or other casualty:
(a) Except as otherwise provided in subparagraph (b) hereof, Landlord, at
Landlord's expense, shall promptly restore the Leased Premises, and Tenant, at
Tenant's sole expense, shall promptly restore all leasehold improvements
installed in the Leased Premises by Tenant or at Tenant's request and its own
furniture, furnishings, trade fixtures and equipment and the rent shall not be
abated. No
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penalty shall accrue for reasonable delay which may arise by reason of
adjustment of insurance on the part of Landlord, or on account of labor
problems, or any other cause beyond Landlord's reasonable control. If the damage
or destruction is such as to make the Leased Premises or any substantial part
thereof untenantable (in Landlord's judgment), and provided that such damage or
destruction is not due in whole or part to the act or omission of Tenant or
Tenant's agents, employees or invites, the Minimum Annual Rent shall abate
proportionately (based on proportion of the number of square feet rendered
untenantable to the total number of square feet of the Leased Premises), from
the date of the damage or destruction until the date the Leased Premises has
been restored by Landlord.
(b) If the Leased Premises are substantially damaged or are rendered
substantially untenantable by fire or other casualty, or if Landlord's architect
certifies that the Leased Premises cannot be repaired within one hundred twenty
(120) working days of normal working hours, said period commencing with the
start of the repair work, or if Landlord shall decide not to restore or repair
the same, or if more than fifty percent (50%) of the gross leasable area of the
Building is rendered untenantable (even if the Leased Premises is undamaged) or
if Landlord shall decide to demolish the Building or not to rebuild it, then
Landlord may, within ninety (90) days after such fire or other casualty,
terminate this Lease by giving Tenant a notice in writing of such decision, and
thereupon the term of this Lease shall expire on the date specified in such
notice, or, if not date is so specified, by lapse of time upon the third day
after such notice is given, and Tenant shall vacate the Leased Premises and
surrender the same to Landlord. Upon the termination of this Lease under the
conditions hereinbefore provided, Tenant's liability for Minimum Annual Rent and
Additional Rent shall cease as of the day following the casualty.
(c) The proceeds payable under all casualty insurance policies maintained
by Landlord on the Leased Premises shall belong to and be the property of
Landlord, and Tenant shall not have any interest in such proceeds. Tenant agrees
to look to Tenant's casualty insurance policies for the restoration and
replacement of the leasehold improvements installed in the Leased Premises by
Tenant or at Tenant's request and Tenant's fixtures, equipment and furnishings
in the Leased Premises, and in the event of termination of this Lease, for any
reason, following any such damage or destruction, Tenant shall promptly assign
to Landlord or otherwise pay to Landlord, upon Landlord's request, the proceeds
of said insurance and such other additional funds so that the total amount
assigned and/or paid by Tenant to Landlord shall be sufficient to restore
(whether or not any such restoration is actually to occur) all improvements,
fixtures, equipment and furnishings (excepting only Tenant's trade fixtures and
equipment) existing in the Leased Premises immediately prior to such damage or
destruction.
(d) Notwithstanding anything to the contrary in this Section 23 or in any
other provision of this Lease, any obligation (under this Lease or otherwise) of
Landlord to restore all or any portion of the Leased Premises shall be subject
to Landlord's receipt of approval of the same by the mortgagee(s) of Landlord
(and any other approvals required by applicable laws), as well as receipt from
any such mortgagee(s) of such fire and other hazard insurance policy proceeds as
may have been assigned to any such mortgagee; it being agreed that if Landlord
has not received such approval(s) and proceeds within one hundred and eighty
(180) days after any such casualty, then Landlord shall have the option to
terminate this Lease, at any time thereafter, upon notice to Tenant.
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24. Condemnation. In the event the whole or a substantial part of the Leased
Premises or the Building 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 shall have the right
to terminate this Lease effective as of the date possession is required to be
surrendered to said authority, and the Minimum Annual Rent and Additional Rent
shall be apportioned as of the date. For purposes of this section, a substantial
part of the Leased Premises or the Building shall be considered to have been
taken if, in Landlord's opinion, the taking shall render it commercially
undesirable for Landlord to permit this Lease to continue or to continue
operating the Leased Premises or 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, the Minimum Annual Rent and
Additional Rents shall be adjusted (based on the ratio that the number of square
feet of rentable area taken from the Leased Premises bears to the number of
rentable square feet in the Leased Premises immediately prior to such taking) as
of the date possession is required to be surrendered to said authority. 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, as long as such award is made in addition to and separately stated
from any award made to Landlord for the Leased Premises or the Building.
Landlord shall have no obligation to contest any taking.
25. Landlord's Reserved Rights. The Landlord reserves the following rights:
(a) To decorate, remodel, repair, alter or otherwise prepare the Leased
Premises for reoccupancy during the last ninety (90) days of the Lease Term, if
during or prior to that time Tenant vacates the Leased Premises; and
(b) To show the Leased Premises to prospective tenants or brokers during
the last one hundred eighty (180) days of the term of this Lease, and to show
the Leased Premises to prospective purchasers, mortgagee, or assignee of any
mortgage on the Building at all reasonable times provided that reasonable prior
notice is given to Tenant in each case and that Tenant's use and occupancy of
the Leased Premises shall not be materially inconvenienced by any such action of
Landlord.
26. Landlord and Tenant Liability.
(a) Landlord's Liability. It is understood and agreed that Landlord is a
Maryland limited partnership and/or joint venture and that no partner of the
partnership, as may now or hereinafter be constituted, shall have liability to
Tenant or any person claiming under, by or through Tenant on any action, claim,
suit or demand brought pursuant to the terms and conditions of this Lease or
arising out of the occupancy by the Tenant of the Leased Premises. Landlord, or
its agents, shall not be responsible or liable to the Tenant or its agents,
employees, contractors, customers or other visitors for any injury or damage
resulting from acts or omissions of persons occupying property adjoining the
Leased Premises, or any part of the Building of which the Leased Premises are a
part, or for any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, rain, dampness or
snow or leaks from or through any part of the Leased Premises or the Building,
including the roof, or from the pipes, conduits, appliances or plumbing works,
or from the roof, street or subsurface or
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from any other place or by dampness or by any other cause of whatsoever nature,
unless caused by or due to the gross negligence of Landlord, its agents,
servants, or employees. All personal property and equipment located in the
Leased Premises shall be at the risk of Tenant.
(b) Tenant's Liability. Tenant shall reimburse Landlord for all expense,
damages or fines, incurred or suffered by Landlord by reason of any breach,
violation or nonperformance by Tenant, or its agents, servants, or employees, of
any material covenant or material provision of this Lease or the Rules and
Regulations promulgated by Landlord hereunder from time to time, or by reason of
damage to persons or property caused by moving property of or for Tenant in or
out of the Building, or by the installation or removal of furniture or other
property of or for Tenant, or by reason of or arising out of the carelessness,
negligence or improper conduct of Tenant, or its agents, servants, employees,
invites or licensees in the use or occupancy of the Leased Premises.
(c) Indemnity. Tenant shall indemnify Landlord and its agents and
employees and save them harmless from and against any and all claims, actions,
damages, liabilities and expenses in connection with loss of life, personal
injury and/or damage to property (i) arising from or out of the occupancy or use
by Tenant of the Leased Premises or any part thereof, or (ii) occasioned wholly
or in part by any act or omission of the Tenant, its agents, contractors,
employees, servants, invites or licensees, whether inside the Leased Premises or
elsewhere in the Building; provided, however, that this indemnification shall
not apply to any such injury, loss, damage or liability arising from any
omission, fault, negligence, or misconduct on the part of the Landlord, its
agents, servants, employees, contractors or licensees. In the event that
Landlord or its agents and employees shall, without fault on its or their part,
be made a party to any litigation commenced by or against Tenant, then Tenant
shall protect and hold the same harmless and shall pay all costs, expenses and
reasonable attorneys' fees incurred or paid in connection with such litigation.
(d) Criminal Acts of Third Parties. Landlord shall not be liable in any
manner to Tenant, its agents, employees, licensees, invitees or contractors for
any injury or damage to Tenant, Tenant's agents, employees, licensees, invites,
or contractors or their property caused by the criminal or intentional
misconduct of third parties. All claims against Landlord for any such damage or
injury are hereby expressly waived by Tenant, and Tenant hereby agrees to hold
harmless and indemnify Landlord from all such damages and the expense of
defending all claims made by Tenant's agents, employees, licensees, invitees or
contractors arising out of such acts.
27. Tenant's Insurance.
(a) Coverages. Tenant shall have issued, pay the premiums therefor, and
maintain in full force and effect during the Lease Term:
(i) Commercial General Liability. A commercial general liability
insurance policy or policies (providing among other coverages: Blanket
Contractual, Personal Injury, independent Contractors, Products/Completed
Operations Hazard, Automobile Liability/Comprehensive Form, and Workers
Compensation) in which the Landlord (and such additional persons and/or entities
as Landlord may request) and Tenant shall be the insured, naming the Landlord
(and such additional persons and/or entities as Landlord may request) and Tenant
as insured parties in the amount of Two
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Million and No/100 Dollars ($2,000,000.00) combined single limit general
liability coverage for bodily injury or property damage, which amount may be
increased from time to time by the Landlord in its reasonable determination;
(ii) All-Risk Property. All-risk property insurance, including
theft, naming Landlord (and such additional persons and/or entities as Landlord
may request) and Tenant as insured, written at replacement cost value and with
replacement cost endorsement, covering all leasehold improvements installed in
the Leased Premises by Tenant or at Tenant's request and all of Tenant's
personal property in the Leased Premises (including, without limitation,
inventory, trade fixtures, floor coverings, furniture and other property
removable by Tenant under the provisions of this Lease);
(iii) Workers' Compensation. If and to the extent required by law,
workers' compensation and employer's liability or similar insurance in form and
amounts required by law; and
(iv) Additional Insurance. Such additional insurance as any
mortgagee of the Building may require.
(b) Policy Requirements. In the event Tenant shall fail to provide such
insurance, or shall fail to pay the premiums when due, Landlord shall have the
right to cause such insurance to be issued and to pay the premiums therefor, or
any premiums in default, and to collect same as Additional Rent together with
interest at the Penalty Rate on the amount of such premiums from the date of
payment by Landlord until the date of repayment by Tenant. All such policies
shall contain only such reasonable deductible amounts as may be approved in
advance by Landlord and shall contain a provision that Landlord shall receive
not less than thirty (30) days advance notice in writing from the insurance
company of any intention of the insurance company to cancel such policy or
policies. Tenant shall provide written evidence to Landlord of its acquisition
of such policies no later than ten (10) days prior to the commencement of this
Lease and prior to any renewal date of such policies. All policies shall be
carried with an insurance company qualified to do business in the State of
Maryland, and rated A or better by the A.M. Best Company.
(c) No Limitation of Liability. Neither the issuance of any insurance
policy required under this Lease nor the minimum limits specified herein shall
be deemed to limit or restrict in any way Tenant's liability arising under or
out of this Lease.
(d) Notice of Fire and Accident. Tenant shall give Landlord immediate
notice in case of fire, theft, or accidents in the Leased Premises, and in case
of fire, theft or accidents in the Building if involving Tenant, its agents,
employees or invitees.
28. Waiver of Subrogation. Landlord and Tenant mutually covenant and agree that
each party, in connection with insurance policies required to be furnished in
accordance with the terms and conditions of this Lease, or in connection with
insurance policies which they obtain insuring such insurable interest as
Landlord or Tenant may have in its own properties, whether personal or real,
shall expressly waive any right of subrogation on the part of the insurer
against the Landlord (and any mortgagee requested by Landlord) or Tenant as the
same may be applicable, which right to the extent not prohibited or violative of
any such policy is hereby expressly waived, and Landlord and Tenant each
mutually waive all right of recovery, claims, losses and/or damages against each
other, their agents, or employees for any
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loss, damage or injury of any nature whatsoever to property or person for which
either party is required by this Lease to carry insurance.
29. No Liens Permitted: Discharged. Tenant will not permit to be created or to
remain undischarged any lien, encumbrance or charge (arising out of any work
done or materials or supplies furnished, or claimed to have been done or
furnished, by any contractor, mechanic, laborer or materialman or any mortgage,
conditional sale, security agreement or chattel mortgage, or otherwise by or for
Tenant) which might be or become a lien or encumbrance or charge upon the
Building or any part thereof or the income therefrom. Tenant will not suffer any
other matter or thing whereby the estate, rights and interests of Landlord in
the Building or any part thereof might be impaired. If any lien, or notice of
lien on account of an alleged debt of Tenant or any notice of contract by a
party engaged by Tenant or Tenant's contractor to work on the Leased Premises
shall be filed against the Building or any part thereof, Tenant, within fifteen
(15) days after notice of the filing thereof, will cause the same to be
discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction or otherwise. If Tenant shall fail to cause such lien or notice of
lien to be discharged within the period aforesaid, then, in addition to any
other right or remedy, Landlord may, but shall not be obligated to, discharge
the same either by paying the amounts claimed to be due or by procuring the
discharge of such lien by deposit or by bonding proceedings and in any such
event Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such lien by the lienor and to
pay the amount of the judgment in favor of the lienor with interest, costs and
allowances. Any amount so paid by Landlord and all costs and expenses, including
attorneys' fees, incurred by Landlord in connection therewith, shall constitute
Additional Rent payable by Tenant under this Lease and shall be paid by Tenant
to Landlord on demand. Nothing herein contained shall obligate Tenant to pay or
discharge any lien created by Landlord.
30. Signs and Advertisements. Landlord shall provide for Tenant, at Landlord's
expense, a notice in the Building directory, Building street sign, and a sign
for the entrance door to the Leased Premises in the type and manner Landlord
from time to time provides for tenants of the Building. No other sign,
advertisement, notice or any other thing of any kind whatsoever shall be
inscribed, painted, affixed or displayed in or about the Building by Tenant and
if any such sign, advertisement or notice is exhibited, Landlord shall have the
right to remove the same and Tenant shall be liable for any and all expenses
incurred by Landlord for said removal. Tenant agrees to maintain its entrance
door or entry sign in good condition and repair at all times.
31. Notices. All notices to be given under this Lease shall be in writing,
hand-delivered, sent by Federal Express, or mailed by United States Certified or
Registered Mail, postage prepaid. Notices should be delivered as follows:
(a) To the Landlord at the address specified in Section 1(a)(18).
(b) To the Tenant at the addresses specified in Sections l(a)(17).
Any such notice shall be deemed to be served on the date it is hand-delivered or
delivered by Federal Express, or on the third day after the date on which it is
deposited in the U.S. mails. Landlord and Tenant shall each have the right to
change
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the person and/or address to which notices shall be delivered upon written
notice thereof to the other party sent pursuant to the provisions of this
paragraph.
32. Time. Landlord and Tenant acknowledge that time is of the essence in the
performance of any and all obligations, terms, and provisions of this Lease.
33. Postponement of Performance. In the event that either party hereto shall be
delayed or hindered in or prevented from the performance of any act required
hereunder by reason of strikes, labor troubles, inability to procure labor or
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrection, war, acts of God, fire or other casualty or other reason of
a similar or dissimilar nature beyond the reasonable control of the party
delayed in performing work or doing acts required under the terms of this Lease,
then performance of such act shall be excused for the period of the delay and
the period for the performance of any such act shall be extended for a period
equivalent to the period of such delay. The provisions of this paragraph shall
not operate to excuse Tenant from the prompt payment of Minimum Annual Rent or
Additional Rent and shall not operate to extend the term of this Lease. Delays
or failures to perform resulting from lack of funds shall not be deemed delays
beyond the reasonable control of a party.
34. No Waiver. No provision of this Lease shall be deemed to have been waived by
Landlord, unless such waiver be in writing signed by Landlord. No waiver by
Landlord of any breach by Tenant of any of the terms, covenants, agreements, or
conditions of this Lease shall be deemed to constitute a waiver of any
succeeding breach thereof, or a waiver of any breach of any of the other terms,
covenants, agreements, and conditions herein contained.
No employee of Landlord or of Landlord's agents shall have any authority
to accept the keys of the Leased Premises prior to termination of the Lease, and
the delivery of keys to any employee of Landlord or Landlord's agents shall not
operate as a termination of the Lease or a surrender of the Leased Premises. The
receipt by Landlord of any payment of Minimum Annual Rent or Additional Rent
with knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. The failure of Landlord to enforce any of the Rules and
Regulations made a part of this Lease, or hereafter adopted, against Tenant or
any other tenant in the Building shall not be deemed a waiver of any such Rules
and Regulations.
35. Limitation of Landlord's Liability. 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
interest of Landlord in the Building of which the Leased Premises are a part;
(b) neither Landlord nor any partner of Landlord shall be personally liable with
respect to any claim arising out of or related to this Lease; (c) no partner of
Landlord shall be sued or named as a party in any suit or action (except as may
be necessary to secure jurisdiction of Landlord); (d) no service of process
shall be made against any partner of Landlord (except as may be necessary to
secure jurisdiction of Landlord); (e) 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; and (f) these covenants and agreements are enforceable both
by Landlord and also by any partner of Landlord.
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36. Transfer of the Building. In the event of the sale or other transfer of
Landlord's right, title and interest in the Leased Premises or the Building
(except in the case of a sale-leaseback financing transaction in which Landlord
is the lessee), Landlord shall transfer and assign to such purchaser or
transferee all amounts of pre-paid Minimum Annual Rent, and Landlord thereupon
and without further act by either party hereto shall be released from all
liability, obligations, and covenants, express or implied, hereunder derived
from this Lease arising out of any act, occurrence or omission relating to the
Leased Premises or this Lease occurring after the consummation of such sale or
transfer, provided that the transferee shall assume all of Landlord's
obligations hereunder from the date of such transfer. Tenant shall have no right
to terminate this Lease nor to abate Minimum Annual Rent nor to deduct from, nor
set-off, nor counterclaim against Minimum Annual Rent because of any sale or
transfer (including, without limitation, any sale-leaseback) by Landlord or its
successors or assigns. This lease shall not be affected by any such sale, and
Tenant agrees to attorn to the purchaser or transferee. Upon any sale or other
transfer as above provided (other than a sale-leaseback), or upon any assignment
of Landlord's interest herein, it shall be deemed and construed conclusively,
without further agreement between the parties, that the purchaser or other
transferee or assignee has assumed and agreed to perform the obligations of
Landlord thereafter accruing.
37. Waiver of Counterclaim and Trial by Jury. Landlord and Tenant waive their
right to trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other (except for personal injury or
property damage) on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
of or occupancy of the Leased Premises, and any emergency statutory or any other
statutory remedy. Tenant shall not interpose any counterclaim or counterclaims
or claims for set-off, recoupment or deduction of Minimum Annual Rent or
Additional Rent in a summary proceeding for nonpayment of Minimum Annual Rent or
Additional Rent or other action or summary proceeding based on termination,
holdover or other default in which Landlord seeks repossession of the Leased
Premises from Tenant.
38. Lease Recording. It is understood and agreed that Landlord shall not record
the within Lease Agreement among the Land Records of Baltimore County, Maryland,
for any purpose.
39. Notice of Default to Landlord and Mortgagee and Right to Cure. Tenant shall
give, by registered mail, a written notice of any failure by Landlord to perform
any of its obligations under this Lease to Landlord which shall specifically set
forth the nature of the nonperformance by the Landlord and shall give the
Landlord thirty (30) days within which to cure such default or non-performance.
However, if such default or non-performance reasonably requires more than thirty
(30) days to cure, Landlord shall not be in default if such cure is commenced
within such thirty (30) day period and thereafter diligently pursued to
completion. Said notice of default shall be a condition precedent to the
institution by Tenant of any judicial proceedings for nonperformance or default
against the Landlord. Tenant agrees to give any mortgagee and/or Trust Deed
Holders whose name and address have been furnished to Tenant in writing, by
registered mail, a copy of any notice of default served upon the Landlord.
Tenant further agrees that if Landlord shall fail to cure such default within
the time provided for in this Lease Agreement, then the mortgagees and/or Trust
Deed Holders shall have an additional thirty (30) days within which to cure such
default or, if such default cannot be cured within that
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time, then such additional time as may be necessary if within such thirty (30)
days, any mortgagee and/or Trust Deed Holders has commenced and is diligently
pursuing the remedies necessary to cure such default, in which event this Lease
shall not be terminated while such remedies are being so diligently pursued.
40. Miscellaneous Provisions.
(a) Governing Law. The laws of the state of Maryland shall govern the
construal, validity, performance and enforcement of this Lease.
(b) Covenants. The parties hereto agree that all the provisions of this
Lease are to be construed as covenants and agreements as though the words
importing such covenants and agreements were used in each separate provision
hereof.
(c) No Representations by Landlord. Neither Landlord nor any agent of
Landlord has made any representations or promises with respect to the Leased
Premises or the Building except as herein expressly set forth, and no rights,
privileges, easements or licenses are granted to Tenant except as herein
expressly set forth.
(d) Exhibits. It is agreed and understood that any Exhibits referred to
herein, and attached hereto, form an integral part of this Lease and are hereby
incorporated by reference.
(e) Pronouns. The neuter, feminine or masculine pronoun when used herein
shall each include each of the other genders and the use of the singular shall
include the plural.
(f) Captions. All section and paragraph captions, marginal references, and
table of contents in this Lease are inserted only as a matter of convenience,
and in no way amplify, define, limit, construe or describe the scope or intent
of this Lease nor in any way affect this Lease.
(g) Landlord's Approval. Whenever Landlord's consent or approval is
required under the terms of this Lease, Landlord may grant or deny such consent
or approval in its sole discretion unless otherwise specified herein.
(h) Separability. If any term or provision of this Lease or applications
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remaining terms and provisions of this Lease, or the
application of such term or provision to persons or circumstances other than
those as to which it is held or unenforceable, shall not be affected thereby,
and each term and provision of this Lease shall be valid and enforced to the
fullest extent permitted by law.
(i) Counterparts. This Lease has been executed in several counterparts,
but all counterparts shall constitute one and the same legal document.
(j) Authority. Landlord and Tenant hereby covenant each for itself, that
each has full right, power and authority to enter into this Lease upon the terms
and conditions herein set forth. If Tenant signs as a corporation, each of the
persons executing this Lease on behalf of Tenant does hereby covenant and
warrant that Tenant is a duly authorized and existing corporation, qualified to
do business in the jurisdiction in which the Leased Premises is located, that
the corporation has
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<PAGE>
full right and authority to enter into this Lease, and that each and both of the
persons signing on behalf of the corporation were authorized to do so. If Tenant
signs as a partnership, each of the persons executing this Lease on behalf of
Tenant does hereby covenant and warrant that Tenant is a duly formed and validly
existing partnership, that the partnership has full right and authority to enter
into this Lease, and that each of the persons signing on behalf of the
partnership were authorized to do so.
(k) Examination of Lease. Submission of this Lease for examination or
signature by Tenant shall not constitute reservation of or option for Lease, and
the same shall not be effective as a Lease or otherwise until execution and
delivery by both Landlord and Tenant.
(l) Interpretation. Although the printed provisions of this Lease were
drawn by Landlord, this Lease shall not be construed for or against Landlord or
Tenant, but this Lease shall be interpreted in accordance with the general tenor
of the language in an effort to reach the intended result.
(m) Entire Agreement; Modification. This Lease contains the entire
agreement between the parties, and any agreement hereafter made shall be
ineffective to change, discharge or effect an abandonment in whole or in part
unless such agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
Acceptance of, or acquiescence in, a course of performance rendered under this
or any prior agreement between the parties or their affiliates shall not be
relevant or admissible to determine the meaning of any term of this Lease.
(n) Termination. This Lease and the tenancy hereby created shall cease and
determine at the end of the Lease Term, or any extension or renewal thereof,
without the necessity of any notice from either Landlord or Tenant to terminate
the same, and Tenant hereby waives notice to vacate the Leased Premises and
agrees that Landlord shall be entitled to the benefit of all provisions of law
respecting the summary recovery of possession of premises from a tenant holding
over to the same extent as if statutory notice had been given. For the period of
three (3) months prior to the expiration of the Lease Term or of any extension
or renewal thereof, Landlord shall have the right to show the Leased Premises
and all parts thereof to prospective tenants between the hours and 9:00 am and
5:00 pm, on any day except Saturday and Sunday and except any legal holiday on
which Tenant shall not be open for business.
(o) Corporate Approval. If Tenant is a corporation, Tenant covenants and
warrants that it has the requisite corporate approval to enter into and execute
this Lease Agreement and accordingly, shall provide to Landlord, as soon as
practicable following execution of this Lease, a copy of an executed resolution
by its Board of Directors, authorizing the execution of the Lease Agreement and
authorizing the individual executing this Lease to execute said Agreement on
behalf of and in the name of the Corporation. If Tenant shall fail to provide
the executed resolution within the time period required under this Section,
Landlord may, at its option, declare this Lease to be null and void and of no
further force or effect. If Tenant is a corporation it acknowledges that this
Lease is executed under seal and that a twelve year period of limitation
applies.
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(p) Approval of Mortgage. This Lease is contingent upon the approval of
any and all mortgagees or other lenders of the Landlord. Landlord shall have
thirty (30) days from the execution of this Lease to obtain all necessary
approvals from this mortgagee or other lenders; and thereafter shall have the
right to extend said approval period an additional ten (10) days upon written
notice to Tenant. If said approvals cannot be obtained within the aforesaid
period, this Lease and the rights and duties of the parties hereunder, shall be
null and void and be of no further effect.
(q) Zoning and Licensing Approvals. Anything herein elsewhere contained to
the contrary, this Lease and all the terms, covenants, and conditions hereof are
in all respect subject and subordinate to all zoning restrictions affecting the
Leased Premises, and the Building in which they are located, and the Tenant
agrees to be bound by such restrictions. The Landlord further does not warrant
that any license or licenses, permit or permits, which may be required for the
business to be conducted by the Tenant on the Leased Premises will be granted,
or, if granted, will be continued in effect or renewed, and any failure to
obtain such licence or licences, permit or permits, or any revocation thereof or
failure to renew the same, shall not release the Tenant from its obligations
under this Lease Agreement.
41. Quiet Enjoyment. If and so long as Tenant pays rent and additional rent
reserved by this Lease, and performs and observes all the covenants and
provisions hereof, Tenant shall quietly enjoy the Leased Premises, subject,
however, to the terms and provisions hereof.
42. Remedies Cumulative. No mention in this Lease of any specific right or
remedy shall preclude Landlord from exercising any other right or from having
any other remedy, or from maintaining any action to which it may otherwise be
entitled, either at law or equity; and the failure of Landlord to insist in any
one or more instances upon a strict performance of any covenant of this Lease or
to exercise any option or right herein contained shall not be construed as a
waiver of relinquishment for the future of such covenant, right or option, but
the same shall remain in full force and effect unless the contrary is expressed
in writing by Landlord.
43. Binding Effect. This Agreement and the covenants and conditions herein
contained shall be binding upon and shall inure to the benefit of Landlord, its
heirs, personal representatives, successors and assigns, and shall be binding
upon Tenant, its heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Tenant and only such assigns of Tenant to whom the
assignment by Tenant has been consented to by Landlord.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and year first above written.
WITNESS/ATTEST:
LANDLORD:
ARE Sparks Limited Partnership
a Maryland Limited Partnership
/s/ Melanie Jensen Ney By: /s/ Loren D. Jensen
_______________________________ __________________________(SEAL)
Name:Loren D. Jensen
Title: General Partner
Date: August 6, 1997
_______________________________
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If Tenant is a corporation, an authorized officer must sign on behalf of the
corporation and by doing so such officer makes the covenants and warranties
contained in Section 40 hereof.
WITNESS/ATTEST: TENANT:
EA Engineering, Science & Technology, Inc.
a Delaware Corporation
/s/ Jack Adler By: /s/ Barbara Posner (SEAL)
________________________________ ___________________________
Name: Barbara Posner
Title: Vice President,
Financial Administration
Date: August 6, 1997
__________________________________
State of Maryland )to wit:
County of Baltimore )
I hereby certify that on this 6th day of August, 1997, before me, the
subscriber, a Notary Public of the State and County aforesaid, personally
appeared Loren D. Jensen of ARE Sparks Limited Partnership and he made oath in
due form of law that the matters and facts set forth in the foregoing Lease are
true and correct to the best of his knowledge and belief, and that he signed
same in his capacity as General Partner of said Limited Partnership.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Carol L. Storck
_________________________________________
Notary Public
My commission Expires: 2/1/2000
__________________
State of Maryland )to wit:
County of Baltimore )
I hereby certify that on this 6th day of August, 1997, before me, the subscribe,
a Notary Public of the State and County aforesaid, personally appeared Barbara
Posner of EA Engineering, Science & Technology, Inc. and he made oath in due
form of law that the matters and facts set forth in the foregoing Lease are true
and correct to the best of his knowledge and belief, and that he signed same in
his capacity as Executive Vice President of said Company.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Carol L. Storck
_________________________________________
Notary Public
My commission Expires: 2/1/2000
__________________
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EXHIBIT B
RULES AND REGULATIONS
1. Tenant will comply with all rules and regulations issued by all government
agencies whose jurisdiction affects the Leased Premises (the "Premises") or the
Building of which the Leased Premises are a part (the "Building"). Tenant shall
not make any alteration to the Building without first obtaining the written
permission of Landlord and all appropriate and necessary governmental permits
and/or licenses.
2. When electric wiring of any kind is introduced, it must be connected as
directed by Landlord, and no stringing or cutting of wires will be allowed,
except with the prior written consent of Landlord, and shall be done only by
contractors approved by Landlord. This number and location of telephones,
telegraph instruments, electric appliances, call boxes, etc., shall be subject
to Landlord's approval. Prior to the termination of the Lease Agreement, all
wires, cables, etc. installed by the Tenant must be removed by Tenant at
Tenant's expense.
3. Tenant, its agents, servants, employees and invitees shall abide by such
security rules and regulations as Landlord may promulgate.
4. A dumpster shall be provided to the Building site by the Landlord for use by
the Tenants with the cost to be borne by the Tenants on a pro-rata share.
Abnormal amounts of trash or garage generated by either Tenant's initial
movement into and occupancy of the Leased Premises, or the purchase of equipment
or fixtures placed on the Leased Premises shall be removed by Tenants at his
sole cost or expense and shall not be placed in the dumpster provided by the
Landlord.
5. No part of the whole of any sidewalls, plaza areas, entrances, loading docks,
passages, courts, elevators, vestibules, stairways, corridors, balconies or
halls of the Building shall be obstructed or encumbered by any tenant or used
for any purpose other than that expressly provided for in the Lease. All halls,
passages, exits, entrances, elevators, stairways, balconies and roof are not for
the use of the general public and the Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence, in
the sole judgement of the Landlord, shall be prejudicial to the safety,
character, reputation and interests of the Building and its Tenants, provided
that nothing herein contained shall be construed to prevent such access to
persons with whom the Tenant normally deals in the ordinary course of business,
unless such persons are engaged in illegal activities. Unless making repairs
required to be made under the terms of the lease to heating, ventilation, or air
conditioning located thereon, neither Tenant nor any employees or invitees of
the Tenant shall have access to or go upon the roof of the Building without the
prior approval of the Landlord.
6. No awnings or other projections shall be attached to the outside walls,
balconies or windows of the Building. No curtains, blinds, shades, or screens
other than Building Standard window coverings shall be attached to or hung in,
or used in connection with, any window or door of the space demised to any
tenant.
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7. No showcases or other articles, including furniture, shall be put on the
balcony, in front of or affixed to any part of the exterior of the Premises, or
placed in the halls, corridors, vestibules, balconies or other appurtenant or
public parts of the Building.
8. Any water and wash closets and other plumbing fixtures in any Premises or the
Building shall not be used for any purposes other than those for which they were
constructed, and no sweepings, rubbish, rags, or other substances (including,
without limitation, coffee grounds) shall be thrown therein. Waste and excessive
or unusual use of electricity or water is prohibited.
9. No tenant shall bring or keep, or permit to be brought or kept, any
inflammable, combustible, or explosive fluid, material, chemical, or substance
in or about the space demised to such tenant.
10. Except for the hanging of artwork on interior walls, no tenant shall make,
paint, drill into, or in anyway deface, any part of the interior or exterior of
the Building or the space demised to such tenant. No boring, cutting, or
stringing of wires shall be permitted.
11. No sign, placard, picture, advertisement, name or notice shall be inscribed,
displayed, printed or affixed on or to any part of the outside or inside of the
Building without the Tenant first obtaining the written consent of Landlord.
Landlord shall have the right to remove any such sign, placard, picture,
advertisement, name or notice without notice to and at the expense of Tenant.
All approved signs or lettering on doors shall be printed, painted or affixed or
inscribed at the expense of Tenant by a person or company approved by the
Landlord. Landlord shall not place anything or allow anything to be placed near
or on the glass of any window, door, partition or wall which may appear
unsightly from outside the premises.
12. Tenant shall promptly report to the Landlord any cracked or broken glass on
the Premises.
13. No tenant shall cause or permit any odors to emanate from the space demised
to such tenant. No tenant shall make, or permit to be made, any noises which may
be heard outside of such Tenant's Premises or disturb or interfere with other
tenants or occupants of the Building or neighboring buildings or premises
whether by the use of any musical instrument, radio, television set, or other
audio device, unmusical noise, whistling, singing, or in any other way. Tenant
shall be responsible for insuring that any office equipment and machinery is
installed in such a manner as to absorb and prevent the transmission of
vibration and noise beyond the confines of the Premises so as not to disturb
other Tenants in the Building. Nothing shall be thrown out, or off, of any
doors, windows, balconies or skylights or down any passageways.
14. The Landlord will provide the tenant two Premises entry door keys, and two
Sonitrol key cards; two additional keys or keycards will be supplied to Tenant
by Landlord, upon request, without charge; any additional keys or key cards
required by Tenant shall be paid for by Tenant. Tenant, its agents and
employees, shall not have any duplicate key made and shall not change any locks.
No additional locks or bolts of any kind shall be placed upon any of the doors
or windows in the space demised to any tenant, nor shall any changes be made in
locks or the mechanism
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thereof. Each tenant must, upon the termination of his tenancy, return to
Landlord all key cards and keys to offices and toilet rooms, either furnished
to, or otherwise procured by, such tenant, and in the event of the loss of any
such keys, such tenant shall pay Landlord the reasonable cost of replacement
keys or locks (at Landlord's option).
15. All removals from the Building, or the carrying in or out of the Building or
the space demised to any tenant of any safes, freight, furniture, or bulky
matter of any description must take place during such hours and in such manner
as Landlord may determine, from time to time. Landlord reserves the right to
inspect all freight for violation of any of these rules and regulations or the
provisions of such tenant's lease.
16. No tenant shall engage or pay any employees in the Building, except those
actually working for such tenant in the Building, nor advertise for laborers
giving an address at the Building.
17. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord's opinion, tends to impair the reputation of the Building or
its desirability as a building for offices, and upon notice from Landlord, such
tenant shall refrain from or discontinue such advertising.
18. Each tenant, before closing and leaving the space demised to such tenant at
any time, shall see that all entrance doors are locked.
19. No space demised to any tenant shall be used, or permitted to be used, for
lodging or sleeping. No cooking shall be done or permitted by any Tenant on the
Leased Premise, nor shall be Premises be used for the storage of merchandise,
washing clothes or for any improper, objectionable or immoral purpose.
20. The requests of tenants will be attended to only upon verbal or written
request to Landlord. Building employees shall not be required to perform, and
shall not be requested by any tenant to perform, any work outside of their
regular duties, unless under specific instructions from Landlord.
21. Canvassing, soliciting, and peddling in the Building are prohibited, and
each tenant shall cooperate in seeking their prevention.
22. There shall not be used in the Building, either by any tenant or by any of
tenant's employees, agents, or invites, in the delivery or receipt of
merchandise, freight, or other matter, any hand trucks or other means of
conveyance except those equipped with rubber tires, rubber side guards, and such
other safeguards as Landlord may require.
23. No animals of any kind shall be brought into or kept about the Building by
any tenant, excluding "seeing-eye" dogs.
24. No tenant shall place, or permit to be placed, on any part of the floor or
floors of the space demised to such tenant a load exceeding the floor load per
square foot which such floor was designed to carry and which is allowed by law.
25. No tenant will install or operate in the space demised to such tenant any
electrically operated equipment or other machinery, other than a reasonable
number
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of electric typewriters, adding machines, radios, televisions, tape recorders,
Dictaphones, bookkeeping machines, copying machines, clocks, word processors,
and personal computers, without first obtaining the prior written consent of
Landlord, who may condition such consent upon payment by Tenant of additional
rent as compensation for additional consumption of utilities as determined at
the discretion of Landlord and for the cost of separate metering or additional
wiring as may be occasioned by the operation of said equipment or machinery.
Landlord reserves the right to separately meter any utility consumption in the
Premises.
26. No tenant shall install any equipment of any kind or nature whatsoever,
including, but not limited to, equipment permitted by Rule 25 to be used on or
in the space demised to such tenant, which will necessitate any changes, or
replacements, or additions to, any water or plumbing, heating, air conditioning,
ventilating, electrical, or other system in or of the space demised to such
tenant of the building without first obtaining the prior written consent of the
Landlord.
27. All equipment and machinery belonging to any tenant which causes noise,
vibration or electrical interference that may be transmitted to the structure of
the Building or to any space therein to such degree to be objectionable to
Landlord or any tenant in the Building shall be installed and maintained by each
such tenant, at such tenant's expense, on vibration eliminators or other devices
sufficient to eliminate such noise or vibration.
28. No bicycles are permitted in the Building. No bicycles are to be attached or
stored on any part of the Building's rails, doors, balconies or other parts,
except those areas designated by Landlord for bicycle storage.
29. No Building or suite doors shall be propped open at any time.
30. Each tenant shall cooperate with any efforts of Landlord to conserve energy.
Landlord reserves the right to institute energy management procedures when
applicable.
31. Each tenant shall light any windows of the Premises and exterior signs and
turn the same off to the extent required by Landlord.
32. The Tenant shall not use any other method of heating or air conditioning
than that provided by the Landlord, without first obtaining the written consent
of the Landlord.
33. Tenant shall not be permitted to keep food upon the Leased Premises except
in proper containers, cabinets and refrigerators and in strict accordance with
all applicable rules, regulations and ordinances of all local health and
sanitation authorities.
34. Tenant shall comply with all Tenant requirements issued and mandated by
insurance companies insuring the Building.
35. Tenant shall not be permitted to use or keep explosives, kerosene, cleaning
fluid or any other illuminating, combustible or explosive material or substance
of any kind in the Building or the Leased Premises.
36. No vending, video, amusement machine or machines of any other description
shall
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be installed, maintained or operated upon the Leased Premises or the Building
without the prior written consent of the Landlord.
37. No Tenant shall lay linoleum, tile, carpet or other similar floor covering
so that the same shall be affixed to the floor of the Leased Premises or the
Building in any manner except as approved by the Landlord. The expense of
repairing any damage resulting from violation of this Rule or of removing any
floor covering shall be borne and paid for by the Tenant who violated, either by
its own action or the actions of its contractors, or employees, this Rule.
38. Landlord shall inspect the Leased Premises prior to the vacation of the
Premises by the Tenant and the Tenant shall be responsible for any damage done
to the Leased Premises by Tenant in the course of its occupancy or vacation of
the Premises.
39. In the event that the Tenant does not have a separate electric meter, Tenant
will be responsible for its proportionate share of the electric usage as shown
on the electric meter which monitors electric usage for the Building in
accordance with the formula set forth in the Lease.
40. No contract of any kind with any supplier of towels, water, ice, toilet
articles, waxing, rug shampooing, venetian blind washing, furniture polishing,
lamp servicing, cleaning of electrical fixtures, removal of waste paper, rubbish
or garbage, or other like service shall be entered into by Tenant for the Leased
Premises or any other portion of the Leases Premises without the prior written
approval of the Landlord, nor shall any vending machine of any kind be installed
in the Building, without prior written approval of the Landlord.
41. Landlord hereby reserves to itself any and all rights not granted to Tenant
hereunder, including, but not limited to, the following rights which are
reserved to Landlord for its purposes in operating the Building:
(a) the right to change the name or address of the Building, without
incurring any liability from Tenant for so doing;
(b) the right to install and maintain a sign or signs on the exterior of
the Building or within the Building area;
(c) the exclusive right to use or dispose of the use of the roof of
the Building;
(d) the right to limit the space on the directory of the Building to
be allotted to Tenant; and
(e) the right to grant anyone the right to conduct any particular business
or undertaking the Building.
42. The Landlord reserves the right at any time to rescind any one or more of
these Rules and Regulations, or to make such other and further reasonable Rules
and Regulations as in the Landlord's judgement may, for time to time, be
necessary for the safety, care and cleanliness of the Building, the Building
Area or any part thereof, and for the preservation of other herein.
37
EXHIBIT 10.10
Ecolair Properties
OFFICE LEASE
Between
Ecolair Limited Partnership
as Landlord
and
EA Engineering, Science, and Technology, Inc.
as Tenant
For Premises in
15 Loveton Circle, Sparks, Maryland 21152
Dated: August 6, 1997
---------------------
<PAGE>
TABLE OF CONTENTS
1. Introductory Provisions.............................................1
(a) Fundamental Lease Provisions..................................1
(b) References and Conflicts......................................2
(c) Exhibits......................................................2
(d) Addendums.....................................................2
2. Premises............................................................2
(a) Leased Premises...............................................2
(b) The Building..................................................2
(c) Tenant's Proportionate Share..................................2
3. Term................................................................2
(a) Lease Term....................................................2
(b) Acceptance of Leased Premises.................................3
4. Rent................................................................3
(a) Minimum Annual Rent...........................................3
(b) Annual Adjustments to Minimum Annual Rent.....................3
(c) Additional Rent...............................................3
(i) General...........................................3
(ii) Basic Operating Expenses..........................3
(iii) Increases in Basic Operating Expenses.............4
(iv) Electrical Service................................4
(v) Landlord's Enforcement Costs......................4
(d) Additional Rent Estimates and Adjustments...................4
(e) Payment of Rent.............................................6
5. Security Deposit....................................................6
6. Improvement of the Leased Premises..................................6
7. Alterations or Improvements by Tenant...............................7
8. Use of Leased Premises..............................................7
(a) Use.........................................................7
(b) Compliance..................................................7
(i) Legal.............................................7
(ii) Fire and Safety...................................7
(c) Environmental Protection....................................8
(d) Indemnification.............................................8
(e) Moving and Deliveries.......................................8
(f) Excessive Floor Load........................................8
9. Taxes on Tenant's Property..........................................8
10. Rules and Regulations...............................................8
11. Utilities and Services..............................................9
(a) Building Standard Services and Utilities....................9
(b) Overtime Services...........................................9
(c) Interruption or Reduction of Service........................9
(d) Excessive Electrical Usage..................................9
(e) Excessive Heat Generation..................................10
(f) Security...................................................10
<PAGE>
12. Landlord's Right of Entry..........................................10
13. Maintenance and Repairs............................................10
(a) Landlord Responsibilities..................................10
(b) Tenant Responsibilities....................................11
14. Common Areas.......................................................11
(a) Common Areas Defined.......................................11
(b) Landlord's Control.........................................11
(c) Changes and Additions to the Building, Additional
Construction.............................................11
(d) Parking....................................................12
15. Surrender and Inspection...........................................12
(a) Surrender..................................................12
(b) Inspection.................................................12
(c) Fixtures and Personal Property Remaining...................12
16. Tenant Holding Over................................................12
17. Covenant Against Assignment and Subletting.........................13
18. Bankruptcy.........................................................13
19. Default............................................................13
20. Landlord's Rights Upon Tenant's Default............................14
(a) Re-Entry...................................................14
(b) Termination................................................14
(c) Distress...................................................15
(d) Lien for Rent..............................................15
(e) No Future Lease Rights.....................................15
(f) Utilities and Services.....................................15
(g) Landlord's Remedies Cumulative.............................15
21. Lender Requirements................................................15
(a) Subordination..............................................15
(b) Attornment.................................................16
(c) Financing..................................................16
(d) Financial Statements.......................................16
22. Estoppel Certificates..............................................16
23. Damage by Fire or Other Casualty...................................17
24. Condemnation.......................................................17
25. Landlord's Reserved Rights.........................................18
26. Landlord and Tenant Liability......................................18
(a) Landlord's Liability.......................................18
(b) Tenant's Liability.........................................18
(c) Indemnity..................................................18
(d) Criminal Acts of Third Parties.............................19
27. Tenant's Insurance.................................................19
(a) Coverages..................................................19
(b) Policy Requirements........................................19
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(c) No Limitation of Liability.................................19
(d) Notice of Fire and Accident................................19
28. Waiver of Subrogation..............................................20
29. No Liens Permitted: Discharged.....................................20
30. Signs and Advertisements...........................................20
31. Notices............................................................20
32. Time...............................................................20
33. Postponement of Performance........................................21
34. No Waiver..........................................................21
35. Limitation of Landlord's Liability.................................21
36. Transfer of the Building...........................................21
37. Waiver of Counterclaim and Trial by Jury...........................21
38. Lease Recording....................................................22
39. Notice of Default to Landlord and Mortgagee and Right to Cure......22
40. Miscellaneous Provisions...........................................22
(a) Governing Law..............................................22
(b) Covenants..................................................22
(c) No Representations by Landlord.............................22
(d) Exhibits...................................................22
(e) Pronouns...................................................22
(f) Captions...................................................22
(g) Landlord's Approval........................................22
(h) Separability...............................................22
(i) Counterparts...............................................23
(j) Authority..................................................23
(k) Examination of Lease.......................................23
(l) Interpretation.............................................23
(m) Entire Agreement; Modification.............................23
(n) Termination................................................23
(o) Corporate Approval.........................................23
(p) Approval of Mortgage.......................................23
(q) Zoning and Licensing Approvals.............................24
41. Quiet Enjoyment....................................................24
42. Remedies Cumulative................................................24
43. Binding Effect.....................................................24
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OFFICE LEASE
THIS LEASE is made this 1st day of January, 1997, between Ecolair Limited
Partnership, a Maryland limited partnership ("Landlord"), and EA Engineering,
Science and Technology, Inc., a Delaware Corporation ("Tenant").
WITNESSETH:
For and in consideration of the covenants herein contained and upon the terms
and conditions herein set forth, the parties agree as follows:
1. Introductory Provisions.
(a) Fundamental Lease Provisions. Certain fundamental Lease provisions
are presented in this Section in summary form solely to facilitate convenient
reference by the parties hereto:
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1. Leased Premises 15 Loveton Circle [See Section 2(a)]
2. Building Address 15 Loveton Circle [See Section 2(a)]
Sparks, Maryland 21152
3. Rentable Area Of Leased
Premises 32,400 square feet [See Section 2(a)]
4. Gross Leasable Area of
Building* 32,400 square feet [See Section 2(b)]
5. Proportionate Share 100 Percent [See Section 2(c)]
6. Rent Commencement Date January 1, 1997 [See Section 3(a)]
7. Lease Term 9 years and 11 months [See Section 3(a)]
8. Minimum Annual Rent $550,800.00 [See Section 4(a)]
9. Basic Monthly Rent $45,900.00 [See Section 4(a)]
10. Annual Adjustment to
Minimum Annual Rent 3% [See Section 4(b)]
11. Use of Leased Premises Professional and [See Section 6]
Administrative Offices
12. Security Deposit $25,000.00 [See Section 5]
13. Base Operating Expense
Amount $6.19 (tax & operating) [See Section 4(c)]
14. Additional Rent [See Section 4(c)]
15. Standard Building
Operating Hours 8:00 a.m. to 6:00 p.m. [See Section 9(a)]
Monday-Friday
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16. Building Holidays New Year's Day, [See Section 9(a)]
Memorial Day, Independence Day,
Labor Day, Thanksgiving Day
Day after Thanksgiving, Christmas Day
17. Address for Notices 11019 McCormick Road [See Section 30(b)]
to Tenant Hunt Valley, Maryland 21031
18. Address for Notices 11019 McCormick Road [See Section 30(a)]
to Landlord Hunt Valley, Maryland 21031
Attn. Melanie Jensen-Ney
19. Leasing Broker(s) NONE [See Section 33]
20. Tenant's Resident Agent Barbara L. Posner
Vice President, Finance & Administration
</TABLE>
*Subject to adjustment pursuant to Section 2(b).
(b) References and Conflicts. References appearing in Section 1(a) are
intended to designate some of the other places in the Lease where additional
provisions are applicable to the particular fundamental Lease provisions appear.
These references are for convenience only and shall not be deemed all inclusive.
Each reference in the Lease to any of the fundamental Lease provisions contained
in Section 1(a) shall be construed to incorporate all of the terms provided for
under such provisions, and such provisions shall be read in conjunction with all
other provisions of the Lease applicable thereto. If there is any conflict
between any of the fundamental Lease provisions set forth in Section 1(a) and
any other provisions of the Lease, the latter shall control.
(c) Exhibits. The following drawings and special provisions are
attached hereto as exhibits and hereby made a part of this Lease:
Exhibit A. Floor Plan of Leased Premises
Exhibit B. Rules and Regulations
(d) Addendums. The following special provisions are attached hereto as
addendums and hereby made a part of this Lease.
Addendum 1 - Leased Premises.
2. Premises.
(a) Leased Premises. Landlord hereby leases to Tenant, and Tenant hereby
rents from Landlord, the Leased Premises as specified in Section 1(a)(1) located
in the building specified in Section 1(a)(2) (the "Building"). The leased
premises shall consist of approximately the square footage of rentable floor
space as specified in Section 1(a)(3), which included an agreed common area
factor of twelve percent (12%), and as outlined in red on the floor plan
attached hereto as Exhibit A. For the purposes of determining the square footage
of the Leased Premises, leasehold space is calculated by measuring from the
outside of any exterior walls of the Leased Premises to the center line of any
partitions constructed which separate the Leased Premises from the remaining or
adjacent premises of the Building.
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(b) The Building. Landlord and Tenant acknowledge that the gross leasable
area in the Building is specified in Section 1(a)(4) ("Gross Leasable Area" or
"GLA"). The GLA shall be used hereinafter for purposes of computing Tenant's
proportionate share of certain expenses payable to Landlord as Additional Rent.
Landlord reserves the right to modify the GLA of the Building from time to time
during the Lease Term as a result of construction of new improvements or the
demolition of existing improvements.
(c) Tenant's Proportionate Share. Tenant's proportionate share of certain
expenses hereinafter made payable to Landlord as additional rent is specified in
Section 1(a)(5). Said computation is based upon the ratio of the total rentable
area in the Leased Premises to the GLA of the Building. The Proportionate Share
shall be modified during the Lease Term in the event that the GLA of the
Building is modified as described in Section 2(b) above.
3. Term.
(a) Lease Term. The term of the Lease (sometimes herein called the "Lease
Term") shall commence on the "Rent Commencement Date," January 1, 1997, and
shall continue for a period of nine (9) years from the first day of the calendar
month next following the first day of the Term, unless sooner terminated as
herein provided.
(b) Acceptance of Leased Premises. Landlord shall deliver, and Tenant
agrees to accept, possession of the Leased Premises in an "as is" condition,
subject, however, to Landlord's performance of its agreed obligation to replace
at no charge to Tenant the carpet in the rear portion of the fourth floor. By
entering into possession, Tenant shall be deemed to have accepted the Leased
Premises, to have acknowledged that the same are in the condition called for
hereunder and to have agreed that the obligations of the Landlord imposed for
the delivery of the Premises have been fully performed. It is expressly
understood and agreed that Landlord has made no representations or warranties
with respect to the Leased Premises.
4. Rent.
(a) Minimum Annual Rent. The minimum Annual Rent reserved hereunder shall
be as specified in Section 1(a)(8) which shall be payable by Tenant to the
Landlord during each Lease Year of the Lease Term in twelve (12) equal monthly
installments of Basic Monthly Rent each as specified in Section (a)(9), due in
advance, without notice or demand, and without set-off, deduction or abatement
of any kind, on the first day of every calendar month thereafter during the
Term. Rent shall be paid to Landlord (or its agent) as specified in Section
1(a)(18), or to such other persons or at such other address as Landlord may
designate from time to time.
(b) Annual Adjustments to Minimum Annual Rent. On the first day of the
second Lease Year, and on the first day of each Lease Year thereafter during the
Lease Term, the Minimum Annual Rent (than in effect) shall be increased by 3
percent (3%).
(c) Additional Rent.
(i) General. Whenever it is provided by the terms of this Lease
that Tenant is required to make any payment to Landlord other than of Minimum
Annual Rent, such payment shall be deemed to be additional rent ("Additional
Rent").
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Unless otherwise expressly specified herein, Additional Rent shall be paid by
Tenant with the installment of Base Monthly Rent thereafter falling due.
Additional Rent shall include, but not be limited to:
(ii) Basic Operating Expenses. Tenant shall pay to Landlord, as
Additional Rent, its Proportionate Share as set forth in Section 1(a)(5) of any
increase in the Basic Operating Expenses incurred by Landlord in the operation
of the Building during any calendar year over the Base Operating Expense Amount
specified in Section 1(a)(13). As used herein, the "Basic Operating Expenses"
shall mean the sum of all costs of operating, policing, managing, maintaining
replacing and repairing the (A) the Building, (B) the personal property used in
conjunction therewith, and (C) the land upon which the Building is situated and
all curbs and sidewalks adjacent to same. Such costs shall include the
following: the charges (including surcharges) for electricity, gas, fuel, steam,
water and sewer and any other utilities supplied to the Building; the cost of
public liability insurance, casualty insurance, rent loss insurance, umbrella
liability insurance, owned and non-owned automobile insurance and all other
insurance coverage carried by Landlord in connection with the Building; legal,
accounting, engineering and other professional fees; management fees (equal to
fifteen percent (15%) of the total Basic Operating Expenses, excluding real
estate taxes and utilities) and personnel costs, including, but not limited to,
reasonable salaries, wages, taxes, fringe benefits and other direct and indirect
costs paid to or on behalf of persons employed in the operation, supervision,
maintenance, management and repair of the Building and Building Area or engaged
to provide any maintenance, operating, repair or upkeep service to the Building
or Building Area, and any other Building personnel; costs of inspecting, and
depreciation of machinery and equipment; costs to maintain and operate a
Building office; security guards or security services deemed necessary by
Landlord; the cost of all service and maintenance contracts; landscaping
maintenance, including reasonable upgrades and replacements; parking facility
maintenance, including repairs, restriping, resurfacing, rebuilding, as well as
removal of snow, ice and debris and depreciation of all machinery and equipment
used therein or thereon; traffic control; sanitary and drainage control; public
address system; holiday decorations; disposal of trash; maintenance, repair and
replacement of mechanical and electrical equipment including heating,
ventilation and air conditioning equipment; window cleaning, janitorial service
and pest control service; maintenance and repair of elevators, stairways, rest
rooms, lobbies, hallways and other common areas and facilities; repainting and
redecoration of all common areas and facilities; sales or use taxes on supplies
or services; and all other reasonable maintenance and repair expenses and
supplies which are deducted by Landlord in computing its Federal income tax
liability; the cost of any capital improvements or alterations made by Landlord
to the Building after the Rent commencement Date of the Lease Term, that reduce
total operating charges, or which are required under any governmental law or
regulation that was not applicable to the Building at the time it was
constructed, such cost to be amortized over such reasonable period as Landlord
shall determine, together with interest on the unamortized balance at the rate
actually paid by Landlord on funds borrowed for purposes of constructing said
capital improvements or alterations; the cost of tools and equipment, materials
and uniforms, supplies and sundries reasonably necessary for the operation and
maintenance of the Building; the Building's share of all costs to maintain,
repair and/or replace as necessary any common driveways, facilities and
structures pursuant to easements, covenants or similar agreements affecting the
Building; charges of any kind imposed by any governmental authority in
connection with the use or occupancy of the Building, including any and all
license, permit, and inspection fees; "Real Estate Taxes" (as
4
<PAGE>
hereinafter defined); and any other reasonable costs and expenses incurred by
Landlord in owning, maintaining, repairing or operating the Building or Building
Area. The Basic Operating Expenses shall not include: leasing commissions
payable by Landlord; the cost of capital improvements, as determined under sound
accounting principals, except to the extent set forth above; or the costs of
special services or utilities separately charged to individual tenants of the
Building.
The term "Real Estate Taxes" shall mean all taxes and assessments,
general and special, ordinary and extraordinary, foreseen and unforeseen, now or
hereafter assessed, levied or imposed upon the Building, and the land on which
it is built, whether or not now customary, including, without limitation, all
other government al impositions and levies, front foot benefit charges and
adequate public facility costs and assessments, together with (i) any tax,
assessment, or other imposition in the nature of a real estate tax, (ii) any ad
valorem tax on rent or any tax on income if imposed in lieu of or in addition to
real estate taxes and assessments, and (iii) any taxes and assessments which may
hereafter be substituted for real estate taxes, including by way of illustration
only, any tax, capital levy, assessment, imposition or otherwise (whether a
business rental or other tax) now or hereafter levied upon Landlord on the rents
or income received from the Building or for Tenant's use or occupancy of or
conduct of business at the Leased Premises, or Tenant's improvements to or
furniture, fixtures or equipment in the Leased Premises. "Real Estate Taxes"
shall further mean any advances or escrow deposits paid or made to any taxing
authority or third party such as a lender on account of any of the foregoing.
"Real Estate Taxes" shall also include all costs, including reasonable attorney
fees, incurred by Landlord in contesting the validity or amount, or in attempts
to restrict increases in, any such taxes. The Real Estate Taxes for any calendar
year shall mean the Real Estate Taxes actually paid or due to be paid during
such calendar year, whether such Real Estate Taxes relates to such calendar year
or a fiscal year.
(iii) Increases in Basic Operating Expenses. For each calendar year
during which any part of the Term falls, Tenant shall pay to Landlord Tenant's
Proportionate Share of the excess, if any, in Basic Operating Expenses for the
Leased Premises for such year (the "Excess Operating Expenses") over the Base
Operating Expense Amount. Such payment shall be prorated for any partial
calendar year during the Term.
(iv) Electrical Service. Tenant shall reimburse Landlord on a
monthly basis for all electrical service to the Leased Premises (other than the
electrical service necessary for Landlord to provide standard heating and air
conditioning, which shall be included in "Basic Operating Expenses".) Landlord
shall pay the monthly bills for such services and submit copies of those bills
to Tenant for reimbursement, with no markup or management fee, and Tenant agrees
to pay each bill promptly in accordance with its terms.
(v) Landlord's Enforcement Costs. Additional Rent shall include any
and all expenses incurred by Landlord, including reasonable attorneys' fees, for
the collection of monies due from Tenant and the enforcement of Tenant's
obligations under the provisions of this Lease. When Landlord, at Tenant's
expense, performs an obligation of Tenant pursuant to the terms of this Lease,
the actual out-of-pocket costs and expenses incurred by Landlord in performance
of such obligations shall be Additional Rent.
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<PAGE>
(d) Additional Rent Estimates and Adjustments.
(i) On or before April 30 (or as soon thereafter as practicable)
of each calendar year, Landlord will submit to Tenant a comparative statement of
the actual increases incurred in Basic Operating Expenses for the preceding
calendar year over the Base Operating Expense Amount, setting forth in
reasonable detail: (i) a schedule of Basic Operating Expenses for the preceding
calendar year, and the amount of the Excess Operating Expenses for such
preceding year; (ii) the amount, if any, paid by Tenant to Landlord during the
preceding calendar year on account of the Excess Operating Expenses for such
preceding year; and (iii) the amount due from Tenant on account of the Excess
Operating Expenses for such preceding year, or the amount due from Landlord to
Tenant because of overpayment by Tenant on account of Excess Operating Expenses.
Landlord's comparative statement of Operating Expenses shall also include
Landlord's good faith estimate of Excess Operating Expenses for the then-current
calendar year and an estimated "Monthly Portion of Excess Operating Expenses"
equal to one-twelfth (1/12) of said good faith estimate of Excess Operating
Expenses.
(ii) Tenant shall pay Landlord, within thirty (30) days of
Tenant's receipt of such statement, as Additional Rent, any amounts due from
Tenant on account of Excess Operating Expenses for the preceding year. Tenant
shall also make payments to Landlord, on account of the Excess Operating
Expenses for the then current calendar year, as follows:
(A) On the first day of the first full month following
receipt by Tenant of the Landlord's comparative statement of Basic Operating
Expenses, Tenant shall pay to Landlord an amount equal to the Monthly Portion of
Excess Operating Expenses multiplied by the number of months elapsed in the
current calendar year (including the month in which the payment is made); and
(B) Commencing on the first day of the second full month
following receipt by Tenant of Landlord's comparative statement of Basic
Operating Expenses, and continuing until the receipt by Tenant of the next
annual comparative statement, the minimum monthly installments of rent due
hereunder shall be increased by an amount equal to the Monthly Portion of Excess
Operating Expenses.
(iii) Landlord shall refund any overpayment made by Tenant within
thirty (30) days after Landlord's submission to Tenant of the aforesaid
operating charge statement for such calendar year.
(iv) Contemporaneously with presentation of Landlord's statement
showing actual figures for the year, Landlord shall furnish to Tenant, in
writing, a detailed statement of Basic Operating Expenses and copies of Real
Estate Tax bills. If it shall be determined that there is an error in Landlord's
statement, Tenant shall be entitled to a credit for any overpayment, or, if
Landlord billed Tenant less than should have been billed to Tenant, Tenant shall
pay such difference to Landlord. Any payment, refund or credit made pursuant to
Section 4(c) or 4(d) shall be made without prejudice to any right of Tenant to
dispute, or of Landlord to correct, any item(s) as billed pursuant to the
provision hereof; provided, however, such right to correct or adjust rental
payments shall terminate at the expiration of two (2) years after the date any
payment shall have become due.
(v) Tenant's obligation to pay any Additional Rent accruing during
the Lease Term pursuant to this Section shall apply pro rata to the
proportionate part
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of the calendar year as to Basic Operating Expenses, in which this Lease begins
or ends, for the portion of each such year during which this Lease is in effect.
Such obligation to make payments of such Additional Rent shall survive the
expiration or sooner termination of the Lease Term, whether or not this Lease is
superseded by a subsequent lease of the Leased Premises or of any other space or
Tenant leaves the Building; any such superseding lease shall not serve to
supersede Tenant's obligation for any such additional rent unless it makes
express reference thereto and recites that such additional rent is abated in
consideration of the superseding lease.
(vi) If, during the Term of this Lease, there shall be a reduction
or elimination of any particular component of Basic Operating Expenses by reason
of the introduction of a labor-saving device, energy conservation device,
capital improvement or replacement installed by Landlord, the corresponding item
of expense in the Base Operating Expense shall be eliminated or reduced in the
same proportion as the reduction of that item in the Basic Operating Expense for
the purposes of calculating Tenant's share of Excess Operating Expenses.
(vii) In the event that Landlord shall make a capital expenditure
for an Essential Capital Improvement (as hereinafter defined) during the Term of
this Lease, the annual amortization of such expenditure (determined by dividing
the amount of the expenditure by the useful life of the improvement) plus
interest on the unamortized balance at the rate actually paid by Landlord for
funds borrowed by Landlord to construct or otherwise provide such Essential
Capital Improvement, shall be deemed an Operating Expense for each year of such
useful life. As used herein, an "Essential Capital Improvement" means any of the
following: (A) a labor saving device or other installation, improvement or
replacement which reduces Operating expenses; (B) an installation or improvement
required by reason of any law, ordinance or regulation of any governmental or
quasi-governmental body, which requirement did not exist (or was not applicable
to the Building) on the date of execution of this Lease; or (C) an installation
or improvement which directly enhances the safety of tenants in the Building
generally (as, for example, but without limitation, for fire safety or
security); provided, however, any expense treated as an Essential Capital
Improvement hereunder must, at Tenant's option and expense, be certified by
independent auditors for Landlord as constituting an Essential Capital
Improvement under generally accepted accounting principles.
(e) Payment of Rent. In the event Minimum Annual Rent or Additional Rent
is not paid within ten (10) days after the same is due, a late charge equal to
five percent (5%) of the delinquent amount shall be assessed as liquidated
damages for the additional administrative charges incurred by Landlord as a
result of such late payment. Tenant also agrees to pay all reasonable attorney
fees incurred by Landlord as a result of Tenant's delinquent payment of rent. No
payment by Tenant or receipt by Landlord of lesser amounts of rent than those
herein stipulated shall be deemed to be other than on account of the earliest
unpaid stipulated rent. No endorsement or statement on any check or any letter
accompanying any check or payment as rent shall be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
provided in this Lease. If Landlord shall pay any monies, or incur any expenses
in correction of violation of covenants herein set forth, the amount so paid or
incurred shall, at Landlord's option, and on written notice to Tenant, be
considered Additional Rent payable by Tenant with the first installment of
rental thereafter becoming due and payable. If Landlord receives from Tenant two
(2) or more returned or "bounced" checks in any twelve (12)
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month period, Landlord may require all future rent be paid by cashier's or
certified check.
5. Security Deposit. Tenant has deposited with Landlord the sum specified in
Section 1(a)(12). Said deposit shall constitute advance rental and shall be held
by Landlord as security for the faithful performance by Tenant of all the terms,
covenants and conditions of this Lease to be kept and performed by Tenant during
the Lease Term. If, at any time during the Lease Term, any payment of Minimum
Annual Rent or Additional Rent herein reserved shall be overdue and unpaid, the
Landlord may, at its option, appropriate and apply any portion of said security
deposit to the payment of any such overdue rent or other sum. Landlord shall
have the unrestricted right (but not the obligation) to apply any part of the
Security Deposit to cure any Default (as described in Section 20 hereof).
In the event of the failure of Tenant to keep and perform any other items,
covenants and conditions of the Lease to be kept and performed by Tenant, then
Landlord, at its option, may appropriate and apply the entire security deposit,
or so much thereof as may be necessary, to compensate Landlord for loss or
damage sustained or suffered by Landlord due to such breach by Tenant. Should
the entire security deposit, or any portion thereof, be appropriated and applied
by Landlord for the payment of overdue rent, to cure any default, or other sums
due and payable to Landlord by Tenant hereunder, then Tenant shall remit to
Landlord, within ten (10) days of the written demand of Landlord, a sufficient
amount in cash to restore the security deposit to the original sum. Tenant's
failure to do so shall constitute a breach of the Lease. Should Tenant comply
with all of said terms, covenants and conditions of the Lease and promptly pay
all Minimum Annual Rent and Additional Rent herein provided as it falls due,
then the security deposit shall be returned in full, without interest, to Tenant
within thirty (30) days of the Expiration Date or earlier termination of the
Term of this Lease. Tenant shall have no right to direct the application of any
part of the Security Deposit.
Landlord may deliver the funds deposited hereunder by Tenant to the
purchaser of Landlord's interest in the building and/or the Leased Premises in
the event that such interest is sold, and thereupon Landlord shall be discharged
from any further liability with respect to such security deposit.
6. Improvement of the Leased Premises. Intentionally deleted.
7. Alterations or Improvements by Tenant. Except for the incidental hanging of
pictures, installation of shelves, and other painting and decoration of the
Leased Premises which do not affect the structure of the Leased Premises, Tenant
shall not make any alterations, additions, or improvements, structural or
otherwise (collectively, "Alterations") in the Leased Premises (such as
carpeting, telephone installation, decoration and installation of specialized
equipment), without the prior written consent of Landlord, which consent shall
not be unreasonably withheld. Tenant shall not install any equipment of any
nature whatsoever which may affect the insurance rating of the Building, or
which may necessitate any changes, replacements or additions to the water
system, plumbing system, heating system, air-conditioning system, telephone
system or the electrical system of the Leased Premises, without the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
Tenant shall pay all costs to make such changes, replacements or additions.
Tenant hereby agrees that all Alterations made in, to, or on the Leased
Premises shall, unless otherwise provided by written agreement, be the property
of Landlord
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and shall remain upon and be surrendered with the Leased Premises on the
Expiration Date or other termination of this Lease, unless Landlord shall, prior
to such expiration or termination have given Tenant not less than 15 days prior
written notice to remove the same, in which event Tenant shall at its expense
forthwith remove such Alterations. Any or all wiring and cabling, such as
telephone, computer and data wires installed by Tenant shall be removed by
Tenant at its sole cost, and the Leased Premises shall be restored to their
original condition by the Expiration Date, ordinary wear and tear excepted. All
property permitted or required to be removed by Tenant at the end of the term
remaining in the Leased Premises after Tenant's removal shall be deemed
abandoned and may, at the election of Landlord, either be retained as Landlord's
property or may be removed from the premises by Landlord at Tenant's expense.
8. Use of Leased Premises.
(a) Use. Tenant shall use and occupy the Leased Premises for the singular
purpose specified in Section 1(a)(11) and for no other purpose. Tenant shall not
use or permit the Leased Premises to be used for any other purpose or purposes
without the prior written consent of Landlord, which consent may be granted or
withheld in its sole discretion.
(b) Compliance. Tenant, at its expense, shall comply with the laws, rules
and regulations of any federal, state or municipal authority, or the Maryland
Fire Underwriters Rating Bureau, or with any notice from any public officer
pursuant to law, or with any notice from any insurance company pertaining to
Tenant's occupancy or use of the Leased Premises, whether such notice shall be
served on Landlord or Tenant. In furtherance of the foregoing, and provided
Tenant shall first have obtained Landlord's prior written consent (which Tenant
agrees to promptly request), Tenant shall, at Tenant's sole cost and expense,
make such changes, alterations, renovations or modifications to the Leased
Premises (except for structural repairs) which are necessitated or required by
any such Law.
(i) Legal. Tenant shall not use or permit the Leased Premises or
any part thereof to be used in violation of any present or future applicable
law, regulation or ordinance, or of the certificate of occupancy issued for the
Building or the Leased Premises, and shall immediately discontinue any use of
the Leased Premises which is declared by any governmental authority having
jurisdiction to be in violation of law or said certificate of occupancy. Tenant
will not use or permit the Leased Premises to be used for any purposes that
interfere with the use and enjoyment of the Building by Landlord or the other
tenants, which will increase the existing rate of insurance on the Building or
which violate the requirements of any insurance company insuring the Building or
its contents, or which, in Landlord's sole discretion, impair the reputation of
the Building. Tenant shall refrain from and discontinue such use immediately
upon receipt of written notice from Landlord.
(ii) Fire and Safety. Tenant shall not do, or permit anything to
be done in the Leased Premises, or bring, use or keep anything therein, which
will in any way increase the rate of fire insurance on the Building, or
invalidate or conflict with fire insurance policies on the Building, fixtures or
on property kept therein. Tenant agrees that any increases of fire insurance
premiums on the Building or contents caused by the occupancy of Tenant and any
expense or cost incurred in consequence of negligence or the willful action of
Tenant, Tenant's employees, agents, servants, invitee, or licensees shall be
deemed Additional Rent and paid as accrued.
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(c) Environmental Protection. Tenant and Tenant's employees and agents
shall not dispose of any oil, petroleum or chemical liquids or solids, liquid or
gaseous products or any hazardous waste or hazardous substance including,
without limitation, asbestos (hereinafter collectively referred to as "hazardous
waste"), as those terms are used in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, or in any other federal, state or local
law governing hazardous substances (hereinafter referred to as the "Act"), as
such laws may be amended from time to time at, upon, under or within the Leased
Premises or the Building or the land on which it is built, or into the plumbing
or sewer or water system servicing the Leased Premises or the Building, nor
shall Tenant, its employees or agents cause or permit the discharge, spillage,
uncontrolled loss, seepage or filtration of any hazardous waste at, upon, under
or within the Leased Premises or the Building or the land or into the plumbing
or sewer or water system servicing the same. Tenant shall comply in all respects
with the requirements of the Act and related regulations, and shall notify
Landlord immediately in the event of its discovery of any hazardous waste at,
upon, under or within the Leased Premises or the Building or the land.
(d) Indemnification. Tenant shall indemnify Landlord against all costs,
expenses, liabilities, losses, damages, injunctions, suits, fines, penalties,
claims, and demands, including reasonable attorneys' fees, arising out of any
violation of or default in the covenants of this Section 8. The provisions of
Sections 8(b) and (c) and this Section 8(d) shall survive the expiration of the
Lease Term.
(e) Moving and Deliveries. No freight, furniture, heavy machinery, heavy
equipment, including computer equipment or other bulky matter or fixtures of any
description shall be transferred into or out of the Building or carried in the
elevators, without Landlord's prior written consent and approval. In obtaining
the Landlord's approval as required under this paragraph, Tenant agrees to
provide Landlord with all technical specifications concerning the equipment and
machinery and to pay the costs of any and all structural changes which in the
sole discretion of the Landlord are required to be made in order to safely and
efficiently accommodate such equipment or machinery. If such machinery or
equipment requires special handling, Tenant agrees to employ only persons
holding the proper licences to do said work, and that all work in connection
therewith shall comply with any applicable Federal, State, County or other
governing laws, rules or regulations. Tenant shall promptly remove from the
public areas within or adjacent to the Building any of Tenant's property
delivered or deposited there, and shall be liable for any damage to the Building
or the Leased Premises caused by its moving and deliveries.
(f) Excessive Floor Load. Landlord shall have the right to prescribe the
weight and method of installation and position of safes or other heavy fixtures
or equipment. Tenant will not, without Landlord's prior written approval,
install in the Leased Premises any fixtures, equipment or machinery that will
place a load upon the floor exceeding the designed floor load capacity. Tenant
shall be liable for all damage done to the Building by installing or removing a
safe or any other article of Tenant's office equipment, or due to its being in
the Leased Premises. Landlord shall repair any such damage at Tenant's expense,
and Tenant shall pay the cost therefor to Landlord upon demand, as Additional
Rent.
9. Taxes on Tenant's Property. Tenant shall be liable for, and shall pay at
least ten (10) days before delinquency, all taxes levied against any personal
property or trade fixtures placed by Tenant in or about the Leased Premises. If
any such taxes
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on Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property, or if the assessed value of the Leased 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 as Additional Rent 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.
10. Rules and Regulations. Tenant covenants on behalf of itself, its employees,
agents, licensees and invitees to comply with the rules and regulations set
forth in Exhibit B, which is attached hereto and made a part hereof (the "Rules
and Regulations"). Landlord shall have the right, in its sole discretion, to
make reasonable additions and amendments to the Rules and Regulations from time
to time and Tenant covenants that Tenant, its employees, agents, licensees and
invitees will comply with additions and amendments to the Rules and Regulations
upon Landlord's provision to Tenant of a written copy of the same. Any
unremedied default by Tenant, or any other party set forth above, of any of the
material provisions of the Rules and Regulations as set forth in Exhibit B, or
as amended from time to time, shall be considered to be a default under the
terms of this Lease. Nothing contained in this Lease shall be construed to
impose upon Landlord any duty or obligation to enforce the Rules and
Regulations, or any amendments or additions thereto, against any other tenant.
Landlord shall have no liability to Tenant or any other party for violations of
the Rules and Regulations by any party whatsoever. If there is any inconsistency
between this Lease and the Rules and Regulations, the Lease shall govern.
11. Utilities and Services.
(a) Building Standard Services and Utilities. As long as Tenant is not in
default under any of the covenants of this Lease, Landlord shall, if and insofar
as existing facilities permit, furnish sufficient electric current for routine
and normal requirements for lighting and typical office equipment and machinery,
such as typewriters, calculators, personal computers, small copiers and similar
items, subject to the limitations of Section 11(b). Landlord shall furnish hot
and cold water for lavatory and drinking purposes, lavatory supplies, and
Building standard fluorescent tube replacements and nightly cleaning and
janitorial services Monday through Friday. Landlord further agrees to furnish
heating and cooling during the appropriate seasons of the year, during the
Standard Building Operating Hours and on the days set forth in Section l(a)(15),
exclusive of the Building Holidays specified in Section l(a)(16), with holidays
falling on Saturday observed both on said day and on the preceding Friday, and
holidays falling on Sunday observed on the following Monday.
(b) Overtime Services. Landlord shall be under no obligation to furnish
electric power at any hours other than normal business hours, or for the
operation of any other electrical equipment or appliance, unless arrangements
for such after-hours operations, and for the installation of such electrical
equipment or appliance, shall have been made pursuant to terms and conditions
acceptable to Landlord and embodied in a separate written agreement between
Landlord and Tenant. In the event that Tenant uses electrical services in excess
of that required for normal office use or during periods other than normal
business hours or both, then
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such excess services shall be supplied at the expense of the Tenant, pursuant to
terms, conditions and costs established by the Landlord in its sole discretion.
Should Tenant require heating and cooling services beyond the hours stipulated
in Section 11(a), Landlord will furnish such additional service at the
then-prevailing hourly rate, as established by Landlord from time to time,
provided that Tenant gives Landlord no less than twenty-four (24) hours advance
written notice of the need therefor.
(c) Interruption or Reduction of Service. In no event shall Landlord be
liable to Tenant for any interruption or failure in the supply of any utilities
to the Leased Premises and the Building. Landlord reserves the right to
interrupt service of the heat, plumbing, air conditioning, cooling, electric,
and sewer and water systems, when necessary, by reason of accident, or of
repairs, alterations or improvements which in the judgment of Landlord are
desirable or necessary to be made, until such repairs, alterations or
improvements shall have been completed; and Landlord shall have no
responsibility or liability for failure to supply heat, plumbing, air
conditioning, cooling, electric, and sewer and water service, or other service
or act for the benefit of Tenant, when prevented from so doing by strikes,
accidents or by any other causes beyond Landlord's reasonable control, or by
orders or regulations of any federal, state, county, or municipal authority, or
by any failure to receive suitable fuel supply, or inability despite exercise of
reasonable diligence to obtain the regularly-used fuel or other suitable
substitute; and Tenant agrees that Tenant shall have no claim for damages nor
shall there be any abatement of Base Annual Rent in the event that any of said
systems or service shall be discontinued or shall fail to function for any
reason. If any public utility supplying any utility to the Building, or any law,
order or regulation of any federal, state, county or municipal authority
requires that Landlord or Tenant must reduce or maintain a certain level of
consumption of electricity or any other utility or interior temperature for the
Leased Premises or the Building, which affects the normal business hours or the
provision of any utility the Leased Premises or the Building, Landlord and
Tenant shall each adhere to and abide by such requirement without any reduction
in rent or in any of Tenant's other obligations hereunder. Landlord's obligation
to supply heat and air conditioning are subject to applicable laws and
regulations as to energy conservation and other restrictions.
(d) Excessive Electrical Usage.
(i) Tenant will not install or operate in the Leased Premises any
heavy duty electrical equipment or machinery, without obtaining the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
Landlord may require, as a condition of its consent to the installation of such
equipment or machinery, payment by Tenant, as Additional Rent, for such excess
consumption of electricity as may be occasioned by the operation of said
equipment or machinery. Landlord may make periodic inspections of the Leased
Premises at reasonable times to determine that Tenant's electrically operated
equipment and machinery complies with the provisions of this Section and Section
11(e).
(ii) Landlord shall have the right to require that one or more
separate meters or submeters be installed to record the consumption or use of
electricity, or to cause a reputable independent electrical engineer to survey
and determine the quantity of electricity consumed by such excessive use. The
cost of any such survey or meters and of installation, maintenance and repair
thereof shall be paid by Tenant. Tenant agrees to pay Landlord (or the utility
company, if direct service is provided by the utility company), promptly upon
demand therefor, for all such electricity consumption as shown by said meters,
or a flat monthly charge determined
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by the survey, as applicable, at the rates charged for such service by the local
public utility company.
(e) Excessive Heat Generation. Landlord shall not be liable for its
failure to maintain comfortable atmospheric conditions in all or any portion of
the Leased Premises, due to heat generated by any equipment or machinery
installed by Tenant (with or without Landlord's consent) that exceeds
generally-accepted engineering design practices for normal office purposes. If
Tenant desires additional cooling to offset excessive heat generated by such
equipment or machinery, Tenant shall pay for auxiliary cooling equipment and its
operating costs, including, without limitation, electricity, gas, oil and water,
or for excess electrical consumption by the existing cooling system, as
appropriate.
(f) Security. Any security measures that Landlord may undertake are for
protection of the Building only and shall not be relied upon by Tenant to
protect Tenant, its property, its employees and/or their property.
12. Landlord's Right of Entry. Landlord, its agents, employees and contractors
shall have the right to enter the Leased Premises at all reasonable times,
including emergencies determined by Landlord, (a) to make inspections or to make
repairs, replacements and improvements to Leased Premises or other premises as
Landlord may deem necessary or reasonably desirable to the Premises or to any
other portion of the Building or which Landlord may elect to perform; (b) to
perform nightly cleaning of the Leased Premises; (c) to exhibit the Leased
Premises to prospective purchasers at any reasonable time, or to prospective
tenants during the last one hundred and eighty (180) days of the Lease Term; and
(d) for any purpose whatsoever relating to the safety, protection or
preservation of the Building. Such entry by Landlord shall be, whenever
reasonably possible, during normally business hours, except in cases of
emergency. Landlord shall use reasonable best efforts to minimize interference
to Tenant's business when making repairs, but, unless otherwise agreed with
Tenant, Landlord shall not be required to perform the repairs at any time other
than during normal working hours. The right and authority hereby reserved do not
impose, no does the Landlord assume by reason thereof, any responsibility or
liability whatsoever for the care, maintenance or supervision of the Leased
Premises or any pipes, fixtures, appliances or appurtenances therein contained
or therewith in any manner connected.
13. Maintenance and Repairs.
(a) Landlord Responsibilities. Landlord shall make structural repairs to
the Leased Premises necessary for safety and tenantability, and shall maintain
and repair all Building equipment serving the Leased Premises and all exterior
plate glass in the Leased Premises, and the cost of all such repairs or
maintenance shall be included in Basic Operating Expenses. Tenant waives the
right to make repairs at Landlord's expense under any law, statute or ordinance
now or hereafter in effect. 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 changes, alterations, additions, improvements, repairs,
relocations or replacements in or to the Building and the fixtures and equipment
thereof. 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
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equipment included in the Leased Premises which are located in the Leased
Premises or located elsewhere outside the Leased Premises. Landlord shall use
reasonable efforts not to disturb Tenant's business operations when making
repairs to the Leased Premises or 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.
(b) Tenant Responsibilities. Tenant will keep the Leased Premises and the
fixtures and equipment therein in good order and condition, will take good care
thereof and will suffer no waste or damage thereto. Tenant will promptly repair
at its own expense any damage to the Leased Premises caused by bringing into the
premises any property for Tenant's use or by the installation or removal of such
property, regardless of fault or by who such damage shall be caused, unless
caused by Landlord, its agents, employees or contractors; and, in default of
such repairs by Tenant, Landlord shall make the same and Tenant agrees to pay
the costs thereof to Landlord promptly upon Landlord's demand therefor. At the
expiration or other termination of the Lease Term, Tenant will surrender the
Leased Premises broom clean and in the same order and condition in which they
were on the Rent Commencement Date, ordinary wear and tear excepted. All repairs
and maintenance required to be performed by Tenant shall be made or performed
immediately upon the occurrence of the necessity therefor, and shall be made or
performed in a first class manner, using first class materials, by a contractor
approved by Landlord and bonded unless waived by Landlord, and shall be made or
performed in accordance with (i) all laws and all applicable governmental codes
and requirements, and (ii) insurance requirements. Maintenance and repair of
equipment such as kitchen fixtures, auxiliary air-conditioning equipment,
private bathroom fixtures and any other type of special equipment, together with
related plumbing or electrical services, whether installed by Tenant or by
Landlord on behalf of Tenant, shall be the sole responsibility of Tenant, and
Landlord shall have no obligation in connection therewith. If Tenant refuses or
neglects to promptly commence and complete repairs or maintenance necessary to
satisfy the provisions of this Section, the Landlord may, but shall not be
required to, make and complete said repairs or maintenance and Tenant shall pay
the cost therefor (including overhead) to Landlord upon demand, as Additional
Rent.
14. Common Areas.
(a) Common Areas Defined. In this Lease, "common areas" means all areas,
facilities and improvements provided, from time to time, in the Building for the
mutual convenience and use of tenants or other occupants of the Building, their
respective agents, employees, and invitees and shall include, if provided, but
shall not be limited to, the lobbies and hallways, the public restrooms, the
parking areas and facilities, access roads, driveways, retaining walls,
sidewalks, walkways, landscaped areas, and exterior lighting facilities.
(b) Landlord's Control. Landlord shall, as between Landlord and Tenant, at
all times during the term of the Lease have the sole and exclusive control,
management and direction of the common areas, and may at any time and from time
to time during the term exclude and restrain any person from use or occupancy
thereof, excepting, however, Tenant and other tenants of Landlord and bona fide
invitee of either who make use of said areas in accordance with the rules and
regulations established by
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Landlord from time to time with respect thereto. The rights of Tenant in and to
the common areas shall at all times be subject to the rights of others to use
the same in common with Tenant, and it shall be the duty of Tenant to keep all
of said areas free and clear of any obstructions created or permitted by Tenant
or resulting from Tenant's operation. Landlord may at any time and from time to
time close all or any portion of the common areas to make repairs or changes or
to such extent as may, in the opinion of Landlord, be necessary to prevent a
dedication thereof or the accrual of any rights to any person or to the public
therein, to close temporarily any or all portions of the said areas to
discourage noncustomer parking, and to do and perform such other acts in and to
said areas as, in the exercise of good business judgment, Landlord shall
determine to be advisable with a view to the improvement of the convenience and
use thereof by tenants, their employees, agents, and invites.
(c) Changes and Additions to the Building, Additional Construction.
Landlord hereby reserves the right at any time to make alterations or additions
to the Building, as well as in or to the street entrances, halls, passages,
stairways and other common facilities thereof. Tenant agrees that Landlord shall
at all times have the right and privilege of determining the nature and extent
of the common areas, and of making such changes, rearrangements, additions or
reductions therein and thereto from time to time which in its opinion are deemed
to be desirable and for the best interest of all persons using the common areas
or which are as a result of any federal, state or local environmental protection
or other law, rule, regulation, guideline or order. The purpose of the floor
plan attached hereto as Exhibit A is to show the approximate locational
relationship of the Leased Premises to other units in the Building and the
common areas as of the Rent Commencement Date. Nothing described in Exhibit A
shall limit or prevent Landlord from effecting any change or alteration to the
Building or the land upon which it is built as described in this paragraph.
(d) Parking. Tenant shall have the right to utilize the Building's parking
facilities on a nonexclusive basis with other tenants of the Building, upon such
reasonable 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 the other tenants. Tenant shall not use parking
areas for the overnight storage of vehicles, other than Tenant-owned corporate
vehicles which Landlord and Tenant have previously agreed will be regularly
parked overnight at the Building. 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
located therein, or for any injury sustained by any person in or about the
parking facilities.
15. Surrender and Inspection.
(a) Surrender. Upon the Expiration Date or other termination of the term
of this Lease, Tenant shall quit and surrender the Leased Premises to the
Landlord in as good order and condition as when received, ordinary wear and tear
excepted, and Tenant shall remove all of its property from the Leased Premises
by the Expiration Date or other termination of this Lease, all to the reasonable
satisfaction of the Landlord. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this Lease.
(b) Inspection. Tenant shall have the right to be present at time of final
inspection of the Leased Premises to determine if any damages were done thereto,
if Tenant notifies Landlord by certified mail of its intention to move, date of
moving
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and new address. The notice of Tenant's desire to be present at the final
inspection of the Leased Premises shall be given at least fifteen (15) days
prior to the date of moving. Upon receipt of such notice, Landlord shall notify
Tenant of time and date when the Leased Premises are to be inspected. The
inspection shall occur within five (5) days before or five (5) days after
Tenant's date of moving, said inspection date to be designated by Landlord.
Tenant shall be deemed to have been advised of its rights under this paragraph
by execution of this Lease.
(c) Fixtures and Personal Property Remaining. If Tenant does not remove
Tenant's furniture, equipment, machinery, trade fixtures, floor coverings and
all other items of personal property of every kind and description from the
Leased Premises prior to the Expiration Date, then Tenant shall be conclusively
presumed to have conveyed the same to Landlord under this Lease as a bill of
sale without further payment or credit by Landlord to Tenant.
16. Tenant Holding Over. If Tenant holds possession of the Leased Premises after
the Expiration Date or other termination of this Lease, Landlord shall have the
option, exercisable in writing within thirty (30) days after the date of
termination of aforesaid, to treat Tenant as a trespasser, or as a tenant by the
month. If the Landlord fails to make such election then the Tenant shall be
deemed a tenant by the month, commencing with the first day after the
termination of the Lease at one hundred and fifty percent (150%) the Basic
Monthly Rent paid during the last month of the Term, and upon all the other
terms of this Lease, including the provisions of this paragraph. Said holdover
term shall terminate upon thirty (30) days notice from one party to the other.
Nothing contained herein shall be construed within said thirty (30) days after
the date of Lease termination as aforesaid as a consent by Landlord to the
occupancy or possession of the Leased Premises by Tenant after the termination
of the Lease, and Landlord, upon said termination, if Landlord elects to treat
Tenant as a trespasser, shall be entitled to the benefit of all public general
or public laws relating to the speedy recovery of the possession of land and
tenements held over by Tenant, whether now or hereafter in force and effect. If
Tenant fails to surrender the Leased Premises upon the expiration or other
termination of 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 attorneys' fees, founded on or resulting from such failure to surrender.
17. Covenant Against Assignment and Subletting. Tenant shall not assign,
mortgage or encumber this Lease, or any right hereunder, nor sublet the Leased
Premises or any part thereof, nor permit the Leased Premises to be used by
others without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, however, Tenant may sublet
this lease to an affiliate, parent or subsidiary of Tenant without Landlord's
consent. If Tenant, or any Guarantor, is a corporation, unincorporated
association or partnership, then the transfer, assignment or hypothecation of
any stock or interest in such corporation, association or partnership so as to
result in a change in the control thereof by the person, persons or entities
owning a controlling interest therein as of the date of this Lease, without the
prior written consent of Landlord as described above, shall be deemed an
assignment made in breach of this covenant. Landlord's consent in any specific
instance to any assignment, mortgage, encumbrance, subletting or use of the
Leased Premises and its collection and acceptance of rent from any such approved
assignee, subtenant or other occupant shall neither constitute a waiver of the
provisions of this paragraph, nor be construed as permission for any subsequent
assignment, mortgage, encumbrance, subletting or use without compliance with
this paragraph. Without the prior written consent of Landlord, this Lease and
the
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interest of Tenant, or any assignee of Tenant, shall not pass by operation of
law, nor shall it be subject to garnishment or sale under execution in any suit
or proceeding which may be brought against or by Tenant, or any assignee of
Tenant. No permitted assignment or sublease or collection of rent from an
approved assignee or subtenant shall relieve Tenant of its obligations
hereunder. Landlord shall have the right at any time to assign this Lease, in
whole or in part, to any third party.
18. Bankruptcy.
(a) The following shall be Events of Bankruptcy under this Lease: (1)
Tenant's or any guarantor of Tenant's obligations under this Lease ("Tenant's
Guarantor") becoming insolvent, as that term is defined in Title 11 of the
United States Code (the "Bankruptcy Code"), or under the insolvency laws of any
state, 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 or Tenant's Guarantor property or assets, or the institution of a
foreclosure action upon any of Tenant's or Tenant's Guarantor's real or personal
property; (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 or Tenant's Guarantor 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 or Tenant's Guarantor's making or consenting to an
assignment for the benefit of creditors or a common law composition of
creditors; or (6) if a corporate reorganization of Tenant or an agent with its
creditors shall be approved by a court under the Federal Bankruptcy Act.
(b) Upon occurrence of an Event of Bankruptcy, Tenant shall be deemed to
have breached a material covenant of this Lease and Landlord shall have all
rights and remedies available to Landlord pursuant to Section 20; 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 20 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.
19. Default. Each of the following shall be deemed a default by Tenant and a
breach of this Lease:
(a) An Event of Bankruptcy as defined in Section 18;
(b) An assignment or encumbrance of Tenant's interest in this Lease or
the Leased Premises or a subletting of any part of the Leased Premises in
violation of Section 17;
(c) The suspension of business by Tenant;
(d) The filing of a tax lien against any property of Tenant;
(e) Discontinuance by Tenant of the conduct of its business in the
Leased Premises, or an abandonment or vacation of the Leased Premises by Tenant
for a period of sixty (60) days or more;
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(f) A failure by Tenant to pay Minimum Annual Rent or Additional Rent when
due, where such failure continues for ten (10) days after notice thereof from
Landlord, provided, however, that Landlord need provide such notice no more than
three (3) times in any twelve (12) month period, and the fourth such default in
a twelve month period shall be deemed a default by Tenant without such notice
from Landlord;
(g) A failure by Tenant to observe and perform any other term, covenant,
agreement or condition of this Lease to be observed or performed by Tenant,
where such failure continues for ten (10) business days after notice thereof
from Landlord, provided, however, that if the nature of the default is such that
the same cannot be reasonably be cured within the ten (10) business day period
allowed, Tenant shall not be deemed to be in default if Tenant shall, within
such ten (10) business day period, commence to cure and there after diligently
prosecute the same to completion. Nonetheless, Tenant will be deemed to be in
default if the same default is not cured within sixty (60) days after that
reasonable effort commences. Landlord shall not, however, be required to give
such notice if Tenant's failure to perform constitutes a noncurable breach of
this Lease. The notice required by this Paragraph is intended to satisfy any and
all notice requirements imposed by law on Landlord and is not in addition to any
such requirement;
(h) Any material misrepresentation by Tenant to Landlord in connection
with the negotiation or execution of this Lease;
(i) A default by Tenant under any other lease or sublease for any other
space in the Building, which has resulted in the termination of said lease;
(j) Failure by any surety or guarantor of this Lease to comply with all
the provisions of the suretyship or guaranty agreement; or
(k) The merger of any corporate surety or corporate guarantor of this
Lease with another entity, or the liquidation or dissolution of such surety or
guarantor or the change of control of such surety or guarantor caused by the
transfer of stock of such surety or guarantor, except by reason of the death of
any shareholder thereof.
20. Landlord's Rights Upon Tenant's Default. Upon default by Tenant of any of
the terms or covenants of this Lease, then in addition to any other remedies
available to Landlord herein at law or in equity, Landlord shall be entitled to
remedy such default as follows:
(a) Re-Entry. Landlord shall have the right, immediately or at any time
thereafter, without further notice to Tenant (unless otherwise provided herein),
to enter the Leased Premises (breaking open locked doors, if necessary, and
using as much reasonable force as necessary to effect the manner thereof),
without terminating this Lease or being guilty of trespass, and do any and all
acts as Landlord may deem necessary, proper or convenient to cure such default,
for the account and at the expense of Tenant, and Tenant agrees to pay to
Landlord as Additional Rent all damage and/or expense incurred by Landlord in so
doing, including interest at the Penalty Rate, from the due date until the date
payment is received by Landlord. Landlord shall not be liable for any loss,
injury or damage resulting in any way from such action by Landlord.
(b) Termination. Landlord shall have the right to terminate this Lease and
Tenant's right to possession of the Leased Premises and, with or without legal
process, take possession of the Leased Premises and remove Tenant, any occupant
and
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any property therefrom, using such force as may be necessary, without being
guilty of trespass and without relinquishing any rights of Landlord against
Tenant. Landlord shall be entitled to recover damages from Tenant in an amount
equal to the amount herein covenanted to be paid as Minimum Annual Rent during
the remainder of the Lease Term, said Minimum Annual Rent and Additional Rent
for the full term then remaining having been fully accelerated at the option of
Landlord, together with (i) all expenses of any proceedings (including, but not
limited to, legal expenses and reasonable attorney's fees) which may be
necessary in order for Landlord to recover possession of the Leased Premises,
(ii) the expenses of the re-renting of the Leased Premises (including, but not
limited to, any commissions paid to any real estate agent, advertising expense
and the costs of such alterations, repairs, replacements and decoration or
re-decoration as Landlord, in its sole judgment, considers advisable and
necessary for the purpose of re-renting the Leased Premises), and (iii) interest
computed at the Penalty Rate from the due date until paid; provided, however,
that there shall be credited against the amount of such damages all amounts
received by Landlord from such re-renting of the Leased Premises and such
amounts shall be refunded to Tenant.
Landlord shall use its best efforts to re-rent the Premises, but Landlord
has no obligation to favor the Leased Premises over any other space available
for lease in the Building, and Landlord shall in no event be liable in any way
whatsoever for failure to re-rent the Leased Premises or, in the event that the
Leased Premises are re-rented, for failure to collect the rent thereof under
such re-renting. No act or thing done by Landlord shall be deemed to be an
acceptance of a surrender of the Leased Premises, unless Landlord shall execute
a written agreement of surrender with Tenant. Tenant's liability hereunder shall
not be terminated by the execution of a new lease of the Leased Premises by
Landlord. In the event Landlord does not exercise its option to accelerate the
payment of Minimum Annual Rent and Additional Rent as provided hereinabove, then
Tenant agrees to pay to Landlord, upon demand, the amount of damages herein
provided after the amount of such damages for any month shall have been
ascertained; provided, however, that any expenses incurred by Landlord shall be
deemed to be a part of the damages for the month in which they were incurred.
Separate actions may be maintained each month or at other times by Landlord
against Tenant to recover the damages then due, without waiting until the end of
the term of this Lease to determine the aggregate amount of such damages. Tenant
hereby expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or being
dispossessed for any cause, or in the event of Landlord obtaining possession of
the Leased Premises by reason of the violation by Tenant of any of the covenants
and conditions of this Lease.
(c) Distress. Upon any default by Tenant in the payment of Minimum Annual
Rent or Additional Rent, Landlord shall have the right, without notice, fifteen
(l5) days after payment of such sum was due, to institute an action of distress
therefor, and, upon distress, in Landlord's discretion, this tenancy shall
terminate. In the event of such termination, the provisions of Section 20(b)
shall be applicable.
(d) Lien for Rent. Upon any default by Tenant in the payment of Minimum
Annual Rent or Additional Rent, Landlord shall have a lien upon the property of
Tenant in the Leased Premises for the amount of any unpaid Minimum Annual Rent
or Additional Rent. In such event, Tenant shall not remove any of Tenant's
property from the Leased Premises except with the prior written consent of
Landlord, and Landlord
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shall have the right and privilege, at its option, to take possession of all
property of Tenant in the Leased Premises, to store the same on the Leased
Premises, or to remove it and store it in such place as may be selected by
Landlord, at Tenant's risk and expense.
(e) No Future Lease Rights. If at any time during the term of this Lease
Tenant has been in default beyond Tenant's right to cure period, then,
regardless of whether Tenant is in default at the time of any option or future
right, all of Tenant's present and future rights to this Lease are then
terminated when the default occurs.
(f) Utilities and Services. Upon any default by Tenant, Landlord may
immediately cease to provide all utilities and services to the Leased Premises
as provided under Section 11 herein.
(g) Landlord's Remedies Cumulative. All rights and remedies of Landlord
herein enumerated shall be cumulative, and none shall exclude any other right or
remedy allowed by law. For the purposes of any suit brought or based hereon,
this Lease shall be construed to be a divisible contract, to the end that
successive actions may be maintained on this Lease as successive periodic sums
mature hereunder.
21. Lender Requirements.
(a) Subordination. Tenant agrees that this Lease is subject and
subordinate to any and all ground or underlying leases and to the lien of any
first mortgages or deeds of trust now on or which at any time may be made a lien
upon the Building, or any part thereof, and to all advances made or hereafter to
be made upon the security thereof. This subordination provision shall be
self-operative and no further instrument of subordination shall be required.
Tenant agrees to execute and deliver, upon request, within five (5) days demand
by Landlord, such further instrument or instruments confirming this
subordination as shall be desired by Landlord or by any mortgagee or proposed
mortgagee; and Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such instrument or instruments. Upon Tenant's
written request, Landlord shall use its best efforts to acquire from any such
mortgagee an agreement that any proceeding to foreclose, sell or any other
action taken under the mortgage shall not affect Tenant's rights to continue to
occupy the Leased Premises and exercise and enjoy all of its rights hereunder so
long as Tenant complies with the terms and provisions of this Lease, and
continues to make the payments required here-under to the appropriate designated
party, provided, Landlord's failure to acquire such an agreement shall not
mitigate Tenant's obligations hereunder. Tenant further agrees that, at the
option of the holder of any first mortgage or of the trustee under any first
deed of trust, this Lease may be made superior to said first mortgage or first
deed of trust by the insertion therein of a declaration that this Lease is
superior thereto.
(b) Attornment. In the event any proceedings are brought for the
foreclosure of, or in the event of exercise of the power of sale under, any deed
to secure debt given by Landlord and covering the Leased Premises, Tenant shall
attorn to the purchaser upon any such foreclosure or sale and recognize such
purchaser as the owner and landlord under this Lease.
(c) Financing. This Lease is subject to the approval of the mortgage
lender(s) providing mortgage financing for the Building, and disapproval of this
Lease by any such mortgage lender shall result in termination of this Lease. In
the event that any mortgage lender providing mortgage financing for the Building
requires, as a
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condition of such financing, that modifications to this Lease be obtained, and
provided that such modifications (i) are reasonable, (ii) do not adversely
affect Tenant's use of the Leased Premises as herein permitted, (iii) do not
materially alter the approved plans for the Basic Work and Additional Work and
(iv) do not increase the rentals and other sums required to be paid by Tenant
hereunder, then Landlord may submit to Tenant a written amendment to this Lease
incorporating such required modifications, and, in the event Tenant does not
execute and return to Landlord such written amendment within ten (10) days after
the same has been submitted to Tenant, then Landlord shall thereafter have the
right, at its sole option, to terminate this Lease. Such option shall be
exercisable by Landlord giving Tenant written notice of termination, immediately
whereupon this Lease shall be terminated, and money or security therefor
deposited by Tenant with Landlord shall be returned to Tenant, and both Landlord
and Tenant shall thereupon be relieved from any and all further liability or
obligation hereunder.
(d) Financial Statements. Tenant agrees, not more often than once per
calendar year, upon written notice by Landlord, to deliver to Landlord such
financial statements detailing its profits and losses, certified by a duly
authorized officer of Tenants if Tenant.
22. Estoppel Certificates. Tenant agrees, at any time and from time to time,
upon not less than ten (10) days prior written notice by Landlord, to execute,
acknowledge and deliver to Landlord a written estoppel certificate (i)
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, stating the nature of same), (ii) stating the
Rent Commencement Date of the Lease Term, (iii) stating the amounts of Minimum
Annual Rent and Additional Rent and the dates to which the Minimum Annual Rent
and Additional Rent have been paid by Tenant, (iv) stating the amount of any
Security Deposit, (v) stating whether or not to the best knowledge of Tenant,
Landlord is in default in the performance of any covenant, agreement or
condition contained in this Lease, and, if so, specifying each such default of
which Tenant may have knowledge, (vi) stating that Tenant has no right to set
off and no defense against payment of the Minimum Annual Rent or Additional
Rent, (vii) address to which notices to Tenant should be sent. and (viii)
certifying such other matters as may be requested by Landlord. Any such
certificate delivered pursuant hereto may be relied upon by an owner of the
Building, any prospective purchaser of the Building, any mortgagee or
prospective mortgagee of the Building or of Landlord's interest therein, or any
prospective assignee of any such mortgage. Failure to deliver the aforesaid
certificate within the five (5) days shall be conclusive upon Tenant for the
benefit of Landlord and any successor to Landlord that this Lease is in full
force and effect and has not been modified except as may be represented by the
party requesting the certificate. Tenant shall be liable for any loss incurred
by Landlord resulting from Tenant's failure to timely execute and deliver any
estoppel certificate requested by Landlord, and shall reimburse Landlord for the
amount of any such loss upon demand, as Additional Rent.
23. Damage by Fire or Other Casualty. If the Leased Premises, or any other
portion of the Building shall, through no fault of Tenant or Tenant's agents,
servants, employees, customers, contractors, visitors or licensees, be damaged
by fire, the elements, unavoidable accident or other casualty:
(a) Except as otherwise provided in subparagraph (b) hereof, Landlord, at
Landlord's expense, shall promptly restore the Leased Premises, and Tenant, at
Tenant's sole expense, shall promptly restore all leasehold improvements
installed in the Leased Premises by Tenant or at Tenant's request and its own
furniture, furnishings, trade fixtures and equipment and the rent shall not be
abated. No
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penalty shall accrue for reasonable delay which may arise by reason of
adjustment of insurance on the part of Landlord, or on account of labor
problems, or any other cause beyond Landlord's reasonable control. If the damage
or destruction is such as to make the Leased Premises or any substantial part
thereof untenantable (in Landlord's judgment), and provided that such damage or
destruction is not due in whole or part to the act or omission of Tenant or
Tenant's agents, employees or invites, the Minimum Annual Rent shall abate
proportionately (based on proportion of the number of square feet rendered
untenantable to the total number of square feet of the Leased Premises), from
the date of the damage or destruction until the date the Leased Premises has
been restored by Landlord.
(b) If the Leased Premises are substantially damaged or are rendered
substantially untenantable by fire or other casualty, or if Landlord's architect
certifies that the Leased Premises cannot be repaired within one hundred twenty
(120) working days of normal working hours, said period commencing with the
start of the repair work, or if Landlord shall decide not to restore or repair
the same, or if more than fifty percent (50%) of the gross leasable area of the
Building is rendered untenantable (even if the Leased Premises is undamaged) or
if Landlord shall decide to demolish the Building or not to rebuild it, then
Landlord may, within ninety (90) days after such fire or other casualty,
terminate this Lease by giving Tenant a notice in writing of such decision, and
thereupon the term of this Lease shall expire on the date specified in such
notice, or, if not date is so specified, by lapse of time upon the third day
after such notice is given, and Tenant shall vacate the Leased Premises and
surrender the same to Landlord. Upon the termination of this Lease under the
conditions hereinbefore provided, Tenant's liability for Minimum Annual Rent and
Additional Rent shall cease as of the day following the casualty.
(c) The proceeds payable under all casualty insurance policies maintained
by Landlord on the Leased Premises shall belong to and be the property of
Landlord, and Tenant shall not have any interest in such proceeds. Tenant agrees
to look to Tenant's casualty insurance policies for the restoration and
replacement of the leasehold improvements installed in the Leased Premises by
Tenant or at Tenant's request and Tenant's fixtures, equipment and furnishings
in the Leased Premises, and in the event of termination of this Lease, for any
reason, following any such damage or destruction, Tenant shall promptly assign
to Landlord or otherwise pay to Landlord, upon Landlord's request, the proceeds
of said insurance and such other additional funds so that the total amount
assigned and/or paid by Tenant to Landlord shall be sufficient to restore
(whether or not any such restoration is actually to occur) all improvements,
fixtures, equipment and furnishings (excepting only Tenant's trade fixtures and
equipment) existing in the Leased Premises immediately prior to such damage or
destruction.
(d) Notwithstanding anything to the contrary in this Section 23 or in any
other provision of this Lease, any obligation (under this Lease or otherwise) of
Landlord to restore all or any portion of the Leased Premises shall be subject
to Landlord's receipt of approval of the same by the mortgagee(s) of Landlord
(and any other approvals required by applicable laws), as well as receipt from
any such mortgagee(s) of such fire and other hazard insurance policy proceeds as
may have been assigned to any such mortgagee; it being agreed that if Landlord
has not received such approval(s) and proceeds within one hundred and eighty
(180) days after any such casualty, then Landlord shall have the option to
terminate this Lease, at any time thereafter, upon notice to Tenant.
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24. Condemnation. In the event the whole or a substantial part of the Leased
Premises or the Building 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 shall have the right
to terminate this Lease effective as of the date possession is required to be
surrendered to said authority, and the Minimum Annual Rent and Additional Rent
shall be apportioned as of the date. For purposes of this section, a substantial
part of the Leased Premises or the Building shall be considered to have been
taken if, in Landlord's opinion, the taking shall render it commercially
undesirable for Landlord to permit this Lease to continue or to continue
operating the Leased Premises or 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, the Minimum Annual Rent and
Additional Rents shall be adjusted (based on the ratio that the number of square
feet of rentable area taken from the Leased Premises bears to the number of
rentable square feet in the Leased Premises immediately prior to such taking) as
of the date possession is required to be surrendered to said authority. 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, as long as such award is made in addition to and separately stated
from any award made to Landlord for the Leased Premises or the Building.
Landlord shall have no obligation to contest any taking.
25. Landlord's Reserved Rights. The Landlord reserves the following rights:
(a) To decorate, remodel, repair, alter or otherwise prepare the Leased
Premises for reoccupancy during the last ninety (90) days of the Lease Term, if
during or prior to that time Tenant vacates the Leased Premises; and
(b) To show the Leased Premises to prospective tenants or brokers during
the last one hundred eighty (180) days of the term of this Lease, and to show
the Leased Premises to prospective purchasers, mortgagee, or assignee of any
mortgage on the Building at all reasonable times provided that reasonable prior
notice is given to Tenant in each case and that Tenant's use and occupancy of
the Leased Premises shall not be materially inconvenienced by any such action of
Landlord.
26. Landlord and Tenant Liability.
(a) Landlord's Liability. It is understood and agreed that Landlord is a
Maryland limited partnership and/or joint venture and that no partner of the
partnership, as may now or hereinafter be constituted, shall have liability to
Tenant or any person claiming under, by or through Tenant on any action, claim,
suit or demand brought pursuant to the terms and conditions of this Lease or
arising out of the occupancy by the Tenant of the Leased Premises. Landlord, or
its agents, shall not be responsible or liable to the Tenant or its agents,
employees, contractors, customers or other visitors for any injury or damage
resulting from acts or omissions of persons occupying property adjoining the
Leased Premises, or any part of the Building of which the Leased Premises are a
part, or for any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, rain, dampness or
snow or leaks from or through any part of the Leased Premises or the Building,
including the roof, or from the pipes,
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conduits, appliances or plumbing works, or from the roof, street or subsurface
or from any other place or by dampness or by any other cause of whatsoever
nature, unless caused by or due to the gross negligence of Landlord, its agents,
servants, or employees. All personal property and equipment located in the
Leased Premises shall be at the risk of Tenant.
(b) Tenant's Liability. Tenant shall reimburse Landlord for all expense,
damages or fines, incurred or suffered by Landlord by reason of any breach,
violation or nonperformance by Tenant, or its agents, servants, or employees, of
any material covenant or material provision of this Lease or the Rules and
Regulations promulgated by Landlord hereunder from time to time, or by reason of
damage to persons or property caused by moving property of or for Tenant in or
out of the Building, or by the installation or removal of furniture or other
property of or for Tenant, or by reason of or arising out of the carelessness,
negligence or improper conduct of Tenant, or its agents, servants, employees,
invites or licensees in the use or occupancy of the Leased Premises.
(c) Indemnity. Tenant shall indemnify Landlord and its agents and
employees and save them harmless from and against any and all claims, actions,
damages, liabilities and expenses in connection with loss of life, personal
injury and/or damage to property (i) arising from or out of the occupancy or use
by Tenant of the Leased Premises or any part thereof, or (ii) occasioned wholly
or in part by any act or omission of the Tenant, its agents, contractors,
employees, servants, invites or licensees, whether inside the Leased Premises or
elsewhere in the Building; provided, however, that this indemnification shall
not apply to any such injury, loss, damage or liability arising from any
omission, fault, negligence, or misconduct on the part of the Landlord, its
agents, servants, employees, contractors or licensees. In the event that
Landlord or its agents and employees shall, without fault on its or their part,
be made a party to any litigation commenced by or against Tenant, then Tenant
shall protect and hold the same harmless and shall pay all costs, expenses and
reasonable attorneys' fees incurred or paid in connection with such litigation.
(d) Criminal Acts of Third Parties. Landlord shall not be liable in any
manner to Tenant, its agents, employees, licensees, invitees or contractors for
any injury or damage to Tenant, Tenant's agents, employees, licensees, invites,
or contractors or their property caused by the criminal or intentional
misconduct of third parties. All claims against Landlord for any such damage or
injury are hereby expressly waived by Tenant, and Tenant hereby agrees to hold
harmless and indemnify Landlord from all such damages and the expense of
defending all claims made by Tenant's agents, employees, licensees, invitees or
contractors arising out of such acts.
27. Tenant's Insurance.
(a) Coverages. Tenant shall have issued, pay the premiums therefor, and
maintain in full force and effect during the Lease Term:
(i) Commercial General Liability. A commercial general liability
insurance policy or policies (providing among other coverages: Blanket
Contractual, Personal Injury, independent Contractors, Products/Completed
Operations Hazard, Automobile Liability/Comprehensive Form, and Workers
Compensation) in which the Landlord (and such additional persons and/or entities
as Landlord may request) and Tenant shall be the insured, naming the Landlord
(and such additional persons and/or entities as Landlord may request) and Tenant
as insured parties in the amount of Two
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Million and No/100 Dollars ($2,000,000.00) combined single limit general
liability coverage for bodily injury or property damage, which amount may be
increased from time to time by the Landlord in its reasonable determination;
(ii) All-Risk Property. All-risk property insurance, including
theft, naming Landlord (and such additional persons and/or entities as Landlord
may request) and Tenant as insured, written at replacement cost value and with
replacement cost endorsement, covering all leasehold improvements installed in
the Leased Premises by Tenant or at Tenant's request and all of Tenant's
personal property in the Leased Premises (including, without limitation,
inventory, trade fixtures, floor coverings, furniture and other property
removable by Tenant under the provisions of this Lease);
(iii) Workers' Compensation. If and to the extent required by law,
workers' compensation and employer's liability or similar insurance in form and
amounts required by law; and
(iv) Additional Insurance. Such additional insurance as any
mortgagee of the Building may require.
(b) Policy Requirements. In the event Tenant shall fail to provide such
insurance, or shall fail to pay the premiums when due, Landlord shall have the
right to cause such insurance to be issued and to pay the premiums therefor, or
any premiums in default, and to collect same as Additional Rent together with
interest at the Penalty Rate on the amount of such premiums from the date of
payment by Landlord until the date of repayment by Tenant. All such policies
shall contain only such reasonable deductible amounts as may be approved in
advance by Landlord and shall contain a provision that Landlord shall receive
not less than thirty (30) days advance notice in writing from the insurance
company of any intention of the insurance company to cancel such policy or
policies. Tenant shall provide written evidence to Landlord of its acquisition
of such policies no later than ten (10) days prior to the commencement of this
Lease and prior to any renewal date of such policies. All policies shall be
carried with an insurance company qualified to do business in the State of
Maryland, and rated A or better by the A.M. Best Company.
(c) No Limitation of Liability. Neither the issuance of any insurance
policy required under this Lease nor the minimum limits specified herein shall
be deemed to limit or restrict in any way Tenant's liability arising under or
out of this Lease.
(d) Notice of Fire and Accident. Tenant shall give Landlord immediate
notice in case of fire, theft, or accidents in the Leased Premises, and in case
of fire, theft or accidents in the Building if involving Tenant, its agents,
employees or invitees.
28. Waiver of Subrogation. Landlord and Tenant mutually covenant and agree that
each party, in connection with insurance policies required to be furnished in
accordance with the terms and conditions of this Lease, or in connection with
insurance policies which they obtain insuring such insurable interest as
Landlord or Tenant may have in its own properties, whether personal or real,
shall expressly waive any right of subrogation on the part of the insurer
against the Landlord (and any mortgagee requested by Landlord) or Tenant as the
same may be applicable, which right to the extent not prohibited or violative of
any such policy is hereby expressly waived, and Landlord and Tenant each
mutually waive all right of recovery, claims, losses and/or damages against each
other, their agents, or employees for any
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loss, damage or injury of any nature whatsoever to property or person for which
either party is required by this Lease to carry insurance.
29. No Liens Permitted: Discharged. Tenant will not permit to be created or to
remain undischarged any lien, encumbrance or charge (arising out of any work
done or materials or supplies furnished, or claimed to have been done or
furnished, by any contractor, mechanic, laborer or materialman or any mortgage,
conditional sale, security agreement or chattel mortgage, or otherwise by or for
Tenant) which might be or become a lien or encumbrance or charge upon the
Building or any part thereof or the income therefrom. Tenant will not suffer any
other matter or thing whereby the estate, rights and interests of Landlord in
the Building or any part thereof might be impaired. If any lien, or notice of
lien on account of an alleged debt of Tenant or any notice of contract by a
party engaged by Tenant or Tenant's contractor to work on the Leased Premises
shall be filed against the Building or any part thereof, Tenant, within fifteen
(15) days after notice of the filing thereof, will cause the same to be
discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction or otherwise. If Tenant shall fail to cause such lien or notice of
lien to be discharged within the period aforesaid, then, in addition to any
other right or remedy, Landlord may, but shall not be obligated to, discharge
the same either by paying the amounts claimed to be due or by procuring the
discharge of such lien by deposit or by bonding proceedings and in any such
event Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such lien by the lienor and to
pay the amount of the judgment in favor of the lienor with interest, costs and
allowances. Any amount so paid by Landlord and all costs and expenses, including
attorneys' fees, incurred by Landlord in connection therewith, shall constitute
Additional Rent payable by Tenant under this Lease and shall be paid by Tenant
to Landlord on demand. Nothing herein contained shall obligate Tenant to pay or
discharge any lien created by Landlord.
30. Signs and Advertisements. Landlord shall provide for Tenant, at Landlord's
expense, a notice in the Building directory, Building street sign, and a sign
for the entrance door to the Leased Premises in the type and manner Landlord
from time to time provides for tenants of the Building. No other sign,
advertisement, notice or any other thing of any kind whatsoever shall be
inscribed, painted, affixed or displayed in or about the Building by Tenant and
if any such sign, advertisement or notice is exhibited, Landlord shall have the
right to remove the same and Tenant shall be liable for any and all expenses
incurred by Landlord for said removal. Tenant agrees to maintain its entrance
door or entry sign in good condition and repair at all times.
31. Notices. All notices to be given under this Lease shall be in writing,
hand-delivered, sent by Federal Express, or mailed by United States Certified or
Registered Mail, postage prepaid. Notices should be delivered as follows:
(a) To the Landlord at the address specified in Section 1(a)(18).
(b) To the Tenant at the addresses specified in Sections l(a)(17).
Any such notice shall be deemed to be served on the date it is hand-delivered or
delivered by Federal Express, or on the third day after the date on which it is
deposited in the U.S. mails. Landlord and Tenant shall each have the right to
change
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the person and/or address to which notices shall be delivered upon written
notice thereof to the other party sent pursuant to the provisions of this
paragraph.
32. Time. Landlord and Tenant acknowledge that time is of the essence in the
performance of any and all obligations, terms, and provisions of this Lease.
33. Postponement of Performance. In the event that either party hereto shall be
delayed or hindered in or prevented from the performance of any act required
hereunder by reason of strikes, labor troubles, inability to procure labor or
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrection, war, acts of God, fire or other casualty or other reason of
a similar or dissimilar nature beyond the reasonable control of the party
delayed in performing work or doing acts required under the terms of this Lease,
then performance of such act shall be excused for the period of the delay and
the period for the performance of any such act shall be extended for a period
equivalent to the period of such delay. The provisions of this paragraph shall
not operate to excuse Tenant from the prompt payment of Minimum Annual Rent or
Additional Rent and shall not operate to extend the term of this Lease. Delays
or failures to perform resulting from lack of funds shall not be deemed delays
beyond the reasonable control of a party.
34. No Waiver. No provision of this Lease shall be deemed to have been waived by
Landlord, unless such waiver be in writing signed by Landlord. No waiver by
Landlord of any breach by Tenant of any of the terms, covenants, agreements, or
conditions of this Lease shall be deemed to constitute a waiver of any
succeeding breach thereof, or a waiver of any breach of any of the other terms,
covenants, agreements, and conditions herein contained.
No employee of Landlord or of Landlord's agents shall have any authority
to accept the keys of the Leased Premises prior to termination of the Lease, and
the delivery of keys to any employee of Landlord or Landlord's agents shall not
operate as a termination of the Lease or a surrender of the Leased Premises. The
receipt by Landlord of any payment of Minimum Annual Rent or Additional Rent
with knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. The failure of Landlord to enforce any of the Rules and
Regulations made a part of this Lease, or hereafter adopted, against Tenant or
any other tenant in the Building shall not be deemed a waiver of any such Rules
and Regulations.
35. Limitation of Landlord's Liability. 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
interest of Landlord in the Building of which the Leased Premises are a part;
(b) neither Landlord nor any partner of Landlord shall be personally liable with
respect to any claim arising out of or related to this Lease; (c) no partner of
Landlord shall be sued or named as a party in any suit or action (except as may
be necessary to secure jurisdiction of Landlord); (d) no service of process
shall be made against any partner of Landlord (except as may be necessary to
secure jurisdiction of Landlord); (e) 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; and (f) these covenants and agreements are enforceable both
by Landlord and also by any partner of Landlord.
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36. Transfer of the Building. In the event of the sale or other transfer of
Landlord's right, title and interest in the Leased Premises or the Building
(except in the case of a sale-leaseback financing transaction in which Landlord
is the lessee), Landlord shall transfer and assign to such purchaser or
transferee all amounts of pre-paid Minimum Annual Rent, and Landlord thereupon
and without further act by either party hereto shall be released from all
liability, obligations, and covenants, express or implied, hereunder derived
from this Lease arising out of any act, occurrence or omission relating to the
Leased Premises or this Lease occurring after the consummation of such sale or
transfer, provided that the transferee shall assume all of Landlord's
obligations hereunder from the date of such transfer. Tenant shall have no right
to terminate this Lease nor to abate Minimum Annual Rent nor to deduct from, nor
set-off, nor counterclaim against Minimum Annual Rent because of any sale or
transfer (including, without limitation, any sale-leaseback) by Landlord or its
successors or assigns. This lease shall not be affected by any such sale, and
Tenant agrees to attorn to the purchaser or transferee. Upon any sale or other
transfer as above provided (other than a sale-leaseback), or upon any assignment
of Landlord's interest herein, it shall be deemed and construed conclusively,
without further agreement between the parties, that the purchaser or other
transferee or assignee has assumed and agreed to perform the obligations of
Landlord thereafter accruing.
37. Waiver of Counterclaim and Trial by Jury. Landlord and Tenant waive their
right to trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other (except for personal injury or
property damage) on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
of or occupancy of the Leased Premises, and any emergency statutory or any other
statutory remedy. Tenant shall not interpose any counterclaim or counterclaims
or claims for set-off, recoupment or deduction of Minimum Annual Rent or
Additional Rent in a summary proceeding for nonpayment of Minimum Annual Rent or
Additional Rent or other action or summary proceeding based on termination,
holdover or other default in which Landlord seeks repossession of the Leased
Premises from Tenant.
38. Lease Recording. It is understood and agreed that Landlord shall not record
the within Lease Agreement among the Land Records of Baltimore County, Maryland,
for any purpose.
39. Notice of Default to Landlord and Mortgagee and Right to Cure. Tenant shall
give, by registered mail, a written notice of any failure by Landlord to perform
any of its obligations under this Lease to Landlord which shall specifically set
forth the nature of the nonperformance by the Landlord and shall give the
Landlord thirty (30) days within which to cure such default or non-performance.
However, if such default or non-performance reasonably requires more than thirty
(30) days to cure, Landlord shall not be in default if such cure is commenced
within such thirty (30) day period and thereafter diligently pursued to
completion. Said notice of default shall be a condition precedent to the
institution by Tenant of any judicial proceedings for nonperformance or default
against the Landlord. Tenant agrees to give any mortgagee and/or Trust Deed
Holders whose name and address have been furnished to Tenant in writing, by
registered mail, a copy of any notice of default served upon the Landlord.
Tenant further agrees that if Landlord shall fail to cure such default within
the time provided for in this Lease Agreement, then the mortgagees and/or Trust
Deed Holders shall have an additional thirty (30) days within which to cure such
default or, if such default cannot be cured within that
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time, then such additional time as may be necessary if within such thirty (30)
days, any mortgagee and/or Trust Deed Holders has commenced and is diligently
pursuing the remedies necessary to cure such default, in which event this Lease
shall not be terminated while such remedies are being so diligently pursued.
40. Miscellaneous Provisions.
(a) Governing Law. The laws of the state of Maryland shall govern the
construal, validity, performance and enforcement of this Lease.
(b) Covenants. The parties hereto agree that all the provisions of this
Lease are to be construed as covenants and agreements as though the words
importing such covenants and agreements were used in each separate provision
hereof.
(c) No Representations by Landlord. Neither Landlord nor any agent of
Landlord has made any representations or promises with respect to the Leased
Premises or the Building except as herein expressly set forth, and no rights,
privileges, easements or licenses are granted to Tenant except as herein
expressly set forth.
(d) Exhibits. It is agreed and understood that any Exhibits referred to
herein, and attached hereto, form an integral part of this Lease and are hereby
incorporated by reference.
(e) Pronouns. The neuter, feminine or masculine pronoun when used herein
shall each include each of the other genders and the use of the singular shall
include the plural.
(f) Captions. All section and paragraph captions, marginal references, and
table of contents in this Lease are inserted only as a matter of convenience,
and in no way amplify, define, limit, construe or describe the scope or intent
of this Lease nor in any way affect this Lease.
(g) Landlord's Approval. Whenever Landlord's consent or approval is
required under the terms of this Lease, Landlord may grant or deny such consent
or approval in its sole discretion unless otherwise specified herein.
(h) Separability. If any term or provision of this Lease or applications
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remaining terms and provisions of this Lease, or the
application of such term or provision to persons or circumstances other than
those as to which it is held or unenforceable, shall not be affected thereby,
and each term and provision of this Lease shall be valid and enforced to the
fullest extent permitted by law.
(i) Counterparts. This Lease has been executed in several counterparts,
but all counterparts shall constitute one and the same legal document.
(j) Authority. Landlord and Tenant hereby covenant each for itself, that
each has full right, power and authority to enter into this Lease upon the terms
and conditions herein set forth. If Tenant signs as a corporation, each of the
persons executing this Lease on behalf of Tenant does hereby covenant and
warrant that Tenant is a duly authorized and existing corporation, qualified to
do business in the jurisdiction in which the Leased Premises is located, that
the corporation has
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<PAGE>
full right and authority to enter into this Lease, and that each and both of the
persons signing on behalf of the corporation were authorized to do so. If Tenant
signs as a partnership, each of the persons executing this Lease on behalf of
Tenant does hereby covenant and warrant that Tenant is a duly formed and validly
existing partnership, that the partnership has full right and authority to enter
into this Lease, and that each of the persons signing on behalf of the
partnership were authorized to do so.
(k) Examination of Lease. Submission of this Lease for examination or
signature by Tenant shall not constitute reservation of or option for Lease, and
the same shall not be effective as a Lease or otherwise until execution and
delivery by both Landlord and Tenant.
(l) Interpretation. Although the printed provisions of this Lease were
drawn by Landlord, this Lease shall not be construed for or against Landlord or
Tenant, but this Lease shall be interpreted in accordance with the general tenor
of the language in an effort to reach the intended result.
(m) Entire Agreement; Modification. This Lease contains the entire
agreement between the parties, and any agreement hereafter made shall be
ineffective to change, discharge or effect an abandonment in whole or in part
unless such agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
Acceptance of, or acquiescence in, a course of performance rendered under this
or any prior agreement between the parties or their affiliates shall not be
relevant or admissible to determine the meaning of any term of this Lease.
(n) Termination. This Lease and the tenancy hereby created shall cease and
determine at the end of the Lease Term, or any extension or renewal thereof,
without the necessity of any notice from either Landlord or Tenant to terminate
the same, and Tenant hereby waives notice to vacate the Leased Premises and
agrees that Landlord shall be entitled to the benefit of all provisions of law
respecting the summary recovery of possession of premises from a tenant holding
over to the same extent as if statutory notice had been given. For the period of
three (3) months prior to the expiration of the Lease Term or of any extension
or renewal thereof, Landlord shall have the right to show the Leased Premises
and all parts thereof to prospective tenants between the hours and 9:00 am and
5:00 pm, on any day except Saturday and Sunday and except any legal holiday on
which Tenant shall not be open for business.
(o) Corporate Approval. If Tenant is a corporation, Tenant covenants and
warrants that it has the requisite corporate approval to enter into and execute
this Lease Agreement and accordingly, shall provide to Landlord, as soon as
practicable following execution of this Lease, a copy of an executed resolution
by its Board of Directors, authorizing the execution of the Lease Agreement and
authorizing the individual executing this Lease to execute said Agreement on
behalf of and in the name of the Corporation. If Tenant shall fail to provide
the executed resolution within the time period required under this Section,
Landlord may, at its option, declare this Lease to be null and void and of no
further force or effect. If Tenant is a corporation it acknowledges that this
Lease is executed under seal and that a twelve year period of limitation
applies.
(p) Approval of Mortgage. This Lease is contingent upon the approval
of any
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and all mortgagees or other lenders of the Landlord. Landlord shall have thirty
(30) days from the execution of this Lease to obtain all necessary approvals
from this mortgagee or other lenders; and thereafter shall have the right to
extend said approval period an additional ten (10) days upon written notice to
Tenant. If said approvals cannot be obtained within the aforesaid period, this
Lease and the rights and duties of the parties hereunder, shall be null and void
and be of no further effect.
(q) Zoning and Licensing Approvals. Anything herein elsewhere contained to
the contrary, this Lease and all the terms, covenants, and conditions hereof are
in all respect subject and subordinate to all zoning restrictions affecting the
Leased Premises, and the Building in which they are located, and the Tenant
agrees to be bound by such restrictions. The Landlord further does not warrant
that any license or licenses, permit or permits, which may be required for the
business to be conducted by the Tenant on the Leased Premises will be granted,
or, if granted, will be continued in effect or renewed, and any failure to
obtain such licence or licences, permit or permits, or any revocation thereof or
failure to renew the same, shall not release the Tenant from its obligations
under this Lease Agreement.
41. Quiet Enjoyment. If and so long as Tenant pays rent and additional rent
reserved by this Lease, and performs and observes all the covenants and
provisions hereof, Tenant shall quietly enjoy the Leased Premises, subject,
however, to the terms and provisions hereof.
42. Remedies Cumulative. No mention in this Lease of any specific right or
remedy shall preclude Landlord from exercising any other right or from having
any other remedy, or from maintaining any action to which it may otherwise be
entitled, either at law or equity; and the failure of Landlord to insist in any
one or more instances upon a strict performance of any covenant of this Lease or
to exercise any option or right herein contained shall not be construed as a
waiver of relinquishment for the future of such covenant, right or option, but
the same shall remain in full force and effect unless the contrary is expressed
in writing by Landlord.
43. Binding Effect. This Agreement and the covenants and conditions herein
contained shall be binding upon and shall inure to the benefit of Landlord, its
heirs, personal representatives, successors and assigns, and shall be binding
upon Tenant, its heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Tenant and only such assigns of Tenant to whom the
assignment by Tenant has been consented to by Landlord.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and year first above written.
WITNESS/ATTEST: LANDLORD:
Ecolair Limited Partnership
a Maryland Limited Partnership
/s/ Melanie Jensen Ney By: /s/ Loren S. Jensen (SEAL)
_______________________________ _________________________
Name:Loren D. Jensen
Title: General Partner
Date: August 6, 1997
_______________________________
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If Tenant is a corporation, an authorized officer must sign on behalf of the
corporation and by doing so such officer makes the covenants and warranties
contained in Section 40 hereof.
WITNESS/ATTEST: TENANT:
EA Engineering, Science & Technology, Inc.
a Delaware Corporation
/s/ Jack Adler By: /s/ Barbara L. Posner (SEAL)
________________________________ _________________________
Name: Barbara L. Posner
Title: Vice President,
Finance & Administration
Date: August 6, 1997
_______________________________
State of Maryland )to wit:
County of Baltimore )
I hereby certify that on this 6th day of August, 1997, before me, the
subscriber, a Notary Public of the State and County aforesaid, personally
appeared Loren D. Jensen of Ecolair Limited Partnership and he made oath in due
form of law that the matters and facts set forth in the foregoing Lease are true
and correct to the best of his knowledge and belief, and that he signed same in
his capacity as General Partner of said Limited Partnership.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Carol L. Storck
_________________________________________
Notary Public
My commission Expires: 2/1/2000
___________________
State of Maryland )to wit:
County of Baltimore )
I hereby certify that on this 6th day of August, 1997, before me, the
subscriber, a Notary Public of the State and County aforesaid, personally
appeared Barbara L. Posner of EA Engineering, Science & Technology, Inc. and she
made oath in due form of law that the matters and facts set forth in the
foregoing Lease are true and correct to the best of her knowledge and belief,
and that she signed same in her capacity as Vice President of said Company.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Carol L. Storck
_________________________________________
Notary Public
My commission Expires: 2/1/2000
___________________
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EXHIBIT B
RULES AND REGULATIONS
1. Tenant will comply with all rules and regulations issued by all government
agencies whose jurisdiction affects the Leased Premises (the "Premises") or the
Building of which the Leased Premises are a part (the "Building"). Tenant shall
not make any alteration to the Building without first obtaining the written
permission of Landlord and all appropriate and necessary governmental permits
and/or licenses.
2. When electric wiring of any kind is introduced, it must be connected as
directed by Landlord, and no stringing or cutting of wires will be allowed,
except with the prior written consent of Landlord, and shall be done only by
contractors approved by Landlord. This number and location of telephones,
telegraph instruments, electric appliances, call boxes, etc., shall be subject
to Landlord's approval. Prior to the termination of the Lease Agreement, all
wires, cables, etc. installed by the Tenant must be removed by Tenant at
Tenant's expense.
3. Tenant, its agents, servants, employees and invitees shall abide by such
security rules and regulations as Landlord may promulgate.
4. A dumpster shall be provided to the Building site by the Landlord for use by
the Tenants with the cost to be borne by the Tenants on a pro-rata share.
Abnormal amounts of trash or garage generated by either Tenant's initial
movement into and occupancy of the Leased Premises, or the purchase of equipment
or fixtures placed on the Leased Premises shall be removed by Tenants at his
sole cost or expense and shall not be placed in the dumpster provided by the
Landlord.
5. No part of the whole of any sidewalls, plaza areas, entrances, loading docks,
passages, courts, elevators, vestibules, stairways, corridors, balconies or
halls of the Building shall be obstructed or encumbered by any tenant or used
for any purpose other than that expressly provided for in the Lease. All halls,
passages, exits, entrances, elevators, stairways, balconies and roof are not for
the use of the general public and the Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence, in
the sole judgement of the Landlord, shall be prejudicial to the safety,
character, reputation and interests of the Building and its Tenants, provided
that nothing herein contained shall be construed to prevent such access to
persons with whom the Tenant normally deals in the ordinary course of business,
unless such persons are engaged in illegal activities. Unless making repairs
required to be made under the terms of the lease to heating, ventilation, or air
conditioning located thereon, neither Tenant nor any employees or invitees of
the Tenant shall have access to or go upon the roof of the Building without the
prior approval of the Landlord.
6. No awnings or other projections shall be attached to the outside walls,
balconies or windows of the Building. No curtains, blinds, shades, or screens
other than Building Standard window coverings shall be attached to or hung in,
or used in connection with, any window or door of the space demised to any
tenant.
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7. No showcases or other articles, including furniture, shall be put on the
balcony, in front of or affixed to any part of the exterior of the Premises, or
placed in the halls, corridors, vestibules, balconies or other appurtenant or
public parts of the Building.
8. Any water and wash closets and other plumbing fixtures in any Premises or the
Building shall not be used for any purposes other than those for which they were
constructed, and no sweepings, rubbish, rags, or other substances (including,
without limitation, coffee grounds) shall be thrown therein. Waste and excessive
or unusual use of electricity or water is prohibited.
9. No tenant shall bring or keep, or permit to be brought or kept, any
inflammable, combustible, or explosive fluid, material, chemical, or substance
in or about the space demised to such tenant.
10. Except for the hanging of artwork on interior walls, no tenant shall make,
paint, drill into, or in anyway deface, any part of the interior or exterior of
the Building or the space demised to such tenant. No boring, cutting, or
stringing of wires shall be permitted.
11. No sign, placard, picture, advertisement, name or notice shall be inscribed,
displayed, printed or affixed on or to any part of the outside or inside of the
Building without the Tenant first obtaining the written consent of Landlord.
Landlord shall have the right to remove any such sign, placard, picture,
advertisement, name or notice without notice to and at the expense of Tenant.
All approved signs or lettering on doors shall be printed, painted or affixed or
inscribed at the expense of Tenant by a person or company approved by the
Landlord. Landlord shall not place anything or allow anything to be placed near
or on the glass of any window, door, partition or wall which may appear
unsightly from outside the premises.
12. Tenant shall promptly report to the Landlord any cracked or broken glass on
the Premises.
13. No tenant shall cause or permit any odors to emanate from the space demised
to such tenant. No tenant shall make, or permit to be made, any noises which may
be heard outside of such Tenant's Premises or disturb or interfere with other
tenants or occupants of the Building or neighboring buildings or premises
whether by the use of any musical instrument, radio, television set, or other
audio device, unmusical noise, whistling, singing, or in any other way. Tenant
shall be responsible for insuring that any office equipment and machinery is
installed in such a manner as to absorb and prevent the transmission of
vibration and noise beyond the confines of the Premises so as not to disturb
other Tenants in the Building. Nothing shall be thrown out, or off, of any
doors, windows, balconies or skylights or down any passageways.
14. The Landlord will provide the tenant two Premises entry door keys, and two
Sonitrol key cards; two additional keys or keycards will be supplied to Tenant
by Landlord, upon request, without charge; any additional keys or key cards
required by Tenant shall be paid for by Tenant. Tenant, its agents and
employees, shall not have any duplicate key made and shall not change any locks.
No additional locks or bolts of any kind shall be placed upon any of the doors
or windows in the space demised to any tenant, nor shall any changes be made in
locks or the mechanism
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thereof. Each tenant must, upon the termination of his tenancy, return to
Landlord all key cards and keys to offices and toilet rooms, either furnished
to, or otherwise procured by, such tenant, and in the event of the loss of any
such keys, such tenant shall pay Landlord the reasonable cost of replacement
keys or locks (at Landlord's option).
15. All removals from the Building, or the carrying in or out of the Building or
the space demised to any tenant of any safes, freight, furniture, or bulky
matter of any description must take place during such hours and in such manner
as Landlord may determine, from time to time. Landlord reserves the right to
inspect all freight for violation of any of these rules and regulations or the
provisions of such tenant's lease.
16. No tenant shall engage or pay any employees in the Building, except those
actually working for such tenant in the Building, nor advertise for laborers
giving an address at the Building.
17. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord's opinion, tends to impair the reputation of the Building or
its desirability as a building for offices, and upon notice from Landlord, such
tenant shall refrain from or discontinue such advertising.
18. Each tenant, before closing and leaving the space demised to such tenant at
any time, shall see that all entrance doors are locked.
19. No space demised to any tenant shall be used, or permitted to be used, for
lodging or sleeping. No cooking shall be done or permitted by any Tenant on the
Leased Premise, nor shall be Premises be used for the storage of merchandise,
washing clothes or for any improper, objectionable or immoral purpose.
20. The requests of tenants will be attended to only upon verbal or written
request to Landlord. Building employees shall not be required to perform, and
shall not be requested by any tenant to perform, any work outside of their
regular duties, unless under specific instructions from Landlord.
21. Canvassing, soliciting, and peddling in the Building are prohibited, and
each tenant shall cooperate in seeking their prevention.
22. There shall not be used in the Building, either by any tenant or by any of
tenant's employees, agents, or invites, in the delivery or receipt of
merchan-dise, freight, or other matter, any hand trucks or other means of
conveyance except those equipped with rubber tires, rubber side guards, and such
other safeguards as Landlord may require.
23. No animals of any kind shall be brought into or kept about the Building by
any tenant, excluding "seeing-eye" dogs.
24. No tenant shall place, or permit to be placed, on any part of the floor or
floors of the space demised to such tenant a load exceeding the floor load per
square foot which such floor was designed to carry and which is allowed by law.
25. No tenant will install or operate in the space demised to such tenant any
electrically operated equipment or other machinery, other than a reasonable
number
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of electric typewriters, adding machines, radios, televisions, tape recorders,
Dictaphones, bookkeeping machines, copying machines, clocks, word processors,
and personal computers, without first obtaining the prior written consent of
Landlord, who may condition such consent upon payment by Tenant of additional
rent as compensation for additional consumption of utilities as determined at
the discretion of Landlord and for the cost of separate metering or additional
wiring as may be occasioned by the operation of said equipment or machinery.
Landlord reserves the right to separately meter any utility consumption in the
Premises.
26. No tenant shall install any equipment of any kind or nature whatsoever,
including, but not limited to, equipment permitted by Rule 25 to be used on or
in the space demised to such tenant, which will necessitate any changes, or
replacements, or additions to, any water or plumbing, heating, air conditioning,
ventilating, electrical, or other system in or of the space demised to such
tenant of the building without first obtaining the prior written consent of the
Landlord.
27. All equipment and machinery belonging to any tenant which causes noise,
vibration or electrical interference that may be transmitted to the structure of
the Building or to any space therein to such degree to be objectionable to
Landlord or any tenant in the Building shall be installed and maintained by each
such tenant, at such tenant's expense, on vibration eliminators or other devices
sufficient to eliminate such noise or vibration.
28. No bicycles are permitted in the Building. No bicycles are to be attached or
stored on any part of the Building's rails, doors, balconies or other parts,
except those areas designated by Landlord for bicycle storage.
29. No Building or suite doors shall be propped open at any time.
30. Each tenant shall cooperate with any efforts of Landlord to conserve energy.
Landlord reserves the right to institute energy management procedures when
applicable.
31. Each tenant shall light any windows of the Premises and exterior signs and
turn the same off to the extent required by Landlord.
32. The Tenant shall not use any other method of heating or air conditioning
than that provided by the Landlord, without first obtaining the written consent
of the Landlord.
33. Tenant shall not be permitted to keep food upon the Leased Premises except
in proper containers, cabinets and refrigerators and in strict accordance with
all applicable rules, regulations and ordinances of all local health and
sanitation authorities.
34. Tenant shall comply with all Tenant requirements issued and mandated by
insurance companies insuring the Building.
35. Tenant shall not be permitted to use or keep explosives, kerosene, cleaning
fluid or any other illuminating, combustible or explosive material or substance
of any kind in the Building or the Leased Premises.
36. No vending, video, amusement machine or machines of any other description
shall
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be installed, maintained or operated upon the Leased Premises or the Building
without the prior written consent of the Landlord.
37. No Tenant shall lay linoleum, tile, carpet or other similar floor covering
so that the same shall be affixed to the floor of the Leased Premises or the
Building in any manner except as approved by the Landlord. The expense of
repairing any damage resulting from violation of this Rule or of removing any
floor covering shall be borne and paid for by the Tenant who violated, either by
its own action or the actions of its contractors, or employees, this Rule.
38. Landlord shall inspect the Leased Premises prior to the vacation of the
Premises by the Tenant and the Tenant shall be responsible for any damage done
to the Leased Premises by Tenant in the course of its occupancy or vacation of
the Premises.
39. In the event that the Tenant does not have a separate electric meter, Tenant
will be responsible for its proportionate share of the electric usage as shown
on the electric meter which monitors electric usage for the Building in
accordance with the formula set forth in the Lease.
40. No contract of any kind with any supplier of towels, water, ice, toilet
articles, waxing, rug shampooing, venetian blind washing, furniture polishing,
lamp servicing, cleaning of electrical fixtures, removal of waste paper, rubbish
or garbage, or other like service shall be entered into by Tenant for the Leased
Premises or any other portion of the Leases Premises without the prior written
approval of the Landlord, nor shall any vending machine of any kind be installed
in the Building, without prior written approval of the Landlord.
41. Landlord hereby reserves to itself any and all rights not granted to Tenant
hereunder, including, but not limited to, the following rights which are
reserved to Landlord for its purposes in operating the Building:
(a) the right to change the name or address of the Building, without
incurring any liability from Tenant for so doing;
(b) the right to install and maintain a sign or signs on the exterior
of the Building or within the Building area;
(c) the exclusive right to use or dispose of the use of the roof of
the Building;
(d) the right to limit the space on the directory of the Building to
be allotted to Tenant; and
(e) the right to grant anyone the right to conduct any particular
business or undertaking the Building.
42. The Landlord reserves the right at any time to rescind any one or more of
these Rules and Regulations, or to make such other and further reasonable Rules
and Regulations as in the Landlord's judgement may, for time to time, be
necessary for the safety, care and cleanliness of the Building, the Building
Area or any part thereof, and for the preservation of other herein.
37
EXHIBIT 10.11
Ecolair Properties
OFFICE LEASE
Between
Merrymack Limited Partnership
as Landlord
and
EA Engineering, Science, and Technology, Inc.
as Tenant
For Premises in
11019 McCormick Road, Hunt Valley, Maryland 21031
Dated: August 6, 1997
---------------------
<PAGE>
TABLE OF CONTENTS
1. Introductory Provisions..................................................1
(a) Fundamental Lease Provisions.......................................1
(b) References and Conflicts...........................................2
(c) Exhibits...........................................................2
(d) Addendums..........................................................2
2. Premises.................................................................2
(a) Leased Premises....................................................2
(b) The Building.......................................................2
(c) Tenant's Proportionate Share.......................................2
3. Term.....................................................................2
(a) Lease Term.........................................................2
(b) Acceptance of Leased Premises......................................3
4. Rent.....................................................................3
(a) Minimum Annual Rent................................................3
(b) Annual Adjustments to Minimum Annual Rent..........................3
(c) Additional Rent....................................................3
(i) General.....................................................3
(ii) Basic Operating Expenses....................................3
(iii) Increases in Basic Operating Expenses.......................4
(iv) Electrical Service..........................................4
(v) Landlord's Enforcement Costs................................4
(d) Additional Rent Estimates and Adjustments..........................4
(e) Payment of Rent....................................................6
5. Security Deposit.........................................................6
6. Improvement of the Leased Premises.......................................6
7. Alterations or Improvements by Tenant....................................7
8. Use of Leased Premises...................................................7
(a) Use................................................................7
(b) Compliance.........................................................7
(i) Legal.......................................................7
(ii) Fire and Safety.............................................7
(c) Environmental Protection...........................................8
(d) Indemnification....................................................8
(e) Moving and Deliveries..............................................8
(f) Excessive Floor Load...............................................8
9. Taxes on Tenant's Property...............................................8
10. Rules and Regulations..................................................8
11. Utilities and Services.................................................9
(a) Building Standard Services and Utilities........................9
(b) Overtime Services...............................................9
(c) Interruption or Reduction of Service............................9
(d) Excessive Electrical Usage......................................9
(e) Excessive Heat Generation......................................10
(f) Security.......................................................10
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12. Landlord's Right of Entry.............................................10
13. Maintenance and Repairs...............................................10
(a) Landlord Responsibilities......................................10
(b) Tenant Responsibilities........................................11
14. Common Areas..........................................................11
(a) Common Areas Defined...........................................11
(b) Landlord's Control.............................................11
(c) Changes and Additions to the Building, Additional
Construction.................................................11
(d) Parking........................................................12
15. Surrender and Inspection..............................................12
(a) Surrender......................................................12
(b) Inspection.....................................................12
(c) Fixtures and Personal Property Remaining.......................12
16. Tenant Holding Over...................................................12
17. Covenant Against Assignment and Subletting............................13
18. Bankruptcy............................................................13
19. Default...............................................................13
20. Landlord's Rights Upon Tenant's Default...............................14
(a) Re-Entry.......................................................14
(b) Termination....................................................14
(c) Distress.......................................................15
(d) Lien for Rent..................................................15
(e) No Future Lease Rights.........................................15
(f) Utilities and Services.........................................15
(g) Landlord's Remedies Cumulative.................................15
21. Lender Requirements...................................................15
(a) Subordination..................................................15
(b) Attornment.....................................................16
(c) Financing......................................................16
(d) Financial Statements...........................................16
22. Estoppel Certificates.................................................16
23. Damage by Fire or Other Casualty......................................17
24. Condemnation..........................................................17
25. Landlord's Reserved Rights............................................18
26. Landlord and Tenant Liability.........................................18
(a) Landlord's Liability...........................................18
(b) Tenant's Liability.............................................18
(c) Indemnity......................................................18
(d) Criminal Acts of Third Parties.................................19
27. Tenant's Insurance....................................................19
(a) Coverages......................................................19
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(b) Policy Requirements............................................19
(c) No Limitation of Liability.....................................19
(d) Notice of Fire and Accident....................................19
28. Waiver of Subrogation.................................................20
29. No Liens Permitted: Discharged........................................20
30. Signs and Advertisements..............................................20
31. Notices...............................................................20
32. Time..................................................................20
33. Postponement of Performance...........................................21
34. No Waiver.............................................................21
35. Limitation of Landlord's Liability....................................21
36. Transfer of the Building..............................................21
37. Waiver of Counterclaim and Trial by Jury..............................21
38. Lease Recording.......................................................22
39. Notice of Default to Landlord and Mortgagee and Right to Cure.........22
40. Miscellaneous Provisions..............................................22
(a) Governing Law..................................................22
(b) Covenants......................................................22
(c) No Representations by Landlord.................................22
(d) Exhibits.......................................................22
(e) Pronouns.......................................................22
(f) Captions.......................................................22
(g) Landlord's Approval............................................22
(h) Separability...................................................22
(i) Counterparts...................................................23
(j) Authority......................................................23
(k) Examination of Lease...........................................23
(l) Interpretation.................................................23
(m) Entire Agreement; Modification.................................23
(n) Termination....................................................23
(o) Corporate Approval.............................................23
(p) Approval of Mortgage...........................................23
(q) Zoning and Licensing Approvals.................................24
41. Quiet Enjoyment.......................................................24
42. Remedies Cumulative...................................................24
43. Binding Effect........................................................24
<PAGE>
OFFICE LEASE
THIS LEASE is made this 1st day of January, 1997, between Merrymack Limited
Partnership, a Maryland limited partnership ("Landlord"), and EA Engineering,
Science and Technology, Inc., a Delaware Corporation ("Tenant").
WITNESSETH:
For and in consideration of the covenants herein contained and upon the terms
and conditions herein set forth, the parties agree as follows:
1. Introductory Provisions.
(a) Fundamental Lease Provisions. Certain fundamental Lease provisions are
presented in this Section in summary form solely to facilitate convenient
reference by the parties hereto:
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1. Leased Premises 11019 McCormick Road [See Section 2(a)]
2. Building Address 11019 McCormick Road [See Section 2(a)]
Hunt Valley, Maryland 21031
3. Rentable Area Of Leased
Premises** 43,707 square feet [See Section 2(a)]
4. Gross Leasable Area of
Building* 57,664 square feet [See Section 2(b)]
5. Proportionate Share 76 Percent [See Section 2(c)]
6. Rent Commencement Date January 1, 1997 [See Section 3(a)]
7. Lease Term 10 years [See Section 3(a)]
8. Minimum Annual Rent $736,044.96 [See Section 4(a)]
9. Basic Monthly Rent $61,337.08 [See Section 4(a)]
10. Annual Adjustment to
Minimum Annual Rent 3% [See Section 4(b)]
11. Use of Leased Premises Professional and [See Section 6]
Administrative Offices
12. Security Deposit $43,648.34 [See Section 5]
13. Base Operating Expense
Amount $5.80 (tax & operating) [See Section 4(c)]
14. Additional Rent [See Section 4(c)]
15. Standard Building
Operating Hours 8:00 a.m. to 6:00 p.m. [See Section 9(a)]
Monday-Friday
</TABLE>
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<TABLE>
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16. Building Holidays New Year's Day, [See Section 9(a)]
Memorial Day, Independence Day,
Labor Day, Thanksgiving Day,
Day after Thanksgiving, Christmas Day
17. Address for Notices 11019 McCormick Road [See Section 30(b)]
to Tenant Hunt Valley, Maryland 21031
18. Address for Notices 11019 McCormick Road [See Section 30(a)]
to Landlord Hunt Valley, Maryland 21031
Attn: Melanie Jensen-Ney
19. Leasing Broker(s) NONE [See Section 33]
20. Tenant's Resident Agent Mr. Jack P. Adler, Esq.
Vice President & General Counsel
</TABLE>
* Subject to adjustment pursuant to Section 2(b).
** See Addendum 1.
(b) References and Conflicts. References appearing in Section 1(a) are
intended to designate some of the other places in the Lease where additional
provisions are applicable to the particular fundamental Lease provisions appear.
These references are for convenience only and shall not be deemed all inclusive.
Each reference in the Lease to any of the fundamental Lease provisions contained
in Section 1(a) shall be construed to incorporate all of the terms provided for
under such provisions, and such provisions shall be read in conjunction with all
other provisions of the Lease applicable thereto. If there is any conflict
between any of the fundamental Lease provisions set forth in Section 1(a) and
any other provisions of the Lease, the latter shall control.
(c) Exhibits. The following drawings and special provisions are attached
hereto as exhibits and hereby made a part of this Lease:
Exhibit A. Floor Plan of Leased Premises
Exhibit B. Rules and Regulations
(d) Addendums. The following special provisions are attached hereto as
addendums and hereby made a part of this Lease.
Addendum 1 - Leased Premises.
2. Premises.
(a) Leased Premises. Landlord hereby leases to Tenant, and Tenant hereby
rents from Landlord, the Leased Premises as specified in Section 1(a)(1) located
in the building specified in Section 1(a)(2) (the "Building"). The leased
premises shall consist of approximately the square footage of rentable floor
space as specified in Section 1(a)(3), which included an agreed common area
factor of twelve percent (12%), and as outlined in red on the floor plan
attached hereto as Exhibit A. For the purposes of determining the square footage
of the Leased Premises, leasehold space is calculated by measuring from the
outside of any exterior walls of the Leased Premises to the center line of any
partitions constructed which separate the Leased Premises from the remaining or
adjacent premises of the Building.
(b) The Building. Landlord and Tenant acknowledge that the gross leasable
area in the Building is specified in Section 1(a)(4) ("Gross Leasable Area" or
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"GLA"). The GLA shall be used hereinafter for purposes of computing Tenant's
proportionate share of certain expenses payable to Landlord as Additional Rent.
Landlord reserves the right to modify the GLA of the Building from time to time
during the Lease Term as a result of construction of new improvements or the
demolition of existing improvements.
(c) Tenant's Proportionate Share. Tenant's proportionate share of certain
expenses hereinafter made payable to Landlord as additional rent is specified in
Section 1(a)(5). Said computation is based upon the ratio of the total rentable
area in the Leased Premises to the GLA of the Building. The Proportionate Share
shall be modified during the Lease Term in the event that the GLA of the
Building is modified as described in Section 2(b) above.
3. Term.
(a) Lease Term. The term of the Lease (sometimes herein called the "Lease
Term") shall commence on the "Rent Commencement Date," January 1, 1997, and
shall continue for a period of nine (9) years from the first day of the calendar
month next following the first day of the Term, unless sooner terminated as
herein provided.
(b) Acceptance of Leased Premises. Landlord shall deliver, and Tenant
agrees to accept, possession of the Leased Premises in an "as is" condition,
subject, however, to Landlord's performance of its agreed obligation to replace
at no charge to Tenant the carpet in the rear portion of the fourth floor. By
entering into possession, Tenant shall be deemed to have accepted the Leased
Premises, to have acknowledged that the same are in the condition called for
hereunder and to have agreed that the obligations of the Landlord imposed for
the delivery of the Premisses have been fully performed. It is expressly
understood and agreed that Landlord has made no representations or warranties
with respect to the Leased Premises.
4. Rent.
(a) Minimum Annual Rent. The minimum Annual Rent reserved hereunder shall
be as specified in Section 1(a)(8) which shall be payable by Tenant to the
Landlord during each Lease Year of the Lease Term in twelve (12) equal monthly
installments of Basic Monthly Rent each as specified in Section (a)(9), due in
advance, without notice or demand, and without set-off, deduction or abatement
of any kind, on the first day of every calendar month thereafter during the
Term. Rent shall be paid to Landlord (or its agent) as specified in Section
1(a)(18), or to such other persons or at such other address as Landlord may
designate from time to time.
(b) Annual Adjustments to Minimum Annual Rent. On the first day of the
second Lease Year, and on the first day of each Lease Year thereafter during the
Lease Term, the Minimum Annual Rent (than in effect) shall be increased by 3
percent (3%).
(c) Additional Rent.
(i) General. Whenever it is provided by the terms of this Lease
that Tenant is required to make any payment to Landlord other than of Minimum
Annual Rent, such payment shall be deemed to be additional rent ("Additional
Rent"). Unless otherwise expressly specified herein, Additional Rent shall be
paid by Tenant with the installment of Base Monthly Rent thereafter falling due.
Additional Rent shall include, but not be limited to:
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(ii) Basic Operating Expenses. Tenant shall pay to Landlord, as
Additional Rent, its Proportionate Share as set forth in Section 1(a)(5) of any
increase in the Basic Operating Expenses incurred by Landlord in the operation
of the Building during any calendar year over the Base Operating Expense Amount
specified in Section 1(a)(13). As used herein, the "Basic Operating Expenses"
shall mean the sum of all costs of operating, policing, managing, maintaining
replacing and repairing the (A) the Building, (B) the personal property used in
conjunction therewith, and (C) the land upon which the Building is situated and
all curbs and sidewalks adjacent to same. Such costs shall include the
following: the charges (including surcharges) for electricity, gas, fuel, steam,
water and sewer and any other utilities supplied to the Building; the cost of
public liability insurance, casualty insurance, rent loss insurance, umbrella
liability insurance, owned and non-owned automobile insurance and all other
insurance coverage carried by Landlord in connection with the Building; legal,
accounting, engineering and other professional fees; management fees (equal to
fifteen percent (15%) of the total Basic Operating Expenses, excluding real
estate taxes and utilities) and personnel costs, including, but not limited to,
reasonable salaries, wages, taxes, fringe benefits and other direct and indirect
costs paid to or on behalf of persons employed in the operation, supervision,
maintenance, management and repair of the Building and Building Area or engaged
to provide any maintenance, operating, repair or upkeep service to the Building
or Building Area, and any other Building personnel; costs of inspecting, and
depreciation of machinery and equipment; costs to maintain and operate a
Building office; security guards or security services deemed necessary by
Landlord; the cost of all service and maintenance contracts; landscaping
maintenance, including reasonable upgrades and replacements; parking facility
maintenance, including repairs, restriping, resurfacing, rebuilding, as well as
removal of snow, ice and debris and depreciation of all machinery and equipment
used therein or thereon; traffic control; sanitary and drainage control; public
address system; holiday decorations; disposal of trash; maintenance, repair and
replacement of mechanical and electrical equipment including heating,
ventilation and air conditioning equipment; window cleaning, janitorial service
and pest control service; maintenance and repair of elevators, stairways, rest
rooms, lobbies, hallways and other common areas and facilities; repainting and
redecoration of all common areas and facilities; sales or use taxes on supplies
or services; and all other reasonable maintenance and repair expenses and
supplies which are deducted by Landlord in computing its Federal income tax
liability; the cost of any capital improvements or alterations made by Landlord
to the Building after the Rent commencement Date of the Lease Term, that reduce
total operating charges, or which are required under any governmental law or
regulation that was not applicable to the Building at the time it was
constructed, such cost to be amortized over such reasonable period as Landlord
shall determine, together with interest on the unamortized balance at the rate
actually paid by Landlord on funds borrowed for purposes of constructing said
capital improvements or alterations; the cost of tools and equipment, materials
and uniforms, supplies and sundries reasonably necessary for the operation and
maintenance of the Building; the Building's share of all costs to maintain,
repair and/or replace as necessary any common driveways, facilities and
structures pursuant to easements, covenants or similar agreements affecting the
Building; charges of any kind imposed by any governmental authority in
connection with the use or occupancy of the Building, including any and all
license, permit, and inspection fees; "Real Estate Taxes" (as hereinafter
defined); and any other reasonable costs and expenses incurred by Landlord in
owning, maintaining, repairing or operating the Building or Building Area. The
Basic Operating Expenses shall not include: leasing commissions payable by
Landlord; the cost of capital improvements, as determined under sound accounting
principals,
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except to the extent set forth above; or the costs of special services or
utilities separately charged to individual tenants of the Building.
The term "Real Estate Taxes" shall mean all taxes and assessments,
general and special, ordinary and extraordinary, foreseen and unforeseen, now or
hereafter assessed, levied or imposed upon the Building, and the land on which
it is built, whether or not now customary, including, without limitation, all
other government al impositions and levies, front foot benefit charges and
adequate public facility costs and assessments, together with (i) any tax,
assessment, or other imposition in the nature of a real estate tax, (ii) any ad
valorem tax on rent or any tax on income if imposed in lieu of or in addition to
real estate taxes and assessments, and (iii) any taxes and assessments which may
hereafter be substituted for real estate taxes, including by way of illustration
only, any tax, capital levy, assessment, imposition or otherwise (whether a
business rental or other tax) now or hereafter levied upon Landlord on the rents
or income received from the Building or for Tenant's use or occupancy of or
conduct of business at the Leased Premises, or Tenant's improvements to or
furniture, fixtures or equipment in the Leased Premises. "Real Estate Taxes"
shall further mean any advances or escrow deposits paid or made to any taxing
authority or third party such as a lender on account of any of the foregoing.
"Real Estate Taxes" shall also include all costs, including reasonable attorney
fees, incurred by Landlord in contesting the validity or amount, or in attempts
to restrict increases in, any such taxes. The Real Estate Taxes for any calendar
year shall mean the Real Estate Taxes actually paid or due to be paid during
such calendar year, whether such Real Estate Taxes relates to such calendar year
or a fiscal year.
(iii) Increases in Basic Operating Expenses. For each calendar year
during which any part of the Term falls, Tenant shall pay to Landlord Tenant's
Proportionate Share of the excess, if any, in Basic Operating Expenses for the
Leased Premises for such year (the "Excess Operating Expenses") over the Base
Operating Expense Amount. Such payment shall be prorated for any partial
calendar year during the Term.
(iv) Electrical Service. Tenant shall reimburse Landlord on a
monthly basis for all electrical service to the Leased Premises (other than the
electrical service necessary for Landlord to provide standard heating and air
conditioning, which shall be included in "Basic Operating Expenses".) Landlord
shall pay the monthly bills for such services and submit copies of those bills
to Tenant for reimbursement, with no markup or management fee, and Tenant agrees
to pay each bill promptly in accordance with its terms.
(v) Landlord's Enforcement Costs. Additional Rent shall include any
and all expenses incurred by Landlord, including reasonable attorneys' fees, for
the collection of monies due from Tenant and the enforcement of Tenant's
obligations under the provisions of this Lease. When Landlord, at Tenant's
expense, performs an obligation of Tenant pursuant to the terms of this Lease,
the actual out-of-pocket costs and expenses incurred by Landlord in performance
of such obligations shall be Additional Rent.
(d) Additional Rent Estimates and Adjustments.
(i) On or before April 30 (or as soon thereafter as practicable)
of each calendar year, Landlord will submit to Tenant a comparative statement of
the actual increases incurred in Basic Operating Expenses for the preceding
calendar year over the Base Operating Expense Amount, setting forth in
reasonable detail: (i) a schedule of Basic Operating Expenses for the preceding
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calendar year, and the amount of the Excess Operating Expenses for such
preceding year; (ii) the amount, if any, paid by Tenant to Landlord during the
preceding calendar year on account of the Excess Operating Expenses for such
preceding year; and (iii) the amount due from Tenant on account of the Excess
Operating Expenses for such preceding year, or the amount due from Landlord to
Tenant because of overpayment by Tenant on account of Excess Operating Expenses.
Landlord's comparative statement of Operating Expenses shall also include
Landlord's good faith estimate of Excess Operating Expenses for the then-current
calendar year and an estimated "Monthly Portion of Excess Operating Expenses"
equal to one-twelfth (1/12) of said good faith estimate of Excess Operating
Expenses.
(ii) Tenant shall pay Landlord, within thirty (30) days of
Tenant's receipt of such statement, as Additional Rent, any amounts due from
Tenant on account of Excess Operating Expenses for the preceding year. Tenant
shall also make payments to Landlord, on account of the Excess Operating
Expenses for the then current calendar year, as follows:
(A) On the first day of the first full month following
receipt
by Tenant of the Landlord's comparative statement of Basic Operating Expenses,
Tenant shall pay to Landlord an amount equal to the Monthly Portion of Excess
Operating Expenses multiplied by the number of months elapsed in the current
calendar year (including the month in which the payment is made); and
(B) Commencing on the first day of the second full month
following
receipt by Tenant of Landlord's comparative statement of Basic Operating
Expenses, and continuing until the receipt by Tenant of the next annual
comparative statement, the minimum monthly installments of rent due hereunder
shall be increased by an amount equal to the Monthly Portion of Excess Operating
Expenses.
(iii) Landlord shall refund any overpayment made by Tenant within
thirty (30) days after Landlord's submission to Tenant of the aforesaid
operating charge statement for such calendar year.
(iv) Contemporaneously with presentation of Landlord's statement
showing actual figures for the year, Landlord shall furnish to Tenant, in
writing, a detailed statement of Basic Operating Expenses and copies of Real
Estate Tax bills. If it shall be determined that there is an error in Landlord's
statement, Tenant shall be entitled to a credit for any overpayment, or, if
Landlord billed Tenant less than should have been billed to Tenant, Tenant shall
pay such difference to Landlord. Any payment, refund or credit made pursuant to
Section 4(c) or 4(d) shall be made without prejudice to any right of Tenant to
dispute, or of Landlord to correct, any item(s) as billed pursuant to the
provision hereof; provided, however, such right to correct or adjust rental
payments shall terminate at the expiration of two (2) years after the date any
payment shall have become due.
(v) Tenant's obligation to pay any Additional Rent accruing during
the Lease Term pursuant to this Section shall apply pro rata to the
proportionate part of the calendar year as to Basic Operating Expenses, in which
this Lease begins or ends, for the portion of each such year during which this
Lease is in effect. Such obligation to make payments of such Additional Rent
shall survive the expiration or sooner termination of the Lease Term, whether or
not this Lease is superseded by a subsequent lease of the Leased Premises or of
any other space or Tenant leaves the Building; any such superseding lease shall
not serve to supersede Tenant's obligation for any such additional rent unless
it makes
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express reference thereto and recites that such additional rent is abated in
consideration of the superseding lease.
(vi) If, during the Term of this Lease, there shall be a reduction
or elimination of any particular component of Basic Operating Expenses by reason
of the introduction of a labor-saving device, energy conservation device,
capital improvement or replacement installed by Landlord, the corresponding item
of expense in the Base Operating Expense shall be eliminated or reduced in the
same proportion as the reduction of that item in the Basic Operating Expense for
the purposes of calculating Tenant's share of Excess Operating Expenses.
(vii) In the event that Landlord shall make a capital expenditure
for an Essential Capital Improvement (as hereinafter defined) during the Term of
this Lease, the annual amortization of such expenditure (determined by dividing
the amount of the expenditure by the useful life of the improvement) plus
interest on the unamortized balance at the rate actually paid by Landlord for
funds borrowed by Landlord to construct or otherwise provide such Essential
Capital Improvement, shall be deemed an Operating Expense for each year of such
useful life. As used herein, an "Essential Capital Improvement" means any of the
following: (A) a labor saving device or other installation, improvement or
replacement which reduces Operating expenses; (B) an installation or improvement
required by reason of any law, ordinance or regulation of any governmental or
quasi-governmental body, which requirement did not exist (or was not applicable
to the Building) on the date of execution of this Lease; or (C) an installation
or improvement which directly enhances the safety of tenants in the Building
generally (as, for example, but without limitation, for fire safety or
security); provided, however, any expense treated as an Essential Capital
Improvement hereunder must, at Tenant's option and expense, be certified by
independent auditors for Landlord as constituting an Essential Capital
Improvement under generally accepted accounting principles.
(e) Payment of Rent. In the event Minimum Annual Rent or Additional Rent
is not paid within ten (10) days after the same is due, a late charge equal to
five percent (5%) of the delinquent amount shall be assessed as liquidated
damages for the additional administrative charges incurred by Landlord as a
result of such late payment. Tenant also agrees to pay all reasonable attorney
fees incurred by Landlord as a result of Tenant's delinquent payment of rent. No
payment by Tenant or receipt by Landlord of lesser amounts of rent than those
herein stipulated shall be deemed to be other than on account of the earliest
unpaid stipulated rent. No endorsement or statement on any check or any letter
accompanying any check or payment as rent shall be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
provided in this Lease. If Landlord shall pay any monies, or incur any expenses
in correction of violation of covenants herein set forth, the amount so paid or
incurred shall, at Landlord's option, and on written notice to Tenant, be
considered Additional Rent payable by Tenant with the first installment of
rental thereafter becoming due and payable. If Landlord receives from Tenant two
(2) or more returned or "bounced" checks in any twelve (12) month period,
Landlord may require all future rent be paid by cashier's or certified check.
5. Security Deposit. Tenant has deposited with Landlord the sum specified in
Section 1(a)(12). Said deposit shall constitute advance rental and shall be held
by Landlord as security for the faithful performance by Tenant of all the terms,
covenants and conditions of this Lease to be kept and performed by Tenant during
the Lease Term. If, at any time during the Lease Term, any payment of Minimum
Annual Rent or Additional Rent herein reserved shall be overdue and unpaid, the
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Landlord may, at its option, appropriate and apply any portion of said security
deposit to the payment of any such overdue rent or other sum. Landlord shall
have the unrestricted right (but not the obligation) to apply any part of the
Security Deposit to cure any Default (as described in Section 20 hereof).
In the event of the failure of Tenant to keep and perform any other items,
covenants and conditions of the Lease to be kept and performed by Tenant, then
Landlord, at its option, may appropriate and apply the entire security deposit,
or so much thereof as may be necessary, to compensate Landlord for loss or
damage sustained or suffered by Landlord due to such breach by Tenant. Should
the entire security deposit, or any portion thereof, be appropriated and applied
by Landlord for the payment of overdue rent, to cure any default, or other sums
due and payable to Landlord by Tenant hereunder, then Tenant shall remit to
Landlord, within ten (10) days of the written demand of Landlord, a sufficient
amount in cash to restore the security deposit to the original sum. Tenant's
failure to do so shall constitute a breach of the Lease. Should Tenant comply
with all of said terms, covenants and conditions of the Lease and promptly pay
all Minimum Annual Rent and Additional Rent herein provided as it falls due,
then the security deposit shall be returned in full, without interest, to Tenant
within thirty (30) days of the Expiration Date or earlier termination of the
Term of this Lease. Tenant shall have no right to direct the application of any
part of the Security Deposit.
Landlord may deliver the funds deposited hereunder by Tenant to the
purchaser of Landlord's interest in the building and/or the Leased Premises in
the event that such interest is sold, and thereupon Landlord shall be discharged
from any further liability with respect to such security deposit.
6. Improvement of the Leased Premises. Intentionally deleted.
7. Alterations or Improvements by Tenant. Except for the incidental hanging of
pictures, installation of shelves, and other painting and decoration of the
Leased Premises which do not affect the structure of the Leased Premises, Tenant
shall not make any alterations, additions, or improvements, structural or
otherwise (collectively, "Alterations") in the Leased Premises (such as
carpeting, telephone installation, decoration and installation of specialized
equipment), without the prior written consent of Landlord, which consent shall
not be unreasonably withheld. Tenant shall not install any equipment of any
nature whatsoever which may affect the insurance rating of the Building, or
which may necessitate any changes, replacements or additions to the water
system, plumbing system, heating system, air-conditioning system, telephone
system or the electrical system of the Leased Premises, without the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
Tenant shall pay all costs to make such changes, replacements or additions.
Tenant hereby agrees that all Alterations made in, to, or on the Leased
Premises shall, unless otherwise provided by written agreement, be the property
of Landlord and shall remain upon and be surrendered with the Leased Premises on
the Expiration Date or other termination of this Lease, unless Landlord shall,
prior to such expiration or termination have given Tenant not less than 15 days
prior written notice to remove the same, in which event Tenant shall at its
expense forthwith remove such Alterations. Any or all wiring and cabling, such
as telephone, computer and data wires installed by Tenant shall be removed by
Tenant at its sole cost, and the Leased Premises shall be restored to their
original condition by the Expiration Date, ordinary wear and tear excepted. All
property permitted or required to be removed by Tenant at the end of the term
remaining in the Leased Premises after Tenant's removal shall be deemed
abandoned and may, at
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the election of Landlord, either be retained as Landlord's property or may be
removed from the premises by Landlord at Tenant's expense.
8. Use of Leased Premises.
(a) Use. Tenant shall use and occupy the Leased Premises for the singular
purpose specified in Section 1(a)(11) and for no other purpose. Tenant shall not
use or permit the Leased Premises to be used for any other purpose or purposes
without the prior written consent of Landlord, which consent may be granted or
withheld in its sole discretion.
(b) Compliance. Tenant, at its expense, shall comply with the laws, rules
and regulations of any federal, state or municipal authority, or the Maryland
Fire Underwriters Rating Bureau, or with any notice from any public officer
pursuant to law, or with any notice from any insurance company pertaining to
Tenant's occupancy or use of the Leased Premises, whether such notice shall be
served on Landlord or Tenant. In furtherance of the foregoing, and provided
Tenant shall first have obtained Landlord's prior written consent (which Tenant
agrees to promptly request), Tenant shall, at Tenant's sole cost and expense,
make such changes, alterations, renovations or modifications to the Leased
Premises (except for structural repairs) which are necessitated or required by
any such Law.
(i) Legal. Tenant shall not use or permit the Leased Premises or
any part thereof to be used in violation of any present or future applicable
law, regulation or ordinance, or of the certificate of occupancy issued for the
Building or the Leased Premises, and shall immediately discontinue any use of
the Leased Premises which is declared by any governmental authority having
jurisdiction to be in violation of law or said certificate of occupancy. Tenant
will not use or permit the Leased Premises to be used for any purposes that
interfere with the use and enjoyment of the Building by Landlord or the other
tenants, which will increase the existing rate of insurance on the Building or
which violate the requirements of any insurance company insuring the Building or
its contents, or which, in Landlord's sole discretion, impair the reputation of
the Building. Tenant shall refrain from and discontinue such use immediately
upon receipt of written notice from Landlord.
(ii) Fire and Safety. Tenant shall not do, or permit anything to
be done in the Leased Premises, or bring, use or keep anything therein, which
will in any way increase the rate of fire insurance on the Building, or
invalidate or conflict with fire insurance policies on the Building, fixtures or
on property kept therein. Tenant agrees that any increases of fire insurance
premiums on the Building or contents caused by the occupancy of Tenant and any
expense or cost incurred in consequence of negligence or the willful action of
Tenant, Tenant's employees, agents, servants, invitee, or licensees shall be
deemed Additional Rent and paid as accrued.
(c) Environmental Protection. Tenant and Tenant's employees and agents
shall not dispose of any oil, petroleum or chemical liquids or solids, liquid or
gaseous products or any hazardous waste or hazardous substance including,
without limitation, asbestos (hereinafter collectively referred to as "hazardous
waste"), as those terms are used in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, or in any other federal, state or local
law governing hazardous substances (hereinafter referred to as the "Act"), as
such laws may be amended from time to time at, upon, under or within the Leased
Premises or the Building or the land on which it is built, or into the plumbing
or sewer or water system servicing the Leased Premises or the Building, nor
shall Tenant, its
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employees or agents cause or permit the discharge, spillage, uncontrolled loss,
seepage or filtration of any hazardous waste at, upon, under or within the
Leased Premises or the Building or the land or into the plumbing or sewer or
water system servicing the same. Tenant shall comply in all respects with the
requirements of the Act and related regulations, and shall notify Landlord
immediately in the event of its discovery of any hazardous waste at, upon, under
or within the Leased Premises or the Building or the land.
(d) Indemnification. Tenant shall indemnify Landlord against all costs,
expenses, liabilities, losses, damages, injunctions, suits, fines, penalties,
claims, and demands, including reasonable attorneys' fees, arising out of any
violation of or default in the covenants of this Section 8. The provisions of
Sections 8(b) and (c) and this Section 8(d) shall survive the expiration of the
Lease Term.
(e) Moving and Deliveries. No freight, furniture, heavy machinery, heavy
equipment, including computer equipment or other bulky matter or fixtures of any
description shall be transferred into or out of the Building or carried in the
elevators, without Landlord's prior written consent and approval. In obtaining
the Landlord's approval as required under this paragraph, Tenant agrees to
provide Landlord with all technical specifications concerning the equipment and
machinery and to pay the costs of any and all structural changes which in the
sole discretion of the Landlord are required to be made in order to safely and
efficiently accommodate such equipment or machinery. If such machinery or
equipment requires special handling, Tenant agrees to employ only persons
holding the proper licences to do said work, and that all work in connection
therewith shall comply with any applicable Federal, State, County or other
governing laws, rules or regulations. Tenant shall promptly remove from the
public areas within or adjacent to the Building any of Tenant's property
delivered or deposited there, and shall be liable for any damage to the Building
or the Leased Premises caused by its moving and deliveries.
(f) Excessive Floor Load. Landlord shall have the right to prescribe the
weight and method of installation and position of safes or other heavy fixtures
or equipment. Tenant will not, without Landlord's prior written approval,
install in the Leased Premises any fixtures, equipment or machinery that will
place a load upon the floor exceeding the designed floor load capacity. Tenant
shall be liable for all damage done to the Building by installing or removing a
safe or any other article of Tenant's office equipment, or due to its being in
the Leased Premises. Landlord shall repair any such damage at Tenant's expense,
and Tenant shall pay the cost therefor to Landlord upon demand, as Additional
Rent.
9. Taxes on Tenant's Property. Tenant shall be liable for, and shall pay at
least ten (10) days before delinquency, all taxes levied against any personal
property or trade fixtures placed by Tenant in or about the Leased 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 Leased
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 as
Additional Rent 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.
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10. Rules and Regulations. Tenant covenants on behalf of itself, its employees,
agents, licensees and invitees to comply with the rules and regulations set
forth in Exhibit B, which is attached hereto and made a part hereof (the "Rules
and Regulations"). Landlord shall have the right, in its sole discretion, to
make reasonable additions and amendments to the Rules and Regulations from time
to time and Tenant covenants that Tenant, its employees, agents, licensees and
invitees will comply with additions and amendments to the Rules and Regulations
upon Landlord's provision to Tenant of a written copy of the same. Any
unremedied default by Tenant, or any other party set forth above, of any of the
material provisions of the Rules and Regulations as set forth in Exhibit B, or
as amended from time to time, shall be considered to be a default under the
terms of this Lease. Nothing contained in this Lease shall be construed to
impose upon Landlord any duty or obligation to enforce the Rules and
Regulations, or any amendments or additions thereto, against any other tenant.
Landlord shall have no liability to Tenant or any other party for violations of
the Rules and Regulations by any party whatsoever. If there is any inconsistency
between this Lease and the Rules and Regulations, the Lease shall govern.
11. Utilities and Services.
(a) Building Standard Services and Utilities. As long as Tenant is not in
default under any of the covenants of this Lease, Landlord shall, if and insofar
as existing facilities permit, furnish sufficient electric current for routine
and normal requirements for lighting and typical office equipment and machinery,
such as typewriters, calculators, personal computers, small copiers and similar
items, subject to the limitations of Section 11(b). Landlord shall furnish hot
and cold water for lavatory and drinking purposes, lavatory supplies, and
Building standard fluorescent tube replacements and nightly cleaning and jani-
torial services Monday through Friday. Landlord further agrees to furnish
heating and cooling during the appropriate seasons of the year, during the
Standard Building Operating Hours and on the days set forth in Section l(a)(15),
exclusive of the Building Holidays specified in Section l(a)(16), with holidays
falling on Saturday observed both on said day and on the preceding Friday, and
holidays falling on Sunday observed on the following Monday.
(b) Overtime Services. Landlord shall be under no obligation to furnish
electric power at any hours other than normal business hours, or for the
operation of any other electrical equipment or appliance, unless arrangements
for such after-hours operations, and for the installation of such electrical
equipment or appliance, shall have been made pursuant to terms and conditions
acceptable to Landlord and embodied in a separate written agreement between
Landlord and Tenant. In the event that Tenant uses electrical services in excess
of that required for normal office use or during periods other than normal
business hours or both, then such excess services shall be supplied at the
expense of the Tenant, pursuant to terms, conditions and costs established by
the Landlord in its sole discretion. Should Tenant require heating and cooling
services beyond the hours stipulated in Section 11(a), Landlord will furnish
such additional service at the then-prevailing hourly rate, as established by
Landlord from time to time, provided that Tenant gives Landlord no less than
twenty-four (24) hours advance written notice of the need therefor.
(c) Interruption or Reduction of Service. In no event shall Landlord be
liable to Tenant for any interruption or failure in the supply of any utilities
to the Leased Premises and the Building. Landlord reserves the right to
interrupt service of the heat, plumbing, air conditioning, cooling, electric,
and sewer and water systems, when necessary, by reason of accident, or of
repairs, alterations or improvements which in the judgment of Landlord are
desirable or necessary to
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be made, until such repairs, alterations or improvements shall have been
completed; and Landlord shall have no responsibility or liability for failure to
supply heat, plumbing, air conditioning, cooling, electric, and sewer and water
service, or other service or act for the benefit of Tenant, when prevented from
so doing by strikes, accidents or by any other causes beyond Landlord's
reasonable control, or by orders or regulations of any federal, state, county,
or municipal authority, or by any failure to receive suitable fuel supply, or
inability despite exercise of reasonable diligence to obtain the regularly-used
fuel or other suitable substitute; and Tenant agrees that Tenant shall have no
claim for damages nor shall there be any abatement of Base Annual Rent in the
event that any of said systems or service shall be discontinued or shall fail to
function for any reason. If any public utility supplying any utility to the
Building, or any law, order or regulation of any federal, state, county or
municipal authority requires that Landlord or Tenant must reduce or maintain a
certain level of consumption of electricity or any other utility or interior
temperature for the Leased Premises or the Building, which affects the normal
business hours or the provision of any utility the Leased Premises or the
Building, Landlord and Tenant shall each adhere to and abide by such requirement
without any reduction in rent or in any of Tenant's other obligations hereunder.
Landlord's obligation to supply heat and air conditioning are subject to
applicable laws and regulations as to energy conservation and other
restrictions.
(d) Excessive Electrical Usage.
(i) Tenant will not install or operate in the Leased Premises any
heavy duty electrical equipment or machinery, without obtaining the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
Landlord may require, as a condition of its consent to the installation of such
equipment or machinery, payment by Tenant, as Additional Rent, for such excess
consumption of electricity as may be occasioned by the operation of said
equipment or machinery. Landlord may make periodic inspections of the Leased
Premises at reasonable times to determine that Tenant's electrically operated
equipment and machinery complies with the provisions of this Section and Section
11(e).
(ii) Landlord shall have the right to require that one or more
separate meters or submeters be installed to record the consumption or use of
electricity, or to cause a reputable independent electrical engineer to survey
and determine the quantity of electricity consumed by such excessive use. The
cost of any such survey or meters and of installation, maintenance and repair
thereof shall be paid by Tenant. Tenant agrees to pay Landlord (or the utility
company, if direct service is provided by the utility company), promptly upon
demand therefor, for all such electricity consumption as shown by said meters,
or a flat monthly charge determined by the survey, as applicable, at the rates
charged for such service by the local public utility company.
(e) Excessive Heat Generation. Landlord shall not be liable for its
failure to maintain comfortable atmospheric conditions in all or any portion of
the Leased Premises, due to heat generated by any equipment or machinery
installed by Tenant (with or without Landlord's consent) that exceeds
generally-accepted engineering design practices for normal office purposes. If
Tenant desires additional cooling to offset excessive heat generated by such
equipment or machinery, Tenant shall pay for auxiliary cooling equipment and its
operating costs, including, without limitation, electricity, gas, oil and water,
or for excess electrical consumption by the existing cooling system, as
appropriate.
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(f) Security. Any security measures that Landlord may undertake are for
protection of the Building only and shall not be relied upon by Tenant to
protect Tenant, its property, its employees and/or their property.
12. Landlord's Right of Entry. Landlord, its agents, employees and contractors
shall have the right to enter the Leased Premises at all reasonable times,
including emergencies determined by Landlord, (a) to make inspections or to make
repairs, replacements and improvements to Leased Premises or other premises as
Landlord may deem necessary or reasonably desirable to the Premises or to any
other portion of the Building or which Landlord may elect to perform; (b) to
perform nightly cleaning of the Leased Premises; (c) to exhibit the Leased
Premises to prospective purchasers at any reasonable time, or to prospective
tenants during the last one hundred and eighty (180) days of the Lease Term; and
(d) for any purpose whatsoever relating to the safety, protection or
preservation of the Building. Such entry by Landlord shall be, whenever
reasonably possible, during normally business hours, except in cases of
emergency. Landlord shall use reasonable best efforts to minimize interference
to Tenant's business when making repairs, but, unless otherwise agreed with
Tenant, Landlord shall not be required to perform the repairs at any time other
than during normal working hours. The right and authority hereby reserved do not
impose, no does the Landlord assume by reason thereof, any responsibility or
liability whatsoever for the care, maintenance or supervision of the Leased
Premises or any pipes, fixtures, appliances or appurtenances therein contained
or therewith in any manner connected.
13. Maintenance and Repairs.
(a) Landlord Responsibilities. Landlord shall make structural repairs to
the Leased Premises necessary for safety and tenantability, and shall maintain
and repair all Building equipment serving the Leased Premises and all exterior
plate glass in the Leased Premises, and the cost of all such repairs or
maintenance shall be included in Basic Operating Expenses. Tenant waives the
right to make repairs at Landlord's expense under any law, statute or ordinance
now or hereafter in effect. 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 changes, alterations, additions, improvements, repairs,
relocations or replacements in or to the Building and the fixtures and equipment
thereof. 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 Leased Premises which are located in the
Leased Premises or located elsewhere outside the Leased Premises. Landlord shall
use reasonable efforts not to disturb Tenant's business operations when making
repairs to the Leased Premises or 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.
(b) Tenant Responsibilities. Tenant will keep the Leased Premises and the
fixtures and equipment therein in good order and condition, will take good care
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thereof and will suffer no waste or damage thereto. Tenant will promptly repair
at its own expense any damage to the Leased Premises caused by bringing into the
premises any property for Tenant's use or by the installation or removal of such
property, regardless of fault or by who such damage shall be caused, unless
caused by Landlord, its agents, employees or contractors; and, in default of
such repairs by Tenant, Landlord shall make the same and Tenant agrees to pay
the costs thereof to Landlord promptly upon Landlord's demand therefor. At the
expiration or other termination of the Lease Term, Tenant will surrender the
Leased Premises broom clean and in the same order and condition in which they
were on the Rent Commencement Date, ordinary wear and tear excepted. All repairs
and maintenance required to be performed by Tenant shall be made or performed
immediately upon the occurrence of the necessity therefor, and shall be made or
performed in a first class manner, using first class materials, by a contractor
approved by Landlord and bonded unless waived by Landlord, and shall be made or
performed in accordance with (i) all laws and all applicable governmental codes
and requirements, and (ii) insurance requirements. Maintenance and repair of
equipment such as kitchen fixtures, auxiliary air-conditioning equipment,
private bathroom fixtures and any other type of special equipment, together with
related plumbing or electrical services, whether installed by Tenant or by
Landlord on behalf of Tenant, shall be the sole responsibility of Tenant, and
Landlord shall have no obligation in connection therewith. If Tenant refuses or
neglects to promptly commence and complete repairs or maintenance necessary to
satisfy the provisions of this Section, the Landlord may, but shall not be
required to, make and complete said repairs or maintenance and Tenant shall pay
the cost therefor (including overhead) to Landlord upon demand, as Additional
Rent.
14. Common Areas.
(a) Common Areas Defined. In this Lease, "common areas" means all areas,
facilities and improvements provided, from time to time, in the Building for the
mutual convenience and use of tenants or other occupants of the Building, their
respective agents, employees, and invitees and shall include, if provided, but
shall not be limited to, the lobbies and hallways, the public restrooms, the
parking areas and facilities, access roads, driveways, retaining walls,
sidewalks, walkways, landscaped areas, and exterior lighting facilities.
(b) Landlord's Control. Landlord shall, as between Landlord and Tenant, at
all times during the term of the Lease have the sole and exclusive control,
management and direction of the common areas, and may at any time and from time
to time during the term exclude and restrain any person from use or occupancy
thereof, excepting, however, Tenant and other tenants of Landlord and bona fide
invitee of either who make use of said areas in accordance with the rules and
regulations established by Landlord from time to time with respect thereto. The
rights of Tenant in and to the common areas shall at all times be subject to the
rights of others to use the same in common with Tenant, and it shall be the duty
of Tenant to keep all of said areas free and clear of any obstructions created
or permitted by Tenant or resulting from Tenant's operation. Landlord may at any
time and from time to time close all or any portion of the common areas to make
repairs or changes or to such extent as may, in the opinion of Landlord, be
necessary to prevent a dedication thereof or the accrual of any rights to any
person or to the public therein, to close temporarily any or all portions of the
said areas to discourage noncustomer parking, and to do and perform such other
acts in and to said areas as, in the exercise of good business judgment,
Landlord shall determine to be advisable with a view to the improvement of the
convenience and use thereof by tenants, their employees, agents, and invites.
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(c) Changes and Additions to the Building, Additional Construction.
Landlord hereby reserves the right at any time to make alterations or additions
to the Building, as well as in or to the street entrances, halls, passages,
stairways and other common facilities thereof. Tenant agrees that Landlord shall
at all times have the right and privilege of determining the nature and extent
of the common areas, and of making such changes, rearrangements, additions or
reductions therein and thereto from time to time which in its opinion are deemed
to be desirable and for the best interest of all persons using the common areas
or which are as a result of any federal, state or local environmental protection
or other law, rule, regulation, guideline or order. The purpose of the floor
plan attached hereto as Exhibit A is to show the approximate locational
relationship of the Leased Premises to other units in the Building and the
common areas as of the Rent Commencement Date. Nothing described in Exhibit A
shall limit or prevent Landlord from effecting any change or alteration to the
Building or the land upon which it is built as described in this paragraph.
(d) Parking. Tenant shall have the right to utilize the Building's parking
facilities on a nonexclusive basis with other tenants of the Building, upon such
reasonable 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 the other tenants. Tenant shall not use parking
areas for the overnight storage of vehicles, other than Tenant-owned corporate
vehicles which Landlord and Tenant have previously agreed will be regularly
parked overnight at the Building. 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
located therein, or for any injury sustained by any person in or about the
parking facilities.
15. Surrender and Inspection.
(a) Surrender. Upon the Expiration Date or other termination of the term
of this Lease, Tenant shall quit and surrender the Leased Premises to the
Landlord in as good order and condition as when received, ordinary wear and tear
excepted, and Tenant shall remove all of its property from the Leased Premises
by the Expiration Date or other termination of this Lease, all to the reasonable
satisfaction of the Landlord. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this Lease.
(b) Inspection. Tenant shall have the right to be present at time of final
inspection of the Leased Premises to determine if any damages were done thereto,
if Tenant notifies Landlord by certified mail of its intention to move, date of
moving and new address. The notice of Tenant's desire to be present at the final
inspection of the Leased Premises shall be given at least fifteen (15) days
prior to the date of moving. Upon receipt of such notice, Landlord shall notify
Tenant of time and date when the Leased Premises are to be inspected. The
inspection shall occur within five (5) days before or five (5) days after
Tenant's date of moving, said inspection date to be designated by Landlord.
Tenant shall be deemed to have been advised of its rights under this paragraph
by execution of this Lease.
(c) Fixtures and Personal Property Remaining. If Tenant does not remove
Tenant's furniture, equipment, machinery, trade fixtures, floor coverings and
all other items of personal property of every kind and description from the
Leased Premises prior to the Expiration Date, then Tenant shall be conclusively
presumed
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to have conveyed the same to Landlord under this Lease as a bill of sale without
further payment or credit by Landlord to Tenant.
16. Tenant Holding Over. If Tenant holds possession of the Leased Premises after
the Expiration Date or other termination of this Lease, Landlord shall have the
option, exercisable in writing within thirty (30) days after the date of
termination of aforesaid, to treat Tenant as a trespasser, or as a tenant by the
month. If the Landlord fails to make such election then the Tenant shall be
deemed a tenant by the month, commencing with the first day after the
termination of the Lease at one hundred and fifty percent (150%) the Basic
Monthly Rent paid during the last month of the Term, and upon all the other
terms of this Lease, including the provisions of this paragraph. Said holdover
term shall terminate upon thirty (30) days notice from one party to the other.
Nothing contained herein shall be construed within said thirty (30) days after
the date of Lease termination as aforesaid as a consent by Landlord to the
occupancy or possession of the Leased Premises by Tenant after the termination
of the Lease, and Landlord, upon said termination, if Landlord elects to treat
Tenant as a trespasser, shall be entitled to the benefit of all public general
or public laws relating to the speedy recovery of the possession of land and
tenements held over by Tenant, whether now or hereafter in force and effect. If
Tenant fails to surrender the Leased Premises upon the expiration or other
termination of 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 attorneys' fees, founded on or resulting from such failure to surrender.
17. Covenant Against Assignment and Subletting. Tenant shall not assign,
mortgage or encumber this Lease, or any right hereunder, nor sublet the Leased
Premises or any part thereof, nor permit the Leased Premises to be used by
others without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, however, Tenant may sublet
this lease to an affiliate, parent or subsidiary of Tenant without Landlord's
consent. If Tenant, or any Guarantor, is a corporation, unincorporated
association or partnership, then the transfer, assignment or hypothecation of
any stock or interest in such corporation, association or partnership so as to
result in a change in the control thereof by the person, persons or entities
owning a controlling interest therein as of the date of this Lease, without the
prior written consent of Landlord as described above, shall be deemed an
assignment made in breach of this covenant. Landlord's consent in any specific
instance to any assignment, mortgage, encumbrance, subletting or use of the
Leased Premises and its collection and acceptance of rent from any such approved
assignee, subtenant or other occupant shall neither constitute a waiver of the
provisions of this paragraph, nor be construed as permission for any subsequent
assignment, mortgage, encumbrance, subletting or use without compliance with
this paragraph. Without the prior written consent of Landlord, this Lease and
the interest of Tenant, or any assignee of Tenant, shall not pass by operation
of law, nor shall it be subject to garnishment or sale under execution in any
suit or proceeding which may be brought against or by Tenant, or any assignee of
Tenant. No permitted assignment or sublease or collection of rent from an
approved assignee or subtenant shall relieve Tenant of its obligations
hereunder. Landlord shall have the right at any time to assign this Lease, in
whole or in part, to any third party.
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18. Bankruptcy.
(a) The following shall be Events of Bankruptcy under this Lease: (1)
Tenant's or any guarantor of Tenant's obligations under this Lease ("Tenant's
Guarantor") becoming insolvent, as that term is defined in Title 11 of the
United States Code (the "Bankruptcy Code"), or under the insolvency laws of any
state, 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 or Tenant's Guarantor property or assets, or the institution of a
foreclosure action upon any of Tenant's or Tenant's Guarantor's real or personal
property; (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 or Tenant's Guarantor 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 or Tenant's Guarantor's making or consenting to an
assignment for the benefit of creditors or a common law composition of
creditors; or (6) if a corporate reorganization of Tenant or an agent with its
creditors shall be approved by a court under the Federal Bankruptcy Act.
(b) Upon occurrence of an Event of Bankruptcy, Tenant shall be deemed to
have breached a material covenant of this Lease and Landlord shall have all
rights and remedies available to Landlord pursuant to Section 20; 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 20 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.
19. Default. Each of the following shall be deemed a default by Tenant and a
breach of this Lease:
(a) An Event of Bankruptcy as defined in Section 18;
(b) An assignment or encumbrance of Tenant's interest in this Lease or the
Leased Premises or a subletting of any part of the Leased Premises in violation
of Section 17;
(c) The suspension of business by Tenant;
(d) The filing of a tax lien against any property of Tenant;
(e) Discontinuance by Tenant of the conduct of its business in the Leased
Premises, or an abandonment or vacation of the Leased Premises by Tenant for a
period of sixty (60) days or more;
(f) A failure by Tenant to pay Minimum Annual Rent or Additional Rent when
due, where such failure continues for ten (10) days after notice thereof from
Landlord, provided, however, that Landlord need provide such notice no more than
three (3) times in any twelve (12) month period, and the fourth such default in
a twelve month period shall be deemed a default by Tenant without such notice
from Landlord;
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(g) A failure by Tenant to observe and perform any other term, covenant,
agreement or condition of this Lease to be observed or performed by Tenant,
where such failure continues for ten (10) business days after notice thereof
from Landlord, provided, however, that if the nature of the default is such that
the same cannot be reasonably be cured within the ten (10) business day period
allowed, Tenant shall not be deemed to be in default if Tenant shall, within
such ten (10) business day period, commence to cure and there after diligently
prosecute the same to completion. Nonetheless, Tenant will be deemed to be in
default if the same default is not cured within sixty (60) days after that
reasonable effort commences. Landlord shall not, however, be required to give
such notice if Tenant's failure to perform constitutes a non-curable breach of
this Lease. The notice required by this Paragraph is intended to satisfy any and
all notice requirements imposed by law on Landlord and is not in addition to any
such requirement;
(h) Any material misrepresentation by Tenant to Landlord in connection
with the negotiation or execution of this Lease;
(i) A default by Tenant under any other lease or sublease for any other
space in the Building, which has resulted in the termination of said lease;
(j) Failure by any surety or guarantor of this Lease to comply with all
the provisions of the suretyship or guaranty agreement; or
(k) The merger of any corporate surety or corporate guarantor of this
Lease with another entity, or the liquidation or dissolution of such surety or
guarantor or the change of control of such surety or guarantor caused by the
transfer of stock of such surety or guarantor, except by reason of the death of
any shareholder thereof.
20. Landlord's Rights Upon Tenant's Default. Upon default by Tenant of any of
the terms or covenants of this Lease, then in addition to any other remedies
available to Landlord herein at law or in equity, Landlord shall be entitled to
remedy such default as follows:
(a) Re-Entry. Landlord shall have the right, immediately or at any time
thereafter, without further notice to Tenant (unless otherwise provided herein),
to enter the Leased Premises (breaking open locked doors, if necessary, and
using as much reasonable force as necessary to effect the manner thereof),
without terminating this Lease or being guilty of trespass, and do any and all
acts as Landlord may deem necessary, proper or convenient to cure such default,
for the account and at the expense of Tenant, and Tenant agrees to pay to
Landlord as Additional Rent all damage and/or expense incurred by Landlord in so
doing, including interest at the Penalty Rate, from the due date until the date
payment is received by Landlord. Landlord shall not be liable for any loss,
injury or damage resulting in any way from such action by Landlord.
(b) Termination. Landlord shall have the right to terminate this Lease and
Tenant's right to possession of the Leased Premises and, with or without legal
process, take possession of the Leased Premises and remove Tenant, any occupant
and any property therefrom, using such force as may be necessary, without being
guilty of trespass and without relinquishing any rights of Landlord against
Tenant. Landlord shall be entitled to recover damages from Tenant in an amount
equal to the amount herein covenanted to be paid as Minimum Annual Rent during
the remainder of the Lease Term, said Minimum Annual Rent and Additional Rent
for the full term then remaining having been fully accelerated at the option of
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Landlord, together with (i) all expenses of any proceedings (including, but not
limited to, legal expenses and reasonable attorney's fees) which may be
necessary in order for Landlord to recover possession of the Leased Premises,
(ii) the expenses of the re-renting of the Leased Premises (including, but not
limited to, any commissions paid to any real estate agent, advertising expense
and the costs of such alterations, repairs, replacements and decoration or
re-decoration as Landlord, in its sole judgment, considers advisable and
necessary for the purpose of re-renting the Leased Premises), and (iii) interest
computed at the Penalty Rate from the due date until paid; provided, however,
that there shall be credited against the amount of such damages all amounts
received by Landlord from such re-renting of the Leased Premises and such
amounts shall be refunded to Tenant.
Landlord shall use its best efforts to re-rent the Premises, but Landlord
has no obligation to favor the Leased Premises over any other space available
for lease in the Building, and Landlord shall in no event be liable in any way
whatsoever for failure to re-rent the Leased Premises or, in the event that the
Leased Premises are re-rented, for failure to collect the rent thereof under
such re-renting. No act or thing done by Landlord shall be deemed to be an
acceptance of a surrender of the Leased Premises, unless Landlord shall execute
a written agreement of surrender with Tenant. Tenant's liability hereunder shall
not be terminated by the execution of a new lease of the Leased Premises by
Landlord. In the event Landlord does not exercise its option to accelerate the
payment of Minimum Annual Rent and Additional Rent as provided hereinabove, then
Tenant agrees to pay to Landlord, upon demand, the amount of damages herein
provided after the amount of such damages for any month shall have been
ascertained; provided, however, that any expenses incurred by Landlord shall be
deemed to be a part of the damages for the month in which they were incurred.
Separate actions may be maintained each month or at other times by Landlord
against Tenant to recover the damages then due, without waiting until the end of
the term of this Lease to determine the aggregate amount of such damages. Tenant
hereby expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or being
dispossessed for any cause, or in the event of Landlord obtaining possession of
the Leased Premises by reason of the violation by Tenant of any of the covenants
and conditions of this Lease.
(c) Distress. Upon any default by Tenant in the payment of Minimum Annual
Rent or Additional Rent, Landlord shall have the right, without notice, fifteen
(l5) days after payment of such sum was due, to institute an action of distress
therefor, and, upon distress, in Landlord's discretion, this tenancy shall
terminate. In the event of such termination, the provisions of Section 20(b)
shall be applicable.
(d) Lien for Rent. Upon any default by Tenant in the payment of Minimum
Annual Rent or Additional Rent, Landlord shall have a lien upon the property of
Tenant in the Leased Premises for the amount of any unpaid Minimum Annual Rent
or Additional Rent. In such event, Tenant shall not remove any of Tenant's
property from the Leased Premises except with the prior written consent of
Landlord, and Landlord shall have the right and privilege, at its option, to
take possession of all property of Tenant in the Leased Premises, to store the
same on the Leased Premises, or to remove it and store it in such place as may
be selected by Landlord, at Tenant's risk and expense.
(e) No Future Lease Rights. If at any time during the term of this Lease
Tenant has been in default beyond Tenant's right to cure period, then,
regardless of whether Tenant is in default at the time of any option or future
right, all of
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Tenant's present and future rights to this Lease are then terminated when the
default occurs.
(f) Utilities and Services. Upon any default by Tenant, Landlord may
immediately cease to provide all utilities and services to the Leased Premises
as provided under Section 11 herein.
(g) Landlord's Remedies Cumulative. All rights and remedies of Landlord
herein enumerated shall be cumulative, and none shall exclude any other right or
remedy allowed by law. For the purposes of any suit brought or based hereon,
this Lease shall be construed to be a divisible contract, to the end that
successive actions may be maintained on this Lease as successive periodic sums
mature hereunder.
21. Lender Requirements.
(a) Subordination. Tenant agrees that this Lease is subject and
subordinate to any and all ground or underlying leases and to the lien of any
first mortgages or deeds of trust now on or which at any time may be made a lien
upon the Building, or any part thereof, and to all advances made or hereafter to
be made upon the security thereof. This subordination provision shall be
self-operative and no further instrument of subordination shall be required.
Tenant agrees to execute and deliver, upon request, within five (5) days demand
by Landlord, such further instrument or instruments confirming this
subordination as shall be desired by Landlord or by any mortgagee or proposed
mortgagee; and Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such instrument or instruments. Upon Tenant's
written request, Landlord shall use its best efforts to acquire from any such
mortgagee an agreement that any proceeding to foreclose, sell or any other
action taken under the mortgage shall not affect Tenant's rights to continue to
occupy the Leased Premises and exercise and enjoy all of its rights hereunder so
long as Tenant complies with the terms and provisions of this Lease, and
continues to make the payments required hereunder to the appropriate designated
party, provided, Landlord's failure to acquire such an agreement shall not
mitigate Tenant's obligations hereunder. Tenant further agrees that, at the
option of the holder of any first mortgage or of the trustee under any first
deed of trust, this Lease may be made superior to said first mortgage or first
deed of trust by the insertion therein of a declaration that this Lease is
superior thereto.
(b) Attornment. In the event any proceedings are brought for the
foreclosure of, or in the event of exercise of the power of sale under, any deed
to secure debt given by Landlord and covering the Leased Premises, Tenant shall
attorn to the purchaser upon any such foreclosure or sale and recognize such
purchaser as the owner and landlord under this Lease.
(c) Financing. This Lease is subject to the approval of the mortgage
lender(s) providing mortgage financing for the Building, and disapproval of this
Lease by any such mortgage lender shall result in termination of this Lease. In
the event that any mortgage lender providing mortgage financing for the Building
requires, as a condition of such financing, that modifications to this Lease be
obtained, and provided that such modifications (i) are reasonable, (ii) do not
adversely affect Tenant's use of the Leased Premises as herein permitted, (iii)
do not materially alter the approved plans for the Basic Work and Additional
Work and (iv) do not increase the rentals and other sums required to be paid by
Tenant hereunder, then Landlord may submit to Tenant a written amendment to this
Lease incorporating such required modifications, and, in the event Tenant does
not
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execute and return to Landlord such written amendment within ten (10) days after
the same has been submitted to Tenant, then Landlord shall thereafter have the
right, at its sole option, to terminate this Lease. Such option shall be
exercisable by Landlord giving Tenant written notice of termination, immediately
whereupon this Lease shall be terminated, and money or security therefor
deposited by Tenant with Landlord shall be returned to Tenant, and both Landlord
and Tenant shall thereupon be relieved from any and all further liability or
obligation hereunder.
(d) Financial Statements. Tenant agrees, not more often than once per
calendar year, upon written notice by Landlord, to deliver to Landlord such
financial statements detailing its profits and losses, certified by a duly
authorized officer of Tenants if Tenant.
22. Estoppel Certificates. Tenant agrees, at any time and from time to time,
upon not less than ten (10) days prior written notice by Landlord, to execute,
acknowledge and deliver to Landlord a written estoppel certificate (i)
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, stating the nature of same), (ii) stating the
Rent Commencement Date of the Lease Term, (iii) stating the amounts of Minimum
Annual Rent and Additional Rent and the dates to which the Minimum Annual Rent
and Additional Rent have been paid by Tenant, (iv) stating the amount of any
Security Deposit, (v) stating whether or not to the best knowledge of Tenant,
Landlord is in default in the performance of any covenant, agreement or
condition contained in this Lease, and, if so, specifying each such default of
which Tenant may have knowledge, (vi) stating that Tenant has no right to set
off and no defense against payment of the Minimum Annual Rent or Additional
Rent, (vii) address to which notices to Tenant should be sent. and (viii)
certifying such other matters as may be requested by Landlord. Any such
certificate delivered pursuant hereto may be relied upon by an owner of the
Building, any prospective purchaser of the Building, any mortgagee or
prospective mortgagee of the Building or of Landlord's interest therein, or any
prospective assignee of any such mortgage. Failure to deliver the aforesaid
certificate within the five (5) days shall be conclusive upon Tenant for the
benefit of Landlord and any successor to Landlord that this Lease is in full
force and effect and has not been modified except as may be represented by the
party requesting the certificate. Tenant shall be liable for any loss incurred
by Landlord resulting from Tenant's failure to timely execute and deliver any
estoppel certificate requested by Landlord, and shall reimburse Landlord for the
amount of any such loss upon demand, as Additional Rent.
23. Damage by Fire or Other Casualty. If the Leased Premises, or any other
portion of the Building shall, through no fault of Tenant or Tenant's agents,
servants, employees, customers, contractors, visitors or liscencees, be damaged
by fire, the elements, unavoidable accident or other casualty:
(a) Except as otherwise provided in subparagraph (b) hereof, Landlord, at
Landlord's expense, shall promptly restore the Leased Premises, and Tenant, at
Tenant's sole expense, shall promptly restore all leasehold improvements
installed in the Leased Premises by Tenant or at Tenant's request and its own
furniture, furnishings, trade fixtures and equipment and the rent shall not be
abated. No penalty shall accrue for reasonable delay which may arise by reason
of adjustment of insurance on the part of Landlord, or on account of labor
problems, or any other cause beyond Landlord's reasonable control. If the damage
or destruction is such as to make the Leased Premises or any substantial part
thereof untenantable (in Landlord's judgment), and provided that such damage or
destruction is not due in whole or part to the act or omission of Tenant or
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Tenant's agents, employees or invites, the Minimum Annual Rent shall abate
proportionately (based on proportion of the number of square feet rendered
untenantable to the total number of square feet of the Leased Premises), from
the date of the damage or destruction until the date the Leased Premises has
been restored by Landlord.
(b) If the Leased Premises are substantially damaged or are rendered
substantially untenantable by fire or other casualty, or if Landlord's architect
certifies that the Leased Premises cannot be repaired within one hundred twenty
(120) working days of normal working hours, said period commencing with the
start of the repair work, or if Landlord shall decide not to restore or repair
the same, or if more than fifty percent (50%) of the gross leasable area of the
Building is rendered untenantable (even if the Leased Premises is undamaged) or
if Landlord shall decide to demolish the Building or not to rebuild it, then
Landlord may, within ninety (90) days after such fire or other casualty,
terminate this Lease by giving Tenant a notice in writing of such decision, and
thereupon the term of this Lease shall expire on the date specified in such
notice, or, if not date is so specified, by lapse of time upon the third day
after such notice is given, and Tenant shall vacate the Leased Premises and
surrender the same to Landlord. Upon the termination of this Lease under the
conditions hereinbefore provided, Tenant's liability for Minimum Annual Rent and
Additional Rent shall cease as of the day following the casualty.
(c) The proceeds payable under all casualty insurance policies maintained
by Landlord on the Leased Premises shall belong to and be the property of
Landlord, and Tenant shall not have any interest in such proceeds. Tenant agrees
to look to Tenant's casualty insurance policies for the restoration and
replacement of the leasehold improvements installed in the Leased Premises by
Tenant or at Tenant's request and Tenant's fixtures, equipment and furnishings
in the Leased Premises, and in the event of termination of this Lease, for any
reason, following any such damage or destruction, Tenant shall promptly assign
to Landlord or otherwise pay to Landlord, upon Landlord's request, the proceeds
of said insurance and such other additional funds so that the total amount
assigned and/or paid by Tenant to Landlord shall be sufficient to restore
(whether or not any such restoration is actually to occur) all improvements,
fixtures, equipment and furnishings (excepting only Tenant's trade fixtures and
equipment) existing in the Leased Premises immediately prior to such damage or
destruction.
(d) Notwithstanding anything to the contrary in this Section 23 or in any
other provision of this Lease, any obligation (under this Lease or otherwise) of
Landlord to restore all or any portion of the Leased Premises shall be subject
to Landlord's receipt of approval of the same by the mortgagee(s) of Landlord
(and any other approvals required by applicable laws), as well as receipt from
any such mortgagee(s) of such fire and other hazard insurance policy proceeds as
may have been assigned to any such mortgagee; it being agreed that if Landlord
has not received such approval(s) and proceeds within one hundred and eighty
(180) days after any such casualty, then Landlord shall have the option to
terminate this Lease, at any time thereafter, upon notice to Tenant.
24. Condemnation. In the event the whole or a substantial part of the Leased
Premises or the Building 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 shall have the right
to terminate this Lease effective as of the date possession is required to be
surrendered to said authority, and the Minimum Annual Rent and Additional Rent
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shall be apportioned as of the date. For purposes of this section, a substantial
part of the Leased Premises or the Building shall be considered to have been
taken if, in Landlord's opinion, the taking shall render it commercially
undesirable for Landlord to permit this Lease to continue or to continue
operating the Leased Premises or 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, the Minimum Annual Rent and
Additional Rents shall be adjusted (based on the ratio that the number of square
feet of rentable area taken from the Leased Premises bears to the number of
rentable square feet in the Leased Premises immediately prior to such taking) as
of the date possession is required to be surrendered to said authority. 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, as long as such award is made in addition to and separately stated
from any award made to Landlord for the Leased Premises or the Building.
Landlord shall have no obligation to contest any taking.
25. Landlord's Reserved Rights. The Landlord reserves the following rights:
(a) To decorate, remodel, repair, alter or otherwise prepare the Leased
Premises for reoccupancy during the last ninety (90) days of the Lease Term, if
during or prior to that time Tenant vacates the Leased Premises; and
(b) To show the Leased Premises to prospective tenants or brokers during
the last one hundred eighty (180) days of the term of this Lease, and to show
the Leased Premises to prospective purchasers, mortgagee, or assignee of any
mortgage on the Building at all reasonable times provided that reasonable prior
notice is given to Tenant in each case and that Tenant's use and occupancy of
the Leased Premises shall not be materially inconvenienced by any such action of
Landlord.
26. Landlord and Tenant Liability.
(a) Landlord's Liability. It is understood and agreed that Landlord is a
Maryland limited partnership and/or joint venture and that no partner of the
partnership, as may now or hereinafter be constituted, shall have liability to
Tenant or any person claiming under, by or through Tenant on any action, claim,
suit or demand brought pursuant to the terms and conditions of this Lease or
arising out of the occupancy by the Tenant of the Leased Premises. Landlord, or
its agents, shall not be responsible or liable to the Tenant or its agents,
employees, contractors, customers or other visitors for any injury or damage
resulting from acts or omissions of persons occupying property adjoining the
Leased Premises, or any part of the Building of which the Leased Premises are a
part, or for any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, rain, dampness or
snow or leaks from or through any part of the Leased Premises or the Building,
including the roof, or from the pipes, conduits, appliances or plumbing works,
or from the roof, street or subsurface or from any other place or by dampness or
by any other cause of whatsoever nature, unless caused by or due to the gross
negligence of Landlord, its agents, servants, or employees. All personal
property and equipment located in the Leased Premises shall be at the risk of
Tenant.
(b) Tenant's Liability. Tenant shall reimburse Landlord for all expense,
damages or fines, incurred or suffered by Landlord by reason of any breach,
violation or nonperformance by Tenant, or its agents, servants, or employees, of
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any material covenant or material provision of this Lease or the Rules and
Regulations promulgated by Landlord hereunder from time to time, or by reason of
damage to persons or property caused by moving property of or for Tenant in or
out of the Building, or by the installation or removal of furniture or other
property of or for Tenant, or by reason of or arising out of the carelessness,
negligence or improper conduct of Tenant, or its agents, servants, employees,
invites or licensees in the use or occupancy of the Leased Premises.
(c) Indemnity. Tenant shall indemnify Landlord and its agents and
employees and save them harmless from and against any and all claims, actions,
damages, liabilities and expenses in connection with loss of life, personal
injury and/or damage to property (i) arising from or out of the occupancy or use
by Tenant of the Leased Premises or any part thereof, or (ii) occasioned wholly
or in part by any act or omission of the Tenant, its agents, contractors,
employees, servants, invites or licensees, whether inside the Leased Premises or
elsewhere in the Building; provided, however, that this indemnification shall
not apply to any such injury, loss, damage or liability arising from any
omission, fault, negligence, or misconduct on the part of the Landlord, its
agents, servants, employees, contractors or licensees. In the event that
Landlord or its agents and employees shall, without fault on its or their part,
be made a party to any litigation commenced by or against Tenant, then Tenant
shall protect and hold the same harmless and shall pay all costs, expenses and
reasonable attorneys' fees incurred or paid in connection with such litigation.
(d) Criminal Acts of Third Parties. Landlord shall not be liable in any
manner to Tenant, its agents, employees, licensees, invitees or contractors for
any injury or damage to Tenant, Tenant's agents, employees, licensees, invites,
or contractors or their property caused by the criminal or intentional
misconduct of third parties. All claims against Landlord for any such damage or
injury are hereby expressly waived by Tenant, and Tenant hereby agrees to hold
harmless and indemnify Landlord from all such damages and the expense of
defending all claims made by Tenant's agents, employees, licensees, invitees or
contractors arising out of such acts.
27. Tenant's Insurance.
(a) Coverages. Tenant shall have issued, pay the premiums therefor, and
maintain in full force and effect during the Lease Term:
(i) Commercial General Liability. A commercial general liability
insurance policy or policies (providing among other coverages: Blanket
Contractual, Personal Injury, independent Contractors, Products/Completed
Operations Hazard, Automobile Liability/Comprehensive Form, and Workers
Compensation) in which the Landlord (and such additional persons and/or entities
as Landlord may request) and Tenant shall be the insured, naming the Landlord
(and such additional persons and/or entities as Landlord may request) and Tenant
as insured parties in the amount of Two Million and No/100 Dollars
($2,000,000.00) combined single limit general liability coverage for bodily
injury or property damage, which amount may be increased from time to time by
the Landlord in its reasonable determination;
(ii) All-Risk Property. All-risk property insurance, including
theft, naming Landlord (and such additional persons and/or entities as Landlord
may request) and Tenant as insured, written at replacement cost value and with
replacement cost endorsement, covering all leasehold improvements installed in
the Leased Premises by Tenant or at Tenant's request and all of Tenant's
personal
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property in the Leased Premises (including, without limitation, inventory, trade
fixtures, floor coverings, furniture and other property removable by Tenant
under the provisions of this Lease);
(iii) Workers' Compensation. If and to the extent required by law,
workers' compensation and employer's liability or similar insurance in form and
amounts required by law; and
(iv) Additional Insurance. Such additional insurance as any
mortgagee of the Building may require.
(b) Policy Requirements. In the event Tenant shall fail to provide such
insurance, or shall fail to pay the premiums when due, Landlord shall have the
right to cause such insurance to be issued and to pay the premiums therefor, or
any premiums in default, and to collect same as Additional Rent together with
interest at the Penalty Rate on the amount of such premiums from the date of
payment by Landlord until the date of repayment by Tenant. All such policies
shall contain only such reasonable deductible amounts as may be approved in
advance by Landlord and shall contain a provision that Landlord shall receive
not less than thirty (30) days advance notice in writing from the insurance
company of any intention of the insurance company to cancel such policy or
policies. Tenant shall provide written evidence to Landlord of its acquisition
of such policies no later than ten (10) days prior to the commencement of this
Lease and prior to any renewal date of such policies. All policies shall be
carried with an insurance company qualified to do business in the State of
Maryland, and rated A or better by the A.M. Best Company.
(c) No Limitation of Liability. Neither the issuance of any insurance
policy required under this Lease nor the minimum limits specified herein shall
be deemed to limit or restrict in any way Tenant's liability arising under or
out of this Lease.
(d) Notice of Fire and Accident. Tenant shall give Landlord immediate
notice in case of fire, theft, or accidents in the Leased Premises, and in case
of fire, theft or accidents in the Building if involving Tenant, its agents,
employees or invitees.
28. Waiver of Subrogation. Landlord and Tenant mutually covenant and agree that
each party, in connection with insurance policies required to be furnished in
accordance with the terms and conditions of this Lease, or in connection with
insurance policies which they obtain insuring such insurable interest as
Landlord or Tenant may have in its own properties, whether personal or real,
shall expressly waive any right of subrogation on the part of the insurer
against the Landlord (and any mortgagee requested by Landlord) or Tenant as the
same may be applicable, which right to the extent not prohibited or violative of
any such policy is hereby expressly waived, and Landlord and Tenant each
mutually waive all right of recovery, claims, losses and/or damages against each
other, their agents, or employees for any loss, damage or injury of any nature
whatsoever to property or person for which either party is required by this
Lease to carry insurance.
29. No Liens Permitted: Discharged. Tenant will not permit to be created or to
remain undischarged any lien, encumbrance or charge (arising out of any work
done or materials or supplies furnished, or claimed to have been done or
furnished, by any contractor, mechanic, laborer or materialman or any mortgage,
conditional sale, security agreement or chattel mortgage, or otherwise by or for
Tenant)
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which might be or become a lien or encumbrance or charge upon the Building or
any part thereof or the income therefrom. Tenant will not suffer any other
matter or thing whereby the estate, rights and interests of Landlord in the
Building or any part thereof might be impaired. If any lien, or notice of lien
on account of an alleged debt of Tenant or any notice of contract by a party
engaged by Tenant or Tenant's contractor to work on the Leased Premises shall be
filed against the Building or any part thereof, Tenant, within fifteen (15) days
after notice of the filing thereof, will cause the same to be discharged of
record by payment, deposit, bond, order of a court of competent jurisdiction or
otherwise. If Tenant shall fail to cause such lien or notice of lien to be
discharged within the period aforesaid, then, in addition to any other right or
remedy, Landlord may, but shall not be obligated to, discharge the same either
by paying the amounts claimed to be due or by procuring the discharge of such
lien by deposit or by bonding proceedings and in any such event Landlord shall
be entitled, if Landlord so elects, to compel the prosecution of an action for
the foreclosure of such lien by the lienor and to pay the amount of the judgment
in favor of the lienor with interest, costs and allowances. Any amount so paid
by Landlord and all costs and expenses, including attorneys' fees, incurred by
Landlord in connection therewith, shall constitute Additional Rent payable by
Tenant under this Lease and shall be paid by Tenant to Landlord on demand.
Nothing herein contained shall obligate Tenant to pay or discharge any lien
created by Landlord.
30. Signs and Advertisements. Landlord shall provide for Tenant, at Landlord's
expense, a notice in the Building directory, Building street sign, and a sign
for the entrance door to the Leased Premises in the type and manner Landlord
from time to time provides for tenants of the Building. No other sign,
advertisement, notice or any other thing of any kind whatsoever shall be
inscribed, painted, affixed or displayed in or about the Building by Tenant and
if any such sign, advertisement or notice is exhibited, Landlord shall have the
right to remove the same and Tenant shall be liable for any and all expenses
incurred by Landlord for said removal. Tenant agrees to maintain its entrance
door or entry sign in good condition and repair at all times.
31. Notices. All notices to be given under this Lease shall be in writing,
hand-delivered, sent by Federal Express, or mailed by United States Certified or
Registered Mail, postage prepaid. Notices should be delivered as follows:
(a) To the Landlord at the address specified in Section 1(a)(18).
(b) To the Tenant at the addresses specified in Sections l(a)(17).
Any such notice shall be deemed to be served on the date it is hand-delivered or
delivered by Federal Express, or on the third day after the date on which it is
deposited in the U.S. mails. Landlord and Tenant shall each have the right to
change the person and/or address to which notices shall be delivered upon
written notice thereof to the other party sent pursuant to the provisions of
this paragraph.
32. Time. Landlord and Tenant acknowledge that time is of the essence in the
performance of any and all obligations, terms, and provisions of this Lease.
33. Postponement of Performance. In the event that either party hereto shall be
delayed or hindered in or prevented from the performance of any act required
hereunder by reason of strikes, labor troubles, inability to procure labor or
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrection, war, acts of God, fire or other casualty or other reason of
a
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similar or dissimilar nature beyond the reasonable control of the party delayed
in performing work or doing acts required under the terms of this Lease, then
performance of such act shall be excused for the period of the delay and the
period for the performance of any such act shall be extended for a period
equivalent to the period of such delay. The provisions of this paragraph shall
not operate to excuse Tenant from the prompt payment of Minimum Annual Rent or
Additional Rent and shall not operate to extend the term of this Lease. Delays
or failures to perform resulting from lack of funds shall not be deemed delays
beyond the reasonable control of a party.
34. No Waiver. No provision of this Lease shall be deemed to have been waived by
Landlord, unless such waiver be in writing signed by Landlord. No waiver by
Landlord of any breach by Tenant of any of the terms, covenants, agreements, or
conditions of this Lease shall be deemed to constitute a waiver of any
succeeding breach thereof, or a waiver of any breach of any of the other terms,
covenants, agreements, and conditions herein contained.
No employee of Landlord or of Landlord's agents shall have any authority
to accept the keys of the Leased Premises prior to termination of the Lease, and
the delivery of keys to any employee of Landlord or Landlord's agents shall not
operate as a termination of the Lease or a surrender of the Leased Premises. The
receipt by Landlord of any payment of Minimum Annual Rent or Additional Rent
with knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. The failure of Landlord to enforce any of the Rules and
Regulations made a part of this Lease, or hereafter adopted, against Tenant or
any other tenant in the Building shall not be deemed a waiver of any such Rules
and Regulations.
35. Limitation of Landlord's Liability. 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
interest of Landlord in the Building of which the Leased Premises are a part;
(b) neither Landlord nor any partner of Landlord shall be personally liable with
respect to any claim arising out of or related to this Lease; (c) no partner of
Landlord shall be sued or named as a party in any suit or action (except as may
be necessary to secure jurisdiction of Landlord); (d) no service of process
shall be made against any partner of Landlord (except as may be necessary to
secure jurisdiction of Landlord); (e) 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; and (f) these covenants and agreements are enforceable both
by Landlord and also by any partner of Landlord.
36. Transfer of the Building. In the event of the sale or other transfer of
Landlord's right, title and interest in the Leased Premises or the Building
(except in the case of a sale-leaseback financing transaction in which Landlord
is the lessee), Landlord shall transfer and assign to such purchaser or trans-
feree all amounts of pre-paid Minimum Annual Rent, and Landlord thereupon and
without further act by either party hereto shall be released from all liability,
obligations, and covenants, express or implied, hereunder derived from this
Lease arising out of any act, occurrence or omission relating to the Leased
Premises or this Lease occurring after the consummation of such sale or
transfer, provided that the transferee shall assume all of Landlord's
obligations hereunder from the date of such transfer. Tenant shall have no right
to terminate this Lease nor to abate Minimum Annual Rent nor to deduct from, nor
set-off, nor counterclaim against Minimum Annual Rent because of any sale or
transfer (including, without
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limitation, any sale-leaseback) by Landlord or its successors or assigns. This
lease shall not be affected by any such sale, and Tenant agrees to attorn to the
purchaser or transferee. Upon any sale or other transfer as above provided
(other than a sale-leaseback), or upon any assignment of Landlord's interest
herein, it shall be deemed and construed conclusively, without further agreement
between the parties, that the purchaser or other transferee or assignee has
assumed and agreed to perform the obligations of Landlord thereafter accruing.
37. Waiver of Counterclaim and Trial by Jury. Landlord and Tenant waive their
right to trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other (except for personal injury or
property damage) on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
of or occupancy of the Leased Premises, and any emergency statutory or any other
statutory remedy. Tenant shall not interpose any counterclaim or counterclaims
or claims for set-off, recoupment or deduction of Minimum Annual Rent or
Additional Rent in a summary proceeding for nonpayment of Minimum Annual Rent or
Additional Rent or other action or summary proceeding based on termination,
holdover or other default in which Landlord seeks repossession of the Leased
Premises from Tenant.
38. Lease Recording. It is understood and agreed that Landlord shall not record
the within Lease Agreement among the Land Records of Baltimore County, Maryland,
for any purpose.
39. Notice of Default to Landlord and Mortgagee and Right to Cure. Tenant shall
give, by registered mail, a written notice of any failure by Landlord to perform
any of its obligations under this Lease to Landlord which shall specifically set
forth the nature of the nonperformance by the Landlord and shall give the
Landlord thirty (30) days within which to cure such default or non-performance.
However, if such default or non-performance reasonably requires more than thirty
(30) days to cure, Landlord shall not be in default if such cure is commenced
within such thirty (30) day period and thereafter diligently pursued to
completion. Said notice of default shall be a condition precedent to the
institution by Tenant of any judicial proceedings for nonperformance or default
against the Landlord. Tenant agrees to give any mortgagee and/or Trust Deed
Holders whose name and address have been furnished to Tenant in writing, by
registered mail, a copy of any notice of default served upon the Landlord.
Tenant further agrees that if Landlord shall fail to cure such default within
the time provided for in this Lease Agreement, then the mortgagees and/or Trust
Deed Holders shall have an additional thirty (30) days within which to cure such
default or, if such default cannot be cured within that time, then such
additional time as may be necessary if within such thirty (30) days, any
mortgagee and/or Trust Deed Holders has commenced and is diligently pursuing the
remedies necessary to cure such default, in which event this Lease shall not be
terminated while such remedies are being so diligently pursued.
40. Miscellaneous Provisions.
(a) Governing Law. The laws of the state of Maryland shall govern the
construal, validity, performance and enforcement of this Lease.
(b) Covenants. The parties hereto agree that all the provisions of this
Lease are to be construed as covenants and agreements as though the words
importing such covenants and agreements were used in each separate provision
hereof.
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(c) No Representations by Landlord. Neither Landlord nor any agent of
Landlord has made any representations or promises with respect to the Leased
Premises or the Building except as herein expressly set forth, and no rights,
privileges, easements or licenses are granted to Tenant except as herein
expressly set forth.
(d) Exhibits. It is agreed and understood that any Exhibits referred to
herein, and attached hereto, form an integral part of this Lease and are hereby
incorporated by reference.
(e) Pronouns. The neuter, feminine or masculine pronoun when used herein
shall each include each of the other genders and the use of the singular shall
include the plural.
(f) Captions. All section and paragraph captions, marginal references, and
table of contents in this Lease are inserted only as a matter of convenience,
and in no way amplify, define, limit, construe or describe the scope or intent
of this Lease nor in any way affect this Lease.
(g) Landlord's Approval. Whenever Landlord's consent or approval is
required under the terms of this Lease, Landlord may grant or deny such consent
or approval in its sole discretion unless otherwise specified herein.
(h) Separability. If any term or provision of this Lease or applications
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remaining terms and provisions of this Lease, or the
application of such term or provision to persons or circumstances other than
those as to which it is held or unenforceable, shall not be affected thereby,
and each term and provision of this Lease shall be valid and enforced to the
fullest extent permitted by law.
(i) Counterparts. This Lease has been executed in several counterparts,
but all counterparts shall constitute one and the same legal document.
(j) Authority. Landlord and Tenant hereby covenant each for itself, that
each has full right, power and authority to enter into this Lease upon the terms
and conditions herein set forth. If Tenant signs as a corporation, each of the
persons executing this Lease on behalf of Tenant does hereby covenant and
warrant that Tenant is a duly authorized and existing corporation, qualified to
do business in the jurisdiction in which the Leased Premises is located, that
the corporation has full right and authority to enter into this Lease, and that
each and both of the persons signing on behalf of the corporation were
authorized to do so. If Tenant signs as a partnership, each of the persons
executing this Lease on behalf of Tenant does hereby covenant and warrant that
Tenant is a duly formed and validly existing partnership, that the partnership
has full right and authority to enter into this Lease, and that each of the
persons signing on behalf of the partnership were authorized to do so.
(k) Examination of Lease. Submission of this Lease for examination or
signature by Tenant shall not constitute reservation of or option for Lease, and
the same shall not be effective as a Lease or otherwise until execution and
delivery by both Landlord and Tenant.
(l) Interpretation. Although the printed provisions of this Lease were
drawn by Landlord, this Lease shall not be construed for or against Landlord or
Tenant,
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but this Lease shall be interpreted in accordance with the general tenor of the
language in an effort to reach the intended result.
(m) Entire Agreement; Modification. This Lease contains the entire
agreement between the parties, and any agreement hereafter made shall be
ineffective to change, discharge or effect an abandonment in whole or in part
unless such agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
Acceptance of, or acquiescence in, a course of performance rendered under this
or any prior agreement between the parties or their affiliates shall not be
relevant or admissible to determine the meaning of any term of this Lease.
(n) Termination. This Lease and the tenancy hereby created shall cease and
determine at the end of the Lease Term, or any extension or renewal thereof,
without the necessity of any notice from either Landlord or Tenant to terminate
the same, and Tenant hereby waives notice to vacate the Leased Premises and
agrees that Landlord shall be entitled to the benefit of all provisions of law
respecting the summary recovery of possession of premises from a tenant holding
over to the same extent as if statutory notice had been given. For the period of
three (3) months prior to the expiration of the Lease Term or of any extension
or renewal thereof, Landlord shall have the right to show the Leased Premises
and all parts thereof to prospective tenants between the hours and 9:00 am and
5:00 pm, on any day except Saturday and Sunday and except any legal holiday on
which Tenant shall not be open for business.
(o) Corporate Approval. If Tenant is a corporation, Tenant covenants and
warrants that it has the requisite corporate approval to enter into and execute
this Lease Agreement and accordingly, shall provide to Landlord, as soon as
practicable following execution of this Lease, a copy of an executed resolution
by its Board of Directors, authorizing the execution of the Lease Agreement and
authorizing the individual executing this Lease to execute said Agreement on
behalf of and in the name of the Corporation. If Tenant shall fail to provide
the executed resolution within the time period required under this Section,
Landlord may, at its option, declare this Lease to be null and void and of no
further force or effect. If Tenant is a corporation it acknowledges that this
Lease is executed under seal and that a twelve year period of limitation
applies.
(p) Approval of Mortgage. This Lease is contingent upon the approval of
any and all mortgagees or other lenders of the Landlord. Landlord shall have
thirty (30) days from the execution of this Lease to obtain all necessary
approvals from this mortgagee or other lenders; and thereafter shall have the
right to extend said approval period an additional ten (10) days upon written
notice to Tenant. If said approvals cannot be obtained within the aforesaid
period, this Lease and the rights and duties of the parties hereunder, shall be
null and void and be of no further effect.
(q) Zoning and Licensing Approvals. Anything herein elsewhere contained to
the contrary, this Lease and all the terms, covenants, and conditions hereof are
in all respect subject and subordinate to all zoning restrictions affecting the
Leased Premises, and the Building in which they are located, and the Tenant
agrees to be bound by such restrictions. The Landlord further does not warrant
that any license or licenses, permit or permits, which may be required for the
business to be conducted by the Tenant on the Leased Premises will be granted,
or, if granted, will be continued in effect or renewed, and any failure to
obtain
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such licence or licences, permit or permits, or any revocation thereof or
failure to renew the same, shall not release the Tenant from its obligations
under this Lease Agreement.
41. Quiet Enjoyment. If and so long as Tenant pays rent and additional rent
reserved by this Lease, and performs and observes all the covenants and
provisions hereof, Tenant shall quietly enjoy the Leased Premises, subject,
however, to the terms and provisions hereof.
42. Remedies Cumulative. No mention in this Lease of any specific right or
remedy shall preclude Landlord from exercising any other right or from having
any other remedy, or from maintaining any action to which it may otherwise be
entitled, either at law or equity; and the failure of Landlord to insist in any
one or more instances upon a strict performance of any covenant of this Lease or
to exercise any option or right herein contained shall not be construed as a
waiver of relinquishment for the future of such covenant, right or option, but
the same shall remain in full force and effect unless the contrary is expressed
in writing by Landlord.
43. Binding Effect. This Agreement and the covenants and conditions herein
contained shall be binding upon and shall inure to the benefit of Landlord, its
heirs, personal representatives, successors and assigns, and shall be binding
upon Tenant, its heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Tenant and only such assigns of Tenant to whom the
assignment by Tenant has been consented to by Landlord.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and year first above written.
WITNESS/ATTEST: LANDLORD:
Merrymack Limited Partnership
a Maryland Limited Partnership
/s/ Melanie Jensen Ney By: /s/ Loren D. Jensen (SEAL)
_______________________________ _________________________
Name:Loren D. Jensen
Title: General Partner
Date: August 6, 1997
_______________________________
If Tenant is a corporation, an authorized officer must sign on behalf of the
corporation and by doing so such officer makes the covenants and warranties
contained in Section 40 hereof.
WITNESS/ATTEST: TENANT:
EA Engineering, Science & Technology, Inc.
a Delaware Corporation
/s/ Jack Adler By: /s/ Barbara L. Posner (SEAL)
________________________________ _________________________
Name: Barbara L. Posner
Title: Vice President,
Finance & Administration
Date: August 6, 1997
_______________________________
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State of Maryland )to wit:
County of Baltimore )
I hereby certify that on this 6th day of August, 1997, before me, the
subscriber, a Notary Public of the State and County aforesaid, personally
appeared Loren D. Jensen of Merrymack Limited Partnership and he made oath in
due form of law that the matters and facts set forth in the foregoing Lease are
true and correct to the best of his knowledge and belief, and that he signed
same in his capacity as General Partner of said Limited Partnership.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Carol L. Storck
_________________________________________
Notary Public
My commission Expires: 2/1/2000
___________________
State of Maryland )to wit:
County of Baltimore )
I hereby certify that on this 6th day of August, 1997, before me, the
subscriber, a Notary Public of the State and County aforesaid, personally
appeared Barbara L. Posner of EA Engineering, Science & Technology, Inc. and she
made oath in due form of law that the matters and facts set forth in the
foregoing Lease are true and correct to the best of her knowledge and belief,
and that she signed same in her capacity as Vice President of said Company.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Carol L. Storck
_________________________________________
Notary Public
My commission Expires: 2/1/2000
___________________
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EXHIBIT B
RULES AND REGULATIONS
1. Tenant will comply with all rules and regulations issued by all government
agencies whose jurisdiction affects the Leased Premises (the "Premises") or the
Building of which the Leased Premises are a part (the "Building"). Tenant shall
not make any alteration to the Building without first obtaining the written
permission of Landlord and all appropriate and necessary governmental permits
and/or licenses.
2. When electric wiring of any kind is introduced, it must be connected as
directed by Landlord, and no stringing or cutting of wires will be allowed,
except with the prior written consent of Landlord, and shall be done only by
contractors approved by Landlord. This number and location of telephones,
telegraph instruments, electric appliances, call boxes, etc., shall be subject
to Landlord's approval. Prior to the termination of the Lease Agreement, all
wires, cables, etc. installed by the Tenant must be removed by Tenant at
Tenant's expense.
3. Tenant, its agents, servants, employees and invitees shall abide by such
security rules and regulations as Landlord may promulgate.
4. A dumpster shall be provided to the Building site by the Landlord for use by
the Tenants with the cost to be borne by the Tenants on a pro-rata share.
Abnormal amounts of trash or garage generated by either Tenant's initial
movement into and occupancy of the Leased Premises, or the purchase of equipment
or fixtures placed on the Leased Premises shall be removed by Tenants at his
sole cost or expense and shall not be placed in the dumpster provided by the
Landlord.
5. No part of the whole of any sidewalls, plaza areas, entrances, loading docks,
passages, courts, elevators, vestibules, stairways, corridors, balconies or
halls of the Building shall be obstructed or encumbered by any tenant or used
for any purpose other than that expressly provided for in the Lease. All halls,
passages, exits, entrances, elevators, stairways, balconies and roof are not for
the use of the general public and the Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence, in
the sole judgement of the Landlord, shall be prejudicial to the safety,
character, reputation and interests of the Building and its Tenants, provided
that nothing herein contained shall be construed to prevent such access to
persons with whom the Tenant normally deals in the ordinary course of business,
unless such persons are engaged in illegal activities. Unless making repairs
required to be made under the terms of the lease to heating, ventilation, or air
conditioning located thereon, neither Tenant nor any employees or invitees of
the Tenant shall have access to or go upon the roof of the Building without the
prior approval of the Landlord.
6. No awnings or other projections shall be attached to the outside walls,
balconies or windows of the Building. No curtains, blinds, shades, or screens
other than Building Standard window coverings shall be attached to or hung in,
or used in connection with, any window or door of the space demised to any
tenant.
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7. No showcases or other articles, including furniture, shall be put on the
balcony, in front of or affixed to any part of the exterior of the Premises, or
placed in the halls, corridors, vestibules, balconies or other appurtenant or
public parts of the Building.
8. Any water and wash closets and other plumbing fixtures in any Premises or the
Building shall not be used for any purposes other than those for which they were
constructed, and no sweepings, rubbish, rags, or other substances (including,
without limitation, coffee grounds) shall be thrown therein. Waste and excessive
or unusual use of electricity or water is prohibited.
9. No tenant shall bring or keep, or permit to be brought or kept, any
inflammable, combustible, or explosive fluid, material, chemical, or substance
in or about the space demised to such tenant.
10. Except for the hanging of artwork on interior walls, no tenant shall make,
paint, drill into, or in anyway deface, any part of the interior or exterior of
the Building or the space demised to such tenant. No boring, cutting, or
stringing of wires shall be permitted.
11. No sign, placard, picture, advertisement, name or notice shall be inscribed,
displayed, printed or affixed on or to any part of the outside or inside of the
Building without the Tenant first obtaining the written consent of Landlord.
Landlord shall have the right to remove any such sign, placard, picture,
advertisement, name or notice without notice to and at the expense of Tenant.
All approved signs or lettering on doors shall be printed, painted or affixed or
inscribed at the expense of Tenant by a person or company approved by the
Landlord. Landlord shall not place anything or allow anything to be placed near
or on the glass of any window, door, partition or wall which may appear
unsightly from outside the premises.
12. Tenant shall promptly report to the Landlord any cracked or broken glass on
the Premises.
13. No tenant shall cause or permit any odors to emanate from the space demised
to such tenant. No tenant shall make, or permit to be made, any noises which may
be heard outside of such Tenant's Premises or disturb or interfere with other
tenants or occupants of the Building or neighboring buildings or premises
whether by the use of any musical instrument, radio, television set, or other
audio device, unmusical noise, whistling, singing, or in any other way. Tenant
shall be responsible for insuring that any office equipment and machinery is
installed in such a manner as to absorb and prevent the transmission of
vibration and noise beyond the confines of the Premises so as not to disturb
other Tenants in the Building. Nothing shall be thrown out, or off, of any
doors, windows, balconies or skylights or down any passageways.
14. The Landlord will provide the tenant two Premises entry door keys, and two
Sonitrol key cards; two additional keys or keycards will be supplied to Tenant
by Landlord, upon request, without charge; any additional keys or key cards
required by Tenant shall be paid for by Tenant. Tenant, its agents and
employees, shall not have any duplicate key made and shall not change any locks.
No additional locks or bolts of any kind shall be placed upon any of the doors
or windows in the space demised to any tenant, nor shall any changes be made in
locks or the mechanism thereof. Each tenant must, upon the termination of his
tenancy, return to Landlord all key cards and keys to offices and toilet rooms,
either furnished to, or otherwise procured by, such tenant, and in the event of
the loss of any
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such keys, such tenant shall pay Landlord the reasonable cost of replacement
keys or locks (at Landlord's option).
15. All removals from the Building, or the carrying in or out of the Building or
the space demised to any tenant of any safes, freight, furniture, or bulky
matter of any description must take place during such hours and in such manner
as Landlord may determine, from time to time. Landlord reserves the right to
inspect all freight for violation of any of these rules and regulations or the
provisions of such tenant's lease.
16. No tenant shall engage or pay any employees in the Building, except those
actually working for such tenant in the Building, nor advertise for laborers
giving an address at the Building.
17. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord's opinion, tends to impair the reputation of the Building or
its desirability as a building for offices, and upon notice from Landlord, such
tenant shall refrain from or discontinue such advertising.
18. Each tenant, before closing and leaving the space demised to such tenant at
any time, shall see that all entrance doors are locked.
19. No space demised to any tenant shall be used, or permitted to be used, for
lodging or sleeping. No cooking shall be done or permitted by any Tenant on the
Leased Premise, nor shall be Premises be used for the storage of merchandise,
washing clothes or for any improper, objectionable or immoral purpose.
20. The requests of tenants will be attended to only upon verbal or written
request to Landlord. Building employees shall not be required to perform, and
shall not be requested by any tenant to perform, any work outside of their
regular duties, unless under specific instructions from Landlord.
21. Canvassing, soliciting, and peddling in the Building are prohibited, and
each tenant shall cooperate in seeking their prevention.
22. There shall not be used in the Building, either by any tenant or by any of
tenant's employees, agents, or invites, in the delivery or receipt of
merchandise, freight, or other matter, any hand trucks or other means of
conveyance except those equipped with rubber tires, rubber side guards, and such
other safeguards as Landlord may require.
23. No animals of any kind shall be brought into or kept about the Building by
any tenant, excluding "seeing-eye" dogs.
24. No tenant shall place, or permit to be placed, on any part of the floor or
floors of the space demised to such tenant a load exceeding the floor load per
square foot which such floor was designed to carry and which is allowed by law.
25. No tenant will install or operate in the space demised to such tenant any
electrically operated equipment or other machinery, other than a reasonable
number of electric typewriters, adding machines, radios, televisions, tape
recorders, Dictaphones, bookkeeping machines, copying machines, clocks, word
processors, and personal computers, without first obtaining the prior written
consent of Landlord, who may condition such consent upon payment by Tenant of
additional rent as compensation for additional consumption of utilities as
determined at the discretion of Landlord and for the cost of separate metering
or
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additional wiring as may be occasioned by the operation of said equipment or
machinery. Landlord reserves the right to separately meter any utility
consumption in the Premises.
26. No tenant shall install any equipment of any kind or nature whatsoever,
including, but not limited to, equipment permitted by Rule 25 to be used on or
in the space demised to such tenant, which will necessitate any changes, or
replacements, or additions to, any water or plumbing, heating, air conditioning,
ventilating, electrical, or other system in or of the space demised to such
tenant of the building without first obtaining the prior written consent of the
Landlord.
27. All equipment and machinery belonging to any tenant which causes noise,
vibration or electrical interference that may be transmitted to the structure of
the Building or to any space therein to such degree to be objectionable to
Landlord or any tenant in the Building shall be installed and maintained by each
such tenant, at such tenant's expense, on vibration eliminators or other devices
sufficient to eliminate such noise or vibration.
28. No bicycles are permitted in the Building. No bicycles are to be attached or
stored on any part of the Building's rails, doors, balconies or other parts,
except those areas designated by Landlord for bicycle storage.
29. No Building or suite doors shall be propped open at any time.
30. Each tenant shall cooperate with any efforts of Landlord to conserve energy.
Landlord reserves the right to institute energy management procedures when
applicable.
31. Each tenant shall light any windows of the Premises and exterior signs and
turn the same off to the extent required by Landlord.
32. The Tenant shall not use any other method of heating or air conditioning
than that provided by the Landlord, without first obtaining the written consent
of the Landlord.
33. Tenant shall not be permitted to keep food upon the Leased Premises except
in proper containers, cabinets and refrigerators and in strict accordance with
all applicable rules, regulations and ordinances of all local health and
sanitation authorities.
34. Tenant shall comply with all Tenant requirements issued and mandated by
insurance companies insuring the Building.
35. Tenant shall not be permitted to use or keep explosives, kerosene, cleaning
fluid or any other illuminating, combustible or explosive material or substance
of any kind in the Building or the Leased Premises.
36. No vending, video, amusement machine or machines of any other description
shall be installed, maintained or operated upon the Leased Premises or the
Building without the prior written consent of the Landlord.
37. No Tenant shall lay linoleum, tile, carpet or other similar floor covering
so that the same shall be affixed to the floor of the Leased Premises or the
Building in any manner except as approved by the Landlord. The expense of
repairing any damage resulting from violation of this Rule or of removing any
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floor covering shall be borne and paid for by the Tenant who violated, either by
its own action or the actions of its contractors, or employees, this Rule.
38. Landlord shall inspect the Leased Premises prior to the vacation of the
Premises by the Tenant and the Tenant shall be responsible for any damage done
to the Leased Premises by Tenant in the course of its occupancy or vacation of
the Premises.
39. In the event that the Tenant does not have a separate electric meter, Tenant
will be responsible for its proportionate share of the electric usage as shown
on the electric meter which monitors electric usage for the Building in
accordance with the formula set forth in the Lease.
40. No contract of any kind with any supplier of towels, water, ice, toilet
articles, waxing, rug shampooing, venetian blind washing, furniture polishing,
lamp servicing, cleaning of electrical fixtures, removal of waste paper, rubbish
or garbage, or other like service shall be entered into by Tenant for the Leased
Premises or any other portion of the Leases Premises without the prior written
approval of the Landlord, nor shall any vending machine of any kind be installed
in the Building, without prior written approval of the Landlord.
41. Landlord hereby reserves to itself any and all rights not granted to Tenant
hereunder, including, but not limited to, the following rights which are
reserved to Landlord for its purposes in operating the Building:
(a) the right to change the name or address of the Building, without
incurring any liability from Tenant for so doing;
(b) the right to install and maintain a sign or signs on the exterior of
the Building or within the Building area;
(c) the exclusive right to use or dispose of the use of the roof of
the Building;
(d) the right to limit the space on the directory of the Building to
be allotted to Tenant; and
(e) the right to grant anyone the right to conduct any particular business
or undertaking the Building.
42. The Landlord reserves the right at any time to rescind any one or more of
these Rules and Regulations, or to make such other and further reasonable Rules
and Regulations as in the Landlord's judgement may, for time to time, be
necessary for the safety, care and cleanliness of the Building, the Building
Area or any part thereof, and for the preservation of other herein.
37
EXHIBIT 10.12
LOAN AND SECURITY AGREEMENT
By And Between
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.,
A Delaware Corporation
Borrower
And
THE FIRST NATIONAL BANK OF MARYLAND
Lender
---------------------------------
Revolving Line Of Credit,
Term Loan,
and
Equipment Line Of Credit
---------------------------------
Dated As Of August 22, 1997
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT is dated as of August 22, 1997, by and
between EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC., a Delaware corporation
("BORROWER"), and THE FIRST NATIONAL BANK OF MARYLAND, a national banking
association ("LENDER").
RECITALS
--------
The BORROWER has applied to the LENDER for certain credit
accommodations. The LENDER is willing to provide the requested credit
accommodations to the BORROWER upon the terms and conditions of this Loan And
Security Agreement, and upon the granting by the BORROWER to the LENDER of the
security interests, liens, and other assurances of payment provided for in this
Loan And Security Agreement.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
---------
DEFINITIONS
-----------
As used in this Loan And Security Agreement, the terms set forth in
this Article 1 have the meanings set forth below, unless the specific context of
this Loan And Security Agreement clearly requires a different meaning. Terms
defined in this Article 1 or elsewhere in this Loan And Security Agreement are
in all capital letters throughout this Loan And Security Agreement. The singular
use of any defined term includes the plural and the plural use includes the
singular.
Section 1.1. Account Debtor. The term "ACCOUNT DEBTOR" means, with
respect to each ACCOUNT or other RECEIVABLE, each PERSON obligated thereon,
including (as applicable) each PERSON: (a) to or for whom the BORROWER has
provided or has agreed to provide any goods or services; or (b) which otherwise
owes the BORROWER any sum of money as a result of goods sold or services
provided by the BORROWER; or (c) which is the maker or endorser on any
INSTRUMENT payable to the BORROWER or otherwise owes the BORROWER any sum of
money on account of any loan or other obligation. With respect to each ACCOUNT
or other RECEIVABLE which is payable by any governmental authority, "ACCOUNT
DEBTOR" includes, without limitation, the agency, instrumentality or official
which has the duty of remitting or causing the remittance of the amounts owing
on such ACCOUNT or other RECEIVABLE.
Section 1.2. Accounts, Chattel Paper, Contract Rights, Documents,
Equipment, Fixtures, General Intangibles, Goods, Instruments and Investment
Property. The terms "ACCOUNTS," "CHATTEL PAPER," "DOCUMENTS," "EQUIPMENT,"
"GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS," and "INVESTMENT PROPERTY" shall
have the same respective meanings as are given to those terms in the Maryland
Uniform Commercial Code-Secured Transactions, Title 9,
<PAGE>
Commercial Law Article, Annotated Code of Maryland, as amended. The term
"CONTRACT RIGHTS" shall have the meaning given to that term in the 1962 Official
Text With Comments of the Uniform Commercial Code as promulgated by the National
Conference Of Commissioners On Uniform State Laws And The American Law
Institute. The term "FIXTURES" shall have the meaning provided by the common law
of the state in which the fixtures are physically located.
Section 1.3. Affiliate. The term "AFFILIATE" means any PERSON: (a) that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with the BORROWER, including, without
limitation, the officers, managers and directors of the BORROWER; (b) that
directly or beneficially owns or holds ten percent (10%) or more of any equity
interests in the BORROWER; or (c) ten percent (10%) or more of whose equity
interests are owned directly or beneficially or held by the BORROWER. As used
herein, the term "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of the power to direct the management or
policies of a PERSON, whether through ownership of equity interests, by contract
or otherwise.
Section 1.4. Agreement. The term "AGREEMENT" means this Loan And
Security Agreement, as amended, extended, or modified from time to time by the
parties hereto, as well as all schedules, exhibits and attachments hereto.
Section 1.5. Applicable Margin. The term "APPLICABLE MARGIN" means the
annual percentage which is to be added to the LIBOR RATE, the FIXED RATE, or the
COST OF FUNDS RATE in order to determine the applicable rate of interest
accruing on the REVOLVING LOAN, the TERM LOAN or the EQUIPMENT LINE. The
APPLICABLE MARGIN is subject to reduction as set forth below, on the dates set
forth below, provided that the BORROWER'S financial statements referenced below
evidence that the BORROWER is in compliance with all financial covenants set
forth in Sections 6.22, 6.23, 6.24 and 6.25 of this AGREEMENT, and at the time
of such reduction there are no DEFAULTS:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
APPLICABLE MARGIN
- -------------------------------------------------------------------------------------------------------------------------
TIME PERIOD REVOLVING EQUIPMENT LINE & TERM LOAN
LOAN
- -------------------------------------------------------------------------------------------------------------------------
COM. COM. COST OF
LIBOR PAPER LIBOR PAPER FIXED FUNDS
RATE RATE RATE RATE RATE RATE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Initial Margin 2.5% 2.6% 2.5% 2.6% 2.8% 2.5%
- -------------------------------------------------------------------------------------------------------------------------
Margin Effective 10 BUSINESS
DAYS after LENDER'S receipt of
2/28/98 financial statements (subject 2.0% 2.1% 2.0% 2.1% 2.3% 2.0%
to above conditions)
- -------------------------------------------------------------------------------------------------------------------------
Margin effective 10 BUSINESS
DAYS after LENDER'S receipt of 1.5% 1.6% 1.5% 1.6% 1.8% 1.5%
8/31/98 financial statements (subject
to above conditions)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section 1.6. Borrowing Base. The term "BORROWING BASE" means an amount
equal to: (a) eighty percent (80%), or such other percentage as the LENDER in
its reasonable discretion may determine from time to time, of the face amount
(less maximum discounts, credits and allowances which may be taken by or are
granted to ACCOUNT DEBTORS in connection therewith) of ELIGIBLE BILLED ACCOUNTS;
plus (b) the lesser of (i) Four Million Dollars ($4,000,000.00), or (ii) fifty
percent (50%), or such other percentage as the LENDER in its reasonable
discretion may determine from time to time, of the face amount (less maximum
discounts, credits and allowances which may be taken by or are granted to the
ACCOUNT DEBTORS in connection therewith) of ELIGIBLE UNBILLED ACCOUNTS; minus
(c) such reserves as the LENDER deems appropriate from time to time. The LENDER
agrees to notify the BORROWER of any changes in the percentages used in
determining the BORROWING BASE.
Section 1.7. Business Day. The term "BUSINESS DAY" means any day other
than a Saturday, Sunday, or other day on which commercial banking institutions
in the State of Maryland are required to be closed.
Section 1.8. Capital Adequacy Requirement. The term "CAPITAL ADEQUACY
REQUIREMENT" means any LAW imposing any capital adequacy requirement or any
other similar requirement (including but not limited to the capital adequacy
regulations contained in Parts 3, 208 and 225 of Title 12 of the Code of Federal
Regulations, as amended), any change in such LAWS or in the interpretation or
application thereof, and any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or government
authority.
Section 1.9. Capital Expenditures. The term "CAPITAL EXPENDITURES" means,
for any period, the aggregate of all expenditures (whether paid in cash or
accrued as liabilities and including expenditures for CAPITAL LEASE OBLIGATIONS)
by the BORROWER during such period that are required by G.A.A.P. to be included
in or reflected by the property, plant, equipment or similar capital asset
accounts in the balance sheet of the BORROWER.
Section 1.10. Capital Lease. The term "CAPITAL LEASE" means a lease with
respect to which the lessee's obligations thereunder should, in accordance with
G.A.A.P., be capitalized and reflected as a liability on the balance sheet of
the lessee.
Section 1.11. Capital Lease Obligations. The term "CAPITAL LEASE
OBLIGATIONS" means any indebtedness incurred as a lessee pursuant to a CAPITAL
LEASE.
Section 1.12. Cash Flow. The term "CASH FLOW" means, for the period of
determination, the NET INCOME of the BORROWER and its SUBSIDIARIES on a
consolidated basis, before INTEREST EXPENSE, depreciation, amortization and
provision for taxes and without giving effect to any extraordinary gains or
losses, for such period, all as determined in accordance with G.A.A.P.
Section 1.13. Closing. The term "CLOSING" means the execution and
delivery of the LOAN DOCUMENTS. The date of CLOSING is the date first written
above as the date of this AGREEMENT.
Section 1.14. Code. The term "CODE" means the Internal Revenue Code of
<PAGE>
1986, as amended, and all Treasury regulations, revenue rulings, revenue
procedures or announcements issued thereunder.
Section 1.15. Collateral. The term "COLLATERAL" means all of the tangible
and intangible assets, property rights, and benefits with respect to which the
BORROWER grants a security interest, pledge or lien to the LENDER or assigns as
security or otherwise pledges or conveys as collateral security from time to
time to the LENDER in accordance with the provisions of the LOAN DOCUMENTS.
Section 1.16. Collection Account. The term "COLLECTION ACCOUNT" means a
bank account designated by the LENDER from which the LENDER alone has power of
access and withdrawal.
Section 1.17. Commercial Account. The term "COMMERCIAL ACCOUNT" means
the commercial checking account to be established and maintained by the BORROWER
with the LENDER and to be utilized as the means of advancing funds under the
REVOLVING LOAN.
Section 1.18. Com. Paper Rate. The term "COM. PAPER RATE" means the
fluctuating annual rate of interest equal to the average rate, rounded to the
nearest one-tenth of one percent (.1%) for ninety day maturity dealer placed
commercial paper for the week most recently reported in the Federal Reserve
Statistical Release No. H.15(519) entitled "Selected Interest Rates" (or any
succeeding publication).
Section 1.19. Cost Of Funds Rate. The term "COST OF FUNDS RATE" means the
fixed annual rate of interest, determined by the LENDER in its sole discretion,
used by the LENDER, at the time of determination, for determining fixed rates of
interest to charge to customers and which is internally referred to as the
"LENDER'S COST OF FUNDS RATE." The BORROWER acknowledges that such internal rate
is not intended to reflect the LENDER'S actual cost of obtaining monies but is
merely a base rate used by the LENDER in quoting fixed rates of interest for its
customers.
Section 1.20. Debt Service. The term "DEBT SERVICE" means, with respect
to any period, the current portion of LONG TERM DEBT plus INTEREST EXPENSE.
Section 1.21. Default. The term "DEFAULT" means any event, occurrence
or omission which, with the giving of notice, the passage of time, or both,
would constitute an EVENT OF DEFAULT.
Section 1.22. Eligible Accounts. The term "ELIGIBLE ACCOUNTS" means those
ACCOUNTS which are, and continue to be, acceptable to the LENDER, in its
reasonable discretion, in all respects. The criteria for eligibility may be
fixed and revised from time to time by the LENDER in its reasonable discretion
(with notification to the BORROWER). An ACCOUNT in no event shall be deemed
eligible unless: (a) the ACCOUNT arises from goods sold or leased or from
services performed in the ordinary course of the BORROWER'S business; (b) the
delivery of the goods or the performance of the services has been completed to
the extent necessary to be billed in accordance with the terms of the applicable
contract; (c) no return, rejection, or repossession has occurred; (d) the
ACCOUNT DEBTORS' obligation to pay the ACCOUNT is not subject to any repurchase
obligation or return right, as with sales made on a
<PAGE>
bill-and-hold, guaranteed sale, sale-and-return, sale on approval (except with
respect to ACCOUNTS in connection with which ACCOUNT DEBTORS are entitled to
return INVENTORY solely on the basis of the quality of such INVENTORY) or
consignment basis; (e) no prior, contemporaneous, or subsequent assignment,
claim, lien, or security interest, other than that of the LENDER, applies to the
ACCOUNT; (f) no bankruptcy or insolvency proceedings or payment moratoriums of
any kind apply to the ACCOUNT; (g) the ACCOUNT DEBTOR is not, in the LENDER'S
sole opinion, unlikely to pay because of death, incompetency, disappearance,
potential bankruptcy, insolvency, damage to or disposition of the goods or
default; (h) the LENDER has not, by notice to the BORROWER, in the LENDER'S
reasonable judgment, deemed the ACCOUNT unsatisfactory for any reason; (i) no
bonding company or surety asserts or has the ability to assert any claim based
upon the legal doctrine of equitable subrogation, or under any other right to
claim a lien into or right to payment of the ACCOUNT; (j) the ACCOUNT does not
arise from or pertain to any transaction with any AFFILIATE; (k) the ACCOUNT is
not payable from any ACCOUNT DEBTOR located outside of the geographic boundaries
of the United States of America (unless such ACCOUNT is fully secured by a
letter of credit acceptable to the LENDER, or is subject to acceptable credit
insurance which has been assigned to the LENDER, or is guaranteed by the full
faith and credit of the United States government upon terms acceptable to the
LENDER); (l) the ACCOUNT is not payable by an ACCOUNT DEBTOR with respect to
which fifty percent (50%) or more of the dollar amount of that ACCOUNT DEBTOR'S
RECEIVABLES to the BORROWER are more than ninety (90) days due from the date of
invoice; (m) the ACCOUNT is not shown as due from EA Labs or EA Toxicology on
the BORROWER'S agings unless the BORROWER has provided the LENDER with a
detailed report of such ACCOUNTS listing the actual ACCOUNT DEBTORS of such
ACCOUNTS; and (n) the LENDER has a perfected first priority security interest
therein. An ACCOUNT which otherwise satisfies the LENDER'S criteria for
eligibility shall also be subject to the following eligibility limitations: (i)
if the ACCOUNT is payable by an ACCOUNT DEBTOR to whom the BORROWER owes money,
only the portion of the ACCOUNT in excess of the amount owed by the BORROWER to
the ACCOUNT DEBTOR may be eligible; (ii) if the ACCOUNT is due from an ACCOUNT
DEBTOR (other than the United States government or any agency or department
thereof, any local or state government or any agency thereof, or any ACCOUNT
DEBTOR having a Aa1 rating with Moodys or AA+ with Standards and Poors) whose
ACCOUNTS in the aggregate constitute in excess of ten percent (10%) of all of
the ACCOUNTS of the BORROWER, only the portion of the aggregate amount of the
ACCOUNTS from that ACCOUNT DEBTOR which does not exceed ten percent (10%) of all
of the ACCOUNTS of the BORROWER may be eligible; (iii) to the extent the ACCOUNT
contains finance or delivery charges, such finance or delivery charges shall not
be eligible; and (iv) to the extent the ACCOUNT consists of retainage; and (v)
to the extent the ACCOUNT is subject to any dispute, defense, adjustment or
allowance only the portion of such ACCOUNT in excess of the amount in dispute or
subject to any defense, adjustment or allowance may be eligible.
Section 1.23. Eligible Billed Accounts. The term "ELIGIBLE BILLED
ACCOUNTS" means ELIGIBLE ACCOUNTS which satisfy the following criteria: (a) the
ELIGIBLE ACCOUNT has been billed; and (b) no more than ninety (90) days have
elapsed from the billing or invoice date.
Section 1.24. Eligible Unbilled Accounts. The term "ELIGIBLE UNBILLED
ACCOUNTS" means ELIGIBLE ACCOUNTS which satisfy the following criteria: (a) the
ELIGIBLE ACCOUNT has not been billed; and (b) the ELIGIBLE ACCOUNT is billable
within thirty (30) calendar days.
<PAGE>
Section 1.25. Employee Benefit Plan. The term "EMPLOYEE BENEFIT PLAN"
means an "employee benefit plan" as defined in Section 3(3) of ERISA.
Section 1.26. Environmental Laws. The term "ENVIRONMENTAL LAWS" means
individually or collectively any local, state or federal LAW, statute, rule,
regulation, order, ordinance, common law, permit or license term or condition,
or state superlien or environmental clean-up or disclosure statutes pertaining
to the environment or to environmental contamination, regulation, management,
control, treatment, storage, disposal, containment, removal, clean-up,
reporting, or disclosure, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as now or
hereafter amended (including, but not limited to, the Superfund Amendments and
Reauthorization Act); the Resource Conservation and Recover Act, as now or
hereafter amended (including, but not limited to, the Hazardous and Solid Waste
Amendments of 1984); the Toxic Substances Control Act, as now or hereafter
amended; the Clean Water Act, as now or hereafter amended; the Safe Drinking
Water Act, as now or hereafter amended; or the Clean Air Act, as now or
hereafter amended.
Section 1.27. EPA Permit. The term "EPA PERMIT" has the meaning given
that term in Section 5.23 of this AGREEMENT.
Section 1.28. Equipment Line. The term "EQUIPMENT LINE" means the One
Million Five Hundred Thousand Dollar ($1,500,000.00) line of credit under which:
(a) the LENDER provides the equipment term loans to the BORROWER in accordance
with the provisions of Section 3.4 of this AGREEMENT; and (b) the LENDER or
LEASECORP acquires items of EQUIPMENT selected by the BORROWER and leases such
EQUIPMENT to the BORROWER in accordance with the provisions of Section 3.4 of
this AGREEMENT.
Section 1.29. Equipment Loan Notes. The term "EQUIPMENT LOAN NOTES" means
collectively those term loan promissory notes executed, or to be executed, by
the BORROWER evidencing advances of loan proceeds under the EQUIPMENT LINE.
Section 1.30. ERISA. The term "ERISA" means the Employee Retirement
Income Security Act of 1974 and regulations issued thereunder, as amended from
time to time and any successor statute.
Section 1.31. ERISA Affiliate. The term "ERISA AFFILIATE" means, in
relation to any PERSON, any trade or business (whether or not incorporated)
which is a member of a group of which that PERSON is a member and which is under
common control within the meaning of the regulations promulgated under Section
414 of the CODE.
Section 1.32. ERISA Liabilities. The term "ERISA LIABILITIES" means the
aggregate of all unfunded vested benefits under any employee pension benefit
plan, within the meaning of Section 3(2) of ERISA, of the BORROWER or any ERISA
AFFILIATE of the BORROWER under any plan covered by ERISA that is not a
MULTIEMPLOYER PLAN and all potential withdrawal liabilities of the BORROWER or
any ERISA AFFILIATE under all MULTIEMPLOYER PLANS.
Section 1.33. Event Of Default. The term "EVENT OF DEFAULT" means any
of the events set forth in Article 8 of this AGREEMENT, provided that any
requirement for the giving of notice, the lapse of time, or both, or any other
<PAGE>
expressly stated condition, has been satisfied.
Section 1.34. Facilities. The term "FACILITIES" means all real property
and the improvements thereon used or occupied or leased by the BORROWER or
otherwise used at any time by the BORROWER in the operation of its business or
for the manufacture, storage, or location of any of the COLLATERAL.
Section 1.35. Fiscal Year. The term "FISCAL YEAR" means with respect to
the BORROWER, the twelve (12) month accounting period of the BORROWER commencing
September 1 of each year and ending August 31 of each subsequent calendar year.
Section 1.36. Fixed Rate. The term "FIXED RATE" means the fixed annual
rate of interest equal to the annual yield for United States Treasury Securities
adjusted for constant maturities, for a period of time most closely
corresponding to the term of the applicable loan, for the week most recently
reported in the Federal Reserve Statistical Release No. H-15(519), entitled
"Selected Interest Rates" (or any succeeding publication).
Section 1.37. G.A.A.P. The term "G.A.A.P." means, with respect to any
date of determination, generally accepted accounting principles as used by the
Financial Accounting Standards Board and/or the American Institute of Certified
Public Accountants consistently applied and maintained throughout the periods
indicated.
Section 1.38. Guaranteed Pension Plan. The term "GUARANTEED PENSION PLAN"
means any pension plan maintained by a BORROWER or an ERISA AFFILIATE of a
BORROWER, or to which a BORROWER or an ERISA AFFILIATE contributes, some or all
of the benefits under which are guaranteed by the United States Pension Benefit
Guaranty Corporation.
Section 1.39. Guarantors. The term "GUARANTORS" means collectively EA
Financial, Inc., a Delaware corporation, EA Global, Inc., a Delaware
corporation, and EA International, Inc., a Maryland corporation.
Section 1.40. Guaranty Agreement. The term "GUARANTY AGREEMENT" means
the guaranty agreement of even date herewith executed by the GUARANTORS for the
benefit of the LENDER.
Section 1.41. Guaranty Indebtedness. The term "GUARANTY INDEBTEDNESS"
means any obligation, contingent or otherwise, of such PERSON directly or
indirectly guaranteeing any debt or obligation of any other PERSON and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such PERSON: (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such debt or obligation (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise, other than agreements to purchase
goods at an arm's length price in the ordinary course of business); or (b)
entered into for the purpose of assuring in any other manner the holder of such
debt or obligation of the payment thereof or to protect such holder against loss
in respect thereof (in whole or in part), provided that the term GUARANTY
INDEBTEDNESS shall not include endorsements for collection or deposit in the
ordinary course of business.
<PAGE>
Section 1.42. Indebtedness. The term "INDEBTEDNESS" means, as to any
PERSON (determined without duplication): (a) indebtedness of such PERSON for
borrowed money (whether by loan or the issuance and sale of debt securities), or
for the deferred purchase or acquisition price of property or services (other
than accounts payable incurred in the ordinary course of business); (b)
obligations of such PERSON in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for the
account of such PERSON (whether or not such obligations are contingent); (c)
CAPITAL LEASE OBLIGATIONS of such PERSON; (d) obligations of such PERSON to
redeem or otherwise retire equity interests in such PERSON; (e) indebtedness of
others of the type described in clause (a), (b), (c) or (d) above secured by a
lien on any of the property of such PERSON, whether or not the respective
obligation so secured has been assumed by such PERSON; and (f) GUARANTY
INDEBTEDNESS.
Section 1.43. Insolvency Proceedings. The term "INSOLVENCY PROCEEDINGS"
means, with respect to any PERSON, any case or proceeding commenced by or
against such PERSON, under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, or any assignments
for the benefit of creditors, formal or informal moratoriums, receiverships,
compositions or extensions with some or all creditors with respect to any
indebtedness of such PERSON.
Section 1.44. Interest Expense. The term "INTEREST EXPENSE" means, as
of any determination date, all interest paid or accrued by the BORROWER and its
SUBSIDIARIES on any INDEBTEDNESS during the period of determination.
Section 1.45. Interest Rate Protection Agreement. The term "INTEREST RATE
PROTECTION AGREEMENT" means, with respect to any referenced PERSON, an interest
rate swap, hedge, cap or collar agreement or similar arrangement between such
PERSON and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
Section 1.46. Inventory. The term "INVENTORY" means all of the BORROWER'S
inventory, goods, merchandise, materials, raw materials, goods in process,
finished goods, work in progress, bindings or component materials, packaging and
shipping materials and other tangible or intangible personal property, now owned
or hereafter acquired and held for sale or lease or furnished or to be furnished
under contracts of service or which contribute to the finished products or the
sale, promotion, storage and shipment thereof, whether located at facilities
owned or leased by the BORROWER, in the course of transport to or from ACCOUNT
DEBTORS, placed on consignment, or held at storage locations.
Section 1.47. Laws. The term "LAWS" means all ordinances, statutes,
rules, regulations, orders, injunctions, writs or decrees of any government or
political subdivision or agency thereof, or any court or similar entity
established by any thereof.
Section 1.48. Leasecorp. The term "LEASECORP" means First Maryland
Leasecorp, an affiliate of the LENDER.
Section 1.49. Leased Equipment Cost. The term "LEASED EQUIPMENT COST"
<PAGE>
means the total cost to the LENDER or LEASECORP in acquiring items of EQUIPMENT
which are to be leased to the BORROWER pursuant to LEASES under the terms of the
EQUIPMENT LINE.
Section 1.50. Leases. The term "LEASES" means collectively the lease
agreements by and between the LENDER or LEASECORP, as lessor, and the BORROWER,
as lessee, pursuant to which the LENDER or LEASECORP shall lease to the BORROWER
items of EQUIPMENT selected by the BORROWER.
Section 1.51. Lender Expenses. The term "LENDER EXPENSES" means all
out-of-pocket expenses or costs incurred by the LENDER arising out of,
pertaining to, or in any way connected with this AGREEMENT, any of the other
LOAN DOCUMENTS or the OBLIGATIONS, or any documents executed in connection
herewith or transactions hereunder. The term "LENDER EXPENSES" shall include,
without limitation: (a) all costs or expenses required to be paid by the
BORROWER pursuant to this AGREEMENT or any of the LOAN DOCUMENT; (b) taxes and
insurance premiums of every nature and kind advanced or otherwise paid by the
LENDER in connection with the COLLATERAL or on behalf of the BORROWER; (c)
filing, recording, title insurance, environmental and consulting fees, audit
fees, search fees and other expenses paid or incurred by the LENDER in
connection with the LENDER'S transactions with the BORROWER; (d) costs and
expenses incurred by the LENDER in the collection of the ACCOUNTS (with or
without the institution of legal action), to correct any default or enforce any
provision of this AGREEMENT, or in gaining possession of, maintaining, handling,
evaluating, preserving, storing, shipping, selling, preparing for sale and/or
advertising to sell the COLLATERAL or any other property of the BORROWER in
which the LENDER has a lien whether or not a sale is consummated; (e) costs and
expenses of litigation incurred by the LENDER, or any participant of the LENDER
in any of the OBLIGATIONS, in enforcing or defending this AGREEMENT or any
portion hereof or in collecting any of the OBLIGATIONS; (f) attorneys' fees and
expenses incurred by the LENDER in obtaining advice or the services of its
attorneys with respect to the structuring, drafting, negotiating, reviewing,
amending, terminating, enforcing or defending of this AGREEMENT, or any portion
hereof or any agreement or matter related hereto, whether or not litigation is
instituted; and (g) travel expenses related to any of the foregoing.
Section 1.52. Liabilities. The term "LIABILITIES" means, as to any
PERSON, liabilities of such PERSON which are or should be reflected on a balance
sheet of such PERSON prepared in accordance with G.A.A.P. and shall include all
INDEBTEDNESS.
Section 1.53. LIBOR Rate. The term "LIBOR RATE" means the rate for
deposits in United States dollars for one (1) month which appears on page 3750
of the Telerate News Services at approximately 11:00 a.m. London time, two (2)
BUSINESS DAYS prior to the date of determination, as such rate is adjusted by
the LENDER for required reserves and FDIC premiums; provided, if, for any
reason, such rate is not available, then "LIBOR RATE" shall mean the rate per
annum at which, as determined by the LENDER, United States dollars in the amount
of Five Million Dollars ($5,000,000.00) are being offered to leading banks at
approximately 11:00 a.m. London time, two (2) BUSINESS DAYS prior to the date of
determination for settlement in immediately available funds by leading banks in
the London interbank market, for a one (1) month period, as such rate is
adjusted by the LENDER for required reserves and FDIC premiums.
<PAGE>
Section 1.54. Loans. The term "LOANS" means collectively the TERM LOAN,
the EQUIPMENT LINE, and the REVOLVING LOAN.
Section 1.55. Loan Documents. The term "LOAN DOCUMENTS" means all
agreements, instruments and documents, including without limitation, loan
agreements (including without limitation this AGREEMENT), notes (including
without limitation the NOTES), guarantees, mortgages, deeds of trust,
subordination agreements, intercreditor agreements, pledges, affidavits, powers
of attorney, consents, assignments, landlord and mortgage waivers, opinions,
collateral assignments, reimbursement agreements, contracts, notices, leases,
financing statements, pledges and all other written matter, whether heretofore,
now or hereafter executed by or on behalf of the BORROWER, or by any other
PERSON in connection with the OBLIGATIONS.
Section 1.56. Lock Box. The term "LOCK BOX" has the meaning given that
term in Section 4.5 of this AGREEMENT.
Section 1.57. Long Term Debt. The term "LONG TERM DEBT" means all
obligations of the BORROWER or any SUBSIDIARY to any PERSON (determined on a
consolidated basis), including, but not limited to, the OBLIGATIONS, payable
more than twelve (12) months from the date of its creation, which in accordance
with G.A.A.P. is shown on the balance sheet as a liability (excluding reserves
for deferred income taxes).
Section 1.58. Material Adverse Event. The term "MATERIAL ADVERSE EVENT"
means the occurrence of any event, condition, or omission which the LENDER in
the good faith exercise of the LENDER'S discretion determines could reasonably
be expected to have a material adverse effect upon: (a) the condition (financial
or otherwise), results of operations, properties, assets, liabilities
(including, without limitation, tax liabilities, liabilities under ENVIRONMENTAL
LAWS, and ERISA LIABILITIES), business, operations, capitalization, equity,
licenses, franchises of the BORROWER or of any GUARANTOR; (b) the ability of the
BORROWER or of any GUARANTOR to perform any of the OBLIGATIONS when and as
required by the terms of the LOAN DOCUMENTS; (c) the rights and remedies of the
LENDER under the LOAN DOCUMENTS; or (d) the value, condition, use, or
availability of any of the COLLATERAL or upon any of the LENDER'S liens and
security interests securing the OBLIGATIONS.
Section 1.59. Maximum Revolver Amount. The term "MAXIMUM REVOLVER
AMOUNT" means the lesser of the REVOLVER DOLLAR CAP or the BORROWING BASE.
Section 1.60. Multiemployer Plan. The term "MULTIEMPLOYER PLAN" means a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is
maintained for employees of any BORROWER, or any ERISA AFFILIATE of any
BORROWER.
Section 1.61. Net Income. The term "NET INCOME" means, for the period of
determination, the net income (or net deficit) of BORROWER and its SUBSIDIARIES,
determined on a consolidated basis, after all expenses, taxes and other proper
charges, determined in accordance with G.A.A.P., eliminating: (a) all
intercompany issues; (b) all earnings attributable to equity interests in
PERSONS that are not SUBSIDIARIES unless actually received by the BORROWER or
its SUBSIDIARIES; (c) all income arising from the forgiveness, adjustment or
negotiated settlement of any LIABILITY; and (d) any increase or decrease of
<PAGE>
income arising from any change in the method of accounting for any item from
that employed in the preparation of the financial statements of the BORROWER
delivered to the LENDER prior to CLOSING.
Section 1.62. Notes. The term "NOTES" collectively means the REVOLVING
LOAN NOTE, the EQUIPMENT LINE NOTES, and the TERM LOAN NOTE.
Section 1.63. Obligations. The term "OBLIGATIONS" means the obligations
of the BORROWER to pay to the LENDER: (a) all sums due to the LENDER arising out
of or in connection with the LOANS or otherwise pursuant to the terms of the
LOAN DOCUMENTS; (b) all sums due to the LENDER arising out of or in connection
with any LEASES; (c) all duties of indemnification owed by the BORROWER to the
LENDER pursuant to the terms of the LOAN DOCUMENTS; (d) all LENDER EXPENSES; (e)
all overdrafts of the BORROWER upon any accounts with the LENDER; (f) all
payments, duties or obligations owed to the LENDER arising from or with respect
to any INTEREST RATE PROTECTION AGREEMENTS; (g) all other indebtedness or
liability of the BORROWER to the LENDER, whether direct or indirect, joint or
several, absolute or contingent, contemplated or uncontemplated, now existing or
hereafter arising; and (h) any indebtedness or liability which may exist or
arise as a result of any payment made by or for the benefit of the BORROWER
being avoided or set aside as a preference under Sections 547 and 550 of the
United States Bankruptcy Code, as amended, or under any state law governing
insolvency or creditors' rights.
Section 1.64. Operating Leases. The term "OPERATING LEASES" means all
lease agreements (including but not limited to real estate leases) which do not
meet the lease classification criteria of a CAPITAL LEASE under G.A.A.P.
Section 1.65. Permitted Liens. The term "PERMITTED LIENS" means: (a)
liens for taxes, assessments, or similar charges incurred in the ordinary course
of business that are not yet due and payable; (b) liens in favor of the LENDER;
(c) any existing liens specifically described on Schedule 1.65 hereof; (d) any
lien on specifically allocated money or securities to secure payments under
workmen's compensation, unemployment insurance, social security and other
similar LAWS, or to secure the performance of bids, tenders or contracts (other
than for the repayment of borrowed money) or to secure statutory obligations or
appeal bonds, or to secure indemnity, performance or other similar bonds in the
ordinary course of business; (e) subsequently arising liens which are expressly
approved in advance of the creation of any such liens by the LENDER in writing;
and (f) liens in specific items of EQUIPMENT securing INDEBTEDNESS used solely
to acquire such specific items of EQUIPMENT provided that such liens do not
attach to any assets other than those acquired with proceeds of such
INDEBTEDNESS.
Section 1.66. Person. The term "PERSON" means any individual,
corporation, partnership, limited liability company, association, joint-stock
company, trust, estate, unincorporated organization, joint venture, court,
government or political subdivision or agency thereof, or other legal entity.
Section 1.67. Receivables. The term "RECEIVABLES" means all of the
BORROWER'S ACCOUNTS, CONTRACT RIGHTS, INSTRUMENTS, DOCUMENTS, GENERAL
INTANGIBLES, CHATTEL PAPER, notes, notes receivable, drafts, acceptances, and
choses in action, now existing or hereafter created or acquired, and all
proceeds and products thereof, and all rights thereto, arising from the sale
<PAGE>
or lease of or the providing of INVENTORY, GOODS, or services by the BORROWER to
ACCOUNT DEBTORS, as well as all other rights, contingent or non-contingent, of
any kind of the BORROWER to receive payment, benefit, or credit from any PERSON.
Section 1.68. Records. The term "RECORDS" means correspondence,
memoranda, tapes, discs, papers, books and other documents, or transcribed
information of any type, whether expressed in ordinary, computer or machine
language.
Section 1.69. Regulated Substance. The term "REGULATED SUBSTANCE" means
any substance which, pursuant to any ENVIRONMENTAL LAW, is identified as a
hazardous substance (or other term having similar import) or is otherwise
subject to special requirements in connection with the use, storage,
transportation, disposition or other handling thereof.
Section 1.70. Release. The term "RELEASE" means a "release" as defined
in Section 101(22) of the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as now or hereafter amended.
Section 1.71. Restricted Payment. The term "RESTRICTED PAYMENT" means:
(a) any redemption, conversion, exchange, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, by the
BORROWER of any equity interest in the BORROWER now or hereafter outstanding; or
(b) any payment made by the BORROWER to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire equity interests in
the BORROWER now or hereafter outstanding.
Section 1.72. Revolver Dollar Cap. The term "REVOLVER DOLLAR CAP" means
Eight Million Five Hundred Thousand Dollars ($8,500,000.00).
Section 1.73. Revolving Loan. The term "REVOLVING LOAN" means the
revolving credit facility extended by the LENDER to the BORROWER in accordance
with the terms set forth in this AGREEMENT.
Section 1.74. Revolving Loan Note. The term "REVOLVING LOAN NOTE" means
the Revolving Credit Promissory Note of even date herewith from the BORROWER as
maker thereof payable to the order of the LENDER in the stated principal amount
of Eight Million Five Hundred Thousand Dollars ($8,500,000.00), as the same may
be amended, extended, renewed or otherwise modified or replaced from time to
time.
Section 1.75. Solvent. The term "SOLVENT" means, as to any PERSON, that
such PERSON at the time of determination: (a) is able to pay all of its
LIABILITIES as such LIABILITIES mature; and (b) has paid in and unimpaired
capital sufficient to carry on its business and transactions and all business
and transactions in which it engages or is about to engage.
Section 1.76. Subsidiary. The term "SUBSIDIARY" means, with respect to
any PERSON, any other PERSON of which securities or other ownership interests
representing an aggregate of fifty percent (50%) of more of the equity or the
ordinary voting power are, at the time as of which any determination is being
made, owned or controlled directly, or indirectly through one or more
intermediaries, by such PERSON.
<PAGE>
Section 1.77. Tangible Net Worth. The term "TANGIBLE NET WORTH" means the
excess of assets, excluding any and all intangible assets such as, but not
limited to, goodwill, licenses, trademarks, patents, copyrights, organizational
costs, appraisal surplus, officer and stockholder advances or receivables,
mineral rights and the like, over LIABILITIES.
Section 1.78. Term Loan. The term "TERM LOAN" means the term loan
facility extended by the LENDER to the BORROWER in accordance with the terms set
forth in this AGREEMENT.
Section 1.79. Term Loan Note. The term "TERM LOAN NOTE" means the
Promissory Note of even date herewith from the BORROWER as maker thereof payable
to the order of the LENDER in the stated principal amount of Four Hundred
Thirty-One Thousand Seven Hundred Forty-Six Dollars and Twenty-Eight Cents
($431,746.28), as the same may be amended, extended, renewed or otherwise
modified or replaced from time to time.
Section 1.80. Termination Event. The term "TERMINATION EVENT" means: (a)
a "Reportable Event" described in Section 4043 of ERISA and the regulations
issued thereunder, but not including any such event for which the 30-day notice
requirement has been waived by applicable regulation; (b) the withdrawal of the
BORROWER or an ERISA AFFILIATE of the BORROWER from a GUARANTEED PENSION PLAN
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (c) the filing of a notice of intent to terminate a
GUARANTEED PENSION PLAN or the treatment of a GUARANTEED PENSION PLAN amendment
as a termination under Section 4041 of ERISA; (d) the institution of proceedings
to terminate a GUARANTEED PENSION PLAN by the Pension Benefit Guaranty
Corporation; (e) the withdrawal or partial withdrawal of the BORROWER or an
ERISA AFFILIATE of the BORROWER from a MULTIEMPLOYER PLAN; or (f) any other
event or condition which might reasonably be expected to constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any GUARANTEED PENSION PLAN.
ARTICLE 2
---------
CONDITIONS PRECEDENT
--------------------
Any obligation of the LENDER to perform any duty imposed or assumed by
the LENDER in accordance with the terms of the LOAN DOCUMENTS or otherwise with
respect to the LOANS shall be conditioned upon the satisfaction by the BORROWER
of the conditions precedent set forth in this Article 2.
Section 2.1. Conditions To Initial Advances. The initial advances of
proceeds of the LOANS shall be subject to the satisfaction of each of the
following conditions precedent:
a. All of the LOAN DOCUMENTS shall be executed and delivered by
the BORROWER, the GUARANTORS, and all other signatories, to the LENDER;
<PAGE>
b. The LENDER shall have received and, in its sole discretion,
approved:
(i) a certificate in form and substance satisfactory
to the LENDER, given by the secretary or other authorized officer of the
BORROWER, accompanied by certified copies of the Articles of
Incorporation of the BORROWER, with all amendments thereto, the By-Laws
of the BORROWER, with all amendments thereto, and resolutions of the
BORROWER authorizing all of the transactions contemplated by this
AGREEMENT and the other LOAN DOCUMENTS;
(ii) such lien search reports and other evidence of
the validity and priority of the security interests granted to the LENDER
under the LOAN DOCUMENTS as the LENDER deems necessary or appropriate;
(iii) true and complete copies of insurance policies
or certificates evidencing that all insurance coverages required under
the LOAN DOCUMENTS are in full force and effect as of CLOSING;
(iv) certificates in form and substance satisfactory
to the LENDER, given by the secretary or other authorized officer of each
of the GUARANTORS, accompanied by certified copies of the Articles of
Incorporation of each GUARANTOR, with all amendments thereto and the
By-Laws of each GUARANTOR, with all amendments thereto, and resolutions
of each of the GUARANTORS authorizing all of the transactions
contemplated by the GUARANTY AGREEMENT;
(v) true and complete copies of the ten (10) largest
(on the basis of unpaid contract value) contracts of the BORROWER with
the United States government or any agency or department thereof;
(vi) letter from the BORROWER'S and the GUARANTORS'
legal counsel in form and substance acceptable to the LENDER and the
LENDER'S counsel;
c. As of CLOSING, all legal matters incidental to the
providing of the LOANS shall be satisfactory to the LENDER'S counsel;
d. All expenses to be paid by the BORROWER pursuant to this
AGREEMENT and incurred as of CLOSING shall have been paid by the BORROWER; and
e. The LENDER shall be satisfied that no MATERIAL ADVERSE
EVENT has occurred and is continuing.
Section 2.2. Conditions Precedent To Each Advance. The obligation of the
LENDER to make any advances under the LOANS shall be subject to the
satisfaction, prior thereto or concurrently therewith, of each of the following
conditions precedent:
a. No event shall have occurred on or prior to such date and
be continuing on such date, and no condition shall exist on such date, which
constitutes a DEFAULT or EVENT OF DEFAULT;
<PAGE>
b. Each of the representations and warranties made by or on
behalf of the BORROWER to the LENDER in the LOAN DOCUMENT: (i) shall be true and
correct in all material respects when made; and (ii) shall, for all purposes of
this AGREEMENT, be deemed to be repeated on and as of the date of BORROWER'S
request for such advance, as the case may be, and shall be true and correct in
all material respects as of each of such dates;
c. The LENDER shall have received all reports, financial
statements, financial information and financial disclosures required by the LOAN
DOCUMENTS, except to the extent that the LENDER has waived to the receipt
thereof; and
d. It shall not be unlawful (i) for the LENDER to perform any
of the agreements or obligations imposed upon the LENDER by any of the LOAN
DOCUMENTS, or (ii) for the BORROWER or any GUARANTOR to perform any of their
respective agreements or obligations as provided by the LOAN DOCUMENTS.
ARTICLE 3
---------
TERMS AND PURPOSES OF THE LOANS
-------------------------------
Section 3.1. Agreement To Lend. Subject to the terms and conditions of
this AGREEMENT and the other LOAN DOCUMENTS, the LENDER agrees to extend to the
BORROWER the REVOLVING LOAN, the EQUIPMENT LINE, and the TERM LOAN.
Section 3.2. Advances Of Revolving Loan Proceeds. The LENDER shall
advance to the BORROWER by depositing into the COMMERCIAL ACCOUNT from time to
time such sums as the BORROWER may request, provided that the aggregate
outstanding principal balance of the REVOLVING LOAN at any one time shall never
exceed the MAXIMUM REVOLVER AMOUNT. The BORROWER shall not request any advance
under the REVOLVING LOAN which would cause the aggregate amount of advances made
to or for the BORROWER and outstanding under the LOAN DOCUMENTS to exceed the
MAXIMUM REVOLVER AMOUNT. In the event the principal amount outstanding under the
REVOLVING LOAN ever exceeds the MAXIMUM REVOLVER AMOUNT the BORROWER shall
immediately, upon the demand of the LENDER, reduce the principal balance of the
REVOLVING LOAN to an amount which is not in excess of the MAXIMUM REVOLVER
AMOUNT. Any termination of the REVOLVING LOAN, by the LENDER shall relieve the
LENDER of the LENDER'S obligation to lend money or to make financial
accommodations to or for the BORROWER and the BORROWER'S account, and shall in
no way release, terminate, discharge or excuse the BORROWER from its absolute
duty to pay or perform the OBLIGATIONS.
Section 3.2.1. Interest And Lender's Records. All sums
advanced under the REVOLVING LOAN shall be repaid with interest at a floating
rate of interest equal to the LIBOR RATE in effect from time to time plus the
APPLICABLE MARGIN. The terms and conditions of the REVOLVING LOAN NOTE are
incorporated herein by reference. The date and amounts of each advance made by
the LENDER and each payment made by the BORROWER shall be recorded by the LENDER
on the books and records of the LENDER, but any failure to record such dates or
amounts shall not relieve the BORROWER of its OBLIGATIONS under the LOAN
DOCUMENTS. Interest accrued under the REVOLVING LOAN shall be computed on
outstanding balances as reflected on the LENDER'S books and records.
Section 3.2.2. Term. All sums due under the REVOLVING LOAN
<PAGE>
shall be paid in full on or before September 30, 1999; provided, however, that
the REVOLVING LOAN may be renewed on an annual basis by the written agreement of
the LENDER and the BORROWER. The BORROWER may borrow, repay and reborrow on or
prior to the termination of the REVOLVING LOAN, subject to the continued
compliance by the BORROWER with the terms and conditions of the LOAN DOCUMENTS.
Section 3.2.3. Purpose. The proceeds of the REVOLVING LOAN shall be
used by the BORROWER solely and exclusively: (a) for the BORROWER'S general
working capital needs; (b) to refinance the BORROWER'S existing line of credit
with Signet Bank, N.A.; and (c) for BORROWER'S investments in acquisitions,
joint ventures, and licensing agreements provided that for advances made for
BORROWER'S investments (i) the aggregate amount of proceeds of the REVOLVING
LOAN that is used for such purposes shall not exceed Two Million Five Hundred
Thousand Dollars ($2,500,000.00), and (ii) the BORROWER shall notify the LENDER
in writing of each use of REVOLVING LOAN proceeds for such purposes.
Section 3.2.4. Monitoring Fee. During the term of the REVOLVING LOAN,
the BORROWER shall pay to the LENDER a monthly monitoring fee to be billed by
the LENDER, such fee not to exceed Six Hundred Dollars ($600.00) a month. The
monthly monitoring fee shall be paid on the first day of each month commencing
on September 1, 1997.
Section 3.2.5. Cancellation Fee. In the event the BORROWER terminates
the REVOLVING LOAN prior to August 31, 1999, the BORROWER shall pay to the
LENDER a cancellation fee equal to: (a) Eighty-Five Thousand Dollars
($85,000.00) if such cancellation occurs prior to August 31, 1998; or (b)
Forty-Two Thousand Five Hundred Dollars ($42,500.00) if such cancellation occurs
on or after August 31, 1998 but prior to August 31, 1999.
Section 3.3. Terms Of Term Loan. Subject to the terms and conditions
stated herein, the LENDER shall advance to the BORROWER as proceeds of the TERM
LOAN the principal sum of Four Hundred Thirty-One Thousand Seven Hundred
Forty-Six Dollars and Twenty-Eight Cents ($431,746.28).
Section 3.3.1. Interest And Repayment. All sums advanced or outstanding
under the TERM LOAN shall bear interest at a fluctuating rate of interest equal
to the LIBOR RATE in effect from time to time plus the APPLICABLE MARGIN.
Notwithstanding the foregoing to the contrary, the BORROWER shall have the right
at any time prior to the occurrence of a DEFAULT to elect to have interest
accrue on the entire principal balance of the TERM LOAN at a fixed annual rate
of interest equal to either the FIXED RATE or the COST OF FUNDS RATE, plus the
APPLICABLE MARGIN, all as determined on the date occurring two (2) BUSINESS DAYS
after the date the BORROWER provides the LENDER with written notice of such
election. In the event the BORROWER provides the LENDER with written notice of
its election to have interest accrue at a fixed rate of interest, interest shall
commence accruing at such fixed annual rate of interest on the date occurring
three (3) BUSINESS DAYS after the LENDER'S receipt of such written notice and
shall continue to accrue at such rate until the TERM LOAN is paid in full. The
TERM LOAN shall be repaid in accordance with the stated terms and conditions of
the TERM LOAN NOTE, which terms and conditions are incorporated herein by
reference.
<PAGE>
Section 3.3.2. Purpose. The proceeds of the TERM LOAN shall be used
solely and exclusively for the purpose of refinancing certain existing
indebtedness over to Signet Bank, N.A.
Section 3.4. Equipment Line. The LENDER agrees: (a) to extend to the
BORROWER, under the EQUIPMENT LINE, term loans from time to time in order to
finance the acquisition of items of EQUIPMENT, provided, that the principal
amount of any such term loan shall not exceed one hundred percent (100%) of the
lesser of (i) the fair market value for the EQUIPMENT purchased with such loan
advance, or (ii) the actual net invoice price paid by the BORROWER (less the
value of all rebates, trade-ins, and all shipping and installation costs) for
the EQUIPMENT purchased with such loan advance; and (b) to acquire, or cause
LEASECORP to acquire, items of EQUIPMENT selected by the BORROWER and lease, or
cause LEASECORP to lease, such items of EQUIPMENT to the BORROWER; provided,
however, that the aggregate of the principal amount of all term loans advanced
under the EQUIPMENT LINE plus the LEASED EQUIPMENT COST shall never exceed the
cumulative principal amount of One Million Five Hundred Thousand Dollars
($1,500,000.00). The minimum amount of any term loan advanced under the
EQUIPMENT LINE shall be Ten Thousand Dollars ($10,000.00) and the minimum amount
of the LEASED EQUIPMENT COST in any single lease transaction shall be Ten
Thousand Dollars ($10,000.00).
Section 3.4.1. Term. The EQUIPMENT LINE shall terminate, and the LENDER'S
obligations to make term loans and acquire equipment to be leased to the
BORROWER shall terminate, on September 30, 1999, unless such date is extended by
written agreement executed by the LENDER.
Section 3.4.2. Term Loan Advances Under Equipment Line.
a. Equipment Notes. Each term loan advanced under the
EQUIPMENT LINE shall be evidenced by and shall be repaid in accordance with the
provisions of an EQUIPMENT NOTE in the form attached hereto as Exhibit A- 1, if
the BORROWER elects interest to accrue based on the LIBOR RATE, or Exhibit A-2,
if the BORROWER elects interest to accrue based on the FIXED RATE or the COST OF
FUNDS RATE, the terms and conditions of which are incorporated herein by
reference.
b. Requisition Procedure. Not less than two (2) BUSINESS DAYS
prior to the date upon which an advance is to be made under the EQUIPMENT LINE,
the BORROWER shall execute and deliver a fully completed Requisition in the form
attached hereto as Exhibit B, containing the specifics required therein relating
to the requested advance. On the date the LENDER is to make an advance of
proceeds under the EQUIPMENT LINE to the BORROWER, the BORROWER shall execute
and deliver to the LENDER an EQUIPMENT NOTE in the principal amount equal to the
sum of such term loan advance. The principal amount of each term loan advance
shall be repaid in even monthly principal installments over a term between three
and five years which shall be determined by the BORROWER and LENDER based on the
useful life of the EQUIPMENT purchased with such loan advance. The LENDER is
hereby authorized by the BORROWER to make any advances hereunder directly to the
persons or entities supplying the EQUIPMENT to the BORROWER that is the subject
of the requested advance.
c. Interest. Interest shall accrue on the unpaid principal
balance of each term loan made under the EQUIPMENT LINE, and be repaid, as
<PAGE>
follows:
(i) Interest Rate. Except as specifically set
forth below, interest shall accrue on the unpaid principal balance of each term
loan advanced under the EQUIPMENT LINE at a fluctuating annual rate of interest
equal to the LIBOR RATE, in effect from time to time, plus the APPLICABLE MARGIN
as of the date of the advance, with changes in such interest rate to be made
daily based upon changes in the LIBOR RATE. Notwithstanding the foregoing to the
contrary, the BORROWER shall have the right to elect to have interest accrue on
the entire principal balance of any term loan made under the EQUIPMENT LINE at a
fixed annual rate of interest equal to either the FIXED RATE or the COST OF
FUNDS RATE, plus the APPLICABLE MARGIN all as determined on the date of the
advance. The BORROWER must elect in writing to have interest accrue based on the
FIXED RATE or the COST OF FUNDS RATE not less than two (2) BUSINESS DAYS prior
to the date upon which such term loan advance is made under the EQUIPMENT LINE.
(ii) Interest Payments. The BORROWER shall make
payments of all accrued and unpaid interest on each term loan under the
EQUIPMENT LINE on the first BUSINESS DAY of each month, commencing on the first
BUSINESS DAY of the first month immediately following the date of the advance of
proceeds of such term loan, and continuing until all sums outstanding under the
term loan are paid in full.
Section 3.4.3. Leases Under Equipment Line. Not less than ten (10)
BUSINESS DAYS prior to the date upon which the BORROWER desires the LENDER to
acquire (or cause LEASECORP to acquire) an item of EQUIPMENT to be leased to the
BORROWER, the BORROWER shall make a written request to the LENDER for the LENDER
or LEASECORP to enter into a lease transaction with the BORROWER pursuant to the
terms of this AGREEMENT and the BORROWER shall provide to the LENDER such
information as the LENDER may require in connection with the EQUIPMENT to be
leased and the seller of such EQUIPMENT. All LEASES entered into by and between
the LENDER or LEASECORP and the BORROWER shall be on terms and conditions
acceptable to both the BORROWER and the LENDER or LEASECORP, as the case may be,
and if the BORROWER and the LENDER or LEASECORP, as the case may be, cannot
agree to such terms and conditions, then neither the LENDER nor LEASECORP shall
have any obligation to acquire such EQUIPMENT and lease it to the BORROWER. All
LEASES shall constitute "Finance Leases" under the Maryland Uniform Commercial
Code, Title 2A, Commercial Law Article, Annotated Code of Maryland, as amended.
Section 3.5. LIBOR Rate Availability. If after the date of this AGREEMENT
the LENDER determines at any time that the adoption of any law, rule or
regulation or change therein, or a change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with interpretation or administration thereof, or a change in
market conditions has made it impracticable or illegal for the LENDER to offer
interest rate pricing based on the LIBOR RATE, the LENDER shall notify the
BORROWER of its determination, and thereafter until the LENDER notifies the
BORROWER that such circumstances no longer exists: (a) the LENDER shall not be
obligated to offer interest rate pricing based on the LIBOR RATE; and (b) each
LOAN accruing interest based on the LIBOR RATE shall automatically commence to
accrue at a fluctuating rate of interest equal to the COM. PAPER RATE plus the
APPLICABLE MARGIN.
<PAGE>
Section 3.6. Calculation Of Interest. Interest shall be calculated on the
unpaid principal balance of the LOANS on the basis of a three hundred sixty
(360) days per year factor applied to the actual days on which there exists an
unpaid balance thereunder.
Section 3.7. Facility Fee. The BORROWER shall pay to the LENDER on or
before CLOSING a non-refundable and unconditional facility fee of Fifteen
Thousand Dollars ($15,000.00), which shall be the absolute property of the
LENDER upon payment. The facility fee shall not be considered to be a payment of
any of the LENDER'S expenses incurred in connection with the LOANS and shall be
paid independent of the amount of proceeds of the LOANS ultimately advanced to
the BORROWER, even if that amount is less than the stated principal amounts of
the LOANS.
Section 3.8. Commitment Fee. For each three (3) month period ending on
the last calendar days of October, January, April and July, or portion thereof
during which the REVOLVING LOAN facility established hereunder is in existence
and has not been terminated, until the termination of the REVOLVING LOAN, the
BORROWER shall pay to the LENDER a commitment fee of: (a) one-quarter of one
percent (1/4%) per annum on that sum (only if such sum is positive) obtained by
subtracting the average daily disbursed principal balance of the REVOLVING LOAN
during such three (3) month period or portion thereof from Six Million Dollars
($6,000,000.00); plus (b) one-half of one percent (1/2%) per annum on that sum
obtained by subtracting (i) the greater of Zero or the amount by which the
average daily disbursed principal balance of the REVOLVING LOAN during such
three (3) month period or portion thereof exceeds Six Million Dollars
($6,000,000.00), from (ii) Two Million Five Hundred Thousand Dollars
($2,500,000.00); provided, however, that the amount of the commitment fee shall
be reduced for each three (3) month period ending after February 28, 1998, to
that amount equal to one-quarter of one percent (1/4%) per annum on that sum
obtained by subtracting the average daily disbursed principal balance of the
REVOLVING LOAN during the applicable three (3) month period or portion thereof
from the REVOLVER DOLLAR CAP, if, and only if, the BORROWER'S financial
statements for the fiscal quarter ending February 28, 1998 evidence that the
BORROWER is in full compliance with all of the financial covenants set forth in
this AGREEMENT and there are no DEFAULTS under this AGREEMENT as of February 28,
1998. The commitment fee shall be payable quarterly in arrears, on the fifteenth
day of each succeeding November, February, May, and August or on the last day of
a portion of a three (3) month period commencing with the first of such payments
to be made on November 15, 1997. The commitment fee is not to be considered a
fee being paid by the BORROWER to the LENDER as an inducement to the LENDER to
make advances, nor shall it be considered to modify or limit the ability of the
LENDER to terminate in accordance with the provisions of this AGREEMENT the
ability of the BORROWER to borrow under the REVOLVING LOAN.
Section 3.9. Capital Adequacy. If at any time or from time to time the
LENDER determines that the adoption or implementation of any CAPITAL ADEQUACY
REQUIREMENT, or the compliance by the LENDER or any corporation controlling the
LENDER therewith, affects the amount of capital to be maintained by the LENDER
or any corporation controlling the LENDER as a result of its obligations
hereunder, or reduces the effective rate of return on the LENDER'S or such
corporation's capital to a level below that which the LENDER or such corporation
would have achieved but for such CAPITAL ADEQUACY REQUIREMENT as a
<PAGE>
consequence of its obligations hereunder (taking into consideration the LENDER'S
or such corporation's policies with respect to capital adequacy), then after
submission by the LENDER to the BORROWER of a written request therefor and a
statement of the basis for such determination, the BORROWER shall pay to the
LENDER such additional amounts as will compensate the LENDER for the cost of
maintaining the increased capital or for the reduction in the rate of return on
capital, together with interest thereon at the highest rate of interest then in
effect under the NOTES from the date the LENDER requests such additional amounts
until those amounts are paid in full; provided, however, the BORROWER shall have
no obligation to pay such amounts to the LENDER unless the need to increase
capital or the reduction in the rate of return on capital is due to a
deterioration in the financial condition of the BORROWER or the value of the
COLLATERAL or due to an EVENT OF DEFAULT.
Section 3.10. Payments. All payments received by the LENDER which are to
be applied to reduce the OBLIGATIONS shall be credited to the balance due from
the BORROWER pursuant to the normal and customary practices of the LENDER, but
shall be provisional and shall not be considered final unless and until such
payment is not subject to avoidance under any provision of the United States
Bankruptcy Code, as amended, including Sections 547 and 550, or any state law
governing insolvency or creditors' rights. If any payment is avoided or set
aside under any provision of the United States Bankruptcy Code, including
Sections 547 and 550, or any state law governing insolvency or creditors'
rights, the payment shall be considered not to have been made for all purposes
of this AGREEMENT and the LENDER shall adjust its records to reflect the fact
that the avoided payment was not made and has not been credited against the
OBLIGATIONS.
Section 3.11. Advancements. If the BORROWER fails to perform any of its
agreements or covenants contained in this AGREEMENT or if the BORROWER fails to
protect or preserve the COLLATERAL or the status and priority of the security
interest of the LENDER in the COLLATERAL, the LENDER may make advances to
perform the same on behalf of the BORROWER to protect or preserve the COLLATERAL
or the status and priority of the security interest of the LENDER in the
COLLATERAL, and all sums so advanced shall immediately upon advance become
secured by the security interests granted in this AGREEMENT, and shall become
part of the principal amount owed to the LENDER with interest to be assessed at
the applicable rate thereon and subject to the terms and provisions of this
AGREEMENT and all of the LOAN DOCUMENTS. The BORROWER shall repay on demand all
sums so advanced on the BORROWER'S behalf, plus all expenses or costs incurred
by the LENDER, including reasonable legal fees, with interest thereon at the
highest rate provided for in the LOAN DOCUMENTS. The provisions of this Section
shall not be construed to prevent the institution of the rights and remedies of
the LENDER upon the occurrence of an EVENT OF DEFAULT. The contrary
notwithstanding, the authorization contained in this Section shall impose no
duty or obligation on the LENDER to perform any action or make any advancement
on behalf of the BORROWER and is for the sole benefit and protection of the
LENDER.
<PAGE>
ARTICLE 4
---------
SECURITY FOR THE OBLIGATIONS
----------------------------
The payment and satisfaction of the OBLIGATIONS shall be secured by the
following described security interests, liens, guarantees, assignments and
pledges.
Section 4.1. Grant Of Security Interest To Lender. As security for all of
the OBLIGATIONS, the BORROWER hereby assigns to the LENDER all of the BORROWER'S
right, title, and interest in and to, and grants to the LENDER a continuing
security interest in and to, all of the tangible and intangible assets of the
BORROWER, wherever located, whether now owned or hereafter acquired by the
BORROWER, together with all substitutions therefor, and all replacements and
renewals thereof, and all accessions, additions, replacement parts, manuals,
warranties and packaging relating thereto, including but not limited to the
following tangible and intangible assets and property rights of the BORROWER:
a. ACCOUNTS;
b. CHATTEL PAPER;
c. CONTRACT RIGHTS;
d. DOCUMENTS;
e. EQUIPMENT;
f. FIXTURES;
g. GENERAL INTANGIBLES;
h. GOODS;
i. INSTRUMENTS;
j. INVENTORY;
k. Leasehold improvements;
l. INVESTMENT PROPERTY;
m. RECEIVABLES;
n. Rights to returned, rejected, or repossessed INVENTORY and
rights of reclamation and stoppage in transit with respect
to INVENTORY sold to ACCOUNT DEBTORS;
o. All monies, bank accounts, and deposits with any financial
institution;
p. All contracts with ACCOUNT DEBTORS, deposits,
franchises, licenses, permits, tax refunds, leases,
rights of indemnification, warranty rights, patents,
patent applications, trademarks, service marks, trade
names, copyrights, rights to sue for violations or
infringements of intellectual property rights, tort
claims, and judgments;
q. All rights of the BORROWER as a secured party with respect
to collateral security now or hereafter securing any of the
obligations of third parties to the BORROWER, together with
all agreements and instruments evidencing or creating any
such security; and
r. All RECORDS relating to or pertaining to any of the above
listed COLLATERAL.
The LENDER shall have the right to require the BORROWER to pledge and
grant a lien into assets which the BORROWER may hereafter acquire which are not
subject to the security interest granted herein.
<PAGE>
Section 4.2. Proceeds And Products. The LENDER'S security interests
provided for herein shall apply to the proceeds, including but not limited to
insurance proceeds, and the products of the COLLATERAL.
Section 4.3. Priority Of Security Interest. Each of the security
interests granted by the BORROWER to the LENDER pursuant to this AGREEMENT shall
be a perfected first priority security interest in the COLLATERAL, except as
expressly agreed in advance to the contrary by the LENDER in writing.
Section 4.4. Future Advances. The security interests granted by the
BORROWER to the LENDER hereunder shall secure all current and all future
advances made by the LENDER to the BORROWER, or for the account or benefit of
the BORROWER, and the LENDER may advance or readvance upon repayment by the
BORROWER all or any portion of the sums loaned to the BORROWER and any such
advance or readvance shall be fully secured by the security interests created by
the LOAN DOCUMENTS.
Section 4.5. Receivable Collections. The BORROWER shall deposit into the
COLLECTION ACCOUNT, immediately upon receipt thereof, all cash, checks, drafts,
and other instruments for the payment of money, properly endorsed, which have
been received by the BORROWER in full or partial payment of any RECEIVABLE.
Prior to any such deposit by the BORROWER into the COLLECTION ACCOUNT, the
BORROWER will not commingle such items of payment with any of its other funds or
property but will hold them separate and apart. The BORROWER shall instruct all
of its ACCOUNT DEBTORS to make all payments on the BORROWER'S RECEIVABLES to a
post office box in which the LENDER alone shall have sole access ("LOCK BOX").
The LENDER shall, on each BUSINESS DAY, withdraw the items of payment from the
LOCK BOX and deposit them into either the COLLECTION ACCOUNT or the COMMERCIAL
ACCOUNT, as determined by the LENDER. The LENDER, from time to time, shall apply
all of the collected funds held in the COLLECTION ACCOUNT toward payment of all
or any part of the OBLIGATIONS, whether or not then due, in such order of
application as the LENDER may determine.
Section 4.6. Collection Of Receivables By Lender. The LENDER, at any time
or from time to time, after the occurrence of a violation of the terms of
Section 4.5 hereof or after the occurrence of an EVENT OF DEFAULT, may terminate
the BORROWER'S authority to collect the RECEIVABLES. Upon a termination of the
BORROWER'S authority, the LENDER shall have the right to send notices of
assignment or notices of the LENDER'S security interest to any and all ACCOUNT
DEBTORS or any third party holding or otherwise concerned with any of the
COLLATERAL, and thereafter the LENDER shall have the sole right to collect the
RECEIVABLES and to take possession of the COLLATERAL and RECORDS relating
thereto. All of the LENDER'S collection expenses shall be charged to the
BORROWER'S account and added to the OBLIGATIONS. If the LENDER is collecting the
RECEIVABLES as above provided, the LENDER shall have the right to receive,
indorse, assign and deliver in the LENDER'S name or the BORROWER'S name any and
all checks, drafts and other instruments for the payment of money relating to
the RECEIVABLES, and the BORROWER hereby waives notice of presentment, protest
and non-payment of any instrument so endorsed. If the LENDER is collecting the
RECEIVABLES directly as above provided, the BORROWER hereby constitutes the
LENDER or the LENDER'S designee as the BORROWER'S attorney-in-fact with power
with respect to the RECEIVABLES: (a) to indorse
<PAGE>
the BORROWER'S name upon all notes, acceptances, checks, drafts, money orders or
other evidences of payment of COLLATERAL that may come into the LENDER'S
possession; (b) to sign the BORROWER'S name on any invoices relating to any of
the RECEIVABLES, drafts against ACCOUNT DEBTORS, assignments and verifications
of RECEIVABLES and notices to ACCOUNT DEBTORS; (c) to send verifications of
RECEIVABLES to any ACCOUNT DEBTOR; (d) to notify the Post Office to change the
address for delivery of mail addressed to the BORROWER to such address as the
LENDER may designate; (e) to receive and open the BORROWER's mail and remove
therefrom all items of payments on RECEIVABLES contained therein (the LENDER
shall use its best efforts to forward to the BORROWER all remaining mail on each
banking day); and (f) to do all other acts and things necessary, proper, or
convenient to carry out the terms and conditions and purposes and intent of this
AGREEMENT. All acts of such attorney or designee are hereby ratified and
approved, and such attorney or designee shall not be liable for any acts of
omission or commission, nor for any error of judgment or mistake of fact or law
in accordance with this AGREEMENT, with the exception of acts arising from
actual fraud or gross and wanton negligence. The power of attorney hereby
granted, being coupled with an interest, is irrevocable while any of the
OBLIGATIONS remain unpaid. The LENDER, without notice to or consent from the
BORROWER, may sue upon or otherwise collect, extend the time of payment of or
compromise or settle for cash, credit or otherwise upon any terms, any of the
RECEIVABLES or any securities, instruments or insurances applicable thereto or
release the obligor thereon. The LENDER is authorized and empowered to accept
the return of the goods represented by any of the RECEIVABLES, without notice to
or consent by the BORROWER, all without discharging or in any way affecting the
BORROWER'S liability under the LOAN DOCUMENTS. The LENDER does not, by anything
herein or in any assignment or otherwise, assume any of the BORROWER'S
obligations under any contract or agreement assigned to the LENDER, and the
LENDER shall not be responsible in any way for the performance by the BORROWER
of any of the terms and conditions thereof.
Section 4.7. Guaranty Agreements. Each of the GUARANTORS shall execute
and deliver a GUARANTY AGREEMENT to the LENDER which shall guarantee, among
other things, the absolute full payment and performance by the BORROWER of the
OBLIGATIONS. Each of the GUARANTOR'S obligations under the GUARANTY AGREEMENT
executed by such GUARANTOR shall be secured by a security interest in all of
such GUARANTOR'S now owned or hereafter acquired assets, all as more
particularly set forth in the GUARANTY AGREEMENT to be executed by such
GUARANTOR.
Section 4.8. Further Assurances. The BORROWER will, at its expense,
promptly execute and deliver all further instruments and documents and take all
further action that may be necessary or desirable or that the LENDER may request
from time to time in order: (a) to perfect and protect the security interests
purported to be created hereby; (b) to enable the LENDER to exercise and enforce
its rights and remedies hereunder in respect of the COLLATERAL; or (c) otherwise
to effect the purposes of this AGREEMENT, including, without limitation: (i)
upon the BORROWER'S acquisition thereof, delivering to the LENDER each item of
CHATTEL PAPER of the BORROWER, (ii) if any RECEIVABLES shall be evidenced by a
promissory note or other INSTRUMENT, delivering and pledging to the LENDER such
note or INSTRUMENT duly endorsed and accompanied by executed instruments of
transfer or assignment, all in form and substance satisfactory to the LENDER,
(iii) executing and filing such financing statements or amendments thereto as
may be necessary in order to perfect and
<PAGE>
preserve the security interests purported to be created hereby, (iv) upon the
acquisition after the date hereof by the BORROWER of any EQUIPMENT covered by a
certificate of title or ownership, cause the LENDER to be listed as the
lienholder on such certificate of title and within sixty (60) days of the
acquisition thereof deliver evidence of the same to the LENDER, and (v) upon the
acquisition after the date hereof of any asset for which an assignment, pledge,
mortgage, or other document is required to be filed in order to grant or perfect
a lien therein for the benefit of the LENDER, execute and deliver to the LENDER
such assignment, pledge, mortgage, or other INSTRUMENT within thirty (30) days
of the acquisition thereof. The BORROWER hereby appoints the LENDER or any
officer of the LENDER as the BORROWER'S attorney in fact for purposes of
executing such instruments or documents in the BORROWER'S name, place and stead
following an EVENT OF DEFAULT, which power of attorney shall be considered as
coupled with an interest and irrevocable.
Section 4.9. Grant Of Security Interest To Leasecorp. As security for all
of the BORROWER'S obligations to LEASECORP under any LEASE in which LEASECORP is
the lessor, the BORROWER hereby assigns to LEASECORP all of the BORROWER'S
right, title, and interest in and to, and grants to LEASECORP a continuing
security interest in and to all of the tangible and intangible assets of the
BORROWER, wherever located, whether now owned or hereafter acquired by the
BORROWER, together with all substitutions therefor, and all replacements and
renewals thereof, and all substitutions, additions, replacement parts, manuals,
warranties and packaging relating thereto including, but not limited to, the
following tangible and intangible assets and property rights of the BORROWER:
a. ACCOUNTS;
b. CHATTEL PAPER;
c. CONTRACT RIGHTS;
d. DOCUMENTS;
e. EQUIPMENT;
f. FIXTURES;
g. GENERAL INTANGIBLES;
h. GOODS;
i. INSTRUMENTS;
j. INVENTORY;
k. Leasehold improvements;
l. INVESTMENT PROPERTY;
m. RECEIVABLES;
n. Rights to returned, rejected, or repossessed INVENTORY and
rights of reclamation and stoppage in transit with respect
to INVENTORY sold to ACCOUNT DEBTORS;
o. All monies, bank accounts, and deposits with any financial
institution;
p. All contracts with ACCOUNT DEBTORS, deposits,
franchises, licenses, permits, tax refunds, leases,
rights of indemnification, warranty rights, patents,
patent applications, trademarks, service marks, trade
names, copyrights, rights to sue for violations or
infringements of intellectual property rights, tort
claims, and judgments;
q. All rights of the BORROWER as a secured party with
respect to collateral security now or hereafter
securing any of the obligations of third parties to
the BORROWER, together with
<PAGE>
all agreements and instruments evidencing or creating any
such security; and
r. All RECORDS relating to or pertaining to any of the above
listed COLLATERAL.
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the LENDER to make the LOANS and to enter into this AGREEMENT,
the BORROWER makes the representations and warranties set forth in this Article
5. The BORROWER acknowledges the LENDER'S justifiable right to rely upon these
representations and warranties.
Section 5.1. Accuracy Of Information. All information, documents,
reports, statements, financial statements, and data submitted by or on behalf of
the BORROWER in connection with the LOANS, or in support thereof, are true,
accurate, and complete in all material respects as of the date made and contain
no knowingly false, incomplete or misleading statements.
Section 5.2. No Litigation. There are no actions, suits,
investigations, or proceedings pending or, to the knowledge of the BORROWER,
threatened against the BORROWER or the assets of the BORROWER, except as
specifically disclosed on Schedule 5.2 attached hereto.
Section 5.3. No Liability Or Adverse Change. The BORROWER does not have
any direct or contingent liability or INDEBTEDNESS known to the BORROWER and not
previously disclosed to the LENDER, nor does the BORROWER know of or expect any
adverse change in the assets, LIABILITIES, properties, business, or condition,
financial or otherwise, of the BORROWER.
Section 5.4. Title To Collateral. The BORROWER has good and marketable
title to all of the COLLATERAL. The LENDER'S liens described herein shall have
the priority described in Section 4.3 hereof.
Section 5.5. Authority; Approvals And Consents.
a. The BORROWER has adequate power and authority and has full
legal right to enter into this AGREEMENT and each of the other LOAN DOCUMENTS,
and to perform, observe and comply with all of its agreements and obligations
under each of such documents, including, without limitation the borrowings
contemplated hereby.
b. The execution and delivery by the BORROWER of each of the
LOAN DOCUMENTS, the performance by the BORROWER of all of its agreements and
obligations under the LOAN DOCUMENTS, and the making by the BORROWER of the
borrowings contemplated by this AGREEMENT, have been duly authorized by all
necessary action on the part of the BORROWER and do not and will not (i)
contravene any provision of the BORROWER'S organizational documents; (ii)
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in the creation of any lien upon any of
the property of the BORROWER under any agreement, trust deed, indenture,
mortgage or other instrument to which the BORROWER is a party or by which the
BORROWER or any property of the BORROWER is bound or affected; (iii)
<PAGE>
violate or contravene any provision of any LAW, rule or regulation (including,
without limitation, Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System) or any order, ruling or interpretation thereunder or any
decree, order of judgment of any court or governmental or regulatory authority,
bureau, agency or official (all as from time to time in effect and applicable to
the BORROWER); or (iv) require any waivers, consents or approvals by any of the
creditors or trustees for creditors of the BORROWER.
c. Other than filings and recordings required to perfect the
security interests and liens granted hereunder, no approval, consent, order,
authorization or license by, or giving notice to, or taking any other action
with respect to, any governmental or regulatory authority or agency is required,
under any provision of any applicable LAW for the execution and delivery by the
BORROWER of this AGREEMENT and the other LOAN DOCUMENTS, for the performance by
the BORROWER of any of the agreements and obligations thereunder or for the
making by the BORROWER of the borrowing contemplated by this AGREEMENT.
Section 5.6. Binding Effect Of Documents, Etc. Each of the LOAN DOCUMENTS
which the BORROWER has executed and delivered as contemplated and required to be
executed and delivered as of the CLOSING DATE by this AGREEMENT, have been duly
executed and delivered and each such LOAN DOCUMENT will be in full force and
effect. The agreements and obligations of the BORROWER contained in each such
LOAN DOCUMENT constitute legal, valid and binding obligations of the BORROWER,
enforceable against the BORROWER in accordance with its respective terms.
Section 5.7. Other Names. The BORROWER has not changed its name, been the
surviving entity in a merger, or changed the location of its chief executive
office within the last twelve (12) years, except as is disclosed on Schedule 5.7
attached hereto. The BORROWER does not trade under any trade or fictitious names
except as set forth on Schedule 5.7 attached hereto.
Section 5.8. No Events Of Default. There is not currently existing any
action, event, or condition which presently constitutes a DEFAULT or an EVENT OF
DEFAULT.
Section 5.9. Guaranty Agreement. The GUARANTY AGREEMENT executed by the
GUARANTORS is the valid and binding obligations of the GUARANTORS and is fully
enforceable against the GUARANTORS in accordance with its terms.
Section 5.10. Taxes. The BORROWER: (a) has filed all federal, state and
local tax returns and other reports which the BORROWER is required by LAW to
file prior to the date hereof and which are material to the conduct of the
business of the BORROWER; (b) has paid or caused to be paid all taxes,
assessments and other governmental charges that are due and payable prior to the
date hereof; and (c) has made adequate provision for the payment of such taxes,
assessments or other charges accruing but not yet payable. The BORROWER has no
knowledge of any deficiency or additional assessment in connection with any
taxes, assessments or charges not provided for on the BORROWER'S books of
account or reflected in the BORROWER'S financial statements.
Section 5.11. Compliance With Laws. The BORROWER has complied in all
<PAGE>
material respects with all applicable LAWS, including, but not limited to, all
LAWS with respect to: (a) all restrictions, specifications, or other
requirements pertaining to products that it sells or to the services it
performs; (b) the conduct of its business; and (c) the use, maintenance, and
operation of the real and personal properties owned or leased by it in the
conduct of its business.
Section 5.12. Chief Place Of Business. The BORROWER'S chief executive
office, chief place of business, and the place where it keeps its RECORDS
concerning the COLLATERAL is 11019 McCormick Road, Hunt Valley, Maryland 21031.
Section 5.13. Location Of Equipment And Fixtures. The BORROWER owns no
EQUIPMENT or FIXTURES which are COLLATERAL and which are located at a location
other than any locations set forth on Schedule 5.13 attached hereto.
Section 5.14. Location Of Inventory. The INVENTORY is and shall be kept
solely at the BORROWER'S locations set forth on Schedule 5.14 attached hereto,
and shall not be moved, sold or otherwise disposed of without prior notification
to the LENDER, except for sales of INVENTORY to ACCOUNT DEBTORS in the ordinary
course of the BORROWER'S business. None of the INVENTORY is stored with or in
the possession of any bailee, warehouseman, or other similar PERSON, except as
specifically disclosed on Schedule 5.14 attached hereto.
Section 5.15. No Subsidiaries. As of the date hereof, the BORROWER has
no SUBSIDIARIES other than the GUARANTORS and EA Engineering, Science And
Technology de Mexico, S.A. de C.V.
Section 5.16. No Labor Agreements. The BORROWER is not subject to any
collective bargaining agreement or any agreement, contract, decree or order
requiring it to recognize, deal with or employ any PERSONS organized as a
collective bargaining unit or other form of organized labor except as described
on Schedule 5.16 attached hereto.
Section 5.17. Eligible Accounts. As to each and every ACCOUNT which the
BORROWER contends is an ELIGIBLE ACCOUNT, the BORROWER represents and warrants
on an ongoing basis to the LENDER that at the time of each reporting by the
BORROWER to the LENDER, the ACCOUNT shall meet all of the criteria for
eligibility set forth in this AGREEMENT. At the time each ELIGIBLE ACCOUNT is
listed on or included in (whether singularly or in the aggregate with other
ELIGIBLE ACCOUNTS) a schedule or report delivered to the LENDER, all of such
ELIGIBLE ACCOUNTS will have been generated in compliance with the BORROWER'S
normal credit policies as historically in effect (or as modified from time to
time on prior written notice of the LENDER), or on such other reasonable terms
disclosed in writing to the LENDER in advance of the creation of such ACCOUNTS,
and such terms shall be expressly set forth on the face of all invoices.
Section 5.18. Approvals. The BORROWER possesses all franchises,
approvals, licenses, contracts, merchandising agreements, merchandising
contracts and governmental approvals, registrations and exemptions necessary for
it lawfully to conduct its business and operation as presently conducted and as
anticipated to be conducted after CLOSING.
<PAGE>
Section 5.19. Financial Statements. The financial statements of the
BORROWER which have been delivered to the LENDER prior to the date of this
AGREEMENT, fairly present the financial condition of the BORROWER as of the
respective dates thereof and the results and operations of the BORROWER for the
fiscal periods ended on such respective dates, all in accordance with G.A.A.P.
The BORROWER has no direct or contingent liability or obligation known to the
BORROWER and not disclosed on the financial statements delivered to the LENDER
or disclosed on Schedule 5.19 hereto. There has been no material adverse change
in the financial condition of the BORROWER since May 31, 1997 and the BORROWER
does not know of or expect any adverse change in the assets, liabilities,
properties, business, or condition, financial or otherwise, of the BORROWER.
Section 5.20. Solvency. The BORROWER will be SOLVENT both before and
after CLOSING, after giving full effect to the LOANS and all of the BORROWER'S
LIABILITIES. The BORROWER presently knows of no existing reason which is likely
to cause it to be unable to maintain such SOLVENT financial condition, giving
full effect to the OBLIGATIONS, as long as any of the OBLIGATIONS remain
unsatisfied.
Section 5.21. Fair Labor Standards Act. The BORROWER has complied in all
material respects with the Fair Labor Standards Act of 1938, as amended.
Section 5.22. Employee Benefit Plans.
a. BORROWER and its ERISA AFFILIATES are in compliance in all
material respects with all applicable provisions of ERISA and the regulations
thereunder and of the CODE with respect to all EMPLOYEE BENEFIT PLANS.
b. No TERMINATION EVENT has occurred or is reasonably expected
to occur with respect to any GUARANTEED PENSION PLAN.
c. The actuarial present value (as defined in Section 4001 of
ERISA) of all benefit commitments (as defined in Section 4001 of ERISA) under
each GUARANTEED PENSION PLAN does not exceed the assets of that plan.
d. Neither the BORROWER or any of its ERISA AFFILIATES has
incurred or reasonably expects to incur any withdrawal liability under ERISA in
connection with any MULTIEMPLOYER PLANS.
Section 5.23. Environmental Conditions.
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a. The BORROWER has obtained all necessary permits, licenses,
variances, clearances and all other necessary approvals (collectively, the "EPA
PERMITS") for the operation and conduct of its business from all applicable
federal, state, and local governmental authorities, utility companies or
development-related entities including, but not limited to, any and all
appropriate Federal or State environmental protection agencies and other county
or city departments, public water works and public utilities in regard to the
use of the FACILITIES, the operation and conduct of its business, and the
handling, transporting, treating, storage, disposal, discharge, or RELEASE of
REGULATED SUBSTANCES, if any, into, on or from the environment (including, but
not limited to, any air, water, or soil).
<PAGE>
b. Each issued EPA PERMIT is in full force and effect, has not
expired or been suspended, denied or revoked, and is not under challenge by any
PERSON. The BORROWER is in compliance in all material aspects with each issued
EPA PERMIT.
c. Neither the BORROWER nor any of the FACILITIES are subject
to any private or governmental litigation, or to BORROWER'S knowledge,
threatened litigation, lien or judicial or administrative notice, order or
action involving the BORROWER or any of the FACILITIES relating to REGULATED
SUBSTANCES or environmental problems, impairments or liabilities.
d. There has been no RELEASE into, on or from any of the
FACILITIES and no REGULATED SUBSTANCES are located on or have been treated,
stored, processed, disposed of, handled or transported to or from, any of the
FACILITIES in violation of any ENVIRONMENTAL LAWS. To BORROWER'S knowledge, no
REGULATED SUBSTANCES have been treated, stored, disposed, RELEASED, located,
discharged, possessed, managed, processed, or otherwise handled in the operation
or conduct of the BORROWER'S business in violation of any ENVIRONMENTAL LAWS.
The BORROWER has complied in all material respects with all ENVIRONMENTAL LAWS
affecting the FACILITIES or the BORROWER'S business.
e. The BORROWER does not transport, in any manner, any
REGULATED SUBSTANCES except in the ordinary course of business in compliance
with all ENVIRONMENTAL LAWS.
f. The BORROWER has not received any notices that any
REGULATED SUBSTANCES transported from any FACILITY was disposed of in violation
of any ENVIRONMENTAL LAWS.
g. The BORROWER has not received written notice of any
circumstances which would result in any obligation under any ENVIRONMENTAL LAW
to investigate or remediate any REGULATED SUBSTANCES in, on or under any of the
FACILITIES.
ARTICLE 6
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AFFIRMATIVE COVENANTS
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Each BORROWER covenants and agrees during the term of this AGREEMENT and
while any OBLIGATIONS are outstanding and unpaid to do and perform each of the
acts and promises set forth in this Article 6:
Section 6.1. Payment. All OBLIGATIONS shall be paid in full when and as
due.
Section 6.2. Casualty Insurance. The BORROWER shall maintain for all of
its respective assets and properties, whether real, personal, or mixed and
including but not limited to the COLLATERAL, fire and extended coverage casualty
insurance in amounts satisfactory to the LENDER and sufficient to prevent any
co-insurance liability (which amount shall be the full insurable value of the
assets and properties insured unless the LENDER in writing agrees to a lesser
amount), naming the LENDER as loss payee with respect to the COLLATERAL, with an
insurance company and upon policy forms containing standard mortgagee clauses
which are acceptable to and approved by the LENDER.
<PAGE>
The LENDER acknowledges that the current amount of the BORROWER'S casualty
insurance is acceptable. The BORROWER shall submit to the LENDER copies of
certificates evidencing the casualty insurance policies and paid receipts
evidencing payment of the premiums due on the same. The casualty insurance
policies shall be endorsed so as to make them noncancellable unless ten (10)
days prior notice of cancellation is provided to the LENDER (the BORROWER shall
request that the insurer provide the LENDER with not less than thirty days prior
written notice of cancellation). The proceeds of any insured loss shall be
applied by the LENDER to the OBLIGATIONS, in such order of application as
determined by the LENDER, unless the LENDER in its reasonable discretion permits
the use thereof to repair or replace damaged or destroyed COLLATERAL.
Section 6.3. Liability And Worker's Compensation Insurance. The BORROWER
shall maintain public liability and property damage insurance in such amounts,
with insurance companies, and upon policy forms acceptable to and approved by
the LENDER. In addition, the BORROWER shall maintain worker's compensation
insurance in such amounts, with insurance companies, and upon policy forms
acceptable to and approved by the LENDER. The LENDER acknowledges that the
current amounts of the BORROWER'S liability and worker's compensation insurance
are in an amount acceptable to the LENDER. The BORROWER, on request, shall
submit to the LENDER copies of the liability and worker's compensation insurance
policies and receipts evidencing the payment of premiums due thereon or,
alternatively, certificates from the insurance companies certifying to the
existence of the policies, summarizing the terms of the policies, and indicating
the payment of premiums due thereon.
Section 6.4. Books And Records. The BORROWER at all times hereafter shall
maintain a standard and modern system of accounting in accordance with G.A.A.P.
with ledger and account cards and/or computer tapes, discs, printouts, and
records pertaining to the COLLATERAL which contain such information as may from
time to time be requested by the LENDER. The BORROWER shall notify the LENDER in
writing if the BORROWER modifies or changes its method of accounting or enters
into, modifies, or terminates any agreement presently existing, or at any time
hereafter entered into with any third party accounting firm for the preparation
and/or storage of the BORROWER'S accounting records; provided, that such
accounting firm agrees to provide to the LENDER information regarding the
COLLATERAL and the BORROWER'S financial condition.
Section 6.5. Collection Of Accounts; Sale Of Inventory. The BORROWER
shall collect its RECEIVABLES and sell its INVENTORY only in the ordinary course
of business, unless written permission to the contrary is obtained from the
LENDER.
Section 6.6. Notice Of Litigation And Proceedings. Except as previously
disclosed to the LENDER on Schedule 5.2 attached hereto, the BORROWER shall give
immediate notice to the LENDER of any action, suit, citation, violation,
direction, notice or proceeding before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the BORROWER or any SUBSIDIARY, or the assets or properties thereof,
which, if determined adversely to the BORROWER or such SUBSIDIARY: (a) could
require the BORROWER or such SUBSIDIARY to pay over more than Fifty Thousand
Dollars ($50,000.00) or deliver assets the value of which exceeds that sum
<PAGE>
(unless such claim is fully covered by insurance without dispute or reservation
of rights by the insurer); or (b) could reasonably be expected to have a
material adverse effect upon the financial condition or business operations of
the BORROWER.
Section 6.7. Payment Of Liabilities To Third Persons. The BORROWER shall
pay when and as due, or within applicable grace periods, all LIABILITIES due to
third persons, except when the amount thereof is being contested in good faith
by appropriate proceedings and with adequate reserves therefor being set aside
by the BORROWER.
Section 6.8. Notice Of Change Of Business Location. The BORROWER shall
notify the LENDER thirty (30) days in advance of: (a) any change in the location
of its principal place of business; or (b) any change in or addition to the
locations at which the COLLATERAL is kept unless the new location is in the same
local jurisdiction as the prior location or another existing location of the
BORROWER. At CLOSING the BORROWER shall deliver to the LENDER landlord's
agreements, in form and substance acceptable to the LENDER, executed by: (a)
each landlord of premises located in Baltimore County, Maryland leased by the
BORROWER; and (b) each landlord of the three premises located outside of
Baltimore County, Maryland in which the aggregate book value of the BORROWER'S
GOODS located on each of such premises is greater than the aggregate book value
of the BORROWER'S GOODS located on the other premises (i.e, other than those
premises for which landlord agreements are required) located outside of
Baltimore County, Maryland leased by the BORROWER. In addition, within one
hundred twenty (120) days after the end of each FISCAL YEAR the BORROWER shall
provide the LENDER with such additional Landlord's Agreements (if the LENDER
does not already have one from such landlord), in form and substance acceptable
to the LENDER, that may be necessary in order for the LENDER to have landlord's
agreements for those premises which, as of the end of such FISCAL YEAR,
satisfies one of the criteria set forth in the immediately preceding sentence.
Section 6.9. Payment Of Taxes. The BORROWER shall pay or cause to be paid
when and as due all taxes, assessments and charges or levies imposed upon it or
on any of its property or which it is required to withhold and pay over to the
taxing authority or which it must pay on its income, except where contested in
good faith, by appropriate proceedings and at its own cost and expense;
provided, however, that the BORROWER shall not be deemed to be contesting in
good faith by appropriate proceedings unless: (a) such proceedings operate to
prevent the taxing authority from attempting to collect the taxes, assessments
or charges; (b) the COLLATERAL is not subject to sale, forfeiture or loss during
such proceedings; (c) the BORROWER'S contest does not subject the LENDER to any
claim by the taxing authority or any other person; (d) the BORROWER establishes
appropriate reserves, satisfactory to the LENDER in its sole discretion, for the
payment of all taxes, assessments, charges, levies, legal fees, court costs and
other expenses for which the BORROWER would be liable if it is unsuccessful in
its contest; (e) the BORROWER prosecutes the contest continuously to its final
conclusion; and (f) at the conclusion of the proceedings, the BORROWER promptly
pays all amounts determined to be payable, including but not limited to all
taxes, assessments, charges, levies, legal fees and court costs.
Section 6.10. Inspections Of Records. The BORROWER shall permit
<PAGE>
representatives of the LENDER access to the BORROWER'S places of business,
without hindrance or delay, at intervals to be determined by the LENDER, before
or after an EVENT OF DEFAULT, to inspect the COLLATERAL and to audit, inspect,
verify, check and make extracts or photocopies from, the RECORDS of the BORROWER
and other data relating to the COLLATERAL or any of the BORROWER'S LIABILITIES,
and the BORROWER shall reimburse the LENDER for the entire cost of all of such
audits, inspections, verifications, copying, and extractions, provided that the
maximum aggregate amount of such costs for which the BORROWER shall be obligated
to reimburse the LENDER for in any calendar year is Seven Thousand Five Hundred
Dollars ($7,500.00) unless there is an EVENT OF DEFAULT in which case there is
no such limitation.
Section 6.11. Collection Of Receivables By Borrower. Unless the
BORROWER'S authority to collect the RECEIVABLES has been terminated by the
LENDER, as provided in this AGREEMENT, the BORROWER, at the BORROWER'S sole
expense, shall collect, when and as due, all sums due on the RECEIVABLES. The
BORROWER shall take such action in collecting the RECEIVABLES as the LENDER may
request, or in the absence of such request, as the BORROWER may deem advisable.
Section 6.12. Notice Of Events Affecting Collateral; Compromise Of
Receivables. The BORROWER, immediately upon learning thereof, shall report to
the LENDER: (a) all claims or disputes asserted by any ACCOUNT DEBTOR or other
obligor involving in excess of Fifty Thousand Dollars ($50,000.00); and (b) all
matters materially affecting the value, enforceability or collectibility of any
of the COLLATERAL. The BORROWER shall immediately notify the LENDER in the event
the aggregate amount of adjustments and compromises of those RECEIVABLES which
were reported to the LENDER as an ELIGIBLE ACCOUNT on the most recent collateral
and loan report, exceeds Fifty Thousand Dollars ($50,000.00) since the date of
the most recent collateral and loan report delivered to the LENDER.
Section 6.13. Documentation Of Collateral. The BORROWER, upon request of
the LENDER, shall provide the LENDER from time to time with: (a) written
statements or schedules identifying and describing the COLLATERAL, and all
additions, substitutions, and replacements thereof, in such detail as the LENDER
may require; (b) copies of ACCOUNT DEBTORS' invoices or billing statements; (c)
evidence of shipment or delivery of goods or merchandise to or performance of
services for ACCOUNT DEBTORS; and (d) such other schedules and information as
the LENDER reasonably may require. The items to be provided under this Section
shall be in form satisfactory to the LENDER and are to be executed and delivered
to the LENDER from time to time solely for the LENDER'S convenience in
maintaining RECORDS of the COLLATERAL. The BORROWER'S failure to give any of
such items to the LENDER shall not affect, terminate, modify or otherwise limit
the LENDER'S security interest in the COLLATERAL. The LENDER shall have the
right, at any time and from time to time, to verify the eligibility of the
BORROWER'S RECEIVABLES, including obtaining verification of the RECEIVABLES
directly from ACCOUNT DEBTORS.
Section 6.14. Reporting Requirements. The BORROWER shall submit the
following items to the LENDER:
a. Receivables And Accounts Payable Reports. On or before the
30th day after the end of each calendar month: (i) a RECEIVABLES report and
<PAGE>
aging (including both billed ACCOUNTS and unbilled ACCOUNTS); (ii) an accounts
payable report and aging; and (iii) a billed and unbilled ACCOUNTS
reconciliation, all in form reasonably acceptable to the LENDER and containing
such information as the LENDER may specify from time to time. Such reports shall
be accompanied by such reports, copies of sales journals, remittance reports,
and other documentation as the LENDER may request from time to time.
b. Borrowing Base Report. Once each calendar week, or more
frequently if requested by the LENDER, a collateral and loan report in such form
and context as may be specified by the LENDER from time to time.
c. Contract Status And Backlog Reports. Within thirty (30)
calendar days after the end of each calendar month (i) contract status (sorted
and listing the top twenty-five (25) contracts and totaled by contract type) and
backlog reports in a form acceptable to the LENDER and containing such
information as the LENDER may specify from time to time; and (ii) a list labeled
as Exhibit A which contains the Contract number, Contract date, federal
contracting agency, name and address of contracting officer and name and address
of disbursing officer (if different than the contracting officer) for each of
the ten (10) largest (based on backlog contract value) contracts with the United
States of America, or any department, agency or instrumentality thereof.
d. SEC And Other Public Announcements. Concurrently with the
issuance thereof, all public announcements made by the BORROWER.
e. Quarterly 10 Q Statements. As soon as available and in any
event within forty-five (45) calendar days after the end of each of the first
three quarters of each FISCAL YEAR of the BORROWER, the BORROWER shall submit to
the LENDER copies of the BORROWER'S 10 Q statement for each such fiscal quarter.
f. Monthly Financial Statements. As soon as available and in
any event within thirty (30) calendar days after the end of each calendar month,
the BORROWER shall submit to the LENDER a consolidated and consolidating balance
sheet of the BORROWER and its SUBSIDIARIES as of the end of such month and a
consolidated and consolidating statement of income and retained earnings of the
BORROWER and its SUBSIDIARIES for such month, and a consolidated and
consolidating statement of cash flow of the BORROWER and its SUBSIDIARIES for
such month, all in reasonable detail and stating in comparative form the
respective consolidated and consolidating figures for the corresponding date and
period in the previous FISCAL YEAR and all prepared in accordance with G.A.A.P.
and certified by the Chief Financial Officer of the BORROWER (subject to
year-end adjustment).
g. Annual Financial Statements. As soon as available and in
any event within one hundred twenty (120) calendar days after the end of each
FISCAL YEAR of the BORROWER, the BORROWER shall submit to the LENDER a
consolidated and consolidating balance sheet of the BORROWER and its
SUBSIDIARIES as of the end of such FISCAL YEAR and a consolidated and
consolidating statement of income and retained earnings of the BORROWER and its
SUBSIDIARIES for such FISCAL YEAR, and a consolidated and consolidating
statement of cash flow of the BORROWER and its SUBSIDIARIES for such FISCAL
YEAR, all in reasonable detail and stating in comparative form the respective
<PAGE>
consolidated and consolidating figures for the corresponding date and period in
the prior FISCAL YEAR and all prepared in accordance with G.A.A.P. and
accompanied by an audited opinion thereon acceptable to the LENDER by
independent accountants selected by the BORROWER and acceptable to the LENDER.
h. Tax Returns. As soon as available and in any event within
one hundred twenty (120) calendar days after the end of each FISCAL YEAR of the
BORROWER (unless the BORROWER properly files an extension with the Internal
Revenue Service, in which case the returns shall be delivered to the LENDER
prior to the expiration of the extension), the BORROWER shall submit to the
LENDER copies of the BORROWER'S consolidated federal tax returns for such FISCAL
YEAR, together with all supporting schedules. Together with such federal tax
returns the BORROWER shall deliver to the LENDER such state tax returns as are
requested by the LENDER.
i. Annual 10 K Statements. As soon as available and in any
event within one hundred twenty (120) calendar days after the end of each FISCAL
YEAR of the BORROWER, the BORROWER shall submit to the LENDER the BORROWER'S 10
K statement for each such FISCAL YEAR.
j. Management Letters. Promptly upon receipt thereof, the
BORROWER shall submit to the LENDER copies of any reports submitted to the
BORROWER or any SUBSIDIARY by independent certified public accountants in
connection with the examination of the financial statements of the BORROWER or
any SUBSIDIARY made by such accountants.
k. Certificates Of No Default. Within thirty (30) calendar
days after the end of each of the quarters of each FISCAL YEAR of the BORROWER,
the BORROWER shall submit to the LENDER a certificate of the chief financial
officer of the BORROWER certifying that: (i) there exists no EVENT OF DEFAULT,
or if an EVENT OF DEFAULT exists, specifying the nature thereof, the period of
existence thereof and what action the BORROWER proposes to take with respect
thereto; (ii) no material adverse change in the condition, financial or
otherwise, business, property or results of operations of the BORROWER has
occurred since the previous certificate was sent to the LENDER by the BORROWER
or, if any such change has occurred, specifying the nature thereof and what
action the BORROWER has taken or proposes to take with respect thereto; (iii)
all insurance premiums then due have been paid; (iv) all taxes then due have
been paid or, for those taxes which have not been paid, a statement of the taxes
not paid and a description of the BORROWER'S rationale therefor; (v) no
litigation, investigation or proceedings, or injunction, writ or restraining
order is pending or threatened of which the BORROWER is required to notify the
LENDER thereof pursuant to Section 6.6 hereof or, if any such litigation,
investigation, proceeding, injunction, writ or order is pending, describing the
nature thereof; and (vi) stating whether or not the BORROWER is in compliance
with the covenants in this AGREEMENT, including a calculation of the financial
covenants in the schedule attached to such officer's certificate in form
satisfactory to the LENDER.
l. Accountant's Report. Simultaneously with the delivery of
the annual financial statements referred to above, the BORROWER shall submit to
the LENDER a certificate of the independent public accountants who prepared such
statements, addressed to the BORROWER and the LENDER, which: (i) either states
that, in making the examination necessary for the preparation of such
<PAGE>
statements, the accountants have obtained no knowledge of any condition or event
which constitutes an EVENT OF DEFAULT, or specifies each such condition or event
which constitutes an EVENT OF DEFAULT of which they have obtained knowledge, and
the nature and status thereof; and (ii) states specifically the scope of the
work for which the accountants were retained.
m. Reports To Other Creditors. Promptly after the furnishing
thereof, the BORROWER shall submit to the LENDER copies of any statement or
report furnished to any other party pursuant to the terms of any indenture,
loan, or credit or similar agreement and not otherwise required to be furnished
to the LENDER pursuant to any other provisions of this AGREEMENT.
n. Management Changes. The BORROWER shall notify the LENDER
immediately of any changes in the personnel holding executive management
positions with the BORROWER at the time of CLOSING, including but not limited to
the BORROWER'S President, Executive Vice President and Chief Financial Officer,
Vice President of Finance and Administration, and Vice President, Secretary and
General Counsel.
o. General Information. In addition to the items set forth in
paragraphs (a) through (n) above, the BORROWER shall submit to the LENDER such
other information respecting the condition or operations, financial or
otherwise, of the BORROWER or any SUBSIDIARY of the BORROWER as the LENDER may
request from time to time.
Section 6.15. Employee Benefit Plans And Guaranteed Pension Plans. The
BORROWER will, and will cause each of its ERISA AFFILIATES to: (a) comply with
all requirements imposed by ERISA and the CODE, applicable from time to time to
any of its GUARANTEED PENSION PLANS or EMPLOYEE BENEFIT PLANS; (b) make full
payment when due of all amounts which, under the provisions of EMPLOYEE BENEFIT
PLANS or under applicable LAW, are required to be paid as contributions thereto;
(c) not permit to exist any material accumulated funding deficiency, whether or
not waived; (d) file on a timely basis all reports, notices and other filings
required by any governmental agency with respect to any of its EMPLOYEE BENEFITS
PLANS; (e) make any payments to MULTIEMPLOYER PLANS required to be made under
any agreement relating to such MULTIEMPLOYER PLANS, or under any LAW pertaining
thereto; (f) not amend or otherwise alter any GUARANTEED PENSION PLAN if the
effect would be to cause the actuarial present value of all benefit commitments
under any GUARANTEED PENSION PLAN to be less than the current value of the
assets of such GUARANTEED PENSION PLAN allocable to such benefit commitments;
(g) furnish to all participants, beneficiaries and employees under any of the
EMPLOYEE BENEFIT PLANS, within the periods prescribed by LAW, all reports,
notices and other information to which they are entitled under applicable LAW;
and (h) take no action which would cause any of the EMPLOYEE BENEFIT PLANS to
fail to meet any qualification requirement imposed by the CODE. As used in this
Section, the term "accumulated funding deficiency" has the meaning specified in
Section 302 of ERISA and Section 412 of the CODE, and the terms "actuarial
present value", "benefit commitments" and "current value" have the meaning
specified in Section 4001 of ERISA.
Section 6.16. Maintenance Of Equipment. The BORROWER shall maintain and
preserve all of its EQUIPMENT in a state of good and efficient working order.
<PAGE>
Section 6.17. Consignments. The BORROWER shall advise the LENDER of all
PERSONS to whom it has consigned or assigned INVENTORY for sale or distribution,
and the location of the INVENTORY subject to any such consignment or assignment
arrangement. The BORROWER shall: (a) duly and properly file financing statements
in all applicable places of public record with respect to each of such
consignments or assignments, which filings shall comply with Section 9-114 of
the 1972 version of the Uniform Commercial Code and with all other requirements
necessary for the BORROWER to protect its interests therein under applicable
LAWS; (b) supply the LENDER with prior evidence of such filing and with a
financing statement, judgment and tax lien search in the name of the consignee
or assignee in all applicable places of public record; and (c) provide written
notification to any holder of any security interests in the inventory of the
consignee or assignee who has filed a financing statement before the BORROWER
files its financing statement, which notice shall state that the BORROWER
expects to deliver goods or assignments, shall describe the goods by item or
type and which notification shall be received by any such holder within five (5)
years before the consignee receives possession of the goods and at five (5) year
intervals thereafter.
Section 6.18. Federal Assignment Of Claims Act. At CLOSING, the BORROWER
shall execute and deliver to the LENDER (or an escrow agent acceptable to the
LENDER and the BORROWER) ten (10) Assignments to the LENDER of all monies due or
to become due under contracts with the United States of America, or any
department, agency or instrumentality thereof, which Assignments shall: (a) be
in accordance with the requirements of the Federal Assignment of Claims Act, as
amended; (b) state that it assigns to the LENDER all monies due under the
contracts described on Exhibit A attached thereto; and (c) not have an Exhibit A
attached thereto as of CLOSING. The BORROWER hereby irrevocably authorizes the
LENDER, following not less than five (5) days prior written notice from the
LENDER to the BORROWER of an occurrence of an EVENT OF DEFAULT, to: (a) attach
to each of the Assignments a copy of the most recent Exhibit A which the
BORROWER delivered to the LENDER pursuant to Section 6.14.c. hereof; (b) date
such Assignments the date the LENDER provides the BORROWER with written notice
of the occurrence of an EVENT OF DEFAULT; and (c) deliver such Assignments, or
certified true copies thereof, together with appropriate notices to the
contracting officers and disbursing officers (if different than the contracting
officer) referenced in such Exhibit A as well as all other PERSONS deemed
necessary or appropriate by the LENDER.
Section 6.19. Compliance With Laws. The BORROWER shall comply in all
material respects with all applicable LAWS, including, but not limited to, all
LAWS with respect to: (a) all restrictions, specifications, or other
requirements pertaining to products that it sells or to the services it
performs; (b) the conduct of its business; (c) the use, maintenance, and
operation of the real and personal properties owned or leased by it in the
conduct of its business; and (d) the obtaining of all necessary licenses,
franchises, PERMITS and governmental approvals, registrations and exemptions
necessary to engage in its business.
Section 6.20. Environmental Laws. In addition to and without limiting
the generality of the preceding Section, the BORROWER shall: (a) comply in all
material respects with, and ensure such compliance by all tenants and
subtenants, if any, with, all applicable ENVIRONMENTAL LAWS and obtain and
comply in all material respects with and maintain, and ensure that all tenants
<PAGE>
and subtenants obtain and comply with and maintain, any and all licenses,
approvals, notifications, registrations or PERMITS required by applicable
ENVIRONMENTAL LAWS; (b) conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions required under
ENVIRONMENTAL LAWS, and promptly comply with all lawful orders and directives of
any governmental authority regarding ENVIRONMENTAL LAWS; and (c) defend,
indemnify and hold harmless the LENDER, and its employees, agents, officers and
directors, from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any ENVIRONMENTAL LAWS
applicable to the operations of the BORROWER, or any orders, requirements or
demands of governmental authorities related thereto, including, without
limitation, reasonable attorney's and consultant's fees, investigation and
laboratory fees, response costs, court costs and litigation expenses, except to
the extent that any of the foregoing directly result from the gross negligence
or willful misconduct of the party seeking indemnification therefor. The
BORROWER shall notify the LENDER of any RELEASE of REGULATED SUBSTANCE on, to or
from any FACILITY in violation of any ENVIRONMENTAL LAWS or of any notice
received by the BORROWER that the BORROWER or any FACILITY is not in compliance
with any ENVIRONMENTAL LAWS within five (5) BUSINESS DAYS after any such RELEASE
or receipt of any such notice.
Section 6.21. Fair Labor Standards Act. The BORROWER shall comply in all
material respects with the Fair Labor Standards Act of 1938, as amended.
Section 6.22. Tangible Net Worth. The BORROWER and its SUBSIDIARIES shall
have a TANGIBLE NET WORTH of not less than: (a) Twelve Million Two Hundred
Thousand Dollars ($12,200,000.00) as of the end of each fiscal quarter ending
between August 31, 1997 and August 30, 1998, inclusive; and (b) Thirteen Million
Five Hundred Thousand Dollars ($13,500,000.00) as of August 31, 1998 and each
fiscal quarter ending thereafter.
Section 6.23. Ratio Of Liabilities To Tangible Net Worth. The BORROWER
and its SUBSIDIARIES shall maintain as of the end of each fiscal quarter during
the terms of the LOANS a ratio of LIABILITIES to TANGIBLE NET WORTH of not
greater than 1.25 to 1.0.
Section 6.24. Debt Service Coverage. The BORROWER and its SUBSIDIARIES
shall maintain a ratio of CASH FLOW to DEBT SERVICE of not less than 2.0 to 1.0
for each of the following periods: (a) the period between September 1, 1997 and
November 30, 1997, inclusive; (b) the period between September 1, 1997 and
February 28, 1998, inclusive; (c) the period between September 1, 1997 and May
31, 1998, inclusive; (d) the period between September 1, 1997 and August 31,
1998, inclusive; and (e) each twelve (12) month period ending on the last day of
a fiscal quarter of the BORROWER after August 31, 1998.
Section 6.25. Capital Expenditures. The aggregate amount of CAPITAL
EXPENDITURES made by the BORROWER and its SUBSIDIARIES, which are not financed
with proceeds of the EQUIPMENT LINE, during the FISCAL YEARS ending on August
31, 1997 and August 31, 1998 shall not exceed Seven Hundred Fifty Thousand
Dollars ($750,000.00) in either FISCAL YEAR.
<PAGE>
ARTICLE 7
---------
NEGATIVE COVENANTS
------------------
The BORROWER covenants while any OBLIGATIONS are outstanding and unpaid
not to do or to permit to be done or to occur any of the acts or happenings set
forth in this Article 7 without the prior written authorization of the LENDER
which authorization shall not be unreasonably denied and which shall be either
provided or denied within five (5) BUSINESS DAYS after written request.
Section 7.1. No Change Of Name, Merger, Etc. The BORROWER shall not
change its name or enter into any merger, consolidation, reorganization or
recapitalization.
Section 7.2. No Sale Or Transfer Of Assets. The BORROWER shall not sell,
transfer, lease or otherwise dispose of all or any part of the COLLATERAL, or
all or any part of any of its other assets, except that: (a) INVENTORY may be
sold to ACCOUNT DEBTORS in the ordinary course of business; (b) items of
EQUIPMENT may be sold or exchanged if that EQUIPMENT is replaced in the ordinary
course of the BORROWER'S business to the satisfaction of the LENDER by EQUIPMENT
of a similar value and which is subject to the first lien security interest of
the LENDER provided for herein; and (c) items of EQUIPMENT which are not longer
used in the BORROWER's business (excluding EQUIPMENT replaced in accordance with
Subsection 7.2(b) above) may be sold or disposed of provided that the aggregate
book value of such EQUIPMENT sold or disposed of at any one time shall not
exceed Fifty Thousand Dollars ($50,000.00), and the aggregate book value of such
EQUIPMENT sold or disposed of in any FISCAL YEAR shall not exceed One Hundred
Thousand Dollars ($100,000.00).
Section 7.3. No Encumbrance Of Assets. The BORROWER shall not mortgage,
pledge, grant or permit to exist a security interest in or lien upon any of its
assets of any kind, now owned or hereafter acquired, except for PERMITTED LIENS
or as otherwise permitted hereunder.
Section 7.4. No Indebtedness. The BORROWER shall not incur, create,
assume, or permit to exist any INDEBTEDNESS except: (a) the OBLIGATIONS; and
(b) INDEBTEDNESS secured by PERMITTED LIENS.
Section 7.5. Restricted Payments. The BORROWER shall not make any
RESTRICTED PAYMENT.
Section 7.6. Transactions With Affiliates. The BORROWER shall not make
any purchase from, or contract for the performance of any services by, any
AFFILIATE, except on terms which fairly represent generally available terms to
be obtained in transactions of a similar nature with independent third PERSONS.
Section 7.7. No Sale-Leaseback Transactions. The BORROWER shall not
enter into any sale-leaseback transaction.
Section 7.8. No Acquisition Of Third Person. The BORROWER shall not
acquire any equity interests in, or all or substantially all of the assets of,
any PERSON.
<PAGE>
Section 7.9. No Assignment. The BORROWER shall not assign or attempt to
assign this AGREEMENT.
Section 7.10. No Alteration Of Structure Or Operations. The BORROWER
shall not amend or change materially its capital structure or its line or scope
of business.
Section 7.11. Unpermitted Uses Of Loans Proceeds. The BORROWER shall not
use any part of the proceeds of the LOANS hereunder for any purpose which
constitutes a violation of, or is inconsistent with, regulations of the Board of
Governors of the Federal Reserve System, including without limitation, the
purchase or carrying of (or refinancing of indebtedness originally incurred to
purchase or carry) margin securities.
Section 7.12. Changes In Fiscal Year. The BORROWER shall not change its
FISCAL YEAR without the LENDER'S consent, which consent shall not be
unreasonably withheld.
ARTICLE 8
---------
EVENTS OF DEFAULT
-----------------
The occurrence of any of the following events shall constitute EVENTS OF
DEFAULT and shall entitle the LENDER to exercise the LENDER'S rights and
remedies under Article 9 of this AGREEMENT.
Section 8.1. Failure To Pay. The failure by the BORROWER to pay any of
the OBLIGATIONS and such failure is not cured within two (2) BUSINESS DAYS after
written notice from the LENDER, provided, however, that the failure to pay any
of the OBLIGATIONS when due shall constitute an immediate EVENT OF DEFAULT if
within the immediate twelve (12) months the BORROWER has failed on at least two
(2) occasions to pay any of the OBLIGATIONS when due.
Section 8.2. Violation Of Covenants.
-----------------------
a. The failure by the BORROWER to perform or a violation of
any of the covenants or agreements provided in this AGREEMENT (other than those
referred to in Subsection 8.2.b. below or any other Section of this Article 8)
and such failure is not cured within five (5) BUSINESS DAYS after written notice
from the LENDER; or
b. The failure by the BORROWER to perform any of the covenants
provided in Section 6.22, 6.23, 6.24 or 6.25 of this AGREEMENT.
Section 8.3. Representation Or Warranty. The failure of any
representation or warranty made by the BORROWER or by any GUARANTOR to be true
in any material respect, as of the date made.
Section 8.4. Default Under Loan Documents. A breach of or default by the
BORROWER under the terms, covenants, and conditions set forth in any other LOAN
DOCUMENT or in any LEASE, and such failure (unless such failure is a failure to
pay any sums when due for which there is no cure period or notice required) is
not cured within five (5) BUSINESS DAYS after written notice from the LENDER.
<PAGE>
Section 8.5. Cross-Default. A default under the terms, covenants, or
conditions of any agreement, loan, guaranty, lease, or other transaction of the
BORROWER or any GUARANTOR with the LENDER or with any other lender relating to a
LIABILITY in excess of One Hundred Thousand Dollars ($100,000.00), if as a
result of such default the PERSON to whom such LIABILITY is owed has the right
to require such LIABILITY to be paid prior to its stated maturity, and such
default is not cured within five (5) BUSINESS DAYS after written notice from the
LENDER. The failure of the BORROWER to make immediately any payment to the
LENDER under the REVOLVING LOAN after the LENDER has made demand therefor
automatically and without further action by the LENDER shall constitute a
default under all other OBLIGATIONS.
Section 8.6. Judgments. The BORROWER shall suffer final judgments for
the payment of money aggregating in excess of Fifty Thousand Dollars
($50,000.00) and shall not discharge the same within a period of thirty (30)
days unless, pending further proceedings, execution has not been commenced or
if commenced has been effectively stayed (e.g. through the posting of a bond).
Section 8.7. Levy By Judgment Creditor. A judgment creditor of the
BORROWER shall obtain possession of any of the COLLATERAL by any means,
including but not limited to levy, distraint, replevin or self-help, and the
BORROWER shall not remedy same within thirty (30) days thereof; or a writ of
garnishment is served on the LENDER relating to any of the accounts of the
BORROWER maintained by the LENDER.
Section 8.8. Failure To Pay Liabilities. The BORROWER shall fail to pay
any of its LIABILITIES, in any material amount, due any third PERSON and such
failure shall continue for more than five (5) BUSINESS DAYS after written notice
from the LENDER, unless the BORROWER holds a reasonably good faith defense to
payment and has set aside reasonable reserves for the payment thereof.
Section 8.9. Involuntary Insolvency Proceedings. The institution of
involuntary INSOLVENCY PROCEEDINGS against the BORROWER and the failure of any
such INSOLVENCY PROCEEDINGS to be dismissed before the earliest to occur of: (a)
the date which is sixty (60) days after the institution of such INSOLVENCY
PROCEEDINGS; (b) the entry of any order for relief in the INSOLVENCY PROCEEDING
or any order adjudicating the BORROWER insolvent; or (c) the occurrence of any
event which results in the principal balance outstanding under the REVOLVING
LOAN exceeding the BORROWING BASE.
Section 8.10. Voluntary Insolvency Proceedings. The commencement by the
BORROWER of INSOLVENCY PROCEEDINGS.
Section 8.11. Insolvency Proceedings Pertaining To Guarantors. The
occurrence of any of the events listed in Sections 8.9 and 8.10 above to any of
the GUARANTORS.
Section 8.12. Material Adverse Event. The occurrence of a MATERIAL
ADVERSE EVENT which is not cured within five (5) BUSINESS DAYS after written
notice from the LENDER.
Section 8.13. Default By Guarantor. The dissolution or liquidation of a
GUARANTOR or the failure by a GUARANTOR to satisfy any obligation imposed
<PAGE>
upon such GUARANTOR in the GUARANTY AGREEMENT or in any other agreement executed
by the GUARANTOR with or for the benefit of the LENDER and such failure is not
cured within five (5) BUSINESS DAYS after written notice from the LENDER.
Section 8.14. Impairment Of Guarantor's Collateral. Any event shall occur
which the LENDER in good faith deems to materially and adversely impair any
collateral which secures a GUARANTOR'S obligations under a GUARANTY AGREEMENT or
in any related security agreement and such event is not cured within five (5)
BUSINESS DAYS after written notice from the LENDER.
Section 8.15. ERISA. If any TERMINATION EVENT shall occur and as of the
date thereof or any subsequent date, the sum of the various liabilities of the
BORROWER and its ERISA AFFILIATES (such liabilities to include, without
limitation, any liability to the Pension Benefit Guaranty Corporation (or any
successor thereto) or to any other party under Sections 4062, 4063, or 4064 of
ERISA or any other provision of LAW and to be calculated after giving effect to
the tax consequences thereof) resulting from or otherwise associated with such
event exceeds One Hundred Thousand Dollars ($100,000.00); or the BORROWER or any
of its ERISA AFFILIATES as an employer under any MULTIEMPLOYER PLAN shall have
made a complete or partial withdrawal from such MULTIEMPLOYER PLANS and the plan
sponsors of such MULTIEMPLOYER PLANS shall have notified such withdrawing
employer that such employer has incurred a withdrawal liability requiring a
payment in an amount exceeding Fifty Thousand Dollars ($50,000.00).
Notwithstanding the aforegoing to the contrary, the occurrence of any of the
events set forth in this Section 8.15 shall not constitute an EVENT OF DEFAULT
unless it is not cured within five (5) BUSINESS DAYS after written notice from
the LENDER.
Section 8.16. Indictment Of Borrower Or Guarantor. The indictment of the
BORROWER or any GUARANTOR for a felony under any federal, state or other LAW,
and the LENDER determines in the good faith exercise of the LENDER'S discretion
that a conviction of the BORROWER or GUARANTOR upon such indictment may result
in a MATERIAL ADVERSE EVENT.
Section 8.17. Injunction. If the BORROWER is enjoined, restrained or in
any way prevented by court order from continuing to conduct all or any material
part of its business affairs and such injunction or restraint is not removed
within five (5) BUSINESS DAYS after written notice from the LENDER.
Section 8.18. Loss Of License, Permit, Etc. The loss, suspension,
revocation or failure to renew any license, permit, franchise, merchandising
agreement, or governmental approval, registration or exemption now held or
hereafter acquired by the BORROWER, which loss, suspension, revocation or
failure to renew is determined by the LENDER to be likely to cause a MATERIAL
ADVERSE EVENT and which license, permit, franchise, merchandising agreement, or
governmental approval, registration, or exemption is not obtained within five
(5) BUSINESS DAYS after written notice from the LENDER.
<PAGE>
ARTICLE 9
---------
RIGHTS AND REMEDIES ON THE OCCURRENCE
-------------------------------------
OF AN EVENT OF DEFAULT
----------------------
Section 9.1. Lender's Specific Rights And Remedies. In addition to all
other rights and remedies provided by LAW and the LOAN DOCUMENTS, the LENDER, on
the occurrence of any EVENT OF DEFAULT, may:
a. Accelerate and call immediately due and payable all or any
part of the OBLIGATIONS;
b. Seek specific performance or injunctive relief to enforce
performance of the undertakings, duties, and agreements provided in the LOAN
DOCUMENTS, whether or not a remedy at law exists or is adequate; and
c. Exercise any rights of a secured creditor under the Uniform
Commercial Code, as adopted and amended in Maryland, including the right to take
possession of the COLLATERAL without the use of judicial process or hearing of
any kind and the right to require the BORROWER to assemble the COLLATERAL at
such place as the LENDER may specify.
Section 9.2. Automatic Acceleration. Upon the occurrence of an EVENT OF
DEFAULT as described in Sections 8.9 or 8.10 of this AGREEMENT, the OBLIGATIONS
shall be automatically accelerated and due and payable without any notice,
demand or action of any type on the part of the LENDER.
Section 9.3. Sale Of Collateral. In addition to any other remedy provided
herein, upon the occurrence of an EVENT OF DEFAULT, the LENDER, in a
commercially reasonable fashion, may sell at public or private sale or otherwise
realize upon, in Baltimore, Maryland, or elsewhere, the whole or, from time to
time, any part of all COLLATERAL which is personal property, or any interest
which the BORROWER may have therein. Pending any such action, the LENDER may
collect and liquidate such COLLATERAL. After deducting from the proceeds of sale
or other disposition of such COLLATERAL all expenses, including all expenses for
legal services, the LENDER shall apply such proceeds toward the satisfaction of
the OBLIGATIONS. Any remainder of the proceeds after satisfaction in full of the
OBLIGATIONS shall be distributed as required by applicable LAW. Notice of any
sale or other disposition shall be given to the BORROWER at least ten (10) days
before the time of any intended public sale or of the time after which any
intended private sale or other disposition of the COLLATERAL is to be made,
which the BORROWER hereby agrees shall be commercially reasonable notice of such
sale or other disposition. The BORROWER shall assemble, or shall cause to be
assembled, at the BORROWER'S own expense, the COLLATERAL at such place or places
as the LENDER shall designate. At any such sale or other disposition, the LENDER
may, to the extent permissible under applicable law, purchase the whole or any
part of the COLLATERAL, free from any right of redemption on the part of the
BORROWER, which right is hereby waived and released to the extent lawfully
permitted. Without limiting the generality of any of the rights and remedies
conferred upon the LENDER under this Section, the LENDER may, to the full extent
permitted by applicable law: (a) enter upon the premises of the BORROWER, and
take immediate possession of the COLLATERAL, either personally or by means of a
receiver appointed by a court of competent jurisdiction, using all necessary
<PAGE>
force to do so; (b) at the LENDER'S option, use, operate, manage, and control
the COLLATERAL in any lawful manner; (c) collect and receive all income,
revenue, earnings, issues, and profits therefrom; and (d) maintain, alter or
remove the COLLATERAL as the LENDER may determine in the LENDER'S discretion.
Section 9.4. Remedies Cumulative. The rights and remedies provided in
this AGREEMENT and in the other LOAN DOCUMENTS or otherwise under applicable
LAWS shall be cumulative and the exercise of any particular right or remedy
shall not preclude the exercise of any other rights or remedies in addition to,
or as an alternative of, such right or remedy.
ARTICLE 10
----------
GENERAL CONDITIONS AND TERMS
----------------------------
Section 10.1. Obligations Are Unconditional. The payment and performance
of the OBLIGATIONS shall be the absolute and unconditional duty and obligation
of the BORROWER, and shall be independent of any defense or any rights of
set-off, recoupment or counterclaim which the BORROWER might otherwise have
against the LENDER, and the BORROWER shall pay absolutely during the terms of
the LOANS the payments of the principal and interest to be made on account of
the LOANS and all other payments required hereunder, free of any deductions and
without abatement, diminution or set-off other than those herein expressly
provided. Until such time as the OBLIGATIONS have been fully paid and performed,
the BORROWER: (a) shall not suspend or discontinue any payments provided for
herein and in the NOTES; (b) shall perform and observe all of the BORROWER'S
other covenants and agreements contained in the LOAN DOCUMENTS, including but
not limited to making all payments required to be made to the LENDER; and (c)
shall not terminate or attempt to terminate the LOAN DOCUMENTS for any cause.
Section 10.2. Indemnity. The BORROWER agrees to defend, indemnify and
hold harmless the LENDER and the LENDER'S parents, subsidiaries, affiliates,
employees, agents, officers and directors, from and against any losses,
penalties, fines, liabilities, settlements, damages, costs and expenses,
suffered in connection with any claim, investigation, litigation or other
proceeding (whether or not the LENDER is a party thereof) and the prosecution
and defense thereof, arising out of or in any way connected with this AGREEMENT,
any other LOAN DOCUMENT or the LOANS, including without limitation reasonable
attorneys' and consultant's fees, except to the extent that any of the foregoing
directly result from the gross negligence or willful misconduct of the party
seeking indemnification therefor. Notwithstanding any termination of this
AGREEMENT or payment and performance of the OBLIGATIONS, the indemnities
provided for herein shall continue in full force and effect and shall protect
the LENDER against events arising after such termination, payment or performance
as well as before.
Section 10.3. Lender Expenses. All LENDER EXPENSES shall be paid by the
BORROWER, whether incurred prior to or after CLOSING, so that the subject
transactions shall at all times be cost free to the LENDER.
Section 10.4. Authorization To Obtain Financial Information. The BORROWER
hereby irrevocably authorizes its accounting firm to provide the LENDER from
time to time with such information as may be requested by the
<PAGE>
LENDER, and hereby authorizes the LENDER to contact directly any such accounting
firm in order to obtain such information.
Section 10.5. Incorporation; Construction Of Inconsistent Provisions. The
terms and conditions of the LOAN DOCUMENTS are incorporated by reference and
made a part hereof, as if fully set forth herein. In the event of any
inconsistency between this AGREEMENT and any other LOAN DOCUMENT, such
inconsistency shall be construed, interpreted, and resolved so as to benefit the
LENDER, independent of whether this AGREEMENT or another LOAN DOCUMENT controls,
and the LENDER'S election of which interpretation or construction is for the
LENDER'S benefit shall govern.
Section 10.6. Waivers. The LENDER at any time or from time to time may
waive all or any rights under this AGREEMENT or any other LOAN DOCUMENT, but any
waiver or indulgence by the LENDER at any time or from time to time shall not
constitute a future waiver of performance or exact performance by the BORROWER.
Section 10.7. Continuing Obligation Of Borrower. The terms, conditions,
and covenants set forth herein and in the LOAN DOCUMENTS shall survive CLOSING
and shall constitute a continuing obligation of the BORROWER during the course
of the transactions contemplated herein. The OBLIGATIONS of the BORROWER under
this AGREEMENT shall remain in effect so long as any OBLIGATION is outstanding,
unpaid or unsatisfied between the BORROWER and the LENDER.
Section 10.8. Choice Of Law. The laws of the State of Maryland
(excluding, however, conflict of law principles) shall govern and be applied to
determine all issues relating to this AGREEMENT and the rights and obligations
of the parties hereto, including the validity, construction, interpretation, and
enforceability of this AGREEMENT and its various provisions and the consequences
and legal effect of all transactions and events which resulted in the execution
of this AGREEMENT or which occurred or were to occur as a direct or indirect
result of this AGREEMENT having been executed.
Section 10.9. Submission/ To Jurisdiction; Venue; Actions Against Lender.
For purposes of any action, in law or in equity, which is based directly or
indirectly on this AGREEMENT, any other LOAN DOCUMENT or any matter related to
this AGREEMENT or any other LOAN DOCUMENT, including any action for recognition
or enforcement of any of the LENDER'S rights under the LOAN DOCUMENTS or any
judgment obtained by the LENDER in respect thereof, the BORROWER hereby:
a. Irrevocably submits to the non-exclusive general
jurisdiction of the courts of the State of Maryland and, if a basis for federal
jurisdiction exists at any time, the courts of the United States of America for
the District of Maryland;
b. Agrees that venue shall be proper in the Circuit Court for
Baltimore City, Maryland, the Circuit Court for any county in the state of
Maryland, as selected by the LENDER, and, if a basis for federal jurisdiction
exists, the courts of the United States of America for the District of Maryland;
and
<PAGE>
c. Waives any right to object to the maintenance of any suit
in any of the courts specified in clause (b) above on the basis of improper
venue or convenience of forum.
The BORROWER further agrees that it shall not institute any
suit or other action against the LENDER, in law or in equity, which is based
directly or indirectly on this AGREEMENT, any other LOAN DOCUMENT or any matter
related to this AGREEMENT or any other LOAN DOCUMENT, in any court other than a
court specified in clause (b) above; provided, that in any instance in which
there is then pending a suit instituted by the LENDER against the BORROWER in a
court other than a court specified in clause (b) above, the BORROWER may file in
such suit any counterclaim which it has against the LENDER but only if such
counterclaim is a compulsory counterclaim and would be barred if not filed as a
counterclaim in such suit. The BORROWER agrees that any suit brought by it
against the LENDER not in accordance with this paragraph should be forthwith
dismissed or transferred to a court specified in clause (b) above.
Section 10.10. Notices. Any notice required or permitted by or in
connection with this AGREEMENT shall be in writing and shall be made by
facsimile (confirmed on the date the facsimile is sent by one of the other
methods of giving notice provided for in this Section) or by hand delivery, by
Federal Express, or other similar overnight delivery service, or by certified
mail, unrestricted delivery, return receipt requested, postage prepaid,
addressed to the LENDER or the BORROWER at the appropriate address set forth
below or to such other address as may be hereafter specified by written notice
by the LENDER or the BORROWER. Notice shall be considered given as of the date
of the facsimile or the hand delivery, one (1) calendar day after delivery to
Federal Express or similar overnight delivery service, or three (3) calendar
days after the date of mailing, independent of the date of actual delivery or
whether delivery is ever in fact made, as the case may be, provided the giver of
notice can establish the fact that notice was given as provided herein. If
notice is tendered pursuant to the provisions of this Section and is refused by
the intended recipient thereof, the notice, nevertheless, shall be considered to
have been given and shall be effective as of the date herein provided.
If to the LENDER:
THE FIRST NATIONAL BANK OF MARYLAND
405 Washington Avenue
Towson, Maryland 21204
Attn.: John C. Wasowicz, Vice President
Fax No.: (410) 832-7866
If to the BORROWER:
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.
11019 McCormick Road
Hunt Valley, Maryland 21031
Attn.: Joseph A. Spadaro, Executive Vice President
Fax No.: (410) 771-1625
<PAGE>
With A Courtesy Copy To:
EA ENGINEERING, SCIENCE, and TECHNOLOGY
11019 McCormick Road
Hunt Valley, Maryland 21031
Attn.: Jack P. Adler, Vice President, Secretary
and General Counsel
Fax No.: (410) 771-1625
The failure of the LENDER to send the above courtesy copy shall not impair the
effectiveness of notice given to the BORROWER in the manner provided herein.
Section 10.11. Participations. The LENDER reserves the right to assign
all or any portion of its interests in either or both of the LOANS or the LOAN
DOCUMENTS or to participate with other lending institutions in the LOANS and the
LOAN DOCUMENTS on such terms and at such times as the LENDER may determine from
time to time, all without any consent thereto or notice thereof to the BORROWER.
The BORROWER hereby grants to each participating lending institution, to the
full extent of the LOANS, the right to set off deposit accounts maintained by
the BORROWER with such institution, and the BORROWER agrees to pay the LENDER
EXPENSES of any such participating lending institution which arise or are
incurred as a result of the occurrence of an EVENT OF DEFAULT.
Section 10.12. Miscellaneous Provisions. The parties agree that: (a)
this AGREEMENT shall be effective as of the date first above written,
independent of the date of execution or delivery hereof; (b) this AGREEMENT
shall be binding upon the parties and their successors and assigns; (c) this
AGREEMENT and the LOAN DOCUMENTS contain the final and entire agreement and
understanding of the parties, and any terms and conditions not set forth in this
AGREEMENT or the LOAN DOCUMENTS are not a part of this AGREEMENT and the
understanding of the parties hereto; (d) this AGREEMENT may be amended or
altered only in writing signed by the party to be bound by the change or
alteration; (e) time is strictly of the essence of this AGREEMENT; (f) as used
herein, the singular includes the plural and the plural includes the singular,
the use of any gender applies to all genders; (g) the captions contained herein
are for purposes of convenience only and are not a part of this AGREEMENT; (h) a
carbon, photographic, photocopy or other reproduction of a security agreement or
financing statement shall be sufficient as a financing statement; (i) this
AGREEMENT may be delivered by facsimile, and a facsimile of any party's
signature to this AGREEMENT shall be deemed an original signature for all
purposes; and (j) this AGREEMENT may be executed in several counterparts, each
of which shall be an original, but all of which, when taken together, shall
constitute one and the same document.
Section 10.13. Leasecorp. It is specifically intended that LEASECORP is
a third party beneficiary of Section 4.9 of this AGREEMENT and the terms of such
Section may not be modified without the consent of LEASECORP.
Section 10.14. Waiver Of Trial By Jury. Each party to this AGREEMENT
agrees that any suit, action, or proceeding, whether claim or counterclaim,
brought or instituted by either party hereto or any successor or assign of any
party on or with respect to this AGREEMENT or any other LOAN DOCUMENT or which
in any way relates, directly or indirectly, to the OBLIGATIONS or any event,
<PAGE>
transaction, or occurrence arising out of or in any way connected with any of
the OBLIGATIONS, or the dealings of the parties with respect thereto, shall be
tried only by a court and not by a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING.
IN WITNESS WHEREOF, the LENDER and the BORROWER have duly executed this
AGREEMENT under seal as of the date first above written.
WITNESS/ATTEST: LENDER:
THE FIRST NATIONAL BANK OF MARYLAND,
A National Banking Association
/s/ MaryJane McDonough By: /s/ John C. Wasowicz
- ---------------------- --------------------
(SEAL) John C. Wasowicz,
Vice President
BORROWER:
EA ENGINEERING, SCIENCE, AND
TECHNOLOGY, INC.,
A Delaware Corporation
/s/ Jack O. Alder By: /s/ Joseph A. Spadaro (SEAL)
- ----------------- ---------------------
Name: Joseph A. Spadaro
Title: Executive Vice President
<PAGE>
$8,500,000.00
REVOLVING LOAN PROMISSORY NOTE
------------------------------
From
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.,
A Delaware Corporation
Borrower
To The Order Of
THE FIRST NATIONAL BANK OF MARYLAND,
A National Banking Association
Lender
Dated As Of August 22, 1997
<PAGE>
Baltimore, Maryland $8,500,000.00
August 22, 1997
REVOLVING LOAN PROMISSORY NOTE
------------------------------
FOR VALUE RECEIVED, the undersigned EA ENGINEERING, SCIENCE, AND
TECHNOLOGY, INC., a Delaware corporation ("BORROWER"), promises to pay to the
order of THE FIRST NATIONAL BANK OF MARYLAND, a national banking association
("LENDER"), at the LENDER'S offices at 25 South Charles Street, Baltimore,
Maryland 21201 or at such other places as the holder of this Promissory Note may
from time to time designate, the principal sum of Eight Million Five Hundred
Thousand Dollars ($8,500,000.00), or so much as may have been advanced to the
BORROWER under the terms of the "REVOLVING LOAN," as defined and described in
the Loan And Security Agreement of even date herewith between the LENDER and the
BORROWER ("AGREEMENT"), together with interest thereon at the rate or rates
hereafter specified until paid in full and any and all other sums which may be
owing to the holder of this Promissory Note by the BORROWER pursuant to this
Promissory Note. The following terms shall apply to this Promissory Note.
11. Interest Rate. Interest shall accrue on the unpaid principal
balance of this Promissory Note until paid in full at the fluctuating annual
rate of interest set forth in the AGREEMENT.
12. Calculation Of Interest. Interest shall be calculated on the basis
of a three hundred sixty (360) days per year factor applied to the actual days
on which there exists an unpaid balance hereunder.
13. Repayment. Accrued and unpaid interest, plus any then due
applicable late payment charges or default interest, shall be paid in
consecutive monthly payments beginning on September 1, 1997 and continuing on
the first calendar day of each succeeding month until September 30, 1999, which
is the final and absolute maturity date of this Promissory Note, at which time
all sums due hereunder that remain unpaid, including principal, interest,
charges and fees, shall be paid in full.
14. Late Payment Charge. If any payment due hereunder, including any
final installment, is not received by the holder within fifteen (15) calendar
days after its due date, the BORROWER shall pay a late payment charge equal to
five percent (5%) of the amount then due. The late payment charge shall be due
whether or not the holder declares this Promissory Note in default or
accelerates and demands immediate payment of the sums due hereunder. The
existence of the right by the holder to receive a late payment charge shall not
constitute a grace period or provide any right in the BORROWER to make a payment
other than on its due date.
15. Application Of Payments. All payments made hereunder shall be
applied first to late payment charges or other sums owed to the holder, next to
accrued interest, and then to principal, or in such other order or proportion as
the holder, in the holder's sole discretion, may elect from time to time.
16. Prepayment. The BORROWER may prepay this Promissory Note in whole
or in part at any time or from time to time without premium or additional
<PAGE>
interest. All prepayments under this Promissory Note shall be applied to the
outstanding principal balance in the inverse order of scheduled maturities.
17. Rights Upon Default. Upon the occurrence of an "EVENT OF DEFAULT"
(as that term is defined in the AGREEMENT), in addition to all other rights or
remedies available to the holder under the AGREEMENT and all other documents
evidencing, securing or otherwise documenting the loan evidenced by this
Promissory Note (collectively with the AGREEMENT, the "LOAN DOCUMENTS") or under
applicable law, the holder of this Promissory Note shall have the following
rights:
17.1. Acceleration. The holder of this Promissory Note, in the
holder's sole discretion and without notice or demand, may declare the entire
unpaid principal balance plus accrued interest and all other sums due hereunder
immediately due and payable. Reference is made to the LOAN DOCUMENTS for further
and additional rights on the part of the holder to declare the entire unpaid
principal balance plus accrued interest and all other sums due hereunder
immediately due and payable.
17.2. Default Interest Rate. The holder of this Promissory
Note, in the holder's sole discretion and without notice or demand, may raise
the rate of interest accruing on the unpaid principal balance by two (2)
percentage points above the rate of interest otherwise applicable, independent
of whether the holder elects to accelerate the unpaid principal balance as a
result of such default, unless prior to the imposition of the default rate of
interest, the BORROWER cures such event to the satisfaction of the holder
hereof. If the default rate of interest is imposed by the holder, the default
rate shall remain in effect until the event authorizing the imposition thereof
has been cured to the holder's satisfaction. Any individual waiver of the
holder's right to impose the default rate of interest or to retain the default
rate of interest after imposition thereof shall not be considered a waiver of
this section or any future right of the holder to impose the default rate of
interest pursuant to this Section.
17.3. Confession Of Judgment. The BORROWER authorizes any
attorney admitted to practice before any court of record in the United States to
appear on behalf of the BORROWER in any court in one or more proceedings, or
before any clerk thereof or prothonotary or other court official, and to confess
judgment against the BORROWER in favor of the holder of this Promissory Note in
the full amount due on this Promissory Note (including principal, accrued
interest and any and all charges, fees and costs) plus attorneys' fees equal to
fifteen percent (15%) of the amount due, plus court costs, all without prior
notice or opportunity of the BORROWER for prior hearing. The BORROWER agrees and
consents that venue and jurisdiction shall be proper in the Circuit Court of any
County of the State of Maryland or of Baltimore City, Maryland, or in the United
States District Court for the District of Maryland. The BORROWER waives the
benefit of any and every statute, ordinance, or rule of court which may be
lawfully waived conferring upon the BORROWER any right or privilege of
exemption, homestead rights, stay of execution, or supplementary proceedings, or
other relief from the enforcement or immediate enforcement of a judgment or
related proceedings on a judgment; provided, however, the BORROWER does not
waive the right to raise a defense based on an actual controversy as to the
merits of the confession of judgment action under Rule 2-611, Maryland Rules,
Annotated Code of Maryland. The authority and power to appear for and enter
judgment against the BORROWER shall
<PAGE>
not be exhausted by one or more exercises thereof, or by any imperfect exercise
thereof, and shall not be extinguished by any judgment entered pursuant thereto;
such authority and power may be exercised on one or more occasions from time to
time, in the same or different jurisdictions, as often as the holder shall deem
necessary, convenient, or proper. Notwithstanding the holder's right to obtain a
judgment by confession which includes attorney's fees of fifteen percent of the
amount due hereunder, the holder shall only collect attorney fees in an amount
equal to the actual attorney fees incurred in connection with the enforcement of
this Promissory Note and the LOAN DOCUMENTS.
18. Interest Rate After Judgment. If judgment is entered against the
BORROWER on this Promissory Note, the amount of the judgment entered (which may
include principal, interest, fees, and costs) shall bear interest at the higher
of the maximum interest rate imposed upon judgments by applicable law or the
above described default interest rate, to be determined on the date of the entry
of the judgment.
19. Expenses Of Collection And Attorneys' Fees. Should this Promissory
Note be referred to an attorney for collection, whether or not judgment has been
confessed or suit has been filed, the BORROWER shall pay all of the holder's
reasonable costs, fees and expenses, including reasonable attorneys' fees,
resulting from such referral.
20. Waiver Of Defenses. In the event any one or more holders of this
Promissory Note transfer this Promissory Note for value, the BORROWER agrees
that all subsequent holders of this Promissory Note who take for value and
without actual knowledge of a claim or defense of the BORROWER against a prior
holder shall not be subject to any claims or defenses which the BORROWER may
have against a prior holder, all of which are waived as to the subsequent
holder, and that all such subsequent holders shall have all rights of a holder
in due course with respect to the BORROWER even though the subsequent holder may
not qualify, under applicable law, absent this section, as a holder in due
course. The BORROWER shall retain all rights and claims which the BORROWER may
have against prior holders despite any such transfers and the waiver of defenses
provided in this section as to subsequent holders.
21. Waiver Of Protest. The BORROWER, and all parties to this Promissory
Note, whether maker, indorser, or guarantor, waive presentment, notice of
dishonor and protest.
22. Extensions Of Maturity. All parties to this Promissory Note,
whether maker, indorser, or guarantor, agree that the maturity of this
Promissory Note, or any payment due hereunder, may be extended at any time or
from time to time without releasing, discharging, or affecting the liability of
such party.
23. Manner And Method Of Payment. All payments called for in this
Promissory Note shall be made in lawful money of the United States of America.
If made by check, draft, or other payment instrument, such check, draft, or
other payment instrument shall represent immediately available funds. In the
holder's discretion, any payment made by a check, draft, or other payment
instrument shall not be considered to have been made until such time as the
funds represented thereby have been collected by the holder. Should any payment
date fall on a non-banking day, the BORROWER shall make the payment on the next
succeeding banking day.
<PAGE>
24. Notices. Any notice or demand required or permitted by or in
connection with this Promissory Note shall be given in the manner specified in
the AGREEMENT for the giving of notices under the AGREEMENT. Notwithstanding
anything to the contrary, all notices and demands for payment from the holder
actually received in writing by the BORROWER shall be considered to be effective
upon the receipt thereof by the BORROWER regardless of the procedure or method
utilized to accomplish delivery thereof to the BORROWER.
25. Assignability. This Promissory Note may be assigned by the LENDER
or any holder at any time or from time to time.
26. Joint And Several Liability. If more than one person or entity is
executing this Promissory Note as a BORROWER, all liabilities under this
Promissory Note shall be joint and several with respect to each of such persons
or entities.
27. Binding Nature. This Promissory Note shall inure to the benefit of
and be enforceable by the LENDER and the LENDER'S successors and assigns and any
other person to whom the LENDER or any holder may grant an interest in the
BORROWER'S obligations hereunder, and shall be binding and enforceable against
the BORROWER and the BORROWER'S personal representatives, successors and
assigns.
28. Invalidity Of Any Part. If any provision or part of any provision
of this Promissory Note shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Promissory Note and this
Promissory Note shall be construed as if such invalid, illegal or unenforceable
provision or part thereof had never been contained herein, but only to the
extent of its invalidity, illegality, or unenforceability.
29. Choice Of Law. The laws of the State of Maryland (excluding,
however, conflict of law principles) shall govern and be applied to determine
all issues relating to this Promissory Note and the rights and obligations of
the parties hereto, including the validity, construction, interpretation, and
enforceability of this Promissory Note and its various provisions and the
consequences and legal effect of all transactions and events which resulted in
the issuance of this Promissory Note or which occurred or were to occur as a
direct or indirect result of this Promissory Note having been executed.
30. Consent To Jurisdiction; Agreement As To Venue. The BORROWER
irrevocably consents to the non-exclusive jurisdiction of the courts of the
State of Maryland and of the United States District Court for the District of
Maryland, if a basis for federal jurisdiction exists. The BORROWER agrees that
venue shall be proper in any circuit court of the State of Maryland selected by
the LENDER or in the United States District Court for the District of Maryland
if a basis for federal jurisdiction exists and waives any right to object to the
maintenance of a suit in any of the state or federal courts of the State of
Maryland on the basis of improper venue or of inconvenience of forum.
31. Unconditional Obligations. The BORROWER'S obligations under this
Promissory Note shall be the absolute and unconditional duty and obligation of
the BORROWER and shall be independent of any rights of set-off, recoupment or
counterclaim which the BORROWER might otherwise have against the holder of this
Promissory Note, and the BORROWER shall pay absolutely the payments of
principal,
<PAGE>
interest, fees and expenses required hereunder, free of any deductions and
without abatement, diminution or set-off.
32. Seal And Effective Date. This Promissory Note is an instrument
executed under seal and is to be considered effective and enforceable as of the
date set forth on the first page hereof, independent of the date of actual
execution and delivery.
33. Tense; Gender; Defined Terms; Section Headings. As used herein, the
singular includes the plural and the plural includes the singular. A reference
to any gender also applies to any other gender. Defined terms are entirely
capitalized throughout. The section headings are for convenience only and are
not part of this Promissory Note.
34. Actions Against Lender. Any action brought by the BORROWER against
the LENDER which is based, directly or indirectly, on this Promissory Note or
any matter in or related to this Promissory Note, including but not limited to
the making of the loan evidenced hereby or the administration or collection
thereof, shall be brought only in courts located in the State of Maryland. The
BORROWER may not file a counterclaim against the LENDER in a suit brought by the
LENDER against the BORROWER in a state other than the State of Maryland unless
under the rules of procedure of the court in which the LENDER brought the action
the counterclaim is mandatory, and not merely permissive, and will be considered
waived unless filed as a counterclaim in the action instituted by the LENDER.
The BORROWER agrees that any forum other than the State of Maryland is an
inconvenient forum and that a suit brought by the BORROWER against the LENDER in
a court of any state other than the State of Maryland should be forthwith
dismissed or transferred to a court located in the State of Maryland by that
Court.
35. Waiver Of Jury Trial. The BORROWER (by execution of this Promissory
Note) and the LENDER (by acceptance of this Promissory Note) agree that any
suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by or against the BORROWER or the LENDER, or any successor or assign
of the BORROWER or the LENDER, on or with respect to this Promissory Note or any
of the other LOAN DOCUMENTS, or which in any way relates, directly or
indirectly, to the obligations of the BORROWER to the LENDER under this
Promissory Note or any of the other LOAN DOCUMENTS, or the dealings of the
parties with respect thereto, shall be tried only by a court and not by a jury.
THE BORROWER AND THE LENDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY SUCH SUIT, ACTION, OR PROCEEDING. The BORROWER and the LENDER acknowledge
and agree that this provision is a specific and material aspect of the agreement
between the parties and that the LENDER would not enter into the transaction
with the BORROWER if this provision were not part of their agreement.
<PAGE>
IN WITNESS WHEREOF, the BORROWER has duly executed this Promissory Note
under seal as of the date first above written.
WITNESS/ATTEST: THE BORROWER:
EA ENGINEERING, SCIENCE, AND
TECHNOLOGY, INC.,
A Delaware Corporation
/s/ Jack P. Adler By: /s/ Joseph A. Spadaro (SEAL)
- ----------------- ---------------------
Name: Joseph A. Spadaro
Title: Executive Vice President
ACKNOWLEDGMENT
--------------
STATE OF MARYLAND, CITY OF BALTIMORE, TO WIT:
I HEREBY CERTIFY, that on this 22nd day of August, 1997, before me, the
undersigned a Notary Public of the State of Maryland, personally appeared Joseph
A. Spadaro, who acknowledged himself to be a Executive Vice President of EA
ENGINEERING, SCIENCE, AND TECHNOLOGY, INC., and acknowledged that he, as such
Executive Vice President, being authorized so to do, executed the foregoing
instrument for the purposes therein contained by signing the name of EA
ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. by himself as Executive Vice
President.
IN WITNESS MY Hand and Notarial Seal.
Laura D. Bell (SEAL)
-------------
NOTARY PUBLIC
My Commission Expires:
3/15/99
<PAGE>
$431,746.28
TERM LOAN PROMISSORY NOTE
From
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.,
A Delaware Corporation
Borrower
To The Order Of
THE FIRST NATIONAL BANK OF MARYLAND,
A National Banking Association
Lender
Dated As Of August 22, 1997
<PAGE>
Baltimore, Maryland $431,746.28
August 22, 1997
TERM LOAN PROMISSORY NOTE
-------------------------
FOR VALUE RECEIVED, the undersigned EA ENGINEERING, SCIENCE, AND
TECHNOLOGY, INC., a Delaware corporation ("BORROWER"), promises to pay to the
order of THE FIRST NATIONAL BANK OF MARYLAND, a national banking association
("LENDER"), at the LENDER'S offices at 25 South Charles Street, Baltimore,
Maryland 21201 or at such other places as the holder of this Promissory Note may
from time to time designate, the principal sum of Four Hundred Thirty-One
Thousand Seven Hundred Forty-Six Dollars and Twenty-Eight Cents ($431,746.28),
together with interest thereon at the rate or rates hereafter specified until
paid in full and any and all other sums which may be owing to the holder of this
Promissory Note by the BORROWER pursuant to this Promissory Note. The following
terms shall apply to this Promissory Note.
36. Interest Rate. Interest shall accrue on the unpaid principal
balance of this Promissory Note until paid in full at an annual rate of interest
as set forth in the Loan And Security Agreement of even date herewith by and
between the BORROWER and the LENDER ("AGREEMENT").
37. Calculation Of Interest. Interest shall be calculated on the basis
of a three hundred sixty (360) days per year factor applied to the actual days
on which there exists an unpaid balance hereunder.
38. Repayment. Payments of accrued and unpaid interest only shall be
made by the BORROWER to the holder of this Promissory Note on September 1, 1997,
and on the first calendar day of each month thereafter until all sums
outstanding hereunder are paid in full. The principal balance of this Promissory
Note shall be repaid as follows: (a) On August 21, 1997, September 21, 1997,
October 21, 1997 and November 21, 1997, the BORROWER shall make monthly
principal payments in the amount of Forty-three Thousand, Six Hundred Fifty
Dollars and Seventy-nine Cents ($43,650.79); (b) commencing on December 21,
1997, and continuing on the Twenty-first day of each month thereafter until all
principal sums outstanding hereunder are paid in full, the Borrower shall make
monthly payments of Twenty- one Thousand Four Hundred Twenty-Eight Dollars and
Fifty-seven Cents ($21,428.57); and (c) on October 21, 1998, which date is the
final and absolute maturity date of this Promissory Note, the Borrower shall
make payment of all sums due hereunder, including principal, interest, charges
and fees, shall be paid in full.
39. Late Payment Charge. If any payment due hereunder, including any
final installment, is not received by the holder within fifteen (15) calendar
days after its due date, the BORROWER shall pay a late payment charge equal to
five percent (5%) of the amount then due. The late payment charge shall be due
whether or not the holder declares this Promissory Note in default or
accelerates and demands immediate payment of the sums due hereunder. The
existence of the right by the holder to receive a late payment charge shall not
constitute a grace period or provide any right in the BORROWER to make a payment
other than on its due date.
<PAGE>
40. Application Of Payments. All payments made hereunder shall be
applied first to late payment charges or other sums owed to the holder, next to
accrued interest, and then to principal, or in such other order or proportion as
the holder, in the holder's sole discretion, may elect from time to time.
41. Prepayment. If interest is accruing on the unpaid principal balance
of this Promissory Note at a fluctuating rate of interest, the BORROWER may
prepay this Promissory Note in whole or in part at any time or from time to time
without premium or additional interest. If interest is accruing on the unpaid
principal balance of this Promissory Note at a fixed rate of interest, the
BORROWER shall pay a prepayment fee to the holder of this Promissory Note in the
event all or any portion of the principal balance of this Promissory Note is
paid prior to its original scheduled maturity date. The prepayment fee shall be
calculated by discounting to present value, as of the date of prepayment, the
remaining payments of principal and interest on the principal balance of the
Promissory Note being prepaid, using a discount rate equal to one percent (1%)
above the yield to maturity of the noncallable debt obligation of the United
States Treasury having a maturity date nearest in time to the maturity date of
the portion of the principal outstanding under this Promissory Note being
prepaid. If such a discounted value exceeds the unpaid principal amount being
prepaid, then the prepayment fee shall be in an amount equal to such excess. If
the discounted value does not exceed the unpaid principal amount being prepaid,
there shall be no prepayment fee. The maturity date and yield to maturity of the
applicable United States Treasury obligation shall be determined on the basis of
quotations published in the Wall Street Journal on the date of prepayment or
from such other source as the holder of this Promissory Note, in its sole
discretion shall deem appropriate. All prepayments under this Promissory Note
shall be applied to the outstanding principal balance in the inverse order of
scheduled maturities.
42. Rights Upon Default. Upon the occurrence of an "EVENT OF DEFAULT"
(as that term is defined in the AGREEMENT), in addition to all other rights or
remedies available to the holder under the AGREEMENT and all other documents
evidencing, securing or otherwise documenting the loan evidenced by this
Promissory Note (collectively with the AGREEMENT, the "LOAN DOCUMENTS") or under
applicable law, the holder of this Promissory Note shall have the following
rights:
42.1. Acceleration. The holder of this Promissory Note, in the
holder's sole discretion and without notice or demand, may declare the entire
unpaid principal balance plus accrued interest and all other sums due hereunder
immediately due and payable. Reference is made to the LOAN DOCUMENTS for further
and additional rights on the part of the holder to declare the entire unpaid
principal balance plus accrued interest and all other sums due hereunder
immediately due and payable.
42.2. Default Interest Rate. The holder of this Promissory
Note, in the holder's sole discretion and without notice or demand, may raise
the rate of interest accruing on the unpaid principal balance by two (2)
percentage points above the rate of interest otherwise applicable, independent
of whether the holder elects to accelerate the unpaid principal balance as a
result of such default, unless prior to the imposition of the default rate of
interest, the BORROWER cures such event to the satisfaction of the holder
hereof. If the default rate of interest is imposed by the holder, the default
rate shall remain
<PAGE>
in effect until the event authorizing the imposition thereof has been cured to
the holder's satisfaction. Any individual waiver of the holder's right to impose
the default rate of interest or to retain the default rate of interest after
imposition thereof shall not be considered a waiver of this section or any
future right of the holder to impose the default rate of interest pursuant to
this Section.
42.3. Confession Of Judgment. The BORROWER authorizes any
attorney admitted to practice before any court of record in the United States to
appear on behalf of the BORROWER in any court in one or more proceedings, or
before any clerk thereof or prothonotary or other court official, and to confess
judgment against the BORROWER in favor of the holder of this Promissory Note in
the full amount due on this Promissory Note (including principal, accrued
interest and any and all charges, fees and costs) plus attorneys' fees equal to
fifteen percent (15%) of the amount due, plus court costs, all without prior
notice or opportunity of the BORROWER for prior hearing. The BORROWER agrees and
consents that venue and jurisdiction shall be proper in the Circuit Court of any
County of the State of Maryland or of Baltimore City, Maryland, or in the United
States District Court for the District of Maryland. The BORROWER waives the
benefit of any and every statute, ordinance, or rule of court which may be
lawfully waived conferring upon the BORROWER any right or privilege of
exemption, homestead rights, stay of execution, or supplementary proceedings, or
other relief from the enforcement or immediate enforcement of a judgment or
related proceedings on a judgment; provided, however, the BORROWER does not
waive the right to raise a defense based on an actual controversy as to the
merits of the confession of judgment action under Rule 2-611, Maryland Rules,
Annotated Code of Maryland. The authority and power to appear for and enter
judgment against the BORROWER shall not be exhausted by one or more exercises
thereof, or by any imperfect exercise thereof, and shall not be extinguished by
any judgment entered pursuant thereto; such authority and power may be exercised
on one or more occasions from time to time, in the same or different
jurisdictions, as often as the holder shall deem necessary, convenient, or
proper. Notwithstanding the holder's right to obtain a judgment by confession
which includes attorney's fees of fifteen percent of the amount due hereunder,
the holder shall only collect attorney fees in an amount equal to the actual
attorney fees incurred in connection with the enforcement of this Promissory
Note and the LOAN DOCUMENTS.
43. Interest Rate After Judgment. If judgment is entered against the
BORROWER on this Promissory Note, the amount of the judgment entered (which may
include principal, interest, fees, and costs) shall bear interest at the higher
of the maximum interest rate imposed upon judgments by applicable law or the
above described default interest rate, to be determined on the date of the entry
of the judgment.
44. Expenses Of Collection And Attorneys' Fees. Should this Promissory
Note be referred to an attorney for collection, whether or not judgment has been
confessed or suit has been filed, the BORROWER shall pay all of the holder's
reasonable costs, fees and expenses, including reasonable attorneys' fees,
resulting from such referral.
45. Waiver Of Defenses. In the event any one or more holders of this
Promissory Note transfer this Promissory Note for value, the BORROWER agrees
that all subsequent holders of this Promissory Note who take for value and
without actual knowledge of a claim or defense of the BORROWER against a prior
holder
<PAGE>
shall not be subject to any claims or defenses which the BORROWER may have
against a prior holder, all of which are waived as to the subsequent holder, and
that all such subsequent holders shall have all rights of a holder in due course
with respect to the BORROWER even though the subsequent holder may not qualify,
under applicable law, absent this section, as a holder in due course. The
BORROWER shall retain all rights and claims which the BORROWER may have against
prior holders despite any such transfers and the waiver of defenses provided in
this section as to subsequent holders.
46. Waiver Of Protest. The BORROWER, and all parties to this Promissory
Note, whether maker, indorser, or guarantor, waive presentment, notice of
dishonor and protest.
47. Extensions Of Maturity. All parties to this Promissory Note,
whether maker, indorser, or guarantor, agree that the maturity of this
Promissory Note, or any payment due hereunder, may be extended at any time or
from time to time without releasing, discharging, or affecting the liability of
such party.
48. Manner And Method Of Payment. All payments called for in this
Promissory Note shall be made in lawful money of the United States of America.
If made by check, draft, or other payment instrument, such check, draft, or
other payment instrument shall represent immediately available funds. In the
holder's discretion, any payment made by a check, draft, or other payment
instrument shall not be considered to have been made until such time as the
funds represented thereby have been collected by the holder. Should any payment
date fall on a non-banking day, the BORROWER shall make the payment on the next
succeeding banking day.
49. Notices. Any notice or demand required or permitted by or in
connection with this Promissory Note shall be given in the manner specified in
the AGREEMENT for the giving of notices under the AGREEMENT. Notwithstanding
anything to the contrary, all notices and demands for payment from the holder
actually received in writing by the BORROWER shall be considered to be effective
upon the receipt thereof by the BORROWER regardless of the procedure or method
utilized to accomplish delivery thereof to the BORROWER.
50. Assignability. This Promissory Note may be assigned by the LENDER
or any holder at any time or from time to time.
51. Joint And Several Liability. If more than one person or entity is
executing this Promissory Note as a BORROWER, all liabilities under this
Promissory Note shall be joint and several with respect to each of such persons
or entities.
52. Binding Nature. This Promissory Note shall inure to the benefit of
and be enforceable by the LENDER and the LENDER'S successors and assigns and any
other person to whom the LENDER or any holder may grant an interest in the
BORROWER'S obligations hereunder, and shall be binding and enforceable against
the BORROWER and the BORROWER'S personal representatives, successors and
assigns.
53. Invalidity Of Any Part. If any provision or part of any provision
of this Promissory Note shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Promissory Note and this
Promissory
<PAGE>
Note shall be construed as if such invalid, illegal or unenforceable provision
or part thereof had never been contained herein, but only to the extent of its
invalidity, illegality, or unenforceability.
54. Choice Of Law. The laws of the State of Maryland (excluding,
however, conflict of law principles) shall govern and be applied to determine
all issues relating to this Promissory Note and the rights and obligations of
the parties hereto, including the validity, construction, interpretation, and
enforceability of this Promissory Note and its various provisions and the
consequences and legal effect of all transactions and events which resulted in
the issuance of this Promissory Note or which occurred or were to occur as a
direct or indirect result of this Promissory Note having been executed.
55. Consent To Jurisdiction; Agreement As To Venue. The BORROWER
irrevocably consents to the non-exclusive jurisdiction of the courts of the
State of Maryland and of the United States District Court for the District of
Maryland, if a basis for federal jurisdiction exists. The BORROWER agrees that
venue shall be proper in any circuit court of the State of Maryland selected by
the LENDER or in the United States District Court for the District of Maryland
if a basis for federal jurisdiction exists and waives any right to object to the
maintenance of a suit in any of the state or federal courts of the State of
Maryland on the basis of improper venue or of inconvenience of forum.
56. Unconditional Obligations. The BORROWER'S obligations under this
Promissory Note shall be the absolute and unconditional duty and obligation of
the BORROWER and shall be independent of any rights of set-off, recoupment or
counterclaim which the BORROWER might otherwise have against the holder of this
Promissory Note, and the BORROWER shall pay absolutely the payments of
principal, interest, fees and expenses required hereunder, free of any
deductions and without abatement, diminution or set-off.
57. Seal And Effective Date. This Promissory Note is an instrument
executed under seal and is to be considered effective and enforceable as of the
date set forth on the first page hereof, independent of the date of actual
execution and delivery.
58. Tense; Gender; Defined Terms; Section Headings. As used herein, the
singular includes the plural and the plural includes the singular. A reference
to any gender also applies to any other gender. Defined terms are entirely
capitalized throughout. The section headings are for convenience only and are
not part of this Promissory Note.
59. Actions Against Lender. Any action brought by the BORROWER against
the LENDER which is based, directly or indirectly, on this Promissory Note or
any matter in or related to this Promissory Note, including but not limited to
the making of the loan evidenced hereby or the administration or collection
thereof, shall be brought only in courts located in the State of Maryland. The
BORROWER may not file a counterclaim against the LENDER in a suit brought by the
LENDER against the BORROWER in a state other than the State of Maryland unless
under the rules of procedure of the court in which the LENDER brought the action
the counterclaim is mandatory, and not merely permissive, and will be considered
waived unless filed as a counterclaim in the action instituted by the LENDER.
The BORROWER agrees that any forum other than the State of Maryland is an
inconvenient forum and that a suit brought by the BORROWER against the LENDER in
<PAGE>
a court of any state other than the State of Maryland should be forthwith
dismissed or transferred to a court located in the State of Maryland by that
Court.
60. Waiver Of Jury Trial. The BORROWER (by execution of this Promissory
Note) and the LENDER (by acceptance of this Promissory Note) agree that any
suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by or against the BORROWER or the LENDER, or any successor or assign
of the BORROWER or the LENDER, on or with respect to this Promissory Note or any
of the other LOAN DOCUMENTS, or which in any way relates, directly or
indirectly, to the obligations of the BORROWER to the LENDER under this
Promissory Note or any of the other LOAN DOCUMENTS, or the dealings of the
parties with respect thereto, shall be tried only by a court and not by a jury.
THE BORROWER AND THE LENDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY SUCH SUIT, ACTION, OR PROCEEDING. The BORROWER and the LENDER acknowledge
and agree that this provision is a specific and material aspect of the agreement
between the parties and that the LENDER would not enter into the transaction
with the BORROWER if this provision were not part of their agreement.
IN WITNESS WHEREOF, the BORROWER has duly executed this Promissory Note
under seal as of the date first above written.
WITNESS/ATTEST: THE BORROWER:
EA ENGINEERING, SCIENCE, AND
TECHNOLOGY, INC.,
A Delaware Corporation
/s/ Jack P. Adler By: /s/ Joseph A. Spadaro (SEAL)
- ----------------- ---------------------
Name: Joseph A. Spadaro
Title: Executive Vice President
<PAGE>
ACKNOWLEDGMENT
--------------
STATE OF MARYLAND, CITY OF BALTIMORE, TO WIT:
I HEREBY CERTIFY, that on this 22nd day of August, 1997, before me, the
undersigned a Notary Public of the State of Maryland, personally appeared Joseph
A. Spadaro, who acknowledged himself to be a Executive Vice President of EA
ENGINEERING, SCIENCE, AND TECHNOLOGY, INC., a Delaware corporation, and
acknowledged that he, as such Executive Vice President, being authorized so to
do, executed the foregoing instrument for the purposes therein contained by
signing the name of EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. by himself as
Executive Vice President.
IN WITNESS MY Hand and Notarial Seal.
/s/ Joseph A. Spadaro (SEAL)
---------------------
NOTARY PUBLIC
My Commission Expires:
3/15/99
EXHIBIT 13
ANNUAL REPORT TO STOCKHOLDERS
FRONT COVER
The cover of EA Engineering, Science, and Technology, Inc.'s 1997 annual report
depicts a series of artistically-placed "building blocks" against a backdrop of
light and texture. These "building blocks" represent the newly transformed EA, a
firm with a fresh company vision, a rejuvenated staff, an energized management
team, and a client-centered organizational structure. Additionally, the cover of
the report introduces a series of company names and divisions, both formal and
informal, for use in representing and marketing the company's breadth. Those
names, EA Companies, EA Consulting, EA Energy Management Solutions, EA
Laboratories, and EA International, Inc., are subtly placed near each of the
"building blocks."
(New page)
ABOUT EA
EA Engineering, Science, and Technology, Inc.
EA is a consulting firm specializing in the fields of energy, the environment,
and health and safety. We serve industry, utilities, and government clients both
directly and indirectly through work performed for architect/engineers,
engineer/contractors, law firms, and financial institutions. We specialize in
the artful application of technology and professional services to help our
clients succeed.
(A cluster of building blocks is centered on the page)
Leveraging the diverse intellectual capabilities of our scientists, planners,
engineers, economists, and business managers, we anticipate and resolve issues
that affect our client's business performance and productivity. With a
management perspective, we provide solutions that are financially responsible,
acceptable to regulators and communities, technically dependable, and
operationally efficient. Our bottom-line goal is assisting our clients in
achieving their objectives of global competitiveness and enhanced profitability.
(PAGE)
(A sphere shaped block is centered above the paragraph)
Successfully guiding client businesses and organizations through change is our
mission. Working side-by-side with our clients, we combine creative leadership
with the latest technologies to solve their most complex problems and resolve
their most pressing issues. Our scientists, engineers, and business managers
create full-service solutions that save time, reduce costs, and add overall
value for our clients. The pace of change today is staggering, especially in
matters pertaining to energy, environment, and health and safety. Using
imagination, talent, and integrity, we convert our clients' challenges into
solutions and their obstacles into competitive advantages.
<PAGE>
(A square shaped block is centered above the paragraph)
EA assists energy providers in managing the issues associated with restructuring
and market competition. With a long history of supporting more than 100 utility
organizations, IPPs, and gas transmission companies, we have responded to needs
ranging from facility licensing to due diligence reviews and optimization
programs. EA's Clean Fuel Vehicles group assists fleet owners and government
officials in planning and implementing programs that address their combined need
for lower emissions and fuel efficiency.
(A triangle shaped block is centered above the paragraph)
As the developing world asserts its place in the global economy, EA
International provides a series of services to this exciting marketplace.
Supported by a distinguished history of work in more than 30 countries, we serve
US government agencies, multinational banks and corporations, international aid
organizations, and the governments of other nations. By applying our knowledge
base and skills to the goals of public and environmental safety, energy
self-sufficiency, pollution control, and water resource management, we have
demonstrated strength and dependability in helping our clients succeed.
(A rectangle shaped block is centered above the paragraph)
With certifications in all 50 states and a track record of "firsts" in
developing new analytical techniques and quality protocols, EA offers clients a
full range of chemical, biological, and ecotoxicological analyses on media
ranging from tissue to sediment, soils, explosives and chemical degradation
products. Complementing EA's consulting capabilities, our laboratory expertise
provides clients with a seamless, single-source service for all field
activities, from sample collection and in-situ measurement to data validation.
(New page)
(A cluster of building block shapes are centered at the top of the page.)
LETTER TO THE SHAREHOLDERS
We look back on 1997 as a bellweather year, as significant in our Company's
history as was 1973, the year in which EA was founded. This was a year of
redefinition, as the organization confronted the realities of a changing
marketplace and world.
The restructuring of EA has been swift and sure. Guiding this rebirth is our
belief that to succeed today, EA must deliver to its clients more than
compliance with environmental laws--we must assist clients in achieving their
broad business objectives. This belief is reinforced in each of the building
blocks used to cement EA's transformation: a fresh company vision, a revitalized
management team, a new clientcentered organizational structure, and a global
marketing approach that alters the conventional rules of engagement. The result
is a new EA, a bold and exciting company that uses the talents of its
extraordinary professionals to create financial value for its clients.
Since March of 1997, the new management team has dramatically improved the
financial performance of the Company. Profitability was restored and maintained
during the final five months of the fiscal year, with fourth quarter income
higher than in any quarter of the past seven. Record high utilization rates
within the organization, combined with effective management of cost and staffing
levels, have pushed our productivity to the top of industry standards. Emphasis
on cash management, along with a new banking relationship, has created the
necessary foundation for continued improvement in our capital structure. These
achievements are just the beginning.
(A sphere shaped block is centered over the paragraph.)
<PAGE>
Company Mission
In our role as an advocate and resource to our clients, EA provides the
management perspective and technical skills needed to anticipate, identify, and
resolve those environmental, energy, and health and safety issues affecting
their business performance and profitability. Recognizing the interrelated
business factors confronting our clients, EA applies the diverse intellectual
capabilities and tactical skills of the entire organization in developing
solutions that are financially responsible, acceptable to regulators,
technically dependable, and operationally efficient.
(A square shaped box is centered over the paragraph.)
Management Team
At the center of the EA transformation you will find the extraordinary
capabilities and dedication of the new management team. This group has been
selected from among the best and brightest in our industry and our Company.
During the final five months of 1997, they have applied great energy and talent
to the task of revitalizing every person in our Company. This new team is driven
to constantly improve profitability, respond to changes in the marketplace, and
provide superior service to our clients. For this team, change is not something
to be endured, it is a way of life.
(A triangle shaped block is centered over the paragraph.)
A Global Marketing Approach
The market for our services is expanding, with the international opportunities
presently exceeding those we see domestically. More important, the distinction
between "domestic" and "international" is diminishing as the world becomes one
global market networked together. These factors are influencing our clients as
well, many of whom see an increasing portion of their expansions occurring in
the developing world.
EA has successfully delivered services in more than 30 countries and continues
an ambitious international business plan. In Alexandria, Egypt, for example, EA
last year completed a multimilliondollar environmental assessment program on
behalf of the US Agency for International Development (USAID) and the Alexandria
General Organization for Sanitary Drainage. EA's project represented the largest
environmental assessment program ever funded by USAID. Our project results will
play a critical role in enabling the City of Alexandria to solve its long-term
resource needs.
In the Western Hemisphere, EA de Mexico received several contracts, including
site characterization and environmental planning work for two cities on behalf
of Mexico's FNM Railroad Authority. In Peru and the Dominican Republic, EA
scientists and planners advised government leaders on programs for the phase-out
of lead-based gasoline.
(A rectangle shaped block is centered over the paragraph.)
At the Center: The Client
We are justifiably proud that "our first client is still our client." For more
than 25 years, EA has maintained a relationship with Baltimore Gas & Electric
Company (BGE). This year, BGE will once again account for about one million
dollars of revenue for EA, with our tasks ranging from stormwater control to
complex remediation of a contaminant-laden retired manufactured gas plant.
Today, nearly 75 percent of our new orders are received from existing clients.
This continuing trust by our clients is our most cherished asset.
<PAGE>
As part of our restructuring, we have created and have focused considerable
authority on our branch offices. This decision follows our belief that being
geographically close to our clients is an essential ingredient to providing
superior client service. In fact, our branch offices are integral parts of the
communities in which they are located. Through participation in civic
organizations and professional societies, our employees understand the
importance of contributing their energies to those activities that make life
better for all. This sense of "partnership" applies to both our professional and
social responsibilities within the communities we serve.
Taken Together
At EA, we understand that "providing superior client service" is more than a
slogan. It requires the dedication of every person in our firm to the goal of
using our intellectual gifts, our creativity, and our commitment to setting us
apart.
As we begin our 25th year, we are determined to demonstrate that understanding
and commitment on a daily basis--in our client relationships, our pursuit of new
opportunities, and in our work with colleagues, suppliers, and shareholders. We
are confident in our new organizational structure and, most importantly, in the
ability of EA's exceptional people to stand second to none in this industry for
quality, talent, and professional performance. EA's evolution is a work in
progress that started in 1997 with our transition from "business as usual" to
business as it should and will be. Armed with that determination and supported
by a revitalized structure, we look forward to 1998.
(PHOTO)
Loren D. Jensen
Chairman of the Board
"For nearly a quarter of a century, I have been honored to represent the men and
women of EA Engineering, Science, and Technology. Those talented professionals
nurtured the growth of our Company from a handful of scientists to a
multifaceted firm with diverse capabilities and an enviable reputation for
quality.
This year, a new group of professionals joined our team, injecting fresh ideas
and experience into our firm. The result has been a revitalized EA, one firmly
rooted in the achievements of the past, but strategically positioned to take its
place among the leaders of our industry. I am confident that EA's heritage of 25
years of excellence is a prologue to even greater success."
(PHOTO)
Donald A. Deieso
President and Chief Executive Officer
Prior to his appointment as President and CEO of EA, Dr. Deieso served as
President and CEO of the Metcalf & Eddy Companies and the Research-Cottrell
Companies. Dr. Deieso has served as Assistant Commissioner of the New Jersey
Department of Environmental Protection, head of the US EPA's Region II Superfund
remediation program, and chief chemical engineer for Consolidated Edison of New
York.
Dr. Deieso leads and serves on many industry committees and has accepted
appointed as Chairman of the U.S. Department of Commerce-sponsored Environmental
Technologies Trade Advisory Committee.
<PAGE>
"I am delighted to have the opportunity of leading this company and its
outstanding professionals. Today, service firms must demonstrate enormous
agility in responding to changing client needs. At EA, we thrive on change."
Sincerely,
(Signature of Donald A. Deieso)
Donald A. Deieso
President and Chief Executive Officer
(Signature of Loren D. Jensen)
Loren D. Jensen
Chairman of the Board
(PAGE)
1997 FINANCIAL OVERVIEW
For EA, 1997 was a momentus year. Following a disappointing second quarter, the
Company launched an ambitious revitalization program centered on cost reduction
and income enhancement. While this restructuring necessitated a sizable loss for
the third quarter, the Companyturned the corner in its fourth quarter, achieving
significant profitability. Profitability in the final quarter of the year
surpassed the results of the firm's seven prior quarters, and returned the
Company to profitability for the first time since the first quarter of 1997.
(A sphere shaped block is centered over the paragraph.)
<PAGE>
Quarterly Review
Quarterly Financial Information
(in thousands, except per share data)
<TABLE>
<CAPTION>
November 30 February 28 May 31 August 31
- --------------------------------- --------------- -------------- ----------- -----------
<S> <C>
1997
Gross revenue $22,178 $17,537 $16,661 $17,514
Net income 187 (2,483) (3,457) 346
Net income per share $0.03 $(0.40) $(0.56) $0.06
1996
Gross revenue $22,940 $19,193 $22,340 $23,835
Net income 536 (830) 243 (529)
Net income per share $0.09 $(0.13) $0.04 $0.09
</TABLE>
Fiscal year 1997 began favorably with a profitable first quarter. However, on a
year-to-year comparative basis, net income as a percentage of gross revenue was
1 percent versus 2.3 percent. This was the beginning of the continued decline of
available work authorizations from federal contracts and a weak private sector
market.
The Company reported a significant loss in the second quarter attributable in
large part to low volume in EA Laboratories, unrecoverable costs on projects,
and higher-than-expected business development expenses.
Realizing the need for rapid change, the Company named a new President and Chief
Executive Officer, Donald A. Deieso, Ph.D., effective March 1, 1997. Quickly
assessing the situation, the management team implemented a major restructuring
plan, which significantly reduced costs and increased profitability. The
anticipated results were achieved by rightsizing, dramatically increasing
utilization rates and productivity, improving cash management, and attracting
fresh financing to the Company.
The loss posted in the third quarter of fiscal 1997 was primarily attributable
to a restructuring charge of $3.0 million and additional estimated costs of $1.4
million in excess of contract values related to certain of the Company's
landfill closure projects, a market EA no longer pursues. The last two months of
the third quarter were profitable, positioning EA for its fourth quarter
success.
The results of the Company's restructuring program were realized in its fourth
quarter with a return to profitability, representing a rise in operating income
of more than $1.2 million over the comparable period from the prior year. This
increase in income was realized on 15 percent lower net revenue. Profitability
improvement has resulted in part from a 20 percent decrease in costs and
operating expenses over the comparable period, including a 10 percent reduction
in interest expense from the prior year.
(A square shaped block is centered above the paragraph.)
Financial Condition
<PAGE>
EA's balance sheet continues to be strong, with minimal long-term debt and
reduced short-term obligations. The Company generated over $1.9 million in cash
from operating activities, much of which was used for debt reduction and
investment in capital equipment, including high-tech computer and
telecommunications capabilities. This in turn reduced working capital and
resulted in a lower current ratio. The Company's debt-to-equity ratio remains
low, below 18 percent.
Improvements made in the Company's billing and collection processes during the
final five months have resulted in a 26-day reduction in Days Sales Outstanding
(DSO) from the prior year. This improvement has reduced our cash borrowings and
interest expense for the year.
Stockholders' equity decreased to $13.3 million, or about $2.13 per share, as a
result of the fiscal 1997 loss, and was partially offset by employee
participation in the Employee Stock Purchase Plan.
(A triangle shaped block is centered above the paragraph.)
Credit Facilities
Adding strength to the Company transformation is the new banking relationship
with The First National Bank of Maryland (FNB). Under the terms of this
agreement, EA has been provided with a revolving credit facility of $8.5
million, of which $2.5 million is available for acquisitions, joint ventures,
and new business opportunities. This new credit facility represents a 42 percent
increase in availability over the previous arrangement. FNB is also making
available an additional $1.5 million for capital equipment. The term of the new
commitment extends until September 30, 1999 and is subject to renewals
thereafter.
(PAGE)
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
August 31,
1997 1996
- -------------------------------------------------- ------------- -------------
Current Assets:
Cash and cash equivalents $ 2,333,300 $ 1,308,600
Accounts receivable, net 9,498,800 12,692,700
Costs and estimated earnings in excess
of billings on uncompleted contracts 5,653,800 12,482,200
Refundable income taxes 1,883,900 319,500
Prepaid expenses and other 1,865,500 1,257,400
- -------------------------------------------------- ------------- -------------
Total Current Assets 21,235,300 28,060,400
- -------------------------------------------------- ------------- -------------
Property and Equipment, at cost:
Furniture, fixtures, and equipment 12,599,200 12,784,500
Leasehold improvements 3,664,800 3,677,800
------------- -------------
16,264,000 16,462,300
Less-Accumulated depreciation and amortization (13,867,200) (13,337,400)
- -------------------------------------------------- ------------- -------------
Net Property and Equipment 2,396,800 3,124,900
- -------------------------------------------------- ------------- -------------
Other Assets 3,009,800 2,143,200
- -------------------------------------------------- ------------- -------------
Total Assets $26,641,900 $33,328,500
================================================== ============= =============
The accompanying notes are an integral part of these balance sheets.
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
August 31,
1997 1996
- ------------------------------------------------------- ----------- -----------
Current Liabilities:
Accounts payable $ 5,960,800 $ 4,047,800
Accounts payable $ 4,306,900 $ 6,061,000
Accrued expenses 2,694,600 1,019,200
Accrued salaries, wages and benefits 2,891,200 3,183,400
Current portion of long-term debt 648,300 644,600
Billings in excess of costs and estimated earnings
on uncompleted contracts 512,200 1,197,700
- ------------------------------------------------------- ----------- -----------
Total Current Liabilities 11,053,200 12,105,900
- ------------------------------------------------------- ----------- -----------
Long-Term Debt, net of current portion 2,331,700 2,664,500
- ------------------------------------------------------- ----------- -----------
Total Liabilities 13,384,900 14,770,400
- ------------------------------------------------------- ----------- -----------
Commitments
- ------------------------------------------------------- ----------- -----------
Stockholders' Equity:
Common stock, $.01 par value; voting;
10,000,000 shares authorized; 6,227,300
and 6,175,000 shares issued and outstanding 62,300 61,800
Preferred stock, $.01 par value;
8,000,000 shares authorized; none issued -- --
Capital in excess of par value 10,902,300 10,796,300
Retained earnings 2,292,400 7,700,000
- ------------------------------------------------------- ----------- -----------
Total Stockholders' Equity 13,257,000 18,558,100
- ------------------------------------------------------- ----------- -----------
Total Liabilities and Stockholders' Equity $26,641,900 $33,328,500
======================================================= =========== ===========
The accompanying notes are an integral part of these balance sheets.
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended August 31,
1997 1996 1995
- ------------------------------------------ ------------- ------------ -----------
<S> <C>
Total revenue $ 73,890,900 $ 88,307,800 $92,364,900
Less - Subcontractor costs (21,435,800) (23,954,100) (19,893,500)
- ------------------------------------------ ------------- ------------ -----------
Net revenue 52,455,100 64,353,700 72,471,400
- ------------------------------------------ ------------- ------------ -----------
Operating costs and expenses:
Direct salaries and other operating 50,031,700 57,799,700 59,681,450
Sales, general and administrative 7,445,400 6,997,600 8,649,250
Restructuring charges 3,000,100 -- --
- ------------------------------------------ ------------- ------------ -----------
Total operating expenses 60,477,200 64,797,300 68,330,700
- ------------------------------------------ ------------- ------------ -----------
Income (loss) from operations (8,022,100) (443,600) 4,140,700
- ------------------------------------------ ------------- ------------ -----------
Interest expense (446,400) (464,900) (522,800)
Interest income 91,600 107,400 94,600
- ------------------------------------------ ------------- ------------ -----------
Income (loss) before income taxes (8,376,900) (801,100) 3,712,500
- ------------------------------------------ ------------- ------------ -----------
(Benefit from) provision for income taxes (2,969,300) (221,000) 1,485,100
- ------------------------------------------ ------------- ------------ -----------
Net income (loss) $(5,407,600) $(580,100) $2,227,400
========================================== ============= ============ ===========
Net income (loss) per share $(0.87) $(0.09) $0.36
========================================== ============= ============ ===========
Weighted average shares outstanding 6,205,700 6,138,100 6,170,700
========================================== ============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED AUGUST 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
Capital in
Common Excess of Retained
Stock Par Value Earnings Total
- -------------------------------- --------- ------------ ----------- -----------
<S> <C>
Balance, August 31, 1994 $57,700 $ 9,066,100 $6,052,700 $15,176,500
Issuance of Stock 3,200 821,700 -- 824,900
Tax Benefit from Stock Options
Exercised -- 650,900 -- 650,900
Net Income -- -- 2,227,400 2,227,400
- -------------------------------- --------- ------------ ----------- -----------
Balance, August 31, 1995 60,900 10,538,700 8,280,100 18,879,700
Issuance of Stock 900 233,000 -- 233,900
Tax Benefit from Stock Options
Exercised -- 24,600 -- 24,600
Net Loss -- -- (580,100) (580,100)
- -------------------------------- --------- ------------ ----------- -----------
Balance, August 31, 1996 61,800 10,796,300 7,700,000 18,558,100
Issuance of Stock 500 106,000 -- 106,500
Net Loss -- -- (5,407,600) (5,407,600)
- -------------------------------- --------- ------------ ----------- -----------
Balance, August 31, 1997 $62,300 $10,902,300 $2,292,400 $13,257,000
================================ ========= ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended August 31,
1997 1996 1995
- ------------------------------------------------------------------ --------------------- ---------------------------------------
<S> <C>
Cash Flows From (Used For) Operating Activities:
Net income (loss) $(5,407,600) $ (580,100) $2,227,400
Noncash expenses included in net income (loss)-
Depreciation and amortization 1,427,100 1,683,900 1,633,100
Deferred (benefit from) provision for income taxes (1,309,800) (198,300) (418,200)
Current (benefit from) provision for income taxes (1,659,500) (22,700) 1,903,300
Net (increase) decrease in noncash assets -
Accounts receivable, net 3,193,900 2,165,400 (2,714,300)
Costs and estimated earnings in excess of billings
on uncompleted contracts 6,828,400 (1,747,200) (2,747,600)
Prepaid expenses and other assets (314,000) (110,800) 179,400
Net increase (decrease) in nondebt liabilities -
Accounts payable and accrued expenses (370,900) (1,149,400) 1,702,700
Refunds of income taxes 400,400 14,700 50,200
Payments of income taxes (156,200) (445,500) (955,500)
Billings in excess of costs and estimated earnings
on uncompleted contracts (685,500) 148,400 47,100
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Net cash flows from (used for) operating activities 1,946,300 (241,600) 907,600
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Cash Flows From (Used For) Financing Activities:
Proceeds from issuance of common stock 106,500 233,900 824,900
Reduction of long-term debt (810,300) (4,489,100) (839,900)
Proceeds from issuance of long-term debt 481,200 3,000,000 --
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Net cash flows used for financing activities (222,600) (1,255,200) (15,000)
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Cash Flows Used For Investing Activities:
Purchase of property and equipment, net (699,000) (1,008,500) (1,067,200)
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Net cash flows used for investing activities (699,000) (1,008,500) (1,067,200)
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 1,024,700 (2,505,300) (174,600)
Cash and Cash Equivalents, beginning of year 1,308,600 3,813,900 3,988,500
- ------------------------------------------------------------------ --------------------- ---------------------------------------
Cash and Cash Equivalents, end of year $2,333,300 $1,308,600 $3,813,900
================================================================== ===================== =======================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1997, 1996, AND 1995
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation--
The accompanying consolidated financial statements present the accounts of EA
Engineering, Science, and Technology, Inc. (EA) and its wholly-owned
subsidiaries, EA International, Inc. and EA Financial, Inc., and its
wholly-owned subsidiaries, EA Global, Inc. and EA Engineering, Science, and
Technology de Mexico, S.A. de C.V. During fiscal 1995, EA Remediation
Technologies, Inc., formerly a wholly-owned subsidiary, was merged into EA.
The entities are collectively referred to herein as the "Company." All
significant intercompany transactions have been eliminated in consolidation.
Revenue Recognition--
The Company is a multidisciplinary environmental services organization
providing a wide range of consulting, engineering, remediation, and analytical
services. These services are generally performed under time and material,
fixed price, and cost plus fixed fee contracts which vary in length from one
month to ten years.
The Company accounts for contract revenues and costs under fixed price
contracts using the percentageof-completion method. The
percentage-of-completion is determined using the "cost-to-cost" method for
each contract cost component. Under this method, direct labor and other
contract costs incurred to date are compared to periodically revised estimates
of the total of each contract cost component at contract completion to
determine the percentage of revenues to be recognized. Revenues from time and
material and cost plus fixed fee contracts are recognized currently as the
work is performed. Provision for estimated losses on uncompleted contracts, to
the full extent of the loss, is made during the period in which the Company
first becomes aware that a loss on a contract is probable.
Contract costs and estimated earnings recognized in excess of amounts billed
are classified as current assets under "costs and estimated earnings in excess
of billings on uncompleted contracts." Billings in excess of contract costs
and estimated earnings are classified as current liabilities under "billings
in excess of costs and estimated earnings on uncompleted contracts."
Generally, contracts provide for the billing of costs incurred and estimated
fees on a monthly basis. Amounts included in "costs and estimated earnings in
excess of billings on uncompleted contracts" in the accompanying financial
statements will be billed within twelve months of the balance sheet date.
Major Clients--
Various agencies of the federal government accounted for approximately 50%,
53%, and 64% of the Company's net revenue for the years ended August 31, 1997,
1996, and 1995, respectively. Additionally,
<PAGE>
various agencies of the federal government accounted for approximately 40% and
48% of the Company's accounts receivable and costs and estimated earnings in
excess of billings on uncompleted contracts as of August 31, 1997 and 1996,
respectively.
Cash and Cash Equivalents--
Cash equivalents consist of money market instruments with a purchased original
maturity of three months or less, stated at cost, which approximates market.
Property and Equipment--
Property and equipment are depreciated using the straight-line method over
their estimated useful lives ranging from 3 to 10 years. Leasehold
improvements are amortized over the shorter of the estimated useful life or
the term of the lease.
Segment Information--
The Company operates within one industry segment, providing a wide range of
consulting, engineering, remediation, and analytical services.
Reclassifications--
Certain prior year balances have been reclassified to conform with current
year presentation.
Risks and Uncertainties--
Reliance on major government contracts subjects the Company to risks
associated with public budgetary restrictions and uncertainties, discrepancies
between awarded contract amounts and actual revenues, and cancellation at the
option of the government. The Company attempts to mitigate these risks by
staffing only to meet reasonably anticipated average workloads, by using
subcontractors to handle peak workloads, and by obtaining termination benefit
contract provisions. Cancellation of any of the Company's major government
contracts, however, could have a material adverse effect on the Company.
Use of Estimates--
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets, liabilities, revenues and expenses
in the financial statements and in the disclosures of contingent assets and
liabilities. While actual results could differ from these estimates,
management believes that actual results will not be materially different from
amounts provided in the accompanying consolidated financial statements.
Supplemental Disclosures of Cash Flow Information--
Cash paid during the years ended August 31, 1997, 1996, and 1995 for interest,
was $467,200, $474,200, and $521,700, respectively. Retirements of property
and equipment for the same periods were $897,200, $2,602,400, and $46,300,
respectively. The noncash tax benefit attributable to the exercise of non-
<PAGE>
qualified stock options was $24,600, and $650,900 for the years ended August
31, 1996 and 1995, respectively. There was no benefit for the year ended
August 31, 1997.
Accounting for Income Taxes--
Deferred income taxes are recorded to reflect the tax consequences on future
years for differences between the tax basis of assets and liabilities and
their financial reporting amounts.
Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." This statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. This statement is
effective for fiscal years beginning after December 15, 1995. Management has
determined that adoption of this Standard has not resulted in any material
changes to its financial statements.
In March 1995, the FASB issued Statement No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation." Companies have the option of adopting the new
accounting provisions or may elect to provide pro forma disclosures of net
income and earnings per share as if the accounting had been adopted.
Management has elected to continue to account for its stock-based compensation
in accordance with APB Opinion No. 25 and has provided pro forma disclosures
(see Note 8).
In February 1997, the FASB issued Statement No. 128 (SFAS 128), "Earnings Per
Share," which establishes new standards for computing and presenting earnings
per share. SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods. Management has
determined that the implementation of SFAS 128 would have no impact on the
Company's earnings per share amounts.
In February 1997, the FASB issued Statement No. 129 (SFAS 129), "Disclosure of
Information about Capital Structure," which eliminates the exemption of
nonpublic entities from certain disclosure requirements of APB Opinion No. 15
as provided by FASB Statement No. 21. SFAS 129 is effective for periods ending
after December 15, 1997. Management has determined that the implementation of
SFAS 129 will have no impact on the Company's financial reporting.
In June 1997, the FASB issued Statement No. 130 (SFAS 130), "Reporting
Comprehensive Income," which establishes standards for reporting and display
of comprehensive income and its components in a full set of general purpose
financial statements. SFAS 130 is effective for fiscal years beginning after
December 15, 1997. Management has not yet determined whether the
implementation of SFAS 130 will have any impact of the Company's financial
reporting.
In July 1997, the FASB issued Statement No. 131 (SFAS 131), "Disclosures About
Segments of an Enterprise and Related Information," which establishes a new
approach for determining segments within a company and reporting information
on those segments. SFAS 131 is effective for fiscal years beginning after
December 15, 1997. Management has not yet determined whether the
implementation of SFAS 131 will have any impact on the Company's current
method of disclosing business segment information.
<PAGE>
Note 2. INCOME TAXES:
The (benefit from) provision for income taxes includes current and deferred
tax amounts summarized as follows:
<TABLE>
<CAPTION>
Year Ended August 31,
- ------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------- -------------------
<S> <C>
Current tax expense (benefit):
Federal $(1,659,500) $ (18,400) $1,602,400
State -- (4,300) 300,900
- ---------------------------------------------------------------------------------------------- -------------------
(1,659,500) (22,700) 1,903,300
- ---------------------------------------------------------------------------------------------- -------------------
Deferred tax expense (benefit):
Federal (1,309,800) (160,600) (352,100)
State -- (37,700) (66,100)
- ---------------------------------------------------------------------------------------------- -------------------
(1,309,800) (198,300) (418,200)
- ---------------------------------------------------------------------------------------------- -------------------
(Benefit from) provision for income taxes $(2,969,300) $(221,000) $1,485,100
============================================================================================== ===================
</TABLE>
Total deferred tax assets and liabilities as of August 31, 1997 and 1996 and
the sources of the differences between the tax and financial reporting basis
of the Company's assets and liabilities which give rise to the deferred tax
assets and liabilities are as follows:
Year Ended August 31,
- ------------------------------------- ----------------------------
1997 1996
- ------------------------------------- ------------- -------------
Deferred tax assets:
Property and equipment $ 929,600 $ 694,200
Accrued expenses and reserves 1,878,900 962,800
Net operating loss 398,200 46,700
- ------------------------------------- ------------- -------------
$3,206,700 $1,703,700
===================================== ============= =============
Deferred tax liabilities:
Prepaid expenses $ 99,300 $ 109,700
Miscellaneous 203,500 --
- ------------------------------------- ------------- -------------
$ 302,800 $ 109,700
===================================== ============= =============
The net deferred tax assets of $2,903,900 and $1,594,000 as of August 31, 1997
and 1996 are included to the extent appropriate in Prepaid expenses and other
and Other Assets in the accompanying consolidated balance sheets.
<PAGE>
Reconciliation of the statutory federal income tax rate and the effective
income tax rate is summarized as follows:
Year Ended August 31,
- ------------------------------------------------------ -----------------------
1997 1996 1995
- ------------------------------------------------------ ------- -------- ------
Statutory federal income tax (benefit) rate 34.0% 34.0% 34.0%
State income tax, net of federal income tax effect 5.3 5.3 5.3
Non-recognition of future benefit from foreign loss (0.4) (4.8) --
Other (3.5) (6.9) 0.7
- ------------------------------------------------------ ------- -------- ------
Effective income tax rate 35.4% 27.6% 40.0%
====================================================== ======= ======== ======
Note 3. ACCOUNTS RECEIVABLE:
Accounts receivable consist of the following:
Year Ended August 31,
- --------------------------------------- -------------------------
1997 1996
- --------------------------------------- ------------ -----------
Contract accounts receivable $ 8,802,400 $12,931,600
Retainage by clients 1,228,400 1,373,300
- --------------------------------------- ------------ -----------
Total accounts receivable 10,030,800 14,304,900
Less-Allowance for doubtful accounts (532,000) (1,612,200)
- --------------------------------------- ------------ -----------
Accounts receivable, net $ 9,498,800 $12,692,700
======================================= ============ ===========
Management anticipates that substantially all retainages will be billed within
one year.
Note 4. BANK FINANCING ARRANGEMENTS:
The Company entered into a new credit arrangement with a regional bank during
fiscal year 1997 consisting of: (i) an $8,500,000 revolving line of credit
secured by receivables; (ii) a $500,000 term loan; and (iii) an equipment line
of credit of $1,500,000. Of the $8,500,000 revolving line of credit,
$2,500,000 is available for acquisitions, joint ventures and licensing
agreements. Borrowings under the revolving line of credit are limited to a
percentage of certain accounts receivable and costs and estimated earnings in
excess of billings on uncompleted contracts (up to a maximum of $4,000,000).
The agreement was effective August 22, 1997. During fiscal years 1997, 1996,
and 1995, the Company was either in compliance or had obtained waivers on all
covenants related to these and prior arrangements.
<PAGE>
Short-term borrowings information resulting from the financing arrangements is
as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
August 31, August 31, August 31,
---------- ---------- ----------
1997 1996 1995
- -------------------------------------------------- ---------- ---------- ----------
<S> <C>
Balance as of end of period $ -- $ -- $ --
Maximum outstanding month-end balance during
the period 3,615,300 5,490,900 3,711,300
Average outstanding month-end balance during
the period 564,000 598,800 293,600
Weighted average interest rate during the period 11.5% 8.4% 8.6%
Interest rate at the end of period 11.5% 8.3% 8.8%
================================================== ========== ========== ==========
</TABLE>
The weighted average interest rate has been calculated based upon the actual
daily interest expense and the daily average balance outstanding. For the year
ended August 31, 1997, the Company only maintained short-term borrowing
balances during the months of April through August. Prior to April and at the
end of August 1997, all borrowings were considered long term. For the year
ended August 31, 1996, short-term balances were for nine months through May
31, 1996.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
August 31,
- -------------------------------------------------------------------------- -----------------------
1997 1996
- -------------------------------------------------------------------------- ----------- ----------
<S> <C>
Revolving credit facility payable to commercial bank effective August 22,
1997, interest charged at LIBOR plus 250;
facility expires September 1999 $1,827,700 $2,276,400
Note payable to a commercial bank payable in equal monthly
installments of $29,600, which includes interest at 9.1%,
through December 1999 secured by certain computer
equipment 720,500 --
Note payable to a commercial bank payable in equal monthly
installments of $43,651 through December 1997. There-
after, $21,429, plus interest charged at LIBOR plus 250;
secured by leasehold improvements and certain analytical
laboratory equipment 431,800 1,032,700
- -------------------------------------------------------------------------- ----------- ----------
Total long-term debt 2,980,000 3,309,100
Less-current portion (648,300) (644,600)
- -------------------------------------------------------------------------- ----------- ----------
Long-term portion $2,331,700 $2,664,500
========================================================================== =========== ==========
</TABLE>
<PAGE>
The debt repayment schedule for the outstanding notes payable is as follows:
Year Ending
August 31,
- ------------------------------------------------ ------------------
1998.......................................... $ 648,300
1999.......................................... 416,500
2000.......................................... 1,915,200
2001 and thereafter........................... 0
- ------------------------------------------------ ------------------
Total notes payable........................... $2,980,000
================================================ ==================
The fair value of the Company's outstanding indebtedness approximated its
carrying value at August 31, 1997.
Note 5. LEASE COMMITMENTS:
The Company's central office, laboratory facilities, regional offices, and
certain furniture and equipment are held under operating leases. These leases
expire at various dates through fiscal 2007, and certain leases call for
annual proportionate increases due to property taxes and certain other
operating expenses. Lease expense amounted to $8,030,200, $8,912,300, and
$8,469,300 for the years ended August 31, 1997, 1996, and 1995, respectively.
Lease expense included payments of approximately $2,016,500, $2,054,900, and
$1,985,300 for years ended August 31, 1997, 1996, and 1995, respectively, to
partnerships consisting of the Chairman of the Board of EA and certain members
of his family for its central office, and Loveton, Maryland, regional office
and laboratory facility. These payments include reimbursements of
approximately $965,000 per year for pass-through taxes and operating expenses
incurred by the lessor which include local property taxes, janitorial and
mechanical equipment maintenance, and utility costs related to the operation
of both office and laboratory leased space. Management of the Company believes
the terms and conditions of the transactions between the Company and entities
with which the Chairman is affiliated, are at least as favorable to the
Company as could have been obtained from third parties and are in the best
interest of the Company.
The minimum lease commitments under noncancellable operating leases are as
follows:
Year Ending
August 31,
- ----------------------------------------------------------
1998................................... $ 4,396,700
1999................................... 3,000,000
2000................................... 2,189,100
2001 .................................. 1,850,300
2002................................... 1,771,500
2003 and thereafter.................... 7,660,500
- ----------------------------------------------------------
Total minimum payments................. $20,868,100
==========================================================
<PAGE>
Note 6. NET INCOME (LOSS) PER SHARE:
Net income (loss) per share is based on the weighted average number of shares
of common stock and common stock equivalents outstanding during the period,
and have been adjusted retroactively to reflect two 3 for 2 stock splits,
effected in the form of 50% stock dividends wherein, on February 23, 1994 and
July 5, 1994, 1 additional share of stock was issued for each 2 shares
outstanding as of the record dates of February 8, 1994 and June 28, 1994,
respectively. Common stock equivalents are calculated using the treasury stock
method. All disclosures with regard to the shares of common stock have been
adjusted to reflect these stock splits.
Note 7. PROFIT SHARING:
EA maintains a defined contribution plan in which all employees who are at
least 21 years of age and have completed six months of credited service, as
defined by the plan, are eligible to participate. The plan provides for
discretionary employer contributions for each fiscal year, in amounts
determined annually by the Board of Directors. The plan also includes a 401(k)
provision, allowing for Company matching contributions. For the years ended
August 31, 1997, 1996, and 1995, matching contributions to the plan made under
the 401(k) provisions of the plan, were $534,900, $729,200, and $710,400,
respectively. Certain officers and stockholders of the Company serve as
trustees to the plan, as appointed by the Board of Directors.
Note 8. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS:
The Company maintains a Stock Option Plan (the Plan), which provides for the
grant of nonqualified stock options and incentive stock options to certain key
employees and officers of the Company. The exercise price of an option granted
under the Plan may not be less than the fair market value of the underlying
shares of Common Stock on the date of the grant. A total of 580,200 options
are issued and outstanding as of August 31, 1997 having an average exercise
price of $2.34. Of the outstanding options, 200,000 were granted to Donald A.
Deieso on February 26, 1997 when he joined the Company as President and CEO.
The exercise amount of the 200,000 shares is $2.25, which was equal to the
market price on the grant date. There are 340,000 options available for
issuance as of August 31, 1997.
The Company maintains an Employee Stock Purchase Plan to provide eligible
employees with the opportunity to purchase shares of the Company's Common
Stock through voluntary payroll deductions. Under the Plan, eligible employees
may purchase shares through monthly payroll deductions at 95% of current
market value at the time of purchase. The Company pays all administrative
expenses related to employee purchases. A total of 155,400 shares remain
authorized for distribution under the Plan as of August 31, 1997.
The Company maintains two Non-Employee Director Stock Option Plans (1993 and
1995) which provide for the granting of nonqualified stock options to its
non-employee directors. The exercise price of the 36,000 options, which were
outstanding as of August 31, 1997 ranged between $2.375 and $6.125, which
equaled the fair market value at the dates of grant. A total of 41,500 options
remain reserved for the Director Stock Option Plans as of August 31, 1997.
<PAGE>
The Company accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for plans been
determined consistent with FASB Statement No. 123, the Company's net loss and
loss per share would have changed the following pro forma amounts:
1997 1996
- --------------------- -------------- ---------- ---------
Net Loss: As Reported $5,407,600 $580,100
Pro Forma 5,470,200 580,100
Loss Per Share As Reported $0.87 $0.09
Pro Forma 0.88 0.09
A summary of the status of the Company's Employee Stock Option Plan and
Non-Employee Director Stock Option Plans (1993 and 1995) follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------- --------------------------- ----------------------------
Shares Wgtd.Avg. Shares Wgtd.Avg. Shares Wgtd.Avg.
(000) Exer.Price (000) Exer.Price (000) Exer.Price
------------ --------------- ----------- --------------- ----------- ----------------
<S> <C>
Outstanding at beginning of year 180 $4.13 341 $4.30 477 $2.34
Granted 506 2.10 11 4.61 134 6.13
Exercised -- -- (28) 1.41 (265) 1.68
Forfeited (70) 4.96 (144) 5.08 (5) 4.37
Expired -- -- -- -- -- --
------------ --------------- ----------- --------------- ----------- ----------------
Outstanding at end of year 616 2.37 180 4.13 341 4.30
------------ --------------- ----------- --------------- ----------- ----------------
Exercisable at year end 164 $2.99 136 $3.40 128 $2.40
Weighted Average Fair Value of
Options Granted $0.96 $1.79 N/A
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997 and 1996: Risk-free interest rates ranging
from 5.19% to 6.68%; expected volatility is 62%.
Note 9. COMPANY RESTRUCTURING
On March 25, 1997 the Company announced a major organizational realignment to
reposition itself in the marketplace. In connection with the restructuring,
the Company incurred charges of $3,000,100 during the third quarter related to
severance, planned reduction in office space, the suspension of the
implementation of a new project/financial system, and other related costs.
<PAGE>
This restructuring included a staff reduction of approximately 125 employees.
As of August 31, 1997, the Company had accruals of $880,100 included as other
current liabilities in the accompanying consolidated balance sheet for costs
to be incurred in future periods.
Note 10. RELATED PARTY TRANSACTIONS
At the request of its former primary lender and in order to maintain its
favorable relationship with that lender, the Company in December 1996
purchased from this lender the secured loans of three EA officers. These
interest-free demand loans, in the aggregate amount of $301,000, are secured
by pledges of the Company's common stock.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
(PAGE)
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
EA Engineering, Science, and Technology, Inc.:
We have audited the accompanying consolidated balance sheets of EA
Engineering, Science, and Technology, Inc. (a Delaware corporation) and
subsidiaries as of August 31, 1997 and 1996, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended August 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EA Engineering, Science, and
Technology, Inc. and subsidiaries as of August 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years
in the period ended August 31, 1997, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Baltimore, Maryland
November 14, 1997
(PAGE)
DIRECTORS AND OFFICERS
Directors
Edmund J. Cashman, Jr.*
Senior Executive Vice President and Director of Legg Mason, Inc.; Senior
Executive Vice President of Legg Mason Wood Walker, Incorporated; Director of
Bartlett Capital Trust, Inc.
Donald A. Deieso, Ph.D.
President and Chief Executive Officer of the
Company
Loren D. Jensen, Ph.D.
Chairman of the Board of the Company
<PAGE>
Rudolph P. Lamone, Ph.D.*
Chairman of the Board, Michael D. Dingman
Center for Entrepreneurship, University of
Maryland College of Business and Management
Cleaveland D. Miller, Esq.*
Chairman, Semmes, Bowen & Semmes,
a Professional Corporation; Director,
Barry's Jewelers, Inc.
George G. Radcliffe*
Chairman of the Board, Emeritus, The Baltimore
Life Insurance Company; Trustee Emeritus of
The Johns Hopkins University
*Audit and Compensation Committee Member
(PAGE)
Officers
Loren D. Jensen, Ph.D., Chairman of the Board; Director, Yaffe & Company, Inc.
Donald A. Deieso, Ph.D., President and Chief Executive Officer
Bijan S. Saless, Executive Vice President, Sales and Marketing
Joseph A. Spadaro, Executive Vice President, Treasurer,
Assistant Secretary, and Chief Financial Officer
Charles R. Flynn, Ph.D., Senior Vice President,
Market Sector Director, Federal Programs
Edward M. Greco, Senior Vice President,
President, EA International, Inc.
David S. Santoro, Senior Vice President, Project Risk Management
Jack P. Adler, Esq., Vice President, Secretary and General Counsel
H. Lee Becker, Vice President,
Branch Operations
Clayton A. Bock, Vice President,
Director, Health and Safety
B. Fritts Golden, Vice President,
Branch Operations
Anwer J. Hasan, Vice President,
Project Administration
<PAGE>
Reza Karimi, Ph.D., Vice President,
Director, EA Laboratories
Ellen Leinfuss, Vice President,
Marketing and Communications
Donald R. Lutch, Vice President,
National Technical Director
Neil P. Mulvey, Vice President,
Branch Operations
Robert P. Newman, Vice President,
National Technical Director
Barbara L. Posner, Vice President,
Finance and Administration
Robert J. Reimold, Ph.D., Vice President,
National Technical Director
(PAGE)
Stockholder Information
Independent Public Accountants
Arthur Andersen LLP
Baltimore, Maryland
Legal Counsel
Semmes, Bowen & Semmes
Baltimore, Maryland
Registrar and Transfer Agent
ChaseMellon Shareholder Services
Pittsburgh, Pennsylvania
Common Stock Listing
NASDAQ Symbol: EACO
Annual Meeting
The Annual Meeting of the Stockholders will be held on January 14, 1998 at
9:00 a.m. (EST) at Marriott's Hunt Valley Inn in Hunt Valley, Maryland.
SEC Form 10-K
The Company's Form 10-K Annual Report for the year ended August 31, 1997 has
been filed with the Securities and Exchange Commission. A copy of this
Report is available upon request.
<PAGE>
Corporate Headquarters
EA Engineering, Science, and Technology, Inc.
11019 McCormick Road
Hunt Valley, Maryland 21031
(410) 584-7000
www.eaest.com.
Marketing for the Registrant's Common Equity and Related Stockholder Matters
On October 31, 1986, EA common stock began public trading in the
over-the-counter market under the symbol "EACO." The following table shows the
high and low closing sales price reported on the NASDAQ National Market
System. Such over-the-counter market quota-tions, however, reflect interdealer
prices, without retail markup, markdown, or commission and may not necessarily
represent actual transactions. These prices are adjusted to reflect EA's two 3
for 2 splits, each effected in the form of a 50 percent stock dividend on
January 25, 1994 and June 14, 1994.
High Low
- ------------------------------- ------------ ------------
Fiscal 1996:
First Quarter 5.25 3.75
Second Quarter 4.13 3.50
Third Quarter 4.00 2.88
Fourth Quarter 3.50 2.25
Fiscal 1997:
First Quarter 2.59 1.50
Second Quarter 2.75 1.75
Third Quarter 2.25 1.63
Fourth Quarter 2.22 1.75
(PAGE)
BACK COVER
Corporate Headquarters
EA Engineering, Science, and Technology, Inc.
11019 McCormick Road
Hunt Valley, MD 21030
Phone: (410) 584-7000
Fax: (410) 771-1625
www.eaest.com
List of cities where EA Engineering, Science, and Technology, Inc. has a
branch office. Each location is separated by a different shape building
block.
Anchorage, AK . Fairbanks, AK . Sacramento, CA . San Francisco, CA . Santa
Barbara, CA . New Castle, DE . Washington, DC . Miami, FL . Pensacola, FL .
Atlanta, GA . Yigo, GU . Honolulu, HI . Chicago, IL . Baltimore, MD . Boston,
MA . Mexico City, MX . Lincoln, NE . Berkeley Heights, NJ . Newburgh, NY .
Syracuse, NY . Dallas, TX . San Antonio, TX . Williamsburg, VA . Seattle, WA
EXHIBIT 22
SUBSIDIARIES OF THE COMPANY
Subsidiaries
EA Engineering, Science, and
Technology de Mexico, S.A. de C.V.
Newton 53, Suite 11
Colonia Polanco-Chapultepec
Mexico, D.F. 11560
EA Financial, Inc.
900 Market Street, Suite 200
Wilmington, Delaware 19801
EA International, Inc.
11019 McCormick Road
Hunt Valley, Maryland 21031
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 2,333,300
<SECURITIES> 0
<RECEIVABLES> 9,548,100
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,284,600
<PP&E> 16,264,000
<DEPRECIATION> 13,867,200
<TOTAL-ASSETS> 26,390,100
<CURRENT-LIABILITIES> 10,801,400
<BONDS> 0
62,300
0
<COMMON> 0
<OTHER-SE> 13,194,700
<TOTAL-LIABILITY-AND-EQUITY> 26,390,100
<SALES> 52,455,100
<TOTAL-REVENUES> 73,890,900
<CGS> 60,477,200
<TOTAL-COSTS> 81,913,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 354,800
<INCOME-PRETAX> (8,376,900)
<INCOME-TAX> (2,969,300)
<INCOME-CONTINUING> (5,407,600)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,407,600)
<EPS-PRIMARY> (0.87)
<EPS-DILUTED> (0.87)
</TABLE>
