<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
For the quarterly period ended July 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-26040
COMPUTER LEARNING CENTERS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3501869
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
11350 RANDOM HILLS ROAD, SUITE 240
FAIRFAX, VIRGINIA 22030
(Address of principal executive offices) (Zip Code)
(703) 359-9333
(Registrant's telephone number, including area code)
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.
CLASS OUTSTANDING AT AUGUST 30, 1996
----- ------------------------------
Common Stock, $.01 par value 4,438,567
1
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COMPUTER LEARNING CENTERS, INC
INDEX
PART I - FINANCIAL INFORMATION PAGE
- - ------------------------------ ----
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheet 3
Consolidated Statement of Operations 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 7
PART II - OTHER INFORMATION
- - ---------------------------
ITEM 1 Legal Proceedings 13
ITEM 2 Changes in Securities 13
ITEM 3 Defaults Upon Senior Securities 13
ITEM 4 Submission of Matters to a Vote of
Security Holders 13
ITEM 5 Other Information 13
ITEM 6 Exhibits and Reports on Form 8-K 13
SIGNATURES 14
- - ----------
2
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COMPUTER LEARNING CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AS OF AS OF
JULY 31, 1996 JANUARY 31, 1996
------------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $11,294 $ 8,260
Accounts receivable, net of allowance for doubtful
accounts of $1,642 and $1,507, respectively 21,037 19,095
Prepaid expenses and other current assets 2,700 2,280
------- -------
Total current assets 35,031 29,635
------- -------
Fixed assets, net 6,499 4,434
Intangible assets, net of amortization 3,229 3,410
Other long-term assets 3,242 2,329
------- -------
Total assets $48,001 $39,808
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Trade accounts payable $ 1,957 $ 958
Accrued employee costs 1,916 1,333
Accrued other expenses 1,940 1,968
Deferred revenues 20,243 16,834
------- -------
Total current liabilities 26,056 21,093
------- -------
Other long-term liabilities 1,698 1,559
------- -------
Total liabilities 27,754 22,652
------- -------
Stockholder's equity:
Common stock, $.01 par value, 10,000,000 authorized
shares, 4,438,567 and 4,329,515 shares issued and
outstanding, respectively 44 43
Additional paid-in capital 16,351 15,749
Less - Subscription note receivable for 70,649 common
shares at $9.43 per share (666) (666)
Net unrealized gain on securities available for sale 235 211
Retained earnings 4,283 1,819
------- -------
Total stockholder's equity 20,247 17,156
------- -------
Total liabilities and stockholder's equity $48,001 $39,808
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE>
COMPUTER LEARNING CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE-MONTH FOR THE SIX-MONTH
PERIOD ENDED JULY 31, PERIOD ENDED JULY 31,
--------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $14,977 $10,659 $28,983 $21,544
Costs and expenses:
Cost of instruction and services 8,247 6,196 15,786 12,497
Selling and promotional 2,574 1,950 5,059 3,835
General and administrative 1,490 843 2,675 1,776
Provision for doubtful accounts 536 522 1,284 1,318
Amortization of intangible 91 91 181 181
------- ------- ------- -------
12,938 9,602 24,985 19,607
Income before interest expense 2,039 1,057 3,998 1,937
Interest (income) expense, net (110) 67 (214) 256
------- ------- ------- -------
Income before income taxes and
discontinued operations 2,149 990 4,212 1,681
Provision for income taxes 892 435 1,748 772
------- ------- ------- -------
Income from continuing operations before
discontinued operations 1,257 555 2,464 909
------- ------- ------- -------
Income (loss) from discontinued operations, net of
applicable income tax -- 199 -- (1,065)
------- ------- ------- -------
Net income (loss) $ 1,257 $ 754 $ 2,464 ($156)
------- ------- ------- -------
------- ------- ------- -------
Earnings (loss) per share:
Income per share from continuing operations,
actual-1996; pro forma-1995 $0.27 $0.15 $0.54 $0.28
Pro forma income (loss) per share from
discontinued operations-1995 -- 0.05 -- (0.33)
------- ------- ------- -------
Net income (loss) per share, actual-1996;
pro forma -1995 $0.27 $0.20 $0.54 ($0.05)
------- ------- ------- -------
------- ------- ------- -------
Weighted average number of shares outstanding,
actual-1996; pro forma-1995 4,687,896 3,722,492 4,581,202 3,247,765
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per share assuming full dilution:
Net income per share $ .27 $ .52
--------- ---------
--------- ---------
Weighted average number of shares outstanding 4,742,268 4,738,218
--------- ---------
--------- ---------
Supplemental pro forma income
per share from continuing operations-1995 $0.14 $0.25
--------- ---------
--------- ---------
Supplemental pro forma weighted
average number of shares outstanding-1995 4,311,025 4,266,471
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
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COMPUTER LEARNING CENTERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX-MONTH PERIOD ENDED JULY 31,
---------------------------------------
1996 1995
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,464 $ (156)
Adjustments to reconcile net income to
Cash provided by operating activities:
Provision for doubtful accounts 1,284 1,318
Depreciation 892 644
Amortization of intangible and other assets 181 181
Changes in net assets and liabilities:
Accounts receivable (2,933) (830)
Prepaid expenses and other current assets (359) 122
Net assets of discontinued operations -- 1,155
Other long-term assets (913) 172
Trade accounts payable 999 204
Accrued employee costs 583 25
Accrued other expenses (28) (748)
Deferred revenues 3,409 616
Other long-term liabilities 139 57
-------- --------
Cash provided by operating activities 5,718 2,760
-------- --------
Cash flows from investing activities:
Capital expenditures (2,957) (701)
Increase in restricted cash -- 700
Perkins matching contributions -- (82)
Product development (37) --
-------- --------
Cash used for investing activities (2,994) (83)
-------- --------
Cash flows from financing activities:
Borrowings from long-term debt -- 9,694
Repayments of long-term debt -- (26,560)
Proceeds from issuance of common stock -- 14,847
Exercise of employee stock options 310 --
-------- --------
Cash provided by (used for) financing activities 310 (2,019)
-------- --------
Net increase in cash and cash equivalents 3,034 658
Cash and cash equivalents, beginning of period 8,260 4,753
-------- --------
Cash and cash equivalents, end of period $11,294 $ 5,411
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE>
COMPUTER LEARNING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The interim consolidated financial statements include the accounts of
Computer Learning Centers, Inc., (the "Company"), and, for the quarter and six
months ended July 31, 1995 the discontinued operations of Blessing/White Inc.
("Blessing White") and Comprehensive Learning Concepts (UK) Limited ("UK Ltd.")
which were spun off to stockholders at the public offering date (see Note 3).
This financial information reflects all adjustments, consisting only of normal
recurring adjustments, that are, in the opinion of management, necessary for a
fair statement of the results for the interim periods presented.
2. In conjunction with the Company's initial public offering (see Note 3), the
Company effected the repurchase of certain shares of its Class B Preferred
Stock, all shares of its Class C Preferred Stock and all of the Common Stock
Warrants. Shares of Class B and Class C Preferred Stock were repurchased at
their book value and the Common Stock Warrants were purchased for an aggregate
price of $986,000, or approximately $5.24 per share purchasable thereunder. The
Company issued subordinated notes aggregating $4,111,400 in consideration of
these repurchases, which amounts were repaid from the proceeds of the offering.
In addition, all outstanding shares of Preferred Stock were converted into
1,826,205 shares of Common Stock.
In conjunction with the Company's initial public offering, the Company
transferred $500,000 cash and its shares of UK Ltd and Mohr Development to
Blessing/White, cancelled a related note receivable from Blessing/White,
distributed pro rata the outstanding common stock of Blessing/White to the
holders of common stock of the Company and distributed pro rata the outstanding
preferred stock of Blessing/White to the holders of the preferred stock of the
Company.
3. On June 7, 1995, the Company completed an initial public offering of
2,200,000 shares of the Company's Common Stock at a price of $8.00 per share.
An additional 90,000 shares were sold on July 6, 1995 pursuant to the exercise
of the underwriters' over allotment at a price of $8.00 per share. The Company
received total net proceeds, after deduction of expenses and underwriting
discounts and commissions payable by the Company, of approximately $14.8 million
from the sale of the 2,290,000 shares. After repayment of Company debt, net
proceeds to the Company from the sale of such 2,290,000 shares were $1.3
million.
In conjunction with the initial public offering, an approximate .314
reverse stock split became effective on May 31, 1995. The accompanying
financial statements have been restated to reflect the reverse stock split.
4. Earnings (loss) per common and common equivalent share (pro forma for the
quarter and six months ended July 31, 1995) is computed using the weighted
average number of common stock and common equivalent shares outstanding
during the period. Common equivalent shares consist of stock options issued
under various benefit plans. The treasury stock method was used to measure
the dilutive effect and common equivalent shares were determined using the
weighted average market price. The unaudited fully diluted income per share
from continuing operations for the three and six months ended July 31, 1996
is equal to historical income from continuing operations divided by the
unaudited fully diluted weighted average number of shares outstanding. The
unaudited fully diluted weighted average number of shares outstanding is
based upon the number of common shares and dilutive common share equivalents
from stock options outstanding at July 31, 1996, using the treasury stock
method. The treasury stock method for fully diluted income per share from
continuing operations assumes that the options are exercised at the closing
market price on July 31, 1996.
5. Supplemental pro forma income per share from continuing operations is equal
to supplemental pro forma income from continuing operations divided by the
supplemental pro forma weighted average number of shares outstanding.
Supplemental pro forma income from continuing operations is derived by adjusting
historical income from continuing operations to give effect to the reduction of
interest expense ($54,000 net of applicable tax for the quarter ended July 31,
1995 and $150,000 net of applicable tax for the six months ended July 31, 1995)
relating to the repayment as of February 1, 1995 of long-term indebtedness
totalling $9.5 million. The number of shares used in the computation of
supplemental pro forma income per share from continuing operations is based upon
the number of shares of common stock and common stock equivalents, using the
treasury stock method, after giving effect to (i) the repurchase transactions
referred to in Note 2, (ii) the recapitalization referred to in Note 2 and 3
above, and (iii) the conversion of the Company's outstanding preferred stock
referred to in Note 2, increased by the estimated amount of additional shares
required to be sold at the initial public offering price to repay such
indebtedness and the subordinated notes payable to affiliates of two of the
Company's preferred stockholders.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes", "anticipates", "plans", "expects" and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking statements.
These factors include, without limitation, those set forth below under the
caption "Certain Factors That May Affect Future Results."
RESULTS OF OPERATIONS
The following table sets forth consolidated statement of operations data of
the Company expressed as a percentage of net revenues for the periods indicated:
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD FOR THE SIX MONTH PERIOD
ENDED JULY 31, ENDED JULY 31,
-------------------------- ------------------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Costs and expenses:
Instruction costs and services 55.1 58.1 54.5 58.0
Selling and promotional 17.2 18.3 17.5 17.8
General and administration 9.9 7.9 9.2 8.3
Provision for doubtful accounts 3.6 4.9 4.4 6.1
Amortization of intangible .6 .9 .6 .8
----- ----- ----- -----
Total costs and expenses 86.4 90.1 86.2 91.0
----- ----- ----- -----
Income before interest expense 13.6 9.9 13.8 9.0
Interest (income) expense, net (.7) .6 (.7) 1.2
----- ----- ----- -----
Income from continuing operations before
income taxes 14.3 9.3 14.5 7.8
Provision for income taxes 5.9 4.1 6.0 3.6
----- ----- ----- -----
Income from continuing operations 8.4% 5.2% 8.5% 4.2%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
THREE MONTHS ENDED JULY 31, 1996 COMPARED WITH THE THREE MONTHS ENDED
JULY 31, 1995
Revenues increased by 40.2% to $15.0 million in the second quarter of 1996
from $10.7 million in the second quarter of 1995 due primarily to an increase
in enrollments from 1995 to 1996, the growing popularity of the Company's
longer programs, including Associate Degree programs, and the continuing
enrollment growth at the three new Learning Centers. Revenues from Advantec
Institute ("AI"), formerly Professional Development Services, increased 165%
to $592,000 in the second quarter of 1996 from $223,000 in the second quarter
of 1995 due primarily to an increase in the number of students trained and
students being trained in longer and higher tuition value programs.
Student enrollment for the three months ended July 31, 1996 was 2,130, a
42.8% increase from the second quarter of 1995. Student enrollment at all of
the Company's Learning Centers which have been open for more than one year
increased 25.7%, yielding an increase in same
7
<PAGE>
Center student population of 14.4%. Ending student population at July 31,
1996 and 1995 was 5,342 and 4,386 respectively, an increase of 21.8%.
Instruction costs and services increased by 32.3% to $8.2 million in the
second quarter of 1996 from $6.2 million in the second quarter of 1995
primarily due to the direct costs necessary to support the increase in the
student population and the opening of three new Learning Centers. These
direct costs consist primarily of faculty and staff compensation and related
benefits, and facilities costs including rent and depreciation. Instruction
costs and services as a percentage of revenues decreased to 55.1% in the
second quarter of 1996 from 58.1% in the second quarter of 1995 due to
greater revenues being spread over the fixed costs related to instructional
services.
Selling and promotional expenses increased by 30.0% to $2.6 million in the
second quarter of 1996 from $2.0 million in the second quarter of 1995 due
primarily to increased marketing and advertising to support the growth in
enrollments. The increase relates primarily to the three new Learning
Centers operating in the second quarter of 1996 which accounted for $374,000
or 62.3% of the increase in selling and promotional expenses. For the
quarter ending July 31, 1995, the Company completed additional commercials
and marketing activities which totalled $175,000. The Company anticipates
incurring a similar level of expenses in the remainder of 1996. Selling and
promotional expenses as a percentage of revenues decreased to 17.2% in the
second quarter of 1996 from 18.3% in the second quarter of 1995.
General and administrative expenses increased 77.9% to $1.5 million in the
second quarter of 1996 from $843,000 in the second quarter of 1995, due
primarily to increased number of personnel and increases in salaries and
related benefits associated with supporting the growth of the business.
General and administrative expense as a percentage of revenues equalled 9.9%
in the second quarter of 1996 compared to 7.9% in the second quarter of 1995.
Provision for doubtful accounts increased by 2.7% to $536,000 in the second
quarter of 1996 from $522,000 in the second quarter of 1995. Provision for
doubtful accounts as a percentage of revenues equalled 3.6% in the second
quarter of 1996 compared to 4.9% in the second quarter of 1995. This is
primarily the result of improved financial aid processing and improved credit
and collection activities. During the quarter, the Company also received
approval to participate in the Federal Title IV financial aid programs in
the three new Learning Centers.
Amortization of intangibles equalled $91,000 in the second quarter of 1996
and the second quarter of 1995 as there has been no change in the gross
amount of the Company's only remaining intangible asset. The asset consists
of the Department of Education certification, which has a remaining life of
approximately nine years.
The Company realized net interest income of $110,000 in the second quarter of
1996, compared to net interest expense of $67,000 in the second quarter of
1995 primarily as a result of the 1996 interest generated by invested cash
balances and the 1995 repayment of debt from the proceeds of the initial
public offering.
SIX MONTHS ENDED JULY 31, 1996 COMPARED WITH THE SIX MONTHS ENDED JULY 31, 1995
Revenues increased 34.9% to $29.0 million for the six months ended July
31, 1996 from $21.5 million for the comparable period of the prior year due
primarily to an increase in enrollments at the Company's existing Learning
Centers, the opening of three new Learning Centers during the period and the
growing popularity of the Company's longer programs, including Associate
Degree programs. Revenues from AI increased 82.0% to $961,000 for the six
months ended July 31, 1996 from $528,000 for the comparable period of the prior
year due primarily to an increase in the number of students trained and
students attending higher tuition programs.
Student enrollment for the six months ended July 31, 1996 was 4,094, a
31.4% increase from the comparable period for the prior year. Student
enrollment at all of the Company's Computer Learning Centers open for more
than one year increased 18.6%, yielding an increase in same Center student
population of 14.4%.
Costs of instruction and services increased 26.4% to $15.8 million for
the six months ended July 31, 1996 from $12.5 million for the comparable
period of the prior year due primarily to the direct costs necessary to
support the increase in the student population and the opening of three new
Learning Centers. These direct costs consist primarily of faculty and staff
compensation and related benefits and facilities costs, including rent and
depreciation. Costs of instruction and services as a percentage of revenues
decreased to 54.5% for the six months ended July 31, 1996 from 58.0% for the
comparable period of the prior year due to greater revenues being spread over
the fixed costs related to instructional services.
Selling and promotional expenses increased 34.2% to $5.1 million for the
six months ended July 31, 1996 from $3.8 million for the comparable period of
the prior year due primarily to increased marketing and advertising to
support the growth in enrollments and as a result of having three new
Learning Centers operating in the first six months of fiscal 1997 versus one
new Learning Center opened during the comparable period in the prior year.
These three new Learning Centers accounted for $738,000, or 56.7%, of the
increase in selling and promotional expenses. For the six months ended July
31, 1995, the Company completed production of additional television
commercials and related marketing activities, which totalled $298,000. The
Company anticipates incurring a similar level of these expenses in the second
half of fiscal 1997. Selling and promotional expenses as a percentage of
revenues decreased to 17.5% for the six months ended July 31, 1996 from 17.8%
for the comparable period of the prior year.
8
<PAGE>
General and administrative expenses increased 50.0% to $2.7 million for
the six months ended July 31, 1996 from $1.8 million for the comparable period
of the prior year, due primarily to an increased number of personnel and
increases in salaries and related benefits associated with supporting the
growth of the business, as well as performance-based incentive compensation
expense. General and administrative expense as a percentage of revenues
equalled 9.2% for the six months ended July 31, 1996 compared to 8.3% for the
comparable period of the prior year.
Provision for doubtful accounts decreased 2.5% to $1,284,000 for the six
months ended July 31, 1996 from $1,318,000 for the comparable period of the
prior year. Provision for doubtful accounts as a percentage of revenues
equalled 4.4% for the six months ended July 31, 1996 compared to 6.1% for the
comparable period of the prior year. This was primarily the result of
improved financial aid processing and improved credit and collection
activities. During the six months ended July 31, 1996, the Company also
received approval to participate in the Title IV Programs in the three new
Learning Centers.
Amortization of intangibles equalled $181,000 for the six months ended
July 31, 1996 and for the comparable period of the prior year as there has
been no change in the gross amount of the Company's only remaining intangible
asset. The asset consists of the Department of Education certifications, which
has a remaining life of approximately nine years.
The Company realized net interest income of $214,000 for the six months ended
July 31, 1996, compared to net interest expense of $256,000 for the
comparable period of the prior year primarily as a result of the 1996
interest generated by invested cash balances and the 1995 repayment of debt
from the proceeds of the Company's initial public offering.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased by $3.0 million for the
six-month period ended July 31, 1996. Cash generated from operations in the
first six months of the fiscal year as compared to the prior year period
increased by approximately $3.0 million due primarily to the difference in
net income for the comparable periods. Excluding cash flow provided by
discontinued operations, cash provided from continuing operations would have
increased by approximately $3.0 million in 1996 versus 1995. Capital
expenditures increased to $3.0 million in 1996 from $701,000 in 1995 primarily
as a result of purchasing the necessary capital equipment for three new
Learning Centers opened during the first six months of 1996. As of July 31,
1996, the Company had outstanding approximately $291,000 of fixed asset
purchase orders. The Company had a $5.0 million secured line of credit with a
bank to be used for working capital purposes. The line of credit expired on
May 15, 1996 but was subsequently extended through July 15, 1996 to allow the
Company to negotiate a new credit facility. The Company is currently
completing negotiations on a new multi-year revolving credit agreement. The
Company believes that current balances of cash and cash equivalents and cash
provided from operations are sufficient to fund its operating needs and
capital spending for the foreseeable future.
9
<PAGE>
STUDENT LOAN DEFAULTS
The Chicago Learning Center's federal fiscal year ("FY") 1993 student loan
cohort default rate ("cohort default rate") as published exceeds 25% which, if
accurate, would result in three consecutive years of default rates that exceed
the U. S. Department of Education ("Department") 25% threshold. The Company
believes the published rates as calculated by the Department, contain errors
which, if a sufficient number are agreed to and thereby corrected by the
Department, could reduce at least one of those final cohort default rates below
25%. Pursuant to the Department's procedures, the Company has submitted appeals
of the Learning Center's FY 1991, FY 1992 and FY 1993 rates setting forth
evidence of such errors. The Department has decided the appeal for the Learning
Center's FY 1992 cohort default rate, which remains above 25%, but the FY 1991
and FY 1993 appeals, submitted June 28, 1996 remain pending.
Depending on the ultimate resolution of those appeals, the Chicago Learning
Center's eligibility to participate in the Federal Family Education Loan
("FFEL") programs could be subject to termination, and, under a recently
enacted statute, that Learning Center's students could lose access to Federal
Pell Grant funds until July 1997. The Chicago Learning Center will remain
eligible to participate in Title IV Programs pending the resolution of its
FY 1991 and FY 1993 cohort default rate appeals. The Company cannot predict
when the Department might decide the Chicago Learning Center's appeals or
the outcome of such appeals.
The Company has received the FY 1994 preliminary cohort default rates for the
Chicago and Philadelphia Learning Centers; the preliminary figures were 20.2%
and 27.4%, respectively. The Department issues preliminary default rates to
allow institutions the opportunity to review and, if necessary, challenge the
student loan default data to ensure their accuracy before the final rates are
published. The Company has challenged certain data contained in the
Philadelphia Learning Center's 1994 preliminary default rate, and is awaiting
the resolution of that challenge.
Because the governing statute requires that FFEL eligibility be based on the
three most recent years for which cohort default rate data are available, the
Company believes that the preliminary FY 1994 default rate for the Chicago
Learning Center, which has not been challenged by the Company, should be deemed
the most recent cohort default rate and therefore sufficient to allow the
Chicago Learning Center to retain its eligibility regardless of the outcome of
its prior year appeals. Although in a communication unrelated to the Company
the Department has asserted a contrary position, the Company is prepared to
contend its position and pursue all appropriate remedies if necessary. The
Company cannot predict when the Department might determine the Chicago Learning
Center's FY 1991 or FY 1993 appeals or the outcome of such appeals.
If the Philadelphia Learning Center's FY 1994 cohort default rate is published
at 25% or higher, as its FY 1994 default rate has been calculated on a
preliminary basis, it would result in three consecutive years of default rates
that exceed the 25% threshold. The Company has appealed or plans to appeal, if
necessary, the accuracy of all three relevant cohort default rates and the
Philadelphia Learning Center will remain eligible to participate in Title IV
Programs pending the resolution of all such appeals. Depending on the ultimate
resolution of those appeals, the Philadelphia Learning Center's eligibility to
participate in the FFEL programs could be subject to termination and, under a
recently enacted statute, that Learning Center's students could lose access to
Federal Pell Grant Funds until July 1997. The Department of Education has
decided the Philadelphia Learning Center's appeal for FY 1992 and, while certain
adjustments were made, such default rate remains above 25%. The Company cannot
predict when the Department of Education might issue final FY 1994 cohort
default rate data or determine the Philadelphia Learning Center's FY 1993
appeal.
In June 1995, the Department changed its methodology used to calculate when
certain loans default. This change in methodology, which was retroactively
applied to the FY 1993 cohort default rate, has been challenged on several
grounds in a lawsuit filed in the District Court of New York by a coalition of
New York proprietary schools. Based upon its internal records, the Company
believes that the FY 1994 cohort default rate would be less than 25% if such
rate were calculated under the methodology in effect until early 1995 when the
Department changed its methodology used to determine when certain loans are
counted in default for cohort default rate purposes. This change is
methodology, which was retroactively applied to the FY 1993 cohort default rate,
has been challenged on several grounds in a lawsuit filed in the District Court
of New York by a coalition of New York proprietary schools. The Company cannot
predict when the Department might determine the Philadelphia Learning Center's
appeals or the eventual outcome of the aforementioned litigation.
10
<PAGE>
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The following factors, among others, could cause actual results to differ
materially from those contained in forward looking statements made in this
Report on Form 10-Q and presented elsewhere by management from time to time.
POTENTIAL ADVERSE EFFECTS OF REGULATION
As educational institutions that participate in various federal and state
financial aid programs, the Company and the Learning Centers are subject to
extensive governmental regulation. In particular, the Higher Education Act of
1965, as amended (the "HEA"), and the regulations promulgated thereunder,
subject the Company, the Learning Centers and all other higher education
institutions eligible to participate in the various federal student financial
aid programs under Title IV of the HEA (the "Title IV Programs") to
significant regulatory scrutiny. The termination or material limitation of the
ability of the Company or any of the Learning Centers to participate in the
Title IV Programs would have a material adverse effect on the Company.
Because certain statutory and regulatory provisions impose significant
requirements on the Company and the Learning Centers and because the agency
administering these regulations, the Department has not fully developed
administrative interpretations of certain of the statutory and regulatory
provisions, it is not clear how the requirements imposed by statute and
regulations will be applied and interpreted. In addition, changes in or new
interpretations of the HEA, its implementing regulations or other applicable
laws, rules or regulations could have a material adverse effect on the
accreditation, authorization to operate in various states, permissible
activities or costs of doing business of the Company or one or more of the
Learning Centers. The failure to maintain or renew any required regulatory
approvals, accreditations or authorizations by the Company or any of the
Learning Centers would have a material adverse effect on the Company.
The violation of federal requirements governing participation in the Title
IV Programs or of state or accrediting agency requirements governing the
provision of educational services by the Company or any Learning Center could
result in the restriction or loss by the Company or a Learning Center of its
ability to participate in government funding programs or to offer education and
training programs. Any such loss or restriction would have a material adverse
effect on the Company. Furthermore, current statutes or regulations or statutory
or regulatory standards that become effective in the future may be applied or
interpreted by the government in ways that will delay or change the Company's
expansion plans or otherwise adversely affect the operation of the Learning
Centers and their participation in the Title IV Programs. In addition, all
government-provided student financial aid programs, including the Title IV
Programs, are subject to the effects of federal and state budgetary processes
and the possible elimination or consolidation of the Department and there can be
no assurance that government funding for the financial aid programs in which the
Company's students participate will continue to be available or be maintained at
current levels. The loss of funding or a reduction in funding levels for the
Title IV Programs would have a material adverse effect on the Company.
CONTROL BY GENERAL ATLANTIC ENTITIES; POTENTIAL ADVERSE REGULATORY EFFECTS OF
CHANGE OF CONTROL
General Atlantic Corporation and certain of its affiliates (the "General
Atlantic Entities") currently own approximately 38% of the Company's Common
Stock. Consequently, the General Atlantic Entities have significant influence
over the policies and affairs of the Company and are in a position to determine
the outcome of corporate actions requiring stockholder approval, including the
election of directors, the adoption of amendments to the Company's Amended and
Restated Certificate of Incorporation and the approval of mergers and sales of
the Company's assets. Because of the control position of the General Atlantic
Entities, any disposition of Common Stock by the General Atlantic Entities or
issuance of stock by the Company that results in a loss of control by the
General Atlantic Entities may have material adverse consequences for the Company
under applicable federal and state regulations and accrediting agency
requirements, including potential loss of eligibility to participate in the
Title IV Programs. Upon a change in ownership resulting in a change of control
of the Company, as defined in the HEA's and the Department's regulations, each
Learning Center would lose its eligibility to participate in the Title IV
Programs for an indeterminate period of time while it applies to regain
eligibility, with the likely
11
<PAGE>
loss of a portion of its Title IV funding during the re-approval period. A
change of control also would have significant regulatory consequences for the
Company at the state level and could affect the accreditation of the Learning
Centers.
COMPETITION
The postsecondary adult education and training market is highly fragmented,
with no single institution or company holding a dominant market share. The
Company competes for students with vocational and technical training schools,
degree-granting colleges and universities, continuing education programs and
commercial training programs. Certain public and private colleges may offer
programs similar to those of the Learning Centers at a lower tuition cost due in
part to government subsidies, foundation grants, tax-deductible contributions or
other financial resources not available to proprietary institutions.
DEPENDENCE ON NEW PROGRAMS; RISKS ASSOCIATED WITH CHANGES IN TECHNOLOGY AND
GROWTH
The market for the Company's programs and services is characterized by
rapidly-changing requirements and characteristics, and the Company's ability to
develop and offer new programs and services and to open new locations is subject
to extensive state and federal regulation and accrediting agency requirements.
If the Company is unable, for financial, regulatory or other reasons, to develop
and offer new programs and services in a timely manner in response to changes in
the industry, or if programs and services offered by the Company fail to gain or
maintain widespread commercial acceptance, the Company's business may be
materially and adversely affected.
The Company offers training programs and services for rapidly-changing
information technology. The introduction of information products embodying new
technologies and the emergence of new information system standards or services
may adversely affect the Company's ability to market its programs and services.
This may require the Company to make substantial expenditures to develop new
programs and services and to acquire new faculty, equipment and facilities. If
the Company is unable, for financial, regulatory or other reasons, to make those
expenditures or acquisitions, the Company's business may be materially and
adversely affected.
The Company's ability to meet its future operating and financial goals will
depend upon the Company's ability to successfully implement its growth strategy,
which will include the introduction of new locations as well as the potential
acquisition of assets and programs complementary to the Company's operations.
The Company's success in this area will depend on its ability to successfully
integrate such new locations, assets and businesses. There can be no assurance
that the Company will be able to effectively implement or manage expansion, and
any failure to manage growth effectively or any delays in expansion would have a
material adverse effect on the Company's business and results of operations.
DEPENDENCE UPON KEY EMPLOYEES
The Company's success depends to a significant extent upon the continued
service of its executive officers and other key personnel. None of the
Company's executive officers or key employees is subject to an employment or
non-competition agreement. The loss of the services of any of its executive
officers or other key employees could have a material adverse effect on the
Company. The Company's future success will depend in part upon its continuing
ability to attract and retain highly qualified personnel. There can be no
assurance that the Company will be successful in attracting and retaining
such personnel.
GENERAL
Because of these and other factors, past financial performance should not
be considered an indicator of future performance. Investors should not use
historical trends to anticipate future results and should be aware that the
trading price of the Company's Common Stock may be subject to wide fluctuations
in response to quarter-to-quarter variations in operating results, general
conditions in the education and training industry, changes in earnings estimates
and recommendations by analysts or other events.
12
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PART II -- OTHER INFORMATION
ITEM 1. Legal Proceedings.
Not applicable.
ITEM 2. Changes in Securities.
Not applicable.
ITEM 3. Defaults Upon Senior Securities.
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders.
The Company's 1996 Annual Meeting of Stockholders was on July 11,
1996. In attendance, in person or by proxy were 3,087,116 shares, or,
approximately 71% of total shares outstanding. The following actions were
taken:
1. Election of two Class I Directors to serve until the 1999 Annual Meeting of
Stockholders. The two nominees, Reid R. Bechtle and Harry H. Gaines were
re-elected by the following vote:
NOMINEE FOR AGAINST NON-VOTE
------- --- ------- --------
Mr. Bechtle 3,086,616 500 0
Mr. Gaines 3,086,616 500 0
2. Amendment to the Company's 1995 Stock Incentive Plan ("the Plan")
increasing from 86,820 to 486,820 the aggregate number of shares of Common Stock
authorized for issuance under the Plan. The amendment to the Plan was approved
by the following vote:
FOR AGAINST NON-VOTE
--------- ------- --------
2,055,441 67,400 964,275
3. Appointment of Auditors. The Board's reappointment of Price Waterhouse LLP
as the Company's independent accountants for the current fiscal year was
ratified as follows:
FOR AGAINST NON-VOTE
--------- ------- --------
3,086,616 500 0
ITEM 5. Other Information.
Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
A list of exhibits required to be filed as part of this
report is set forth in the Index to Exhibits, which
immediately precedes such exhibits and is incorporated
herein by reference.
(b) Reports on Form 8-K
None.
13
<PAGE>
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.
COMPUTER LEARNING CENTERS, INC.
BY:
--------------------------------------
CHARLES L. COSGROVE
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER (PRINCIPAL FINANCIAL OFFICER)
Date: September 3, 1996
14
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
FILING DESCRIPTION PAGE NO. IN THIS FILING
----------- --------------------------------- -------------------------
<S> <C> <C>
3.1 Second Amended and Restated Incorporated by reference
Certificate of Incorporation of to Exhibit 3.3 of the
the Registrant. Registrant's Report on
Form 10-Q filed July 14,
1995 (the "Form 10-Q")
3.2 Amended and Restated Bylaws of Incorporated by reference
the Registrant. to Exhibit 3.4 of the
Registrant's Form S-1
Registration Statement as
amended, filed March 29,
1995 (No. 33-90716) (the
"Form S-1")
4.1 Form of Certificate for Shares Incorporated by reference
of the Registrant's Common to Exhibit 4.1 of the Stock.
Form S-1
10.1 Office Space Lease, dated April 1, Page 16
1996 and executed May 1, 1996
by and between 312 Marshal
Avenue Limited Partnership and
the Registrant
10.2 Employment Agreement, dated June 6, Page 110
1996 between Harry H. Gaines and
the Registrant
11.1 Computation of Earnings Per Share Page 115
27 Financial Data Schedule Page 117
</TABLE>
15
<PAGE>
Exhibit 10.1
------------------
LEASE AGREEMENT
By and Between
312 MARSHALL AVENUE LIMITED PARTNERSHIP,
as Landlord
and
COMPUTER LEARNING CENTERS, INC.
as Tenant
Dated: April 1, 1996
[TEMPORARY SPACE]
16
<PAGE>
TABLE OF CONTENTS
LEASE AGREEMENT
EXHIBIT A -- Plan Showing Premises
EXHIBIT B -- Schedule of Improvements
EXHIBIT C -- [Intentionally Omitted]
EXHIBIT D -- Rules and Regulations
EXHIBIT E -- Holidays
EXHIBIT F -- Site Plan
EXHIBIT G -- Tenant's Sign Plans
EXHIBIT H -- Janitorial Specifications
EXHIBIT I-1 -- Non-Disturbance Agreement (Lender)
EXHIBIT I-2 -- Non-Disturbance Agreement (Groundlessor)
EXHIBIT J -- Prime Lease
17
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is dated as of the 1st day of
April, 1996, by and between 312 MARSHALL AVENUE LIMITED PARTNERSHIP, a
Maryland limited partnership ("Landlord"), and COMPUTER LEARNING CENTERS, a
Virginia corporation ("Tenant").
RECITALS
A. Landlord is the owner of the office building (the "Building")
located at 312 Marshall Avenue, Laurel, Maryland and owns a leasehold
interest in the land upon which it is situated (the "Land").
B. Tenant desires to lease space in the Building, and Landlord is
willing to rent space in the Building to Tenant upon the terms, conditions,
covenants and agreements set forth herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby covenant and agree as set forth below.
ARTICLE I
PREMISES
1.1 Landlord hereby leases to Tenant and Tenant hereby rents from
Landlord, for the term and upon the terms, conditions, covenants and
agreements herein provided, approximately 1,848 square feet of rentable area,
located on the first floor of the Building (the "Premises"). The rentable
square feet of the Premises shall be determined in accordance with WDCAR
standards. The rentable square feet of the Premises includes a core factor
reflecting Tenant's use of the common areas. The Premises is outlined on
Exhibit A attached hereto and made a part hereof.
1.2 The lease of the Premises includes the right, together with
other tenants of the Building and members of the public and subject to the
Rules and Regulations attached hereto as Exhibit D, to use the common and
public areas of the Building, but includes no other rights not specifically
set forth herein.
1.3 Landlord agrees to provide Tenant with the non-exclusive use
of (10) parking spaces per 1,000 square feet of leased space throughout the
initial term and with the same ratio for all expansions and renewals. Said
parking shall be at no cost to Tenant and will be made available in the areas
marked on the site plan attached hereto as Exhibit F. Between the hours of
7:00 AM and 6:00 PM, Monday through Friday, Tenant will park no more then
three (3) cars per 1000 square feet of leased space in the lots marked "A"
and "B" and the balance of their cars in the lot marked "C" on the site plan
attached hereto as Exhibit F. The parties acknowledge that certain of the
parking rights granted to Tenant hereunder pertain to certain property
adjacent to the Building and the Land owned by Landlord or an affiliate of
Landlord. Landlord represents and warrants that (i) it has the authority to
grant such parking rights to Tenant pursuant to the terms of that certain
Construction, Operating and Reciprocal Easement Agreement dated April 5, 1963
recorded at Liber 2851, folio 314 among the land records of Prince George's
County, Maryland (the "Land Records"), as amended by that certain First
Supplement dated June 19, 1964 recorded among the Land Records at Liber 2992,
folio 619, that certain Second Supplement dated November 15, 1965 recorded
among the Land Records at Liber 3276, folio 157 and that certain Third
Supplement dated October 22, 1966 recorded among the Land Records at Liber
3435, folio 517 (as so amended, the "Cross-Easement Agreement"), (ii) that it
shall provide to Tenant a true and correct copy of the Cross-Easement
Agreement prior to execution hereof, and (iii) that it shall not terminate or
modify the Cross-Easement Agreement in any manner which might impair Tenant's
parking rights hereunder. Tenant will devise a plan to be approved by the
Landlord for enforcement of the parking restrictions set forth in this
paragraph. Tenant further agrees to use reasonable efforts to enforce these
parking restrictions.
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<PAGE>
ARTICLE II
TERM
2.1 The term of this Lease (the "Lease Term") shall commence on
April 1, 1996 (the "Lease Commencement Date") and shall continue for a period
of five (5) consecutive years thereafter, unless the Lease Term is terminated
earlier in accordance with the provisions of this Lease.
2.2 For purposes of this Lease, the term "Lease Year" shall mean a
period of twelve (12) consecutive months, commencing on the Lease
Commencement Date, and each successive twelve (12) month period thereafter;
except that if the Lease Commencement Date is a day other than the first day
of a month, then the first Lease Year shall commence on the Lease
Commencement Date and shall continue for the balance of the month in which
the Lease Commencement Date occurs and for a period of twelve (12) calendar
months thereafter.
2.3 Tenant shall have the option to cancel this Lease at the end
of any Lease Year, without penalty, provided that (a) Tenant is not then in
default hereunder beyond any notice and cure periods and (b) Tenant provides
written notice of its exercise of such cancellation right no later than nine
(9) months prior to the termination date.
ARTICLE III
BASE RENT
3.1 (a) During the Lease Term, Tenant shall pay to Landlord, as
annual base rent for the Premises in equal monthly installments, in advance,
on the first day of each calendar month during the Term, the amounts set
forth below:
Year Rental Rate Amount
1 $15.00 $2,310.00
2 $13.00 $2,002.00
3 $13.39 $2,062.06
4 $13.79 $2,123.66
5 $14.21 $2,188.34
(b) Concurrently with the execution of this Lease, Tenant
shall pay to Landlord an amount equal to one (1) monthly installment of the
annual base rent payable during the first (1st) Lease Year, which amount
shall be credited by Landlord toward the monthly installment of annual base
rent payable for the first full calendar month falling within the Lease Term.
This amount shall be a non-refundable payment to Landlord in the event
Tenant does not occupy the Premises pursuant to this Lease. If the Lease
Commencement Date is a day other than the first day of a month, then annual
base rent from the Lease Commencement Date until the first day of the
following month shall be prorated on a per diem basis at the rate of
one-thirtieth (1/30th) of the monthly installment of annual base rent payable
during the first Lease Year, and Tenant shall pay such prorated installment
of annual base rent in advance on the Lease Commencement Date.
3.2 All sums payable by Tenant under this Lease, whether or not
stated to be annual base rent or additional rent, shall be paid to Landlord
in legal tender of the United States, without notice, setoff, deduction or
demand, except as specifically provided for herein, at the address to which
notices to Landlord are to be given or to such other party or to such other
address as Landlord may designate from time to time by written notice to
Tenant. If Landlord shall at any time accept rent after it shall have become
due and payable, such
19
<PAGE>
acceptance shall not excuse a delay upon subsequent occasions, or constitute
or be construed as a waiver of any of Landlord's rights hereunder.
ARTICLE IV
INCREASES IN OPERATING CHARGES
4.1 Operating Charges.
(a) As additional rent for the Premises, Tenant shall pay to
Landlord Tenant's proportionate share of the amount by which the Operating
Charges (as hereinafter defined) incurred by Landlord in the operation of the
Building (which term, for the purposes of this Article IV, shall include the
Land) during each calendar year falling entirely or partly within the Lease
Term exceed the Operating Charges incurred by Landlord in the operation of
the Building during the 1996 calendar year (the "Operating Charges Base
Amount"). For purposes of determining Operating Charges Base Amount, the
following provisions shall apply: (i) to the extent any landscaping,
maintenance and/or repair work is covered by any guarantees or warranties,
the Operating Charges for each of such items shall be the costs incurred on
account thereof during the first full year after such guarantees or
warranties have expired; (ii) in the event any maintenance or repair work is
deferred during the 1996 calendar year, Operating Costs shall be increased by
the costs which Landlord would have incurred in performing such deferred
obligations; (iii) to the extent the Lease Commencement Date occurs after
June 1, 1996, then the base year shall be the 1997 calendar year; and (iv)
Real Estate Taxes included in the Operating Charges Base Amount shall be
calculated based upon the Real Estate Taxes for the first full tax year that
reflect the occupancy of the Building by Tenant and BG&E and the improvements
made to the Building to accommodate Tenant and BG&E. For purposes of this
Section, Tenant's proportionate share of increases in Operating Charges shall
be that percentage which is equal to a fraction, the numerator of which is
the number of square feet of rentable area in the Premises, and the
denominator of which is the total rentable area of the Building.
(b) The Operating Charges shall mean the sum of the costs and
expenses reasonably incurred by Landlord in the course of operating,
managing, insuring, servicing, repairing, maintaining, and protecting the
Building (including, but not limited to, a fair market management fee equal
to five percent (5%) of the gross income from the Building), and Real Estate
Taxes as defined in Section 4.1(c). All Operating Charges shall be
determined according to generally accepted accounting principles which shall
be consistently applied. Anything contained herein to the contrary
notwithstanding, "Operating Charges" shall not include: (i) expenses for
which Landlord is reimbursed (either by an insurer, condemnor, tenant,
warrantor or otherwise) to the extent of funds received by Landlord; (ii)
expenses incurred in leasing or procuring tenants (including lease
commissions, advertising expenses and expenses of renovating space for
tenants); (iii) interest or amortization payments on any mortgages or deeds
of trust; (iv) net basic rents under ground leases; (v) costs specially
billed to and paid by specific tenants; (vi) depreciation or capital
improvements costs with respect to the Building, the Land or any equipment,
machinery, fixtures or improvements therein, EXCEPT for amortization of the
cost of improvements or equipment which are capital in nature and which are
installed for the purpose of either reducing Operating Charges of the
Building, up to the amount saved as a result of the installation thereof in
any Lease Year, or (II) of complying with any laws, ordinances, rules and
regulations first taking effect after the Lease Commencement Date (and all of
such permitted capital costs shall be amortized on a straight-line basis over
the useful life of the capital investment items, such useful life being
deemed the longest period permissible by IRS regulations, with only the
annual amortized portion being included in Operating Charges for any Lease
Year); (vii) rental or similar payments made in connection with the leasing
of any equipment which is considered capital in nature; (viii) compensation
paid to officers of Landlord or officers of the management agent who do not
perform property management related activities; (ix) the cost of tools,
equipment and material used in the initial construction of the Building; (x)
costs directly resulting from the gross negligence or willful misconduct of
Landlord, its employees, agents, contractors or employees; (xi) costs for any
structural maintenance, replacement or redesign; (xii) legal fees and other
expenses incurred by Landlord or agents in connection with negotiations or
disputes with tenants or prospective tenants for the Building; (xiii)
expenses for the correction of defects in Landlord's construction of the
Building and/or in its construction of the Improvements; (xiv) allowances,
concessions, permits,
20
<PAGE>
licenses, inspections, and other costs and expenses incurred in the initial
build-out of space for tenants (including Tenant), or any cash or other
consideration paid by Landlord on account of, with respect to, or in lieu of
the initial build-out described above; (xv) Landlord's costs of any services
sold or provided to tenants for which Landlord is otherwise reimbursed by
Tenant under this Lease or any other tenant: (xvi) expenses in connection
with services or other benefits of a type which are not made available to
Tenant but which are provided to another tenant or occupant, if any; (xvii)
costs incurred due to violation by Landlord or any tenant (other than Tenant)
of the terms and conditions of any lease; (xviii) renovation of the Building
made necessary by casualty or the exercise of eminent domain; (xix) any
compensation paid to clerks, attendants or other persons in commercial
concessions operated for profit by Landlord; (xx) increased insurance
premiums caused by Landlord's or any tenant's (other than Tenant's) hazardous
acts; (xxi) costs arising from the presence of hazardous materials in, about
or below the Building or the Land; (xxii) costs incurred for any items to the
extent of Landlord's recovery under a manufacturer's, materialmen's, vendor's
or contractor's warranty; (xxiii) costs of acquisition of sculpture,
paintings or other objects of art; (xxiv) reserves for repairs, maintenance
and replacements; (xxv) costs of repairs incurred by reason of condemnation,
to the extent Landlord receives compensation therefor through condemnation or
similar awards; (xxvi) costs relating to maintaining Landlord's existence,
either as a corporation, partnership, trust or other entity; (xxv)
Landlord's general overhead expenses; (xxvi) costs incurred to achieve
compliance with any governmental laws, ordinances, rules, regulations or
orders enacted prior to the date hereof; (xxvii) any penalties or interest
expenses incurred because of Landlord's failure timely to pay any Operating
Charges or Taxes; (xxviii) costs of any repairs or improvements to the
Building resulting from a fire or other casualty, to the extent such repairs
would be covered by the insurance which Landlord is required to procure
hereunder and Landlord fails to procure the same; (xxix) accounting fees
other than those attributable to reviewing and preparing operating statements
for the Building; and (xxx) because the Premises has or will be separately
metered for electricity and HVAC usage, and that Tenant will be paying all
bills for electricity consumed within the Premises directly to the local
utility provider, Operating Charges shall also exclude electric, HVAC and
related costs for leased space in the Building (but the reasonable cost of
providing electrical and HVAC service to the Common Areas, as reasonably
demonstrated by Landlord, shall constitute an Operating Charge). There shall
be no duplication of costs or reimbursement. Landlord shall use reasonable
efforts to minimize Operating Charges for the Building.
(c) Real Estate Taxes shall mean (i) all real estate taxes,
including general and special assessments, if any, which are imposed upon
Landlord or assessed against the Building and/or the Land, (ii) any other
present or future taxes or governmental charges that are imposed upon
Landlord or assessed against the Building and/or the Land which are in the
nature of or in substitution for real estate taxes, including any tax levied
on or measured by the rents payable by tenants of the Building, and (iii)
expenses (including reasonable attorneys' fees) incurred in reviewing,
protesting or seeking a reduction of real estate taxes. There shall be
excluded from such taxes all income taxes; provided, however, that if at any
time during the Lease Term the present system of ad valorem taxation of real
property shall be changed so that in lieu of the whole or any part of the ad
valorem tax on real property, there shall be assessed on Landlord a tax in
lieu thereof, including, without limitation, a capital levy or a tax on the
gross rents received with respect to the Building or Land, or a federal,
state, county, municipal, or other local income or similar tax, assessment,
levy or charge (distinct from any now in effect in the jurisdiction in which
the Land is located) measured by or based, in whole or in part, upon any such
gross rents, then any and all of such taxes, assessments, levies or charges,
to the extent so measured or based, shall be deemed to be included within the
term Real Estate Taxes, but only to the extent that the same would be payable
if the Building or Land were the only property of Landlord, or otherwise
properly allocable to the Land. Landlord covenants to pay all Operating
Charges and real property taxes before the same become delinquent. No
penalty or interest because of the failure to timely pay any tax shall be
included as Real Estate Taxes. In no event shall Real Estate Taxes include
any increases attributable to any enlargement, expansion or substantial
renovation of the Building or any part thereof. At Tenant's request,
Landlord shall contest any assessed valuation of the Building or Land or the
amount of any Real Estate Taxes with counsel reasonably acceptable to Tenant;
provided that Landlord may elect not to so appeal the assessed value of the
Land or Building or the amount of any Real Estate Taxes, in which event
Tenant shall be entitled to appeal the same on Landlord's behalf (and Tenant
shall be entitled to recover the cost it incurs in prosecuting any such
appeal before any savings generated thereby is passed on to the tenants of
the Building). Landlord and its affiliated entities (including Berman
Enterprises Limited Partnership) agree to execute such documents as Tenant may
21
<PAGE>
request in order to enable Tenant to appeal any Real Estate Tax bill or
assessment of the Land and/or Building. Reductions in real estate taxes
shall reduce the Operating Charges for the applicable Lease Year(s).
Landlord's obligation to refund amounts to Tenant on account of any refund of
Real Estate Taxes received after the Lease Term has expired, but attributable
to periods within the Lease Term, shall survive the expiration or earlier
termination of this Lease.
4.2 If the average occupancy rate for the entire Building during
any calendar year is less than ninety-five percent (95%), or if Landlord is
not furnishing to any particular tenant or tenants in the Building any
services or utilities customarily furnished by Landlord to all tenants in the
Building, then the Operating Charges for such calendar year which vary with
occupancy levels (such as janitorial charges) shall be deemed to include all
additional costs and expenses, as reasonably estimated by Landlord, which
would have been incurred during such calendar year if such average occupancy
rate had been ninety-five percent (95%) and if Landlord had in fact furnished
to all tenants all services and utilities customarily furnished by Landlord
to tenants in the Building. Further, the parties agree that, in all events,
Operating Charges for the 1996 calendar year shall be grossed-up to reflect
costs which would have been incurred had the Building been one hundred
percent (100%) leased at all times during such period.
4.3 Following the expiration of the first Lease Year, Tenant shall
make estimated monthly payments to Landlord on account of increases in charges
described in Section 4.1 that are expected to be incurred during each calendar
year, as reasonably estimated by Landlord. Within approximately ninety (90)
days after the expiration of each calendar year, Landlord shall submit to
Tenant an itemized statement ("Year-End Statement") of Operating Charges for
such calendar year, showing Tenant's proportionate share of the amounts by
which the costs and expenses actually incurred during the preceding calendar
year exceeded the Operating Charges Base Amount. The Year-End Statement
shall (i) include copies of all Real Estate Tax bills, (ii) include a itemized
break-down of Operating Charges (including those applicable to the 1996
calendar year and those incurred on account of "controllable" expenses), and
(iii) be certified as true and correct by an officer of Landlord. If such
statement indicates that the aggregate amount of Tenant's estimated payments,
if any, exceeds Tenant's actual liability, Tenant shall deduct the net
overpayment from its next payment or payments of annual base rent, except
that in the last Lease Year Landlord shall promptly remit such overpayment to
Tenant. If such statement indicates that Tenant's actual liability exceeds
the estimated payments, if any, made by Tenant, then Tenant shall pay to
Landlord, within fifteen (15) days of the date of Landlord's statement, the
amount of such excess as additional rent due hereunder.
4.4 In the event the Lease Term expires on a day other than the
first day or the last day of a calendar year, the increases in the charges
described in Section 4.1 to be paid by Tenant for such calendar year shall be
a pro rata portion of Tenant's proportionate share thereof for the full
calendar year.
4.5 Landlord will respond to any request for information
concerning any Operating Charge statement within thirty (30) days of Tenant's
written request. Landlord agrees to retain the books and records
substantiating Operating Charges incurred in each Lease Year at Landlord's
address for notice for a period of at least three (3) years from the date
Landlord submits its annual statement of actual Operating Charges to Tenant.
Tenant shall have the right, during business hours and upon reasonable prior
notice, to inspect Landlord's books and records relating to Operating Charges
and/or to have such books and records audited at Tenant's expense by a
certified public accountant or other party designated by Tenant; provided,
however, that if any audit that discloses a discrepancy of more than six
percent (6%) in the amount of Tenant's proportionate share of Operating
Charges for any Lease Year, the cost of the audit shall be paid for by
Landlord. Upon final resolution of the matter, any discrepancy shall be
promptly corrected by a payment of any shortfall or overpayment to the
appropriate party within thirty (30) days after the audit.
4.6 Anything contained herein to the contrary notwithstanding, in
no event shall Tenant's proportionate share of "controllable" Operating
Charges increase by more than five percent (5%) in any calendar year. For
purposes hereof, "controllable" Operating Charges shall mean all Operating
Charges other than Real Estate Taxes, utility charges, insurance premiums and
snow removal charges. Further, for purposes of the foregoing calculations,
increases in the "repair and maintenance" line item of Operating Charges
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(excluding capital repairs) (i) shall be subject to a cap of eight and one
half percent (8.5%) during the second (2nd) Lease Year, (ii) shall be subject
to a cap of six and one-half percent (6.5%) during the third (3rd) Lease
Year, and (iii) shall thereafter be subject to a five percent (5%) cap
calculated on a cumulative, compounding basis, separate and apart from other
Operating Charges.
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
USE OF PREMISES
6.1 Tenant shall use and occupy the Premises solely for the
operation of a technical school with related uses, including training,
storage and general office uses (the "Permitted Uses"), and for no other use
or purpose without the prior written consent of Landlord, which consent shall
not be unreasonably withheld. Tenant shall not use or occupy the Premises
for any unlawful purpose or in any manner that will constitute waste,
nuisance or unreasonable annoyance to Landlord or other tenants of the
Building. Tenant shall comply with all present and future laws, ordinances
(including zoning ordinances and land use requirements), regulations, and
orders of the United States of America, the State of Maryland, and any other
public or quasi-public authority having jurisdiction over the Premises,
concerning Tenant's use and occupancy of the Premises and all machinery,
equipment and furnishings therein. It is expressly understood that if any
present or future law, ordinance, regulation or order requires an occupancy
or use permit for the Premises, Tenant shall obtain such permit at Tenant's
own expense and shall promptly deliver a copy thereof to Landlord. Use of
the Premises is subject to all covenants, conditions and restrictions of
record.
6.2 Tenant shall pay any business, rent or other taxes that are
now or hereafter levied upon Tenant's specific use or occupancy of the
Premises, the conduct of Tenant's business at the Premises, or Tenant's
equipment or other personal property. In the event that any such taxes are
enacted, changed or altered so that any of such taxes are levied against
Landlord, or the mode of collection of such taxes is changed so that Landlord
is responsible for collection or payment of such taxes, Tenant shall pay any
and all such taxes to Landlord upon written demand from Landlord.
6.3 Tenant shall not use or allow the Premises to be used for the
Release, storage, use, treatment, disposal or other handling of any Hazardous
Substance, without the prior consent of Landlord. The term "Release" shall
have the same meaning as is ascribed to it in the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended, ("CERCLA"). The term "Hazardous Substance" means (i) any substance
defined as a "hazardous substance" under CERCLA, (ii) petroleum, petroleum
products, natural gas, natural gas liquids, liquefied natural gas, and
synthetic gas, and (iii) any other substance or material deemed to be
hazardous or toxic under any federal, state or local law, code, ordinance or
regulation. Nothing herein shall prohibit the transportation to and from,
and the use, storage, maintenance and handling within, the Premises of
cleaning and copying fluids and other similar substances customarily used in
commercial offices, provided: (a) such substances shall be used and
maintained only in such quantities as are reasonably necessary for such
permitted uses and strictly in accordance with applicable laws and the
manufacturers' instructions therefor; (b) if any applicable laws require that
any such substances be disposed of separately from ordinary trash, Tenant
shall make arrangements at Tenant's expense
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for such disposal directly with a qualified and licensed disposal company at
a lawful disposal site; and (c) any remaining such substances shall be
completely, properly and lawfully removed from the Building and Land by
Tenant, at its sole expense, upon expiration or earlier termination of this
Lease. Tenant shall: (a) comply with all federal, state, and local laws,
codes, ordinances, regulations, permits and licensing conditions governing
the Release, discharge, emission, or disposal of any Hazardous Substance and
prescribing methods for or other limitations on storing, handling, or
otherwise managing Hazardous Substances, (b) at its own expense, promptly
contain and remediate any Release of Hazardous Substances arising from or
related to Tenant's activities in the Premises, the Building, the Land or the
environment and remediate and pay for any resultant damage to property,
persons, and/or the environment, (c) give prompt notice to Landlord, and all
appropriate regulatory authorities, of any Release of any Hazardous Substance
in the Premises, the Building, the Land or the environment arising from or
related to Tenant's activities, which Release is not made pursuant to and in
conformance with the terms of any permit or license duly issued by
appropriate governmental authorities, (d) following any Release, at
Landlord's request, retain an independent engineer or other qualified
consultant or expert acceptable to Landlord, to conduct, at Tenant's expense,
an environmental audit of the Premises and immediate surrounding areas, (e)
reimburse Landlord, upon demand, the reasonable cost of any testing for the
purpose of ascertaining if there has been any Release of Hazardous Substances
in the Premises, if such testing is required by any governmental agency or
Landlord's Mortgagee, (f) upon expiration or termination of this Lease,
surrender the Premises to Landlord free from the presence and contamination
of any Hazardous Substance. Landlord represents and warrants that, to the
best of its knowledge, as of the date hereof the Premises, Building and Land
are free from Hazardous Substances and comply with all applicable laws,
ordinances, rules and regulations pertaining to the same. Landlord shall
indemnify, defend and hold Tenant harmless from any loss or damage Tenant may
suffer in the event the representation set forth in the immediately preceding
sentence is untrue, or in the event any Hazardous Substances are released in
the Building or Land as a result of the negligence or willful misconduct of
Landlord or its agents or employees.
6.4 As long as Tenant is not in default hereunder beyond any
applicable notice and cure periods, Landlord covenants and agrees that Tenant
shall have the exclusive right to conduct computer training and technical
school/classroom operations from the Building, and Landlord shall not lease
any space in the Building to any party that will engage in any such
activities in a manner which is directly competitive with Tenant.
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ARTICLE VII
ASSIGNMENT AND SUBLETTING
7.1 Tenant shall not mortgage or otherwise encumber this Lease or
all or any of Tenant's rights hereunder without obtaining the prior written
consent of Landlord, which consent may be withheld in Landlord's sole and
absolute discretion. Similarly, Tenant shall not assign its rights under
this Lease, or sublet all or any portion of the Premises, without Landlord's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed. Tenant may sublease or assign any portion of the
leased premises to any related entity or affiliate of Tenant, including any
entity created on account of a sale, merger, consolidation or other business
combination (a "Permitted Transfer") without the Landlord's approval. The
consent by Landlord to any assignment, subletting or occupancy shall not be
construed as a waiver or release of Tenant from liability for the performance
of any covenant or obligation to be performed by Tenant under this Lease, nor
shall the collection or acceptance of rent from any assignee, subtenant or
occupant constitute a waiver or release of Tenant from any of its liabilities
or obligations under this Lease. Landlord's consent to any assignment,
subletting or occupancy shall not be construed as relieving Tenant or any
assignee, subtenant or occupant from the obligation of obtaining Landlord's
prior written consent to any subsequent assignment, or occupancy. For any
period during which Tenant is in default hereunder, Tenant hereby assigns to
Landlord the rent due from any assignee, subtenant or occupant of Tenant and
hereby authorizes each such assignee, subtenant or occupant to pay said rent
directly to Landlord. If the rental paid to Tenant on any subletting,
assignment or occupancy exceeds the rental payable by Tenant to Landlord
hereunder (and if the subleased space does not constitute the entire
Premises, the existence of such excess shall be determined on a pro rata
basis), all such excess shall be split 50/50 with the Landlord and Tenant.
The foregoing calculation shall be made only on any "net profits" realized by
Tenant in connection with any assignment or subletting. In connection
therewith, any excess payments realized by Tenant shall be offset by any
brokerage fees, space fees, or advertising fees, any improvements paid for or
allowances or other concessions provided by Tenant to or for the subtenant or
assignee, and any other third-party costs actually incurred by Tenant in
connection with any subletting or assignment, as well as rental attributable
to any period that any space to be sublet or assigned is vacant or under
construction. Further, in the case of an assignment, net profits shall
include only the consideration paid for the right to assume this Lease, and
not any amounts on account of the value of Tenant's business, inventory,
good will, equipment, customer lists or other assets.
7.2 If Tenant is a partnership, any dissolution of Tenant or
withdrawal or change, whether voluntary, involuntary or by operation of law,
of any general or limited partner or partners of Tenant shall be deemed a
voluntary assignment of this Lease and subject to the provisions of Section
7.1. If Tenant is a corporation, any dissolution, merger, consolidation or
other reorganization of Tenant, or the sale or transfer of any stock or any
interest in the capital stock of Tenant, voluntarily, involuntarily or by
operation of law, shall be deemed a voluntary assignment of this Lease and
subject to the provisions of Section 7.1 (but the foregoing shall not
preclude Tenant from engaging in a Permitted Transfer).
7.3 If, at any time during the Lease Term, Tenant desires to
transfer, assign or sublet all or part of the Premises to a party other than
a Permitted Transferee, Tenant shall give notice to Landlord in writing
("Tenant's Request Notice") of the identity of the proposed assignee or
subtenant and its business, the terms of the proposed assignment or
subletting, the commencement date of the proposed assignment or subletting
(the "Proposed Sublease Commencement Date"), and the area proposed to be
assigned or sublet (the "Proposed Sublet Space"). Tenant shall also transmit
therewith the most recent financial statement or other evidence of financial
responsibility of such assignee or subtenant and a certification executed by
Tenant and such proposed assignee or subtenant stating whether or not any
premium or other consideration is being paid for the proposed assignment or
sublease. Landlord shall notify Tenant in writing of its decision to approve
or reject any request by Tenant to assign or sublet (providing Tenant with
the reasonable basis for any such denial) within ten (10) business days of
the date of the request, failing which such request shall be deemed approved.
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7.4 Tenant agrees to pay to Landlord as additional rent hereunder
the reasonable attorneys' fees incurred by Landlord in connection with any
request by Tenant for Landlord to give its consent to any assignment,
transfer, mortgage, encumbrance, or subletting by Tenant. Any sublease,
assignment or other transfer shall, at Landlord's option, be effected on
forms reasonably approved by Landlord.
7.5 Without limiting the other instances in which it may be
reasonable for Landlord to withhold its consent to an assignment or
subletting, Landlord and Tenant acknowledge that it will be reasonable for
Landlord to withhold its consent in any of the following instances: (i) the
proposed assignee or subtenant is not reasonably creditworthy; (ii) the
character or reputation, of the proposed subtenant or assignee is
inconsistent with the quality of other tenancies in the Building; (iii)
Landlord has received from any prior lessor to the proposed assignee or
subtenant a negative report concerning such prior lessor's experience with
the proposed assignee or subtenant; (iv) Landlord has experienced previous
defaults by or is in litigation with the proposed assignee or subtenant; (v)
the proposed assignment or sublease will create a vacancy elsewhere in the
Building; or (vi) at the time such request is made, Tenant is in default of
any obligation under this Lease beyond any applicable notice and cure period.
ARTICLE VIII
MAINTENANCE AND REPAIRS
8.1 Tenant shall keep and maintain the interior, non-structural
portions of the Premises and all fixtures and equipment located therein in
clean, safe and sanitary condition, shall take good care thereof and make all
required repairs thereto, shall suffer no waste or injury thereto, and shall,
at the expiration or other termination of the Lease Term, surrender the
Premises in the same order and condition in which they were on the Lease
Commencement Date, ordinary wear and tear and unavoidable damage by the
elements excepted. The foregoing notwithstanding, Landlord shall perform all
maintenance and make all repairs and replacements to the Project which are
necessary to maintain in good order and repair the base building structure
and systems, including the exterior walls, load bearing elements,
foundations, pipes, conduits, roof and Common Areas, sprinkler system and
other life/safety systems, and the mechanical, electrical, HVAC and plumbing
systems. All repairs and maintenance required of Landlord pursuant to this
Section or elsewhere in this Lease shall be performed in accordance with
standards applicable to comparable office buildings in the Laurel, Maryland
area, and performed in a timely and diligent fashion. Landlord represents
and warrants that the base building systems serving the Premises (i.e., HVAC
units, ductwork, VAV boxes, sprinkler systems, etc.) are in good condition
and working order and comply with all applicable laws.
8.2 Except as otherwise provided in Article XVII hereof, all
injury, breakage and damage to the Premises caused by any act or omission of
Tenant, or of any agent, employee, subtenant, assignee, contractor, client,
guest, family member, licensee, customer or invitee of Tenant, shall be
repaired by and at the sole expense of Tenant.
ARTICLE IX
ALTERATIONS
9.1 The original improvement of the Premises shall be accomplished
by Landlord in accordance with the terms of Article XXIV below. It is
understood and agreed that Landlord is under no obligation to make any
initial structural or other alterations, decorations, additions or
improvements in or to the Premises except as provided in Article XXIV of this
Lease.
9.2 Tenant will not make or permit anyone to make any alterations,
additions, improvements or other changes (hereinafter referred to
collectively as "Alterations"), structural or otherwise, in or to the
Premises or the Building, without the prior written consent of Landlord.
Landlord's consent to nonstructural Alterations not visible from the exterior
of the Premises shall not be unreasonably withheld or delayed. The parties
acknowledge that cosmetic improvements and non-structural alterations which
do not affect building systems and which cost less than $10,000 in each
instance shall not constitute "Alterations" for purposes hereof and may be
made by Tenant at any time. When granting its consent, Landlord may impose
reasonable conditions, including, without limitation, the approval of plans
and
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specifications, approval of the contractor or other persons who will perform
the work, and the obtaining of specified insurance. All Alterations
permitted by Landlord pursuant to this Section 9.2 must conform to all laws,
regulations and requirements of federal, state and county governments, and
any other public or quasi-public authority having jurisdiction over the
Premises. Tenant agrees to obtain and deliver to Landlord, prior to the
completion of any Alterations, written, unconditional waivers of mechanics'
and materialmen's liens against the Premises, the Building and the Land from
all proposed contractors, subcontractors, laborers and material suppliers for
all work, labor and services to be performed and materials to be furnished in
connection with Alterations. If, notwithstanding the foregoing, any
mechanics' or materialmen's lien is filed against the Premises, any equipment
within the Premises, the Building and/or the Land, for work claimed to have
been done for, or materials claimed to have been furnished to, the Premises,
such lien shall be discharged by Tenant within twenty (20) days thereafter,
at Tenant's sole cost and expense, by the payment thereof or by the filing of
a bond acceptable to Landlord. If Tenant shall fail timely to discharge any
such mechanics' or materialmen's lien, Landlord may, at its option, discharge
such lien without inquiry into the validity thereof and treat the cost
thereof (including reasonable attorneys' fees incurred in connection
therewith) as additional rent due hereunder, it being expressly agreed that
such discharge by Landlord shall not be deemed to waive or release the
default of Tenant in not discharging such lien. It is understood and agreed
that any Alterations shall be conducted on behalf of Tenant and not on behalf
of Landlord. It is further understood and agreed that in the event Landlord
shall give its written consent to the making of any Alterations, such written
consent shall not be deemed to be an agreement or consent by Landlord to
subject its interest in the Premises, the Building or the Land to any
mechanics' or materialmen's liens which may be filed in connection therewith.
9.3 Tenant shall indemnify and hold Landlord harmless from and
against any all expenses, liens, claims, liabilities and damages (including,
without limitation, reasonable attorneys' fees) based on or arising, directly
or indirectly, by reason of the making of any Alterations. If any
Alterations are made without the prior written consent of Landlord, Landlord
shall have the right to remove and correct such Alterations and restore the
Premises and the Building to their condition immediately prior thereto, and
Tenant shall be liable for all expenses incurred by Landlord in connection
therewith. All Alterations to the Premises or the Building made by either
party shall immediately become the property of Landlord and shall remain upon
and be surrendered with the Premises as a part thereof at the end of the
Lease Term; provided, however, that if Tenant is not in default under this
Lease beyond any notice and cure period, then Tenant shall have the right to
remove, prior to the expiration or earlier termination of the Lease Term, all
movable or systems furniture, furnishings, fixtures, information or
telecommunications systems and equipment installed in the Premises solely at
the expense of Tenant, and except that Tenant shall be required to remove all
Alterations in the Premises or the Building which Landlord designates in
writing for removal at the time its consent to the installation thereof is
given to Tenant. All damage and injury to the Premises or the Building
caused by such removal shall be repaired by Landlord, at Tenant's sole
expense. If such property of Tenant is not removed by Tenant prior to the
expiration or earlier termination of this Lease, the same shall become the
property of Landlord and shall be surrendered with the Premises as a part
thereof; provided, however, that Landlord shall have the right to remove at
Tenant's expense such property and any Alteration which Landlord designates
in writing for removal.
ARTICLE X
SIGNS AND FURNISHINGS
10.1 No sign, advertisement or notice shall be inscribed, painted,
affixed or otherwise displayed on any part of the exterior or the interior of
the Building except on the directories and the doors of the offices and such
other areas as are designated by Landlord, and then only in such place,
number, size, color and style as are approved in writing by Landlord.
Landlord, at Landlord's expense, shall install building standard signage on
Tenant's suite entry door and on the directory board in the Building lobby.
All of Tenant's signs that are
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approved by Landlord shall be installed by Landlord at Tenant's cost and
expense. If any sign, advertisement or notice that has not been approved by
Landlord is exhibited or installed by Tenant, Landlord shall have the right
to remove the same at Tenant's expense.
10.2 Landlord shall have the right to prescribe the weight and
position of safes and other heavy equipment and fixtures contemplated in
Tenant's plans for the initial build-out of the Premises, which, if
considered necessary by Landlord, shall be installed in such manner as
Landlord directs in order to distribute their weight adequately. Subject to
the provisions of Section 13.5 below, any and all damage or injury to the
Premises or the Building caused by moving the property of Tenant into or out
of the Premises, or due to the same being in or upon the Premises, shall be
repaired (by Landlord or a contractor selected by Landlord) at the sole cost
of Tenant. No furniture, equipment or other bulky matter of any description
will be received into the Building or carried in the elevators except as
approved by Landlord, and all such furniture, equipment and other bulky
matter shall be delivered only through the designated delivery entrance of
the Building and the designated freight elevator. All moving of furniture,
equipment and other materials shall be under the direct control and
supervision of Landlord who shall not, however, be responsible for any damage
to or charges for moving the same. Tenant agrees to remove promptly from the
sidewalks adjacent to the Building any of Tenant's furniture, equipment or
other material there delivered or deposited.
ARTICLE XI
TENANT'S EQUIPMENT
11.1 Tenant shall not install any equipment of any type or nature
that will or may necessitate any changes, replacements or additions to the
water system, heating system, plumbing system, air-conditioning system or
electrical system of the Premises or the Building, without first obtaining
the prior written consent of Landlord, which consent may be withheld in
Landlord's sole and absolute discretion. Machines and equipment belonging to
Tenant which cause noise, vibration or odors that may be transmitted to the
structure of the Building or to any space therein to such a degree as to be
objectionable to Landlord or to any tenant in the Building shall be installed
and maintained by Tenant, at Tenant's expense, on vibration eliminators or
other devices sufficient to reduce such noise, vibration and odors to a level
satisfactory to Landlord.
ARTICLE XII
INSPECTION BY LANDLORD
12.1 Upon at least 24 hours prior notice, Tenant shall permit
Landlord, its agents, mortgagees and representatives, any federal, state,
county or municipal officer or representative, and prospective purchasers of
interests in the Building or Landlord, to enter the Premises, without charge
therefor and without diminution of the rent payable by Tenant, to examine,
inspect and protect the Premises and the Building, to make such alterations
and/or repairs as in the sole judgment of Landlord may be deemed necessary,
or to exhibit the same to prospective tenants during the last six (6) months
of the Lease Term. In connection with any such entry, Landlord shall
endeavor to minimize the disruption to Tenant's use of the Premises. During
the course of any alteration or repair by Landlord in the Premises, Landlord
may store within the Premises all necessary materials, tools, supplies and
equipment. Nothing in this Section shall be construed as imposing any
obligation on Landlord to make any alterations or repairs.
ARTICLE XIII
INSURANCE
13.1 Anything contained herein to the contrary notwithstanding,
Tenant shall not conduct or permit to be conducted any activity, or place any
equipment in or about the Premises or the Building, which will in any way
increase the rate of fire insurance or other insurance on the Building. If
any increase in the rate of fire insurance or other insurance is stated by
any insurance company or by the applicable insurance rating organization (or
other organization exercising similar functions in connection with the
prevention of fire or the correction of hazardous conditions) to be due to
any activity or equipment of Tenant in or about the Premises or the Building,
such
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statement shall be conclusive evidence that the increase in such rate is due
to such activity or equipment and, as a result thereof, Tenant shall be
liable for the amount of such increase, Tenant shall reimburse Landlord for
such amount and any such amount shall be considered additional rent
hereunder; in lieu of the foregoing, Tenant may cease such use and pay the
ratable cost of any premium increase until it ceases such use. For the
purposes of this Section, the term "Building" shall be deemed to include the
Land.
13.2 At all times after the Premises are released to Tenant for
construction of its improvements, Tenant shall, at Tenant's expense, obtain
and maintain the following insurance:
(a) public liability insurance in the amounts set forth below
naming Landlord and the holder of any Mortgage (as hereinafter defined in
Section 21.1) now or hereafter encumbering the Building or the Land as
additional insured thereunder; such insurance shall contain an endorsement
that said insurance shall remain in full force and effect notwithstanding
that the insured may have waived its right of action against any person prior
to the occurrence of a loss. No later than the Lease Commencement Date,
Tenant shall obtain public liability insurance in minimum amounts of one
million dollars ($1,000,000.00) for injury to one (1) person, three million
dollars ($3,000,000.00) for injury to more than one (1) person and six
hundred thousand dollars ($600,000.00) for damage to property;
(b) all-risk property insurance covering Tenant's furniture,
equipment, fittings, installations, fixtures, supplies and other personal
property in an amount equal to the full replacement value; and
(c) to the extent required by law, worker's compensation or
similar in form and amounts required by law.
13.3 The company or companies writing any insurance which Tenant is
required to carry and maintain pursuant to Section 13.2, as well as the form
of such insurance, shall at all times be subject to Landlord's reasonable
approval and any such company or companies shall be licensed to do business
in the State of Maryland. Public liability and all-risk casualty insurance
policies evidencing such insurance shall name Landlord and the holder of any
Mortgage (as defined in Section 21.1) as additional insured, shall be primary
and non-contributory, and shall also contain a provision by which the insurer
agrees that such policy shall not be canceled, materially changed or not
renewed without at least thirty (30) days advance notice to Landlord or any
Mortgagee. The insurance which Tenant is required to carry and maintain
pursuant to Section 13.2 shall contain commercially reasonable deductibles.
Each such policy, or a certificate thereof, shall be deposited with Landlord
by Tenant promptly upon commencement of Tenant's obligation to procure the
same and, if requested by Landlord, at least annually thereafter. If Tenant
shall fail to perform any of its obligations under Section 13.2 or 13.3, and
such failure is not cured within five (5) business days following Tenant
receipt of a notice of the same from Landlord, then Landlord may perform the
same and the cost of same shall be deemed additional rental and shall be
payable upon Landlord's demand.
13.4 Throughout the term of this Lease, Landlord shall maintain in
full force and effect (i) liability insurance in at least twice the amounts
set forth in Section 13.2(a) hereinabove and (ii) fire and extended coverage
insurance to the extent of at least ninety percent (90%) of the replacement
value of the Building, excluding footings and foundations. Landlord may, at
its election, obtain such coverages under an umbrella or blanket policy or
policies, covering the Building and other Buildings in which Landlord has an
interest or which are managed by Landlord's management company. Landlord's
insurance policies shall contain commercially reasonable deductibles.
13.5 In any case in which Tenant shall be obligated to pay to
Landlord any loss, cost, damage, liability or expense suffered or incurred by
Landlord, Landlord shall allow to Tenant as an offset against the amount
thereof the net proceeds of any insurance collected by Landlord for or on
account of such loss, cost, damage, liability or expense, or the net proceeds
which would have been collected if Landlord had procured the insurance
required of it hereunder, whether or not actually procured by Landlord. In
any case in which Landlord shall be obligated to pay to Tenant any loss,
cost, damage, liability or expense suffered or incurred by Tenant, Tenant
shall allow to Landlord
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as an offset against the amount thereof the net proceeds of any insurance
collected by Tenant for or on account of such loss, cost, damage, liability or
expense OR the maximum amount which would have been collectible had Tenant
procured the insurance policies required of it pursuant to this Lease, whether
or not actually procured by Tenant. Landlord and Tenant agree that each
insurance policy described above, or otherwise covering the Premises, the
Building, or personal property, fixtures and equipment located thereon and
therein, shall contain a clause or endorsement pursuant to which the insurance
companies waive subrogation and consent to a waiver of right of recovery.
Landlord and Tenant further agree that each will not make any claim against or
seek to recover from the other for any loss, cost, damage, liability, expense
or peril covered or required to be covered by such insurance.
ARTICLE XIV
SERVICES AND UTILITIES
14.1 Landlord shall furnish to the Premises conditioned water for
heat pumps, fresh air, and hot and cold water. Landlord shall provide
after-hours janitorial service, subject to the specifications attached hereto
as Exhibit H.) In addition, Landlord shall provide (i) zoned heating,
ventilation and air conditioning during the days and hours specified below
during the seasons of the year and within the temperature ranges usually
furnished in comparable office buildings in the Laurel, Maryland area, and,
in all events, but subject to the provisions of Paragraph 12 of the Work
Agreement, the HVAC system shall provide cooling sufficient for normal office
use (but Tenant shall be responsible to pay all bills for electrical service
directly to the provider of such service); (ii) balancing of the HVAC system
when necessary in an effort to provide reasonably uniform air temperatures
throughout the zones within the Premises; (iii) a directory listing for
Tenant, Tenant's employees and other Building tenants in the Building lobby
directory; (iv) replacement of light tubes and bulbs for Building standard
lighting fixtures; (v) restroom facilities and necessary lavatory supplies,
including hot and cold running water at the points of supply, provided for
general use, excluding any equipment; and (vi) after-hours access to the
Building via an electronic, Kastle-key card or other access control system,
and an adequate number of access keys or cards for Tenant's employees. No
concierge shall be provided in the Building. The cost of installing separate
meters for electrical consumption in the Premises shall be paid for by
Landlord. Landlord will also provide elevator service; provided, however,
that Landlord shall have the right to remove elevators from service as may be
required for moving freight, or for servicing or maintaining the elevators
and/or the Building as long as at least one (1) elevator is available for
public use. The normal hours of operation of the Building for Tenant will be
7:00 a.m. to 11:00 p.m. on Monday through Friday (excluding the holidays set
forth on Exhibit E hereto) and 9:00 a.m. to 1:00 p.m. on Saturday (excluding
the holidays set forth on Exhibit E hereto) and such other hours, if any, as
Landlord determines. Landlord shall not be obligated to maintain or operate
the Building at times other than these hours of operation of the Building
unless special arrangements are made in advance by Tenant; provided, however,
that Tenant shall have access into the Building at all times. Landlord will
furnish all services and utilities required by this Lease only during the
normal hours of operation of the Building, unless otherwise specified herein.
Tenant shall pay all electricity, telephone and power bills separately
metered to the Premises, and any other service or material used by, or
provided to, Tenant in connection therewith, when due. If Tenant does not
pay the same when due, Landlord may pay the same and the amount of such
payment shall be deemed Additional Rent which shall be due upon receipt of
Landlord's invoice therefor.
14.2 Anything contained herein to the contrary notwithstanding, in
the event Tenant is deprived of electricity, water, HVAC service or any other
utility or other service set forth in Section 14.1 above (including, without
limitation, HVAC service comporting with the temperature specifications set
forth herein on account of matters which Tenant is not responsible for) for a
period exceeding three (3) business days, and as a result thereof Tenant is
unable to conduct business from the Premises or any portion thereof in its
normal and customary manner and without undue hardship, then from and after
such third (3rd) business day Tenant shall be entitled to abate its rental
and other obligations hereunder as to the Premises or portion thereof which
is not usable until such time as the condition is rectified. The provisions
of Section 25.19 of this Lease shall not apply with respect to Tenant's
rights under this Section.
14.3 The parties hereto agree to comply with all mandatory energy
or water conservation controls and requirements applicable to office
buildings that are imposed or instituted by the federal, state, or county
governments, including, without limitation,
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controls on the permitted range of temperature settings in office buildings,
and requirements necessitating curtailment of the volume of energy or water
consumption or the hours of operation of the Building. Any terms or
conditions of this Lease that conflict or interfere with compliance with such
controls or requirements shall be suspended for the duration of such controls
or requirements. It is further agreed that compliance with such controls or
requirements shall not be considered an eviction, actual or constructive, of
the Tenant from the Premises and shall not entitle Tenant to terminate this
Lease or to an abatement of any rent payable hereunder.
14.4 In the event (i) Landlord elects to submeter the Premises for
water consumption (which Landlord may do at any time during the Lease Term at
its sole cost and expense) and (ii) it is determined that, during any Lease
Year or calendar year, Tenant consumes "substantially more" water than other
building tenants and typical office building users, measured pursuant to the
annual statistics published by BOMA, then Tenant shall reimburse Landlord for
all utility charges attributable to such excess water consumption within
thirty (30) days after written demand by Landlord (accompanied by copies of
water bills for the Building and the Premises and the BOMA standard
applicable to such period). For purposes hereof, Tenant's water consumption
shall be deemed "substantially more" than that of other office users if it
exceeds the per square foot water charges attributable to other tenants in
the Building AND the average per square foot water charges for office users
published by BOMA by more than ten percent (10%).
14.5 Tenant shall have access to the Premises twenty-four (24)
hours per day, seven (7) days per week (subject, however, to the Rules and
Regulations attached hereto as Exhibit D). There will be a minimum of one
(1) elevator in operation for Tenant's use outside of the building standard
hours.
ARTICLE XV
LIABILITY OF LANDLORD
15.1 Landlord and its employees and agents shall not be liable to
Tenant, Tenant's employees, agents, invitees, licensees, customers, clients,
family members, assignees, subtenants or guests, or to any other person or
entity for any damage (including indirect and consequential damage) injury,
loss, compensation or claim arising within the Premises, unless the same is
attributable to the gross negligence or willful misconduct of Landlord or its
agents, employees or contractors. Subject to the foregoing qualification,
any goods, property or personal effects stored or placed by Tenant, its
employees or agents in or about the Premises or the Building shall be at the
sole risk of Tenant, and Landlord shall not in any manner be held responsible
therefor. If any employee of Landlord receives any packages or articles
delivered to the Building for Tenant, such employee shall be acting as the
agent of Tenant for such purposes and not as the agent of Landlord. For
purposes of this Article XV, the term "Building" shall be deemed to include
the Land. Notwithstanding the foregoing provisions of this Section 15.1,
Landlord shall not be released from liability to Tenant for any injury caused
by the willful misconduct or gross negligence of Landlord or its agents,
employees or contractors.
15.2 Subject to the provisions of Article XVII and Section 13.5
hereof, Tenant shall defend, indemnify and hold Landlord harmless from and
against all costs, damages, claims, liabilities and expenses (including
reasonable attorneys' fees) suffered by or claimed against Landlord, directly
or indirectly, based on, arising out of or resulting from (i) Tenant's use
and occupancy of the Premises or the business conducted by Tenant therein,
(ii) any acts or omissions by Tenant or Tenant's employees, agents,
assignees, subtenants, contractors, licensees and invitees, (iii) any breach
or default in the performance or observance of Tenant's covenants or
obligations under this Lease, including without limitation any failure to
surrender the Premises upon the expiration or earlier termination of the
Lease Term, or (iv) any entry by Tenant, its employees, agents or contractors
upon the Land prior to the Lease Commencement Date. Subject to the
provisions of Section 13.5 hereof, Landlord shall indemnify and hold Tenant
harmless from and against all costs, damages, claims, liabilities and
expenses (including reasonable attorneys, fees) suffered by or claimed
against Tenant or its agents, employees, representatives, contractors,
successors, assigns, licensees and invitees, based on or arising out of (i)
Landlord's operation, management or control of the Building, Land
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and Common Areas, (ii) the acts or omissions of Landlord and its agents,
employees and contractors, or (iii) any breach of Landlord's obligations
under this Lease.
15.3 In the event that at any time any Landlord hereunder shall
sell or transfer the Building, said landlord shall not be liable to Tenant
for any obligations or liabilities based on or arising out of events or
conditions occurring on or after the date of such sale or transfer, to the
extent the transferee expressly assumes the obligations of Landlord hereunder
in writing.
15.4 Except with respect to Tenant's rights under Sections 14.2,
17.1, 18.1 and 19.7 hereof, in the event that at any time during the Lease
Term Tenant shall have a claim against Landlord, Tenant shall not have the
right to set off or deduct the amount allegedly owed to Tenant from any rent
or other sums payable to Landlord hereunder, it being understood that in such
events Tenant's sole remedy for recovering upon such claim shall be to
institute an independent action against Landlord.
15.5 Tenant agrees that in the event Tenant or any of Tenant's
employees, agents, subtenants, assignees, contractors, clients, guests,
family members, licensees, customers or invitees is awarded a money judgment
against Landlord, the sole recourse for satisfaction of such judgment shall
be limited to execution against the estate and interest of Landlord in the
Building and Land (including any insurance or condemnation proceeds and any
sale or refinancing proceeds realized at a time when Landlord is in default
hereunder); in no event shall any other assets of Landlord or of any partner
of Landlord or of any other person or entity be available to satisfy or
subject to such judgment, nor shall any partner of Landlord or any other
person or entity be held to have any personal liability for satisfaction of
any claims or judgments against Landlord and/or any partner of Landlord in
such partner's capacity as a partner of Landlord.
ARTICLE XVI
RULES AND REGULATIONS
16.1 Tenant and its agents, employees, invitees, licensees,
customers, clients, family members, guests, assignees and subtenants shall at
all times abide by and observe the rules and regulations attached hereto as
Exhibit D, and all other rules or regulations that Landlord may promulgate
from time to time for the operation and maintenance of the Building, provided
that, with respect to any new rules and regulations (i) notice thereof is
given to Tenant, and (ii) such new rules and regulations shall not increase
Tenant's monetary or other obligations under this Lease or conflict with or
diminish any of Tenant's rights hereunder. Nothing contained in this Lease
shall be construed as imposing upon Landlord any duty or obligation to
enforce such rules and regulations, or the terms, conditions or covenants
contained in any other lease, as against any other tenant, and Landlord shall
not be liable to Tenant for the violation of such rules or regulations by any
other tenant or its employees, agents, assignees, subtenants, invitees,
licensees, customers, clients, family members or guests, but the same shall
be enforced in a consistent fashion. If there is any inconsistency between
this Lease and the Rules and Regulations set forth in Exhibit D, this Lease
shall govern.
ARTICLE XVII
DAMAGE OR DESTRUCTION
17.1 If the Premises or the Building are totally or partially
damaged or destroyed from any cause, thereby rendering the Premises totally
or partially inaccessible or unusable, Landlord shall (taking into account
the time necessary to effectuate a satisfactory settlement with any insurance
company involved) diligently restore and repair the Premises and the Building
to substantially the same condition they were in prior to such damage;
provided, however, that if in Landlord's judgment (communicated to Tenant
within ten (10) days after such damage) the repairs and restoration cannot be
completed within one hundred eighty (180) days after the occurrence of such
damage (taking into account the time needed for removal of debris,
preparation of plans and issuance of all required governmental permits),
either Tenant or Landlord shall may terminate this Lease as of the
forty-fifth (45th) day after such damage by giving written notice of
termination to the other party within thirty (30) days after the occurrence
of such damage. If this Lease is terminated pursuant to the
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preceding sentence, subject to the abatement provisions set forth below, all
rent payable hereunder shall be apportioned and paid to the date of
termination. If this Lease is not terminated as a result of such damage, then
until the repair and restoration of the Premises is substantially complete,
Tenant shall be required to pay annual base rent and additional rent only for
those portions of the Premises that Tenant is able, in its business judgment,
to use while repairs are being made. Landlord shall bear the costs and
expenses of repairing and restoring the Premises and the Building.
Notwithstanding anything above to the contrary, Landlord shall have the right
to terminate this Lease in the event zoning or other applicable laws or
regulations do not permit such repair or restoration. Additionally, in the
event all damage is not ultimately repaired within such one hundred eighty
(180) period, Tenant shall have the right to terminate this Lease by written
notice to Landlord.
17.2 Notwithstanding anything above to the contrary, if Landlord
repairs and restores the Premises as provided in Section 17.1, Landlord shall
not be required to repair, restore or replace any decorations, alterations or
improvements to the Premises previously made by Tenant or any trade fixtures,
furnishings, equipment or personal property belonging to Tenant. It shall be
Tenant's sole responsibility to repair and restore all such items.
17.3 Notwithstanding anything to the contrary contained herein, if
there is damage to or a destruction of the Building that exceeds thirty-three
percent (33%) of the replacement value of the Building, then, whether or not
the Premises are damaged or destroyed, Landlord shall have the right to
terminate this Lease by written notice to Tenant. In the event the Lease is
terminated pursuant to the provisions of this Section 17, then, in addition
to the remedies set forth hereinabove, Landlord shall reimburse Tenant for
the unamortized costs of the Tenant Work paid for by Tenant (based upon
actual costs determined prior to the expiration of the first Lease Year).
ARTICLE XVIII
CONDEMNATION
18.1 If the whole or a substantial part (as hereinafter defined) of
the Premises, or the use or occupancy of the Premises, shall be taken or
condemned by any governmental or quasi-governmental authority for any public
or quasi-public use or purpose (including a sale thereof under threat of such
a taking), then this Lease shall terminate on the date title thereto vests in
such governmental or quasi-governmental authority, and all rent payable
here-under shall be apportioned as of such date. If less than a substantial
part of the Premises, or if the use or occupancy of less than a substantial
part of the Premises, is taken or condemned by any governmental or
quasi-governmental authority for any public or quasi-public use or purpose
(including a sale thereof under threat of such a taking), then this Lease
shall continue in full force and effect, except that as of the date title
vests in the governmental or quasi-governmental authority Tenant shall not be
required to pay annual base rent and additional rent with respect to the
portion of the Premises taken or condemned. In addition, in the event as a
result of any taking or act of any governmental or quasi-governmental
authority access to the Building and Premises is materially and adversely
impaired, or Tenant's parking rights are diminished, then (i) for as long as
such situation exists Tenant's base rent and additional rental obligations
hereunder shall be equitably adjusted to account for such diminution and (ii)
in the event such situation continues for more than sixty (60) days, then at
any time thereafter until the same is corrected Tenant may terminate this
Lease upon thirty (30) days' prior written notice to Landlord. For purposes
of this Section 18.1, a substantial part of the Premises shall be considered
to have been taken if more than five percent (5%) of the rentable area of the
Premises is rendered unusable as a result of such condemnation.
18.2 All awards, damages and other compensation paid by the
condemning authority on account of such taking or condemnation (or sale under
threat of such a taking) shall belong to Landlord, and Tenant hereby assigns
to Landlord all rights to such
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awards, damages and compensation. Tenant agrees not to make any claim
against the Landlord or the condemning authority for any portion of such
award or compensation attributable to damages to the Premises, the value of
the unexpired Lease Term, the loss of profits or goodwill. Nothing contained
herein, however, shall prevent Tenant from pursuing a separate claim against
the condemning authority for the value of furnishings, tenant improvements
(including portions of the Tenant Work paid for by Tenant), equipment and
trade fixtures installed in the premises at Tenant's expense and for
relocation expenses, provided that such claim shall in no way diminish the
award or compensation payable to or recoverable by Landlord in connection
with such taking or condemnation.
18.3 Notwithstanding anything to the contrary contained herein, if
twenty-five percent (25%) or more of the Land or of the Building is taken,
condemned, or sold under threat of such a taking, Landlord shall have the
right, in Landlord's sole discretion, to terminate this Lease as of the date
title vests in the governmental or quasi-governmental authority. In
addition, if twenty-five percent (25%) or more of the Building is taken,
condemned or sold under threat of such a taking, and as a consequence thereof
the Building will no longer be operated as a first-class office building,
then Tenant shall have the right to terminate this Lease as of the date title
vests in such authority.
ARTICLE XIX
DEFAULT
19.1 The occurrence of any of the following shall constitute a
default by Tenant under this Lease:
(a) If Tenant shall fail to pay any payment of annual base
rent or additional rent when due, or shall fail to make when due any other
payment required by this Lease, and such failure is not cured within five (5)
days after Tenant's receipt of written notice from Landlord;
(b) If Tenant shall violate or fail to perform any other
term, condition, covenant or agreement to be performed or observed by Tenant
under this Lease, and such failure shall continue for a period of thirty (30)
days after Landlord furnishes Tenant with written notice of such violation or
failure, except that such thirty (30)-day period shall be extended for such
additional period of time as may reasonably be necessary to cure such
default, if such default, by its nature, cannot be cured within such thirty
(30)-day period, provided that Tenant commences to cure such default within
the initial thirty (30)-day period and is, at all times thereafter, in the
process of diligently curing the same;
(c) If Tenant shall abandon the Premises;
(d) An Event of Bankruptcy as specified in Article XX with
respect to Tenant, any guarantor of Tenant's obligations under this Lease (a
"Guarantor"), or any general partner of Tenant (a "General Partner"); or
(e) A dissolution or liquidation of Tenant.
19.2 If there shall be any default by Tenant under this Lease
beyond any applicable notice and cure period, including without limitation
any default by Tenant prior to the Lease Commencement Date, Landlord shall
have the right, at its sole option, to terminate this Lease. In addition,
with or without terminating this Lease, Landlord may re-enter, terminate
Tenant's right of possession and take possession of the Premises and the
provisions of this Article XIX shall operate as a notice to quit, any other
notice to quit or of Landlord's intention to re-enter the Premises being
hereby expressly waived. Landlord may relet the Premises or any part thereof
(and covenants in good faith to attempt to so relet the Premises and thereby
mitigate its damages), alone or together with other premises, for such
term(s) (which may be greater or less than the period which otherwise would
have constituted the balance of the Lease Term) and on such terms and
conditions (which may include market concessions or free rent) as Landlord,
in its sole discretion, may determine, but Landlord shall not be liable for,
nor shall Tenant's obligations hereunder be diminished by reason of, any
inability by Landlord to relet the Premises despite its
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good faith efforts to do so or any failure by Landlord to collect any rent
due upon such reletting. Whether or not this Lease is terminated by reason
of Tenant's default, Tenant nevertheless shall remain liable for any annual
base rent, additional rent or damages which may be due or sustained prior to
such default, all reasonable costs, fees and expenses including, but not
limited to, reasonable attorneys' fees, brokerage fees, expenses incurred in
placing the Premises in rentable condition (per building standard conditions
as of the date of execution hereof), and other costs and expenses incurred by
Landlord in pursuit of its remedies hereunder. In addition, Tenant shall be
liable, at Landlord's option, for either of the following measures of future
damages:
(a) an amount equal to the annual base rent and additional
rent which would have become due during the remainder of the Lease Term, less
the amount of rental, if any, which Landlord shall receive during such period
from others to whom the Premises may be rented (other than any additional
rent received by Landlord as a result of any failure of such other person to
perform any of its obligations to Landlord), in which case such damages shall
be computed and payable in monthly installments, in advance, on the first day
of each calendar month following Tenant's default and continuing until the
date on which the Lease Term would have expired but for Tenant's default.
Separate suits or actions may be brought to collect any such damages for any
month(s), and such separate suits or actions shall not in any manner
prejudice the right of Landlord to collect any damages for any subsequent
month(s) by similar proceedings, or Landlord may defer any suits or actions
until after the expiration of the Lease Term; or
(b) an amount equal to the difference between (i) the present
value (as of the date of Tenant's default) of all annual base rent and
additional rent which would have become due during the remainder of the Lease
Term, and (ii) the present value of the expected rental income to be realized
by Landlord with respect to the Premises over the remainder of the Lease
Term, which difference shall be payable to Landlord in one lump sum on
demand. For purposes of this Section 19.2(b), "present value" shall be
compute by using a discount rate equal to three (3) percentage points above
the discount rate then in effect at the Federal Reserve Bank nearest to the
Building. The provisions contained in this Section shall be in addition to,
and shall not prevent the enforcement of, any claim Landlord may have against
Tenant for anticipatory breach of this Lease.
19.3 All rights and remedies of Landlord set forth in this Lease
are in addition to all other rights and remedies available to Landlord at law
or in equity. All rights and remedies available to Landlord pursuant to this
Lease or at law or in equity are expressly declared to be cumulative. The
exercise by Landlord of any such right or remedy shall not prevent the
concurrent or subsequent exercise of any other right or remedy. No delay or
failure by Landlord to exercise or enforce any of Landlord's rights or
remedies or Tenant's obligations shall constitute a waiver of any such
rights, remedies or obligations. Landlord shall not be deemed to have waived
any default by Tenant hereunder unless such waiver expressly is set forth in
a written instrument signed by Landlord. If Landlord waives in writing any
default by Tenant, such waiver shall not be construed as a waiver of any
covenant, condition or agreement set forth in this Lease except as to the
specific circumstances described in such written waiver.
19.4 If Landlord shall institute proceedings against Tenant and a
compromise or settlement thereof shall be made, the same shall not constitute
a waiver of the same or of any other covenant, condition or agreement set
forth herein, nor of any of Landlord's rights hereunder. Neither the payment
by Tenant of a lesser amount than the monthly installment of base rent,
additional rent or of any sums due hereunder nor any endorsement or statement
on any check or letter accompanying a check for payment of rent or other sums
payable hereunder shall be deemed an accord and satisfaction, and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover or do such act, all costs and expenses incurred by Landlord, plus
interest thereon at a per annum rate (the "Default Rate) which is three (3)
percentage points higher than the prime rate announced from time to time by
Nations Bank, from the date incurred by Landlord to the date of payment
thereof by Tenant, shall constitute additional rent due hereunder; provided,
however, that nothing contained herein
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shall be construed as permitting Landlord to charge or receive interest in
excess of the maximum rate then allowed by law. If Nations Bank ceases to
announce a prime rate or announces more than one prime rate, then for purposes
of determining the Default Rate, Landlord shall have the right to designate a
substitute rate which Landlord deems comparable.
19.5 If Tenant fails to make any payment of base rent, additional rent or
any other sum within five (5) days of the date such payment is due and payable
on more than one occasion in any 365 day period, then for each additional late
payment occurring within such period Tenant shall pay to Landlord a late charge
of five percent (5%) of the amount of such payment. In addition, in such event
such payment and such late fee shall bear interest at the Default Rate from the
date such payment or late fee, respectively, became due to the date of payment
thereof by Tenant; provided, however, that nothing contained herein shall be
construed as permitting Landlord to charge or receive interest in excess of the
maximum rate then allowed by law. Such late charge and interest shall
constitute additional rent due hereunder.
19.6 Landlord hereby waives any statutory lien, landlord's lien or other
lien or security interest it may have in or upon any personal property of Tenant
now or hereafter located in the Premises. Landlord further waives all rights of
distraint available under applicable law.
19.7 Tenant agrees to provide written notice to Landlord and any lender
having a lien on the Building or Land (provided such lender so requests of
Tenant in writing) in the event Landlord breaches any of its material
obligations hereunder. In the event Landlord (or Landlord's lender) shall fail
to cure any such breach within thirty (30) days after receipt of written notice
from Tenant [or if such breach is not reasonably capable of being cured within
thirty (30) days, such additional period as may reasonably be necessary to cure
the same with due diligence, not to exceed ninety (90) days without Tenant's
consent, which shall not be unreasonably withheld, conditioned or delayed], then
Landlord shall be in default hereunder, and Tenant shall be entitled to bring an
action for damages or injunctive relief against Landlord. In the event any
default by Landlord is not cured within the foregoing cure period, or in the
event any emergency repairs to the Premises are needed and Tenant is unable,
despite diligent efforts, to contact Landlord by telephone, then, in either of
such events, Tenant shall be entitled to take such action as may be commercially
reasonable under the circumstance to correct such uncured default and/or make
such repairs as are needed to correct the emergency situation, and Landlord
shall reimburse Tenant for all costs reasonably incurred in the exercise of such
rights within ten (10) days after written demand. In the event Landlord fails
fully to reimburse Tenant for the foregoing costs within such ten (10) day
period, then Tenant may deduct the amount due and owing from Landlord from its
rental obligations next coming due.
ARTICLE XX
BANKRUPTCY
20.1 The following shall be Events of Bankruptcy under this Lease:
(a) The appointment of a receiver or custodian for any or all of
Tenant's, a Guarantor's or a General Partner's property or assets, or the
institution of a foreclosure action upon so material a portion of the real or
personal property of Tenant or a Guarantor or a General Partner that Landlord in
its discretion concludes that its security under the Lease is materially
impaired;
(b) The filing of a voluntary petition by Tenant, a Guarantor or a
General Partner under the provisions of Title 11 of the United States Code (the
"Bankruptcy Code"), or under the insolvency laws of any state, district,
commonwealth or territory of the United States (the "Insolvency Laws");
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(c) The filing of an involuntary petition against Tenant, a Guarantor
or a General Partner as the subject debtor under the Bankruptcy Code or
Insolvency Laws, which either (i) is not dismissed within sixty (60) days of
filing, or (ii) results in the issuance of an order for relief against the
debtor; or
(d) Tenant's, a Guarantor's or a General Partner's making or
consenting to an assignment for the benefit of creditors or a common law
composition of creditors.
ARTICLE XXI
SUBORDINATION
21.1 This Lease shall be subject and subordinate to the lien,
provisions, operation and effect of any and all mortgages, deeds of trust,
ground leases or other security instruments (collectively, "Mortgages") which
may now or hereafter encumber the Building or the Land, to all funds and all
indebtedness intended to be secured by such Mortgages, and to all and any
renewals, extensions, modifications, recastings or refinancings thereof,
provided that such lender enter into a commercially reasonable subordination,
attornment and non-disturbance agreement, in a form substantially similar to
the agreement attached hereto as Exhibit I-1 (a "Non-Disturbance Agreement").
Landlord represents and warrants that neither the Building nor the Land is
encumbered by any mortgages, deeds of trust or other lien instruments.
Landlord represents that it leases the Land from Berman Enterprises Limited
Partnership (the "Ground Lessor") pursuant to that certain Land Lease dated
January 2, 1978 (the "Prime Lease"). Contemporaneous herewith, Ground Lessor
has entered into a Non-Disturbance Agreement with Tenant in the form attached
hereto as Exhibit I-2. Landlord shall use its best efforts to obtain a
non-disturbance agreement similar in form and substance to the agreement
attached hereto as Exhibit I-1 or I-2, as applicable from any future
mortgagee, groundlessor or beneficiary of any deed of trust with respect to
the Premises; however, Tenant shall have no obligation to subordinate its
rights hereunder to any mortgagee or groundlessor that does not provide
Tenant with a non-disturbance agreement substantially similar to the form of
agreement attached as Exhibit I-1 or I-2 hereto, as applicable. The holder
of any Mortgage to which this Lease is subordinate shall have the right
(subject to any required consents or approvals of the holders of superior
Mortgages) at any time to declare this Lease to be superior to the lien,
provisions, operation and effect of such Mortgage and Tenant agrees to
execute all documents required by such holder in confirmation thereof.
21.2 In confirmation of the foregoing subordination, Tenant shall, at
Landlord's request, promptly execute any requisite or appropriate certificate or
other document. Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such certificate or other document for or on
behalf of Tenant. If the Land, the Building or Landlord's interest therein is
sold at a foreclosure sale or by deed in lieu of foreclosure, and this Lease is
not extinguished upon such sale or by the purchaser following such sale, then,
at the request of such purchaser, Tenant shall attorn to such purchaser and
shall recognize such purchaser as the landlord under this Lease, and Tenant
waives the provisions of any statute or rule of law, now or hereafter in effect,
which may give or purport to give Tenant any right to terminate or otherwise
adversely affect this Lease and the obligations of Tenant hereunder in the event
any such foreclosure proceeding is prosecuted or completed or in the event of
any such sale. Tenant agrees that upon such attornment, such purchaser shall
not be (a) bound by any payment of annual base rent or additional rent for more
than one (1) month in advance, except prepayments in the nature of security for
the performance by Tenant of its obligations under this Lease but only to the
extent such prepayments have been delivered to such purchaser, (b) bound by any
amendment of this Lease made without the consent of any lender entering into a
Non-Disturbance Agreement with Tenant, (c) liable for damages for any act or
omission of any prior landlord other than those of a continuing nature, or (d)
subject to any offsets or defenses which Tenant might have against any prior
landlord other than those of a continuing nature; provided further, that after
succeeding to Landlord's interest under this Lease, such purchaser shall perform
in accordance with the terms of this Lease all obligations of Landlord arising
after the date such purchaser acquires title to the Land, the Building or
Landlord's interest therein. Within
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five (5) days after request by such purchaser at foreclosure, Tenant shall
execute and deliver an instrument or instruments confirming its attornment
upon the foregoing terms.
21.3 If any lender providing construction or permanent financing or any
refinancing for the Building requires, as a condition of such financing or
refinancing, that modifications to this Lease be obtained, and provided that
such modifications (i) are reasonable, (ii) do not adversely affect Tenant's use
of the Premises as herein permitted, (iii) do not increase any of Tenant's
monetary or other obligations hereunder, (iv) do not adversely affect any of
Tenant's rights hereunder and (v) do not decrease any of Landlord's obligations
or liabilities hereunder, then Landlord may submit to Tenant a written amendment
to this Lease incorporating such required modifications, and Tenant hereby
covenants and agrees to execute, acknowledge and deliver such amendments to
Landlord within five (5) days of Tenant's receipt thereof.
21.4 Landlord hereby represents, warrants and covenants that: (i) a true
and correct copy of the Prime Lease is attached hereto as Exhibit J (with
certain economic terms redacted therefrom); (ii) the Prime Lease is in full
force and effect; (iii) neither Landlord nor Tenant are in default under the
Prime Lease and no condition exists which, with the passage of time or the
giving of notice or both could become a default; (iv) Landlord shall not
terminate the Prime Lease, or amend or modify the Prime Lease in any manner
which will affect the rights of Tenant hereunder, as long as this Lease remains
in full force and effect; and (v) Landlord will provide Tenant with written
notices of any default on the part of Landlord or the Ground Lessor under the
Prime Lease.
ARTICLE XXII
HOLDING OVER
22.1 If Tenant shall not immediately surrender the Premises on the date of
the expiration of the Lease Term, the rent payable by Tenant hereunder shall be
increased to one hundred fifty percent (150%) of the annual base rent,
additional rent in effect immediately prior to such termination date. Such rent
shall be computed by Landlord on a monthly basis and shall be payable by Tenant
on the first day of such holdover period and the first day of each calendar
month thereafter during such holdover period until the Premises have been
vacated by Tenant. Landlord's acceptance of such rent from Tenant shall not in
any manner impair or adversely affect Landlord's other rights and remedies
hereunder, including, but not limited to, (i) Landlord's right to evict Tenant
from the Premises, and (ii) Landlord's right to recover damages pursuant to this
Lease and such other damages as are available to Landlord at law or in equity.
ARTICLE XXIII
COVENANTS OF LANDLORD
23.1 Landlord covenants that it has the right to make this Lease for the
term aforesaid, and that if Tenant shall pay all rent when due and punctually
perform all the covenants, terms, conditions and agreements of this Lease to be
performed by Tenant, Tenant shall, during the Lease Term, freely, peaceably and
quietly occupy and enjoy the full possession of the Premises without hindrance
by Landlord or any party claiming through or under Landlord, subject, however,
to the provisions of this Lease, including but not limited to the Rules and
Regulations and the provisions of Section 23.2 hereof. Additionally, Landlord
hereby represents, warrants and covenants to and with Tenant that, as of the
date hereof, on the Lease Commencement Date and during the term hereof,
including any extensions and renewals hereof: (i) Landlord has the full right,
power and authority to enter into this Lease and to perform each and all of the
terms, provisions, covenants, agreements, matters and things herein provided to
be performed by Landlord and to execute and deliver all documents provided
herein to be executed and delivered by Landlord; (ii) this Lease does not, nor
will the performance by Landlord of its obligations hereunder, contravene any
provision of any existing law, covenant, indenture or agreement binding upon
Landlord or upon the Land and/or the Building; (iii) the signatories of this
Lease are authorized to sign this Lease on behalf of Landlord; (v) there is no
litigation pending or, to the best of Landlord's knowledge, threatened which may
adversely affect the Building, the Land, the Premises or Tenant's interest in
the Premises; (iv) there are no
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suits, judgments or notices from any governmental agency relating to any
violation of the health, pollution control, building, fire or zoning laws or
regulations relating to the use and maintenance of the Building, the land and
the Premises; (vii) the Building and Land are zoned to permit use of the
Premises by Tenant as described herein; and (v) the Building does not contain
asbestos and complies with all applicable laws, orders, rules and regulations
(including the provisions of the American with Disabilities Act). Anything
contained herein to the contrary notwithstanding, Landlord shall, at its own
expense, comply with all laws, orders, ordinances and regulations of Federal
and local authorities and with directions of public rules, recommendations,
requirements and regulations of the Board of Fire Underwriters, Landlord's
insurance companies and any other organization establishing insurance rates
in the geographical area where the Building is located, respecting all
matters of condition or maintenance of the Common Areas, the Land and the
Building (other than matters pertaining to the use of the Premises by
Tenant), including, without limitation, the provisions of the Americans with
Disabilities Act, all zoning and other land use laws, and all laws pertaining
to Hazardous Substances and indoor air quality.
23.2 Landlord hereby reserves to itself and its successors and assigns the
following rights (all of which are hereby consented to by Tenant): (i) to change
the street address and/or name of the Building; (ii) to erect, use and maintain
pipes and conduits in and through the ceilings above Premises; (iii) to grant to
anyone the exclusive right to conduct any particular business or undertaking in
the Building, subject to the exclusive rights granted to Tenant herein; (iv) the
exclusive right to use and/or lease the roof areas, and the sidewalks and other
exterior areas; (v) the right to resubdivide the Land or to combine the Land
with other lands; and (vi) the right to relocate Tenant's non-reserved parking
spaces to a comparable location to the location of the initial spaces granted to
Tenant herein. Landlord may exercise any or all of the foregoing rights without
being deemed to be guilty of an eviction, actual or constructive, or a
disturbance or interruption of the business of Tenant or of Tenant's use or
occupancy of the Premises.
23.3 Tenant acknowledges and agrees that all rights of Tenant to use and
occupy the Premises and all rights, terms and conditions of this Lease are in
all respects subject to all applicable zoning and land use restrictions, and to
all covenants, conditions, and restrictions of record existing on the date
hereof (and amendments thereto, provided such amendments do not interfere with
Tenant's use of the Premises). Tenant agrees to observe and be bound by each
and every covenant and restriction to which the Land is now subject or is
hereinafter subjected, insofar as any such covenant or restriction affects the
Premises or Tenant's use thereof.
23.4 Tenant acknowledges and agrees that Landlord shall retain the right to
enter into any lot owners' association agreement or cross easement agreement to
provide for maintaining, landscaping, insuring, lighting and other operation and
enhancement of the common areas of the Building and Land. Landlord agrees to
enter into such an agreement only if the terms thereof do not interfere with
Tenant's rights or obligations under this Lease or increase any of Tenant's
monetary obligations hereunder. If Landlord enters into such an agreement,
subject to the foregoing qualifications, Tenant acknowledges and agrees that it
shall be bound by the provisions of such agreement, and any breach by Tenant of
the terms or provisions of such agreement shall constitute a default under this
Lease.
ARTICLE XXIV
TENANT IMPROVEMENTS
24.1 Tenant agrees to lease the Premises in its "as-is" condition,
subject to the obligations of Landlord and Tenant set forth in this Lease
(including, without limitation, the provisions of this Article XXIV). The
foregoing notwithstanding, Landlord agrees to complete construction of the
improvements to the Premises specified in Exhibit B hereto prior to the Lease
Commencement Date. Tenant shall reimburse Landlord for the actual third party
costs incurred by Landlord in constructing such improvements within thirty
(30) days following the Lease Commencement Date upon presentation of a bill
therefor and appropriate invoices. There shall be no supervisory fee
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charges by Landlord to Tenant for any of the work specified in Exhibit B,
other than an eight percent (8%) general contractor's mark-up on all hard
costs incurred in connection therewith.
ARTICLE XXV
GENERAL PROVISIONS
25.1 Tenant acknowledges that neither Landlord nor any broker, agent or
employee of Landlord has made any representations or promises with respect to
the Premises or the Building except as herein expressly set forth, and no
rights, privileges, easements or licenses are being acquired by Tenant except as
herein expressly set forth.
25.2 Nothing contained in this Lease shall be construed as creating a
partnership or joint venture of or between Landlord and Tenant, or to create any
other relationship between the parties hereto other than that of landlord and
tenant.
25.3 Landlord and Tenant each represents and warrants to the other that
other than Barnes Morris Pardoe & Foster, The Stuart Rabkin Company and Ken
Duncan (collectively, the "Broker") neither of them has employed or dealt with
any broker, agent or finder in carrying on the negotiations relating to this
Lease. Landlord and Tenant shall each indemnify and hold the other harmless
from and against any claim or claims for brokerage or other commissions asserted
by any broker, agent or finder engaged by it or with whom it has dealt, other
than the Broker. Landlord shall pay all fees to Broker in connection with this
transaction.
25.4 Tenant agrees, at any time and from time to time, upon not less than
ten (10) business days' prior written notice by Landlord, to execute,
acknowledge before a Notary Public, and deliver to Landlord and/or any other
person or entity designated by Landlord a statement in writing: (i) certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the Lease is in full force and effect as modified and
stating the modifications); (ii) stating the dates to which the rent and any
other charges hereunder have been paid by Tenant; (iii) stating whether or not,
to the best knowledge of Tenant, Landlord is in default in the performance of
any covenant, agreement or condition contained in this Lease, and if so,
specifying the nature of such default; (iv) stating the address to which notices
to Tenant are to be sent; (v) stating that this Lease is subject and subordinate
to all Mortgages encumbering the Building or the Land (as long as Tenant
receives a Non-Disturbance Agreement); (vi) stating that Tenant has accepted the
Premises and that all work thereto has been completed by Landlord (or if such
work has not been completed, specifying the incomplete work); and (vii)
containing such other customary factual certifications as Landlord may
reasonably request. Any such statement delivered by Tenant may be relied upon
by any owner of the Building or the Land, any prospective purchaser of the
Building or the Land, any Mortgagee or prospective Mortgagee of the Building or
the Land or of Landlord's interest therein, any prospective assignee any of such
Mortgagee or any other person or entity. Tenant acknowledges that time is of
the essence to the delivery of such statements by Tenant, and that Tenant's
failure or refusal to do so may result in substantial damages to Landlord
resulting from, for example, delays suffered by Landlord in obtaining financing
or refinancing secured by the Building. Tenant shall be liable for all such
damages suffered by Landlord.
25.5 Landlord and Tenant each hereby waives trial by jury in any action,
proceeding, claim or counterclaim brought by either party in connection with any
matter arising out of or in any way connected with this Lease, the relationship
of landlord and tenant hereunder, Tenant's use or occupancy of the Premises,
and/or any claim of injury or damage. Landlord and Tenant each hereby waives
any objection to the venue of any action filed by either party in any court
situated in Prince George's County, Maryland and each party further waives any
right, claim or power, under the doctrine of forum non conveniens or otherwise,
to transfer any such action filed by any party in any such court to any other
court.
25.6 All notices or other communications required hereunder shall be in
writing and shall be deemed duly given if delivered in person (with receipt
therefor), or if sent by certified or registered mail, return receipt requested,
postage prepaid, to the following
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addresses: (i) if to Landlord, Suite 380, 11140 Rockville Pike, Rockville,
Maryland 20852, Attn: Gary Berman, (ii) if to Tenant, at 11350 Random Hills
Road, Suite 240, Fairfax, Virginia 22030, Attn: Charles L. Cosgrove, Vice
President, with a copy to Tucker, Flyer & Lewis, P.C., 1615 L Street, N.W.,
Washington, D.C. 20036, Attn: Mark D. Jackson, Esq. Notices shall be
effective upon receipt or refusal to accept receipt. Either party may change
its address for the giving of notices by notice given in accordance with this
Section.
25.7 Each provision of this Lease shall be valid and enforced to the
fullest extent permitted by law. If any provision of this Lease or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, such provision shall be deemed to be replaced by the valid and
enforceable provision most substantively similar to such invalid or
unenforceable provision, and the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby.
25.8 Feminine or neuter pronouns shall be substituted for those of the
masculine form, and the plural shall be substituted for the singular number, in
any place or places herein in which the context may require such substitution.
25.9 The provisions of this Lease shall be binding upon, and shall inure to
the benefit of, the parties hereto and each of their respective representatives,
successors and assigns, subject to the provisions hereof restricting assignment
or subletting by Tenant.
25.10 This Lease contains and embodies the entire agreement of the parties
hereto and supersedes all prior agreements, negotiations and discussions between
the parties hereto. Any representation, inducement or agreement that is not
contained in this Lease shall not be of any force or effect. This Lease may not
be modified or changed in whole or in part in any manner other than by an
instrument in writing duly signed by both parties hereto.
25.11 This Lease shall be governed by and construed in accordance with the
laws of the State of Maryland.
25.12 Article and section headings are used herein for the convenience of
reference and shall not be considered when construing or interpreting this
Lease.
25.13 The submission of an unsigned copy of this document to Tenant for
Tenant's consideration does not constitute an offer to lease the Premises or an
option to or for the Premises. This document shall become effective and binding
only upon the execution and delivery of this Lease by both Landlord and Tenant.
25.14 Time is of the essence with respect to all obligations under this
Lease.
25.15 This Lease is being executed in multiple counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document.
25.16 This Lease shall not be recorded except that upon the request of
Landlord, Tenant agrees to execute, in recordable form, a short-form memorandum
of this Lease, provided that such memorandum shall not contain any of the
specific rental terms set forth herein. Such memorandum may be recorded at
Landlord's expense in the land records of Prince George's County, Maryland.
25.17 Except as otherwise provided in this Lease, any additional rent or
other sum owed by Tenant to Landlord, and any cost, expense, damage or liability
incurred by Landlord for which Tenant is liable, shall be paid by Tenant to
Landlord no later than the later of (a) ten (10) days after the date Landlord
notifies Tenant of the amount of such additional rent, sum, cost, expense,
damage or liability, or
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(b) the first day of the first calendar month following the date Landlord so
notifies Tenant; provided, however, that if Landlord so notifies Tenant prior
to the commencement or after the expiration or earlier termination of the
Lease Term, such additional rent, sum, expense, damage or liability shall be
paid by Tenant to Landlord not later than ten (10) days after Landlord so
notifies Tenant.
25.18 Any liability of Tenant to Landlord or Landlord to Tenant existing
hereunder at the expiration or earlier termination of the Lease Term shall
survive such expiration or earlier termination.
25.19 In the event Landlord or Tenant is in any way delayed, interrupted
or prevented from performing any of its construction or repair obligations under
this Lease, and such delay, interruption or prevention is due to fire, act of
God, governmental act or failure to act, strike, labor dispute, inability to
procure materials, or any other cause beyond such party's reasonable control
(whether similar or dissimilar), then the time for performance of the affected
obligation(s) shall be excused for the period of the delay and extended for a
period equivalent to the period of such delay, interruption or prevention.
25.20 Tenant agrees to cooperate with Landlord (at no cost, expense or
liability to Tenant) in obtaining any permits or licenses necessary or desirable
for the use or operation of the Building or the Premises, including without
limitation by execution of any applications for such licenses and permits.
25.21 Tenant agrees to give written notice of any default by Landlord
under this Lease to any lender of Landlord secured by the Premises and a
reasonable time within which to cure such default prior to Tenant taking any
action to remedy such default or cancel the Lease, provided that such lender
enters into a Non-Disturbance Agreement with Tenant.
25.22 Tenant warrants and represents that Tenant's entering into this
Lease is a valid and authorized act by the Tenant, which is duly formed and in
good standing under the laws of the state of its formation and qualified to do
business in the State of Maryland.
25.23 Unless specifically provided to the contrary herein, all consents
or approvals to be granted by either party hereto to the other shall not be
unreasonably withheld, conditioned or delayed, and the parties hereto shall at
all times act in a commercially reasonable manner.
25.24 Provided that Tenant is not in Default under the terms and
conditions of this Lease, Tenant may, at its own cost, use portions of the
Building's roof for the installation of one or more satellite dishes, antennae
or similar devices (collectively, the "Roof Devices", and individually, a "Roof
Device"); provided that (i) the installation and operation of such Roof Device
shall be at Tenant's sole cost and expense (including, without limitation, the
cost of any permits therefor), (ii) use of such Roof Device shall be in
accordance with the terms of this Section 25.24, (iii) Tenant's right to install
a Roof Device shall be subject to there being space available on the Building's
roof, (iv) no Roof Device installed by Tenant shall interfere with the reception
of any other antennas, satellites or roof devices then located on the Building's
roof, and (v) the Roof Device shall be architecturally compatible with the
Building and comply with all applicable laws, orders, rules and regulations. If
Tenant elects to install a Roof Device, then Tenant shall also have the right to
run cabling using the Building's risers and conduits from the Demised Premises
to the roof for the purposes. Tenant shall not install or operate any Roof
Device without the prior written approval of Landlord, which shall not be
unreasonably withheld or delayed. Landlord shall not charge Tenant additional
rent for the use of the Building's roof and any Roof Device. Upon prior written
notice to Landlord, Tenant shall have access to the Building's roof at
reasonable times to install, maintain or repair any Roof Device permitted
hereunder. Upon the expiration or sooner termination of this Lease, Tenant
shall be required to remove and dispose of such Roof Devices from the Building
at its own cost. Tenant shall leave the portion of the roof where any Roof
Device was located in good order and repair, and shall cause no damage to any
part of the Building, including without limitation the structural components of,
or mechanical systems in, the Building.
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25.25 In the event Tenant leases all or any substantial portion of two
(2) or more adjacent floors, Tenant may, at its sole risk, continually use the
Building stairs and landings on and between such floors for access to and from
such floors. Tenant may also install, at Tenant's expense, but in accordance
with all applicable laws, rules and regulations of any governmental authority,
carpeting (or other floor covering selected by Tenant) on the stairs and
landings, install additional lighting and paint the walls, subject to the
Landlord's prior written approval of color and style choices, which approval
shall not be unreasonably withheld, conditioned or delayed. Landlord agrees to
install, if requested by Tenant and at Tenant's sole expense, appropriate
security devices to prevent the doors from being opened in and from the
stairwells on such contiguous floors without an appropriate key card.
Landlord's cleaning crew shall regularly clean and maintain the stairwells in
building-standard fashion, the cost which shall constitute an Operating Charge
for all purposes hereof.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on or as
of the day and year first above written.
LANDLORD:
WITNESS: 312 MARSHALL AVENUE LIMITED PARTNERSHIP
- - -------------------------- By:
------------------------------------------
Its: General Partner
TENANT:
ATTEST: COMPUTER LEARNING CENTERS, INC.
- - ------------------------- By:
-------------------------------------------
Its:
------------------------------------------
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EXHIBIT A
PLAN SHOWING PREMISES
44
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EXHIBIT B
SCHEDULE OF IMPROVEMENTS
The improvements specified below shall be completed by Landlord prior to the
Lease Commencement Date:
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EXHIBIT C
[INTENTIONALLY OMITTED]
46
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EXHIBIT D
RULES AND REGULATIONS
This Exhibit is attached to and made a part of that Certain Lease Agreement
dated as of the 1st day of April, 1996 (the "Lease"), by and between 312
MARSHALL AVENUE LIMITED PARTNERSHIP ("Landlord") and COMPUTER LEARNING CENTERS,
INC. ("Tenant"). Unless the context otherwise requires, the terms used in this
Exhibit that are defined in the Lease shall have the same meanings as provided
in the Lease.
The following rules and regulations have been formulated for the safety and
well-being of all tenants of the Building ("tenants"). Strict adherence to
these rules and regulations is necessary to guarantee that every tenant will
enjoy a safe and undisturbed occupancy of its premises in the Building. Any
continuing violation of these rules and regulations by Tenant shall constitute a
default by Tenant under the Lease.
Landlord may, upon request of any tenant, waive the compliance by such
tenant of any of the rules and regulations, provided that (i) no waiver shall be
effective unless signed by Landlord or Landlord's authorized agent, (ii) any
such waiver shall not relieve such tenant from the obligation to comply with
such rule or regulation in the future unless otherwise agreed to by Landlord,
(iii) no waiver granted to any tenant shall relieve any other tenant from the
obligation of complying with these rules and regulations, and (iv) any such
waiver by Landlord shall not relieve Tenant from any liability to Landlord for
any loss or damage occasioned as a result of Tenant's failure to comply with any
rule or regulation.
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, halls and other parts of the Building not exclusively
occupied by any tenant shall not be obstructed or encumbered by any tenant or
used for any purpose other than ingress and egress to and from each tenant's
premises. Landlord shall have the right to control and operate the public
portions of the Building and the facilities furnished for common use of the
tenants, in such manner as Landlord deems best for the benefit of the tenants
generally. No tenant shall permit the visit to its premises of persons in such
numbers or under such conditions as to interfere with the use and enjoyment of
the entrances, corridors, elevators and other public portions or facilities of
the Building by other tenants.
2. No awnings or other projections shall be attached to the outside walls of
the Building without the prior written consent of Landlord. No drapes, blinds,
shades or screens (other than those furnished by Landlord) shall be attached to,
hung in, or used in connection with any window or door of any tenant's premises,
without the prior written consent of Landlord. All awnings, projections,
curtains, blinds, shades, screens and other fixtures must be of a quality, type,
design and color, and attached in a manner, approved by Landlord.
3. No showcases or other articles shall be placed or allowed to remain in
front of or affixed to any part of the exterior of the Building or its windows,
nor placed in the halls, corridors or vestibules without the prior written
consent of Landlord.
4. Tenant shall not use the water and wash closets and other plumbing fixtures
for any purposes other than those for which they were constructed, and Tenant
shall not place any debris, rubbish, rags or other substances therein. All
damage resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose servants, employees, agents, visitors, customers, clients,
invitees, guests, or licensees, shall have caused the same.
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5. No tenant shall move, paint, drill or deface the exterior of the Building
or the exterior of any tenant's premises other than to install signs permitted
pursuant to the terms of its lease. Tenants shall not construct, maintain, use
or operate within their respective premises any electrical device, wiring or
apparatus in connection with a loud speaker system or other sound system, except
as reasonably required as part of a communication system approved in writing by
Landlord prior to the installation thereof. No tenant shall construct,
maintain, use or operate any such loud speaker or sound system outside of its
premises.
6. No tenant shall bring bicycles, vehicles, animals, birds or pets of any
kind into the Building. No cooking shall be done or permitted by any tenant on
its premises, except for microwave cooking and use of coffee machines by such
tenant's employees for their own consumption. No tenant shall cause or permit
any unusual or objectionable odors to be produced upon or permeate from its
premises.
7. No space in the Building shall be used for the sale of goods in the
ordinary course of business, or for the sale at auction of merchandise, goods or
property of any kind. "Sale of goods in the ordinary course of business" means
the sale of goods to the public at large.
8. No tenant shall make any unseemly or disturbing noises or disturb or
interfere with occupants of the Building or neighboring buildings or premises or
those having business with them, whether by the use of any musical instrument,
radio, talking machine, whistling, singing, or in any other way. No tenant shall
throw anything out of the doors or windows or down the corridors or stairs of
the Building.
9. Tenants shall not bring into or keep in or upon the Building any flammable,
combustible or explosive fluid, or chemical substance, except pursuant to the
terms of the Lease.
10. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any tenant, nor shall any changes be made in any existing
locks or the locking mechanism therein, without Landlord's prior written
approval. Tenants shall keep the doors leading to the corridors or main halls
closed during business hours except as such doors may be used for ingress or
egress. Each tenant shall, upon the termination of its tenancy, restore to the
Landlord all keys of stores, offices, storage and toilet rooms either furnished
to, or otherwise procured by, such tenant, and in the event of the loss of any
keys so furnished, such tenant shall pay to Landlord the replacement cost
thereof. Tenant's key system shall be separate from that for the rest of the
Building.
11. No tenant shall employ any of Landlord's employees for any purpose
whatsoever without Landlord's prior written consent.
12. Landlord reserves the right to exclude from the Building at all times any
person who is not known or does not properly identify himself to the Building
management or watchman on duty. Landlord may, at its sole option, require all
persons admitted to or leaving the Building during hours other than normal hours
of operation of the Building (as set forth in Section 14.1 of the Lease) to
register. Each tenant shall be responsible for all persons for whom it
authorizes entry into the Building and shall be liable to Landlord for all acts
or omissions of such persons.
13. The Premises shall not, at any time, be used for lodging or sleeping or for
any immoral or illegal purpose.
14. Each tenant, before closing and leaving its premises at any time, shall see
that all windows are closed and all lights turned off.
15. Tenants shall not request Landlord's employees to perform any work or do
anything outside of such employees' regular duties without the prior written
consent of the management of the Building. The special requirements of tenants
will be attended to only upon application to Landlord, and any such special
requirements of Tenant shall be billed to Tenant (and paid as additional rent)
in accordance with the schedule of charges maintained by Landlord from time to
time or at such charge as is agreed upon in advance by Landlord and Tenant.
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16. Canvassing, soliciting and peddling in the Building is prohibited and each
tenant shall cooperate to prevent the same.
17. There shall not be used in any space, or in the public halls of the
Building, either by any tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards. Tenant shall be responsible to Landlord for any loss or damage
resulting from any deliveries made by or for Tenant to the Building.
18. Tenant shall not place any mats, trash or other objects in the public
corridors of the Building.
19. Drapes installed by Landlord for the use of Tenant or drapes installed by
Tenant, which are visible from the exterior of the Building, must be cleaned by
Tenant at least once a year, without notice from Landlord, at Tenant's own
expense. Landlord shall have the right to prescribe standards for all curtains,
drapes, blinds, shades, screens, lights and ceilings, including without
limitation standards designed to give the Building a uniform, attractive
appearance. Tenant shall comply with all such standards prescribed by Landlord.
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EXHIBIT E
HOLIDAYS
January 1 - New Year's Day
Martin Luther King's Birthday
Presidents' Day
Memorial Day
July 4 - Independence Day
Labor Day
Columbus Day
Thanksgiving Day and the day immediately thereafter
December 25 - Christmas Day
50
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EXHIBIT F
SITE PLAN
51
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EXHIBIT G
[INTENTIONALLY OMITTED]
52
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EXHIBIT H
JANITORIAL SPECIFICATIONS
53
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EXHIBIT I-1
NON-DISTURBANCE AGREEMENT
[Mortgage]
54
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EXHIBIT I-2
NON-DISTURBANCE AGREEMENT
[Ground Lease]
55
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EXHIBIT J
PRIME LEASE
56
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ATTORNMENT AND NON-DISTURBANCE AGREEMENT
THIS ATTORNMENT AND NON-DISTURBANCE AGREEMENT (the "Agreement") is made
and entered into as of the 1st day of April, 1996, by and among (i) BERMAN
ENTERPRISES LIMITED PARTNERSHIP, a Maryland limited partnership ("Owner"),
(ii) 312 MARSHALL AVENUE LIMITED PARTNERSHIP, a Maryland limited partnership
("Landlord"), and (iii) COMPUTER LEARNING CENTERS, INC., a Virginia
corporation (Tenant").
W I T N E S S E T H :
WHEREAS, Owner and Landlord have entered into that certain Land Lease
dated January 2, 1978 (as now or hereafter amended, modified or extended, the
"Groundlease"), pursuant to which Landlord has leased from Owner the land
described in EXHIBIT A attached hereto (the "Land") upon which Landlord has
constructed a commercial office building having an address of 312 Marshall
Avenue, Laurel, Maryland, containing approximately 114,284 rentable square
feet of space (the "Building"); and
WHEREAS, Landlord and Tenant have entered into that certain Lease
Agreement dated April 1, 1996 (as now or hereafter amended, modified or
extended, the "Lease"), pursuant to which Landlord has leased to Tenant
approximately 16,564 rentable square feet in the Building, which space is
referred to herein and in the Lease as the "Premises"; and
WHEREAS, Tenant wishes to obtain from Owner certain assurances that
Tenant's rights under the Lease will be recognized by Owner in the event of a
default by Landlord under the Groundlease and a termination thereof; and
WHEREAS, Owner is willing to provide such assurances to each other upon
and subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the above, the mutual promises
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto mutually
agree as follows:
SUBORDINATION AND ATTORNMENT. The Lease and all of the rights of Tenant
thereunder shall be and are hereby declared to be and at all times hereafter
shall be and remain subject and subordinate in all respects to the
Groundlease and to all renewals, modifications, consolidations, replacements
and extensions thereof and all of the rights of the Owner thereunder.
Notwithstanding such subordination, Tenant hereby agrees that the Lease shall
not terminate in the event of a termination of the Lease; rather, in such
event, (i) Tenant agrees to enter into a new direct lease with Owner upon the
terms set forth in the Lease (the "New Lease") and (ii) Tenant agrees to
attain to and to recognize Owner as Tenant's landlord for the balance of the
term of the Lease or New Lease in accordance with the terms and provisions
thereof.
ESTOPPEL. Owner and Landlord hereby agree that the Groundlease has not
been modified or amended except as set forth in the recitals above, and that
the Groundlease is a complete statement of the agreement of Landlord and
Owner with respect to the Land and the Building.
NON-DISTURBANCE. As long as Tenant is not in default under the Lease
beyond any notice and cure period provided therein, Owner agrees that, in the
event the Lease is terminated: (a) Tenant's possession of the Premises and
Tenant's rights, privileges and obligations under the Lease shall not be
disturbed, diminished or interfered with by Owner during the term of the
Lease, including any extensions thereof; (b) Owner agrees to enter into the
New Lease with Tenant upon all of the terms and conditions set forth in the
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Lease; and (c) the Lease (or New Lease) shall continue in full force and
effect and shall not be terminated except in accordance with the terms of
thereof.
NOTICES. All notices required or permitted to be given pursuant to this
Agreement shall be in writing, be personally delivered or shall be sent
postage prepaid, by certified mail, return receipt requested. Rejection or
other refusal to accept or inability to deliver because of changed address of
which no notice has been given shall constitute receipt of the notice, demand
or request sent. If given to Owner, notices shall be addressed as follows:
c/o GDR Management, Inc., 11140 Rockville Pike, Suite 380, Rockville,
Maryland 20852, Attention: Gary Berman; if given to Landlord, notices shall
be address as follows: c/o GDR Management, Inc., 11140 Rockville Pike, Suite
380, Rockville, Maryland 20852, Attention: Gary Berman; if given to Tenant,
notices shall be address as follows: Computer Learning Centers, Inc., 11350
Random Hills Road, Suite 240, Fairfax, Virginia 22030, Attention: Charles
L. Cosgrove. Any party entitled to receive notice there under may designate
any other address to the parties hereto in a writing and delivered in
accordance with the provisions of this Section 4.
MISCELLANEOUS. This Agreement may not be amended or modified in any
manner other than by an agreement in writing signed by the parties hereto or
their respective successors in interest, and this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
GOVERNING LAW; VENUE. This Agreement shall be construed in accordance
with the laws of the State of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this Attornment and
Non-Disturbance Agreement to be property executed by their duly authorized
representatives as of the date first above written.
WITNESS: OWNER:
BERMAN ENTERPRISES LIMITED PARTNERSHIP
- - ----------------------------- By:
-------------------------------------
Its:
------------------------------------
WITNESS: LANDLORD:
312 MARSHALL AVENUE LIMITED PARTNERSHIP
- - ----------------------------- By:
-------------------------------------
Its:
------------------------------------
ATTEST: TENANT:
COMPUTER LEARNING CENTERS, INC.
- - ----------------------------- By:
[Asst.] Secretary -------------------------------------
Its:
------------------------------------
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COMMONWEALTH OF VIRGINIA )
) ss:
COUNTY OF FAIRFAX )
On this __ day of April, 1996, before me, __________________________________,
the undersigned officer, personally appeared _________________________________,
who acknowledged himself to be the __________________ of Computer Learning
Centers, Inc., a Virginia corporation (the "Corporation), and that in such
capacity, and being authorized so to do, executed the foregoing instrument for
the purposes therein contained on behalf of the Corporation as his and its free
act and deed.
----------------------------------------
Notary Public
My commission expires:
-----------------
STATE OF MARYLAND )
) ss:
COUNTY OF MONTGOMERY )
On this __ day of April, 1996, before me, __________________________________,
the undersigned officer, personally appeared _________________________________,
who acknowledged himself to be the general partner of Berman Enterprises
Limited Partnership, a Maryland limited partnership (the "Partnership"), and
that in such capacity, and being authorized so to do, executed the foregoing
instrument for the purposes therein contained on behalf of the Partnership as
his and its free act and deed.
----------------------------------------
Notary Public
My commission expires:
-----------------
59
<PAGE>
STATE OF MARYLAND )
) ss:
COUNTY OF MONTGOMERY )
On this __ day of April, 1996, before me, __________________________________,
the undersigned officer, personally appeared _________________________________,
who acknowledged himself to be the general partner of 312 Marshall Avenue
Limited Partnership, a Maryland limited partnership (the "Partnership"), and
that in such capacity, and being authorized so to do, executed the foregoing
instrument for the purposes therein contained on behalf of the Partnership as
his and its free act and deed.
----------------------------------------
Notary Public
My commission expires:
-----------------
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EXHIBIT A
LEGAL DESCRIPTION OF LAND
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---------------------
LEASE AGREEMENT
By and Between
312 MARSHALL AVENUE LIMITED PARTNERSHIP,
as Landlord
and
COMPUTER LEARNING CENTERS, INC.
as Tenant
Dated: April 1, 1996
[PRIMARY LEASE]
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TABLE OF CONTENTS
LEASE AGREEMENT
EXHIBIT A -- Plan Showing Premises
EXHIBIT B -- Work Agreement
EXHIBIT C -- Form of Certificate
EXHIBIT D -- Rules and Regulations
EXHIBIT E -- Holidays
EXHIBIT F -- Site Plan
EXHIBIT G -- Tenant's Sign Plans
EXHIBIT H -- Janitorial Specifications
EXHIBIT I-1 -- Non-Disturbance Agreement (Lender)
EXHIBIT I-2 -- Non-Disturbance Agreement (Groundlessor)
EXHIBIT J -- Prime Lease
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LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is dated as of the 1st day of April,
1996, by and between 312 MARSHALL AVENUE LIMITED PARTNERSHIP, a Maryland
limited partnership ("Landlord"), and COMPUTER LEARNING CENTERS, a Virginia
corporation ("Tenant").
RECITALS
A. Landlord is the owner of the office building (the "Building")
located at 312 Marshall Avenue, Laurel, Maryland and owns a leasehold
interest in the land upon which it is situated (the "Land").
B. Tenant desires to lease space in the Building, and Landlord is
willing to rent space in the Building to Tenant upon the terms, conditions,
covenants and agreements set forth herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby covenant and agree as set forth below.
ARTICLE I
PREMISES
1.1 Landlord hereby leases to Tenant and Tenant hereby rents from
Landlord, for the term and upon the terms, conditions, covenants and
agreements herein provided, approximately Sixteen Thousand Five Hundred
Sixty-Four (16,564) square feet of rentable area, located on the first,
second and third floors of the Building (the "Premises"). The rentable
square feet of the Premises shall be determined in accordance with WDCAR
standards. The parties acknowledge that the square footage calculations set
forth above have been prepared by Tenant's architect, and are subject to
verification by Landlord's architect. In the event Landlord's architect
disagrees with the foregoing calculations, the two (2) architects shall use
their best efforts to resolve such discrepancy. In the event the architects
agree to adjust the foregoing square footage calculations, the monthly base
rental figures set forth in Paragraph 3.1(b) shall also be equitably adjusted
(and all such adjustments shall be evidenced in an amendment to this Lease).
The rentable square feet of the Premises includes a core factor reflecting
Tenant's use of the common areas. The Premises is outlined on Exhibit A
attached hereto and made a part hereof.
1.2 The lease of the Premises includes the right, together with other
tenants of the Building and members of the public and subject to the Rules
and Regulations attached hereto as Exhibit D, to use the common and public
areas of the Building, but includes no other rights not specifically set
forth herein.
1.3 Landlord agrees to provide Tenant with the non-exclusive use of
(10) parking spaces per 1,000 square feet of leased space throughout the
initial term and with the same ratio for all expansions and renewals. Said
parking shall be at no cost to Tenant and will be made available in the areas
marked on the site plan attached hereto as Exhibit F. Between the hours of
7:00 AM and 6:00 PM, Monday through Friday, Tenant will park no more then
three (3) cars per 1000 square feet of leased space in the lots marked "A"
and "B" and the balance of their cars in the lot marked "C" on the site plan
attached hereto as Exhibit F. The parties acknowledge that certain of the
parking rights granted to Tenant hereunder pertain to certain property
adjacent to the Building and the Land owned by Landlord or an affiliate of
Landlord. Landlord represents and warrants that (i) it has the authority to
grant such parking rights to Tenant pursuant to the terms of that certain
Construction, Operating and Reciprocal Easement Agreement dated April 5, 1963
recorded at Liber 2851, folio 314 among the land records of Prince George's
County, Maryland (the "Land Records"), as amended by that certain First
Supplement dated June 19, 1964 recorded among the Land Records at Liber 2992,
folio 619, that certain Second Supplement dated November 15, 1965 recorded
among the
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Land Records at Liber 3276, folio 157 and that certain Third Supplement dated
October 22, 1966 recorded among the Land Records at Liber 3435, folio 517 (as
so amended, the "Cross-Easement Agreement"), (ii) that it shall provide to
Tenant a true and correct copy of the Cross-Easement Agreement prior to
execution hereof, and (iii) that it shall not terminate or modify the
Cross-Easement Agreement in any manner which might impair Tenant's parking
rights hereunder. Tenant will devise a plan to be approved by the Landlord
for enforcement of the parking restrictions set forth in this paragraph.
Tenant further agrees to use reasonable efforts to enforce these parking
restrictions. As a part of the foregoing, Landlord shall provide ten (10)
reserved spaces as noted on Exhibit F, which shall be marked as reserved for
Tenant with appropriate signage.
ARTICLE II
TERM
2.1 The term of this Lease (the "Lease Term") shall commence on
the Lease Commencement Date, as determined pursuant to Section 2.2 hereof,
and shall continue for a period of ten (10) consecutive years thereafter,
unless the Lease Term is terminated earlier in accordance with the provisions
of this Lease; provided, however, that if the Lease Commencement Date is a
day other than the first day of a month, then the Lease Term shall commence
on the Lease Commencement Date and shall continue for the balance of the
month in which the Lease Commencement Date occurs and for a period of the
aforesaid number of consecutive years thereafter, unless the Lease Term is
terminated earlier in accordance with the provisions of this Lease.
2.2 The Lease Commencement Date shall be the earlier to occur of (a)
the day after the date on which the work and materials to be provided
pursuant to Article XXIV hereof ("Tenant Work") is "substantially complete",
as defined in Exhibit B hereto, and Tenant shall have obtained a certificate
of occupancy for the Premises (provided that the Tenant Work shall be deemed
substantially complete notwithstanding the failure to obtain a certificate of
occupancy in the event such failure is attributable to matters pertaining to
Tenant's use and occupancy of the Premises and not to the Tenant Work); or
(b) ninety (90) days following the date that the condition precedent set
forth in Paragraph 25.26 below is either satisfied or waived by Tenant and
all building permits for the Tenant Work have been issued (but in no event
shall the Lease Commitment Date be earlier than June 1, 1996).
Notwithstanding the foregoing, if Landlord is delayed in completing
construction of the Premises as a result of any "Tenant Delay" (as defined in
Paragraph 10 of Exhibit B), then for purposes of determining the Lease
Commencement Date, the Premises shall be deemed to have been substantially
complete on the date determined in accordance with Paragraph 10 of Exhibit B.
The foregoing notwithstanding, no Tenant Delay shall exist unless and until
Landlord has notified Tenant in writing that an event which could, if
uncured, give rise to a Tenant Delay has occurred and Tenant fails to correct
such occurrence (if validly noted) within three (3) business days of its
receipt of such notice; provided that the foregoing shall not apply with
respect to any delays attributable to change orders initiated and approved by
Tenant and/or Tenant's failure to meet the deadlines set forth herein for
development and approval of the plans and specifications for the Tenant Work.
Additionally, the total number of days of Tenant Delay shall be offset by the
number of days of delay attributable to the acts of omissions of Landlord or
its contractors, architects, representatives, licensees and agents, so that
Tenant shall only be responsible for the number of net days of delay
attributable to it, if any.
2.3 Promptly after the Lease Commencement Date is ascertained, Landlord
and Tenant shall execute a certificate, in the form attached hereto as
Exhibit C, which certificate shall set forth the Lease Commencement Date and
the date upon which the initial term of this Lease will expire.
2.4 It is presently anticipated that the Premises will be ready for
occupancy by Tenant on or about ninety (90) days following the date that the
conditions precedent set forth in Section 25.26 below are either satisfied or
waived by Tenant and all building permits for the Tenant Work have been
issued; provided, however, that if Landlord does not deliver possession of
the Premises by such date, Landlord shall not have any liability whatsoever
to Tenant on account of such failure to deliver possession of the Premises to
Tenant and this
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Lease shall not be rendered void or voidable as a result of such delay, except
as otherwise expressly provided herein. The foregoing notwithstanding, in the
event Tenant selects Landlord's proposed contractor as the general contractor
for the Tenant Work, and the Tenant Work is not substantially complete within
ninety (90) days following the date Tenant instructs Landlord to proceed with
such work, then, Tenant's obligation to pay Interim Rent shall cease after the
expiration of such ninety (90) day period. Further, in the event Tenant selects
Landlord's contractor as the general contractor for the Tenant Work and such
work is not substantially complete within two hundred seventy (270) days
following the date Tenant instructs Landlord to proceed with the same, then
Tenant may terminate this Lease by written notice to Landlord. The provisions
of Section 25.19 below shall not apply to Tenant's rights under this paragraph.
2.5 For purposes of this Lease, the term "Lease Year" shall mean a
period of twelve (12) consecutive months, commencing on the Lease
Commencement Date, and each successive twelve (12) month period thereafter;
except that if the Lease Commencement Date is a day other than the first day
of a month, then the first Lease Year shall commence on the Lease
Commencement Date and shall continue for the balance of the month in which
the Lease Commencement Date occurs and for a period of twelve (12) calendar
months thereafter.
2.6 Provided that Tenant is not in default hereunder beyond any notice
and cure period at the time of exercise, Tenant shall have the right and
option, by giving notice as set forth below, to extend and renew the term of
this Lease for two (2) additional terms of five (5)- years each (the "Option
to Renew") beginning on the day immediately following expiration of the
initial term hereof (the "Renewal Term") and upon the same terms and
conditions as the original term of this Lease. Notwithstanding the
foregoing, Landlord shall not be required to grant or provide any rent
waivers, allowances or improvements with respect to the Renewal Term, and
Tenant shall not be entitled to any additional renewal terms subsequent to
the Renewal Term. If Tenant desires to exercise the Option to Renew, Tenant
shall give Landlord written notice thereof at least nine (9) months prior to
the expiration of the initial Lease Term or the first Renewal Term, as
applicable. In the event of any earlier termination of this Lease, or if
Tenant shall fail to timely exercise the aforesaid Option to Renew then and
in such event, all rights of Tenant to the Renewal Term hereof shall be of no
further force or effect. The annual base rent for first Lease Year of any
Renewal Term shall be equal to the rent in the prior year multiplied by 1.03.
For each succeeding Lease Year during such Renewal Term the base rent will
increase by three percent (3%).
2.7 Tenant shall have the option to cancel this Lease at the end of the
seventy-second (72nd) month of the Term provided:
a) Tenant is not then in default hereunder beyond any notice and
cure periods.
b) Tenant provides written notice no later than nine (9) months
prior to the aforesaid termination date.
c) Tenant pays to Landlord a termination payment equal to $12.00 per
square foot. Said payment to be made no later than the end of the
seventy-second (72nd) month of the Term.
Tenant's failure to timely pay the termination payment to Landlord shall render
Tenant's election to cancel this Lease null and void.
2.8 (a) At all times during the initial Lease Term and any Renewal
Term, and provided the Tenant is not in default hereunder beyond any
applicable notice and cure period, Tenant shall have an option and right of
first refusal to lease all space on the third (3rd) and fourth (4th) floors
of the Building (such space being collectively referred to as "Expansion
Space") on the same terms and provisions then in effect under the Lease, in
minimum increments of at least 5,000 rentable square feet (to the extent
available on the applicable floor), except that the monthly base rent for the
Expansion Space shall be equal to the base rent currently being paid by
Tenant. Further, in the event Tenant leases any Expansion Space during the
first Lease Year, the Allowance for the Expansion Space shall be calculated
on the basis off $22.00 per rentable square foot; for Expansion Space leased
in subsequent Lease Years, the Allowance shall be reduced by $2.20 per
rentable square foot per year. No Allowance shall be provided for Expansion
Space leased during any Renewal Term.
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(b) At any time any Expansion Space is unleased, Tenant may, by
written notice to Landlord, exercise its option to lease the same, in minimum
increments of at least 5,000 rentable square feet (to the extent available on
the applicable floor) upon the terms set forth herein. In addition, in the
event Landlord obtains a written offer or letter of intent from a prospective
tenant to lease all or any part of that portion of the Expansion Space
located on the third (3rd) floor of the Building, or a serious written or
oral expression of interest by a bona-fide prospective tenant to lease
portions of the fourth (4th) floor Expansion Space (in either case, an
"Offer"), and Landlord desires to enter into discussions with respect to such
Offer, then Landlord shall promptly notify Tenant. Upon receipt of such
notice Tenant shall have ten (10) days in which to notify Landlord in writing
exercising Tenant's right to lease such Expansion Space. The foregoing
notwithstanding, in the event the Offer is for more than 5,000 rentable
square feet of space, Tenant shall only be required to lease 5,000 rentable
square feet of space if it exercises its expansion option in connection with
such Offer (but Tenant may, at its election, lease all of the space subject
to the Offer). Further, in the event (i) less than 5,000 rentable square
feet of space remains to be leased on the third (3rd) or fourth (4th) floors
of the Building, (ii) an Offer is made for less than all of such available
space on either floor and (iii) Landlord advises Tenant of the foregoing
circumstances at the time it presents the Offer to Tenant, then, by
exercising its expansion option with respect to such Offer, Tenant will be
deemed to have elected to lease all of the available space on such floor (not
to exceed 5,000 rentable square feet of space). The right to lease any
Expansion Space shall, at Landlord's election, be null and void if Tenant is
in default under the Lease beyond any applicable notice and cure periods at
the date Landlord notifies Tenant of the availability of the Expansion Space
or at any time thereafter and prior to commencement of the lease for such
Expansion Space.
(c) If Tenant exercises the right to lease the Expansion Space
provided herein, in order to confirm the leasing of such Expansion Space to
Tenant (and promptly after Landlord has prepared same), the parties may
execute a mutually agreed-upon amendment to the Lease. Such amendment shall
provide for a sixty (60) day period to develop plans and specifications for
the improvements Tenant desires Landlord to make to the Expansion Space and a
period of ninety (90) days thereafter for Landlord to construct the same.
(d) In the event Tenant exercises its right to lease Expansion
Space herein, Tenant's pro rata share shall be proportionately increased to
account for the increase in the rentable area of the Premises.
(e) If Tenant does not exercise its right to lease any Expansion
Space or does not respond to the Landlord's written notice that the space is
available within the ten (10) day period specified above, then Landlord may
lease such space to the proposed tenant under the Offer without further
notification to the Tenant; provided, however, that if such space again
becomes available for lease at any time during the Lease Term (whether on one
more occasions), Tenant's option rights hereunder shall again apply.
Anything contained herein to the contrary notwithstanding, Landlord agrees
that (i) it shall attempt to lease all other space in the Building prior to
leasing the remainder of the third (3rd) floor of the Building, and (ii) in
the event the remainder of the third (3rd) floor is leased to a third party
during the first three (3) Lease Years, then Tenant may nevertheless exercise
its right to lease such space at any time prior to the expiration of the
third (3rd) Lease Year (notwithstanding that Tenant may have opted not to
exercise that right when an Offer for such space was first presented to
Tenant); provided further, that Tenant may also elect to lease such space at
any time following the third (3rd) Lease Year as long as it agrees to be
responsible for the cost of relocating the then-occupant of such space or
terminating its lease (it being the intent hereof that such relocation and/or
termination costs shall be borne by Landlord if Tenant exercises its option
during the first three (3) Lease Years). In connection with the provisions
of clause (ii) above, Landlord covenants to include a provision in the lease
with the third floor tenant permitting Landlord either to relocate such
tenant or to terminate its lease in the event Tenant elects to lease such
space pursuant to the terms set forth above.
(f) In the event Landlord leases all or any material portion of
the fourth (4th) floor to another party after Tenant has elected not to lease
such space, Landlord shall extend Tenant's expansion rights regarding such
space to an additional 15,000 square feet of contiguous space in the
Building, as designated by Landlord (less any portion of the 4th floor leased
by Tenant).
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ARTICLE III
BASE RENT
3.1 (a) Commencing upon the date this Lease is executed by each of
Landlord and Tenant (the "Execution Date") through and including the Lease
Comment Date (e.g., the "License Period", as defined in such Section), Tenant
shall pay to Landlord minimum rent (hereinafter referred to as "Interim
Rent") in the amount of Ten Thousand and No/100 Dollars ($10,000.00) per
month. If the Execution Date is a date other than the first day of a month,
then the Interim Rent from the Execution Date until the first day of the
following month shall be prorated on a per diem basis. In the event Tenant
terminates this Lease pursuant to its rights under Section 25.26 below, then
Tenant's obligation on account of Interim Rent shall cease as of the date of
such termination. In the event Tenant does not so terminate the Lease and
the condition precedent set forth in Section 25.26 is either satisfied or
waived, then Tenant shall be entitled to a rental abatement in an amount
equal to the total Interim Rent paid by Tenant. Twenty percent (20%) of the
foregoing abatement shall be applied against Tenant's rental obligations
first coming due hereunder at the commencement of each of the fourth (4th),
fifth (5th), sixth (6th), seventh (7th) and eighth (8th) Lease Years (and the
same shall continue in each of such Lease Years until the full twenty percent
(20%) of the total Interim Rent paid by Tenant has been fully recouped during
such Lease Year).
(b) During the Lease Term, Tenant shall pay to Landlord, as annual
base rent for the Premises in equal monthly installments, in advance, on the
first day of each calendar month during the Term, the amounts set forth below:
Year Rental Rate Amount
1 $15.00 $20,705.00
2 $15.45 $21,326.15
3 $15.91 $21,961.10
4 $16.39 $22,623.66
5 $16.88 $23,300.03
6 $17.39 $24,004.00
7 $17.91 $24,721.77
8 $18.45 $25,467.15
9 $19.00 $26,226.33
10 $19.57 $27,013.12
The base rent set forth above reflects an annual increase of three percent (3%)
per year during the initial Lease Term, and this increase shall also apply to
any Renewal Terms.
(c) Concurrently with the execution of this Lease, Tenant shall
pay to Landlord an amount equal to one (1) monthly installment of the annual
base rent payable during the first (1st) Lease Year, which amount shall be
credited by Landlord toward the monthly installment of annual base rent
payable for the first full calendar month falling within the Lease Term.
This amount shall be a non-refundable payment to Landlord in the event Tenant
does not occupy the Premises pursuant to this Lease. If the Lease
Commencement Date is a day other than the first day of a month, then annual
base rent from the Lease Commencement Date until the first day of the
following month shall be prorated on a per diem basis at the rate of
one-thirtieth (1/30th) of the monthly installment of annual base rent payable
during the first Lease Year, and Tenant shall pay such prorated installment
of annual base rent in advance on the Lease Commencement Date.
3.2 All sums payable by Tenant under this Lease, whether or not stated
to be annual base rent or additional rent, shall be paid to Landlord in legal
tender of the United States, without notice, setoff, deduction or demand,
except as specifically provided for herein,
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at the address to which notices to Landlord are to be given or to such other
party or to such other address as Landlord may designate from time to time by
written notice to Tenant. If Landlord shall at any time accept rent after it
shall have become due and payable, such acceptance shall not excuse a delay
upon subsequent occasions, or constitute or be construed as a waiver of any
of Landlord's rights hereunder.
ARTICLE IV
INCREASES IN OPERATING CHARGES
4.1 Operating Charges.
(a) As additional rent for the Premises, Tenant shall pay to
Landlord Tenant's proportionate share of the amount by which the Operating
Charges (as hereinafter defined) incurred by Landlord in the operation of the
Building (which term, for the purposes of this Article IV, shall include the
Land) during each calendar year falling entirely or partly within the Lease
Term exceed the Operating Charges incurred by Landlord in the operation of
the Building during the 1996 calendar year (the "Operating Charges Base
Amount"). For purposes of determining Operating Charges Base Amount, the
following provisions shall apply: (i) to the extent any landscaping,
maintenance and/or repair work is covered by any guarantees or warranties,
the Operating Charges for each of such items shall be the costs incurred on
account thereof during the first full year after such guarantees or
warranties have expired; (ii) in the event any maintenance or repair work is
deferred during the 1996 calendar year, Operating Costs shall be increased by
the costs which Landlord would have incurred in performing such deferred
obligations; (iii) to the extent the Lease Commencement Date occurs after
June 1, 1996, then the base year shall be the 1997 calendar year; and (iv)
Real Estate Taxes included in the Operating Charges Base Amount shall be
calculated based upon the Real Estate Taxes for the first full tax year that
reflect the occupancy of the Building by Tenant and BG&E and the improvements
made to the Building to accommodate Tenant and BG&E. For purposes of this
Section, Tenant's proportionate share of increases in Operating Charges shall
be that percentage which is equal to a fraction, the numerator of which is
the number of square feet of rentable area in the Premises, and the
denominator of which is the total rentable area of the Building.
(b) The Operating Charges shall mean the sum of the costs and
expenses reasonably incurred by Landlord in the course of operating,
managing, insuring, servicing, repairing, maintaining, and protecting the
Building (including, but not limited to, a fair market management fee equal
to five percent (5%) of the gross income from the Building), and Real Estate
Taxes as defined in Section 4.1(c). All Operating Charges shall be
determined according to generally accepted accounting principles which shall
be consistently applied. Anything contained herein to the contrary
notwithstanding, "Operating Charges" shall not include: (i) expenses for
which Landlord is reimbursed (either by an insurer, condemnor, tenant,
warrantor or otherwise) to the extent of funds received by Landlord; (ii)
expenses incurred in leasing or procuring tenants (including lease
commissions, advertising expenses and expenses of renovating space for
tenants); (iii) interest or amortization payments on any mortgages or deeds
of trust; (iv) net basic rents under ground leases; (v) costs specially
billed to and paid by specific tenants; (vi) depreciation or capital
improvements costs with respect to the Building, the Land or any equipment,
machinery, fixtures or improvements therein, EXCEPT for amortization of the
cost of improvements or equipment which are capital in nature and which are
installed for the purpose of either reducing Operating Charges of the
Building, up to the amount saved as a result of the installation thereof in
any Lease Year, or (II) of complying with any laws, ordinances, rules and
regulations first taking effect after the Lease Commencement Date (and all of
such permitted capital costs shall be amortized on a straight-line basis over
the useful life of the capital investment items, such useful life being
deemed the longest period permissible by IRS regulations, with only the
annual amortized portion being included in Operating Charges for any Lease
Year); (vii) rental or similar payments made in connection with the leasing
of any equipment which is considered capital in nature; (viii) compensation
paid to officers of Landlord or officers of the management agent who do not
perform property management related activities; (ix) the cost of tools,
equipment and material used in the initial construction of the Building; (x)
costs directly resulting from the gross negligence or willful misconduct of
Landlord, its employees, agents, contractors or
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employees; (xi) costs for any structural maintenance, replacement
or redesign; (xii) legal fees and other expenses incurred by Landlord or agents
in connection with negotiations or disputes with tenants or prospective tenants
for the Building; (xiii) expenses for the correction of defects in Landlord's
construction of the Building and/or in its construction of the Improvements;
(xiv) allowances, concessions, permits, licenses, inspections, and other costs
and expenses incurred in the initial build-out of space for tenants (including
Tenant), or any cash or other consideration paid by Landlord on account of, with
respect to, or in lieu of the initial build-out described above; (xv) Landlord's
costs of any services sold or provided to tenants for which Landlord is
otherwise reimbursed by Tenant under this Lease or any other tenant: (xvi)
expenses in connection with services or other benefits of a type which are not
made available to Tenant but which are provided to another tenant or occupant,
if any; (xvii) costs incurred due to violation by Landlord or any tenant (other
than Tenant) of the terms and conditions of any lease; (xviii) renovation of the
Building made necessary by casualty or the exercise of eminent domain; (xix) any
compensation paid to clerks, attendants or other persons in commercial
concessions operated for profit by Landlord; (xx) increased insurance premiums
caused by Landlord's or any tenant's (other than Tenant's) hazardous acts; (xxi)
costs arising from the presence of hazardous materials in, about or below the
Building or the Land; (xxii) costs incurred for any items to the extent of
Landlord's recovery under a manufacturer's, materialmen's, vendor's or
contractor's warranty; (xxiii) costs of acquisition of sculpture, paintings or
other objects of art; (xxiv) reserves for repairs, maintenance and replacements;
(xxv) costs of repairs incurred by reason of condemnation, to the extent
Landlord receives compensation therefor through condemnation or similar awards;
(xxvi) costs relating to maintaining Landlord's existence, either as a
corporation, partnership, trust or other entity; (xxv) Landlord's general
overhead expenses; (xxvi) costs incurred to achieve compliance with any
governmental laws, ordinances, rules, regulations or orders enacted prior to the
date hereof; (xxvii) any penalties or interest expenses incurred because of
Landlord's failure timely to pay any Operating Charges or Taxes; (xxviii) costs
of any repairs or improvements to the Building resulting from a fire or other
casualty, to the extent such repairs would be covered by the insurance which
Landlord is required to procure hereunder and Landlord fails to procure the
same; (xxix) accounting fees other than those attributable to reviewing and
preparing operating statements for the Building; and (xxx) because the Premises
has or will be separately metered for electricity and HVAC usage, and that
Tenant will be paying all bills for electricity consumed within the Premises
directly to the local utility provider, Operating Charges shall also exclude
electric, HVAC and related costs for leased space in the Building (but the
reasonable cost of providing electrical and HVAC service to the Common Areas, as
reasonably demonstrated by Landlord, shall constitute an Operating Charge).
There shall be no duplication of costs or reimbursement. Landlord shall use
reasonable efforts to minimize Operating Charges for the Building.
(c) Real Estate Taxes shall mean (i) all real estate taxes,
including general and special assessments, if any, which are imposed upon
Landlord or assessed against the Building and/or the Land, (ii) any other
present or future taxes or governmental charges that are imposed upon
Landlord or assessed against the Building and/or the Land which are in the
nature of or in substitution for real estate taxes, including any tax levied
on or measured by the rents payable by tenants of the Building, and (iii)
expenses (including reasonable attorneys' fees) incurred in reviewing,
protesting or seeking a reduction of real estate taxes. There shall be
excluded from such taxes all income taxes; provided, however, that if at any
time during the Lease Term the present system of ad valorem taxation of real
property shall be changed so that in lieu of the whole or any part of the ad
valorem tax on real property, there shall be assessed on Landlord a tax in
lieu thereof, including, without limitation, a capital levy or a tax on the
gross rents received with respect to the Building or Land, or a federal,
state, county, municipal, or other local income or similar tax, assessment,
levy or charge (distinct from any now in effect in the jurisdiction in which
the Land is located) measured by or based, in whole or in part, upon any such
gross rents, then any and all of such taxes, assessments, levies or charges,
to the extent so measured or based, shall be deemed to be included within the
term Real Estate Taxes, but only to the extent that the same would be payable
if the Building or Land were the only property of Landlord, or otherwise
properly allocable to the Land. Landlord covenants to pay all Operating
Charges and real property taxes before the same become delinquent. No
penalty or interest because of the failure to timely pay any tax shall be
included as Real Estate Taxes. In no event shall Real Estate Taxes include
any increases attributable to any enlargement, expansion or substantial
renovation of the Building or any part thereof. At Tenant's request,
Landlord shall contest any assessed valuation of the Building or Land or the
amount of any Real Estate Taxes with counsel reasonably acceptable to Tenant;
provided that Landlord may elect not to so appeal the assessed value of the
Land or Building or the amount of any Real Estate Taxes, in which event
Tenant shall be entitled to appeal the same on Landlord's behalf (and Tenant
shall be entitled to recover the cost it incurs in prosecuting any such
appeal before any savings generated thereby is passed on to the tenants of
the Building).
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Landlord and its affiliated entities (including Berman Enterprises Limited
Partnership) agree to execute such documents as Tenant may request in order to
enable Tenant to appeal any Real Estate Tax bill or assessment of the Land
and/or Building. Reductions in real estate taxes shall reduce the Operating
Charges for the applicable Lease Year(s). Landlord's obligation to refund
amounts to Tenant on account of any refund of Real Estate Taxes received after
the Lease Term has expired, but attributable to periods within the Lease Term,
shall survive the expiration or earlier termination of this Lease.
4.2 If the average occupancy rate for the entire Building during any
calendar year is less than ninety-five percent (95%), or if Landlord is not
furnishing to any particular tenant or tenants in the Building any services
or utilities customarily furnished by Landlord to all tenants in the
Building, then the Operating Charges for such calendar year which vary with
occupancy levels (such as janitorial charges) shall be deemed to include all
additional costs and expenses, as reasonably estimated by Landlord, which
would have been incurred during such calendar year if such average occupancy
rate had been ninety-five percent (95%) and if Landlord had in fact furnished
to all tenants all services and utilities customarily furnished by Landlord
to tenants in the Building. Further, the parties agree that, in all events,
Operating Charges for the 1996 calendar year shall be grossed-up to reflect
costs which would have been incurred had the Building been one hundred
percent (100%) leased at all times during such period.
4.3 Following the expiration of the first Lease Year, Tenant shall make
estimated monthly payments to Landlord on account of increases in charges
described in Section 4.1 that are expected to be incurred during each
calendar year, as reasonably estimated by Landlord. Within approximately
ninety (90) days after the expiration of each calendar year, Landlord shall
submit to Tenant an itemized statement ("Year-End Statement") of Operating
Charges for such calendar year, showing Tenant's proportionate share of the
amounts by which the costs and expenses actually incurred during the
preceding calendar year exceeded the Operating Charges Base Amount. The
Year-End Statement shall (i) include copies of all Real Estate Tax bills,
(ii) include a itemized break-down of Operating Charges (including those
applicable to the 1996 calendar year and those incurred on account of
"controllable" expenses), and (iii) be certified as true and correct by an
officer of Landlord. If such statement indicates that the aggregate amount
of Tenant's estimated payments, if any, exceeds Tenant's actual liability,
Tenant shall deduct the net overpayment from its next payment or payments of
annual base rent, except that in the last Lease Year Landlord shall promptly
remit such overpayment to Tenant. If such statement indicates that Tenant's
actual liability exceeds the estimated payments, if any, made by Tenant, then
Tenant shall pay to Landlord, within fifteen (15) days of the date of
Landlord's statement, the amount of such excess as additional rent due
hereunder.
4.4 In the event the Lease Term expires on a day other than the first
day or the last day of a calendar year, the increases in the charges
described in Section 4.1 to be paid by Tenant for such calendar year shall be
a pro rata portion of Tenant's proportionate share thereof for the full
calendar year.
4.5 Landlord will respond to any request for information concerning any
Operating Charge statement within thirty (30) days of Tenant's written
request. Landlord agrees to retain the books and records substantiating
Operating Charges incurred in each Lease Year at Landlord's address for
notice for a period of at least three (3) years from the date Landlord
submits its annual statement of actual Operating Charges to Tenant. Tenant
shall have the right, during business hours and upon reasonable prior notice,
to inspect Landlord's books and records relating to Operating Charges and/or
to have such books and records audited at Tenant's expense by a certified
public accountant or other party designated by Tenant; provided, however,
that if any audit that discloses a discrepancy of more than six percent (6%)
in the amount of Tenant's proportionate share of Operating Charges for any
Lease Year, the cost of the audit shall be paid for by Landlord. Upon final
resolution of the matter, any discrepancy shall be promptly corrected by a
payment of any shortfall or overpayment to the appropriate party within
thirty (30) days after the audit.
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4.6 Anything contained herein to the contrary notwithstanding, in no
event shall Tenant's proportionate share of "controllable" Operating Charges
increase by more than five percent (5%) in any calendar year. For purposes
hereof, "controllable" Operating Charges shall mean all Operating Charges
other than Real Estate Taxes, utility charges, insurance premiums and snow
removal charges. Further, for purposes of the foregoing calculations,
increases in the "repair and maintenance" line item of Operating Charges
(excluding capital repairs) (i) shall be subject to a cap of eight and one
half percent (8.5%) during the second (2nd) Lease Year, (ii) shall be subject
to a cap of six and one-half percent (6.5%) during the third (3rd) Lease
Year, and (iii) shall thereafter be subject to a five percent (5%) cap
calculated on a cumulative, compounding basis, separate and apart from other
Operating Charges.
ARTICLE V
SECURITY DEPOSIT
5.1 Security Deposit. Upon the execution of this Lease, Tenant shall
pay to Landlord a security deposit equal to two (2) months rent in the amount
of Forty-One Thousand Four Hundred Ten and no/100 Dollars ($41,410.00) (the
"Security Deposit"). In the event that the Tenant is not in default at the
end of the fifth (5th) Lease Year beyond any notice and cure period, Landlord
agrees to refund one (1) months Security Deposit. In no instance shall the
amount of such Security Deposit be considered a measure of liquidated
damages. All or any part of the Security Deposit may be applied by Landlord
in total or partial satisfaction of any default by Tenant. The application
of all or any part of the Security Deposit to any obligation or default of
Tenant under this Lease shall not deprive Landlord of any other rights or
remedies Landlord may have nor shall such application by Landlord constitute
a waiver by Landlord. If all or any part of the Security Deposit is applied
to an obligation of Tenant under this Lease, then Landlord shall have the
right to call upon Tenant to restore the Security Deposit to its original
amount by giving notice to Tenant and Tenant shall immediately restore the
Security Deposit by payment thereof to Landlord. The Security Deposit shall
be held by Landlord without liability for interest; and Landlord shall be
entitled to full use of the Security Deposit and shall not be required to
keep it in a segregated account or escrow. It is understood and agreed that
should Landlord convey its interest under the Lease, the Security Deposit
shall be turned over by Landlord to Landlord's grantee or transferee, and
upon such delivery of the Security Deposit, Tenant hereby release Landlord
herein named of any and all liability with respect to the Security Deposit,
its application and return, and Tenant agrees to look solely to such grantee
or transferee, and it is further understood and agreed that this provision
shall also apply to any subsequent grantees and transferee. Landlord will
return the balance of the Security Deposit, not previously applied as
provided herein, within thirty (30) days after the expiration of the Lease
Term.
ARTICLE VI
USE OF PREMISES
6.1 Tenant shall use and occupy the Premises solely for the operation
of a technical school with related uses, including training, storage and
general office uses (the "Permitted Uses"), and for no other use or purpose
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Tenant shall not use or occupy the Premises for any
unlawful purpose or in any manner that will constitute waste, nuisance or
unreasonable annoyance to Landlord or other tenants of the Building. Tenant
shall comply with all present and future laws, ordinances (including zoning
ordinances and land use requirements), regulations, and orders of the United
States of America, the State of Maryland, and any other public or
quasi-public authority having jurisdiction over the Premises, concerning
Tenant's use and occupancy of the Premises and all machinery, equipment and
furnishings therein. It is expressly understood that if any present or
future law, ordinance, regulation or order requires an occupancy or use
permit for the Premises, Tenant shall obtain such permit at Tenant's own
expense and shall promptly deliver a copy thereof to Landlord (subject, in
all events, to the provisions regarding the initial certificate of occupancy
for the Premises set forth in Section 2.2. above). Use of the Premises is
subject to all covenants, conditions and restrictions of record.
6.2 Tenant shall pay any business, rent or other taxes that are now or
hereafter levied upon Tenant's specific use or occupancy of the Premises, the
conduct of Tenant's business at the Premises, or Tenant's equipment or other
personal property. In the event
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that any such taxes are enacted, changed or altered so that any of such taxes
are levied against Landlord, or the mode of collection of such taxes is changed
so that Landlord is responsible for collection or payment of such taxes, Tenant
shall pay any and all such taxes to Landlord upon written demand from Landlord.
6.3 Tenant shall not use or allow the Premises to be used for the
Release, storage, use, treatment, disposal or other handling of any Hazardous
Substance, without the prior consent of Landlord. The term "Release" shall
have the same meaning as is ascribed to it in the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended, ("CERCLA"). The term "Hazardous Substance" means (i) any substance
defined as a "hazardous substance" under CERCLA, (ii) petroleum, petroleum
products, natural gas, natural gas liquids, liquefied natural gas, and
synthetic gas, and (iii) any other substance or material deemed to be
hazardous or toxic under any federal, state or local law, code, ordinance or
regulation. Nothing herein shall prohibit the transportation to and from,
and the use, storage, maintenance and handling within, the Premises of
cleaning and copying fluids and other similar substances customarily used in
commercial offices, provided: (a) such substances shall be used and
maintained only in such quantities as are reasonably necessary for such
permitted uses and strictly in accordance with applicable laws and the
manufacturers' instructions therefor; (b) if any applicable laws require that
any such substances be disposed of separately from ordinary trash, Tenant
shall make arrangements at Tenant's expense for such disposal directly with a
qualified and licensed disposal company at a lawful disposal site; and (c)
any remaining such substances shall be completely, properly and lawfully
removed from the Building and Land by Tenant, at its sole expense, upon
expiration or earlier termination of this Lease. Tenant shall: (a) comply
with all federal, state, and local laws, codes, ordinances, regulations,
permits and licensing conditions governing the Release, discharge, emission,
or disposal of any Hazardous Substance and prescribing methods for or other
limitations on storing, handling, or otherwise managing Hazardous Substances,
(b) at its own expense, promptly contain and remediate any Release of
Hazardous Substances arising from or related to Tenant's activities in the
Premises, the Building, the Land or the environment and remediate and pay for
any resultant damage to property, persons, and/or the environment, (c) give
prompt notice to Landlord, and all appropriate regulatory authorities, of any
Release of any Hazardous Substance in the Premises, the Building, the Land or
the environment arising from or related to Tenant's activities, which Release
is not made pursuant to and in conformance with the terms of any permit or
license duly issued by appropriate governmental authorities, (d) following
any Release, at Landlord's request, retain an independent engineer or other
qualified consultant or expert acceptable to Landlord, to conduct, at
Tenant's expense, an environmental audit of the Premises and immediate
surrounding areas, (e) reimburse Landlord, upon demand, the reasonable cost
of any testing for the purpose of ascertaining if there has been any Release
of Hazardous Substances in the Premises, if such testing is required by any
governmental agency or Landlord's Mortgagee, (f) upon expiration or
termination of this Lease, surrender the Premises to Landlord free from the
presence and contamination of any Hazardous Substance. Landlord represents
and warrants that, to the best of its knowledge, as of the date hereof the
Premises, Building and Land are free from Hazardous Substances and comply
with all applicable laws, ordinances, rules and regulations pertaining to the
same. Landlord shall indemnify, defend and hold Tenant harmless from any
loss or damage Tenant may suffer in the event the representation set forth in
the immediately preceding sentence is untrue, or in the event any Hazardous
Substances are released in the Building or Land as a result of the negligence
or willful misconduct of Landlord or its agents or employees.
6.4 As long as Tenant is not in default hereunder beyond any applicable
notice and cure periods, Landlord covenants and agrees that Tenant shall have
the exclusive right to conduct computer training and technical
school/classroom operations from the Building, and Landlord shall not lease
any space in the Building to any party that will engage in any such
activities in a manner which is directly competitive with Tenant.
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ARTICLE VII
ASSIGNMENT AND SUBLETTING
7.1 Tenant shall not mortgage or otherwise encumber this Lease or all
or any of Tenant's rights hereunder without obtaining the prior written
consent of Landlord, which consent may be withheld in Landlord's sole and
absolute discretion. Similarly, Tenant shall not assign its rights under
this Lease, or sublet all or any portion of the Premises, without Landlord's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed. Tenant may sublease or assign any portion of the
leased premises to any related entity or affiliate of Tenant, including any
entity created on account of a sale, merger, consolidation or other business
combination (a "Permitted Transfer") without the Landlord's approval. The
consent by Landlord to any assignment, subletting or occupancy shall not be
construed as a waiver or release of Tenant from liability for the performance
of any covenant or obligation to be performed by Tenant under this Lease, nor
shall the collection or acceptance of rent from any assignee, subtenant or
occupant constitute a waiver or release of Tenant from any of its liabilities
or obligations under this Lease. Landlord's consent to any assignment,
subletting or occupancy shall not be construed as relieving Tenant or any
assignee, subtenant or occupant from the obligation of obtaining Landlord's
prior written consent to any subsequent assignment, or occupancy. For any
period during which Tenant is in default hereunder, Tenant hereby assigns to
Landlord the rent due from any assignee, subtenant or occupant of Tenant and
hereby authorizes each such assignee, subtenant or occupant to pay said rent
directly to Landlord. If the rental paid to Tenant on any subletting,
assignment or occupancy exceeds the rental payable by Tenant to Landlord
hereunder (and if the subleased space does not constitute the entire
Premises, the existence of such excess shall be determined on a pro rata
basis), all such excess shall be split 50/50 with the Landlord and Tenant.
The foregoing calculation shall be made only on any "net profits" realized by
Tenant in connection with any assignment or subletting. In connection
therewith, any excess payments realized by Tenant shall be offset by any
brokerage fees, space fees, or advertising fees, any improvements paid for or
allowances or other concessions provided by Tenant to or for the subtenant or
assignee, and any other third-party costs actually incurred by Tenant in
connection with any subletting or assignment, as well as rental attributable
to any period that any space to be sublet or assigned is vacant or under
construction. Further, in the case of an assignment, net profits shall
include only the consideration paid for the right to assume this Lease, and
not any amounts on account of the value of Tenant's business, inventory,
good will, equipment, customer lists or other assets.
7.2 If Tenant is a partnership, any dissolution of Tenant or withdrawal
or change, whether voluntary, involuntary or by operation of law, of any
general or limited partner or partners of Tenant shall be deemed a voluntary
assignment of this Lease and subject to the provisions of Section 7.1. If
Tenant is a corporation, any dissolution, merger, consolidation or other
reorganization of Tenant, or the sale or transfer of any stock or any
interest in the capital stock of Tenant, voluntarily, involuntarily or by
operation of law, shall be deemed a voluntary assignment of this Lease and
subject to the provisions of Section 7.1 (but the foregoing shall not
preclude Tenant from engaging in a Permitted Transfer).
7.3 If, at any time during the Lease Term, Tenant desires to transfer,
assign or sublet all or part of the Premises to a party other than a
Permitted Transferee, Tenant shall give notice to Landlord in writing
("Tenant's Request Notice") of the identity of the proposed assignee or
subtenant and its business, the terms of the proposed assignment or
subletting, the commencement date of the proposed assignment or subletting
(the "Proposed Sublease Commencement Date"), and the area proposed to be
assigned or sublet (the "Proposed Sublet Space"). Tenant shall also transmit
therewith the most recent financial statement or other evidence of financial
responsibility of such assignee or subtenant and a certification executed by
Tenant and such proposed assignee or subtenant stating whether or not any
premium or other consideration is being paid for the proposed assignment or
sublease. Landlord shall notify Tenant in writing of its decision to approve
or reject any request by Tenant to assign or sublet (providing Tenant with
the reasonable basis for any such denial) within ten (10) business days of
the date of the request, failing which such request shall be deemed approved.
7.4 Tenant agrees to pay to Landlord as additional rent hereunder the
reasonable attorneys' fees incurred by Landlord in connection with any
request by Tenant for Landlord to give its consent to any assignment,
transfer, mortgage, encumbrance, or subletting by Tenant. Any sublease,
assignment or other transfer shall, at Landlord's option, be effected on
forms reasonably approved by Landlord.
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7.5 Without limiting the other instances in which it may be reasonable for
Landlord to withhold its consent to an assignment or subletting, Landlord and
Tenant acknowledge that it will be reasonable for Landlord to withhold its
consent in any of the following instances: (i) the proposed assignee or
subtenant is not reasonably creditworthy; (ii) the character or reputation, of
the proposed subtenant or assignee is inconsistent with the quality of other
tenancies in the Building; (iii) Landlord has received from any prior lessor to
the proposed assignee or subtenant a negative report concerning such prior
lessor's experience with the proposed assignee or subtenant; (iv) Landlord has
experienced previous defaults by or is in litigation with the proposed assignee
or subtenant; (v) the proposed assignment or sublease will create a vacancy
elsewhere in the Building; or (vi) at the time such request is made, Tenant is
in default of any obligation under this Lease beyond any applicable notice and
cure period.
ARTICLE VIII
MAINTENANCE AND REPAIRS
8.1 Tenant shall keep and maintain the interior, non-structural portions
of the Premises and all fixtures and equipment located therein in clean, safe
and sanitary condition, shall take good care thereof and make all required
repairs thereto, shall suffer no waste or injury thereto, and shall, at the
expiration or other termination of the Lease Term, surrender the Premises in the
same order and condition in which they were on the Lease Commencement Date,
ordinary wear and tear and unavoidable damage by the elements excepted. The
foregoing notwithstanding, Landlord shall perform all maintenance and make all
repairs and replacements to the Project which are necessary to maintain in good
order and repair the base building structure and systems, including the exterior
walls, load bearing elements, foundations, pipes, conduits, roof and Common
Areas, sprinkler system and other life/safety systems, and the mechanical,
electrical, HVAC and plumbing systems. All repairs and maintenance required of
Landlord pursuant to this Section or elsewhere in this Lease shall be performed
in accordance with standards applicable to comparable office buildings in the
Laurel, Maryland area, and performed in a timely and diligent fashion. Landlord
represents and warrants that the base building systems serving the Premises
(i.e., HVAC units, ductwork, VAV boxes, sprinkler systems, etc.) are in good
condition and working order and comply with all applicable laws.
8.2 Except as otherwise provided in Article XVII hereof, all injury,
breakage and damage to the Premises caused by any act or omission of Tenant, or
of any agent, employee, subtenant, assignee, contractor, client, guest, family
member, licensee, customer or invitee of Tenant, shall be repaired by and at the
sole expense of Tenant.
ARTICLE IX
ALTERATIONS
9.1 The original improvement of the Premises shall be accomplished by
Landlord and/or Tenant in accordance with the terms of Article XXIV below and
Exhibit B attached hereto. It is understood and agreed that Landlord is under
no obligation to make any initial structural or other alterations, decorations,
additions or improvements in or to the Premises except as set forth in Exhibit B
or as otherwise provided in Article XXIV of this Lease.
9.2 Tenant will not make or permit anyone to make any alterations,
additions, improvements or other changes (hereinafter referred to collectively
as "Alterations"), structural or otherwise, in or to the Premises or the
Building, without the prior written consent of Landlord. Landlord's consent to
nonstructural Alterations not visible from the exterior of the Premises shall
not be unreasonably withheld or delayed. The parties acknowledge that cosmetic
improvements and non-structural alterations which do not affect building systems
and which cost less than $10,000 in each instance shall not constitute
"Alterations" for purposes hereof and may be made by Tenant at any time. When
granting its consent, Landlord may impose reasonable conditions, including,
without limitation, the approval of plans and
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specifications, approval of the contractor or other persons who will perform the
work, and the obtaining of specified insurance. All Alterations permitted by
Landlord pursuant to this Section 9.2 must conform to all laws, regulations and
requirements of federal, state and county governments, and any other public or
quasi-public authority having jurisdiction over the Premises. Tenant agrees to
obtain and deliver to Landlord, prior to the completion of any Alterations,
written, unconditional waivers of mechanics' and materialmen's liens against the
Premises, the Building and the Land from all proposed contractors,
subcontractors, laborers and material suppliers for all work, labor and services
to be performed and materials to be furnished in connection with Alterations.
If, notwithstanding the foregoing, any mechanics' or materialmen's lien is filed
against the Premises, any equipment within the Premises, the Building and/or the
Land, for work claimed to have been done for, or materials claimed to have been
furnished to, the Premises, such lien shall be discharged by Tenant within
twenty (20) days thereafter, at Tenant's sole cost and expense, by the payment
thereof or by the filing of a bond acceptable to Landlord. If Tenant shall fail
timely to discharge any such mechanics' or materialmen's lien, Landlord may, at
its option, discharge such lien without inquiry into the validity thereof and
treat the cost thereof (including reasonable attorneys' fees incurred in
connection therewith) as additional rent due hereunder, it being expressly
agreed that such discharge by Landlord shall not be deemed to waive or release
the default of Tenant in not discharging such lien. It is understood and agreed
that any Alterations, other than those made by Landlord pursuant to Exhibit B,
shall be conducted on behalf of Tenant and not on behalf of Landlord. It is
further understood and agreed that in the event Landlord shall give its written
consent to the making of any Alterations, such written consent shall not be
deemed to be an agreement or consent by Landlord to subject its interest in the
Premises, the Building or the Land to any mechanics' or materialmen's liens
which may be filed in connection therewith.
9.3 Tenant shall indemnify and hold Landlord harmless from and against any
all expenses, liens, claims, liabilities and damages (including, without
limitation, reasonable attorneys' fees) based on or arising, directly or
indirectly, by reason of the making of any Alterations. If any Alterations are
made without the prior written consent of Landlord, Landlord shall have the
right to remove and correct such Alterations and restore the Premises and the
Building to their condition immediately prior thereto, and Tenant shall be
liable for all expenses incurred by Landlord in connection therewith. All
Alterations to the Premises or the Building made by either party shall
immediately become the property of Landlord and shall remain upon and be
surrendered with the Premises as a part thereof at the end of the Lease Term;
provided, however, that if Tenant is not in default under this Lease beyond any
notice and cure period, then Tenant shall have the right to remove, prior to the
expiration or earlier termination of the Lease Term, all movable or systems
furniture, furnishings, fixtures, information or telecommunications systems and
equipment installed in the Premises solely at the expense of Tenant, and except
that Tenant shall be required to remove all Alterations in the Premises or the
Building which Landlord designates in writing for removal at the time its
consent to the installation thereof is given to Tenant. All damage and injury
to the Premises or the Building caused by such removal shall be repaired by
Landlord, at Tenant's sole expense. If such property of Tenant is not removed
by Tenant prior to the expiration or earlier termination of this Lease, the same
shall become the property of Landlord and shall be surrendered with the Premises
as a part thereof; provided, however, that Landlord shall have the right to
remove at Tenant's expense such property and any Alteration which Landlord
designates in writing for removal.
ARTICLE X
SIGNS AND FURNISHINGS
10.1 No sign, advertisement or notice shall be inscribed, painted, affixed
or otherwise displayed on any part of the exterior or the interior of the
Building except on the directories and the doors of the offices and such other
areas as are designated by Landlord, and then only in such place, number, size,
color and style as are approved in writing by Landlord. Landlord, at Landlord's
expense, shall install building standard signage on Tenant's suite entry door
and on the directory board in the Building lobby. Landlord hereby consents to
the installation by Tenant of the monument and first floor facade signs
described in Exhibit G hereto (as to size, materials and color) in the location
or locations depicted in such Exhibit, subject to compliance with all applicable
laws and provided that the signage proposed by Tenant will not legally preclude
Landlord from installing a sign on the top floor of the Building's facade for
the benefit of another tenant in the Building. All of Tenant's signs that are
approved by Landlord shall be installed by Landlord at Tenant's cost and
expense. If any sign,
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advertisement or notice that has not been approved by Landlord is exhibited or
installed by Tenant, Landlord shall have the right to remove the same at
Tenant's expense.
10.2 Landlord shall have the right to prescribe the weight and position of
safes and other heavy equipment and fixtures contemplated in Tenant's plans for
the initial build-out of the Premises, which, if considered necessary by
Landlord, shall be installed in such manner as Landlord directs in order to
distribute their weight adequately. Subject to the provisions of Section 13.5
below, any and all damage or injury to the Premises or the Building caused by
moving the property of Tenant into or out of the Premises, or due to the same
being in or upon the Premises, shall be repaired (by Landlord or a contractor
selected by Landlord) at the sole cost of Tenant. No furniture, equipment or
other bulky matter of any description will be received into the Building or
carried in the elevators except as approved by Landlord, and all such furniture,
equipment and other bulky matter shall be delivered only through the designated
delivery entrance of the Building and the designated freight elevator. All
moving of furniture, equipment and other materials shall be under the direct
control and supervision of Landlord who shall not, however, be responsible for
any damage to or charges for moving the same. Tenant agrees to remove promptly
from the sidewalks adjacent to the Building any of Tenant's furniture, equipment
or other material there delivered or deposited.
ARTICLE XI
TENANT'S EQUIPMENT
11.1 Tenant shall not install any equipment of any type or nature that will
or may necessitate any changes, replacements or additions to the water system,
heating system, plumbing system, air-conditioning system or electrical system of
the Premises or the Building, without first obtaining the prior written consent
of Landlord, which consent may be withheld in Landlord's sole and absolute
discretion. Machines and equipment belonging to Tenant which cause noise,
vibration or odors that may be transmitted to the structure of the Building or
to any space therein to such a degree as to be objectionable to Landlord or to
any tenant in the Building shall be installed and maintained by Tenant, at
Tenant's expense, on vibration eliminators or other devices sufficient to reduce
such noise, vibration and odors to a level satisfactory to Landlord.
ARTICLE XII
INSPECTION BY LANDLORD
12.1 Upon at least 24 hours prior notice, Tenant shall permit Landlord, its
agents, mortgagees and representatives, any federal, state, county or municipal
officer or representative, and prospective purchasers of interests in the
Building or Landlord, to enter the Premises, without charge therefor and without
diminution of the rent payable by Tenant, to examine, inspect and protect the
Premises and the Building, to make such alterations and/or repairs as in the
sole judgment of Landlord may be deemed necessary, or to exhibit the same to
prospective tenants during the last six (6) months of the Lease Term. In
connection with any such entry, Landlord shall endeavor to minimize the
disruption to Tenant's use of the Premises. During the course of any alteration
or repair by Landlord in the Premises, Landlord may store within the Premises
all necessary materials, tools, supplies and equipment. Nothing in this Section
shall be construed as imposing any obligation on Landlord to make any
alterations or repairs.
ARTICLE XIII
INSURANCE
13.1 Anything contained herein to the contrary notwithstanding, Tenant
shall not conduct or permit to be conducted any activity, or place any equipment
in or about the Premises or the Building, which will in any way increase the
rate of fire insurance or other insurance on the Building. If any increase in
the rate of fire insurance or other insurance is stated by any insurance company
or by the
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applicable insurance rating organization (or other organization exercising
similar functions in connection with the prevention of fire or the correction of
hazardous conditions) to be due to any activity or equipment of Tenant in or
about the Premises or the Building, such statement shall be conclusive evidence
that the increase in such rate is due to such activity or equipment and, as a
result thereof, Tenant shall be liable for the amount of such increase, Tenant
shall reimburse Landlord for such amount and any such amount shall be considered
additional rent hereunder; in lieu of the foregoing, Tenant may cease such use
and pay the ratable cost of any premium increase until it ceases such use. For
the purposes of this Section, the term "Building" shall be deemed to include the
Land.
13.2 At all times after the Premises are released to Tenant for
construction of its improvements, Tenant shall, at Tenant's expense, obtain and
maintain the following insurance:
(a) public liability insurance in the amounts set forth below naming
Landlord and the holder of any Mortgage (as hereinafter defined in Section 21.1)
now or hereafter encumbering the Building or the Land as additional insured
thereunder; such insurance shall contain an endorsement that said insurance
shall remain in full force and effect notwithstanding that the insured may have
waived its right of action against any person prior to the occurrence of a loss.
No later than the Lease Commencement Date, Tenant shall obtain public liability
insurance in minimum amounts of one million dollars ($1,000,000.00) for injury
to one (1) person, three million dollars ($3,000,000.00) for injury to more than
one (1) person and six hundred thousand dollars ($600,000.00) for damage to
property;
(b) all-risk property insurance covering Tenant's furniture,
equipment, fittings, installations, fixtures, supplies and other personal
property in an amount equal to the full replacement value; and
(c) to the extent required by law, worker's compensation or similar
in form and amounts required by law.
13.3 The company or companies writing any insurance which Tenant is
required to carry and maintain pursuant to Section 13.2, as well as the form of
such insurance, shall at all times be subject to Landlord's reasonable approval
and any such company or companies shall be licensed to do business in the State
of Maryland. Public liability and all-risk casualty insurance policies
evidencing such insurance shall name Landlord and the holder of any Mortgage (as
defined in Section 21.1) as additional insured, shall be primary and non-
contributory, and shall also contain a provision by which the insurer agrees
that such policy shall not be canceled, materially changed or not renewed
without at least thirty (30) days advance notice to Landlord or any Mortgagee.
The insurance which Tenant is required to carry and maintain pursuant to Section
13.2 shall contain commercially reasonable deductibles. Each such policy, or a
certificate thereof, shall be deposited with Landlord by Tenant promptly upon
commencement of Tenant's obligation to procure the same and, if requested by
Landlord, at least annually thereafter. If Tenant shall fail to perform any of
its obligations under Section 13.2 or 13.3, and such failure is not cured within
five (5) business days following Tenant receipt of a notice of the same from
Landlord, then Landlord may perform the same and the cost of same shall be
deemed additional rental and shall be payable upon Landlord's demand.
13.4 Throughout the term of this Lease, Landlord shall maintain in full
force and effect (i) liability insurance in at least twice the amounts set forth
in Section 13.2(a) hereinabove and (ii) fire and extended coverage insurance to
the extent of at least ninety percent (90%) of the replacement value of the
Building, including the original Tenant Work, but excluding footings and
foundations. Landlord may, at its election, obtain such coverages under an
umbrella or blanket policy or policies, covering the Building and other
Buildings in which Landlord has an interest or which are managed by Landlord's
management company. Landlord's insurance policies shall contain commercially
reasonable deductibles.
13.5 In any case in which Tenant shall be obligated to pay to Landlord any
loss, cost, damage, liability or expense suffered or incurred by Landlord,
Landlord shall allow to Tenant as an offset against the amount thereof the net
proceeds of any insurance collected by Landlord for or on account of such loss,
cost, damage, liability or expense, or the net proceeds which would have been
collected if Landlord had procured the insurance required of it hereunder,
whether or not actually procured by Landlord. In any case in which Landlord
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shall be obligated to pay to Tenant any loss, cost, damage, liability or expense
suffered or incurred by Tenant, Tenant shall allow to Landlord as an offset
against the amount thereof the net proceeds of any insurance collected by Tenant
for or on account of such loss, cost, damage, liability or expense OR the
maximum amount which would have been collectible had Tenant procured the
insurance policies required of it pursuant to this Lease, whether or not
actually procured by Tenant. Landlord and Tenant agree that each insurance
policy described above, or otherwise covering the Premises, the Building, or
personal property, fixtures and equipment located thereon and therein, shall
contain a clause or endorsement pursuant to which the insurance companies waive
subrogation and consent to a waiver of right of recovery. Landlord and Tenant
further agree that each will not make any claim against or seek to recover from
the other for any loss, cost, damage, liability, expense or peril covered or
required to be covered by such insurance.
ARTICLE XIV
SERVICES AND UTILITIES
14.1 Landlord shall furnish to the Premises conditioned water for heat
pumps, fresh air, and hot and cold water. Landlord shall provide after-hours
janitorial service, subject to the specifications attached hereto as Exhibit H.)
In addition, Landlord shall provide (i) zoned heating, ventilation and air
conditioning during the days and hours specified below during the seasons of the
year and within the temperature ranges usually furnished in comparable office
buildings in the Laurel, Maryland area, and, in all events, but subject to the
provisions of Paragraph 12 of the Work Agreement, the existing HVAC system (not
supplemented by the additional units and improvements to be installed by Tenant
as part of the Tenant Work) are sufficient to provide a constant temperature of
75 degrees (plus or minus 2 degrees) FDB in all portions of the Premises during
the cooling season and a constant temperature of 72 degrees (plus or minus 2
degrees) FDB in all portions of the Premises during the heating season, and
Landlord shall take steps to reduce any excessive noise levels produced by the
existing system to levels reasonably acceptable to Tenant (and the provisions of
this paragraph shall be subject to the terms set forth in Paragraph 12 of the
Work Agreement), but Tenant shall be responsible to pay all bills for electrical
service directly to the provider of such service; (ii) balancing of the HVAC
system when necessary in an effort to provide reasonably uniform air
temperatures throughout the zones within the Premises; (iii) a directory listing
for Tenant, Tenant's employees and other Building tenants in the Building lobby
directory; (iv) replacement of light tubes and bulbs for Building standard
lighting fixtures; (v) restroom facilities and necessary lavatory supplies,
including hot and cold running water at the points of supply, provided for
general use, excluding any equipment; and (vi) after-hours access to the
Building via an electronic, Kastle-key card or other access control system, and
an adequate number of access keys or cards for Tenant's employees. No concierge
shall be provided in the Building. The cost of installing separate meters for
electrical consumption in the Premises shall be paid for by Landlord, separate
and apart from any Allowances provided for herein. Landlord will also provide
elevator service; provided, however, that Landlord shall have the right to
remove elevators from service as may be required for moving freight, or for
servicing or maintaining the elevators and/or the Building as long as at least
one (1) elevator is available for public use. The normal hours of operation of
the Building for Tenant will be 7:00 a.m. to 11:00 p.m. on Monday through Friday
(excluding the holidays set forth on Exhibit E hereto) and 9:00 a.m. to 1:00
p.m. on Saturday (excluding the holidays set forth on Exhibit E hereto) and such
other hours, if any, as Landlord determines. Landlord shall not be obligated to
maintain or operate the Building at times other than these hours of operation
of the Building unless special arrangements are made in advance by Tenant;
provided, however, that Tenant shall have access into the Building at all times.
Landlord will furnish all services and utilities required by this Lease only
during the normal hours of operation of the Building, unless otherwise specified
herein. Tenant shall pay all electricity, telephone and power bills separately
metered to the Premises, and any other service or material used by, or provided
to, Tenant in connection therewith, when due. If Tenant does not pay the same
when due, Landlord may pay the same and the amount of such payment shall be
deemed Additional Rent which shall be due upon receipt of Landlord's invoice
therefor.
14.2 Anything contained herein to the contrary notwithstanding, in the
event Tenant is deprived of electricity, water, HVAC service or any other
utility or other service set forth in Section 14.1 above (including, without
limitation, HVAC service comporting with the
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temperature specifications set forth herein on account of matters which Tenant
is not responsible for) for a period exceeding three (3) business days, and as a
result thereof Tenant is unable to conduct business from the Premises or any
portion thereof in its normal and customary manner and without undue hardship,
then from and after such third (3rd) business day Tenant shall be entitled to
abate its rental and other obligations hereunder as to the Premises or portion
thereof which is not usable until such time as the condition is rectified. The
provisions of Section 25.19 of this Lease shall not apply with respect to
Tenant's rights under this Section.
14.3 The parties hereto agree to comply with all mandatory energy or water
conservation controls and requirements applicable to office buildings that are
imposed or instituted by the federal, state, or county governments, including,
without limitation, controls on the permitted range of temperature settings in
office buildings, and requirements necessitating curtailment of the volume of
energy or water consumption or the hours of operation of the Building. Any
terms or conditions of this Lease that conflict or interfere with compliance
with such controls or requirements shall be suspended for the duration of such
controls or requirements. It is further agreed that compliance with such
controls or requirements shall not be considered an eviction, actual or
constructive, of the Tenant from the Premises and shall not entitle Tenant to
terminate this Lease or to an abatement of any rent payable hereunder.
14.4 In the event (i) Landlord elects to submeter the Premises for water
consumption (which Landlord may do at any time during the Lease Term at its sole
cost and expense) and (ii) it is determined that, during any Lease Year or
calendar year, Tenant consumes "substantially more" water than other building
tenants and typical office building users, measured pursuant to the annual
statistics published by BOMA, then Tenant shall reimburse Landlord for all
utility charges attributable to such excess water consumption within thirty (30)
days after written demand by Landlord (accompanied by copies of water bills for
the Building and the Premises and the BOMA standard applicable to such period).
For purposes hereof, Tenant's water consumption shall be deemed "substantially
more" than that of other office users if it exceeds the per square foot water
charges attributable to other tenants in the Building AND the average per square
foot water charges for office users published by BOMA by more than ten percent
(10%).
14.5 Tenant shall have access to the Premises twenty-four (24) hours per
day, seven (7) days per week (subject, however, to the Rules and Regulations
attached hereto as Exhibit D). There will be a minimum of one (1) elevator in
operation for Tenant's use outside of the building standard hours.
ARTICLE XV
LIABILITY OF LANDLORD
15.1 Landlord and its employees and agents shall not be liable to Tenant,
Tenant's employees, agents, invitees, licensees, customers, clients, family
members, assignees, subtenants or guests, or to any other person or entity for
any damage (including indirect and consequential damage) injury, loss,
compensation or claim arising within the Premises, unless the same is
attributable to the gross negligence or willful misconduct of Landlord or its
agents, employees or contractors. Subject to the foregoing qualification, any
goods, property or personal effects stored or placed by Tenant, its employees or
agents in or about the Premises or the Building shall be at the sole risk of
Tenant, and Landlord shall not in any manner be held responsible therefor. If
any employee of Landlord receives any packages or articles delivered to the
Building for Tenant, such employee shall be acting as the agent of Tenant for
such purposes and not as the agent of Landlord. For purposes of this Article
XV, the term "Building" shall be deemed to include the Land. Notwithstanding
the foregoing provisions of this Section 15.1, Landlord shall not be released
from liability to Tenant for any injury caused by the willful misconduct or
gross negligence of Landlord or its agents, employees or contractors.
15.2 Subject to the provisions of Article XVII and Section 13.5 hereof,
Tenant shall defend, indemnify and hold Landlord harmless from and against all
costs, damages, claims, liabilities and expenses (including reasonable
attorneys' fees) suffered by or claimed against Landlord, directly or
indirectly, based on, arising out of or resulting from (i) Tenant's use and
occupancy of the Premises or the business conducted by Tenant therein, (ii) any
acts or omissions by Tenant or Tenant's employees, agents, assignees,
subtenants, contractors,
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licensees and invitees, (iii) any breach or default in the performance or
observance of Tenant's covenants or obligations under this Lease, including
without limitation any failure to surrender the Premises upon the expiration or
earlier termination of the Lease Term, or (iv) any entry by Tenant, its
employees, agents or contractors upon the Land prior to the Lease Commencement
Date. Subject to the provisions of Section 13.5 hereof, Landlord shall
indemnify and hold Tenant harmless from and against all costs, damages, claims,
liabilities and expenses (including reasonable attorneys, fees) suffered by or
claimed against Tenant or its agents, employees, representatives, contractors,
successors, assigns, licensees and invitees, based on or arising out of (i)
Landlord's operation, management or control of the Building, Land and Common
Areas, (ii) the acts or omissions of Landlord and its agents, employees and
contractors, or (iii) any breach of Landlord's obligations under this Lease.
15.3 In the event that at any time any Landlord hereunder shall sell or
transfer the Building, said landlord shall not be liable to Tenant for any
obligations or liabilities based on or arising out of events or conditions
occurring on or after the date of such sale or transfer, to the extent the
transferee expressly assumes the obligations of Landlord hereunder in writing.
15.4 Except with respect to Tenant's rights under Sections 14.2, 17.1, 18.1
and 19.7 hereof, in the event that at any time during the Lease Term Tenant
shall have a claim against Landlord, Tenant shall not have the right to set off
or deduct the amount allegedly owed to Tenant from any rent or other sums
payable to Landlord hereunder, it being understood that in such events Tenant's
sole remedy for recovering upon such claim shall be to institute an independent
action against Landlord.
15.5 Tenant agrees that in the event Tenant or any of Tenant's employees,
agents, subtenants, assignees, contractors, clients, guests, family members,
licensees, customers or invitees is awarded a money judgment against Landlord,
the sole recourse for satisfaction of such judgment shall be limited to
execution against the estate and interest of Landlord in the Building and Land
(including any insurance or condemnation proceeds and any sale or refinancing
proceeds realized at a time when Landlord is in default hereunder); in no event
shall any other assets of Landlord or of any partner of Landlord or of any other
person or entity be available to satisfy or subject to such judgment, nor shall
any partner of Landlord or any other person or entity be held to have any
personal liability for satisfaction of any claims or judgments against Landlord
and/or any partner of Landlord in such partner's capacity as a partner of
Landlord.
ARTICLE XVI
RULES AND REGULATIONS
16.1 Tenant and its agents, employees, invitees, licensees, customers,
clients, family members, guests, assignees and subtenants shall at all times
abide by and observe the rules and regulations attached hereto as Exhibit D, and
all other rules or regulations that Landlord may promulgate from time to time
for the operation and maintenance of the Building, provided that, with respect
to any new rules and regulations (i) notice thereof is given to Tenant, and (ii)
such new rules and regulations shall not increase Tenant's monetary or other
obligations under this Lease or conflict with or diminish any of Tenant's rights
hereunder. Nothing contained in this Lease shall be construed as imposing upon
Landlord any duty or obligation to enforce such rules and regulations, or the
terms, conditions or covenants contained in any other lease, as against any
other tenant, and Landlord shall not be liable to Tenant for the violation of
such rules or regulations by any other tenant or its employees, agents,
assignees, subtenants, invitees, licensees, customers, clients, family members
or guests, but the same shall be enforced in a consistent fashion. If there is
any inconsistency between this Lease and the Rules and Regulations set forth in
Exhibit D, this Lease shall govern.
ARTICLE XVII
DAMAGE OR DESTRUCTION
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17.1 If the Premises or the Building are totally or partially damaged or
destroyed from any cause, thereby rendering the Premises totally or partially
inaccessible or unusable, Landlord shall (taking into account the time necessary
to effectuate a satisfactory settlement with any insurance company involved)
diligently restore and repair the Premises and the Building to substantially the
same condition they were in prior to such damage; provided, however, that if in
Landlord's judgment (communicated to Tenant within ten (10) days after such
damage) the repairs and restoration cannot be completed within one hundred
eighty (180) days after the occurrence of such damage (taking into account the
time needed for removal of debris, preparation of plans and issuance of all
required governmental permits), either Tenant or Landlord shall may terminate
this Lease as of the forty-fifth (45th) day after such damage by giving written
notice of termination to the other party within thirty (30) days after the
occurrence of such damage. If this Lease is terminated pursuant to the
preceding sentence, subject to the abatement provisions set forth below, all
rent payable hereunder shall be apportioned and paid to the date of termination.
If this Lease is not terminated as a result of such damage, then until the
repair and restoration of the Premises is substantially complete, Tenant shall
be required to pay annual base rent and additional rent only for those portions
of the Premises that Tenant is able, in its business judgment, to use while
repairs are being made. Landlord shall bear the costs and expenses of repairing
and restoring the Premises (including the initial Tenant Work) and the Building.
Notwithstanding anything above to the contrary, Landlord shall have the right to
terminate this Lease in the event zoning or other applicable laws or regulations
do not permit such repair or restoration. Additionally, in the event all damage
is not ultimately repaired within such one hundred eighty (180) period, Tenant
shall have the right to terminate this Lease by written notice to Landlord.
17.2 Notwithstanding anything above to the contrary, if Landlord repairs
and restores the Premises as provided in Section 17.1, Landlord shall not be
required to repair, restore or replace any decorations, alterations or
improvements to the Premises previously made by Tenant (other than the initial
improvements made pursuant to the provisions of Article XXIV and Exhibit B
hereto) or any trade fixtures, furnishings, equipment or personal property
belonging to Tenant. It shall be Tenant's sole responsibility to repair and
restore all such items.
17.3 Notwithstanding anything to the contrary contained herein, if there is
damage to or a destruction of the Building that exceeds thirty-three percent
(33%) of the replacement value of the Building, then, whether or not the
Premises are damaged or destroyed, Landlord shall have the right to terminate
this Lease by written notice to Tenant. In the event the Lease is terminated
pursuant to the provisions of this Section 17, then, in addition to the remedies
set forth hereinabove, Landlord shall reimburse Tenant for the unamortized costs
of the Tenant Work paid for by Tenant (based upon actual costs determined prior
to the expiration of the first Lease Year).
ARTICLE XVIII
CONDEMNATION
18.1 If the whole or a substantial part (as hereinafter defined) of the
Premises, or the use or occupancy of the Premises, shall be taken or condemned
by any governmental or quasi-governmental authority for any public or quasi-
public use or purpose (including a sale thereof under threat of such a taking),
then this Lease shall terminate on the date title thereto vests in such
governmental or quasi-governmental authority, and all rent payable here-under
shall be apportioned as of such date. If less than a substantial part of the
Premises, or if the use or occupancy of less than a substantial part of the
Premises, is taken or condemned by any governmental or quasi-governmental
authority for any public or quasi-public use or purpose (including a sale
thereof under threat of such a taking), then this Lease shall continue in full
force and effect, except that as of the date title vests in the governmental or
quasi-governmental authority Tenant shall not be required to pay annual base
rent and additional rent with respect to the portion of the Premises taken or
condemned. In addition, in the event as a result of any taking or act of any
governmental or quasi-governmental authority access to the Building and Premises
is materially and adversely impaired, or Tenant's parking rights are diminished,
then (i) for as long as such situation exists Tenant's base rent and additional
rental obligations hereunder shall be equitably adjusted to account for such
diminution and (ii) in the event such situation continues for more than sixty
(60) days, then at any time thereafter until the same is corrected Tenant may
terminate this Lease upon thirty
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(30) days' prior written notice to Landlord. For purposes of this Section 18.1,
a substantial part of the Premises shall be considered to have been taken if
more than five percent (5%) of the rentable area of the Premises is rendered
unusable as a result of such condemnation.
18.2 All awards, damages and other compensation paid by the condemning
authority on account of such taking or condemnation (or sale under threat of
such a taking) shall belong to Landlord, and Tenant hereby assigns to Landlord
all rights to such awards, damages and compensation. Tenant agrees not to make
any claim against the Landlord or the condemning authority for any portion of
such award or compensation attributable to damages to the Premises, the value of
the unexpired Lease Term, the loss of profits or goodwill. Nothing contained
herein, however, shall prevent Tenant from pursuing a separate claim against the
condemning authority for the value of furnishings, tenant improvements
(including portions of the Tenant Work paid for by Tenant), equipment and trade
fixtures installed in the premises at Tenant's expense and for relocation
expenses, provided that such claim shall in no way diminish the award or
compensation payable to or recoverable by Landlord in connection with such
taking or condemnation.
18.3 Notwithstanding anything to the contrary contained herein, if twenty-
five percent (25%) or more of the Land or of the Building is taken, condemned,
or sold under threat of such a taking, Landlord shall have the right, in
Landlord's sole discretion, to terminate this Lease as of the date title vests
in the governmental or quasi-governmental authority. In addition, if twenty-
five percent (25%) or more of the Building is taken, condemned or sold under
threat of such a taking, and as a consequence thereof the Building will no
longer be operated as a first-class office building, then Tenant shall have the
right to terminate this Lease as of the date title vests in such authority.
ARTICLE XIX
DEFAULT
19.1 The occurrence of any of the following shall constitute a default by
Tenant under this Lease:
(a) If Tenant shall fail to pay any payment of annual base rent or
additional rent when due, or shall fail to make when due any other payment
required by this Lease, and such failure is not cured within five (5) days after
Tenant's receipt of written notice from Landlord;
(b) If Tenant shall violate or fail to perform any other term,
condition, covenant or agreement to be performed or observed by Tenant under
this Lease, and such failure shall continue for a period of thirty (30) days
after Landlord furnishes Tenant with written notice of such violation or
failure, except that such thirty (30)-day period shall be extended for such
additional period of time as may reasonably be necessary to cure such default,
if such default, by its nature, cannot be cured within such thirty (30)-day
period, provided that Tenant commences to cure such default within the initial
thirty (30)-day period and is, at all times thereafter, in the process of
diligently curing the same;
(c) If Tenant shall abandon the Premises;
(d) An Event of Bankruptcy as specified in Article XX with respect to
Tenant, any guarantor of Tenant's obligations under this Lease (a "Guarantor"),
or any general partner of Tenant (a "General Partner"); or
(e) A dissolution or liquidation of Tenant.
19.2 If there shall be any default by Tenant under this Lease beyond any
applicable notice and cure period, including without limitation any default by
Tenant prior to the Lease Commencement Date, Landlord shall have the right, at
its sole option, to terminate this
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Lease. In addition, with or without terminating this Lease, Landlord may re-
enter, terminate Tenant's right of possession and take possession of the
Premises and the provisions of this Article XIX shall operate as a notice to
quit, any other notice to quit or of Landlord's intention to re-enter the
Premises being hereby expressly waived. Landlord may relet the Premises or any
part thereof (and covenants in good faith to attempt to so relet the Premises
and thereby mitigate its damages), alone or together with other premises, for
such term(s) (which may be greater or less than the period which otherwise would
have constituted the balance of the Lease Term) and on such terms and conditions
(which may include market concessions or free rent) as Landlord, in its sole
discretion, may determine, but Landlord shall not be liable for, nor shall
Tenant's obligations hereunder be diminished by reason of, any inability by
Landlord to relet the Premises despite its good faith efforts to do so or any
failure by Landlord to collect any rent due upon such reletting. Whether or not
this Lease is terminated by reason of Tenant's default, Tenant nevertheless
shall remain liable for any annual base rent, additional rent or damages which
may be due or sustained prior to such default, all reasonable costs, fees and
expenses including, but not limited to, reasonable attorneys' fees, brokerage
fees, expenses incurred in placing the Premises in rentable condition (per
building standard conditions as of the date of execution hereof), and other
costs and expenses incurred by Landlord in pursuit of its remedies hereunder.
In addition, Tenant shall be liable, at Landlord's option, for either of the
following measures of future damages:
(a) an amount equal to the annual base rent and additional rent which
would have become due during the remainder of the Lease Term, less the amount of
rental, if any, which Landlord shall receive during such period from others to
whom the Premises may be rented (other than any additional rent received by
Landlord as a result of any failure of such other person to perform any of its
obligations to Landlord), in which case such damages shall be computed and
payable in monthly installments, in advance, on the first day of each calendar
month following Tenant's default and continuing until the date on which the
Lease Term would have expired but for Tenant's default. Separate suits or
actions may be brought to collect any such damages for any month(s), and such
separate suits or actions shall not in any manner prejudice the right of
Landlord to collect any damages for any subsequent month(s) by similar
proceedings, or Landlord may defer any suits or actions until after the
expiration of the Lease Term; or
(b) an amount equal to the difference between (i) the present value
(as of the date of Tenant's default) of all annual base rent and additional rent
which would have become due during the remainder of the Lease Term, and (ii) the
present value of the expected rental income to be realized by Landlord with
respect to the Premises over the remainder of the Lease Term, which difference
shall be payable to Landlord in one lump sum on demand. For purposes of this
Section 19.2(b), "present value" shall be compute by using a discount rate equal
to three (3) percentage points above the discount rate then in effect at the
Federal Reserve Bank nearest to the Building. The provisions contained in this
Section shall be in addition to, and shall not prevent the enforcement of, any
claim Landlord may have against Tenant for anticipatory breach of this Lease.
19.3 All rights and remedies of Landlord set forth in this Lease are in
addition to all other rights and remedies available to Landlord at law or in
equity. All rights and remedies available to Landlord pursuant to this Lease or
at law or in equity are expressly declared to be cumulative. The exercise by
Landlord of any such right or remedy shall not prevent the concurrent or
subsequent exercise of any other right or remedy. No delay or failure by
Landlord to exercise or enforce any of Landlord's rights or remedies or Tenant's
obligations shall constitute a waiver of any such rights, remedies or
obligations. Landlord shall not be deemed to have waived any default by Tenant
hereunder unless such waiver expressly is set forth in a written instrument
signed by Landlord. If Landlord waives in writing any default by Tenant, such
waiver shall not be construed as a waiver of any covenant, condition or
agreement set forth in this Lease except as to the specific circumstances
described in such written waiver.
19.4 If Landlord shall institute proceedings against Tenant and a
compromise or settlement thereof shall be made, the same shall not constitute a
waiver of the same or of any other covenant, condition or agreement set forth
herein, nor of any of Landlord's rights hereunder. Neither the payment by
Tenant of a lesser amount than the monthly installment of base rent, additional
rent or of any sums due hereunder nor any endorsement or statement on any check
or letter accompanying a check for payment of rent or other sums payable
hereunder shall be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right
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to recover or do such act, all costs and expenses incurred by Landlord, plus
interest thereon at a per annum rate (the "Default Rate) which is three (3)
percentage points higher than the prime rate announced from time to time by
Nations Bank, from the date incurred by Landlord to the date of payment thereof
by Tenant, shall constitute additional rent due hereunder; provided, however,
that nothing contained herein shall be construed as permitting Landlord to
charge or receive interest in excess of the maximum rate then allowed by law.
If Nations Bank ceases to announce a prime rate or announces more than one prime
rate, then for purposes of determining the Default Rate, Landlord shall have the
right to designate a substitute rate which Landlord deems comparable.
19.5 If Tenant fails to make any payment of base rent, additional rent or
any other sum within five (5) days of the date such payment is due and payable
on more than one occasion in any 365 day period, then for each additional late
payment occurring within such period Tenant shall pay to Landlord a late charge
of five percent (5%) of the amount of such payment. In addition, in such event
such payment and such late fee shall bear interest at the Default Rate from the
date such payment or late fee, respectively, became due to the date of payment
thereof by Tenant; provided, however, that nothing contained herein shall be
construed as permitting Landlord to charge or receive interest in excess of the
maximum rate then allowed by law. Such late charge and interest shall
constitute additional rent due hereunder.
19.6 Landlord hereby waives any statutory lien, landlord's lien or other
lien or security interest it may have in or upon any personal property of Tenant
now or hereafter located in the Premises. Landlord further waives all rights of
distraint available under applicable law.
19.7 Tenant agrees to provide written notice to Landlord and any lender
having a lien on the Building or Land (provided such lender so requests of
Tenant in writing) in the event Landlord breaches any of its material
obligations hereunder. In the event Landlord (or Landlord's lender) shall fail
to cure any such breach within thirty (30) days after receipt of written notice
from Tenant [or if such breach is not reasonably capable of being cured within
thirty (30) days, such additional period as may reasonably be necessary to cure
the same with due diligence, not to exceed ninety (90) days without Tenant's
consent, which shall not be unreasonably withheld, conditioned or delayed], then
Landlord shall be in default hereunder, and Tenant shall be entitled to bring an
action for damages or injunctive relief against Landlord. In the event any
default by Landlord is not cured within the foregoing cure period, or in the
event any emergency repairs to the Premises are needed and Tenant is unable,
despite diligent efforts, to contact Landlord by telephone, then, in either of
such events, Tenant shall be entitled to take such action as may be commercially
reasonable under the circumstance to correct such uncured default and/or make
such repairs as are needed to correct the emergency situation, and Landlord
shall reimburse Tenant for all costs reasonably incurred in the exercise of such
rights within ten (10) days after written demand. In the event Landlord fails
fully to reimburse Tenant for the foregoing costs within such ten (10) day
period, then Tenant may deduct the amount due and owing from Landlord from its
rental obligations next coming due.
ARTICLE XX
BANKRUPTCY
20.1 The following shall be Events of Bankruptcy under this Lease:
(a) The appointment of a receiver or custodian for any or all of
Tenant's, a Guarantor's or a General Partner's property or assets, or the
institution of a foreclosure action upon so material a portion of the real or
personal property of Tenant or a Guarantor or a General Partner that Landlord in
its discretion concludes that its security under the Lease is materially
impaired;
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(b) The filing of a voluntary petition by Tenant, a Guarantor or a
General Partner under the provisions of Title 11 of the United States Code (the
"Bankruptcy Code"), or under the insolvency laws of any state, district,
commonwealth or territory of the United States (the "Insolvency Laws");
(c) The filing of an involuntary petition against Tenant, a Guarantor
or a General Partner as the subject debtor under the Bankruptcy Code or
Insolvency Laws, which either (i) is not dismissed within sixty (60) days of
filing, or (ii) results in the issuance of an order for relief against the
debtor; or
(d) Tenant's, a Guarantor's or a General Partner's making or
consenting to an assignment for the benefit of creditors or a common law
composition of creditors.
ARTICLE XXI
SUBORDINATION
21.1 This Lease shall be subject and subordinate to the lien, provisions,
operation and effect of any and all mortgages, deeds of trust, ground leases or
other security instruments (collectively, "Mortgages") which may now or
hereafter encumber the Building or the Land, to all funds and all indebtedness
intended to be secured by such Mortgages, and to all and any renewals,
extensions, modifications, recastings or refinancings thereof, provided that
such lender enter into a commercially reasonable subordination, attornment and
non-disturbance agreement, in a form substantially similar to the agreement
attached hereto as Exhibit I-1 (a "Non-Disturbance Agreement"). Landlord
represents and warrants that neither the Building nor the Land is encumbered by
any mortgages, deeds of trust or other lien instruments. Landlord represents
that it leases the Land from Berman Enterprises Limited Partnership (the "Ground
Lessor") pursuant to that certain Land Lease dated June 2, 1978 (the "Prime
Lease"). Contemporaneous herewith, Ground Lessor has entered into a Non-
Disturbance Agreement with Tenant in the form attached hereto as Exhibit I-2.
Landlord shall use its best efforts to obtain a non-disturbance agreement
similar in form and substance to the agreement attached hereto as Exhibit I-1 or
I-2, as applicable, from any future mortgagee, groundlessor or beneficiary of
any deed of trust with respect to the Premises; however, Tenant shall have no
obligation to subordinate its rights hereunder to any mortgagee or groundlessor
that does not provide Tenant with a non-disturbance agreement substantially
similar to the form of agreement attached as Exhibit I-1 or I-2 hereto, as
applicable. The holder of any Mortgage to which this Lease is subordinate shall
have the right (subject to any required consents or approvals of the holders of
superior Mortgages) at any time to declare this Lease to be superior to the
lien, provisions, operation and effect of such Mortgage and Tenant agrees to
execute all documents required by such holder in confirmation thereof.
21.2 In confirmation of the foregoing subordination, Tenant shall, at
Landlord's request, promptly execute any requisite or appropriate certificate or
other document. Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such certificate or other document for or on
behalf of Tenant. If the Land, the Building or Landlord's interest therein is
sold at a foreclosure sale or by deed in lieu of foreclosure, and this Lease is
not extinguished upon such sale or by the purchaser following such sale, then,
at the request of such purchaser, Tenant shall attorn to such purchaser and
shall recognize such purchaser as the landlord under this Lease, and Tenant
waives the provisions of any statute or rule of law, now or hereafter in effect,
which may give or purport to give Tenant any right to terminate or otherwise
adversely affect this Lease and the obligations of Tenant hereunder in the event
any such foreclosure proceeding is prosecuted or completed or in the event of
any such sale. Tenant agrees that upon such attornment, such purchaser shall
not be (a) bound by any payment of annual base rent or additional rent for more
than one (1) month in advance, except prepayments in the nature of security for
the performance by Tenant of its obligations under this Lease but only to the
extent such prepayments have been delivered to such purchaser, (b) bound by any
amendment of this Lease made without the consent of any lender entering into a
Non-Disturbance Agreement with Tenant, (c) liable for damages for any act or
omission of any prior landlord other than those of a continuing nature, or (d)
subject to any offsets or defenses which Tenant might have against any prior
landlord other than those of a continuing nature; provided further, that after
succeeding to Landlord's interest under this Lease, such purchaser shall perform
in accordance with the terms of this Lease all
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obligations of Landlord arising after the date such purchaser acquires title to
the Land, the Building or Landlord's interest therein. Within five (5) days
after request by such purchaser at foreclosure, Tenant shall execute and deliver
an instrument or instruments confirming its attornment upon the foregoing terms.
21.3 If any lender providing construction or permanent financing or any
refinancing for the Building requires, as a condition of such financing or
refinancing, that modifications to this Lease be obtained, and provided that
such modifications (i) are reasonable, (ii) do not adversely affect Tenant's use
of the Premises as herein permitted, (iii) do not increase any of Tenant's
monetary or other obligations hereunder, (iv) do not adversely affect any of
Tenant's rights hereunder and (v) do not decrease any of Landlord's obligations
or liabilities hereunder, then Landlord may submit to Tenant a written amendment
to this Lease incorporating such required modifications, and Tenant hereby
covenants and agrees to execute, acknowledge and deliver such amendments to
Landlord within five (5) days of Tenant's receipt thereof.
21.4 Landlord hereby represents, warrants and covenants that: (i) a
true and correct copy of the Prime Lease is attached hereto as Exhibit J (with
certain economic terms redacted therefrom); (ii) the Prime Lease is in full
force and effect; (iii) neither Landlord nor Tenant are in default under the
Prime Lease and no condition exists which, with the passage of time or the
giving of notice or both could become a default; (iv) Landlord shall not
terminate the Prime Lease, or amend or modify the Prime Lease in any manner
which will affect the rights of Tenant hereunder, as long as this Lease remains
in full force and effect; and (v) Landlord will provide Tenant with written
notices of any default on the part of Landlord or the Ground Lessor under the
Prime Lease.
ARTICLE XXII
HOLDING OVER
22.1 If Tenant shall not immediately surrender the Premises on the date of
the expiration of the Lease Term, the rent payable by Tenant hereunder shall be
increased to one hundred fifty percent (150%) of the annual base rent,
additional rent in effect immediately prior to such termination date. Such rent
shall be computed by Landlord on a monthly basis and shall be payable by Tenant
on the first day of such holdover period and the first day of each calendar
month thereafter during such holdover period until the Premises have been
vacated by Tenant. Landlord's acceptance of such rent from Tenant shall not in
any manner impair or adversely affect Landlord's other rights and remedies
hereunder, including, but not limited to, (i) Landlord's right to evict Tenant
from the Premises, and (ii) Landlord's right to recover damages pursuant to this
Lease and such other damages as are available to Landlord at law or in equity.
ARTICLE XXIII
COVENANTS OF LANDLORD
23.1 Landlord covenants that it has the right to make this Lease for the
term aforesaid, and that if Tenant shall pay all rent when due and punctually
perform all the covenants, terms, conditions and agreements of this Lease to be
performed by Tenant, Tenant shall, during the Lease Term, freely, peaceably and
quietly occupy and enjoy the full possession of the Premises without hindrance
by Landlord or any party claiming through or under Landlord, subject, however,
to the provisions of this Lease, including but not limited to the Rules and
Regulations and the provisions of Section 23.2 hereof. Additionally, Landlord
hereby represents, warrants and covenants to and with Tenant that, as of the
date hereof, on the Lease Commencement Date and during the term hereof,
including any extensions and renewals hereof: (i) Landlord has the full right,
power and authority to enter into this Lease and to perform each and all of the
terms, provisions, covenants, agreements, matters and things herein provided to
be performed by Landlord and to execute and deliver all documents provided
herein to be executed and delivered by Landlord; (ii) this Lease does not, nor
will the performance by Landlord of its obligations hereunder, contravene any
provision of any existing law, covenant, indenture or agreement binding upon
Landlord or upon the Land and/or the Building; (iii) the
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signatories of this Lease are authorized to sign this Lease on behalf of
Landlord; (v) there is no litigation pending or, to the best of Landlord's
knowledge, threatened which may adversely affect the Building, the Land, the
Premises or Tenant's interest in the Premises; (iv) there are no suits,
judgments or notices from any governmental agency relating to any violation of
the health, pollution control, building, fire or zoning laws or regulations
relating to the use and maintenance of the Building, the land and the Premises;
(vii) the Building and Land are zoned to permit use of the Premises by Tenant as
described herein; and (v) the Building does not contain asbestos and complies
with all applicable laws, orders, rules and regulations (including the
provisions of the American with Disabilities Act). Anything contained herein to
the contrary notwithstanding, Landlord shall, at its own expense, comply with
all laws, orders, ordinances and regulations of Federal and local authorities
and with directions of public rules, recommendations, requirements and
regulations of the Board of Fire Underwriters, Landlord's insurance companies
and any other organization establishing insurance rates in the geographical area
where the Building is located, respecting all matters of condition or
maintenance of the Common Areas, the Land and the Building (other than matters
pertaining to the use of the Premises by Tenant), including, without limitation,
the provisions of the Americans with Disabilities Act, all zoning and other land
use laws, and all laws pertaining to Hazardous Substances and indoor air
quality.
23.2 Landlord hereby reserves to itself and its successors and assigns the
following rights (all of which are hereby consented to by Tenant): (i) to change
the street address and/or name of the Building; (ii) to erect, use and maintain
pipes and conduits in and through the ceilings above Premises; (iii) to grant to
anyone the exclusive right to conduct any particular business or undertaking in
the Building, subject to the exclusive rights granted to Tenant herein; (iv) the
exclusive right to use and/or lease the roof areas, and the sidewalks and other
exterior areas; (v) the right to resubdivide the Land or to combine the Land
with other lands; and (vi) the right to relocate Tenant's non-reserved parking
spaces to a comparable location to the location of the initial spaces granted to
Tenant herein. Landlord may exercise any or all of the foregoing rights without
being deemed to be guilty of an eviction, actual or constructive, or a
disturbance or interruption of the business of Tenant or of Tenant's use or
occupancy of the Premises.
23.3 Tenant acknowledges and agrees that all rights of Tenant to use and
occupy the Premises and all rights, terms and conditions of this Lease are in
all respects subject to all applicable zoning and land use restrictions, and to
all covenants, conditions, and restrictions of record existing on the date
hereof (and amendments thereto, provided such amendments do not interfere with
Tenant's use of the Premises). Tenant agrees to observe and be bound by each
and every covenant and restriction to which the Land is now subject or is
hereinafter subjected, insofar as any such covenant or restriction affects the
Premises or Tenant's use thereof.
23.4 Tenant acknowledges and agrees that Landlord shall retain the right to
enter into any lot owners' association agreement or cross easement agreement to
provide for maintaining, landscaping, insuring, lighting and other operation and
enhancement of the common areas of the Building and Land. Landlord agrees to
enter into such an agreement only if the terms thereof do not interfere with
Tenant's rights or obligations under this Lease or increase any of Tenant's
monetary obligations hereunder. If Landlord enters into such an agreement,
subject to the foregoing qualifications, Tenant acknowledges and agrees that it
shall be bound by the provisions of such agreement, and any breach by Tenant of
the terms or provisions of such agreement shall constitute a default under this
Lease.
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ARTICLE XXIV
TENANT IMPROVEMENTS
24.1 Tenant agrees to lease the Premises in its "as-is" condition, subject
to the obligations of Landlord and Tenant set forth in this Lease (including,
without limitation, the provisions of this Article XXIV and the provisions of
the Work Agreement attached hereto as Exhibit B). Landlord agrees to provide a
construction allowance equal to $22.00 per rentable square foot of leased space
(the "Allowance") for the improvements Tenant desires to make to the Premises
(the "Tenant Work"). The Allowance is inclusive of all architectural, MEP
plans, fees and permitting. In the event the cost to construct the space per
the Tenant's plans and specifications exceeds the Allowance, Tenant agrees to
provide the additional cost to complete the space. The Lease shall not include
any contingency regarding the Landlord's obtaining or applying for financing to
pay for the Tenant improvements. In order to keep the paper work to a minimum,
the Tenant proposes to pay the architectural and MEP plans cost up-front, with
the Landlord to reimburse Tenant for said costs from the Allowance. The
Landlord reserves the right to approve all final working drawings and cost
estimates, the general contractor, the architect and other professional
consultants and to inspect the work in progress; Landlord's approval shall not
be unreasonably withheld or delayed. All heating, ventilating, and air-
conditioning to be designed and installed by Maloney Aire. Additionally, Tenant
agrees that (i) installation or modification of fire alarm systems shall be
performed by Landlord's fire alarm contractor and (ii) all demolition work shall
be performed by Landlord or its general contractor as long the price quoted for
performing such work is competitive. The Work Agreement attached hereto as
Exhibit B sets forth additional terms and conditions with respect to the
construction of the Tenant Work.
24.2 Tenant shall prepare its own space plans and working drawings. Tenant
shall select contractors, who will be mutually agreed upon by Tenant and
Landlord to participate in the bidding process. Landlord may suggest certain
contractors who will be considered by Tenant. Tenant may bid the project's
construction and shall select the contractor through a sealed bidding process
which Tenant shall control, and Landlord shall approve and enter into a
construction contract with the contractor Tenant selects. There shall be no
supervisory fee charges by Landlord to Tenant for any Tenant Work.
ARTICLE XXV
GENERAL PROVISIONS
25.1 Tenant acknowledges that neither Landlord nor any broker, agent or
employee of Landlord has made any representations or promises with respect to
the Premises or the Building except as herein expressly set forth, and no
rights, privileges, easements or licenses are being acquired by Tenant except as
herein expressly set forth.
25.2 Nothing contained in this Lease shall be construed as creating a
partnership or joint venture of or between Landlord and Tenant, or to create any
other relationship between the parties hereto other than that of landlord and
tenant.
25.3 Landlord and Tenant each represents and warrants to the other that
other than Barnes Morris Pardoe & Foster, The Stuart Rabkin Company and Ken
Duncan (collectively, the "Broker") neither of them has employed or dealt with
any broker, agent or finder in carrying on the negotiations relating to this
Lease. Landlord and Tenant shall each indemnify and hold the other harmless
from and against any claim or claims for brokerage or other commissions asserted
by any broker, agent or finder engaged by it or with whom it has dealt, other
than the Broker. Landlord shall pay all fees to Broker in connection with this
transaction.
25.4 Tenant agrees, at any time and from time to time, upon not less than
ten (10) business days' prior written notice by Landlord, to execute,
acknowledge before a Notary Public, and deliver to Landlord and/or any other
person or entity designated by Landlord a statement in writing: (i) certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the
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Lease is in full force and effect as modified and stating the modifications);
(ii) stating the dates to which the rent and any other charges hereunder have
been paid by Tenant; (iii) stating whether or not, to the best knowledge of
Tenant, Landlord is in default in the performance of any covenant, agreement or
condition contained in this Lease, and if so, specifying the nature of such
default; (iv) stating the address to which notices to Tenant are to be sent; (v)
stating that this Lease is subject and subordinate to all Mortgages encumbering
the Building or the Land (as long as Tenant receives a Non-Disturbance
Agreement); (vi) stating that Tenant has accepted the Premises and that all work
thereto has been completed by Landlord (or if such work has not been completed,
specifying the incomplete work); and (vii) containing such other customary
factual certifications as Landlord may reasonably request. Any such statement
delivered by Tenant may be relied upon by any owner of the Building or the Land,
any prospective purchaser of the Building or the Land, any Mortgagee or
prospective Mortgagee of the Building or the Land or of Landlord's interest
therein, any prospective assignee any of such Mortgagee or any other person or
entity. Tenant acknowledges that time is of the essence to the delivery of such
statements by Tenant, and that Tenant's failure or refusal to do so may result
in substantial damages to Landlord resulting from, for example, delays suffered
by Landlord in obtaining financing or refinancing secured by the Building.
Tenant shall be liable for all such damages suffered by Landlord.
25.5 Landlord and Tenant each hereby waives trial by jury in any action,
proceeding, claim or counterclaim brought by either party in connection with any
matter arising out of or in any way connected with this Lease, the relationship
of landlord and tenant hereunder, Tenant's use or occupancy of the Premises,
and/or any claim of injury or damage. Landlord and Tenant each hereby waives
any objection to the venue of any action filed by either party in any court
situated in Prince George's County, Maryland and each party further waives any
right, claim or power, under the doctrine of forum non conveniens or otherwise,
to transfer any such action filed by any party in any such court to any other
court.
25.6 All notices or other communications required hereunder shall be in
writing and shall be deemed duly given if delivered in person (with receipt
therefor), or if sent by certified or registered mail, return receipt requested,
postage prepaid, to the following addresses: (i) if to Landlord, Suite 380,
11140 Rockville Pike, Rockville, Maryland 20852, Attn: Gary Berman, (ii) if to
Tenant, at 11350 Random Hills Road, Suite 240, Fairfax, Virginia 22030, Attn:
Charles L. Cosgrove, Vice President, with a copy to Tucker, Flyer & Lewis, P.C.,
1615 L Street, N.W., Washington, D.C. 20036, Attn: Mark D. Jackson, Esq.
Notices shall be effective upon receipt or refusal to accept receipt. Either
party may change its address for the giving of notices by notice given in
accordance with this Section.
25.7 Each provision of this Lease shall be valid and enforced to the
fullest extent permitted by law. If any provision of this Lease or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, such provision shall be deemed to be replaced by the valid and
enforceable provision most substantively similar to such invalid or
unenforceable provision, and the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby.
25.8 Feminine or neuter pronouns shall be substituted for those of the
masculine form, and the plural shall be substituted for the singular number, in
any place or places herein in which the context may require such substitution.
25.9 The provisions of this Lease shall be binding upon, and shall inure to
the benefit of, the parties hereto and each of their respective representatives,
successors and assigns, subject to the provisions hereof restricting assignment
or subletting by Tenant.
25.10 This Lease contains and embodies the entire agreement of the parties
hereto and supersedes all prior agreements, negotiations and discussions between
the parties hereto. Any representation, inducement or agreement that is not
contained in this Lease shall not be of any force or effect. This Lease may not
be modified or changed in whole or in part in any manner other than by an
instrument in writing duly signed by both parties hereto.
25.11 This Lease shall be governed by and construed in accordance with the
laws of the State of Maryland.
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25.12 Article and section headings are used herein for the convenience of
reference and shall not be considered when construing or interpreting this
Lease.
25.13 The submission of an unsigned copy of this document to Tenant for
Tenant's consideration does not constitute an offer to lease the Premises or an
option to or for the Premises. This document shall become effective and binding
only upon the execution and delivery of this Lease by both Landlord and Tenant.
25.14 Time is of the essence with respect to all obligations under this
Lease.
25.15 This Lease is being executed in multiple counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document.
25.16 This Lease shall not be recorded except that upon the request of
Landlord, Tenant agrees to execute, in recordable form, a short-form memorandum
of this Lease, provided that such memorandum shall not contain any of the
specific rental terms set forth herein. Such memorandum may be recorded at
Landlord's expense in the land records of Prince George's County, Maryland.
25.17 Except as otherwise provided in this Lease, any additional rent or
other sum owed by Tenant to Landlord, and any cost, expense, damage or liability
incurred by Landlord for which Tenant is liable, shall be paid by Tenant to
Landlord no later than the later of (a) ten (10) days after the date Landlord
notifies Tenant of the amount of such additional rent, sum, cost, expense,
damage or liability, or (b) the first day of the first calendar month following
the date Landlord so notifies Tenant; provided, however, that if Landlord so
notifies Tenant prior to the commencement or after the expiration or earlier
termination of the Lease Term, such additional rent, sum, expense, damage or
liability shall be paid by Tenant to Landlord not later than ten (10) days after
Landlord so notifies Tenant.
25.18 Any liability of Tenant to Landlord or Landlord to Tenant existing
hereunder at the expiration or earlier termination of the Lease Term shall
survive such expiration or earlier termination.
25.19 In the event Landlord or Tenant is in any way delayed, interrupted
or prevented from performing any of its construction or repair obligations under
this Lease, and such delay, interruption or prevention is due to fire, act of
God, governmental act or failure to act, strike, labor dispute, inability to
procure materials, or any other cause beyond such party's reasonable control
(whether similar or dissimilar), then the time for performance of the affected
obligation(s) shall be excused for the period of the delay and extended for a
period equivalent to the period of such delay, interruption or prevention.
25.20 Tenant agrees to cooperate with Landlord (at no cost, expense or
liability to Tenant) in obtaining any permits or licenses necessary or desirable
for the use or operation of the Building or the Premises, including without
limitation by execution of any applications for such licenses and permits.
25.21 Tenant agrees to give written notice of any default by Landlord
under this Lease to any lender of Landlord secured by the Premises and a
reasonable time within which to cure such default prior to Tenant taking any
action to remedy such default or cancel the Lease, provided that such lender
enters into a Non-Disturbance Agreement with Tenant.
25.22 Tenant warrants and represents that Tenant's entering into this
Lease is a valid and authorized act by the Tenant, which is duly formed and in
good standing under the laws of the state of its formation and qualified to do
business in the State of Maryland.
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25.23 Unless specifically provided to the contrary herein, all consents
or approvals to be granted by either party hereto to the other shall not be
unreasonably withheld, conditioned or delayed, and the parties hereto shall at
all times act in a commercially reasonable manner.
25.24 Provided that Tenant is not in Default under the terms and
conditions of this Lease, Tenant may, at its own cost, use portions of the
Building's roof for the installation of one or more satellite dishes, antennae
or similar devices (collectively, the "Roof Devices", and individually, a "Roof
Device"); provided that (i) the installation and operation of such Roof Device
shall be at Tenant's sole cost and expense (including, without limitation, the
cost of any permits therefor), (ii) use of such Roof Device shall be in
accordance with the terms of this Section 25.24, (iii) Tenant's right to install
a Roof Device shall be subject to there being space available on the Building's
roof, (iv) no Roof Device installed by Tenant shall interfere with the reception
of any other antennas, satellites or roof devices then located on the Building's
roof, and (v) the Roof Device shall be architecturally compatible with the
Building and comply with all applicable laws, orders, rules and regulations. If
Tenant elects to install a Roof Device, then Tenant shall also have the right to
run cabling using the Building's risers and conduits from the Demised Premises
to the roof for the purposes. Tenant shall not install or operate any Roof
Device without the prior written approval of Landlord, which shall not be
unreasonably withheld or delayed. Landlord shall not charge Tenant additional
rent for the use of the Building's roof and any Roof Device. Upon prior written
notice to Landlord, Tenant shall have access to the Building's roof at
reasonable times to install, maintain or repair any Roof Device permitted
hereunder. Upon the expiration or sooner termination of this Lease, Tenant
shall be required to remove and dispose of such Roof Devices from the Building
at its own cost. Tenant shall leave the portion of the roof where any Roof
Device was located in good order and repair, and shall cause no damage to any
part of the Building, including without limitation the structural components of,
or mechanical systems in, the Building.
25.25 In the event Tenant leases all or any substantial portion of two
(2) or more adjacent floors, Tenant may, at its sole risk, continually use the
Building stairs and landings on and between such floors for access to and from
such floors. Tenant may also install, at Tenant's expense, but in accordance
with all applicable laws, rules and regulations of any governmental authority,
carpeting (or other floor covering selected by Tenant) on the stairs and
landings, install additional lighting and paint the walls, subject to the
Landlord's prior written approval of color and style choices, which approval
shall not be unreasonably withheld, conditioned or delayed. Landlord agrees to
install, if requested by Tenant and at Tenant's sole expense, appropriate
security devices to prevent the doors from being opened in and from the
stairwells on such contiguous floors without an appropriate key card.
Landlord's cleaning crew shall regularly clean and maintain the stairwells in
building-standard fashion, the cost which shall constitute an Operating Charge
for all purposes hereof.
25.26 Anything contained herein to the contrary notwithstanding, this
Lease and Tenant's obligations hereunder are expressly subject to and
conditioned upon Tenant receipt of a preliminary license to operate a vocational
school from the applicable State and County education authorities within three
hundred (300) days of the Execution Date (the "License Period"). In the event
such condition is not satisfied or waived by Tenant in writing on or prior to
the expiration of the License Period, or in the event Tenant's application is
rejected prior to the expiration of such period, then at any time prior to the
expiration of such period Tenant may (i) terminate this Lease by written notice
to Landlord, whereupon Landlord shall return all security and rental deposits to
Tenant and thereafter no party hereto shall have any further rights, obligations
or liability hereunder or (ii) Tenant may unilaterally elect, by written notice
to Landlord, to extend the License Period for up to six (6) consecutive
additional periods of thirty (30) days each. In addition, in the event the
foregoing condition precedent is not satisfied or waived prior to the expiration
of the initial three hundred (300) day License Period, then Landlord may elect,
by written notice given to Tenant within five (5) days after the expiration of
such period, to terminate this Lease, whereupon Landlord shall return all
security and rental deposits to Tenant and thereafter no party hereto shall have
any further rights or obligations hereunder. The foregoing notwithstanding,
following any termination of the Lease pursuant to this Section 25.26, Tenant
shall reimburse Landlord for any design or construction costs authorized by
Tenant in writing and actually incurred by Landlord within thirty (30) days of a
request therefor by Landlord, accompanied by invoices and appropriate back-up
documentation.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on or as
of the day and year first above written.
LANDLORD:
WITNESS: 312 MARSHALL AVENUE LIMITED PARTNERSHIP
- - ----------------------------- By:
-------------------------------------
Its: General Partner
TENANT:
ATTEST: COMPUTER LEARNING CENTERS, INC.
- - ----------------------------- By:
-------------------------------------
Its:
------------------------------------
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EXHIBIT A
PLAN SHOWING PREMISES
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EXHIBIT B
WORK AGREEMENT
1. TENANT WORK. Subject to the terms and conditions of this Work
Agreement and Article XXIV of the Lease, the Tenant Work shall be constructed
substantially in accordance with final architectural plans and specifications to
be agreed upon by the parties pursuant to the procedures set forth hereinbelow.
2. APPOINTMENT OF ARCHITECT AND ENGINEER. Tenant hereby appoints Eiger
Consulting, Inc. (the "Architect") as the architect, and hereby appoints Schmidt
& Stacey, Inc. (the "Engineer") as the engineer, who will prepare any and all
architectural drawings, plans and specifications necessary for the Tenant Work.
The fees of the Architect and Engineer shall be paid by Landlord from the
Allowance". Landlord shall furnish the Architect and the Engineer with copies
of all as-built plans and specifications with respect to the Building to enable
them to complete their respective portions of such drawings, plans and
specifications.
3. PRELIMINARY PLAN. Within forty-five (45) days after the Execution
Date, the Architect and the Engineer shall prepare a set of preliminary
drawings, plans and specifications for the Tenant Work (the "Preliminary
Plans"). The Preliminary Plans shall describe, in such detail as may be
necessary to enable contractors to bid, price and complete the work described in
the Preliminary Plans, at a minimum, the following: (i) Tenant's plans for the
configuration of the Premises, including without limitation, space allocation
and partition layout, finishes and "built-ins"; (ii) information with respect to
Tenant's requirements pertaining to the electrical, mechanical, HVAC, telephone,
plumbing, lighting and similar systems servicing the Building, heat generating
equipment and power requirements, computer facilities (equipment, power and heat
output) and energy management systems (if any); (iii) Tenant's power and
telephone layout, kitchen layout with equipment schedules, general lighting
plans, receptacle plans, ceiling plans and wiring plans; and (iv) any other
special requirements of Tenant with respect to the completion of the Premises.
4. COST ESTIMATES. Within ten (10) business days of Landlord's receipt
of the Preliminary Plans, Landlord or its designated contractor shall provide
Tenant with (i) a list of its objections, modifications, deletions or
qualifications to the Preliminary Plans (but Landlord agrees that it shall not
unreasonably withhold its consent to any Tenant Work), (ii) a written good-faith
estimate of the "Total Cost" (as define in Paragraph 9(a) below) of completing
the Tenant Work described in the Preliminary Plans, subject to any such
objections, modifications, deletions or qualifications, and (iii) a schedule of
items constituting "long-lead" items (as defined below). For purposes hereof,
the term "long-lead" items shall mean any items or material element thereof
which Landlord believes, due to long-lead time for fabrication or delivery, will
not be available at the Premises in time to be completed or installed prior to
the originally scheduled Lease Commencement Date.
5. FINAL PLANS. Tenant shall have five (5) business days from receipt of
Landlord's cost estimate and its list of objections, modifications, deletions or
qualifications to (a) substitute materials to eliminate any long-lead items and
(b) cause the Architect and the Engineer to prepare final drawings, plans, and
specifications (the "Plans"), based on the Preliminary Plans but conforming to
Landlord's objections, modifications, deletions or qualifications, which shall
provide the information and detail required by clauses (i) through (iv) of
Paragraph 4 above. No drawings, plans or specifications shall be deemed to be
the final Plans until approved by Landlord and Tenant in writing. Upon final
approval of the Plans by Landlord and Tenant, Tenant shall submit the same for
approval by the appropriate governmental authorities; provided, however, that
Tenant shall not be required to procure any approvals or permits unless and
until the condition precedent set forth in Section 25.26 of the Lease is
satisfied.
6. PERFORMANCE; GENERAL CONTRACTOR. Construction of the Tenant Work
shall be performed in a good and workmanlike manner. All contractors for the
construction of the Tenant Work shall be licensed in the State of Maryland and
carry insurance coverages satisfactory to Landlord, in its reasonable
discretion. The general contract for the Tenant Work shall be bid to at least
three (3) contractors.
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Tenant shall have the right to propose at least two (2) of the bidding
contractors, and Landlord shall have the right to propose one (1) of the bidding
contractors. Subcontracts shall also be subject to competitive bidding, unless
Tenant elects to direct a particular contract to a particular subcontractor or
vendor. The bidding process shall be "open book", in which, prior to commencing
work and awarding any subcontracts, the selected general contractor shall submit
a list of detailed prices (itemized to set forth all pertinent information with
respect to each bid, such as profit, overhead, general conditions,
contingencies, etc.) for Tenant's approval sufficient to allow for Tenant's
review and comment and subsequent modification. In the event Tenant selects
Landlord's general contractor as the contractor for the Tenant Work, Landlord
shall enter into a contract with such contractor for the work and shall oversee
and supervise the same. In the event Tenant does not select Landlord's general
contractor as the contractor for the Tenant Work, Tenant shall enter into a
contract with the selected contractor for the work and shall oversee and
supervise the same. Landlord shall, in all events, warrant all Tenant Work
against defect for a period of at least one (1) year, and shall assign to Tenant
all warranties and guarantees it may receive with respect to any portion of the
Tenant Work.
7. CHANGE ORDERS. Tenant shall have the right to request changes in
Tenant Work, provided that the cost of performing the changes shall constitute a
part of the Total Costs. Any such change shall be initiated by the Architect
and approved by Landlord and the general contractor as a change order on
American Institute of Architects ("AIA") forms and in accordance with AIA
procedures. No change shall be permitted without the prior written consent of
Landlord, which shall not be unreasonably withheld. Landlord shall not be
permitted to make any changes to the Plans without the prior written consent of
Tenant.
8. INSPECTIONS. In the event Tenant does not select Landlord's general
contractor as the contractor for the Tenant Work, Tenant and its contractors
shall have full access to the Premises at all time for the purposes of
prosecuting such work. In the event Tenant selects Landlord's general
contractor as the contractor for the Tenant Work, upon reasonable prior notice,
Tenant shall have the right to inspect the Tenant Work during the course of
construction, provided that Tenant shall not disrupt or interfere with such
construction and provided further that all such inspections shall be at Tenant's
sole risk, and Landlord shall have no liability to Tenant for any injury or
damage to Tenant or Tenant's agents, employees or contractors occurring in the
course of such inspections. Further, in such event, Tenant shall have the
right, at all times prior to the Lease Commencement Date, to enter the Premises,
or to cause its contractors to enter the Premises, for the purpose of taking
measurements, installing telecommunication, fiberoptics and computer lines,
installing its fixtures and systems furniture and performing other items of
work, provided that all of such work shall be coordinated in advance with
Landlord's contractor (who shall accommodate Tenant to the extent reasonably
feasible) and shall not unreasonably interfere with Landlord's construction of
the Tenant Work. Tenant shall have the right (without charge) to the use of the
Building's risers and conduits for purposes of running cabling, wiring and
fiberoptics for purposes of connecting telecommunications, computer and similar
equipment, and Tenant shall have no obligation to remove such cabling, wiring or
fiberoptics at the conclusion of the term.
9. USE OF ALLOWANCE.
(a) In the event Tenant selects Landlord's general contractor as the
contractor for the Tenant Work, during the course of construction the Allowance
shall be deemed reduced by the "Total Cost" incurred or paid by Landlord in
constructing the Tenant Work. For purposes hereof, the term "Total Cost" shall
mean the following costs which may be paid or incurred by Landlord in connection
with the construction of the Tenant Work: (i) all fees authorized by Tenant in
writing to be paid to the Architect and the Engineer and any consultants
retained by either of such parties in connection with space planning costs and
the costs of preparing architectural and engineering plans and specifications;
(ii) if Tenant so elects, move-related expenses, including the installation of
telephone and computer cables or the acquisition of furniture or equipment;
(iii) the agreed upon fixed fee payable to the Landlord's general contractor for
profit and overhead, plus the actual, reasonable and competitive cost of
performing the final cleaning and other so-called "general conditions" work; and
(iv) all sums paid to the subcontractors, suppliers, manufacturers and other
parties furnishing labor, material or services in connection with the
construction of the Tenant Work under subcontracts approved by Tenant. No other
costs which may be incurred by Landlord in connection with the construction of
the Tenant Work shall be paid for from the Allowance or paid for by Tenant,
whether directly or indirectly, in any other manner. In no event shall the
Total Cost include costs attributable to overtime work; concealed conditions;
failure by Landlord, its general contractor or any subcontractors to perform;
any "force majeure" or other events giving rise to additional payments under any
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general contact or any subcontract; abatement of any asbestos, if any; or any
costs incurred because portions of the Building do not comply with any laws,
ordinances, rules or regulations. In addition, Landlord agrees to complete the
"Base Building Shell" work described in SCHEDULE 1 attached to this Work
Agreement at its sole cost and expense.
(b) In the event Tenant selects Landlord's general contractor as the
contractor for the Tenant Work, Landlord shall provide Tenant with monthly
reports detailing the Total Cost incurred during the prior month. Each monthly
report shall also detail the total amount of the Allowance which has been
utilized.
(c) In the event Tenant selects Landlord's general contractor as the
contractor for the Tenant Work, when and if the Total Cost of constructing the
Tenant Work exceeds the Allowance, Tenant shall be responsible for payment, on a
monthly basis, of all such excess costs (the "Excess Costs"). Tenant shall fund
the Excess Costs on a monthly basis within five (5) business days following its
receipt from Landlord of (i) a disbursement request therefor, (ii) lien waivers
from the general contractor constructing the Tenant Work with respect to the
amount so requested and (ii) a certification from the Architect that the work
for which payment is being requested has been satisfactorily completed.
(d) In the event Tenant does not select Landlord's general contractor as
the contractor for the Landlord's Work, then Landlord shall remit portions of
the Allowance to Tenant (together with any costs incurred by Tenant on account
of Base Building Shell work or other costs not includable within the definition
of "Total Cost" set forth herein) on a monthly basis within five (5) business
days following its receipt from Tenant of (i) a disbursement request therefor,
(ii) lien waivers from the general contractor constructing the Tenant Work with
respect to the amount requested and (iii) a certification from the Architect
that the work for which payment is being requested has been satisfactorily
completed.
(e) In the event the Allowance is not fully utilized in connection with
the construction of the Tenant Work, Tenant shall be entitled to deduct any such
unutilized amounts against its rental obligations next coming due.
10. SUBSTANTIAL COMPLETION. The Tenant Work shall be conclusively deemed
"substantially complete" when the Architect certifies that the same has been
substantially completed in accordance with the Final Plans so as to enable
Tenant to lawfully occupy the Premises. The Premises shall not be deemed to be
unavailable if minor details of construction, decoration or mechanical
adjustments remain to be done to the Premises. Even if the Premises is not
deemed to be substantially complete, the Lease Commencement Date shall not be
postponed if Landlord shall be delayed in substantially completing the Tenant
Work as a result of (i) the Preliminary Plans or Final Plans not being prepared
and/or approved by Tenant or its agents by the dates set forth in herein; (ii)
Tenant's request for changes, alterations or additions in drawings, plans and
specifications; or (iii) Tenant's request for materials, finishes or
installations constituting long-lead items (the foregoing events constituting
"Tenant Delay" for all purposes of this Lease). Tenant Delay shall, in all
events, be calculated in accordance with the provisions of Section 2.2 of the
Lease.
11. PUNCHLIST. In the event Tenant selects Landlord's general contractor
as the contractor for the Tenant Work, Landlord shall notify Tenant in writing
fifteen (15) days in advance of the date it reasonably expects the Tenant Work
to be substantially complete. In addition, in such event, Landlord shall notify
Tenant in writing when it believes the Tenant Work is substantially complete,
and shall afford Tenant the opportunity to walk-through the Premises and Common
Areas in order to create a punchlist of items which have not been completed in
accordance with the Plans and the provision hereof. Landlord shall use its best
efforts to complete all punchlist items within thirty (30) days after creation
of the punchlist. If Landlord fails to complete any punch-list items within
such thirty (30) day period, then Tenant may correct such items itself and
offset the costs it incurs in connection therewith against its rental
obligations hereunder. Neither substantial completion of the Tenant Work nor
completion of any punch-list items shall relieve Landlord of its obligation to
repair defective or non-conforming work or any latent defects in the Premises.
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12. HVAC PROVISIONS. Landlord represents and warrants that the existing
base building HVAC system serving the Premises (including, without limitation,
heat pumps, chillers, diffuses and ductwork) is, or shall be on or prior to the
Lease Commencement Date, in good working order and condition. The cost of any
repairs or maintenance to the existing system needed to bring such system into
good working order shall be borne by Landlord as a part of the Base Building
Shell work. As part of the Tenant Work, Tenant will be installing supplemental
heating and cooling units serving each of Tenant's classrooms/labs and making
certain other modifications to the existing HVAC system. The exact
specifications for the supplemental units and other improvements to the existing
HVAC system shall be specified by Tenant in the Plans, and shall not be altered.
The parties agree to cause the HVAC subcontractor to warrant that the HVAC
system installed pursuant to the Plans will meet the performance standards set
forth in Section 14.1 of the Lease for a period of at least one (1) year from
the Lease Commencement Date. In the event that the HVAC system fails to comply
with the ASHRAE standards and/or temperature parameters set forth in Section
14.1 of the Lease on account of (i) the Landlord's failure (if Landlord's
contractor is the general contractor for the Tenant Work) to install the HVAC-
related improvements in the manner specified in the Plans or pursuant to the
manufacturer's instructions and specifications, (ii) the failure to properly
balance the HVAC system or (iii) any matter pertaining to the base building HVAC
system existing as of the date hereof, then Landlord shall be responsible for
correcting such failure and the services-interruption provisions set forth in
Section 14.2 of the Lease shall apply; PROVIDED, HOWEVER, in the event any such
failure is attributable to a defect in the supplemental HVAC units or related
improvements installed pursuant to the Plans, then Landlord shall correct such
failure at Tenant's expense. Landlord agrees to assign to Tenant all of its
rights in any and all warranties of the HVAC system from all manufacturers,
suppliers, contractors and subcontractors during the term of the Lease. Tenant
shall be responsible for maintaining, repairing and (if Tenant's deems it
necessary) replacing the supplemental units installed pursuant to the Plans
throughout the Lease Term; Landlord shall be responsible for the repair,
maintenance and replacement of the base building HVAC system throughout the
Lease Term.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Agreement
as of April 1, 1996.
LANDLORD: TENANT:
312 MARSHALL AVENUE COMPUTER LEARNING CENTERS, INC.
LIMITED PARTNERSHIP
By: By:
------------------------------ -------------------------------------
Its: Its:
----------------------------- ------------------------------------
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EXHIBIT C
FORM OF
CERTIFICATE
This Exhibit is attached to and made a part of that certain Lease Agreement
dated as of the ___ day of ________, 1996 (the "Lease"), by and between 312
MARSHALL AVENUE LIMITED PARTNERSHIP ("Landlord") and COMPUTER LEARNING CENTERS,
INC. ("Tenant"). The terms used in this Exhibit that are defined in the Lease
shall have the same meanings as provided in the Lease. The Certificate to be
executed by Landlord and Tenant pursuant to Section 2.3 of the Lease shall
provide as follows:
"This Certificate is being provided pursuant to the terms and
provisions of that certain lease agreement dated ___________ __, 1996 (the
"Lease"), between 312 MARSHALL AVENUE LIMITED PARTNERSHIP and COMPUTER
LEARNING CENTERS, INC. The parties to the Lease desire to confirm that the
following terms which are defined in the Lease shall have the meanings set
forth below for all purposes in the Lease:
1. The Lease Commencement Date is _________________.
2. The initial Lease Term of the Lease shall expire on __________,
______ (subject to early termination by Tenant as set forth in Section
2.7 of the Lease).
Attached to this Certificate is evidence of payment of premiums for all
insurance required pursuant to Section 13.2 of the Lease."
LANDLORD: TENANT:
312 MARSHALL AVENUE COMPUTER LEARNING CENTERS, INC.
LIMITED PARTNERSHIP
By: By:
------------------------------ -------------------------------------
Its: Its:
----------------------------- ------------------------------------
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EXHIBIT D
RULES AND REGULATIONS
This Exhibit is attached to and made a part of that Certain Lease Agreement
dated as of the 1st day of April, 1996 (the "Lease"), by and between 312
MARSHALL AVENUE LIMITED PARTNERSHIP ("Landlord") and COMPUTER LEARNING CENTERS,
INC. ("Tenant"). Unless the context otherwise requires, the terms used in this
Exhibit that are defined in the Lease shall have the same meanings as provided
in the Lease.
The following rules and regulations have been formulated for the safety and
well-being of all tenants of the Building ("tenants"). Strict adherence to
these rules and regulations is necessary to guarantee that every tenant will
enjoy a safe and undisturbed occupancy of its premises in the Building. Any
continuing violation of these rules and regulations by Tenant shall constitute a
default by Tenant under the Lease.
Landlord may, upon request of any tenant, waive the compliance by such
tenant of any of the rules and regulations, provided that (i) no waiver shall be
effective unless signed by Landlord or Landlord's authorized agent, (ii) any
such waiver shall not relieve such tenant from the obligation to comply with
such rule or regulation in the future unless otherwise agreed to by Landlord,
(iii) no waiver granted to any tenant shall relieve any other tenant from the
obligation of complying with these rules and regulations, and (iv) any such
waiver by Landlord shall not relieve Tenant from any liability to Landlord for
any loss or damage occasioned as a result of Tenant's failure to comply with any
rule or regulation.
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, halls and other parts of the Building not exclusively
occupied by any tenant shall not be obstructed or encumbered by any tenant or
used for any purpose other than ingress and egress to and from each tenant's
premises. Landlord shall have the right to control and operate the public
portions of the Building and the facilities furnished for common use of the
tenants, in such manner as Landlord deems best for the benefit of the tenants
generally. No tenant shall permit the visit to its premises of persons in such
numbers or under such conditions as to interfere with the use and enjoyment of
the entrances, corridors, elevators and other public portions or facilities of
the Building by other tenants.
2. No awnings or other projections shall be attached to the outside walls of
the Building without the prior written consent of Landlord. No drapes, blinds,
shades or screens (other than those furnished by Landlord) shall be attached to,
hung in, or used in connection with any window or door of any tenant's premises,
without the prior written consent of Landlord. All awnings, projections,
curtains, blinds, shades, screens and other fixtures must be of a quality, type,
design and color, and attached in a manner, approved by Landlord.
3. No showcases or other articles shall be placed or allowed to remain in
front of or affixed to any part of the exterior of the Building or its windows,
nor placed in the halls, corridors or vestibules without the prior written
consent of Landlord.
4. Tenant shall not use the water and wash closets and other plumbing fixtures
for any purposes other than those for which they were constructed, and Tenant
shall not place any debris, rubbish, rags or other substances therein. All
damage resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose servants, employees, agents, visitors, customers, clients,
invitees, guests, or licensees, shall have caused the same.
5. No tenant shall move, paint, drill or deface the exterior of the Building
or the exterior of any tenant's premises other than to install signs permitted
pursuant to the terms of its lease. Tenants shall not construct, maintain, use
or operate within their respective premises any electrical device, wiring or
apparatus in connection with a loud speaker system or other sound system, except
as reasonably
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required as part of a communication system approved in writing by Landlord prior
to the installation thereof. No tenant shall construct, maintain, use or
operate any such loud speaker or sound system outside of its premises.
6. No tenant shall bring bicycles, vehicles, animals, birds or pets of any
kind into the Building. No cooking shall be done or permitted by any tenant on
its premises, except for microwave cooking and use of coffee machines by such
tenant's employees for their own consumption. No tenant shall cause or permit
any unusual or objectionable odors to be produced upon or permeate from its
premises.
7. No space in the Building shall be used for the sale of goods in the
ordinary course of business, or for the sale at auction of merchandise, goods or
property of any kind. "Sale of goods in the ordinary course of business" means
the sale of goods to the public at large.
8. No tenant shall make any unseemly or disturbing noises or disturb or
interfere with occupants of the Building or neighboring buildings or premises or
those having business with them, whether by the use of any musical instrument,
radio, talking machine, whistling, singing, or in any other way. No tenant shall
throw anything out of the doors or windows or down the corridors or stairs of
the Building.
9. Tenants shall not bring into or keep in or upon the Building any flammable,
combustible or explosive fluid, or chemical substance, except pursuant to the
terms of the Lease.
10. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any tenant, nor shall any changes be made in any existing
locks or the locking mechanism therein, without Landlord's prior written
approval. Tenants shall keep the doors leading to the corridors or main halls
closed during business hours except as such doors may be used for ingress or
egress. Each tenant shall, upon the termination of its tenancy, restore to the
Landlord all keys of stores, offices, storage and toilet rooms either furnished
to, or otherwise procured by, such tenant, and in the event of the loss of any
keys so furnished, such tenant shall pay to Landlord the replacement cost
thereof. Tenant's key system shall be separate from that for the rest of the
Building.
11. No tenant shall employ any of Landlord's employees for any purpose
whatsoever without Landlord's prior written consent.
12. Landlord reserves the right to exclude from the Building at all times any
person who is not known or does not properly identify himself to the Building
management or watchman on duty. Landlord may, at its sole option, require all
persons admitted to or leaving the Building during hours other than normal hours
of operation of the Building (as set forth in Section 14.1 of the Lease) to
register. Each tenant shall be responsible for all persons for whom it
authorizes entry into the Building and shall be liable to Landlord for all acts
or omissions of such persons.
13. The Premises shall not, at any time, be used for lodging or sleeping or for
any immoral or illegal purpose.
14. Each tenant, before closing and leaving its premises at any time, shall see
that all windows are closed and all lights turned off.
15. Tenants shall not request Landlord's employees to perform any work or do
anything outside of such employees' regular duties without the prior written
consent of the management of the Building. The special requirements of tenants
will be attended to only upon application to Landlord, and any such special
requirements of Tenant shall be billed to Tenant (and paid as additional rent)
in accordance with the schedule of charges maintained by Landlord from time to
time or at such charge as is agreed upon in advance by Landlord and Tenant.
101
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16. Canvassing, soliciting and peddling in the Building is prohibited and each
tenant shall cooperate to prevent the same.
17. There shall not be used in any space, or in the public halls of the
Building, either by any tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards. Tenant shall be responsible to Landlord for any loss or damage
resulting from any deliveries made by or for Tenant to the Building.
18. Tenant shall not place any mats, trash or other objects in the public
corridors of the Building.
19. Drapes installed by Landlord for the use of Tenant or drapes installed by
Tenant, which are visible from the exterior of the Building, must be cleaned by
Tenant at least once a year, without notice from Landlord, at Tenant's own
expense. Landlord shall have the right to prescribe standards for all curtains,
drapes, blinds, shades, screens, lights and ceilings, including without
limitation standards designed to give the Building a uniform, attractive
appearance. Tenant shall comply with all such standards prescribed by Landlord.
102
<PAGE>
EXHIBIT E
HOLIDAYS
January 1 - New Year's Day
Martin Luther King's Birthday
Presidents' Day
Memorial Day
July 4 - Independence Day
Labor Day
Columbus Day
Thanksgiving Day and the day immediately thereafter
December 25 - Christmas Day
103
<PAGE>
EXHIBIT F
SITE PLAN
104
<PAGE>
EXHIBIT G
TENANT'S SIGN PLANS
[TO BE PROVIDED BY TENANT FOLLOWING LEASE EXECUTION]
105
<PAGE>
EXHIBIT H
JANITORIAL SPECIFICATIONS
106
<PAGE>
EXHIBIT I-1
NON-DISTURBANCE AGREEMENT
(MORTGAGE)
107
<PAGE>
EXHIBIT I-2
NON-DISTURBANCE AGREEMENT
(GROUND LEASE)
108
<PAGE>
EXHIBIT J
GROUND LEASE
109
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 6th day of June,
1996, is entered into by Computer Learning Centers, Inc., a Delaware corporation
with its principal place of business at 11350 Random Hills Road, Suite 240,
Fairfax, Virginia 22030 (the "COMPANY") and Harry H. Gaines, residing at 35
Maher Lane, Newtown, Pennsylvania 18940 (the "EMPLOYEE").
The Company desires to employ the Employee on a part-time basis, and the
Employee desires to be employed by the Company on a part-time basis. In
consideration of the mutual covenants and promises contained herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby agrees to employ the Employee
on a part-time basis, and the Employee hereby accepts employment with the
Company on a part-time basis, upon the terms set forth in this Agreement, for
the period commencing on June 6, 1996 (the "COMMENCEMENT DATE") and ending on
January 31, 1997 (such period, as it may be extended, the "EMPLOYMENT PERIOD"),
unless sooner terminated in accordance with the provisions of Section 4.
2. TITLE: CAPACITY. The Employee shall serve in such position as the
Company or its Board of Directors (the "BOARD") may determine from time to
time. The Employee shall be subject to the supervision of, and shall have such
authority as is delegated to him by, the Board or the President of the Company.
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities as the Board or the President of the Company shall
from time to time reasonably assign to him. The Employee agrees to devote at
least five (5) days per month to the business and interests of the Company
during the Employment Period. The Employee agrees to abide by the rules,
regulations, instructions, personnel practices and policies of the Company and
changes therein which may be adopted from time to time by the Company. The
Employee acknowledges receipt of copies of all such rules and policies committed
to writing as of the date of this Agreement.
3. COMPENSATION AND BENEFITS.
3.1 SALARY. The Company shall pay the Employee, in monthly
installments, an annual base salary of $30,000.00 for the one-year period
commencing on the Commencement Date. Such salary shall be subject to adjustment
thereafter as determined by the Board.
3.2 FRINGE BENEFITS. The Employee shall not be entitled to
participate in any bonus and benefit programs that the Company establishes and
makes available to its employees, other than the Company's stock benefit plans.
The Employee shall not be entitled to paid vacation.
3.3 REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, upon presentation by
the Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Company may request, PROVIDED, HOWEVER, that the
amount available for such travel, entertainment and other expenses may be fixed
in advance by the Board.
4. EMPLOYMENT TERMINATION. The employment of the Employee by the Company
pursuant to this Agreement shall terminate upon the occurrence of any of the
following:
110
<PAGE>
4.1 Expiration of the Employment Period in accordance with Section 1;
4.2 At the election of the Company, for cause, immediately upon
written notice by the Company to the Employee. For the purposes of this Section
4.2, cause for termination shall be deemed to exist upon (a) a good faith
finding by the Company of failure of the Employee to perform his assigned duties
for the Company, dishonesty, gross negligence or misconduct, or (b) the
conviction of the Employee of, or the entry of a pleading of guilty or nolo
contendere by the Employee to, any crime involving moral turpitude or any
felony;
4.3 Thirty days after the death or disability of the Employee. As
used in this Agreement, the term "disability" shall mean the inability of the
Employee, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360-day period to perform the services
contemplated under this Agreement. A determination of disability shall be made
by a physician satisfactory to both the Employee and the Company, PROVIDED THAT
if the Employee and the Company do not agree on a physician, the Employee and
the Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on all
parties;
4.4 At the election of either party, upon not less than six months,
prior to written notice of termination.
5. EFFECT OF TERMINATION.
5.1 TERMINATION FOR CAUSE OR AT ELECTION OF EITHER PARTY. In the
event the Employee's employment is terminated for cause pursuant to Section 4.2,
or at the election of either party pursuant to Section 4.4., the Company shall
pay to the Employee the compensation otherwise payable to him under Section 3
through the last day of his actual employment by the Company.
5.2 TERMINATION FOR DEATH OR DISABILITY. If the Employee's
employment is terminated by death or because of disability pursuant to Section
4.3, the Company shall pay to the estate of the Employee or to the Employee, as
the case may be, the compensation which would otherwise be payable to the
Employee up to the end of the month in which the termination of his employment
because of death or disability occurs.
5.3 SURVIVAL. The provisions of Sections 6 and 7 shall survive the
termination of this Agreement.
6. NON-COMPETE.
(a) During the Employment Period and for a period of six (6) months
after the termination or expiration thereof, the Employee will not directly or
indirectly:
(i) as an individual proprietor, partner, stockholder officer,
employee, director, joint venturer, investor, lender, or in any other capacity
whatsoever (other than as the holder of not more than one percent (1%) of the
total outstanding stock of a publicly held company), engage in the business of
developing, producing, marketing or selling products or services of the kind or
type developed or being developed, produced, marketed or sold by the Company
while the Employee was employed by the Company; or
(ii) recruit, solicit or induce, or attempt to induce, any
employee or employees of the Company to terminate their employment with, or
otherwise cease their relationship with, the Company; or
111
<PAGE>
(iii) solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts of the Company which
were contacted, solicited or served by the Employee while employed by the
Company.
(b) If any restriction set forth in this Section 6 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
(c) The restrictions contained in this Section 6 are necessary for
the protection of the business and goodwill of the Company and are considered by
the Employee to be reasonable for such purpose. The Employee agrees that any
breach of this Section 6 will cause the Company substantial and irrevocable
damage and therefore, in the event of any such breach, in addition to such other
remedies which may be available, the company shall have the right to seek
specific performance and injunctive relief.
7. PROPRIETARY INFORMATION AND DEVELOPMENTS.
7.1 PROPRIETARY INFORMATION.
(a) Employee agrees that all information and know-how, whether
or not in writing, of a private, secret or confidential nature concerning the
Company's business or financial affairs (collectively, "PROPRIETARY
INFORMATION") is and shall be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, developments, plans, research data, clinical data,
financial data, personnel data, computer programs, and customer and supplier
lists. Employee will not disclose any Proprietary Information to others outside
the Company or use the same for any unauthorized purposes without written
approval by an officer of the Company, either during or after his employment,
unless and until such Proprietary Information has become public knowledge
without fault by the Employee.
(b) Employee agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, laboratory notebooks, program listings, or
other written, photographic, or other tangible material containing Proprietary
Information, whether created by the Employee or others, which shall come into
his custody or possession, shall be and are the exclusive property of the
company to be used by the Employee only in the performance of his duties for the
Company.
(c) Employee agrees that his obligation not to disclose or use
information, know-how and records of the types set forth in paragraphs (a) and
(b) above, also extends to such types of information, know-how, records and
tangible property of third parties who may have disclosed or entrusted the same
to the Company or to the Employee in the course of the Company's business.
7.2 DEVELOPMENTS.
(a) Employee will make full and prompt disclosure to the Company
of all inventions, improvements, discoveries, methods, developments, software,
and works of authorship, whether patentable or not, which are created, made,
conceived or reduced to practice by the employee or under his direction or
jointly with others during this employment by the Company, whether or not during
normal working hours or on the premises of the Company (all of which are
collectively referred to in this Agreement as "DEVELOPMENTS").
(b) Employee agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all his right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. However, this Section 7(b)
shall not apply to Developments which do not related to the present or planned
112
<PAGE>
business or research and development of the Company and or planned business or
research and development of the Company and which are made and conceived by the
Employee not during normal working hours, not on the Company's premises and not
using Company's tools, devices, equipment or Proprietary Information.
(c) Employee agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments. Employee shall
sign all papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignment of priority
rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interest in any Development.
7.3 OTHER AGREEMENTS. Employee hereby represents that he is not
bound by the terms of any agreement with any previous employer or other party to
refrain from using or disclosing any trade secret or confidential or proprietary
information in the course of his employment with the Company or to refrain from
competing, directly or indirectly, with the business of such previous employer
or any other party. Employee further represents that his performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence proprietary information, knowledge or
data acquired by him in confidence or in trust prior to his employment with the
Company.
8. NOTICES. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 8.
9. PRONOUNS. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
11. AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
12. GOVERNING LAW. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the Commonwealth of Virginia.
13. SUCCESSORS AND ASSIGNS. This agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
14. MISCELLANEOUS.
14.1 No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other rights. A waiver
or consent given by the Company on any one occasion shall be effective only in
that instance and shall not be construed as a bar or waiver of any right on any
other occasion.
113
<PAGE>
14.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
14.3 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set for above.
COMPUTER LEARNING CENTERS, INC.
By:
------------------------------------
Title:
---------------------------------
EMPLOYEE
---------------------------------------
Harry H. Gaines
114
<PAGE>
EXHIBIT 11.1
COMPUTER LEARNING CENTERS, INC.
COMPUTATION OF EARNINGS PER SHARE
(dollar amounts in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD ENDED JULY 31,
---------------------------------------------------------------------
PRIMARY EPS FULLY DILUTED EPS 1995 1995 SUPPLEMENTAL
1996 ACTUAL 1996 ACTUAL PRO FORMA (1) PRO FORMA (1)
----------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
Income from continuing operations $ 1,257 $ 555 $ 609
----------
----------
Loss from discontinued operations - 199
--------- --------- ----------
Net income (loss) $ 1,257 $ 1,257 $ 754
--------- --------- ----------
--------- --------- ----------
Weighted average number of common
shares outstanding:
Preferred shares converted to common stock - 1,826,205 1,826,205
Common stock 4,294,339 4,294,339 1,361,847 1,361,847
Common stock equivalents:
Employee stock options 287,556 323,264 272,121 272,121
Nonqualified stock options 59,191 69,821 7,469 7,469
Directors stock options 9,645 11,114 145 145
Subscription note receivable 37,165 43,730 - -
Number of shares to be sold to retire the
following (2)
Bank debt of $5,500,000 - - - 340,730
Convertible subordinated debt of $4,000,000 - - - 247,803
Subordinated notes to certain preferred
stockholders of $4,111,400 - - 254,705 254,705
--------- --------- ---------- ---------
Weighted average common shares outstanding 4,687,896 4,742,268 3,722,492 4,311,025
--------- --------- ---------- ---------
--------- --------- ---------- ---------
Earnings per share:
Income per share from continuing operations $.27 $ - $ .15 $.14
----
----
Income per share from discontinued operations - - .05
---- ---- -----
Net income per share $.27 $.27 $.20
---- ---- ----
---- ---- ----
- - --------------
(1) After giving pro forma effect for the conversion of Class D Convertible Preferred Stock, Class B Convertible
Preferred Stock and Class A Convertible Preferred into Common Stock at 1:408, 1:369 and 1:314, respectively,
and the subsequent reverse stock split.
(2) Based upon the initial public offering price of $8.00 per share.
</TABLE>
115
<PAGE>
EXHIBIT 11.1
COMPUTER LEARNING CENTERS, INC.
COMPUTATION OF EARNINGS PER SHARE
(dollar amounts in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTH PERIOD ENDED JULY 31,
----------------------------------------------------------------------
PRIMARY EPS FULLY DILUTED EPS 1995 1995 SUPPLEMENTAL
1996 ACTUAL 1996 ACTUAL PRO FORMA (1) PRO FORMA (1)
----------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
Income from continuing operations $ 2,464 $ 909 $ 1,059
----------
----------
Loss from discontinued operations - (1,065)
--------- --------- ----------
Net income (loss) $ 2,464 $ 2,464 $ (156)
--------- --------- ----------
--------- --------- ----------
Weighted average number of common
shares outstanding:
Preferred shares converted to common stock - 1,826,205 1,826,205
Common stock 4,276,798 4,276,798 702,632 702,632
Common stock equivalents:
Employee stock options 230,329 333,872 270,514 270,514
Nonqualified stock options 41,369 71,935 7,467 7,467
Directors stock options 7,839 11,883 72 72
Subscription note receivable 24,867 43,730 - -
Number of shares to be sold to retire the
following (2)
Bank debt of $5,500,000 - - - 589,777
Convertible subordinated debt of $4,000,000 - - - 428,929
Subordinated notes to certain preferred
stockholders of $4,111,400 - - 440,875 440,875
--------- --------- ---------- ----------
Weighted average common shares outstanding 4,581,202 4,738,218 3,247,765 4,266,471
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Earnings per share:
Income per share from continuing operations $.54 $ - $ .28 $.25
----
----
Loss per share from discontinued operations - - (.33)
---- ----- -----
Net income (loss) per share $.54 $ .52 $(.05)
---- ----- -----
---- ----- -----
- - --------------
(1) After giving pro forma effect for the conversion of Class D Convertible Preferred Stock, Class B Convertible
Preferred Stock and Class A Convertible Preferred into Common Stock at 1:408, 1:369 and 1:314, respectively,
and the subsequent reverse stock split.
(2) Based upon the initial public offering price of $8.00 per share.
</TABLE>
116
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Consolidated
Statement of Operations and the Consolidated Balance Sheet and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1996
<CASH> 11294
<SECURITIES> 0
<RECEIVABLES> 21037
<ALLOWANCES> 2700
<INVENTORY> 297
<CURRENT-ASSETS> 35031
<PP&E> 13461
<DEPRECIATION> (6962)
<TOTAL-ASSETS> 48001
<CURRENT-LIABILITIES> 26056
<BONDS> 0
44
0
<COMMON> 0
<OTHER-SE> 20203
<TOTAL-LIABILITY-AND-EQUITY> 48001
<SALES> 1038
<TOTAL-REVENUES> 28983
<CGS> 1246
<TOTAL-COSTS> 24985
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1284
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4212
<INCOME-TAX> 1748
<INCOME-CONTINUING> 2464
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2464
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.52
</TABLE>
