<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended: March 31, 1996
OR
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number:
0-19836
America Online, Inc.
(Exact name of registrant as specified in its charter)
Delaware
54-1322110
(State or other jurisdiction of (I.R.S. Employer Identification
No.)
incorporation or organization)
8619 Westwood Center Drive, Vienna, Virginia 22182-2285
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (703) 448-8700
Former name, former address, and former year, if changed since last report:
Not applicable
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 the number of shares outstanding of each of the Issuer's classes of
Common Stock, as of the latest practicable date.
Title of each class
Common stock $.01 par value
Shares outstanding on April 30,
1996................................................90,765,066
<PAGE>
AMERICA ONLINE, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets-March 31, 1996
and June 30, 1995 3
Consolidated Statements of Operations-Three
months ended March 31, 1996 and 1995 4
Consolidated Statements of Operations-Nine
months ended March 31, 1996 and 1995 5
Consolidated Statements of Cash Flows-Nine
months ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
Exhibit Index 21
<PAGE>
AMERICA ONLINE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(amounts in thousands, except share data)
<TABLE>
<S> <C> <C>
March 31, June 30,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $119,202 $45,877
Short-term investments 10,130 18,672
Trade accounts receivable 39,355 32,176
Other receivables 18,774 11,381
Prepaid expenses and other current assets 46,495 25,527
Total current assets 233,956 133,633
Property and equipment at cost, net 91,646 70,919
Other assets:
Product development costs, net 37,022 18,949
Deferred subscriber acquisition costs, net 277,615 77,229
License rights, net 4,000 5,579
Other assets 27,069 9,121
Deferred income taxes 118,432 35,627
Goodwill, net 53,554 54,356
$ 843,294 $405,413
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 136,407 $ 84,640
Accrued personnel costs 7,410 2,863
Other accrued expenses and liabilities 84,313 23,509
Deferred revenue 33,527 20,021
Line of credit - 484
Current portion of long-term debt and
capital lease obligations 1,735 1,845
Total current liabilities 263,392 133,362
Long-term liabilities:
Notes payable 20,061 17,369
Capital lease obligations 1,098 2,158
Deferred income taxes 118,432 35,627
Deferred rent 332 85
Total liabilities 403,315 188,601
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized, none issued - -
Common stock, $.01 par value, 300,000,000 shares
authorized, 89,946,490 and 76,727,477 shares
issued and outstanding at March 31, 1996
and June 30,1995, respectively 899 767
Additional paid-in capital 462,913 252,668
Accumulated deficit (23,833) (36,623)
Total stockholders' equity 439,979 216,812
$ 843,294 $ 405,413
See accompanying notes.
3
</TABLE>
<PAGE>
AMERICA ONLINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(amounts in thousands, except per share data)
<TABLE>
Three months ended
March 31,
<S> <C> <C>
1996 1995
Revenues:
Online service revenues $285,481 $95,391
Other revenues 26,859 13,713
Total revenues 312,340 109,104
Costs and expenses:
Cost of revenues 183,644 66,526
Marketing 56,789 20,234
Product development 15,398 3,313
General and administrative 29,973 11,421
Acquired research and development - 7,550
Amortization of goodwill 1,816 551
Total costs and expenses 287,620 109,595
Income (loss) from operations 24,720 (491)
Other income 1,280 829
Merger expenses (848) -
Income before provision for
income taxes 25,152 338
Provision for income taxes (10,025) (3,634)
Net income (loss) $ 15,127 $ (3,296)
Earnings (loss) per share $ 0.14 $ (0.05)
Weighted average shares outstanding 111,232 71,016
</TABLE>
See accompanying notes.
4
<PAGE>
AMERICA ONLINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(amounts in thousands, except per share data)
<TABLE>
Nine months ended
March 31,
<S> <C> <C>
1996 1995
Revenues:
Online service revenues $ 688,485 $ 211,045
Other revenues 70,902 31,390
Total revenues 759,387 242,435
Costs and expenses:
Cost of revenues 448,649 142,290
Marketing 145,871 47,856
Product development 35,308 8,664
General and administrative 74,439 24,910
Acquired research and development 16,981 50,335
Amortization of goodwill 5,228 551
Total costs and expenses 726,476 274,606
Income (loss) from operations 32,911 (32,171)
Other income 3,572 2,301
Merger expenses (848) (1,710)
Income (loss) before provision for
income taxes 35,635 (31,580)
Provision for income taxes (21,885) (9,977)
Net income (loss) $ 13,750 $ (41,557)
Earnings (loss) per share: $ 0.13 $ (0.62)
Weighted average shares outstanding 108,346 67,529
</TABLE>
See accompanying notes.
5
<PAGE>
AMERICA ONLINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(amounts in thousands)
<TABLE>
Nine months ended March 31,
<S> <C> <C>
1996 1995
Cash flows from operating activities
Net income (loss) $13,750 $(41,557)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation and amortization 23,106 5,240
Amortization of subscriber acquisition costs 76,173 37,936
Loss on sale of property and equipment 44 37
Charge for acquired research and development 16,981 50,335
Changes in assets and liabilities:
Trade accounts receivable (6,851) (2,989)
Other receivables (7,393) (10,138)
Prepaid expenses and other current assets (20,968) (12,831)
Deferred subscriber acquisition costs (276,559) (65,526)
Other assets (18,129) (373)
Trade accounts payable 51,653 41,808
Accrued personnel costs 4,547 733
Other accrued expenses and liabilities 60,641 599
Deferred revenue 13,506 4,383
Deferred income taxes 21,885 9,360
Deferred rent 247 (10)
Total adjustments (61,117) 58,564
Net cash provided by (used in) operating
activities (47,367) 17,007
Cash flows from investing activities:
Short-term investments 8,542 (708)
Purchase of property and equipment (33,963) (33,388)
Product development costs (22,675) (6,693)
Sale of property and equipment - 180
Purchase costs of acquired businesses (5,857) (19,648)
Net cash used in investing activities (53,953) (60,257)
Cash flows from financing activities:
Proceeds from issuance of common stock, net 173,607 4,526
Principal and accrued interest payments on
revolving line of credit and long-term debt (783) (2,612)
Proceeds from revolving line of credit
and issuance of long-term debt 3,000 12,295
Proceeds (payments) under capital lease
obligations (1,179) 355
Net cash provided by financing activities 174,645 14,564
Net increase (decrease) in cash and cash
equivalents 73,325 (28,686)
Cash and cash equivalents at beginning of period 45,877 44,093
Cash and cash equivalents at end of period $119,202 $15,407
Supplemental cash flow information
Cash paid during the period for:
Interest 1,251 321
Income taxes - -
</TABLE>
See accompanying notes.
6
<PAGE>
AMERICA ONLINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements,
which include the accounts of America Online, Inc. (the "Company") and its
wholly and majority owned subsidiaries, have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, consisting only of
normal recurring accruals, considered necessary for a fair presentation, have
been included in the accompanying unaudited financial statements. All
significant intercompany transactions and balances have been eliminated in
consolidation. Prior period financial statements have been restated for
business combinations accounted for under the pooling of interests method of
accounting unless the effect of the business combination is not material to
the consolidated financial statements of the Company. Certain amounts in
prior years' consolidated financial statements have been reclassified to
conform to the current year presentation. Operating results for the three
and nine months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the full year ending June 30, 1996. For
further information, refer to the consolidated financial statements and notes
thereto, included in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1995.
Note 2. Stockholders' Equity
In October 1995 the Company completed a public stock offering of
3,913,266 shares of common stock at a price of $29.1875 per share. Pursuant
to an option granted to the underwriters to cover overallotments, an
additional 1,050,000 shares of common stock were sold to the public in
November 1995 at a price of $29.1875 per share.
In October 1995, the Shareholders of the Company approved an increase of
its authorized common stock to 300,000,000 shares.
In November 1995, the Company effected a two-for-one split of the
outstanding shares of common stock. Accordingly, all data shown in the
accompanying consolidated financial statements and notes has been
retroactively adjusted to reflect the stock split.
Note 3. Change in Accounting Estimate
Effective July 1, 1995, the Company modified the components of
subscriber acquisition costs deferred, and changed the period over which it
amortizes subscriber acquisition costs. The period over which the Company
amortizes subscriber acquisition costs was changed from twelve and eighteen
months to twenty-four months, in order to more appropriately match subscriber
acquisition costs with associated online service revenues. The effect of
this change in accounting estimate for the three and nine months ended March
31, 1996 was to increase the net income by $15,922,000 ($.14 per share) and
$23,781,000 ($.22 per share), respectively.
Note 4. Income Taxes
The components of the provision for income taxes are as follows:
<TABLE>
Nine
Quarter Months
Ended Ended
<S> <C> <C>
3/31/96 3/31/96
Current:
Federal $ - $ -
State - -
Total current $ - $ -
Deferred:
Federal $ 8,970,000 $ 19,580,000
State 1,055,000 2,305,000
Total deferred $10,025,000 $ 21,885,000
Total $10,025,000 $ 21,885,000
</TABLE>
The provision for income taxes differs from the amount computed by
applying the statutory federal income tax rate of 34% to income before
provision for income taxes as follows:
<TABLE>
Nine
Quarter Months
Ended Ended
<S> <C> <C>
3/31/96 3/31/96
Tax computed at statutory rate $ 8,552,000 $ 12,695,000
Increase resulting from:
State taxes, net of federal income
tax benefit 1,055,000 2,305,000
Non-deductible charge for purchased
research and development - 5,773,000
Loss for which no tax benefit is
derived 180,000 662,000
Other 238,000 450,000
$10,025,000 $ 21,885,000
</TABLE>
Deferred income taxes arise because of differences in the treatment of
income and expense items for financial reporting and income tax purposes,
primarily relating to subscriber acquisition and product development costs.
As of March 31, 1996, the Company had available net operating loss
carryforwards of approximately $394,237,000 for tax purposes, which will be
available, subject to certain annual limitations, to offset future taxable
income. If not used, these loss carryforwards will expire between 2002 and
2011. To the extent that net operating loss carryforwards, when realized,
relate to stock option deductions, the resulting benefits will be credited to
stockholders' equity.
Significant components of the Company's deferred tax liabilities and
assets as of March 31, 1996 are as follows:
<TABLE>
<S> <C>
Deferred tax liabilities:
Capitalized software costs $ 13,935,000
Deferred subscriber acquisition costs 104,497,000
Net deferred tax liabilities $ 118,432,000
Deferred tax assets:
Net operating loss carryforward $ 148,740,000
Total deferred tax assets 148,740,000
Valuation allowance for deferred assets (30,308,000)
Net deferred tax assets $ 118,432,000
</TABLE>
Note 5. Business Combinations
On February 1, 1996, the Company completed its merger with Johnson-Grace
Company (JG), in which JG became a wholly-owned subsidiary of the Company.
The Company issued 1,617,778 shares of its common stock for all the
outstanding common and preferred stock of JG. Additionally, 72,429 shares
of the Company's common stock were reserved for outstanding stock options
issued by JG and being assumed by the Company. The merger was accounted for
as a pooling of interests, and accordingly, the accompanying financial
statements have been restated to include the accounts and operations of JG
for all periods presented prior to the merger.
Separate results of the combining entities for the nine months ended
March 31, 1996 and 1995 are as follows:
<TABLE>
Nine Months ended Nine Months ended
March 31, 1996 March 31, 1995
<S> <C> <C>
Total revenues
AOL $ 759,304,000 $ 242,435,000
JG 1,272,000 -
Less intercompany sales (1,189,000) -
$ 759,387,000 $ 242,435,000
Net income (loss)
AOL $ 18,375,000 $ (39,836,000)
JG (3,777,000) (1,721,000)
Less intercompany (848,000) -
$ 13,750,000 $ (41,557,000)
</TABLE>
Note 6. Legal Proceedings
From July 1995 through November 1995, thirteen class action suits were
filed against the Company in a number of state courts seeking unspecified
damages for alleged breach of contract, fraud and unfair trade practices
arising from the Company's billing practices. The primary substantive
allegations in each case involve claims of overcharging customers arising out
of changes to the Company's billing system relating to the costs the Company
incurs in providing telecommunications services. The cases allege that
certain aspects of the Company's billing practices were not disclosed to
customers. The Company does not believe that these proceedings will have a
material effect on the financial position of the Company.
Note 7. Subsequent Events
In May 1996, the Company entered into a joint venture with Mitsui & Co.,
Ltd. (Mitsui) and Nihon Keizai Shimbun, Inc., (Nikkei) to offer interactive
online services in Japan. The joint venture will consist of America Online
owning 50%, Mitsui 40% and Nikkei 10% . Mitsui and Nikkei will contribute
approximately $56 million to fund the launch of the service. In addition,
Mitsui purchased 1,000 shares of convertible preferred stock in America
Online for approximately $28 million. The preferred stock is convertible to
common stock and converts upon the second anniversary of the formation of the
Joint Venture, together with an accrued dividend of 4%, at fair market value
of common stock at the time of conversion.
In connection with the move of the Company's headquarters to Sterling,
Virginia, in March 1996, the Company entered into a Purchase Agreement
pursuant to which the Company agreed to purchase unimproved land, and in
April 1996, the Company entered into a Purchase Agreement pursuant to which
the Company agreed to purchase improved land contiguous with the unimproved
land. The Company did not close on the Purchase Agreements, and in May 1996,
the Company assigned its rights and obligations under the Purchase Agreements
to a limited partnership. Also in May 1996, the limited partnership closed
under the Purchase Agreements and purchased the properties and at that time
arranged to finance various building improvements and expansion. Commencing on
approximately December 31, 1996, the limited partnership will lease the
properties to the Company for an initial five-year term, renewable up to a
maximum term of thirty-seven years for a total commitment of approximately
$46,600,000.
<PAGE>
Item 2. Management's Discussion and Analysis Of Financial Condition and
Results of Operations
The following information should be read in conjunction with the
consolidated financial statements and the notes thereto included in Item 1 of
this Quarterly Report, and the financial statements and the notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K for the year
ended June 30, 1995.
The Company's online service revenues are generated primarily from
subscribers paying a monthly membership fee and hourly charges based on usage
in excess of the number of hours of usage provided as part of the monthly
fee.
Through December 31, 1994, the standard monthly membership fee for the
AOL Brand (AOL), which includes five hours of service, was $9.95, with a
$3.50 hourly fee for usage in excess of five hours per month. Effective
January 1, 1995 the hourly fee for usage in excess of five hours per month
decreased from $3.50 to $2.95, while the monthly membership fee remained
unchanged at $9.95.
In May 1996, the Company announced an additional pricing plan for AOL to
improve retention among its heavier users. The new pricing plan, which
becomes effective July 1, 1996, includes 20 hours of service for $19.95, with
a $2.95 hourly fee for usage in excess of 20 hours per month. The Company
expects that the new pricing plan will result in an increased number of hours
of usage relative to revenues and a reduction in gross margin. The Company
expects that this impact will partially be offset by lower per hour data
network costs as a higher percentage and more network traffic is carried on
AOLnet (see Cost of Revenues).
In October 1995, the Company launched its Internet service, Global
Network Navigator (GNN). The service is aimed at the segment of online
consumers who seek a full-featured Internet-based service. The current
standard monthly membership fee for GNN, which includes 20 hours of service,
is $14.95, with a $1.95 hourly fee for usage in excess of the 20 hours per
month.
The Company's other revenues are generated primarily from the sale of
merchandise, data network services, online transactions and advertising,
production services as well as development and licensing fees.
The online services and Internet markets are highly competitive. The
Company believes that existing competitors, which include, among others,
commercial online services such as CompuServe and Prodigy, Internet-based
services, including, among others, the Microsoft Network, and Internet
service providers such as long distance and regional telephone companies, are
likely to enhance their service offerings. In addition, new competitors,
including Internet directory services and various media companies, have
entered or announced plans to enter the online services and Internet markets,
resulting in greater competition for the Company. The competitive environment
could require additional pricing programs and increased spending on
marketing, content procurement and product development; limit the Company's
opportunities to enter into and/or renew agreements with content providers
and distribution partners; limit the Company's ability to grow its subscriber
base; and result in increased attrition in the Company's subscriber base.
Any of the foregoing events could result in an increase in costs as a
percentage of revenues, and may have a material adverse effect on the
Company's financial condition and operating results.
<PAGE>
Results of Operations
Online Service Revenues
For the three months ended March 31, 1996, online service revenues
increased from $95,391,000 to $285,481,000, or 199%, over the three months
ended March 31, 1995. This increase was primarily attributable to a 138%
increase in the number of AOL subscribers. The percentage increase in online
service revenues for the three months ended March 31, 1996 was greater than
the percentage increase in AOL subscribers principally due to an increase in
the average monthly online service revenue per AOL subscriber, which
increased from $16.34 in the three months ended March 31, 1995 to $18.72 in
the three months ended March 31, 1996.
For the nine months ended March 31, 1996, online service revenues
increased from $211,045,000 to $688,485,000, or 226%, over the nine months
ended March 31, 1995. This increase was primarily attributable to a 138%
increase in the number of AOL subscribers. The percentage increase in online
service revenues for the nine months ended March 31, 1996 was greater than
the percentage increase in AOL subscribers principally due to an increase in
the average monthly online service revenue per AOL subscriber, which
increased from $16.14 in the nine months ended March 31, 1995 to $18.14 in
the nine months ended March 31, 1995.
Other Revenues
For the three months ended March 31, 1996, other revenues, consisting
principally of the sale of merchandise, data network services, online
transactions and advertising, production services as well as development and
licensing fees increased from $13,713,000 to $26,859,000, or 96% over the
three months ended March 31, 1995. For the nine months ended March 31, 1996
other revenues increased from $31,390,000 to $70,902,000 or 126% over the
nine months ended March 31, 1995. The increase in both periods was primarily
attributable to an increase in the sale of merchandise, data network revenues
from ANS CO+RE Systems, Inc. ("ANS"), acquired in February 1995, and online
transaction and advertising revenues.
Cost of Revenues
Cost of revenues includes network-related costs, consisting primarily of
data and voice communication costs, costs associated with operating the data
centers and providing customer support, royalties paid to information and
service providers and cost of merchandise sold. For the three months ended
March 31, 1996 cost of revenues increased from $66,526,000 to $183,644,000,
or 176%, over the three months ended March 31, 1995 and decreased as a
percentage of total revenues from 61.0% to 58.8%. For the nine months ended
March 31, 1996 cost of revenues increased from $142,290,000 to $448,649,000,
or 215%, over the nine months ended March 31, 1995 and increased as a
percentage of total revenues from 58.7% to 59.1%.
The increase in cost of revenues was primarily attributable to an
increase in data communications costs, customer support costs and royalties
paid to information and service providers. Data communication costs
increased primarily as a result of the larger customer base and more usage by
customers. Customer support costs, which include personnel and telephone
costs associated with providing customer support, were higher as a result of
the larger customer base and a large number of new subscriber registrations.
Royalties paid to information and service providers increased as a result of
a larger customer base, more usage and the Company's addition of more service
content to broaden the appeal of the AOL service.
<PAGE>
The decrease in cost of revenues as a percentage of total revenues for
the three months ended March 31, 1996 compared to the three months ended
March 31, 1995 is primarily attributable to a decrease in data communications
costs and production costs related to production service revenues (as a
percentage of total revenues), partially offset by an increase in leased
equipment costs and royalties.
The increase in cost of revenues as a percentage of total revenues for
the nine months ended March 31, 1996 compared to the nine months ended March
31, 1995 is primarily attributable to: (1) an increase in costs associated
with providing data network services, related to ANS; (2) an increase in
leased equipment costs; and (3) an increase in royalties. The aforementioned
increase was partially offset by a decrease in customer support costs and
data network costs.
In late fiscal 1995, the Company launched AOLnet, a proprietary TCP/IP
network that is owned and operated by the Company. The Company has formed
AOLnet in order to increase its network capacity, provide its members with
more reliable, higher speed access, and to reduce the costs of data
communication charges. As the Company builds AOLnet, it is managing traffic
to this network, and currently approximately 50% of overall network traffic
is generated on AOLnet. The buildout of AOLnet requires a substantial
investment in telecommunications equipment, which the Company is financing
principally through leasing. As the size of AOLnet increases, and an
increasingly higher percentage of overall network traffic is generated on
AOLnet, it is expected that the Company's communications costs will become
more fixed in nature, rather than variable. The overall per hour costs of
providing data communications, however, is expected to decrease.
Marketing
Marketing expenses include the costs to acquire and retain subscribers
and other general marketing expenses. For the three months ended March 31,
1996, marketing expenses increased from $20,234,000 to $56,789,000, or 181%,
over the three months ended March 31, 1995, and decreased as a percentage of
total revenues from 18.6% to 18.2%. For the nine months ended March 31,
1996, marketing expenses increased from $47,856,000 to $145,871,000, or 205%,
over the nine months ended March 31, 1995, and decreased as a percentage of
total revenues from 19.7% to 19.2%. The increase in marketing expenses for
the three and nine months ended March 31, 1996 versus the comparable periods
of 1995, was primarily due to an increase in the number and size of marketing
programs to expand the Company's subscriber base as well as new branding
programs which began in August 1995. The decrease in marketing expenses as a
percentage of total revenues for the three months ended March 31, 1996 versus
the comparable period of 1995 is primarily attributable to the change in
accounting estimate effective July 1, 1995 (see Note 3 of Notes to
Consolidated Financial Statements), partially offset by an increase in
personnel related costs. The decrease in marketing expenses as a percentage
of total revenues for the nine months ended March 31, 1996 versus the
comparable period of 1995 is primarily attributable to the aforementioned
change in accounting estimate as well as marketing expenses related to
production service revenues.
For the three months ended March 31, 1996, subscriber acquisition costs,
before capitalization and amortization, increased from $32,478,000 to
$132,414,000 or 308% over the three months ended March 31, 1995. For the nine
months ended March 31, 1996, subscriber acquisition costs, before
capitalization and amortization, increased from $65,526,000 to $306,661,000
or 368% over the nine months ended March 31, 1995. Due to seasonality
<PAGE>
factors, such as reduced computer-related consumer spending and the reduced
effectiveness of consumer marketing programs in the summer months, and the
expected launch of an upgraded service offering, the Company does not plan to
spend as aggressively on acquisition marketing in the fourth quarter of
fiscal 1996 as compared to the third quarter of fiscal 1996. As a result of
the combination of less aggressive acquisition marketing spending and higher
subscriber attrition, which the Company believes is related primarily to the
large number of subscribers acquired in the most recent two quarters, the
growth in subscribers is expected to slow through the first quarter of fiscal
1997.
Product Development
Product development costs include research and development expenses,
other product development costs and the amortization of software costs. For
the three months ended March 31, 1996, product development costs increased
from $3,313,000 to $15,398,000, or 365%, over the three months ended March
31, 1995, and increased as a percentage of total revenues from 3.0% to 4.9%.
For the nine months ended March 31, 1996, product development costs increased
from $8,664,000 to $35,308,000, or 308%, over the nine months ended March 31,
1995, and increased as a percentage of total revenues from 3.6% to 4.7%. The
increase in product development costs was attributable to an increase in
personnel costs related to an increase in the number of technical employees.
Product development costs, before capitalization and amortization, increased
by 300% and 260% in the three and nine months ended March 31, 1996,
respectively.
General and Administrative
For the three months ended March 31, 1996, general and administrative
expenses increased from $11,421,000 to $29,973,000, or 162%, over the three
months ended March 31, 1995, and decreased as a percentage of total revenues
from 10.5% to 9.6%. For the nine months ended March 31, 1996, general and
administrative expenses increased from $24,910,000 to $74,439,000, or 199%,
over the nine months ended March 31, 1995, and decreased as a percentage of
total revenues from 10.3% to 9.8%. The increase in general and
administrative costs was principally attributable to higher office, travel
and personnel expenses related to an increase in the number of employees.
The decrease in general and administrative costs as a percentage of total
revenues was the result of substantial growth in revenues, which more than
offset the additional general and administrative costs, combined with the
semi-variable nature of many of the general and administrative costs.
Acquired Research and Development
Acquired research and development costs, totaling $16,981,000 for the
nine months ended March 31, 1996, relate to in-process research and
development purchased pursuant to the Company's acquisition of Ubique, Ltd.
in September 1995.
Amortization of Goodwill
Amortization of goodwill relates principally to the Company's
acquisitions of ANS and Global Network Navigator, Inc., which resulted in
approximately $56 million of goodwill. The goodwill related to these
acquisitions is being amortized on a straight-line basis over periods ranging
from 5 - 10 years.
<PAGE>
Other Income
Other income consists primarily of investment income net of interest
expense. For the three months ended March 31, 1996, other income increased
from $829,000 to $1,280,000, over the three months ended March 31, 1995. For
the nine months ended March 31, 1996, other income increased from $2,301,000
to $3,573,000, over the nine months ended March 31, 1995. The increase for
the three and nine months ended March 31, 1996 was primarily attributable to
an increase in interest income generated by higher levels of cash available
for investment, partially offset by an increase in interest expense.
Merger Expenses
Non-recurring merger expenses totaling $848,000 were recognized in the
three and nine months ended March 31, 1996 in connection with the merger of
America Online, Inc. and Johnson-Grace Company.
Non-recurring merger expenses totaling $1,710,000 were recognized in the
nine months ended March 31, 1995 in connection with the merger of America
Online, Inc. and Redgate Communications Corporation.
Provision for Income Taxes
The provision for income taxes was $10,025,000 and $3,634,000 in the
three months ended March 31, 1996 and 1995, respectively and $21,885,000 and
$9,977,000 in the nine months ended March 31, 1996 and 1995, respectively.
For additional information regarding income taxes, refer to Note 4 of the
Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
The Company has financed its operations through cash generated from
operations and the sale of its common stock. Net cash provided by (used in)
operating activities was $17,007,000 and $(47,367,000) in the nine months
ended March 31, 1995 and 1996, respectively. Included in operating
activities were expenditures for deferred subscriber acquisition costs of
$65,526,000 and $276,559,000 in the nine months ended March 31, 1995 and
1996, respectively. Net cash used in investing activities was $60,257,000
and $53,953,000 in the nine months ended March 31, 1995 and 1996,
respectively.
In October 1995 the Company completed a public stock offering of
3,913,266 shares of common stock at a price of $29.1875 per share. Pursuant
to an option granted to the underwriters to cover overallotments, an
additional 1,050,000 shares of common stock were sold to the public in
November 1995 at a price of $29.1875 per share.
In May 1996, the Company entered into a joint venture with Mitsui and
Nikkei to offer interactive online services in Japan. In connection with the
agreement, the Company received approximately $28 million through the sale of
convertible preferred stock to Mitsui. The preferred stock is convertible to
common stock and converts upon the second anniversary of the formation of the
Joint Venture, together with an accrued dividend of 4%, at fair market value
of common stock at the time of conversion.
The Company leases the majority of its equipment under noncancelable
operating leases, and as part of its network strategy in building AOLnet, its
data communications network. The buildout of this network requires a
substantial investment in telecommunications equipment, which the Company is
financing principally through leasing.
<PAGE>
In connection with the move of the Company's headquarters to
Sterling, Virginia, in March 1996, the Company entered into a Purchase
Agreement pursuant to which the Company agreed to purchase unimproved land,
and in April 1996, the Company entered into a Purchase Agreement pursuant to
which the Company agreed to purchase improved land contiguous with the
unimproved land. The Company did not close on the Purchase Agreements, and
in May 1996, the Company assigned its rights and obligations under the
Purchase Agreements to a limited partnership. Also in May 1996, the limited
partnership closed under the Purchase Agreements and purchased the properties
and at that time arranged to finance various building improvements and
expansion. Commencing on approximately December 31, 1996, the
limited partnership will lease the properties to the Company for an initial
five-year term, renewable up to a maximum term of thirty-seven years for a
total commitment of approximately $46,600,000.
The Company uses its working capital to finance ongoing operations and
to fund marketing and content programs and the development of its products
and services. The Company plans to continue to invest aggressively in
acquisition marketing and content programs to expand its subscriber base, as
well as in computing and support infrastructure. Additionally, the Company
expects to use a portion of its cash for the acquisition and subsequent
funding of technologies, products and businesses complementary to the
Company's current business. The Company anticipates that available cash and
cash provided by operating activities will be sufficient to fund its
operations for the next twelve months.
Seasonality
The Company's business is beginning to be impacted by the effects of
seasonality in both member acquisitions and in the amount of time spent by
customers using its services. Member acquisition is expected to be highest
in the second and third fiscal quarters, when sales of new computers and
computer software are highest due to the holiday season. Customer usage is
expected to be lower in the summer months due largely to extended daylight
hours and competing outdoor leisure activities.
Inflation
The Company believes that inflation has not had a material effect on its
results of operations.
Forward-Looking Statements
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, America Online, Inc. (the
"Company") wishes to caution readers that the following important factors
could cause the Company's actual results to differ materially from those
projected in forward-looking statements made by, or on behalf of, the
Company:
- - - Factors related to increased competition from existing and new
competitors, including price reductions and increased spending on marketing
and product development; limitations on the Company's opportunities to enter
into and/or renew agreements with content providers and distribution
partners; limitations on its ability to develop new products and services;
limitations on its ability to continue to grow its subscriber bases;
increased membership acquisition costs; lower paid usage and increased
attrition in the Company's membership.
<PAGE>
- - - Risks related to the buildout of AOLnet, including the inability to
expand server and network capacity at a rate sufficient to satisfy subscriber
demands; the failure of any of the Company's network providers, particularly
U.S. Sprint; the failure to obtain the necessary financing for the build-out
of AOLnet; and the risk that demand will not develop for the capacity AOLnet
will provide.
- - - Any damage or failure to the Company's computer equipment and the
information stored in its data centers, such as damage by fire, power loss,
telecommunications failures, unauthorized intrusions and other events, that
causes interruptions in the Company's operations.
- - - The Company's inability to manage its growth and to adapt its
administrative, operational and financial control systems to the needs of the
expanded entity; and the failure of management to anticipate, respond to and
manage changing business conditions.
- - - The failure of the Company or its partners to successfully market, sell
and deliver its services in international markets; and risks inherent in
doing business on an international level, such as laws governing content that
differ greatly from those in the U.S., unexpected changes in regulatory
requirements, political risks, export restrictions, export controls relating
to encryption technology, tariffs and other trade barriers, fluctuations in
currency exchange rates, issues regarding intellectual property and
potentially adverse tax consequences.
- - - A moderating growth rate in the sale of new computers in the U.S. and,
to some extent, internationally; general or specific economic conditions; the
ability and willingness of purchasers to substitute other services for AOL;
the perceived absolute or relative overall value of these services by the
purchasers, including the features, quality and pricing compared to other
competitive services; smaller market or slowing of market growth for such
services.
- - - The amount and rate of growth in AOL's marketing, general and
administrative expenses; the implementation of new marketing programs and
promotional offers; the implementation of additional pricing programs; and
the impact of unusual items resulting from AOL's ongoing evaluation of its
business strategies, asset valuations and organizational structures.
- - - Difficulties or delays in the development, production, testing and
marketing of products, including, but not limited to, a failure to ship new
products and technologies when anticipated, including, but not limited to,
new client software and new features and functionality, and the failure to
develop new technology or modify existing technology to incorporate new
standards and protocols.
- - - The acquisition of businesses, fixed assets and other assets and
acquisition related risks, including successful integration and management of
acquired technology, operations and personnel, the loss of key employees of
the acquired companies, and diversion of management attention from other
ongoing business concerns; the making or incurring of any expenditures and
expenses, including, but not limited to, depreciation and significant charges
for in-process research and development or other matters; and any revaluation
of assets or related expenses.
- - - The ability of the Company to diversify its sources of revenue through
the introduction of new products and services and through the development of
new revenue sources, such as advertising, transactions and merchandise sales.
<PAGE>
- - - The effects of, and changes in, trade, monetary and fiscal policies,
laws and regulations, other activities of governments, agencies and similar
organizations, and social and economic conditions, such as trade restrictions
or prohibitions, inflation and monetary fluctuations, import and other
charges, or federal, state, local and other taxes.
- - - The loss of the services of executive officers and other key employees;
and the Company's continued ability to attract and retain highly skilled and
qualified personnel.
- - - The costs and other effects of litigation, governmental investigations,
legal and administrative cases and proceedings (whether civil, such as
environmental and product-related, or criminal), settlements and
investigations, claims, and changes in those items, and developments or
assertions by or against the Company relating to intellectual property rights
and intellectual property licenses.
- - - Adoptions of new, or changes in, accounting policies, practices and
estimates and the application of such policies, practices and estimates.
- - - The effects of any activities of parties with which AOL has an agreement
or understanding, including any issues affecting any investment or joint
venture in which AOL has an investment; the amount, type and cost of the
financing which AOL has, and any changes to that financing.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Purchase Agreement between Broad Run Office Center Associates
Limited Partnership and America Online, Inc. dated March
28,1996.
10.2 Lease Agreement between Shepherd Mall Partners, L.L.C. and
America Online, Inc. dated February 20, 1996.
(b) Reports on Form 8-K
Form Item # Description Filing Date
Form 8-K 2, 7 February 14, 1996
<PAGE>
AMERICA ONLINE, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICA ONLINE, INC.
DATE: May 15, 1996 SIGNATURE: /s/Stephen M. Case
Stephen M. Case
Chief Executive Officer
DATE: May 15, 1996 SIGNATURE: /s/Lennert J. Leader
Lennert J. Leader
Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
AMERICA ONLINE, INC.
EXHIBIT INDEX
Exhibit
Number
10.1 Purchase Agreement between Broad Run Office Center Associates
Limited Partnership and America Online, Inc. dated March 28,1996.
10.2 Lease Agreement between Shepherd Mall Partners, L.L.C. and America
Online, Inc. dated February 20, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 119,202
<SECURITIES> 10,130
<RECEIVABLES> 58,129
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 233,956
<PP&E> 124,164
<DEPRECIATION> 32,518
<TOTAL-ASSETS> 843,294
<CURRENT-LIABILITIES> 263,392
<BONDS> 0
0
0
<COMMON> 899
<OTHER-SE> 439,080
<TOTAL-LIABILITY-AND-EQUITY> 843,294
<SALES> 759,387
<TOTAL-REVENUES> 759,387
<CGS> 448,649
<TOTAL-COSTS> 726,476
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 35,635
<INCOME-TAX> 21,885
<INCOME-CONTINUING> 13,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,750
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
PURCHASE AGREEMENT
between
BROAD RUN OFFICE CENTER ASSOCIATES LIMITED PARTNERSHIP
(as Seller),
and
AMERICA ONLINE, INC.
(as Purchaser)
Dated: March 28, 1996
TABLE OF CONTENTS
PAGE
ARTICLE I Definitions 1
Section 1.1 General Interpretive Principles 1
Section 1.2 Defined Terms 2
ARTICLE II Purchase and Sale; Options to Purchase 7
Section 2.1 Purchase and Sale of the Property 7
Section 2.2 Purchase and Sale of Option Property 7
ARTICLE III Purchase Price and Terms of Payment 8
Section 3.1 Amount for Property 8
Section 3.2 Amount for Option Property 8
Section 3.3 Payment 8
ARTICLE IV Deposit 9
Section 4.1 Delivery of Deposit 9
Section 4.2 Disposition of Deposit. 9
Section 4.3 Interpleader 10
Section 4.4 Escrow Agent as Stakeholder 10
Section 4.5 Escrow Agent to Acknowledge Agreement 10
ARTICLE V Inspection and Feasibility Period 10
Section 5.1 Physical Inspection of Real Property 10
Section 5.2 Termination 12
ARTICLE VI Representations and Warranties of
the Seller 12
Section 6.1 Representations and Warranties Regarding
Authority and Status 12
Section 6.2 Representations and Warranties Regarding
the Real Property. 13
Section 6.3 Representation and Warranty Regarding
Brokers 15
Section 6.4 Survival 15
ARTICLE VII Representations and Warranties of
the Purchaser 16
Section 7.1 General. 16
Section 7.2 Survival 17
ARTICLE VIII Additional Obligations of the Seller 17
Section 8.1 Possession 17
Section 8.2 Delivery of Engineering Studies 17
Section 8.3 Closing Affidavit 17
Section 8.4 Further Assurances 18
Section 8.5 Expenses 18
Section 8.6 Negative Covenants 18
Section 8.7 Survey 18
Section 8.8 Indemnification by Seller 19
Section 8.9 Sales Commission 19
Section 8.10 Subdivision of Real Property 19
Section 8.11 Notice of Rights 19
Section 8.12 Waiver of Stormwater Management Payment 20
Section 8.13 Removal of Construction Debris 20
Section 8.14 Formation of Association 20
Section 8.15 [Intentionally Omitted] 20
Section 8.16 Brokerage Commissions on Option Property 20
ARTICLE IX Additional Obligations of the Purchaser 21
Section 9.1 Expenses 21
Section 9.2 Indemnification by Purchaser 21
Section 9.3 Delivery of British Aerospace Purchase
Agreement 21
Section 9.4 Further Assurances 21
Section 9.5 Effect of Increase in Density on Storm
Water Pond 21
Section 9.6 Brokerage Commissions on Option
Property 21
ARTICLE X Conditions Precedent to the Seller's
Obligations 22
Section 10.1 Purchaser's Representations and
Warranties True 22
Section 10.2 Purchaser's Performance 22
Section 10.3 Exercise of Options 22
ARTICLE XI Conditions Precedent to the Purchaser's
Obligations 22
Section 11.1 Seller's Representations and Warranties
True 22
Section 11.2 Seller's Performance 23
Section 11.3 Title to Real Property 23
Section 11.4 Condemnation 23
Section 11.5 Completion of Subdivision 23
Section 11.6 Survey 23
Section 11.7 Closing Under British Aerospace
Purchase Agreement 23
ARTICLE XII Closing 24
Section 12.1 Closing Date and Escrow 24
Section 12.2 Seller's Deliveries 25
Section 12.3 Purchaser's Deliveries 26
Section 12.4 Delivery in Escrow 26
ARTICLE XIII Closing Adjustments and Prorations 26
Section 13.1 General. 26
Section 13.2 Taxes and Assessments 27
Section 13.3 Closing Costs and Transfer Taxes 27
Section 13.4 Third Party Offer 27
ARTICLE XIV Termination 27
Section 14.1 Reasons for Termination 27
Section 14.2 Termination by Purchaser 28
Section 14.3 Termination by Seller 28
Section 14.4 Purchaser's Right to Seek Specific
Performance 28
Section 14.5 Exception 29
ARTICLE XV Preemptive Options to Purchase
Option Land 29
Section 15.1 Right of First Refusal on Sale 29
Section 15.2 Other Option to Purchase 30
Section 15.3 Purchaser's Insolvency 32
Section 15.4 Notice of Termination 32
ARTICLE XVI Seller Improvements 32
Section 16.1 Seller's Obligation to Complete 32
Section 16.2 Insurance 34
Section 16.3 Indemnification 34
Section 16.4 Seller Improvements Escrow Fund 35
Section 16.5 Improvement Plans and Specifications 35
Section 16.6 Dedication of Pacific Boulevard 36
Section 16.7 Governmental Acceptance for Maintenance 36
Section 16.8 Liquidated Damages 36
ARTICLE XVII Miscellaneous Provisions 38
Section 17.1 Entire Agreement 38
Section 17.2 Counterparts 38
Section 17.3 Benefit and Burden 38
Section 17.4 Governing Law 38
Section 17.5 Notices 38
Section 17.6 Partial Invalidity 40
Section 17.7 Waiver of Jury Trial 40
Section 17.8 Survival of Obligations 41
Section 17.9 Consent to Assignment 41
EXHIBITS
A-1 Boundary Line Adjustment Plat
A-2 Description of Option Land
A-3 Pacific Boulevard Extension
B Form of Deed
C Special Exceptions
D Seller Improvements
D-1 Description of Pacific Boulevardand Prentice Drive Construction
Areas
D-2 Description of Pacific Boulevard and
Dresden Street Construction Areas
E Form of Seller Improvements Escrow Agreement
F Form of Letter of Credit
G Additional Title Exceptions
H Form of Memorandum
PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 28th day of March,
1996, by and between (i) BROAD RUN OFFICE CENTER ASSOCIATES LIMITED
PARTNERSHIP ("Seller"), a Virginia limited partnership, and (ii) AMERICA
ONLINE, INC. ("Purchaser"), a Delaware corporation.
RECITALS
A. The Seller owns certain parcels of unimproved land located in
Loudoun County, Virginia.
B. The Seller has agreed to sell to the Purchaser, and the Purchaser
has agreed to purchase from the Seller, a part of the land. The Seller has
also agreed to grant to the Purchaser options to purchase additional parts of
the land.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
Definitions
Section 1.1 General Interpretive Principles. For purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires, (i) the terms defined in this Section have the meanings
assigned to them in this Section and include the plural as well as the
singular, and the use of any gender herein shall be deemed to include the
other genders; (ii) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; (iii) references herein to "Articles," "Sections," "subsections,"
"paragraphs" and other subdivisions without reference to a document are to
designated Articles, Sections, subsections, paragraphs and other subdivisions
of this Agreement; (iv) a reference to a subsection without further reference
to a Section is a reference to such subsection as contained in the same
Section in which the reference appears, and this rule shall also apply to
paragraphs and other subdivisions; (v) a reference to an Exhibit without a
further reference to the document to which the Exhibit is attached is a
reference to an Exhibit to this Agreement; (vi) the words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular provision; and (vii) the word "including"
means "including, but not limited to."
Section 1.2 Defined Terms. For all purposes of this Agreement, the
following terms shall have the respective meanings set forth below:
"Agreement" shall mean this Agreement in its present form or as it
may be amended from time to time.
"Affiliate" when used with reference to any Person, shall mean any
Person that, directly or indirectly, through one or more intermediaries
controls, is controlled by, or is under common control with, the
specified Person (the term "control" for this purpose, shall mean the
ability, whether by the ownership of shares or other equity interest, by
contract or otherwise, to elect a majority of the directors of a
corporation, independently to select the managing partner of a
partnership or the managers of a limited liability company, or otherwise
to have the power independently to remove and then select a majority of
those Persons exercising governing authority over an entity, and control
shall be conclusively presumed in the case of the direct or indirect
ownership of 50% or more of the equity interests); and, when used with
reference to the Seller, shall include a trust for the benefit of one or
members of the Goelet family.
"Applicable Part of the Real Property" shall mean the part of the
Real Property to be sold and conveyed by the Seller to the Purchaser at
each Closing.
"Boundary Line Adjustment Plat" shall mean the Plat Showing Boundary
Line Adjustments for Broad Run Business Center prepared by William H.
Gordon Associates, Inc., dated February 27, 1996, a copy of which is
attached as Exhibit A-1.
"British Aerospace Closing Date" shall mean the date on which the
Purchaser is required by the terms of the British Aerospace Purchase
Agreement to consummate the purchase of the British Aerospace Property.
"British Aerospace Property" shall mean the improved real property
containing 38.886 acres, more or less, which has a street address of
22070 Broderick Drive and 22111 Pacific Avenue, Sterling, Loudoun
County, Virginia.
"British Aerospace Purchase Agreement" shall mean the contract now
under negotiation between British Aerospace Holdings, Inc., a Delaware
corporation, as seller, and the Purchaser, as purchaser, for the
purchase and sale of the British Aerospace Property, as the same may be
amended from time to time.
"Business Days" shall mean any day of the week other than Saturday,
Sunday or a day on which banking institutions in Washington, D.C. or New
York City are obligated or authorized by law to close.
"Closing" shall have the meaning set forth in Section 12.1.
"Closing Date" shall mean the Initial Closing Date and each Option
Closing Date, if any.
"Closing Statement" shall mean the statements prepared by the Seller
and the Purchaser pursuant to Section 13.1.
"Declaration of Protective Covenants" shall mean the Declaration of
Protective Covenants for Broad Run Business Center dated May 4, 1990,
recorded in Deed Book 1089, at page 1565, among the Land Records.
"Deed" shall mean a special warranty deed, substantially in the form
attached as Exhibit B, signed by the Seller in proper form for
recording, pursuant to which the Applicable Part of the Real Property is
to be conveyed to the Purchaser.
"Deposit" shall mean the cash payments made by the Purchaser to the
Escrow Agent pursuant to Section 4.1 and the interest earned thereon.
"Development Proposal" shall have the meaning set forth in Section
15.2(c).
"Effective Date" shall mean the date of this Agreement.
"Environmental Law" shall mean any federal, state or local law,
ordinance, rule, regulation, requirement, guideline, code, resolution,
order or decree (including consent decrees and administrative orders) in
effect on the date of this Agreement which regulates the use,
generation, handling, storage, treatment, transportation,
decontamination, clean-up, removal, encapsulation, enclosure, abatement
or disposal of any Hazardous Material, including the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq., the Resource Conservation and Recovery Act,
42 U.S.C. Sections 6901, et seq., the Toxic Substance Control Act,
15 U.S.C. Sections 2601, et seq., the Clean Water Act, 33 U.S.C.
Sections 1251 et seq., the Hazardous Materials Transportation Act, 49
U.S.C. Section 1802, their state analogs, and any other federal, state
or local statute, law, ordinance, resolution, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or
standards of conduct concerning any Hazardous Material, all as amended
to date.
"Escrow Agent" shall mean Commercial Title Group, Ltd., 8605
Westwood Center Drive, Suite 401, Vienna, Virginia 22182.
"Feasibility Period" shall mean the period beginning on the
Effective Date and ending on the later to occur of (i) March 24, 1996,
or (ii) the tenth day after the Purchaser receives the survey of the
Land required by Section 8.7.
"Governmental Authorities" shall mean any board, bureau, commission,
department or body of any municipal, county, state or federal
governmental unit, or any subdivision thereof, having or acquiring
jurisdiction over the Real Property or the management, operation, use or
improvement thereof.
"Hazardous Material" shall mean any flammable, explosive,
radioactive or reactive materials, any asbestos (whether friable or non-
friable), any pollutants, contaminants or other hazardous, dangerous or
toxic chemicals, materials or substances, any petroleum products or
substances or compounds containing petroleum products, including
gasoline, diesel fuel and oil, any polychlorinated biphenyls or
substances or compounds containing polychlorinated biphenyls, and any
other material or substance defined as a "hazardous substance,"
"hazardous material," "hazardous waste," "toxic materials,"
"contamination," and/or "pollution" within the meaning of any
Environmental Law.
"Initial Closing Date" shall mean the date on which the purchase and
sale of the Property is consummated.
"Land" shall mean Lot 41A and Lot 42A, as shown on the Boundary Line
Adjustment Plat, and Lots 43 and 44, as shown on the plat entitled
"Consolidation and Record Plat of Broad Run Business Center, Phase I,"
attached to Deed of Subdivision, Dedication, Vacation, Easement and
Temporary Easement recorded in Deed Book 1119, at page 1599, among the
Land Records.
"Land Records" shall mean the Land Records of Loudoun County,
Virginia.
"Legal Requirements" shall mean all laws, ordinances, rules,
regulations, orders and requirements of all Governmental Authorities
relating to, or regulating, the ownership, use, operation, management,
maintenance and repair of the Real Property.
"Mortgage" shall mean a mortgage, deed of trust or other type of
security instrument of the type commonly given to secure loans or
advances on, or the unpaid purchase price of, real property in the
jurisdiction in which such real property is located.
"Option" shall mean the options granted by the Seller to the
Purchaser in Article XV to purchase all, or from time to time parts of,
the Option Property. The Option need not be exercised at one time with
respect to all of the Option Property.
"Option Closing Date" shall mean the date(s) on which the purchase
and sale of the Option Property is (are) consummated, if applicable.
"Option Land" shall mean the parcels of land described in Exhibit A-
2.
"Option Property" shall mean the Option Land and the other rights
described in subsections (b) and (c) of Section 2.2.
"Pacific Boulevard and Dresden Street Construction Areas" shall mean
the areas in Pacific Boulevard and Dresden Street cross-hatched on
Exhibit D-2 connecting the existing paved area of Dresden Street
northeast of Broderick Drive and the area of Pacific Boulevard cross-
hatched on Exhibit D-1.
"Pacific Boulevard and Prentice Drive Construction Areas" shall mean
the areas in Pacific Boulevard and Prentice Drive cross-hatched on
Exhibit D-1 connecting the existing paved area of Pacific Boulevard
south of Waxpool Road and the existing paved area of Prentice Drive east
of Broderick Drive.
"Permitted Exceptions" shall mean (i) the lien of current Real
Estate Taxes not yet due and payable, (ii) the Declaration of Protective
Covenants, including the reservation of easements and inchoate liens for
assessments thereunder, (iii) the additional exceptions described on
Exhibit G, and (iv) encroachments, overlaps, boundary disputes and other
matters disclosed by the survey delivered by the Seller to the Purchaser
pursuant to Section 8.7.
"Person" shall mean an individual, estate, trust, partnership,
corporation or other legal entity.
"Property" shall mean the Land and the other rights described in
subsections (b) and (c) of Section 2.1.
"Purchase Price" shall mean the purchase price of the Property
specified in Section 3.1 and, if applicable, the purchase price of the
Option Property specified in Article XV.
"Qualified Bank" shall mean a national bank located in Washington,
D.C. or Fairfax County, Virginia, which (x) is chartered by the Office
of the Comptroller of the Currency (the "Comptroller"), (y) has total
assets of not less than $1,000,000,000 as reported in the most recent
edition of Polk's World Bank Directory or a similar reporting service,
and (z) is not subject to any supervisory agreement or regulatory order
imposed by the Comptroller or the Federal Deposit Insurance Corporation
relating to its financial soundness.
"Real Estate Taxes" shall mean all taxes, assessments, vault
rentals, and other charges, if any, general, special or otherwise,
including the supplemental tax for the Route 28 special taxing district
and all assessments for schools, public betterments and general or local
improvements, levied or assessed upon or with respect to the ownership
of and/or all other taxable interests in the Real Property imposed by
any public or quasi-public authority having jurisdiction.
"Real Property" shall mean the Land and the Option Land.
"Sales Agents" shall mean Taylor & Associates, Inc. and The Evans
Company.
"Seller Improvements" shall mean the improvements described in
Exhibit D.
"Special Exceptions" shall mean the special exceptions described in
Exhibit C.
"Storm Water Management Agreement" shall mean the Storm Water
Management Agreement and Deed of Easements dated February 12, 1992,
between British Aerospace Holdings, Inc. and the Seller, recorded in
Deed Book 1154, at page 1793, among the Land Records.
"Subdivided Lot" shall mean a subdivided lot established in
accordance with the Loudoun County subdivision ordinance, as evidenced
by the recordation among the Land Records of a plat of subdivision or a
plat of boundary line adjustment.
"Subdivision Date" shall mean the date of recording among the Land
Records of the approved plat of boundary line adjustment establishing
the Applicable Part of the Real Property as a Subdivided Lot.
"Third Party Offer" shall have the meaning set forth in Section
15.1(b).
ARTICLE II
Purchase and Sale; Options to Purchase
Section 2.1 Purchase and Sale of the Property. On the Initial
Closing Date, and subject to the terms and conditions set forth in this
Agreement, the Seller agrees to sell to the Purchaser, and the Purchaser
agrees to purchase from the Seller:
(a) the Land;
(b) all right, title and interest of the Seller, if any, in any
land lying in the bed of any street, road, avenue or alley, open or
closed, adjacent to the Land, to the center line thereof; and
(c) all easements, covenants and other rights appurtenant to, and
all the estate and rights of the Seller in and to, the Land, but not
including any rights of the Seller created by or pursuant to this
Agreement or any rights of the Seller as "Grantor" under the Declaration
of Protective Covenants or any other rights held by the Seller as owner
or developer of property other than the Land.
The Seller shall sell and convey and the Purchaser shall purchase and accept
fee simple title to the Property free and clear of all liens, encumbrances,
easements, covenants, conditions, leases and other matters affecting title,
except for the Permitted Exceptions applicable thereto.
Section 2.2 Purchase and Sale of Option Property. If (i) the
Purchaser purchases the Property in accordance with the terms of this
Agreement, and (ii) the Purchaser timely exercises the Option with respect to
all or, from time to time, any part of the Option Land, then on the
applicable Option Closing Date, and subject to the terms and conditions set
forth in this Agreement, the Seller agrees to sell to the Purchaser, and the
Purchaser agrees to purchase from the Seller:
(a) the Option Land (or the part hereof for which the Option was
timely exercised);
(b) all right, title and interest of the Seller, if any, in any
land lying on the bed of any street, road, avenue or alley, open or
closed, adjacent to the Phase II Option Land, or part thereof, if
applicable, to the center line thereof; and
(c) all easements, covenants and other rights appurtenant to, and
all the estate and rights of the Seller in and to, the Option Land, or
part thereof, if applicable, but not including any rights of the Seller
created by or pursuant to this Agreement or any other rights of the
Seller as owner or developer of property other than the Option Land.
Except as otherwise expressly provided in a Third Party Offer, the Seller
shall sell and convey and the Purchaser shall purchase and accept fee simple
title to each part of the Option Property free and clear of all liens,
encumbrances, easements, covenants, conditions, leases and other matters
affecting title, except for the Permitted Exceptions applicable thereto.
ARTICLE III
Purchase Price and Terms of Payment
Section 3.1 Amount for Property. The purchase price to be paid by
the Purchaser to the Seller for the Property shall be an amount equal to the
sum of (i) $6,534,000, and (ii) the product obtained by multiplying (x)
$2.25, by (y) the exact area (expressed in square feet) of Lot 42A, as shown
on the Boundary Line Adjustment Plat, and Lot 43 and Lot 44, which are
described in the definition of the term "Land," as determined by the survey
obtained by the Seller pursuant to Section 8.7, subject to the adjustments
and prorations pursuant to Article XIII.
Section 3.2 Amount for Option Property. If the Purchaser exercises
one or more of the Options, the purchase price to be paid by the Purchaser to
the Seller for each part of the Option Property to be purchased shall be the
amount determined pursuant to Article XV, subject to the adjustments and
prorations pursuant to Article XIII unless otherwise provided in a Third
Party Offer or a Development Proposal, if applicable.
Section 3.3 Payment. On each Closing Date, and subject to the terms
and conditions of this Agreement, the Purchaser shall pay the Purchase Price
for the Applicable Part of the Real Property, to, or for the account of, the
Seller in the manner provided in Section 12.1, subject, however, in the case
of a part of the Option Property purchased pursuant to Section 15.1(a), to
any deferred payment terms contained in the Third Party Offer.
ARTICLE IV
Deposit
Section 4.1 Delivery of Deposit. Within three Business Days after
the Seller delivers a fully-signed counterpart of this Agreement to the
Purchaser, the Purchaser shall deliver to the Escrow Agent a deposit in the
amount of $100,000 to be held by the Escrow Agent as a good faith deposit
under this Agreement (the "Initial Deposit"). Unless this Agreement is
terminated pursuant to Section 5.2, on or before the last day of the
Feasibility Period the Purchaser shall deliver to the Escrow Agent an
additional deposit in the amount of $400,000 to be held by the Escrow Agent
as an additional good faith deposit under this Agreement (the "Additional
Deposit"). The Initial Deposit and the Additional Deposit shall be in the
form of a good check payable to the order of, or a wire transfer of federal
funds to, the Escrow Agent. The Escrow Agent shall, promptly after receipt,
deposit the Purchaser's checks for collection. The Escrow Agent shall invest
the Deposit in any of the following types of investments designated by the
Purchaser: (i) prime commercial paper, banker's acceptances or certificates
of deposit in one or more Qualified Banks, in each case having a maturity of
not more than 30 days, or (ii) obligations of the United States Government
having a maturity of not more than 30 days, or (iii) one or more mutual funds
which invest their assets primarily in investments of the type described in
clauses (i) and (ii), or (iv) one or more interest-bearing accounts in a
Qualified Bank(s) the deposits in which are insured by an agency of the
United States. If the Purchaser fails to deliver a good check for the
Initial Deposit to the Escrow Agent within the time period referred to in the
first sentence, this Agreement shall automatically terminate at the end of
the third Business Day after the Seller delivers a signed counterpart of this
Agreement to the Purchaser and neither party shall have any further liability
or obligation to the other under this Agreement.
Section 4.2 Disposition of Deposit. If this Agreement is terminated
pursuant to Section 5.2 or Section 14.1 and thereafter either the Seller or
the Purchaser makes a written demand on the Escrow Agent for the return of
the Deposit (if the demand is made by the Purchaser) or for the payment of
the Deposit (if the demand is made by the Seller), the Escrow Agent shall
give written notice of such demand to the other party. If the Escrow Agent
does not receive a written objection from the other party to the proposed
payment or return of the Deposit within 10 days after the giving of such
notice, the Escrow Agent shall pay the Deposit to the party making the
demand. If the Escrow Agent receives a written objection from the other
party within the 10-day period, the Escrow Agent shall continue to hold the
Deposit until otherwise directed by written instructions from the Seller and
the Purchaser or until otherwise directed by a court of competent
jurisdiction. During the Feasibility Period, the provisions of Section 5.2,
and not the provisions of this Section, shall control the disposition of the
Deposit.
Section 4.3 Interpleader. In the event of a dispute concerning the
disposition of the Deposit, the Escrow Agent shall have the right at any time
to deposit any cash funds held by it under this Agreement with the clerk of
the court of general jurisdiction of the county in which the Land is located.
The Escrow Agent shall give written notice of such deposit to Seller and
Purchaser. Upon such deposit the Escrow Agent shall be relieved and dis
charged of all further obligations and responsibilities hereunder.
Section 4.4 Escrow Agent as Stakeholder. The parties acknowledge
that the Escrow Agent is acting solely as a stakeholder at their request and
for their convenience; that the Escrow Agent shall be deemed to be the agent
of both parties; and that the Escrow Agent shall not be liable to any of the
parties for any act or omission on its part unless in violation of the
provisions of this Agreement or taken or suffered in bad faith, in willful
disregard of this Agreement or involving gross negligence. The Seller and
the Purchaser shall jointly and severally indemnify and hold the Escrow Agent
harmless from and against all costs, claims, and expenses, including
reasonable attorneys' fees, incurred in connection with the performance of
the Escrow Agent's duties hereunder, except with respect to actions or
omissions taken or suffered by the Escrow Agent in violation of the
provisions of this Agreement or in bad faith, in willful disregard of this
Agreement or involving gross negligence on the part of the Escrow Agent.
Section 4.5 Escrow Agent to Acknowledge Agreement. The Escrow Agent
shall acknowledge its agreement to the provisions of this Section, Article
XII and Article XIV by a separate document delivered to the parties promptly
after receipt of the Deposit.
ARTICLE V
Inspection and Feasibility Period
Section 5.1 Physical Inspection of Real Property.
(a) Right to Inspect. The Seller agrees that the Purchaser and its
authorized agents and representatives shall have the right, at the
Purchaser's risk, cost and expense, to enter upon the Real Property at
any time or times after the delivery of the Deposit to the Escrow Agent
and before the Initial Closing Date, in the case of the Land, or each
Option Closing Date, in the case of the Option Land, during normal
business hours and after reasonable advance notice, for purposes of con
ducting such environmental and engineering tests, including soil
borings, inspections, investigations and studies, as the Purchaser deems
necessary or desirable to evaluate the Real Property. In addition,
Purchaser may conduct such architectural, engineering, environmental,
economic and other studies of the Real Property as the Purchaser may
deem necessary or desirable. The Purchaser shall provide the Seller at
least one Business Day's notice in advance of its entry upon the Real
Property for purposes other than visual inspections. No soil borings,
drilling, digging or other tests or studies that require physical
changes to the Real Property shall be made before the Purchaser becomes
the owner thereof without the Seller's prior written consent, such
consent not to be unreasonably withheld, delayed or conditioned. The
Purchaser agrees, at it sole cost and expense, to promptly repair any
damage caused to the Applicable Part of the Real Property as a result of
any such architectural, environmental, engineering and economic studies
or tests and, to the extent reasonably practicable, to restore the
Applicable Part of the Real Property to the condition that existed
immediately prior to such studies or tests being conducted.
(b) Insurance. The Purchaser shall not enter the Real Property for
any purpose other than visual inspections until the Purchaser has
delivered to the Seller a certificate of insurance (in the form of ACORD
27) evidencing that the Purchaser has obtained a policy of Commercial
General Liability Insurance protecting the Purchaser, as named insured,
and the Seller, as an additional insured, against liability for bodily
injury, death and property damage occurring in or about the Real
Property, with such policy to afford protection to the limit of not less
than $5,000,000 combined single limit annual aggregate for bodily
injury, death and property damage. Such certificate shall also provide
that the policy will not be canceled or terminated, or the limits of
liability thereunder reduced, unless the Seller receives at least 20
days advance notice thereof.
(c) Indemnification. The Purchaser shall indemnify and hold harm
less the Seller and its partners, employees and agents (collectively,
the "Indemnitees") from and against (i) all physical damage to the Real
Property owned by the Seller caused by its tests and investigations,
(ii) all loss, liability or damage suffered or incurred by the
Indemnitees arising out of or resulting from injury or death to
individuals or damage to personal property caused by the tests and
investigations conducted by, or at the direction of, the Purchaser or
otherwise caused by the Purchaser's entry on the Real Property owned by
the Seller, and (iii) all reasonable costs and expenses (including
reasonable attorneys' fees and disbursements) incurred by the
Indemnitees in connection with any action, suit, proceeding, demand,
assessment or judgment incident to the foregoing.
(d) Survival. The Purchaser's obligations to indemnify the Seller
pursuant to Section 5.2(c) shall survive the termination of this
Agreement.
Section 5.2 Termination. This Agreement shall automatically
terminate at the end of the Feasibility Period unless, on or before the last
day of the Feasibility Period, the Purchaser gives the Seller written
notification (the "Feasibility Notice") that Purchaser elects to consummate
the purchase of the Property in accordance with the terms of this Agreement
and delivers to the Escrow Agreement a good check for the Additional Deposit
required by Section 4.1. The Purchaser shall also have the right to
terminate this Agreement by notice given to the Seller at any time before the
end of the Feasibility Period. The Purchaser shall have the absolute right,
in its sole and absolute discretion, to determine whether to give the
Feasibility Notice. If the Feasibility Notice is not timely given or a good
check for the Additional Deposit is not timely delivered to the Escrow Agent,
or if a notice of early termination is given, this Agreement shall terminate,
the Purchaser or the Seller, or both, shall so notify the Escrow Agent, the
Escrow Agent shall promptly return the Initial Deposit to the Purchaser, and,
except as otherwise expressly provided in this Agreement, no party shall have
any further liability to any other party under this Agreement. If this Agree
ment is terminated pursuant to the provisions of this subsection, the
Purchaser agrees to pay the sum of $100 to the Seller as consideration for
this Agreement and, within 10 days after the termination of this Agreement,
to deliver to the Seller, without cost, copies of all surveys, written
engineering tests or studies and other data prepared by third parties for the
Purchaser during the Feasibility Period.
ARTICLE VI
Representations and Warranties of the Seller
The Seller makes the following representations and warranties to the
Purchaser for the purpose of inducing the Purchaser to execute and deliver
this Agreement and to consummate the transactions contemplated by this
Agreement:
Section 6.1 Representations and Warranties Regarding Authority and
Status.
(a) Organization. The Seller is a limited partnership duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia.
(b) Authorization. The requisite number of the general and limited
partners of the Seller required by the Agreement of Limited Partnership
pursuant to which the Seller is organized has authorized the execution
and delivery of this Agreement and the transactions contemplated hereby.
(c) No Conflicting Agreements. The execution and delivery by the
Seller of, and the performance and compliance by the Seller with the
terms and provisions of, this Agreement do not violate any of the terms,
conditions or provisions of (i) the Seller's Agreement of Limited
Partnership, (ii) any judgment, order, injunction, decree, regulation or
ruling of any court or other governmental authority to which the Seller
is subject, or (iii) any agreement or contract to which the Seller is a
party or to which it or the Property is subject.
(d) Approvals. No authorization, consent, order, approval or
license from, filing with, or other act by any Governmental Authority or
other Person is or will be necessary to permit the valid execution and
delivery by the Seller of this Agreement or the performance by the
Seller of the obligations to be performed by it under this Agreement,
except for the approval to be obtained from the applicable Governmental
Authority approving the boundary line adjustment necessary to establish
the Applicable Part of the Real Property as a Subdivided Lot.
(e) United States Person. The Seller is a "United States person"
within the meaning of Sections 1445(f)(3) and 7701(a)(30) of the
Internal Revenue Code of 1986, as amended.
Section 6.2 Representations and Warranties Regarding the Real
Property.
(a) Ownership. To the best of Seller's knowledge, the Seller is
the sole owner of the Real Property, but the Seller makes no
representation or warranty concerning the quality of the Sellers' title
to the Real Property.
(b) Condemnation. The Seller has not received from any
Governmental Authority any notice of, and the Seller has no knowledge
of, pending or contemplated condemnation proceedings affecting the Real
Property, or any part thereof.
(c) Zoning. The Land is zoned PD-IP under the zoning ordinance of
Loudoun County, Virginia. The Option Land is zoned PD-IP under the
zoning ordinance of Loudoun County. Except as set forth in Exhibit C,
there are no special exceptions, subdivision approvals, waivers or
variances applicable to the zoning of the Real Property.
(d) Environmental Matters. To the actual knowledge of the Seller,
the Real Property does not contain, and there is not located on or about
the Real Property, any Hazardous Materials. The Seller has not received
any written complaint, order, summons, citation, notice of violation,
directive letter or other communication from any Governmental Authority
with regard to Hazardous Materials, or any other environmental matters
affecting the Real Property or any portion thereof. The Seller has not
knowingly undertaken, permitted, authorized or suffered the presence, or
suspected presence, use, manufacture, handling, generation, storage,
treatment, discharge, release, burial or disposal on the Real Property
of any Hazardous Material, except in compliance with Environmental Laws.
(e) Underground Storage Tanks. To the actual knowledge of the
Seller, there are no underground storage tanks located on the Real
Property. The Seller has not removed, or caused to be removed, any
underground storage tanks from the Real Property.
(f) No Commitments. Except for the Permitted Exceptions, the
Special Exception and the dedication of the applicable Governmental
Authority of a part of the Land, containing 2.74 acres, more or less,
shown on Exhibit A-2 for the extension of Pacific Avenue, the Seller has
not made any commitments to any Governmental Authorities, utility
company, school board, church or other religious body, or any homeowner
or homeowners' association, or to any other organization, group or
individual, relating to the Real Property which would impose any
obligation on the Purchaser, or its successors or assigns, after each
Closing Date, to make any contributions of money, dedications of land or
grant of easements or rights-of-way, or to construct, install or
maintain any improvements of a public or private nature on or off the
Applicable Part of the Real Property.
(g) No Obligations. After the Purchaser acquires title to an
Applicable Part of the Real Property, the Purchaser, in its capacity as
the owner of the Applicable Part of the Real Property, will have no
obligations under any of the Special Exceptions to construct or maintain
improvements on real property not included as a part of the Applicable
Part of the Real Property.
(h) Status of Pacific Boulevard and Prentice Drive. The Pacific
Boulevard and Prentice Drive Construction Areas have been duly dedicated
to public use as public streets in accordance with all requirements of
all applicable Governmental Authorities. The Seller has delivered to
the applicable Governmental Authorities all surety bonds required to
guaranty the completion of Pacific Boulevard and Prentice Drive in the
Pacific Boulevard and Prentice Drive Construction Areas. All such
surety bonds are in full force and effect and will not lapse or expire
until August 1996.
(i) Absence of Archeological/Historical Significance. To the best
of the Seller's knowledge, (i) no part of the Real Property has been
designated by any Governmental Authority as having sufficient historical
or archeological significance to interfere with or impede the
development of an office campus on the Real Property, and (ii) no part
of the Real Property contains a cemetery or human burial grounds.
(j) Performance Under Covenants. To the best of the Seller's
knowledge, the owner of the British Aerospace Property has performed all
covenants and obligations required to be performed by it under the
Declaration of Protective Covenants and the Storm Water Management
Agreement. This representation and warranty is made with the intent
that the Purchaser will rely on it in purchasing the British Aerospace
Property pursuant to the British Aerospace Purchase Agreement.
Section 6.3 Representation and Warranty Regarding Brokers. Except
for the Sales Agents, no agent, broker, or other Person acting pursuant to
express or implied authority of the Seller is entitled to a commission or
finder's fee in connection with the transactions contemplated by this
Agreement or will be entitled to make any claim against the Purchaser for a
commission or finder's fee. The Seller has not dealt with any agent or
broker in connection with the sale of the Property to the Purchaser other
than the Sales Agents.
Section 6.4 Survival. Except as otherwise expressly provided in a
Third Party Offer or a Development Proposal, the representations and
warranties contained in Section 6.1 and Section 6.3 shall survive each
Closing indefinitely. Except as otherwise expressly provided in a Third
Party Offer or a Development Proposal and except for the representation and
warranty in Section 6.2(a) (which shall not survive each Closing), the
representations and warranties in Section 6.2 shall survive each Closing for
a period of 12 months insofar as those representations and warranties relate
to the Applicable Part of the Real Property conveyed by the Seller to the
Purchaser at such Closing.
ARTICLE VII
Representations and Warranties of the Purchaser
Section 7.1 General. The Purchaser makes the following
representations and warranties to the Seller for the purpose of inducing the
Seller to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement:
(a) Organization. The Purchaser is a corporation duly formed,
validly existing and in good standing under the laws of the State of
Delaware and is duly qualified as a foreign corporation in good standing
in the Commonwealth of Virginia.
(b) Authorization. The execution and delivery by the Purchaser of
this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of
the Purchaser.
(c) No Conflicting Agreements. The execution and delivery by the
Purchaser of, and the performance and compliance by the Purchaser with
the terms and provisions of, this Agreement do not violate any of the
terms, conditions or provisions of (i) the Purchaser's Certificate of
Incorporation or Bylaws, (ii) any judgment, order, injunction, decree,
regulation or ruling of any court or other governmental authority to
which the Purchaser is subject, or (iii) any agreement or contract to
which the Purchaser is a party or to which it is subject.
(d) Investigations. The Purchaser has examined and inspected, and
during the Feasibility Period will have the right to examine and
inspect, the physical nature and condition of the Real Property. Each
part of the Real Property purchased by the Purchaser will be purchased
in its "as is" condition on the Effective Date, solely in reliance on
the Purchaser's own tests, investigations and studies and not in
reliance on any representations or warranties made by the Seller except
as expressly set forth in this Agreement. Neither the Seller nor any
agent, partner, employee, or representative of the Seller has made any
representation or warranty regarding the physical condition of the Real
Property, the availability or adequacy of public utilities, access to
the Real Property, compliance with Legal Requirements, the presence or
absence of Hazardous Materials on the Real Property or other
environmental conditions, or anything relating to the subject matter of
this Agreement, except as expressly set forth in this Agreement; and the
Purchaser, in signing and delivering this Agreement, has not and will
not rely upon any statement, information, or representation to
whomsoever made or given, whether to the Purchaser or others, and
whether directly or indirectly, verbally or in writing, made by any
Person, except as expressly set forth in this Agreement.
(e) Brokers. Except for the Sales Agents, no agent, broker or
other Person acting pursuant to express or implied authority of the
Purchaser is entitled to any commission or finder's fee in connection
with the transactions contemplated by this Agreement or will be entitled
to make any claim against the Seller for a commission or finder's fee.
The Purchaser has not dealt with any agent or broker in connection with
the purchase of the Property other than the Sales Agents.
Section 7.2 Survival. The representations and warranties in Section
7.1 shall survive each Closing indefinitely.
ARTICLE VIII
Additional Obligations of the Seller
Section 8.1 Possession. Except as otherwise expressly provided in a
Third Party Offer, the Seller agrees to give possession of the Applicable
Part of the Real Property to the Purchaser on the applicable Closing Date,
free and clear of all leases, tenancies and rights of occupancy.
Section 8.2 Delivery of Engineering Studies. Within five days after
the Effective Date, the Seller agrees to deliver to the Purchaser (if it has
not previously done so), without any additional cost or expense, all
engineering studies and other data (including topographic and boundary
surveys, street grade profiles, grading plans and storm drainage plans, if
any) theretofore prepared by or for the account of the Seller with respect to
the Real Property and any improvements to be constructed thereon. The
Purchaser shall not be responsible for paying professional fees or other
expenses relating to any engineering studies prepared for the Seller with
respect to the Real Property before the Effective Date, but all of such fees
and expenses shall be paid by the Seller. If this Agreement is terminated
for any reason, the Purchaser shall promptly return to the Seller all
documents and information delivered pursuant to this Section. The
Purchaser's obligations under the preceding sentence shall survive the
termination of this Agreement.
Section 8.3 Closing Affidavit. If requested to do so by the
Purchaser, at each Closing, the Seller shall execute and deliver to the
Purchaser, or any title insurance company designated by it, an Owner's
Affidavit, in the customary form, with respect to the absence of claims which
would give rise to mechanic's liens on, and the absence of parties in
possession of, the Applicable Part of the Real Property and the absence of
unrecorded easements granted by the Seller, but the Seller shall not be
obligated in its Owner's Affidavit to attest to the absence of claims which
would give rise to mechanic's liens and parties in possession of the
Applicable Part of the Real Property which result from any act of Purchaser,
its agents, employees, contractors or stockholders.
Section 8.4 Further Assurances. The Seller agrees that it will, at
any time and from time to time after each Closing Date, upon request of the
Purchaser and at no cost or expense to the Seller, do, execute, acknowledge
and deliver, or will cause to be done, executed, acknowledged and delivered,
all such further acts, deeds, assignments, transfers, conveyances and
assurances as may reasonably be required for the better assigning,
transferring, granting, assuring and confirming to the Purchaser, or to its
successors and assigns, or for aiding and assisting in collecting and
reducing to possession, any or all of the assets or property sold to the
Purchaser pursuant to this Agreement.
Section 8.5 Expenses. The Seller agrees to pay all expenses
incurred by it in connection with the negotiation, execution and performance
of this Agreement and the transactions contemplated hereby, including the
fees and expenses of its legal counsel.
Section 8.6 Negative Covenants. Between the Effective Date and the
Initial Closing Date, the Seller agrees that, without the Purchaser's written
consent in each case, it will not (i) voluntarily grant, create, assume or
permit to exist any Mortgage, lien, lease, encumbrance, easement, covenant,
condition, right-of-way or restriction upon the Real Property other than the
Permitted Exceptions, or voluntarily take or permit any action adversely
affecting the title to the Real Property as it exists on the Effective Date,
(ii) take any action to change the zoning of the Real Property as it exists
on the Effective Date or enter into any special exceptions, waivers or
variances relating to such zoning, or (iii) make any proffers or other
commitments of the type referred to in Section 6.2(f) that will be binding on
the Purchaser or any successor owner of the Real Property after the Initial
Closing Date.
Section 8.7 Survey. The Seller agrees to obtain and deliver to the
Purchaser a survey of the Land on or before March 31, 1996. If the Purchaser
does not terminate this Agreement during the Feasibility Period, the
Purchaser shall be deemed to have accepted the survey of the Land and any
matters disclosed thereon, including any encroachments, overlaps, strips,
gores, boundary line disputes or other similar matters. The Seller agrees to
obtain and deliver to the Purchaser, at least 15 days before each Option
Closing Date, a survey of the Applicable Part of the Real Property. Each
survey shall be prepared by a registered land surveyor, shall locate all
Permitted Exceptions that can be located by a survey, shall set forth the
exact area of the Applicable Part of Real Property (in square feet), shall be
prepared in accordance with "Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys," jointly established and adopted by ALTA and
ACSM in 1992 and shall meet the accuracy requirements of a Class A Survey (as
defined therein), and shall be in such form as is customary to enable the
Purchaser's title insurance company to delete the "survey" exception from the
Purchaser's title insurance policy. The Seller shall pay for the cost of
each survey except as otherwise provided in a Third Party Offer or a
Development Proposal.
Section 8.8 Indemnification by Seller. The Seller agrees to
indemnify and hold harmless the Purchaser from and against all loss,
liability, damage, cost and expense, including reasonable attorneys' fees and
disbursements, arising out of a breach of the representation and warranty
contained in Section 6.3. The Seller's obligations under this Section shall
survive the Closing of the purchase and sale of the Property.
Section 8.9 Sales Commission. The Seller agrees to pay the
commissions payable to the Sales Agents in accordance with a separate
agreement between them.
Section 8.10 Subdivision of Real Property. Promptly after the end of
the Feasibility Period, the Seller shall proceed, at its expense, in a
diligent manner to cause (i) Lot 41A and Lot 42A to be established as
Subdivided Lots in accordance with the Boundary Line Adjustment Plat. Unless
the Purchaser exercises the Option to purchase a part or parts of the Option
Land that constitute one or more Subdivided Lots in their entirety, promptly
after the Purchaser exercises the Option to purchase a part (or all) of the
Option Land, the Seller shall proceed, at its expense, in a diligent manner
to cause the part of the Option Land for which the Option was exercised to be
established as a separate Subdivided Lot by boundary line adjustment. In the
case of a part of the Option Land for which a boundary line adjustment is
required, the Seller shall notify the Purchaser within two Business Days
after the Subdivision Date occurs for each Applicable Part of the Real
Property to be purchased pursuant to this Agreement, and shall include with
the notice a certified copy of the recorded plat of boundary line adjustment.
Section 8.11 Notice of Rights. On the Closing Date, the Seller shall
execute in recordable form and shall deliver to the Purchaser, for
recordation among the Land Records at the Purchaser's expense, a Memorandum
in the form of Exhibit H.
Section 8.12 Waiver of Stormwater Management Payment. The Seller
hereby waives and releases the Purchaser from the obligation to make the
payment required by Article XI, Section A, of the Declaration of Protective
Covenants with respect to the Land because such payment has been included in
the Purchase Price. Unless otherwise expressly provided in a Third Party
Offer or a Development Proposal, the Seller agrees to waive and release the
Purchaser from the obligation to make the payment required by Article XI,
Section A, of the Declaration of Protective Covenants with respect to the
part of the Option Land that is the subject of the Third Party Offer or the
Development Proposal.
Section 8.13 Removal of Construction Debris. Before the Closing Date,
the Seller agrees, at its sole cost and expense, to remove from the Land the
construction debris presently located in the vicinity of the underground
natural gas easement area.
Section 8.14 Formation of Association. Within 20 days after the
Effective Date, the Seller shall (i) cause the Association (as defined in the
Declaration of Protective Covenants and the Storm Water Management Agreement)
to be formed as a non-profit corporation under the laws of the Commonwealth
of Virginia, and (ii) deliver to the Purchaser a copy of the Articles of
Incorporation of the Association, certified by the Virginia State Corporation
Commission, and a copy of the Bylaws of the Association, certified by the
Secretary of the Association. The Seller shall not cause or permit the
Articles of Incorporation or Bylaws of the Association to be amended before
the Closing Date.
Section 8.15 [Intentionally Omitted].
Section 8.16 Brokerage Commissions on Option Property. The Seller
agrees to indemnify and hold harmless the Purchaser from and against claims
for a commission or a finder's fee made by The Evans Company and any other
agent, broker or finder acting pursuant to express or implied authority of
the Seller (other than Taylor & Associates) with respect to each purchase and
sale of all or any part of the Option Property. The Seller's obligations
under this Section shall survive the Closing of each purchase and sale of all
or a part of the Option Property.
ARTICLE IX
Additional Obligations of the Purchaser
Section 9.1 Expenses. The Purchaser agrees to pay all expenses
incurred by it in connection with the negotiation, execution and performance
of this Agreement and the transactions contemplated hereby, including the
fees and expenses of its legal counsel.
Section 9.2 Indemnification by Purchaser. The Purchaser agrees to
indemnify and hold harmless the Seller from and against all loss, liability,
damage, cost and expense, including reasonable attorneys' fees and
disbursements, arising out of a breach of the representation and warranty
contained in Section 7.1(e). The Purchaser's obligations under this Section
shall survive the Closing of the purchase and sale of the Property.
Section 9.3 Delivery of British Aerospace Purchase Agreement. The
Purchaser shall deliver to the Seller a copy of the British Aerospace
Purchase Agreement promptly after it is signed, and a copy of each amendment,
if any, thereto, promptly after such amendment is signed.
Section 9.4 Further Assurances. The Purchaser agrees that it will,
at any time and from time to time after each Closing Date, upon request of
the Seller and at no cost or expense to the Purchaser, do, execute,
acknowledge and deliver, or will cause to be done, executed, acknowledged and
delivered, all such further acts and assurances as may reasonably be required
to carry out the transactions contemplated by this Agreement.
Section 9.5 Effect of Increase in Density on Storm Water Pond. The
Purchaser agrees that the Seller shall not be required to increase the size
of, or to perform any construction work related to, the existing wet storm
water management pond located on the Land because of an increase, after the
Initial Closing Date, in the density of development of improvements on the
Land resulting from a special exception or other zoning action initiated by
the Purchaser or its successors and assigns. This provision shall survive
the Closing of the purchase and sale of the Property.
Section 9.6 Brokerage Commissions on Option Property. The Purchaser
agrees to indemnify and hold harmless the Seller from and against claims for
a commission or a finder's fee made by Taylor & Associates and any other
agent, broker or finder acting pursuant to express or implied authority of
the Purchaser (other than The Evans Company) with respect to each purchase
and sale of all or any part of the Option Property. The Purchaser's
obligations under this Section shall survive the Closing of each purchase and
sale of all or a part of the Option Property.
ARTICLE X
Conditions Precedent to the Seller's Obligations
The obligations of the Seller to sell each Applicable Part of the Real
Property to the Purchaser and to perform the other covenants and obligations
to be performed by it on each Closing Date, shall be subject to the following
conditions (all or any of which may be waived, in whole or in part, by the
Seller):
Section 10.1 Purchaser's Representations and Warranties True. Except
as otherwise expressly provided in the Third Party Offer or the Development
Proposal, the representations and warranties made by the Purchaser in Article
VII shall be true and correct in all material respects with respect to the
Applicable Part of the Real Property on and as of the applicable Closing
Date, with the same force and effect as though such representations and
warranties had been made on and as of such date; and the Purchaser shall have
executed and delivered to the Seller a certificate, dated as of the
applicable Closing Date, to the foregoing effect.
Section 10.2 Purchaser's Performance. The Purchaser shall have
performed all obligations required by this Agreement to be performed by it on
or before the applicable Closing Date.
Section 10.3 Exercise of Options. In the case of each purchase of all
or a part of the Option Property, the Purchaser shall have (i) purchased the
Property in accordance with the terms of this Agreement, and (ii) timely
exercised the Option for all, or such part, of the Option Property.
ARTICLE XI
Conditions Precedent to the Purchaser's Obligations
The obligations of the Purchaser to purchase each Applicable Part of the
Real Property from the Seller and to perform the other covenants and
obligations to be performed by it on each Closing Date, shall be subject to
the following conditions (all or any of which may be waived, in whole or in
part, by the Purchaser):
Section 11.1 Seller's Representations and Warranties True. Except as
otherwise expressly provided in the Third Party Offer or the Development
Proposal, the representations and warranties made by the Seller in Article VI
shall be true and correct in all material respects with respect to the
Applicable Part of the Real Property on and as of the applicable Closing
Date, with the same force and effect as if such representations had been made
on and as of such date, but each reference in Article VI to the "Real
Property" shall be deemed to be a reference to the Applicable Part of the
Real Property; and the Seller shall have executed and delivered to the
Purchaser a certificate, dated as of the Applicable Closing Date, to the
foregoing effect.
Section 11.2 Seller's Performance. The Seller shall have performed
all covenants and obligations required by this Agreement to be performed by
it on or before the applicable Closing Date.
Section 11.3 Title to Real Property. Except as otherwise expressly
provided in the Third Party Offer, on each Closing Date, (i) the Seller shall
be the sole owner of the Applicable Part of the Real Property, in fee simple,
and the Seller's title to the Applicable Part of the Real Property shall be
marketable, good of record and in fact, and free and clear of all Mortgages,
liens, encumbrances, easements, leases, conditions and other matters
affecting title, recorded or unrecorded, other than the Permitted Exceptions
applicable thereto, and (ii) subject to the payment by the Purchaser of the
applicable premium, the Purchaser shall receive from one or more title
insurance companies reasonably satisfactory to the Purchaser, an ALTA Form B
owner's policy of title insurance (1987 edition), or an unconditional binder
to issue the same, in an amount equal to the Purchase Price for the
Applicable Part of the Real Property, dated, or updated to, the applicable
Closing Date insuring, or committing to insure, at standard rates, the
Purchaser's marketable fee simple title to the Applicable Part of the Real
Property in the condition required by clause (i) above.
Section 11.4 Condemnation. Except as otherwise expressly provided in
the Third Party Offer, on each Closing Date, the Applicable Part of the Real
Property shall not be about to be acquired by authority of any governmental
agency in the exercise of its power of eminent domain or by private purchase
in lieu thereof.
Section 11.5 Completion of Subdivision. The Subdivision Date shall
have occurred with respect to the Applicable Part of the Real Property to be
purchased on the Closing Date.
Section 11.6 Survey. The survey for the Applicable Part of the Real
Property delivered by the Seller to the Purchaser pursuant to Section 8.7
shall not disclose any encroachments, overlaps, strips, gores, boundary line
disputes or other similar matters that are not acceptable to the Purchaser,
in its reasonable judgment. The preceding sentence shall not apply to the
purchase and sale of the Property.
Section 11.7 Closing Under British Aerospace Purchase Agreement. The
closing of the purchase and sale of the British Aerospace Property shall be
consummated simultaneously with the Closing of the purchase and sale of the
Property, unless the failure of the purchase and sale of the British
Aerospace Property to be consummated is caused by a default by the Purchaser
in performing its obligations under the British Aerospace Purchase Agreement.
The preceding sentence shall only apply to the purchase and sale of the
Property.
ARTICLE XII
Closing
Section 12.1 Closing Date and Escrow.
(a) Initial Closing Date. The closing of the purchase and sale of
the Property (a "Closing") shall take place on the later to occur of (i)
the tenth Business Day after the Subdivision Date for Lot 41A and Lot
42A, or (ii) the British Aerospace Closing Date, or on any earlier
Business Day mutually agreed upon by the Seller and the Purchaser, with
time being of the essence. The Purchaser shall notify the Seller of the
British Aerospace Closing Date within two Business Days after it is
established.
(b) Option Closing Dates. If the Purchaser timely exercises one or
more of the Options, the closing of the purchase and sale of the Option
Property for which the Option was exercised (a "Closing") shall take
place on the tenth (10th) Business Day after the later to occur of (i)
the date on which the Purchaser exercises the Option, or (ii) the
Subdivision Date for the Option Land for which the Option was exercised
(if applicable), or on any earlier Business Day mutually agreed upon by
the Seller and the Purchaser, with time being of the essence. If the
Option is exercised pursuant to Section 15.1(a), the Closing of the
purchase and sale of the part of the Option Land for which the Option
was exercised shall take place at the time specified in the Third Party
Offer.
(c) Place of Closing; Closing Procedures. Each Closing shall be
held at the office of the Escrow Agent. On or before noon, local time,
on each Closing Date, the Purchaser shall cause to be deposited with the
Escrow Agent immediately available funds in an amount equal to the sum
of the Purchase Price for the Applicable Part of the Real Property, and
the costs, expenses, prorations, adjustments and other amounts payable
by the Purchaser under this Agreement, reduced by (x) the amount of the
Deposit (in the case of the purchase of the Land only), and (y) the
amount of the prorations and adjustments for which the Purchaser
receives credit on the Closing Statement. If the Seller and the
Purchaser have each notified the Escrow Agent that the conditions in
Article X (in the case of the Seller) and the conditions in Article XI
(in the case of the Purchaser) have been satisfied or waived (other than
the respective covenants and obligations of the Seller and the Purchaser
to be performed pursuant to this Article XII), and (y) the Escrow Agent
has received (a) the funds from the Purchaser in accordance with the
preceding sentence, (b) the documents and instruments to be delivered by
the Seller pursuant to Section 12.2, and (c) the documents and
instruments to be delivered by the Purchaser pursuant to Section 12.3,
then the Escrow Agent shall promptly (in the following order) not later
than 3:00 p.m., local time, on the applicable Closing Date, (i) record
the Deed for the Applicable Part of the Real Property, (ii) disburse to
the Seller an amount equal to the Purchase Price for the Applicable Part
of the Real Property (including as a part of the Purchase Price of the
Land, the Deposit), in each case reduced by the costs, expenses,
prorations and adjustments payable by the Seller under this Agreement
and increased by the amount of the prorations and adjustments for which
the Seller receives credit on the Closing Statement, (iii) deliver to
the Purchaser the documents and instruments referred to in Section 12.2
and all other documents and instruments received by it which, in
accordance with the terms of this Agreement, are to be delivered by the
Seller to the Purchaser at each Closing, (iv) deliver to the Seller the
documents and instruments referred to in Section 12.3 and all other
documents and instruments received by it which, in accordance with the
terms of this Agreement, are to be delivered by the Purchaser to the
Seller at each Closing, and (v) make the other disbursements and
deliveries required by the Closing Statement, if any.
Section 12.2 Seller's Deliveries. Subject to the terms and conditions
of this Agreement, the Seller shall deliver to the Escrow Agent on or before
noon, local time, on each Closing Date, the following:
(a) the Deed for the Applicable Part of the Real Property;
(b) a certification as to the Seller's non-foreign status which
complies with the provisions of Section 1445(b)(2) of the Internal Reve
nue Code of 1986, as amended, any temporary or final regulations
promulgated thereunder, and any revenue procedures or other officially
published announcements of the Internal Revenue Service or the
U.S. Department of the Treasury in connection therewith;
(c) the Closing Statement for the Applicable Part of the Real
Property; and
(d) any other documents and instruments required by a Third Party
Offer (if applicable) or this Agreement.
Section 12.3 Purchaser's Deliveries. Subject to the terms and
conditions of this Agreement, the Purchaser shall, in addition to its
obligations under Section 12.1, deliver to the Escrow Agent on or before
noon, local time, on each Closing Date, the following to be held by the
Escrow Agent in escrow pursuant to the terms of Section 12.1(b):
(a) the Closing Statement for the Applicable Part of the Real
Property; and
(b) any other documents and instruments required by a Third Party
Offer (if applicable) or this Agreement.
Section 12.4 Delivery in Escrow. The delivery to the Escrow Agent at
each Closing of the Purchase Price, the Deed and all other documents and
instruments required to be delivered by either party to the other at such
Closing by the terms of this Agreement shall be deemed to be a good and suffi
cient tender of performance of the terms hereof.
ARTICLE XIII
Closing Adjustments and Prorations
Section 13.1 General. All expenses incurred in connection with the
ownership of the Applicable Part of the Real Property, including assessments
under the Declaration of Protective Covenants, shall be paid or shall be
prorated between the Seller and the Purchaser in accordance with the
provisions of this Article. For purposes of the prorations and adjustments
to be made pursuant to this Article, the Purchaser shall be deemed to own the
Applicable Part of the Real Property and therefore be responsible for any
expenses for the entire day upon which the applicable Closing occurs. Any
apportionments and prorations which are not expressly provided for in this
Article shall be made in accordance with the customary practice in Loudoun
County, Virginia. The Seller and the Purchaser shall prepare a schedule of
adjustments for the Applicable Part of the Real Property (the "Closing
Statement") at each Closing. Any net adjustment in favor of the Purchaser
shall be credited against the Purchase Price at the Closing. Any net
adjustment in favor of the Seller shall be paid in cash or cash equivalent at
the Closing by the Purchaser to the Seller. A copy of the Closing Statement
agreed upon by the Seller and the Purchaser shall be executed by the Seller
and the Purchaser and delivered to the Escrow Agent at each Closing.
Section 13.2 Taxes and Assessments. All non-delinquent Real Estate
Taxes assessed against the Applicable Part of the Real Property shall be
prorated between the Seller and the Purchaser on an accrual basis, based upon
the actual current tax bill. If the most recent tax bill received by the
Seller before the applicable Closing Date is not the actual current tax bill,
then the Seller and the Purchaser shall initially prorate the Real Estate
Taxes at the Closing by applying 100% of the tax rate for the period covered
by the most current available tax bill to the latest assessed valuation, and
shall reprorate the real estate taxes retroactively as soon as the actual
current tax bill becomes available. Any delinquent real estate taxes
assessed against the Applicable Part of the Real Property shall be paid
(together with any interest and penalties) by the Seller at the Closing from
the Purchase Price.
Section 13.3 Closing Costs and Transfer Taxes. The Virginia grantor's
tax and all other State and County transfer taxes and recording charges
payable in connection with the recording of each Deed (whether imposed in the
form of transfer taxes, revenue stamps or otherwise) shall be divided equally
between the Seller and the Purchaser. The Purchaser shall pay for all
expenses of examinations of title, the tax certificate and all other
recording fees and escrow expenses. The fees, charges and expenses of the
Escrow Agent shall be divided equally between the Seller and the Purchaser.
Section 13.4 Third Party Offer. If a Third Party Offer provides for
prorations, adjustments or allocations of closing costs and transfer taxes
that differ from those provided in this Article, the prorations, adjustments
or allocations with respect to the Designated Part of the Option Land shall
be made in accordance with the terms of the Third Party Offer.
ARTICLE XIV
Termination
Section 14.1 Reasons for Termination. This Agreement may be
terminated upon written notice given to the other party by:
(a) the Purchaser at any Closing, if any one of the conditions set
forth in Article XI is not satisfied on the applicable Closing Date;
(b) the Seller at any Closing, if any one of the conditions set
forth in Article X is not satisfied on the applicable Closing Date; or
(c) the Purchaser or the Seller at any time on or after July 1,
1996, if the British Aerospace Closing Date does not occur before the
date of termination.
Section 14.2 Termination by Purchaser. If the Purchaser terminates
this Agreement pursuant to Section 14.1(a) or Section 14.1(c), this Agreement
shall become null and void, the Escrow Agent shall return the Deposit (if
any) to the Purchaser and no party shall have any further liability or
obligation to any other party under this Agreement, except as otherwise pro
vided in this Agreement. If the Purchaser terminates this Agreement pursuant
to Section 14.1(a) because of a breach by the Seller of any of the
representations or warranties made by it in this Agreement or the failure of
the Seller to perform any of the covenants or agreements to be performed by
it under this Agreement, the Purchaser's sole remedy shall be to sue to
recover its damages arising out of such breach or nonperformance, but the
Seller's liability for damages shall be limited to an amount equal to the
lesser of (i) $500,000, or (ii) the costs and expenses, including reasonable
legal fees and disbursements, incurred by the Purchaser in negotiating this
Agreement and exercising its rights under Article V, application fees,
deposits, legal fees and disbursements and other costs and expenses incurred
by the Purchaser in applying for and obtaining third-party financing to
purchase the Land or the Option Land, as the case may be.
Section 14.3 Termination by Seller. If the Seller terminates this
Agreement pursuant to Section 14.1(b) or Section 14.1(c), this Agreement
shall become null and void, the Escrow Agent shall return the Deposit (of
any) to the Purchaser and no party shall have any further liability or
obligation to the other under this Agreement, except as otherwise provided in
this Agreement. If the Seller terminates this Agreement pursuant to Section
14.1(b) because the Purchaser defaults in performing any of the obligations
to be performed by it under this Agreement, the Escrow Agent shall pay the
Deposit to the Seller. Except as otherwise provided in Section 5.1(c) and
Section 9.3, (i) the Seller's sole and exclusive remedy for the Purchaser's
misrepresentation, breach of warranty or default shall be to retain the
Deposit as liquidated damages, and (ii) in no event and under no
circumstances shall the Seller be entitled to receive more than the Deposit
as damages for the Purchaser's misrepresentation, breach of warranty or
default. The Seller and the Purchaser agree that the Deposit is not a
penalty for the Purchaser's breach, but represents a fair and reasonable
estimate of the damages that would be incurred by the Seller in the event of
breach, such damages being difficult or impossible to ascertain.
Section 14.4 Purchaser's Right to Seek Specific Performance. If the
Seller defaults in performing any of the covenants or agreements to be
performed by it under this Agreement, the Purchaser shall have the right,
instead of terminating this Agreement pursuant to Section 14.1(a), to elect
to permit this Agreement to remain in effect and to sue for specific
performance.
Section 14.5 Exception. If the Purchaser terminates this Agreement
pursuant to Section 14.1(c) or pursuant to Section 14.2 because the condition
precedent described in Section 11.7 is not satisfied (including the failure
of the condition in Section 11.7 to be satisfied because the British
Aerospace Purchase Agreement is never signed), or if the Seller terminates
this Agreement pursuant to Section 14.1(c), the Purchaser agrees to reimburse
the Seller for an amount equal to the lesser of (i) the reasonable costs and
expenses (including reasonable attorneys' fees and disbursements) incurred by
the Seller in negotiating this Agreement and in preparing and delivering the
materials referred to in Section 8.2, or (ii) $100,000.
ARTICLE XV
Preemptive Options to Purchase Option Land
Section 15.1 Right of First Refusal on Sale.
(a) Grant of Option. Except as otherwise provided in Section 15.3,
if (i) the Purchaser purchases the Property pursuant to the terms of
this Agreement, and (ii) at any time or from time to time during the
period beginning on the Initial Closing Date and ending on the fifth
anniversary of the Initial Closing Date, the Seller obtains a Third
Party Offer (as defined in subsection (b)) for the purchase of all or
any part of the Option Land which the Seller intends to accept, the
Seller shall promptly deliver notice thereof (a "Sale Notice") to the
Purchaser. A true copy of the Third Party Offer, setting forth all the
terms and conditions of the proposed purchase, with the name and address
of the purchaser, shall be attached to the Sale Notice. For a period of
10 Business Days after its receipt of the Sale Notice (the "Purchaser's
Decision Period"), the Purchaser shall have the option, which it may
exercise by giving notice to the Seller during the Purchaser's Decision
Period, to purchase the part of the Option Land that is the subject of
the Third Party Offer (the "Designated Part of the Option Land") for the
same price and on the same terms and conditions as those contained in
the Third Party Offer. If the Purchaser does not exercise the Option to
purchase the Designated Part of the Option Land within the Purchaser's
Decision Period, the Seller shall be free to sell the Designated Part of
the Option Land to the Person who made the Third Party Offer, but the
contract with the Person who made the Third Party Offer must be entered
into within 60 days after the expiration of the Purchaser's Decision
Period and the sale must be consummated in accordance with the terms and
conditions of the Third Party Offer. If a contract with the Person who
made the Third Party Offer is not signed within the 60-day period or, if
the contract is signed within that time period, but the sale is not
consummated within the time period set forth in the Third Party Offer,
then any subsequent sale of the Designated Part of the Option Land to
the same Person who made the Third Party Offer or to any other Person on
the same or other terms and conditions must comply again with all the
terms and provisions of this subsection.
(b) Third Party Offer. For purposes of subsection (a), a Third
Party Offer shall be a written offer or letter of intent from a Person
identified therein by name and address, who reasonably appears capable
of complying with the terms of the Third Party Offer and who is not an
Affiliate of the Seller or any of its partners and which does not
contain terms or conditions which the Purchaser, for reasons other than
its financial condition, is not reasonably capable or performing, such
as payment in a specific form of property (such as corporate stock or a
unique or specific item or class of property) not readily available to
the Purchaser or for which no recognized or adequate public market
exists. If the Person making the Third Party Offer is a corporation
(other than a publicly-held corporation), a partnership or a limited
liability company, all shareholders, partners or members shall be
identified.
Section 15.2 Other Option to Purchase.
(a) Grant of Option. Except as otherwise provided in Section 15.3,
if (i) the Purchaser purchases the Property pursuant to the terms of
this Agreement, and (ii) at any time or from time to time during the
period beginning on the Initial Closing Date and ending on the fifth
anniversary of the Initial Closing Date, the Seller obtains a
Development Proposal (as defined in subsection (c)) for a transaction in
which the Seller would, either alone or with others, develop and
construct on all or any part of the Option Land one or more buildings on
a "build to suit" basis and, upon completion of construction, would
lease the building(s) and the part of the Option Land on which the
building(s) was (were) constructed, which the Seller intends to accept,
the Seller shall promptly deliver notice thereof (a "Development
Notice") to the Purchaser. A true copy of the Development Proposal,
setting forth the material economic terms and conditions of the proposed
lease and "build to suit transaction," with the name and address of the
tenant, shall be attached to the Development Notice. For a period of 10
Business Days after its receipt of the Development Notice (the
"Purchaser's Decision Period"), the Purchaser shall have the option,
which it may exercise by giving notice to the Seller during the
Purchaser's Decision Period, to purchase the part of the Option Land
that is the subject of the Development Proposal (the "Designated Part of
the Option Land") for the price set forth in subsection (b) and on the
other terms and conditions contained in this Agreement. If the
Purchaser does not exercise the option to purchase the Designated Part
of the Option Land within the Purchaser's Decision Period, the Seller
shall be free to lease the Designated Part of the Phase II Option Land
to the Person who made the Development Proposal, but the lease with the
Person who made the Development Proposal must be entered into within 120
days after the expiration of the Purchaser's Decision Period. If a
lease with the Person who made the Development Proposal is not signed
within the 120-day period or, if a lease with the Person who made the
Development Proposal is signed within the 120-day period, but such lease
is thereafter terminated before the Seller commences the construction of
the improvements contemplated by such lease (as evidenced by the good
faith commencement of grading preparatory to excavation for footings),
then any subsequent sale or leasing of the Designated Part of the Phase
II Option Land to the same Person who made the Development Proposal or
to any other Person on the same or other terms and conditions must
comply again with all the terms and provisions of this subsection.
(b) Purchase Price. The purchase price of each Designated Part of
the Option Land shall be an amount equal to the product obtained by
multiplying (i) the exact area (expressed in square feet) of the
Designated Part of the Option Land determined by the survey obtained by
the Seller pursuant to Section 8.7, by (ii) an amount equal to $2.50 per
square foot, increased at the rate of five percent (5%) per annum
(compounded at one year intervals beginning on the first anniversary of
the Initial Closing Date) beginning on the Initial Closing Date and
ending on the date the Purchaser exercises the Option for the Designated
Part of the Option Land.
(c) Development Proposal. For purposes of subsection (a), a
Development Proposal shall be a written offer or letter of intent from a
Person identified therein by name and address, who reasonably appears
capable of complying with the terms of the Development Proposal and who
is not an Affiliate of the Seller or any of its partners. If the Person
making the Development Proposal is a corporation (other than a publicly-
held corporation), a partnership or a limited liability company, all
shareholders, partners or members shall be identified.
Section 15.3 Purchaser's Insolvency. The Purchaser shall not have the
right to exercise an option to purchase a Designated Part of the Option Land
pursuant to Section 15.1 or Section 15.2 if, at the time the Purchaser
receives a Sale Notice or a Development Notice, as the case may be, all or
any part of the Purchaser's property is then being administered as a part of
a debtor's estate in a proceeding under any chapter of the Federal Bankruptcy
Code, 11 U.S. Code, or all or any substantial part of the Purchaser's
property is then subject to a receivership, insolvency or similar proceeding
under the laws of any state or the District of Columbia relating to the
rights of debtors and creditors.
Section 15.4 Notice of Termination. If the Purchaser does not
exercise the Option to purchase a Designated Part of the Option Land within
the Purchaser's Decision Period (as defined in Section 15.1 or Section 15.2,
as the case may be), the Purchaser shall execute and deliver to the Seller,
within 10 days after receipt of a written request therefor accompanied by a
photocopy of the contract signed by the Seller and the Person who made the
Third Party Offer or the lease signed by the Seller and the Person who made
Development Proposal, as the case may be, a Memorandum or other similar
document, in recordable form, that gives public notice that the Purchaser's
option to purchase the Designated Part of the Option Land has lapsed and is
no longer in effect, except as otherwise provided in the last sentence of
Section 15.1(a) or the last sentence of Section 15.2(a), as the case may be.
ARTICLE XVI
Seller Improvements
Section 16.1 Seller's Obligation to Complete.
(a) Obligation to Construct. The Seller shall, at the Seller's
sole cost and expense, construct the Seller Improvements in accordance
with the provisions of Exhibit D. The Seller shall commence actual
construction of the Seller Improvements and shall complete construction
thereof (and obtain all required inspections by Governmental
Authorities) within the time periods set forth in Exhibit D. Each
segment of the Seller Improvements shall not be deemed to have been
completed for purposes of this Article XVI until all required
inspections by Governmental Authorities have been obtained and the
specified part of the Seller Improvements is available for public use.
The date of completion shall be extended if, and only to the extent
that, the Seller is delayed from completing the Seller Improvements
solely because of Unavoidable Delays. As used in this subsection, the
term "Unavoidable Delays" means delays caused by events or circumstances
(other than financial) not within the Seller's reasonable control,
including (i) acts of God, (ii) delays in obtaining plan approvals from,
or in obtaining the issuance of required permits by, Governmental
Authorities (despite diligent efforts by the Seller to obtain such plan
approvals and permits), (iii) the Seller's inability to obtain, for
reasons other than price, materials (such as asphalt) necessary to
complete the Seller Improvements, and (iv) adverse weather conditions,
but shall not include delays that should reasonably be expected such as
a normal amount of aggregate delay resulting from adverse weather
conditions or the normal and usual time for processing and issuing
permits or other governmental approvals or the normal delay in waiting
for governmental inspections. No delays except those relating to
weather (which may be determined retrospectively based upon usual
aggregate weather-related delays and actual delays experienced) shall be
considered an Unavoidable Delay unless the Seller gives written notice
of the claim within 30 days after it occurs or, in the case of a
continuing delay, within 30 days after it commences. The term "Required
Completion Date," when used in this Article with reference to a
specified part of the Seller Improvements, means the date of completion
for such part of the Seller Improvements specified in Exhibit D, as such
date of completion may be extended on account of Unavoidable Delays.
(b) Quality of Construction; Easements. The Seller Improvements
shall be constructed in a good and workmanlike manner in accordance with
all applicable Legal Requirements and shall be suitable for their
intended purposes. The Purchaser shall, on request, grant to the Seller
and its agents and contractors temporary easements over and across any
part of the Real Property owned by the Purchaser for access,
construction, grading and staging, to the extent such easements are
reasonably required to enable the Seller to construct and complete the
Seller Improvements.
(c) Arbitration. If the Seller and the Purchaser are unable to
agree on the number of days by which the Seller is delayed from
completing the Seller Improvements because of Unavoidable Delays, the
dispute shall be determined by binding arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
then in effect. The arbitration proceeding shall be conducted in
Washington, D.C. by one arbitrator selected in accordance with the
Commercial Arbitration Rules. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. All
direct and reasonable costs of the arbitration proceeding, including
compensation of the arbitrator, but excluding compensation paid to
counsel, agents, employees and witnesses of either party, shall be borne
equally by the Seller and the Purchaser or as the arbitrator shall
otherwise determine.
(d) Replacement of Surety Bonds. The Seller, at its expense, shall
cause the existing surety bonds guaranteeing completion of Pacific
Boulevard and Prentice Drive Construction Areas (or new surety bonds
issued in substitution or replacement thereof) to be maintained in full
force and effect with the applicable Governmental Authorities until the
Seller Improvements in those Areas have been completed and all required
inspections have been obtained.
Section 16.2 Insurance. The Seller shall not enter on any part of the
Real Property owned by the Purchaser for any purpose relating to the
construction of the Seller Improvements other than visual inspections until
the Seller has delivered to the Purchaser a certificate of insurance (in the
form of ACORD 27) evidencing that the Seller has obtained a policy of
Commercial General Liability Insurance protecting the Seller, as named
insured, and the Purchaser and, if applicable, any Person holding a Mortgage
encumbering a part of the Real Property owned by the Purchaser, as additional
insureds, against liability for bodily injury, death and property damage
occurring in or about the Real Property owned by the Purchaser, with such
policy to afford protection to the limit of not less than $5,000,000 combined
single limit annual aggregate for bodily injury, death and property damage.
Such certificate shall also provide that the policy will not be canceled or
terminated, or the limits of liability thereunder reduced, unless the
Purchaser (and, if applicable, its Mortgagee) receives at least 20 days
advance notice thereof.
Section 16.3 Indemnification. The Seller shall indemnify and hold
harmless the Purchaser and its officers, employees, agents and stockholders
(collectively, the "Indemnitees"), from and against (i) all physical damage
to the Real Property owned by the Purchaser caused by the construction of the
Seller Improvements, (ii) all loss, liability or damage suffered or incurred
by the Indemnitees arising out of or resulting from injury or death to
individuals or damage to personal property sustained on the Real Property
owned by the Purchaser and caused by the construction of the Seller
Improvements or otherwise caused by entry on the Real Property owned by the
Purchaser by the Seller or its employees, agents or contractors, (iv) all
liens for labor and materials furnished to the Seller or its contractors in
connection with the construction of the Seller Improvements which are filed
or asserted against the Real Property owned by the Purchaser, and (iv) all
reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by the Purchaser in connection with any action, suit,
proceeding, demand, assessment or judgment incident to the foregoing.
Section 16.4 Seller Improvements Escrow Fund. In order to provide
security for the Seller's performance of its obligations to construct Pacific
Boulevard and Dresden Street within the Pacific Boulevard and Dresden Street
Construction Areas, the Seller shall provide security in accordance with the
following provisions:
(a) On the Initial Closing Date, the Seller shall deliver to the
Escrow Agent a letter of credit in the amount of $665,000 to be held in
escrow in accordance with the terms and provisions of the Seller
Improvements Escrow Agreement in the form attached as Exhibit E. At the
Closing, the Seller and the Purchaser shall join with the Escrow Agent
in signing and delivering multiple counterparts of the Seller
Improvements Escrow Agreement.
(b) The letter of credit delivered by Seller to the Escrow Agent
pursuant to this Section shall be (i) in the form attached hereto as
Exhibit F, and (ii) issued by (x) Bank of America, N.A., or (y) another
bank of equal or greater size organized under the laws of the United
States which maintains an office or has a correspondent in Washington,
D.C. or Fairfax County, Virginia, and which is approved by the
Purchaser, such approval not to be unreasonably withheld, delayed or
conditioned.
Section 16.5 Improvement Plans and Specifications. Within 90 days
after the Initial Closing Date, the Seller shall provide the Purchaser with a
copy of the preliminary engineering drawings and specifications for the
construction of Pacific Boulevard and Dresden Street within the Pacific
Boulevard and Dresden Street Construction Areas (the "Road Construction
Work"), which shall describe the proposed locations, design, quality and
capacity of the Road Construction Work, including the locations of the
utility stubs, if any. The preliminary engineering drawings and
specifications for the Road Construction Work shall be subject to the
Purchaser's approval, but the Purchaser shall not unreasonably withhold,
delay or condition its approval. The Seller shall use its best efforts to
locate the utility stubs in reasonable locations requested by the Purchaser
and beneficial for the development of the Real Property. After the Purchaser
approves the preliminary engineering drawings and specifications for the Road
Construction Work, the Seller shall prepare final engineering plans,
specifications and working drawings for the Road Construction Work, shall
submit the final plans, specifications and working drawings to the applicable
Governmental Authorities for their approval, and shall use its best efforts
to obtain such approval from the Governmental Authorities and to obtain all
permits required by the Governmental Authorities for the performance of the
Road Construction Work.
Section 16.6 Dedication of Pacific Boulevard. After the applicable
Governmental Authorities have approved the final plans, specifications and
working drawings for the design of the extension of Pacific Boulevard in the
2.74 acre parcel shown on Exhibit A-3 (the "Pacific Boulevard Extension"),
the Seller, at its expense, shall prepare all documents and plats required by
Loudoun County for the dedication to public use of the Pacific Boulevard
Extension. Within 10 Business Days after receipt of the same, the Purchaser
shall sign and return to the Seller all documents and plats required to
complete the dedication to public use of the Pacific Boulevard Extension.
Section 16.7 Governmental Acceptance for Maintenance. The Seller
shall, at its sole cost and expense, diligently and continuously pursue the
acquisition of final approval and public dedication of all streets and roads
leading to and surrounding the Real Property which are included as a part of
the Seller Improvements and all water, sanitary sewer and storm drainage
utility lines servicing the Real Property and all conduits providing electric
service to the Real Property and public operation and maintenance by the
applicable Governmental Authorities. Until such governmental acceptance for
maintenance, the Seller shall, at its sole cost an expense, maintain and keep
in good repair, and in compliance with all applicable Legal Requirements, all
such streets, roads and utilities. However, the Purchaser shall indemnify
the Seller for any damage to such streets, roads and utilities caused
intentionally or negligently by the Purchaser or its employees, agents or
contractors.
Section 16.8 Liquidated Damages. The Seller understands that the
Seller's agreement to complete the Seller Improvements within the respective
time periods specified in Section 16.1 and Exhibit D is a material inducement
to the Purchaser to enter into this Agreement and to purchase the Property.
Furthermore, the Seller and the Purchaser acknowledge that, if the Seller
fails to complete the Seller Improvements within the time periods specified
in Section 16.1 and Exhibit D the damages that the Purchaser will incur will
be difficult to ascertain. Accordingly, the Seller has agreed that, if the
Seller Improvements are not completed within the respective time periods
required by Section 16.1 and Exhibit D, the Seller will pay liquidated
damages to the Purchaser in accordance with the following provisions:
(a) If the construction of Pacific Boulevard and Prentice Drive
within the Pacific Boulevard and Prentice Drive Construction Areas is
not completed so that Pacific Boulevard and Prentice Drive are available
for public use within those Areas on or before the Required Completion
Date, the Seller shall pay liquidated damages to the Purchaser at the
rate of $1,000 per day for each calendar day during the period beginning
on (and including) the day after the Required Completion Date for such
construction and ending on (and including) the day on which such
construction is completed and Pacific Boulevard and Prentice Drive are
available for public use within those Areas.
(b) If the construction of Pacific Boulevard and Dresden Street
within the Pacific Boulevard and Dresden Street Construction Areas is
not completed so that Pacific Boulevard and Dresden Street are available
for public use within those Areas on or before the Required Completion
Date, except as otherwise provided in subsection (d), the Seller shall
pay liquidated damages to the Purchaser at the rate of $2,667 per day
for each calendar day during the period beginning on (and including) the
day after the later to occur of (i) the Required Completion Date for
such construction, or (ii) the New Building Completion Date (as defined
in subsection (d)), and ending on (and including) the day on which such
construction is completed and Pacific Boulevard and Dresden Street are
available for public use within those Areas.
(c) The Seller and the Purchaser agree that the amounts provided in
subsections (a) and (b) are a reasonable estimate of the actual damages
that would be incurred by the Purchaser and that such amounts are not
intended to be penalties.
(d) For purposes of subsection (b), (i) the term "New Building"
means the building and related improvements the Purchaser intends to
construct on the Land after the Closing Date at a location near the
intersection of Pacific Boulevard and Dresden Street, and (ii) the term
"New Building Completion Date" means the date on which the New Building
is substantially completed, as evidenced by the issuance by the
Purchaser's architect, who must be an architect duly licensed to
practice in the Commonwealth of Virginia, of a Certificate of
Substantial Completion on AIA Form G704.
(e) The Purchaser's sole and exclusive remedy for damages for the
Seller's failure to complete the Seller Improvements by the Required
Completion Date shall be to receive liquidated damages pursuant to
subsections (a) and (b), but the liquidated damage remedy shall not
preclude the Purchaser from suing for specific performance or other
equitable relief.
ARTICLE XVII
Miscellaneous Provisions
Section 17.1 Entire Agreement. This Agreement, together with the
Exhibits hereto, contains the entire agreement between the parties relating
to the purchase and sale of the Real Property, all prior negotiations between
the parties are merged by this Agreement and there are no promises,
agreements, conditions, undertakings, warranties or representations, oral or
written, express or implied, between them other than as herein set forth. No
change or modification of this Agreement shall be valid unless the same is in
writing and signed by the parties hereto. No waiver of any of the provisions
of this Agreement, or any other agreement referred to herein, shall be valid
unless in writing and signed by the party against whom it is sought to be
enforced.
Section 17.2 Counterparts. This Agreement may be executed in any
number of counterparts and it shall not be necessary that each party to this
Agreement execute each counterpart. Each counterpart so executed (or, if all
parties do not sign on the same counterpart, each group of counterparts
signed by all parties) shall be deemed to be an original, but all such
counterparts together shall constitute one and the same instrument. In
making proof of this Agreement, it shall not be necessary to account for more
than one counterpart or group of counterparts signed by all parties.
Section 17.3 Benefit and Burden. All terms of this Agreement shall be
binding upon, and inure to the benefit of and be enforceable by, the respec
tive personal representatives, heirs, successors and assigns of the parties
hereto, except that the Purchaser may not assign its rights under this
Agreement without the Seller's prior written consent. The Seller hereby
consents to the Purchaser's assignment of its rights under this Agreement to
any Person who provides financing for the Purchaser's purchase of the Real
Property, including a Person who provides financing as a part of a sale-
leaseback transaction.
Section 17.4 Governing Law. This Agreement is intended to be
performed in the jurisdiction in which the Land is located and shall be
construed and enforced in accordance with the laws of such jurisdiction.
Section 17.5 Notices.
(a) Manner of Giving Notice. Each notice, request, demand,
consent, approval or other communication (hereafter in this Section
referred to collectively as "notices" and referred to singly as a
"notice") which the Seller or the Purchaser is required or permitted to
give to the other party pursuant to this Agreement shall be in writing
and shall be deemed to have been duly and sufficiently given if
(1) personally delivered with proof of delivery thereof
(any notice so delivered shall be deemed to have been received at
the time so delivered),
(2) sent by Federal Express (or other similar overnight
courier) designating early morning delivery (any notice so delivered
shall be deemed to have been received on the next Business Day
following receipt by the courier), or
(3) sent by United States registered or certified mail,
return receipt requested, postage prepaid, at a post office
regularly maintained by the United States Postal Service (any notice
so sent shall be deemed to have been received two days after mailing
in the United States).
(b) Addresses for Notices. All notices shall be addressed to the
parties at the following addresses:
(1) if to the Seller:
c/o The Evans Company
8251 Greensboro Drive
Suite 200
McLean, Virginia 22182
Attention: Mr. Stephen J. Garchik
Telecopy Number: (703) 893-0617
with copies to:
Chris M. Smith, Esquire
Shearman & Sterling
153 East 53rd Street
New York, New York 10022
Telecopy Number: (212) 848-5252
and
Goelet Corporation
22 East 67th Street
New York, New York 10021
Attention: Mr. Jonathan M. Rather
Telecopy Number: (212) 861-2179
(2) if to the Purchaser:
America Online Incorporated
8619 Westwood Center Drive
Vienna, Virginia 22182-2285
Attention: Mr. Mark E. Stavish
Vice President, Human Resources
and Facilities
Telecopy Number: (703) 918-2101
with a copy to:
Joel N. Simon, Esquire
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Telecopy Number: (202) 857-6395
Either party may, by notice given pursuant to this Section, change the
person or persons and/or address or addresses, or designate an
additional person or persons or an additional address or addresses, for
its notices, but notice of a change of address shall only be effective
upon receipt. The Seller and the Purchaser each agrees that it will not
refuse or reject delivery of any notice given hereunder, that it will
acknowledge, in writing, receipt of the same upon request by the other
party and that any notice rejected or refused by it shall be deemed for
all purposes of this Agreement to have been received by the rejecting
party on the date so refused or rejected, as conclusively established by
the records of the U.S. Postal Service or the courier service.
(c) Notice Given by Counsel. All Notices that are required or
permitted to be given under this Agreement may be given by the parties hereto
or by their respective counsel, who are hereby authorized to do so on the
parties' behalf.
Section 17.6 Partial Invalidity. If any term or provision of this
Agreement or the application thereof to any persons or circumstances shall,
to any extent, be invalid or unenforceable, the remainder of this Agreement
or the application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable shall not be
affected thereby, and each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
Section 17.7 Waiver of Jury Trial. The Seller and the Purchaser waive
trial by jury in any action, proceeding or counterclaim brought by either of
them against the other on any matter arising out of or in any way connected
with this Agreement.
Section 17.8 Survival of Obligations. The obligations of the parties
under this Agreement which, by their terms, are to be performed after a
Closing shall survive such Closing.
Section 17.9 Consent to Assignment. Subject to the Purchaser's
purchase of the British Aerospace Property pursuant to the British Aerospace
Purchase Agreement, the Seller hereby consents to the assignment by British
Aerospace Holdings, Inc. of its rights under Section 21.00 and Exhibit D of
the Purchase Agreement dated March 6, 1989, as amended, between the Seller
and British Aerospace, Inc.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above stated.
SELLER
BROAD RUN OFFICE CENTER ASSOCIATES
LIMITED PARTNERSHIP
By: /s/David W. Evans
David W. Evans,
Authorized General Partner
PURCHASER
AMERICA ONLINE, INC.
By: /s/Mark E. Stavish
Mark E. Stavish,
Vice President,
Human Resources and Facilities
LEASE AGREEMENT
SHEPHERD MALL PARTNERS, L.L.C.,
LANDLORD
and
AMERICA ONLINE, INC.,
TENANT
for
Street Address: 1000 Shepherd Mall
Oklahoma City, Oklahoma 73107
TABLE OF CONTENTS
Section Number and Caption Page
1. Definitions 1
2. Lease of the Premises 3
3. Landlord's Renovation Program and the Initial Tenant Improvements. 3
4. Base Rent. 5
5. Operating Expenses. 5
6. Use. 8
7. Utilities. 9
8. Landlord's Services and Maintenance. 9
9. Landlord's Right of Entry. 11
10. Common Areas; Parking. 11
11. Signs. 11
12. Alterations. 12
13. Fixtures and Equipment. 12
14. Indemnification. 15
15. Insurance. 15
16. Casualty Loss. 16
17. Assignment and Subletting. 17
18. Subordination; Attornment; Non-Disturbance. 17
19. Tenant's Defaults 18
20. Landlord's Defaults. 18
21. Condemnation 19
22. Recording 20
23. Consent or Approval 20
24. Holding Over 20
25. Surrender of Premises 20
26. Notices 20
27. Estoppel Certificates 21
28. Rules and Regulations 21
29. Intentionally deleted 22
30. Lender's Approval. 22
31. Tenant's Right of First Refusal. 22
32. Competitors. 22
33. Waiver of Distraint. 22
34. Quiet Enjoyment. 23
35. Brokerage. 23
36. Environmental Requirements. 23
37. ADA Requirements. 24
38. Option to Expand and Option to Renew 25
39. Miscellaneous. 27
Exhibit 1 (Final Base Rent)
Exhibit 2 (Temporary Space Letter Agreement)
Exhibit A (Site Plan)
Exhibit B (Workletter)
Exhibit C (Project Legal Description)
Exhibit D (Landlord's Renovation Program)
Exhibit E (Parking)
Exhibit F (Lighting for Parking Lot)
Exhibit G (Electricity Requirements for Premises)
Exhibit H (HVAC Requirements for Premises)
Exhibit I (Janitorial Requirements for Premises)
Exhibit J (Rules and Regulations)
Exhibit K (Non-Disturbance Agreement)
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made this 20TH day of
February, 1996 (the "Effective Date"), by and between Shepherd Mall Partners
L.L.C., an Oklahoma limited liability company, whose address is 1000 Shepherd
Mall, Oklahoma City, Oklahoma, 73107 ("Landlord"), and AMERICA ONLINE, INC.,
a Delaware corporation, whose address is 8619 Westwood Center Drive, Vienna,
Virginia 22182 ("Tenant").
In consideration of the promises in the Lease, Landlord and Tenant
agree as follows:
1. Definitions.
Certain terms in this Lease are defined below:
A. Base Rent:
(a) The parties agree that the rental rate per square foot for the
Premises shall be in the range of nine dollars ($9.00) to ten dollars (10.00)
per rentable square foot, calculated based upon an "Estimated Cost" for the
Tenant Improvement Work being from sixteen dollars ($16.00) per square foot
to twenty-two dollars ($22.00) per square foot for hard costs and Tenant's
Architectural and Engineering design fees, which is based upon: (1) the
Landlord, at its sole cost and expense and not as part of the Estimated Cost,
performing the Landlord's Renovation Program, hereinafter defined and as set
forth in Exhibit D; (2) the Landlord performing the Initial Tenant
Improvement Work, as hereinafter defined, in the Premises, and as set forth
in Exhibit B, the Workletter (as hereinafter defined); and, (3) the Landlord
providing systems for the Premises which meet the Electricity Requirements
for the Premises, as hereinafter defined and as set forth in Exhibit G, and
the HVAC Requirements for the Premises, as hereinafter defined and as set
forth in Exhibit H. The parties acknowledge that the Workletter contains
outline and performance specifications and that the design for the Tenant
Improvement Work will be finalized expeditiously by the Landlord's Architect
based upon these requirements (and the space layout and design intent
drawings which will be expeditiously provided by Tenant's Architect to
Landlord) and said finalized design shall be subject to Tenant's Architect's
review and approval (the "Final Design"), that the Landlord's Architect and
the Tenant's Architect shall cooperate in the finalization of the design, and
that the Landlord, at its cost, shall provide pricing and value engineering
to facilitate the finalization of the design and the selection of systems for
the Tenant Improvement Work at a cost within the Estimated Cost. The
cumulative drawings that are approved by Tenant's Architect collectively
shall be deemed to be the Final Design for the Initial Tenant Improvements.
The final Base Rent Rental Rate shall be determined based upon the final cost
for the Final Design for the Initial Tenant Improvements (the fair market
cost for the Landlord's Renovation Program shall be deducted from the total
cost of the Tenant Improvement Work to the extent that items included in the
Landlord's Renovation Program are upgraded by the design details and
requirements for the Tenant Improvement Work, for example, the cost of
Landlord's standard HVAC system that would be provided as part of the
Landlord's Renovation Program shall be deducted from the cost of the HVAC
system specified in the Final Design for the Tenant Improvement Work). The
parties shall execute an amendment to this Lease setting forth the final Base
Rent (in the format set forth in Exhibit 1) when (i) the final cost for the
Final Design for the Initial Tenant Improvement has been determined and (ii)
the Base Rent has been adjusted pursuant to subparagraph (c) below.
(b) The Landlord agrees that, excepting adjustments to Base Rent
pursuant to subparagraph (c) below, that the rental rate per square foot for
the Premises shall not exceed ten dollars (10.00) per rentable square foot
for the Landlord to complete the Tenant Improvement Work based upon the
design and requirements set forth in Exhibits B, G and H.
(c) Adjustment to Base Rent: After the execution of this Lease, in
the event that Tenant makes changes in the Final Design for the Initial
Tenant Improvements, the cost of such changes not to exceed Two Hundred
Thousand and No/100 Dollars ($200,000), then the Base Rent shall be as
follows: the amount of said changes shall be amortized over the Term of this
Lease at 12% annual interest and the monthly amount of said amortized payment
shall be added to the Base Rent, and the parties shall execute an amendment
to this Lease setting forth said adjusted Base Rent.
B. Building: The building in which the Premises are located,
known as "Building A" of the Shepherd Mall.
C. Common Areas: "Common Areas" means all areas within the
Project which Landlord makes available to tenants and their invitees for
their general use, convenience and benefit, including parking areas, drive-
ways, walkways, landscaped or planted areas, lighting facilities, service
areas, loading and unloading areas, lobbies, and common hallways. Landlord may
not make any changes to the Common Areas which materially and adversely
affect Tenant's use and occupancy of the Premises or which materially
increase Operating Expenses (as defined in Section 5 of this Lease).
D. Lease Commencement Date: The Effective Date of this Lease.
E. Lease Year: The first "Lease Year" shall begin on the Rent
Commencement Date. If the Rent Commencement Date is the first day of a
month, the first Lease Year will end twelve (12) full calendar months after
the Rent Commencement Date. If the Rent Commencement Date is a day other
than the first day of a month, the first Lease Year will end on the last day
of the month in which the first anniversary of the Rent Commencement Date
occurs. Each subsequent Lease Year shall commence on the day immediately
following the last day of the preceding Lease Year, and shall continue for a
period of twelve (12) full calendar months.
F. Premises: The space outlined in red on Exhibit A, which
contains approximately 65,000 rentable square feet on the first floor in the
Building. Upon completion of construction of the Initial Tenant Improvements,
Crandall & Associates shall measure the Premises in accordance with BOMA
standards and any revision to the amount of the square footage of the
Premises and any resulting adjustment to Base Rent shall be set forth in a
Lease amendment signed by the parties.
G. Project: The Shepherd Mall, located at N.W. 23d Street &
Villa Avenue, Oklahoma City, Oklahoma, 73107, which contains approximately
640,000 rentable square feet, as determined by Crandall & Associates in
accordance with BOMA standards, with 4,100 parking spaces, and located on 49.66
acres. The Project is shown on the site plan attached as Exhibit A. The
Building and Premises are located in the Project. The legal description of the
Project is set forth in Exhibit C. The area of the Project north of the
location of the management office is intended to be for office or service
tenants, whereas the area of the Project south thereof is generally intended to
be for retail tenants, both areas being designated on Exhibit A.
H. Rent Commencement Date: The Rent Commencement Date shall be
May 5, 1996, provided that the Landlord's Renovation Program and the Tenant
Improvements are substantially completed by May 1, 1996, and further provided
that the Premises have been sufficiently completed such that Tenant has been
able to commence its Pre-Occupancy Work by April 15, 1996 and has been able
to complete said work such that Tenant will be able to fully commence its
operations by May 5, 1996. Tenant shall not be obligated to pay Base Rent or
additional rent under this Lease for any period of time that Tenant occupies
the Premises prior to the Rent Commencement Date. The Rent Commencement Date
shall be extended by one day for each day that Tenant is unable to commence
its operations on or after May 5, 1996, provided such delay is not caused
solely by Tenant.
I. Tenant's Proportionate Share of the Project: Tenant's
Proportionate Share of the Project is 10.15%, which equals the percentage
that the number of rentable square feet in the Premises bears to the number
of rentable square feet in the Project. Tenant's Proportionate Share of the
Project shall be adjusted in accordance with the measurements of the Premises
and Project as provided above, and such adjusted amount shall be set forth in
an amendment to the Lease signed by the parties. If the number of rentable
square feet in the Project changes, Tenant's Proportionate Share of the
Project will be adjusted accordingly.
J. Term: The period that begins on the Lease Commencement Date
and ends ten (10) Lease Years after the Rent Commencement Date, unless sooner
terminated pursuant to this Lease or unless renewed in accordance with
Tenant's options to renew as set forth in Paragraph 38 hereof.
K. Temporary Space: Landlord shall provide to Tenant temporary
space in accordance with that certain letter agreement, Exhibit 2 hereto.
Landlord shall not charge Tenant any rent or other charges for the use of the
temporary space.
2. Lease of the Premises.
Landlord leases to Tenant and Tenant leases from Landlord the
Premises for the Term.
3. Landlord's Renovation Program and the Initial Tenant Improvements.
(a) Landlord's Renovation Program:
A. Landlord, at its cost, will renovate the Building in
accordance with the renovation program set forth in Exhibit D. Landlord
shall complete the renovation program for the first and second floors of the
Building prior to the Scheduled Tenant Improvements Completion Date as
defined below. In no event shall Landlord permit construction of tenant
improvement in or for the second floor of the Building so as to interfere
with Tenant's use and occupancy of the first floor or to cause excessive
noise or dust in the first floor.
B. Landlord, at its cost, will perform the parking lot work as
designated on Exhibit E.
(b) Initial Tenant Improvements:
A. Landlord, at its cost, shall construct the initial
improvements to the Premises (the "Initial Tenant Improvements") in
accordance with Exhibit B (the "Workletter"). The Initial Tenant
Improvements shall be constructed in compliance with all applicable laws,
including the Americans with Disabilities Act (the "ADA"). The Initial
Tenant Improvements shall be "substantially completed" (as defined below) by
May 1, 1996, (the "Scheduled Tenant Improvements Completion Date"). The term
"substantially completed" means that the Initial Tenant Improvements have
been completed and a Certificate of Occupancy (or a Temporary Certificate of
Occupancy which permits Tenant to fully occupy and conduct business in the
Premises) has been obtained for the Premises such that the Premises can be
occupied and used by Tenant, except for minor punchlist items, which shall be
expeditiously completed. Landlord shall be responsible for obtaining all
permits for the construction of the Initial Tenant Improvements and for
obtaining the Certificate of Occupancy for the Premises.
B. Tenant shall have the right of access to the Premises at least
thirty (30) days prior to the Scheduled Tenant Improvements Completion Date
to preform certain pre-occupancy work, including the installation of Tenant's
telephone switches and lines, computer lines, electrical lines, furniture,
fixtures and any other equipment and wiring which Tenant determines requires
early installation (the "Pre-Occupancy Work"). Landlord shall fully
accommodate and facilitate Tenant's Pre-Occupancy Work in the Premises. In
addition, Landlord's construction contracts for the Initial Tenant
Improvements shall include a provision requiring Landlord and the contractor
to fully accommodate and facilitate Tenant's Pre-Occupancy Work in the
Premises. Tenant shall perform the Pre-Occupancy Work in a manner which will
not interfere with Landlord's construction of the Initial Tenant
Improvements. Landlord shall not be responsible for performing or paying for
the Pre-Occupancy Work to be performed by Tenant.
C. Landlord shall give Tenant notice at any time prior to the
Scheduled Tenant Improvements Completion Date that it has not completed any
stage of the Initial Tenant Improvements in compliance with Landlord's
schedule for construction of the Initial Tenant Improvements or Landlord
receives information from its contractors or subcontractors (or that Landlord
otherwise has reason to believe) that the Initial Tenant Improvements will
not be completed on or before the Scheduled Tenant Improvements Completion
Date. Such notice shall state the reason for the expected delay in order to
facilitate Tenant's exercise of its right to accelerate substantial
completion of the Initial Tenant Improvements as described in the following
sentences of this subsection C. If Tenant determines, either by notice from
Landlord or in Tenant's discretion, that the Initial Tenant Improvements will
not be substantially completed by the Scheduled Tenant Improvements
Completion Date, Tenant shall have the right, but not the obligation, to pay
Landlord's contractors or subcontractors or suppliers (or any third party
contractors, subcontractors or suppliers) to accelerate the delivery of
equipment, materials and the completion of the Initial Tenant Improvements so
as to cause the Initial Tenant Improvements to be substantially completed on
or before the Scheduled Tenant Improvements Completion Date. Tenant shall
notify Landlord of its intention to make such payments to accelerate the
completion of the Initial Tenant Improvements, and Landlord shall cooperate
in facilitating such payments and acceleration. If Tenant chooses to
accelerate completion of the Initial Tenant Improvements because of a delay
pursuant to this subsection C, Landlord shall reimburse Tenant within forty-
five (45) business days after Tenant submits to Landlord invoices and other
written evidence of the cost incurred by Tenant to accelerate completion of
the Initial Tenant Improvements.
D. Notwithstanding the foregoing, if Tenant wishes to occupy the
Premises before the Scheduled Tenant Improvements Completion Date and there
is no delay of the Scheduled Tenant Improvements Completion Date that is due
to the fault of Landlord, Landlord's contractor, subcontractor or suppliers,
then Tenant shall have the right, but not the obligation, to accelerate said
date in the manner described in Section 3.C at Tenant's cost.
E. If the Initial Tenant Improvements are not substantially
completed on or before the Scheduled Tenant Improvements Completion Date (and
such failure to substantially complete the Premises is not due primarily to
the fault of Tenant or due to force majeure, as hereafter defined), then
Tenant shall have the right to abate two (2) days' Base Rent and additional
rent under this Lease for each day of delay. If the Initial Tenant
Improvements will not be or are not completed on or before the sixtieth
(60th) day after the Scheduled Tenant Improvements Completion Date (and such
failure to complete the Premises is not due primarily to the fault of Tenant
or due to force majeure, which shall mean acts of God, unusual inclement
weather, general labor strikes, or governmental action other than based upon
permits or licenses), then Tenant also shall have the right to terminate this
Lease upon notice given to Landlord.
4. Base Rent.
Commencing on the Rent Commencement Date, Tenant shall pay to
Landlord Base Rent in monthly installments as set forth in Section 1.A. All
monthly installments of Base Rent shall be payable in advance on the first
day of each month, except that the first payment of the Term shall be due on
the Rent Commencement Date. If the Rent Commencement Date is not the first
day of a month, the Base Rent for that month shall be prorated. All Base
Rent and additional rent shall be payable at Landlord's address above or at
such other place as Landlord designates in writing. Tenant shall pay
Landlord a late charge of three percent (3%) of the monthly Base Rent if
Tenant fails to pay its monthly installment of Base Rent within ten (10)
business days after receipt of notice from Landlord.
5. Operating Expenses.
A. Commencing on the Rent Commencement Date and continuing for
the remainder of the Term, Tenant shall pay to Landlord Tenant's Proportionate
Share of "Operating Expenses" for the Project (as hereafter defined) and
Tenant's entire share of "Operating Expenses" for the Premises, together with
monthly installments of Base Rent. The term "Operating Expenses" for the
Project means all costs paid by Landlord during each calendar year with
respect to the operation, management, maintenance, security, and repair of
the Common Areas (excluding the premises of any and all other tenants),
including real estate taxes on the Project, insurance for the Project,
utilities for the Common Areas, snow removal, trash collection for the Common
Areas, and landscaping. Landlord shall not charge an administrative fee for
its management for the Project, however, Operating Expenses shall include
Landlord's on-site management employees. In addition, Tenant shall pay the
following "Operating Expenses" for the Premises:
(1) the reasonable cost of electrical lighting for the parking lot
area designated on Exhibit F during the hours of 10:00 p.m. to 6:00 a.m.,
provided however, that the cost of such lighting shall be shared on a
proportionate basis with any other tenant using said parking area during this
period;
(2) notwithstanding the foregoing, Tenant shall pay for utilities
for the Premises as provided in Section 7 below;
(3) notwithstanding the foregoing, Tenant shall pay 100% of the
reasonable costs of necessary repairs, service and maintenance for the
completed Tenant Improvement Work exclusively in Tenant's Premises (unless
said work is due to due to the fault of Landlord or its employees), except to
the extent that such costs are covered by warranties (which Landlord shall
diligently pursue) and except to the extent said costs are paid as part of
Common Area Operating Expenses (e.g. sprinkler maintenance and service) or
are performed by Landlord's employees whose salaries are paid as part of
Operating Expenses. Landlord shall provide Tenant with an itemized statement
of said costs, together with supporting invoices if requested by Tenant, and
Tenant shall reimburse Landlord within thirty (30) days of Tenant's receipt
of said statement;
(4) notwithstanding the foregoing, Tenant shall pay 100% of the
reasonable costs of cleaning and janitorial services (such services to be
provided by Landlord) for Tenant's Premises, except to the extent said costs
are paid as part of Common Area Operating Expenses. In addition, at any time
during the Term of the Lease, and upon adequate notice, Tenant shall have the
right to elect to provide its own expense its own cleaning and janitorial
services for the Premises in lieu of such service being provided by Landlord.
Tenant shall provide notice to Landlord so that Landlord may give the
requisite notice of termination to its service.
B. The following items shall be excluded from Operating
Expenses for the Project and Operating Expenses for the Premises:
(1) Any expense which under generally accepted accounting
principles is properly classified as a capital expenditure;
(2) Depreciation of the Building or the equipment serving
the Building;
(3) Interest and principal payments on mortgages and other
debt costs;
(4) Expenses resulting from the negligence or willful
misconduct of Landlord, its agents, contractors or employees;
(5) Legal fees, leasing commissions and advertising
expenses;
(6) Costs for which Landlord is reimbursed by its insurance
carrier or any other party;
(7) Any reserves for bad debts or rent loss;
(8) The cost of any services or benefits provided to other
tenants in the Project which are not provided to Tenant;
(9) Salaries or other compensation for any employee who
does not devote all of such person's time to the Project;
(10) Salaries or other compensation for any person above the
level of the Building or Project manager;
(11) Ground rent;
(12) Fees for services rendered with respect to the Project
by entities controlled by or under common control with Landlord to the extent
that such fees exceed the market rate payable for such services if rendered by
unrelated third parties;
(13) Fines, penalties, late payment charges and interest;
(14) Costs of repairs or replacements caused by the exercise
of any condemnation rights by any public or quasi-public authority to the extent
that Landlord receives compensation for same from the condemning authority;
(15) Inheritance, estate, succession, transfer, gift,
franchise, special tax assessments, excess profit taxes, corporation income or
profit tax or capital levy payable by Landlord or similar taxes on Landlord's
business;
(16) Any rent paid for Landlord's on-site management or
leasing office, or any other offices or spaces of Landlord or any related
entity;
(17) Charges for utilities for other tenant space in the
Building, and costs for the repair, servicing and maintenance of the premises,
including HVAC systems, of any other tenant in the Project;
(18) Any costs associated with any concession granted to
other tenants in the Project (e.g., moving expenses);
(19) All payments related to the sale, financing, or leasing
of the Building or the Project;
(20) The cost of any work performed to prepare a tenant's
space for occupancy;
(21) The cost of installing, operating and maintaining any
specialty service, such as an observatory, broadcasting facility, luncheon club,
retail store, health club, sundry shop, newsstand, or concession;
(22) Costs related to the lease or purchase of art;
(23) Costs arising from the presence within the Project of
"Hazardous Materials" (as defined in Section 36);
(24) Charitable or political contributions;
(25) Increased property or ad valorem taxes due to the sale of
the Project, or part thereof, or the construction of new or replacement
structures on the Project; and
(26) Cost of installation, service, maintenance and repair of
the elevators located, constructed or installed in the Building.
(27) Assessments for public improvements relating to the
construction, installation or improvement of a electrical, gas, or sewer
system and/or sewage treatment plant whether or not such assessments are
measured by the amount of electrical, gas or water consumed by Tenant in the
Premises, unless said amount is amortized over at least a 10 year period and
Tenant shall then only be liable annually for the amortized amount for each
remaining Lease Year of the Term.
C. Landlord shall annually notify Tenant of Landlord's good
faith estimate of Tenant's Proportionate Share of Operating Expenses for each
calendar year, and Tenant shall pay such amount in equal monthly installments
in advance on the first day of each of the twelve (12) months after the date
of such notice, the first such monthly installment to be due on the Rent
Commencement Date. If the Rent Commencement Date is a date other than the
first day of a month, Tenant's Proportionate Share of Operating Expenses for
that month shall be prorated. Within ninety (90) days after the end of each
calendar year, Landlord shall submit to Tenant a statement showing the actual
Tenant's Proportionate Share of Operating Expenses for the prior calendar
year, the amount paid by Tenant, and the balance due or overpayment. The
balance due shall be paid by Tenant to Landlord, or the overpayment shall be
paid by Landlord to Tenant, without interest, within thirty (30) days after
the date of the statement.
D. Landlord shall keep a full and accurate set of books and
records substantiating the Operating Expenses for each calendar year. These
books shall be kept in accordance with generally accepted accounting principles
and shall be retained by Landlord for a period of at least three (3) years
following the end of the calendar year to which they pertain. Upon
reasonable prior written notice, Tenant shall have the right to inspect or
audit Landlord's records regarding Operating Expenses at a mutually
convenient place and time. If this audit reveals that Tenant's Proportionate
Share of Operating Expenses is less than those paid by Tenant, Landlord shall
refund the overpayment immediately, failing which Tenant may deduct the
overpayment against its next installment of rent. If this audit reveals that
Tenant has paid less than is due, Tenant shall remit the amount due within
thirty (30) days. Landlord shall reimburse Tenant for the cost of Tenant's
audit if the audit reveals that Tenant has overpaid by more than five percent
(5%).
6. Use.
Tenant may use the Premises for any lawful office purpose. In
addition, Tenant may use the Premises for any other such lawful purpose
(including retail use) to which Landlord consents, which consent shall not be
unreasonably withheld, conditioned, or delayed. Tenant shall have access to
the Premises twenty-four (24) hours a day, seven (7) days a week.
7. Utilities.
A. Tenant shall pay for its electricity and gas consumption used
by it in the Premises, which electrical and gas shall be separately metered
(Landlord hereby agreeing to install said meters at its sole cost) to measure
Tenant's actual consumption. Tenant shall make such payments directly to the
utility companies. Landlord shall pay all construction charges arising out
of, connected with or attributable to any fire sprinkler or other sprinkler
system, or any other life safety system for the Project.
B. Tenant shall have the sole right to apply for, claim and
receive any rebate, reimbursement, credit, or payment from any utility
company providing service to the Premises resulting from the installation of
energy saving equipment in or on the Premises.
8. Landlord's Services and Maintenance.
A. Landlord shall provide the following services to and
maintenance of the Project, the Building and the Premises:
(1) electricity to the Premises available twenty-four (24)
hours a day, seven (7) days a week (including holidays) in amounts specified
on Exhibit G;
(2) heating, air-conditioning and ventilation to the Premises
available twenty-four (24) hours a day, seven (7) days a week, including
holidays, in the amounts specified on Exhibit H;
(3) sanitary sewer service in common with other tenants into
the applicable utility's lines and mains;
(4) domestic water in common with other tenants from the
applicable utility's mains for drinking, lavatory and toilet purposes;
(5) adequate supplies for toilet rooms located in public
areas of the Building;
(6) cleaning and janitorial services for the Project,
provided however, that Landlord shall provide cleaning and janitorial
services for the Premises in accordance with the requirements and standards
set forth in Exhibit I attached to this Lease (the contract with such service
shall include a right of termination for convenience);
(7) all electric bulbs and fluorescent tubes in building
standard light fixtures in the public areas of the Building and the Project,
including parking lot illumination;
(8) a reasonable number of keys for the Premises and access
control cards for the Building, if applicable, at no cost to Tenant; but all
additional keys and access control cards, including replacements for lost
keys and access control cards, shall be issued only upon the payment of a
reasonable cost for each additional key and access control card;
(9) access to the Building and the Premises twenty-four (24)
hours per day, three hundred sixty-five (365) days per year, including
holidays, subject to the operation of the after-hours Building access control
system;
(10) extermination and pest control, when necessary;
(11) Landlord shall (i) keep the Common Areas clean, and free
of snow and ice, (ii) maintain all Common Areas, including landscaped areas,
parking areas, outdoor lights, and lobbies and provide adequate security for
such areas; (iii) maintain all life safety systems in the Project, including
sprinklers, (iv) maintain the roofs, structural components and exteriors of
Building and of the Project, and (v) maintain all systems serving the
Premises, including the plumbing, electrical, and heating, ventilating and
air-conditioning systems; and
(12) Fiber optic cable connection to the current locations in
the Project, to the extent such service is adequate, otherwise to the street
connection.
B. The foregoing services and maintenance obligations shall
include making all repairs and replacements and performing all maintenance
necessary to keep the Project, the Building and the Premises in a first class
condition at all times during the Term. Landlord shall operate and manage the
Project in a first class manner.
C. If (i) any of the foregoing services are interrupted or if
Landlord fails to perform its maintenance, repair or replacement
responsibilities for any reason (not caused by Tenant's negligence or willful
misconduct) within three (3) days after notice from Tenant, and (ii) as a
result of this interruption or failure, all or a portion of the Premises cannot
be used by Tenant for its business, then, starting with the fourth (4th)
day after Tenant's notice and continuing until the service is restored by
Landlord or the maintenance, repair or replacement is made by Landlord, and the
Premises are usable for Tenant to conduct its business therein, Base
Rent and additional rent under this Lease shall abate in accordance with the
following provisions. If twenty-five percent (25%) or more of the
Premises is unusable, then all Base Rent and additional rent shall abate. If
less than twenty-five percent (25%) of the Premises is unusable, then Base
Rent and additional rent shall abate by the percentage that the number of
rentable square feet that is unusable bears to the total number of rentable
square feet in the Premises. In addition, if twenty-five percent (25%) or more
of the Premises is unusable and the service is not restored by Landlord or
maintenance, repair or replacement is not made by Landlord within thirty (30)
days after Tenant's notice, Tenant may terminate this Lease upon notice to
Landlord, and, if the interruption or the failure was caused by Landlord's
breach of its obligations under this Agreement or by the negligence or
willful misconduct of Landlord, its employees or agents, then, in addition to
terminating this Lease, Tenant shall be entitled to recover from Landlord all
losses and damages Tenant has suffered as a result of this early termination
of this Lease.
D. In addition to the rent abatement provided in subsection C
above, if Landlord fails to perform its maintenance obligations or to make a
repair or replacement that is Landlord's responsibility, Tenant may perform
such maintenance or make the repair or replacement under the
following circumstances. In an emergency, Tenant may perform the maintenance
or make the repair or replacement without notice to Landlord. In all
other circumstances, Tenant may perform the maintenance or make the repair
or replacement only after expiration of the default and cure period provided in
Section 20.A. If Tenant performs Landlord's maintenance obligations or makes
a repair or replacement in accordance with this subsection, Landlord shall
reimburse Tenant for all amounts spent by Tenant performing such maintenance
or in making the repair or replacement, failing which Tenant may deduct the
amounts spent against rent due hereunder.
E. The Tenant agrees that it shall not cause damage to the
Premises beyond normal wear and tear from its use of the Premises.
9. Landlord's Right of Entry.
Upon twenty-four (24) hours' notice to Tenant (except in an
emergency when no notice shall be required), Landlord and its agents may
enter the Premises at reasonable hours to make repairs, replacements or
alterations to the Premises that Landlord is required to make pursuant to
this Lease or to exhibit the Premises at reasonable hours within nine (9)
months prior to the termination of the Term.
10. Common Areas; Parking.
A. Landlord grants to Tenant, its employees and customers, the
right, in common with other tenants in the Project, their employees and
customers, to use the Common Areas during the Term.
B. Landlord shall provide parking for Tenant's use as provided
in Exhibit E. Landlord shall provide Tenant with a minimum of 1000 parking
spaces. Landlord shall not reconfigure or alter Tenant's parking area so as
to affect or change Tenant's parking rights under this Lease.
C. In the event that circumstances arise within the Project with
the effect that 1000 parking stalls are not available on a regular and
consistent basis in the area designated on Exhibit E, then Tenant shall
notify Landlord and Landlord, at its cost and expense, shall take such steps
as may be necessary to ensure that the 1000 designated parking stalls as
designated on Exhibit E are available for Tenant's employees and visitors on
an exclusive basis.
11. Signs.
Tenant shall be allowed signage on its entrance door(s) and
directory signage in accordance with applicable ordinances. Tenant, at its
cost, shall have the right to install a sign exhibiting Tenant's logo on the
exterior of the Building that complies with Landlord's signage criteria for
the Project and with all applicable ordinances. Tenant shall be entitled to
install signage comparable to that which Landlord permits other tenants of
the Building to install, including monument signage.
12. Alterations.
Notwithstanding anything to the contrary in this Lease, Tenant may
make any alterations to the interior of the Premises that it deems
appropriate, provided such alterations comply with all applicable building
codes, regulations and laws and do not harm the structure of the Building or
the electrical, plumbing, heating or air conditioning facilities in the
Building. Tenant may not make any alterations to the exterior of the
Premises or the structure of the Building without Landlord's consent. In the
event that a mechanics lien is filed on the Project for payment for work done
or materials supplied for any alteration for which Tenant is responsible,
then Tenant shall bond off such lien within thirty (30) days of Tenant being
notified of such lien.
13. Fixtures and Equipment.
A. Tenant, at its cost, may erect such shelves, bins,
machinery, equipment, cabling and trade fixtures (collectively "Trade Fixtures")
in the Premises as it deems appropriate. Regardless of how they are attached to
the Premises, all Trade Fixtures shall remain Tenant's property. Tenant may
remove its Trade Fixtures at any time prior to expiration of the Term,
provided that Tenant repairs any damage to the Premises occasioned by the
removal.
B. Tenant may install and maintain, in locations in the
Premises, in and on the Building (including on the roof) and on the Project
adjacent to the Building, that are reasonably acceptable to Landlord and
Tenant, satellite dishes, antennae and other communications equipment
(the "Communications Equipment"), subject to the following conditions:
C. Tenant, at its cost, shall procure all necessary
governmental permits and licenses for the installation, maintenance and/or
use of the Communications Equipment, and shall at all times comply with all
requirements of laws, ordinances and rules of all public authorities and
insurance companies and all orders, rules and regulations of any public
authority, which shall impose any order or duty upon Landlord or Tenant with
respect to or affecting the Communications Equipment or arising out of Tenant's
use or manner of use thereof.
D. Tenant shall promptly pay and discharge all out-of-pocket
costs and expenses incidental to and/or connected with the furnishing,
installation, maintenance and operation of the Communications Equipment.
(1) Installation of the Communications Equipment shall be
at Tenant's expense. Tenant shall obtain Landlord's prior consent as to the
location of the Communication Equipment and the manner in which such
installation work is to be done. All plans and specifications concerning such
installation shall be subject to Landlord's prior written approval. Tenant
shall not disturb the roof membrane or make any other penetration on the roof
or the exterior facade of the Building.
(2) Tenant, at its cost, shall maintain the Communications
Equipment in a clean and safe manner throughout the entire Lease Term, and shall
comply with all applicable laws, ordinances, regulations and insurance
requirements. In addition, all repairs to the Building made necessary by
reason of the furnishing, installation, maintenance or operation of the
Communications Equipment or any replacements thereof shall be at Tenant's sole
cost. Upon expiration or termination of this Lease, Tenant promptly shall
remove the Communications Equipment and any wiring or accessories associated
with the Communications Equipment and shall repair any damage to the Building
caused by the installation or removal of the Communications Equipment and
related equipment, all at its cost.
(3) Tenant, at its cost, shall maintain such insurance as
is appropriate with respect to the installation, operation and maintenance of
the Communications Equipment and shall provide Landlord with evidence of such
insurance prior to installation. Landlord shall have no liability on account
of any damage to or interference with the operation of the Communications
Equipment, except that which is caused by the negligence or willful
misconduct of Landlord or its agents or by the failure of Landlord to observe
any of the terms and conditions of this Lease.
E. Tenant may install, operate and maintain an auxiliary
generator (the "Generator") to service Tenant's electric power needs in the
Premises, subject to the following conditions:
(1) If the Generator is not entirely situated within the
Premises, then the location of the Generator shall be subject to Landlord's
reasonable approval, and shall be screened from view in a manner and with
materials reasonably acceptable to Landlord. If such location is on the roof
of the Building, Tenant shall not disturb the roof membrane or make any other
penetration on the roof or the exterior facade of the Building.
(2) Tenant, at its cost, shall procure all necessary
governmental permits and licenses for the installation, maintenance and/or
use of the Generator, and shall at all times comply with all requirements
of laws, ordinances and rules of all public authorities and insurance companies,
which shall impose any order or duty upon Landlord or Tenant with respect to or
affecting the Generator or arising out of Tenant's use or manner of use
thereof.
(3) Tenant shall promptly pay all out-of-pocket costs and
expenses incidental to and/or connected with the furnishing, installation,
maintenance, operation and removal of the Generator.
(4) All plans and specifications concerning the
installation of the Generator shall be subject to Landlord's prior written
approval.
(5) Tenant, at its cost, shall maintain the Generator in a
clean and safe manner and shall comply with all applicable laws, ordinances,
regulations and insurance companies. In addition, all repairs to the
Building made necessary by reason of the furnishing, installation,
maintenance, operation or removal of the Generator or any replacements
thereof shall be at Tenant's cost. Upon expiration or termination of this
Lease, Tenant shall remove promptly the Generator and any wiring or
accessories associated with the Generator and shall repair promptly any
damage to the Building or the Project caused by the installation or removal
of the Generator and related equipment, all at its cost.
(6) Tenant shall, at its cost, maintain such insurance as
is appropriate with respect to the installation, operation and maintenance of
the Generator and shall provide Landlord with evidence of such insurance
prior to installation. Landlord shall have no liability on account of any
damage to or interference with the operation of the Generator, except that
which is caused by the negligence or willful misconduct of Landlord or its
agents or by the failure of Landlord to observe any of the terms and
conditions of this Lease.
F. Tenant may install, operate and maintain supplemental HVAC
units (the "HVAC Equipment"), subject to the following conditions:
(1) Tenant, at its cost, shall procure all necessary
governmental permits and licenses for the installation, maintenance or use of
the HVAC Equipment, and shall at all times comply with all requirements of
laws, ordinances and rules of all public authorities and insurance companies,
which shall impose any order or duty upon Landlord or Tenant with respect to
or affecting the HVAC Equipment or arising out of Tenant's use or manner of use
thereof.
(2) Tenant shall promptly pay and discharge all out-of-
pocket costs and expenses incidental to and/or connected with the furnishing,
installation, maintenance and operation of the HVAC Equipment.
(3) Installation of the HVAC Equipment shall be at Tenant's
expense. Tenant shall obtain Landlord's prior consent as to the locations of
the HVAC Equipment and the manner in which such installation work is to be done.
All plans and specifications concerning such installation shall be subject
to Landlord's prior written approval.
(4) Tenant, at its cost, shall maintain the HVAC Equipment
in a clean and safe manner throughout the Term, and shall comply with all
applicable laws, ordinances, regulations and insurance companies. In
addition, all repairs to the Building made necessary by reason of the
furnishing, installation, maintenance, operation or removal of the HVAC
Equipment or any replacements thereof shall be at Tenant's sole cost. Upon
expiration or termination of this Lease, Tenant will promptly remove the HVAC
Equipment and any wiring, conduit or accessories associated with the HVAC
Equipment and shall promptly repair any damage to the Building or the Project
caused by the installation or removal of the HVAC Equipment and related
equipment, all at its cost.
(5) Tenant, at its cost, shall maintain such insurance as
is appropriate with respect to the installation, operation and maintenance of
the HVAC Equipment and shall provide Landlord with evidence of such insurance
prior to installation. Landlord shall have no liability on account of any
damage to or interference with the operation of the HVAC Equipment, except
that which is caused by the negligence or willful misconduct of Landlord or
its Agents or by the failure of Landlord to observe any of the terms and
conditions of the Lease.
(6) Tenant, at its cost, shall cause the utilities used by
the HVAC Equipment to be separately metered and shall pay for such utilities.
G. Tenant may install, maintain and remove fiber cabling and
other telecommunications wiring in, to and from the Premises (including within
the plenum above the drop ceiling).
H. Tenant shall have the right to install an automatic teller
machine in the Premises for the exclusive use of its employees.
14. Indemnification.
A. Landlord shall not be liable for, and Tenant shall protect,
defend, indemnify and hold Landlord harmless from and against, any liability or
claim (including reasonable attorneys' fees) in connection with any injury or
loss to any person or property arising within the Premises, unless and to the
extent caused by the negligence or willful misconduct of Landlord, its
employees or agents.
B. Tenant shall not be liable for, and Landlord shall protect,
defend, indemnify and hold Tenant harmless from and against, any liability or
claim (including reasonable attorneys' fees) in connection with any injury or
loss to any person or property arising within the Common Areas, unless and to
the extent caused by the negligence or willful misconduct of Tenant,
its employees or agents.
15. Insurance.
A. During the Term, Tenant shall carry public liability
insurance with the broad form commercial general liability endorsement,
including contractual liability insurance covering Tenant's indemnity
obligations hereunder, in an amount not less than $1,000,000 combined single
limit per occurrence, together with umbrella and excess liability coverage of
$1,000,000. Upon Landlord's request, Tenant shall furnish to Landlord
policies or certificates evidencing the foregoing insurance coverage from
insurance company(s) licensed to do business within the State of Oklahoma.
Tenant's policies shall state that such insurance coverage may not be reduced
or canceled without at least thirty (30) days' prior written notice to
Landlord.
B. During the Term, Landlord shall maintain the following
coverages in the following amounts:
(1) Public liability insurance with the broad form
commercial general liability endorsement, including contractual liability
insurance covering Landlord's indemnity obligations hereunder, in an amount
not less than $1,000,000 combined single limit per occurrence, together with
umbrella and excess liability coverage of $1,000,000.
(2) "All risk" physical damage insurance including fire,
sprinkler leakage, boiler and machinery, vandalism and extended coverage for
the full replacement cost of physical damage insurance on the Project,
including all mechanical and electrical equipment therein, together with
adequate boiler and machinery coverage.
(3) Rent interruption insurance.
Upon Tenant's request, Landlord shall furnish to Tenant policies or
certificates evidencing the foregoing insurance coverage. Landlord's
policies shall state that such insurance coverage may not be reduced or
canceled without at least thirty (30) days' prior written notice to Tenant.
C. All fire and extended coverage and material damage
insurance which may be carried by either Landlord or Tenant shall be endorsed
with a clause providing that any release from liability of, or waiver of claim
for recovery from, the other party or any of the parties named as additional
insureds entered into in writing by the insured thereunder prior to any loss or
damage, shall not affect the validity of said policy or the right of the
insured to recover thereunder. Furthermore, Landlord's and Tenant's policies
shall provide that the insurer waives all rights of subrogation which such
insurer might have against any of the named insureds. Landlord waives all
claims for recovery from Tenant and its respective agents, partners, servants
and employees, and Tenant waives all claims for recovery from Landlord and
its respective agents, partners, servants and employees, for any loss or
damage to any of Landlord's or Tenant's property insured under valid and
collectible insurance policies to the extent of any recovery collectible
under such insurance policies.
16. Casualty Loss.
A. If the Premises, Building or Project is damaged or destroyed
by fire or any other cause, Landlord shall, within thirty (30) days after the
date of such damage or destruction, notify Tenant in writing as to when
Landlord will commence to repair the damage and the amount of time it will
take Landlord to repair or replace the Premises, Building or Project
("Landlord's Notice") so that Tenant may continue in occupancy. Tenant shall
notify Landlord within fifteen (15) days after receipt of Landlord's Notice
as to whether Tenant elects to (i) remain as Tenant under the Lease; or (ii)
terminate the Lease. If Tenant elects to remain as Tenant under the Lease
and resume occupancy after the date specified in Landlord's Notice, and
Landlord has not completed repairing the damage within the time period
specified in Landlord's Notice, then Tenant may terminate this Lease upon
notice to Landlord given at any time after the expiration of such specified
period but before the damage has been repaired. Notwithstanding the
foregoing, Tenant shall not have the right to terminate this Lease if
Landlord repairs the damages or rebuilds the Premises, Building or Project to
its pre-casualty state such that Tenant can re-occupy the Premises and
commence business in the same manner as prior to the casualty within sixty
(60) days after receipt of Landlord's Notice. In the event that the Premises
and Building are substantially destroyed in the last Lease Year, Landlord
shall not be obligated to reconstruct the Premises and Building unless Tenant
exercises its Option to Renew, as provided below (if the casualty occurs
prior to the date upon which Tenant is required to elect to renew, then the
date of the election shall be changed to thirty (30) days after Tenant's
receipt of a notice from Landlord that it intends not to reconstruct unless
Tenant exercises its option to renew).
B. If the Premises are not damaged, or the damage does not
interfere with Tenant's use or occupancy of the Premises or Tenant conducting
business in the Premises, there shall be no abatement of rent. If the damage
interferes with Tenant's use or occupancy of the Premises or Tenant
conducting business in the Premises, but Tenant is able to use the Premises,
Base Rent and all additional rent shall be abated by the percentage that the
unusable rentable area of the Premises bears to the total rentable area
thereof, starting on the date of the casualty and ending fifteen (15) days
after the date that Landlord's repairs to the Premises have been
substantially completed. If the damage makes it impracticable for Tenant to
carry on its business in the Premises, all rent shall be abated, starting on
the date of the casualty and ending fifteen (15) days after the date that
Landlord's repairs to the Premises have been substantially completed.
17. Assignment and Subletting.
A. Tenant shall have the right to sublease or assign all or any
portion of the Premises subject to Landlord's consent. Notwithstanding the
foregoing, without Landlord's consent, Tenant shall have the right to sublet
or assign, or to allow to use and occupy under any other arrangement, all or
any part of the Premises to any entity resulting from a merger or
consolidation with the original Tenant, corporation or other entity
succeeding to all the business and assets of the original Tenant hereunder,
or any subsidiary or affiliate of Tenant. Landlord shall not share in any
profits from any subleasing or assignment. In addition, Tenant may permit
any subsidiary or affiliate of Tenant to occupy and use all or any part of
the Premises without subletting or assigning the Premises to such subsidiary
or affiliate. Tenant shall not sublease or assign all or any portion of the
Premises to a law enforcement agency, trade school, or to any retail tenant
whose occupancy violates an exclusive that Landlord has granted to other
tenants in the Project. Tenant shall not be relieved of liability in the
event Tenant assigns the Lease to an entity which is not able to meet the
financial obligations under this Lease as of the date of the assignment.
B. In the event Landlord transfers or assigns the ownership of
the Project, then the existing Landlord shall have the right to assign this
Lease without Tenant's consent to the new owner of the Project who shall
become the Landlord under this Lease.
18. Subordination; Attornment; Non-Disturbance.
A. This Lease shall be subject and subordinate at all times
to the lien of any mortgage, deed of trust, assignment of rents and leases, or
similar instrument now or hereafter placed on or against the Project;
provided, however, that such subordination shall be effective only if the
holder of the interest to which this Lease is being subordinated enters into
a non-disturbance agreement on a form substantially similar to that attached
as Exhibit K, granting Tenant the right to continue in possession of the
Premises pursuant to the terms of this Lease in the event of a foreclosure as
long as Tenant is not in default under this Lease. Within ten (10) days from
the date of execution of this Lease, Landlord shall deliver to Tenant an
original, executed non-disturbance agreement, on a form reasonably acceptable
to Tenant, from the current holder(s) of any mortgage or deed of trust on the
Building, failing which all rent due hereunder shall abate until such non-
disturbance agreement is obtained.
B. Tenant hereby attorns, in accordance with the terms of this
Lease, to any lender whose interest is secured by a deed of trust or mortgage
affecting the Project (the "Lender"), such attornment to be effective upon
Lender's acquisition of title to the Project and Tenant's receipt of an
original, executed non-disturbance agreement that meets the requirements set
forth in subsection A above, wherein the Lender agrees in writing with
Tenant, at the time of Lender's acquisition of title, to recognize the
validity of this Lease, notwithstanding any foreclosure or deed in lieu
thereof, so long as Tenant is not in default. Tenant's attornment shall not
be terminated by foreclosure of any such deed of trust or by deed in lieu
thereof.
19. Tenant's Defaults.
A. Tenant shall be in default under this Lease if Tenant (a)
fails to pay any installment of Base Rent or additional rent within ten (10)
days after written notice to Tenant that said installment is past due; or (b)
fails to comply with any term, provision or covenant of this Lease, and does
not cure such failure within thirty (30) days after written notice thereof to
Tenant. Notwithstanding anything to the contrary contained in the
immediately preceding sentence, Tenant shall not be in default if the default
thereunder is of such a nature that it cannot be cured within the thirty (30)
day period provided for therein so long as Tenant shall commence to cure such
default within such thirty (30) day period and shall thereafter diligently
and continuously prosecute the curing of such default.
B. Upon Tenant's default (after expiration of the applicable
cure period), Landlord may either (a) cure the default on Tenant's behalf and
charge the cost thereof to Tenant's rent; (b) terminate this Lease, enter the
Premises and expel any person occupying the Premises; (c) relet the Premises
and apply the Base Rent and additional rent from the new tenant toward all
payments required under this Lease; or (d) elect to recover from Tenant the
present discounted value [using a discount rate of eight percent (8%)] at the
time of said election of the excess, if any, of all Base Rent and additional
rent due under this Lease for the remainder of the Term (but for termination
of this Lease by Landlord) over the then reasonable rental value of the
Premises for that period. In no event shall Tenant be responsible for more
than the balance that may be due, if any, if Landlord relets the Premises.
If Tenant defaults under this Lease, Landlord shall use commercially
reasonable efforts to mitigate its damages. Landlord's remedies in this
subsection B shall be Landlord's sole remedies in the event of a default
under this Lease by Tenant. In no event shall Tenant be liable to Landlord
for lost profits or any consequential damages.
20. Landlord's Defaults.
A. Landlord shall be in default under this Lease if Landlord
fails to perform or observe any covenants, obligations or other provisions of
this Lease within thirty (30) days after notice of default from Tenant;
provided, however, that Landlord shall not be in default if the default is of
such a nature that it cannot be cured within such thirty (30) day period as long
as Landlord shall commence to cure such default within such thirty (30) day
period and shall thereafter diligently and continuously prosecute the curing
of such default.
B. Upon Landlord's default (after expiration of the applicable
cure period), Tenant may (i) terminate this Lease and all obligations of Tenant
thereunder shall immediately cease, or (ii) cure such default for the account
of Landlord, and Landlord shall reimburse Tenant for all amounts paid by
Tenant in curing the default, failing which Tenant may deduct the amounts
against rent due hereunder, or (iii) in the event Landlord is liable to
Tenant for any damages, whether arising from a default under this Lease or
under any other basis of liability, and Landlord fails to satisfy such
liability when due, then Tenant shall be entitled to set-off said amount
against the rent due under this Lease until said liability has been
satisfied. Pursuit of any of the foregoing remedies shall not preclude, but
shall be in addition to, pursuit of any of the other remedies provided by
law, nor shall pursuit of any remedy herein provided constitute a forfeiture
or waiver of any monies due to Tenant or of any damages accruing to Tenant by
reason of the violation of any of the terms, provisions and covenants herein
contained. Forbearance by Tenant to enforce one or more of the remedies
herein provided upon an event of default shall not be deemed or construed to
constitute a waiver of default. In no event shall Landlord be liable to
Tenant for lost profits or any consequential damages.
21. Condemnation.
A. If during the Term all or any part of the Premises is taken
or condemned by any competent authority, Tenant reserves the right to prosecute
a claim, or to require Landlord to prosecute such a claim if Tenant is not
permitted to do so as a matter of law, in all appropriate courts and agencies
for an award or damages for such taking based upon its leasehold interest,
Tenant's Communications Equipment, Trade Fixtures, all leasehold improvements
paid for by Tenant, interruption of business, moving expenses and other
damages available under applicable law, without impairing Landlord's rights
for the taking of or injury to the reversion.
B. If all or any part of the Premises, Building or Project
shall be taken or condemned which, in Tenant's sole judgment, materially
interferes with Tenant's business, then Tenant may terminate this Lease at
any time prior to or within thirty (30) days after the date the condemning
authority requires possession. If Tenant does not terminate this Lease, then
this Lease shall continue in effect with respect to the remaining portion of
the Premises; provided however, all payments required under this Lease shall
be reduced by a fraction, the numerator of which shall be the square footage of
the Premises taken or condemned and the denominator of which shall be the
square footage of the Premises prior to the taking or condemnation, until
such time as Landlord has completely restored the Premises. If the Premises,
Building or Project cannot be restored within sixty (60) days after the date
of such taking or condemnation due to the inability of either party to obtain
materials or labor needed, strikes or acts of God or governmental
restrictions that would prohibit, limit, or delay such restoration, then the
time for completion of such repairs and replacements shall be extended
accordingly; provided, however, that in any event, if the restoration of the
Premises, Building or Project has not been completed within a period of one
hundred-fifty (150) days from the date of taking or condemnation, Tenant may
terminate this Lease.
22. Recording.
Upon request of either party, the parties shall execute a
recordable memorandum of lease (such memorandum shall not include economic
terms) and, upon the expiration or earlier termination of this Lease, a
recordable termination agreement. The cost of all documentary stamps,
transfer taxes and recording fees shall be paid by the party requesting the
document to be recorded.
23. Consent or Approval.
Where Landlord's consent or approval is required, any consent or
approval shall not be unreasonably withheld, conditioned or delayed and any
demand for a modification of the terms of this Lease shall be deemed
unreasonable. If Landlord fails to respond to a second request for consent
or approval within thirty (30) days after written demand, such request shall
be deemed granted.
24. Holding Over.
If Tenant lawfully remains in possession of the Premises after the
expiration of the Term, Tenant shall be a tenant from month to month, upon
all the terms hereof which are not inconsistent with such tenancy. Such
tenancy may be terminated by Landlord or Tenant upon thirty (30) days notice.
25. Surrender of Premises.
Upon termination of the Term for any reason, Tenant shall surrender
the Premises to Landlord in good condition, except for ordinary wear and
tear, casualty damage and condemnation. Tenant may remove its Trade Fixtures
at any time before or upon the end of the Term. Any Trade Fixtures not so
removed by Tenant shall be deemed abandoned and may be stored, removed, or
disposed of by Landlord at Landlord's discretion.
26. Notices.
All notices and other communications required or permitted under
this Lease must be in writing and will be deemed to have been given (i) when
sent by facsimile with delivery acknowledged by the sending machine, (ii)
when received by hand delivery, (iii) one (1) day after being deposited with
any nationally recognized overnight carrier that routinely issues receipts,
(iv) three (3) days after being deposited in any depository regularly
maintained by the United States Postal Service, postage prepaid, certified
mail, return receipt requested, or (v) when sent by electronic mail via
America Online, Inc., with confirmation upon receipt, addressed to the party
for whom it is intended at its address(es) set forth below. Either Landlord
or Tenant may add additional addresses or change its address for purposes of
receipt of any such communication by giving ten (10) days' prior written
notice of such change to the other party in the manner prescribed in this
Section.
If to Landlord: Shepherd Mall Partners, L.L.C.
1000 Shepherd Mall
Oklahoma City, Oklahoma 73107
Attention: Edward H. Duclos,
General Manager
Electronic Mail Address:
EdDuclos
If to Tenant: America Online, Inc.
8619 Westwood Center Drive
Vienna, Virginia 22182
Attention: Ellen M. Kirsch,
General Counsel and Vice
President and Faith M. Denault,
Director of Facilities
Electronic Mail Address:
EKirsh, FDenault
27. Estoppel Certificates.
A. Within fifteen (15) business days after a request by
Landlord, Tenant shall execute and deliver to Landlord, or to such
person(s) as Landlord designates, an estoppel certificate in a form reasonably
acceptable to Tenant. The estoppel certificate shall be limited to a statement
regarding various facts pertaining to the status of this Lease, and shall not
purport to amend this Lease.
B. Within fifteen (15) business days after a request by Tenant,
Landlord shall execute and deliver to Tenant, or to such person(s) as Tenant
designates, an estoppel certificate in a form reasonably acceptable to
Tenant. The estoppel certificate shall be limited to a statement regarding
various facts pertaining to the status of this Lease, and shall not purport
to amend this Lease.
28. Rules and Regulations.
Tenant will comply with the rules and regulations set forth on
Exhibit J. Tenant also will comply with all other reasonable rules and
regulations adopted by Landlord for the Project provided (i) Landlord has
notified Tenant of the additional rules and regulations, and (ii) the
additional rules and regulations do not materially interfere with the conduct
of Tenant's business. Landlord shall enforce all rules and regulations in a
non-discriminatory manner.
29. Intentionally deleted.
30. Lender's Approval.
This Lease is conditioned upon the approval of Landlord's
lender(s), if any, on or before thirty (30) days from the date of this Lease.
If this approval is not obtained within thirty (30) days from the date of
this Lease, Landlord or Tenant may, upon notice to the other party, terminate
this Lease, in which event any Base Rent and additional rent paid to Landlord
by Tenant shall be returned to Tenant, and neither party shall have any
further liability to the other under this Lease.
31. Tenant's Right of First Refusal.
If, at any time during the Term, Landlord receives an offer for the
purchase of all or any portion of the Premises or Building, Landlord, before
accepting the offer, shall send Tenant notice of the offer together with a
copy of any executed documents pertaining thereto. Tenant is hereby granted
thirty (30) days after receipt of such notice in which to enter into a
contract with Landlord on the same terms and conditions as therein contained,
with closing to take place on the later of thirty (30) days after the date
set for closing in the offer to purchase or a date mutually convenient to
Landlord and Tenant. In addition, if Landlord intends to market the Premises
or Building Landlord shall give Tenant notice before beginning its marketing
efforts and Tenant shall have the right within thirty (30) days after receipt
of such notice to present an offer to Landlord to purchase all or any portion
of the Premises or Building that Landlord intends to market. The rights
described in this Section shall continue notwithstanding Tenant's failure to
exercise any rights hereunder, and shall bind Landlord, its successors and
assigns.
32. Competitors.
Throughout the Term, Landlord shall not (i) enter into any lease
for space within the Project with any direct competitor of Tenant, or (ii)
permit any sign or other advertising by a direct competitor of Tenant to be
placed anywhere in the Project. In addition, if Landlord sells the Project
or the Building to a direct competitor of Tenant at any time during the Term,
Tenant may terminate this Lease upon notice to Landlord. For purposes of
this Lease, a "direct competitor of Tenant" means any enterprise whose
primary business is providing computerized on-line data and information
services to subscribers.
33. Waiver of Distraint.
Landlord hereby waives any and all rights granted by any present or
future laws creating a landlord's lien or other right to levy or distrain for
rent upon any goods, merchandise, equipment, fixtures, furniture and personal
property of Tenant located in the Project. Landlord will execute any
documents reasonably required by Tenant to confirm this waiver.
34. Quiet Enjoyment.
Tenant may peaceably and quietly enjoy the Premises during the
Term, subject to the terms, covenants and conditions of this Lease, without
hindrance by Landlord or any person claiming through or under Landlord.
35. Brokerage.
Landlord and Tenant acknowledge that, in connection with this
Lease, (i) the Landlord does not have a listing broker, and (ii) M. D.
Gyllenhaal, 4834 E. Water Street, Tucson, Arizona, represents the Tenant
only. Landlord and Tenant represent and warrant that, except for the broker
named in the preceding sentence, they have not consulted or negotiated with
any broker, finder or agent with regard to the Premises. Landlord and Tenant
agree to hold the other party harmless and indemnify the other party against
all costs, expenses, attorneys' fees, or other liability for commissions or
other compensation or charges claimed by any broker, finder or agent claiming
the same by, through or under Landlord or Tenant, and such indemnity shall
survive the expiration or earlier termination of this Lease. Landlord shall
pay the commission(s) to Mr. Gyllenhaal pursuant to a separate agreement
between Landlord and Mr. Gyllenhaal dated February 15, 1996.
36. Environmental Requirements.
A. Landlord warrants that Landlord has no knowledge of the
existence of any "Hazardous Materials" (as defined below) on, in, under or about
the Project. Neither Landlord nor its agents, employees or contractors shall
cause or permit Hazardous Materials to be brought upon, kept or used in, on,
or about the Premises. Landlord shall manage the Project in compliance with
all "Environmental Requirements" (as defined below) and, at its cost, shall
remediate immediately any Hazardous Materials released on or from the Project
by Landlord, its agents, employees or contractors and repair, clean up and
detoxify the Project as a result of the release of any such Hazardous
Materials. The term "Environmental Requirements" means all present and
future statutes, regulations, ordinances, rules, codes, orders or other
similar enactments of any governmental authority or agency regulating or
relating to environmental conditions on, under, or about the Project,
including the following: the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"); the Resource Conservation and
Recovery Act; and all state and local counterparts thereto, and any
regulations or policies promulgated or issued thereunder. The term
"Hazardous Materials" means and includes petroleum (as defined in CERCLA) and
any substance, material, waste, pollutant, or contaminant listed or defined
as hazardous or toxic under any Environmental Requirements.
B. Except as otherwise provided in subsection D below, Landlord
shall defend, indemnify and hold Tenant harmless from and against any and all
claims, causes of action, demands, liabilities, and costs (including
reasonable attorneys' fees) that Tenant may suffer or incur because of the
existence or discovery of any Hazardous Materials on the Project, or the
migration of any Hazardous Materials to other properties or released into the
environment. If Landlord fails to indemnify Tenant against such costs as
described above, Tenant may set off the amount of such costs against any Base
Rent or other charges otherwise payable by Tenant to Landlord under this
Lease. In addition, if the existence of Hazardous Materials is discovered
on, in, under or about the Project, and such existence of Hazardous Materials
interferes with Tenant's use or occupancy of the Premises or Tenant
conducting business in the Premises, Tenant shall have the right to terminate
this Lease upon notice given to Landlord.
C. Landlord shall notify Tenant immediately of (i) any and all
enforcement, clean up, removal, investigation or other governmental or
regulatory actions instituted or threatened against the Project with respect
to any Environmental Requirements applicable to the Project, and (ii) any and
all claims made or threatened by any third person against Landlord, Tenant,
or any other tenant in the Project relating to any Environmental
Requirements.
D. Except for Hazardous Materials contained in products used by
Tenant in reasonable quantities for ordinary cleaning and office purposes,
Tenant shall not cause any Hazardous Materials to be used or stored upon the
Premises without Landlord's prior written consent. Tenant shall operate its
business in the Premises in compliance with all Environmental Requirements
and shall immediately remediate any Hazardous Materials released on or from
the Project or the Premises by Tenant, its agents, employees or contractors.
Tenant shall defend, indemnify and hold Landlord harmless from and against
any claims, causes of action, demands, liabilities and costs (including
reasonable attorneys' fees) that Landlord may suffer or incur as a result of
a release of Hazardous Materials which Tenant is obligated to remediate as
provided above.
E. Landlord shall ensure that the air quality in the Premises
shall comply with the Oklahoma Environmental Quality Act, 27A Okla.St.Ann.
Section 1-101 et seq., or other such law which applies to the Premises during
the Term of the Lease. The Building shall be designated as a non-smoking
area. Landlord shall provide a designated smoking area outside the west
entrance doors which lead to the area of the Mall adjacent to the Building.
37. ADA Requirements.
Landlord shall be solely responsible for assuring that the Initial
Tenant Improvements, the Common Areas and the front entrance to the Premises
comply in all respects with the ADA. Landlord shall indemnify Tenant and
hold Tenant harmless from and against any loss, cost or damage (including
reasonable attorneys' fees) resulting from any claim, complaint, action,
order, directive, decree or finding that the Initial Tenant Improvements, the
Common Areas or the front entrance to the Premises do not comply with the
ADA. Where alterations made by either Landlord or Tenant after the date of
this Lease trigger "path of travel" requirements under the ADA, the party
making such alterations shall be responsible for satisfying such
requirements.
38. Option to Expand and Option to Renew.
(a) Option to Expand:
A. Tenant shall have the option to expand the Premises to include
the adjacent space identified as "Expansion Space" on Exhibit A. Any such
expansion of the Premises shall be upon the same terms, covenants and
conditions as are set forth herein, except that the Base Rent shall coincide
with the Base Rent (less the amount of the adjustment under Paragraph 1 B
above) at the time of occupancy of the Expansion Space, calculated on a
square foot basis. Tenant shall have the right to exercise this expansion
option at any time prior to Landlord leasing said Expansion Space to another
tenant or after the termination of any lease Landlord subsequently enters
into for such space. Landlord shall not lease said expansion space for a
period of ninety (90) days from the Rent Commencement Date under this Lease
(the "initial option period"), and thereafter, Tenant shall have a right of
first refusal to lease any or all of said Expansion Space. After the initial
option period, Landlord shall give Tenant notice of its intent to lease any
or all of said Expansion Space to another tenant and Tenant shall notify
Landlord within five (5) business days of its receipt of said notice as to
whether Tenant elects to lease said space. Tenant shall have the right at any
time to exercise its option to lease the Expansion Space even though the
Expansion Space is leased to another tenant, and Landlord agrees that it
shall relocate said tenant, provided that Tenant shall pay for the reasonable
cost of the relocation. Landlord shall include in any and all leases for the
Expansion Space a provision that Landlord shall have the right to relocate
said tenant to another space in the Project in the event that Tenant elects
to exercise its option to expand during a period when the Expansion Space is
leased to another tenant. In the event Tenant elects to lease said space,
Landlord and Tenant shall enter into an amendment to this Lease to reflect
the addition of the Expansion Space to the Premises.
B. Should Tenant duly exercise its option or right of first
refusal, the amount Landlord shall expend upon the Tenant Improvements for
said space shall be the following:
(i) Original amount of the Tenant Improvements stated in dollars
per square foot shall be divided by the number of months of the basic Term of
the Lease.
(ii) The resulting quotient shall be multiplied by the number of
months remaining in the basic Term of the Lease from the date of occupancy of
the Expansion Space to the date on which the basic Term of the lease ends.
(iii) The resulting product shall be multiplied by the number of
square feet in the Expansion Space and shall be understood as being the total
amount of Landlord-provided contribution to the Tenant Improvements.
(iv) Should the resulting product be less than the amount Tenant
needs to complete the Tenant Improvements in the Expansion Space, Tenant
agrees to pay the difference between the amount to be paid by Landlord as
defined above and the amount needed to complete the new Tenant Improvements
for the Expansion Space.
(b) Option to Renew:
A. Tenant shall have the option to extend the Term of this
Lease from the date upon which it would otherwise expire for two (2) separate
renewal periods of five (5) years each (each such period being hereinafter
called a "Renewal Period") upon the same terms and conditions as are herein set
forth, except that Base Rent shall be determined in accordance with subsections
B and C below. If Tenant elects to exercise any one or more of said options to
renew, it shall do so by giving notice of such election to Landlord at least
nine (9) months before the beginning of the Renewal Period or Renewal Periods
for which the Term is to be renewed by the exercise of such option or
options. If Tenant elects to exercise any one or more of its options to
renew, the Term of this Lease shall be automatically extended for the Renewal
Period covered by the option or options so exercised without execution of an
extension or renewal lease. If Tenant does not give notice of such election
to Landlord within the time period provided above, Landlord shall give notice
to Tenant that Tenant has failed to give notice of such election to Landlord
(the "Option Notice"). Tenant's time to give notice of such election shall
continue until sixty (60) days after receipt of the Option Notice.
B. At the commencement of each Renewal Period, Base Rent (and
the monthly installments thereof) shall be adjusted to equal ninety-five percent
(95%) of the "Market Rent" for the Premises. The "Market Rent" shall mean
the prevailing fair market rental rate being offered by landlords and agreed
to by tenants as of the commencement of the applicable Renewal Period in
leases for premises similar to the Premises (in size and quality) in
buildings of similar age, quality and location as the Building, and with
tenants of comparable financial strength, credit-worthiness and reputation as
Tenant ("Comparable Leases"). The amount by which the Base Rent shall be
escalated annually during the applicable Renewal Period (commencing with the
second Lease Year) shall be adjusted to equal the "Market Rent Escalation"
(as defined in the next sentence). The "Market Rent Escalation" shall mean
the prevailing fair market annual rental escalation in Comparable Leases.
Effective as of the commencement of the applicable Renewal Period, Tenant
also shall be given the benefit of "Market Tenant Concessions" (as defined in
the next sentence). Market Tenant Concessions shall mean all rent abatement,
construction allowances and other tenant concessions being provided by
landlords in Comparable Leases. Tenant may elect to receive the benefit of
the Market Tenant Concessions in the form of a reduction in Base Rent. (The
Market Rent, Market Rent Escalation and Market Tenant Concessions are
referred to hereafter collectively as the "Renewal Economic Terms.")
C. For a period of thirty (30) days after Tenant's exercise of
its renewal option (the "Negotiating Period"), the parties shall attempt in
good faith to agree upon the Renewal Economic Terms. If the parties are unable
to agree upon the Renewal Economic Terms during the Negotiating Period, the
Renewal Economic Terms shall be determined pursuant to the following
provisions. Within ten (10) days after the Negotiating Period has expired,
each party will designate a licensed real estate broker with at least five
(5) years' experience in commercial office building leasing (an "Appraiser"
or the "Appraisers"). The two Appraisers shall have fifteen (15) days to
agree upon the Renewal Economic Terms. If they agree, the Renewal Economic
Terms shall be as determined by the two Appraisers. If the Appraisers are
unable to agree upon the Renewal Economic Terms within this 15-day period,
the Appraisers shall together select a third Appraiser within five (5) days
after the 15-day period has expired. Within fifteen (15) days after the
third Appraiser has been chosen, he shall determine the Renewal Economic
Terms and notify the parties. Subject to subsection D below, the third
Appraiser's determination of the Renewal Economic Terms shall be final. All
of the Appraisers shall use the definitions and criteria set forth in
subsection B above in determining the Renewal Economic Terms. Each party
shall pay for the cost of its Appraiser and the parties shall share equally
the cost of the third Appraiser.
D. The Renewal Economic Terms determined pursuant to sub-
sections B and C above shall be binding upon the parties.
39. Miscellaneous.
A. Entire Agreement; Joint and Several Liability; Successors
and Assigns. This Lease constitutes the entire agreement between the parties
concerning the matters set forth herein. If Landlord shall include more than
one person, the obligations hereunder of all such persons shall be joint and
several. This Lease shall be binding upon and inure to the benefit of the
parties and their respective successors, permitted assigns, heirs and legal
representatives.
B. Interpretation. The named Exhibits are part of this Lease.
Section and subsection headings are for convenience only, and not for use in
interpreting this Lease. If a court finds any provision of this Lease
unenforceable, all other provisions remain enforceable.
C. Construction. Both parties have had an opportunity to make
comments and modifications to this Lease and review this Lease with their
legal counsel. As a result, this Lease shall not be strictly construed
against either party. Any reference to gender is used solely as a matter of
convenience. Use of the singular shall include the plural and the plural
shall include the singular.
D. Costs; Include; Shall; May; Term. Except as expressly
provided otherwise in this Lease, the party obligated or permitted to perform
an obligation also is obligated, as between Landlord and Tenant, to pay the
cost of performance. "Include," "includes," and "including" mean considered
as part of a larger group, and not limited to the items recited. "Shall"
means is obligated to. "May" means "is permitted to." References to "Term"
shall be deemed to read "as extended" so as to include the Renewal Period(s)
if Tenant exercises its renewal option(s).
E. Waiver. No provision of this Lease is waived by Landlord or
Tenant unless waived by them in writing. No waiver by Landlord or Tenant of
any default is a waiver of any other default of the same or any other provision
of this Lease.
F. Rule Against Perpetuities. Notwithstanding any provision in
this Lease to the contrary, if the Term has not commenced within three (3) years
after the date of this Lease, this Lease shall automatically terminate on the
third anniversary of the date hereof. The sole purpose of this provision is
to avoid any possible interpretation that this Lease violates the Rule
Against Perpetuities or other rule of law against restraints on alienation.
G. Remedies. Except as otherwise provided in this Lease, the
rights and remedies provided in this Lease are in addition to, and do not
deprive a party of any other rights at law or in equity.
H. Additional Rent. All sums owed by Tenant to Landlord in
connection with this Lease which are not otherwise designated as rent shall be
deemed to be additional rent.
I. Legal Fees. If either party shall institute any action
against the other relating to this Lease, the unsuccessful party in the action
shall reimburse the successful party for the reasonable attorneys' fees and
costs incurred by the successful party. In a case involving multiple claims
and/or counterclaims, the parties agree that the court shall equitably
award attorneys' fees to the extent one or each party prevails on its claims
and/or defenses.
J. Ownership of Leasehold Improvements. Immediately upon their
completion, all leasehold improvements made to the Premises, whether made by
Landlord or Tenant, shall become Landlord's property automatically. In no
event shall any of the fixtures or equipment described in Section 13 be
deemed leasehold improvements hereunder, including any Trade Fixtures,
Communications Equipment, HVAC Equipment or the Generator.
K. Governing Law. This Lease shall be governed by and construed
in accordance with the laws of the State of Oklahoma.
L. Modifications to Lease. No alterations, changes or
modifications of this Lease shall be effective unless made in writing and
executed by the party sought to be charged.
M. Time is of the Essence. Time is of the essence with respect
to the obligations to be performed hereunder.
N. Authorization. Landlord warrants and represents that James E.
Williams is authorized to sign this Lease on Landlord's behalf, and upon his
execution thereof the Landlord shall be legally bound and obligated under
this Lease.
This Lease is signed under seal by the parties as of the Effective
Date.
LANDLORD:
WITNESS/ATTEST: Shepherd Mall Partners, L.L.C.
By:/S/James E. Williams
[Corporate Seal, if applicable]
TENANT:
ATTEST: AMERICA ONLINE, INC.,
A Delaware Corporation
By:/S/Mark Stavish
ATTEST:
/S/Ellen M. Kirsh, Secretary
[Corporate Seal]
