-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QUMKwoLfLn297c71QsdkhLC4qMt0YS5Nu2JAD7fwGc2bIz7u8e5GdZPUWK5eBXUG XFrPg5zfaW2nkWqMdsU0EQ== 0000950109-96-001565.txt : 19960318 0000950109-96-001565.hdr.sgml : 19960318 ACCESSION NUMBER: 0000950109-96-001565 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960315 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDUSTRIAL TRAINING CORP CENTRAL INDEX KEY: 0000764867 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 521078263 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13741 FILM NUMBER: 96535051 BUSINESS ADDRESS: STREET 1: 13515 DULLES TECHNOLOGY DR CITY: HERNDON STATE: VA ZIP: 22071 BUSINESS PHONE: 7037133335 MAIL ADDRESS: STREET 1: 13515 DULLES TECHNOLOGY DRIVE CITY: HERNDON STATE: VA ZIP: 22071 10KSB 1 FORM 10KSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-KSB Annual Report Under Section 13 or 15(d) of The Securities Exchange Act For the Fiscal Year ended December 31, 1995 Commission File Number 0-13741 INDUSTRIAL TRAINING CORPORATION ------------------------------- (Exact name of small business issuer as specified in its charter) Maryland 52-1078263 -------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 13515 Dulles Technology Drive, Herndon, Virginia 22071 ------------------------------------------------------ (Address of principal executive offices and zip code) Issuer's telephone number (703)713-3335 (including area code) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each Class which registered ------------------- ---------------- None None Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [_] Issuer's revenues for the year ended December 31, 1995 were $22,768,664. Aggregate market value of all voting stock outstanding at February 15, 1996 was $25,290,815. Amount was computed using the average bid and ask price as of February 15, 1996, which was $7.125. As of February 15, 1996, 3,549,588 shares of common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- Portions of the proxy statement for the annual shareholders meeting to be held May 7, 1996 are incorporated by reference into Part III. TABLE OF CONTENTS
PART I PAGE - ------ ---- Item 1 Description of Business 1 Item 2 Description of Properties 3 Item 3 Legal Proceedings 3 Item 4 Submission of Matters to a Vote of Security Holders 3 PART II - ------- Item 5 Market for Common Equity and Related Stockholder Matters 4 Item 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 4 Item 7 Financial Statements 8 Item 8 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 23 PART III - -------- Item 9 Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act 24 Item 10 Executive Compensation 26 Item 11 Security Ownership of Certain Beneficial Owners and Management 26 Item 12 Certain Relationships and Related Transactions 26 Item 13 Exhibits and Reports on Form 8-K 27
PART I ITEM 1. DESCRIPTION OF BUSINESS (a) General Development of Business ------------------------------- Industrial Training Corporation (the "Company" or "ITC") was incorporated under the laws of the State of Maryland on January 28, 1977. ITC develops, markets and sells training materials in many media; however, the overwhelming majority of the Company's products are delivered in multimedia platforms. ITC's multimedia training courseware combines full-motion video, audio, animation, graphics and text into a single training presentation. During 1995, the Company concentrated its efforts on expanding product platforms and development efforts and increasing distribution capabilities. The majority of the company's product development efforts focused on improving ITC's core multimedia training products, including converting its existing analog laserdisc training programs into the digital CD-ROM format. The conversion, which is scheduled to be completed in early 1996, is expected to provide ITC's customers with a wide range of products in multiple formats. In addition to its internal program development activities, on February 17, 1995, the Company acquired all the rights, title and ownership interests in the INVOLVE(R) Instrumentation series. With this acquisition, INVOLVE(R) became the fifth learning library available under the ITC Activ(R) trademark. On July 28, 1995, the Company filed a registration statement on Form SB-2 with the Securities and Exchange Commission (SEC) for a public offering of 1,207,500 shares (including an over-allotment option) of its common stock ("the Offering"). The Offering included 175,000 shares sold by ITC shareholders. The registration statement was declared effective by the SEC on September 28, 1995. On October 4, 1995, the Offering was completed and the Company's stock was sold at $9.75 per share. The over-allotment option which was exercised on November 10, 1995 resulted in the sale of an additional 157,500 shares of the Company's common stock. In aggregate, the net proceeds to the Company from the Offering amounted to $9,048,000. A portion of the net proceeds, $1,763,000, was immediately used to reduce the Company's long-term borrowings. The balance of the net proceeds will be used to fund the conversion of the Company's existing analog courseware training products into the digital CD-ROM format, fund the Company's efforts to broaden and expand its training products by acquiring companies or products, and for general working capital and corporate purposes. On November 3, 1995, Activ Training, Ltd., a wholly owned subsidiary of the Company, was incorporated as a private limited company of England and Wales. Activ Training, Ltd. was created in order to expand the Company's sales, marketing and distribution activities within the international marketplace. Activ Training, Ltd. is headquartered in London, England. (b) Narrative Description of Business --------------------------------- ITC is a full-service training company specializing in the development, production, marketing and sale of off-the-shelf training courseware for corporate, educational and governmental organizations. ITC courseware uses the power of full-motion video as a learning tool on a PC platform. These courses combine high quality video and sound with the PC's capability for graphics and automatic recordkeeping. Standard multimedia platforms for ITC products include both laserdisc and CD-ROM. The Company's CD-ROM products are primarily delivered using the MPEG digital video format. However, at various times the Company has also used both the DVI and INDEO(R) digital video formats to deliver its courseware. The majority of the Company's multimedia products are sold under the 1 Company's registered trademark Activ(R). These products are focused in five primary areas, as represented by the five Activ(R) Learning Libraries: the "Activ(R) PC Skills Learning Library," the "Activ(R) Regulatory Training Learning Library," the "Activ(R) Basic Skills Learning Library," the "Activ(R) Technical Skills Learning Library," and the "Activ(R) INVOLVE(R) Instrumentation Learning Library." Distribution of the Company's products is managed through a number of channels. Primarily, the Company employs a direct salesforce which is responsible for sales of the Company's multimedia training products throughout North America, with the exception of those territories which have been sold to ComSkill Learning Center (ComSkill) franchises as exclusive territories for distribution of the "Activ(R) PC Skills Learning Library." ComSkill franchisees in turn employ sales persons to market and sell ITC's "PC Skills" products throughout their protected territories. In certain other U.S. markets, the Company also uses dealers to distribute its courseware products. In foreign markets other than Canada and the United Kingdom, the Company markets its products primarily through dealers and distributors. All of the Company's training programs are proprietary and as a result they are all protected by copyright. The Company's libraries of marketable off-the-shelf products include in excess of 200 Activ(R) training programs, all of which were produced by the Company. Certain of the Company's "Basic Skills" and "Technical Skills" products are owned by limited partnerships in which the Company acts as a general partner and, in some cases, the Company participates as a limited partner. In addition to selling multimedia training courseware, the Company sells related hardware products. The Company uses many IBM compatible hardware systems for the delivery of its products. In addition to being an authorized IBM Industry Remarketer and a Value Added Reseller, the Company utilizes the products of Compaq, Hewlett Packard, Gateway 2000 and other computer hardware manufacturers. Such hardware is integrated with ITC's Activ(R) courseware to provide a full- service solution to the training needs of ITC's clients. All materials used in the Company's products are available from numerous sources of supply. The Company does not foresee any shortage of such materials. Further, ITC does not believe that the loss of any single supplier would have a material adverse effect on the Company taken as a whole. There are many companies engaged in the business of providing training and instructional materials using various media. These companies include providers of traditional instructor-led training, multimedia developers and sellers, textbook publishers, and others, all of which compete for available training funds. At present, there are several providers of interactive multimedia training products and management believes that the number of companies providing multimedia training products will continue to increase in the future. Some of these companies are larger and have greater resources than ITC, while others offer only specialized training materials. Considering all five of the Company's "Learning Libraries" and the current conversion of the majority of the Company's analog-based training products to the digital CD-ROM platform, management believes that ITC offers the most broad array of multimedia training products and services available. 2 At December 31, 1995, the Company and its subsidiaries employed a total of 83 people, all of whom are full-time. This represents an increase of 8 employees relative to December 31, 1994. The Company utilizes free-lance and temporary personnel who are familiar with ITC's development and production process to support increased personnel requirements that arise from time to time. The Company is not a party to any collective bargaining agreements, and believes that relations with its employees are good. ITEM 2. DESCRIPTION OF PROPERTIES The Company currently occupies 28,431 square feet of office, warehouse and production space in a commercial building located at 13515 Dulles Technology Drive, Herndon, Virginia. This lease will expire in June of 1999. Prior to February 1, 1996, the Company occupied approximately 6,450 square feet of office space in a commercial building located at One Buckhead Plaza, Suite 1500, 3060 Peachtree Road, Atlanta, Georgia. This lease expired in January of 1996. Effective February 1, 1996, the Company occupies 3,405 square feet of office space in a commercial building located at 2000 RiverEdge Parkway, Atlanta, Georgia. This lease will expire in January of 2001, and effectively replaces the Peachtree Road office space. The Company also leases 950 square feet of office space in a commercial building located at 2 Milliston Road, Suite 1C, Millis, Massachusetts. This lease expires in March of 1996. All facilities are in good condition and are adequate for the Company's use. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to, nor is any of its property the subject of, any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company has not submitted any matters to a vote of security holders since the May 1995 Annual Meeting. 3 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) Market Information ------------------ The Company's Common Stock is traded on the National Association of Security Dealers Automated Quotation System (NASDAQ), National Market System (NMS). The following table states the high and low quotation information by quarter for the Company's Common Stock based on actual trading, as reported by NASDAQ/NMS.
High Low ------ ----- 1st Quarter, 1994 5 1/4 4 2nd Quarter, 1994 4 1/2 3 5/8 3rd Quarter, 1994 8 1/2 3 5/8 4th Quarter, 1994 8 1/2 7 1/4 1st Quarter, 1995 10 1/2 6 1/4 2nd Quarter, 1995 10 1/2 8 3rd Quarter, 1995 11 1/4 9 5/8 4th Quarter, 1995 11 8 3/4
(b) Holders ------- As of December 31, 1995, there were 1,029 holders of record of the Company's Common Stock, the Company's only class of stock. (c) Dividends --------- Shareholders of the Company's Common Stock are entitled to receive ratably such dividends as may be declared by the Board of Directors out of funds legally available. There has been no declaration of dividends since 1984. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenues - -------- During 1995, revenues for ITC totaled $22,769,000 as compared to $22,337,000 achieved during fiscal 1994, representing a $432,000, or 2% increase. Revenues were positively impacted by an 18% increase in the sales of ITC's off-the-shelf ACTIV(R) courseware. At the same time however, revenues were negatively impacted by several factors. These factors include reduced revenues from custom courseware and consulting services, franchise fees and royalties, linear products, and sales of multimedia hardware related products. 4 Revenues from the Company's courseware products totaled $18,496,000, an increase of $512,000 or 3% over 1994 levels. The Company's courseware product sales include off-the-shelf courseware, custom courseware and consulting services, fees and royalties and linear training products. Revenues from off-the-shelf courseware products totaled $16,307,000 for the year as compared to $13,784,000 achieved during fiscal 1994, an increase of $2,523,000 (18%). The increase in off-the-shelf courseware sales resulted from several factors, including: increased efforts used to market its core products, a development schedule that resulted in the release of 85 new training courses including converted products, and the Company's continued efforts to increase additional third-party distribution channels. Furthermore, the Company believes that significant increases in the acceptance of multimedia training tools has fueled the growth in revenues of its core products. Consistent with 1994, revenues from custom courseware and consulting services declined as a result of the Company's continued decision to de-emphasize custom courseware sales during 1995 and 1994. Revenues from custom courseware and consulting services totaled $1,003,000, representing a $1,384,000 decrease as compared to fiscal 1994. During the first quarter of 1996, the Company organized a new multimedia services division and expects to emphasize service related activities such as implementation support, hardware and network integration, and instructional design. Fees and royalties from the Company's franchise network, ComSkill Learning Centers, Inc. (ComSkill) totaled $464,000 as compared to $565,000 achieved during 1994. The decrease of $101,000 or 18% was primarily due to lower than anticipated sales volume generated by the franchise network, resulting in lower royalty income to the Company and a decline in the number of franchises sold during 1995 as compared to 1994. During the year, the Company concentrated its efforts on enhancing the performance of the existing franchise network as opposed to selling additional territories, although such efforts did not result in increased performance. Furthermore, during December of 1995, the Company terminated the Indianapolis, Indiana and Chicago, Illinois franchise agreements at a cost of $72,000. These territories had been sold during 1993 and 1994, respectively. Sales of the Company's linear training products, marketed under the label USA Training, totaled $722,000, a decrease of $526,000 or 42% over 1994 amounts. The decline in sales of these products is consistent with industry trends and the Company's strategy to de-emphasize these products. 5 Sales of the Company's hardware systems totaled $4,273,000 during 1995, as compared to $4,353,000 during 1994, representing a decrease of 2%. The decrease in hardware sales reflects the standardization of hardware requirements due to the emergence of digital CD-ROM technology. The resulting impact was a reduction in unit prices and, unlike the situation with laserdisc systems, availability of required hardware through multiple channels, resulting in increased competition to ITC. INCOME BEFORE PROVISION FOR INCOME TAXES - ---------------------------------------- Income before provision for income taxes totaled $2,555,000 in 1995. This represents an increase of $590,000 or 30% over the corresponding result of $1,965,000 achieved for fiscal 1994. The significant increase in earnings before taxes in 1995 has resulted from several factors including the increase in sales of the Company's off-the-shelf training products, the reduction in royalty expense due to the Company's purchase of the involve/(R)/ series, and the positive impact of net interest income resulting from the reduction in debt and investment of net proceeds following the Company's public offering. Cost of sales represented 57% and 61% of total revenues for the years ended 1995 and 1994, respectively. The decrease in cost of sales on a comparative basis is principally attributable to a higher percentage of sales from off-the-shelf courseware products which typically carry higher margins, and the increased level of sales from products owned solely by the Company. Company owned product sales accounted for 86% and 72% of total off-the-shelf multimedia courseware sales in 1995 and 1994, respectively. The substantial increase in sales of Company owned products was due primarily to the acquisition of the involve/(R)/ series during the first quarter of 1995. Selling, general and administrative expenses totaled $7,531,000 in 1995, an increase of $838,000 or 13% over the corresponding period of 1994. Significant portions of the increase, $258,000 and $169,000, resulted from increased marketing related activities and higher depreciation expense, respectively. Furthermore, the Company expanded its capabilities for customer support by providing additional staffing and resources in the customer assurance department. This expansion is directly related to the Company's expanding customer and product base. TAXES - ----- As a result of the Company's available tax loss carryforwards, the Company has historically paid a minimal amount of income taxes. However, as a result of the Company's increasing level of profitability, combined with the restrictions on the utilization of certain of the Company's net operating losses, the Company began to pay a larger amount of income taxes beginning in the second quarter of 1995. These increased levels of tax payments are expected to continue, provided the Company continues to have profitable results. 6 NET INCOME - ---------- Net income for 1995 totaled $1,507,000 or $.54 per share as compared to $1,160,000 or $.48 per share achieved in 1994. This represented increases of $347,000 (30%) and $.06 per share (13%) respectively. CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES Working capital at December 31, 1995 was $13,274,000 as compared to $4,095,000 at December 31, 1994, an increase of $9,179,000. The substantial increase in working capital resulted primarily from the public offering of 1,207,500 shares of the Company's common stock during the third quarter of 1995, of which 1,032,500 shares were sold by the Company. In total, the offering generated net proceeds to the Company of $9,048,000. For the year ended December 31, 1995, the Company's cash position increased to $10,349,000 from $440,000 at December 31, 1994, an increase of $9,909,000. During 1995, cash flow generated from operations totaled $6,132,000, resulting primarily from increased profitability and a significant decrease in accounts receivable which was partially offset by decreases in accounts payable and accrued expenses. The Company invested a total of $4,636,000 in 1995 for the development of new programs, the purchase of the INVOLVE(R) Series (described below), and certain other capital expenditures. On February 17, 1995, ITC purchased all rights, title and all other ownership interests in the 51 videodiscs in the INVOLVE(R) Series ("INVOLVE(R)"). The aggregate purchase price for this transaction was approximately $1,590,000. The purchase price included the forgiveness of a receivable from ISA of approximately $90,000 and approximately $180,000 of INVOLVE(R) inventory. The Company borrowed $1,320,000 to finance the acquisition of the INVOLVE(R) Series. Due to the Company's strong operating performance during 1995 and the net proceeds received from the public offering, the Company was also able to reduce borrowings under the Company's line-of-credit and term loans of $80,000 and $2,135,000, respectively. The amount of net proceeds from the offering which were used to reduce its borrowings under two separate term loans was $1,763,000. During 1995, the Company's borrowing capacity, under the terms and conditions of its line-of-credit, was increased to $2,500,000. At December 31, 1995, there are no amounts outstanding pursuant to the line-of-credit agreement. Management believes that cash generated from operations combined with the Company's existing resources and available line of credit are adequate to meet ITC's working capital and other financing requirements for 1996. 7 ITEM 7. FINANCIAL STATEMENTS
INDEX PAGE NO. - -------------------------------------------------------------------------------- Report of Independent Auditors 9 Consolidated Statements of Income for the Years Ended December 31, 1995 and 1994 10 Consolidated Balance Sheets as of December 31, 1995 and 1994 11-12 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995 and 1994 13 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995 and 1994 14 Notes to Consolidated Financial Statements 15
8 REPORT OF INDEPENDENT AUDITORS ------------------------------ The Board of Directors and Stockholders Industrial Training Corporation We have audited the accompanying consolidated balance sheets of Industrial Training Corporation as of December 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Industrial Training Corporation at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Vienna, Virginia Ernst & Young LLP February 16, 1996 9 INDUSTRIAL TRAINING CORPORATION CONSOLIDATED STATEMENTS OF INCOME Years ended December 31, 1995 and 1994
1995 1994 ---- ---- Revenues, net: Courseware $18,495,997 $17,983,796 Hardware 4,272,667 4,353,219 ----------- ----------- Total revenues, net (note 3) 22,768,664 22,337,015 Cost of sales: Courseware 8,772,664 9,440,595 Hardware 4,098,232 4,187,960 ----------- ----------- Total cost of sales 12,870,896 13,628,555 ----------- ----------- Gross Margin 9,897,768 8,708,460 Selling, general and administrative expenses 7,530,771 6,693,221 Equity in earnings of affiliates (145,768) (136,012) ----------- ----------- Income before interest and provision for income taxes 2,512,765 2,151,251 Interest (income) expense, net (42,343) 186,194 ----------- ----------- Income before provision for income taxes 2,555,108 1,965,057 Income tax expense (note 8) 1,048,000 805,000 ----------- ----------- Net income $ 1,507,108 $ 1,160,057 =========== =========== Net income per common share (note 1) $.54 $.48 =========== =========== Weighted average number of shares outstanding 2,793,958 2,427,707 =========== ===========
See accompanying Notes. 10 INDUSTRIAL TRAINING CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 1995 and 1994 ASSETS
1995 1994 ---- ---- Current assets: Cash and cash equivalents $10,348,762 $ 439,923 Accounts receivable, net (notes 2, 5 and 6) 4,802,054 7,293,477 Due from affiliates (note 3) 18,842 86,111 Inventories, net of reserve of $93,400 at December 31, 1995 and 1994 871,072 1,203,876 Prepaid expenses 253,061 118,446 ----------- ----------- Total current assets 16,293,791 9,141,833 Property and equipment (note 6): Video and computer equipment 3,221,982 2,510,841 Furniture and fixtures 1,037,404 1,032,563 Leasehold improvements 93,106 89,106 ----------- ----------- 4,352,492 3,632,510 Less accumulated depreciation and amortization (3,036,918) (2,507,393) ----------- ----------- Net property and equipment 1,315,574 1,125,117 Deferred program development costs, net of accumulated amortization of $5,203,491 and $3,006,689 at December 31, 1995 and 1994, respectively 5,941,079 4,358,315 Goodwill, net of accumulated amortization of $346,111 and $206,284 at December 31, 1995 and 1994, respectively 1,961,299 2,185,126 Investments in affiliates (note 3) 231,315 245,887 Other 31,089 73,769 ----------- ----------- Total assets $25,774,147 $17,130,047 =========== ===========
See accompanying notes. 11 INDUSTRIAL TRAINING CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 1995 and 1994 LIABILITIES AND STOCKHOLDERS' EQUITY
1995 1994 ---- ---- Current liabilities: Line of credit (note 5) $ -- $ 80,000 Current installments of long-term debt (note 6) 117,175 328,637 Accounts payable 1,621,543 2,112,271 Due to affiliates (note 3) 261,230 419,895 Accrued compensation and benefits 594,796 942,215 Other accrued expenses 319,798 1,164,219 Income taxes payable 105,000 -- ------------- ------------- Total current liabilities 3,019,542 5,047,237 Deferred lease obligations 102,964 119,316 Deferred income taxes (note 8) 1,608,522 1,136,522 Long-term debt (note 6) 130,745 772,826 ------------- ------------- Total liabilities 4,861,773 7,075,901 Commitments (note 9) Stockholders' equity (notes 7 and 10): Common stock, $.10 par value, 4,000,000 shares authorized; 3,556,424 and 2,448,824 shares issued and outstanding in 1995 and 1994, respectively 355,643 244,883 Additional paid-in capital 14,770,853 5,638,493 Note receivable from ESOP (250,177) (358,177) Retained earnings 6,036,055 4,528,947 ------------- ------------- Total stockholders' equity 20,912,374 10,054,146 ------------- ------------- Total liabilities and stockholders' equity $ 25,774,147 $ 17,130,047 ============= =============
See accompanying notes. 12 INDUSTRIAL TRAINING CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended December 31, 1995 and 1994
Common Stock Additional Total ---------------------- Paid-In Note Receivable Retained Stockholders' Shares Par Value Capital From ESOP Earnings Equity ------ --------- ------- --------- -------- ------ Balance at January 1, 1994 2,357,724 $235,773 $ 5,274,378 $(460,827) $3,368,890 $ 8,418,214 Note payments - - - 102,650 - 102,650 New shares issued: Stock issuance 100,000 10,000 402,500 - - 412,500 Stock options exercised 5,700 570 17,955 - - 18,525 Common stock issued to employees 400 40 2,160 - - 2,200 Common stock acquired (15,000) (1,500) (58,500) - - (60,000) Net income - - - - 1,160,057 1,160,057 --------- -------- ----------- --------- --------- ---------- Balance at December 31, 1994 2,448,824 244,883 5,638,493 (358,177) 4,528,947 10,054,146 Note payments - - - 108,000 - 108,000 New shares issued: Stock issuance 1,032,500 103,250 8,945,353 - - 9,048,603 Stock options exercised 74,500 7,450 182,192 - - 189,642 Common stock issued to employees 600 60 4,815 - - 4,875 Net income - - - - 1,507,108 1,507,108 --------- -------- ----------- --------- --------- ---------- Balance at December 31, 1995 3,556,424 $355,643 $14,770,853 $(250,177) $6,036,055 $20,912,374 ========= ======== =========== ========= ========== ===========
See accompanying notes. INDUSTRIAL TRAINING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1995 and 1994
1995 1994 ---- ---- Cash flows from operating activities: Net income $ 1,507,108 $ 1,160,057 Reconciling items: Provision for deferred taxes 556,000 765,000 Depreciation and amortization 2,987,304 1,918,123 Salespeople awards of common shares 4,875 2,200 (Decrease) increase in allowance for doubtful accounts (90,667) 78,000 Increase in reserve for inventory obsolescence -- 10,000 Loss on sale of property and equipment 29,772 -- Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 2,582,090 (2,441,390) Decrease in inventories 332,804 74,061 (Increase) decrease in prepaid expenses (134,615) 63,932 (Decrease) increase in due to affiliates, net (91,396) 61,731 Decrease in other assets 42,680 24,846 (Decrease) increase in accounts payable (490,728) 556,612 (Decrease) increase in accrued expenses (1,086,840) 959,286 (Decrease) increase in deferred lease obligation (16,352) 7,586 ----------- ----------- Net cash provided by operating activities 6,132,035 3,240,044 Cash flows from investing activities: Deferred program development costs (3,779,566) (1,543,128) Capital expenditures (755,707) (477,944) Investment in affiliates (100,625) (38,268) ----------- ----------- Net cash used in investing activities (4,635,898) (2,059,340) Cash flows from financing activities: Repayments under line of credit (80,000) (570,000) Proceeds from long-term debt 1,320,000 -- Principal payments under term loans (2,135,257) (742,204) Payments under capital lease obligations, net of deferred interest (38,286) (28,388) Issuance of common stock 9,238,245 431,025 Acquisition of common stock -- (60,000) Employee stock option note collections 108,000 102,650 ----------- ----------- Net cash provided by (used in) financing activities 8,412,702 (866,917) ----------- ----------- Net increase in cash 9,908,839 313,787 Cash and cash equivalents at beginning of year 439,923 126,136 ----------- ----------- Cash and cash equivalents at end of year $10,348,762 $ 439,923 =========== ===========
See accompanying notes. 14 INDUSTRIAL TRAINING CORPORATION Notes to Consolidated Financial Statements December 31, 1995 and 1994 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ a) Basis of Presentation --------------------- The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, ComSkill Learning Centers, Inc. ("ComSkill") and Activ Training, Ltd. Significant intercompany accounts and transactions have been eliminated in consolidation. ITC is a full-service training Company specializing in the development, production, marketing and sale of both off-the- shelf and custom multimedia training courseware for corporate, educational and governmental organizations. ITC's multimedia training courseware combines full- motion video, audio, animation, graphics and text into a single training presentation. b) Revenues and Cost ----------------- Revenues from courseware include both off-the-shelf and custom courseware sales and consulting service revenues. The Company recognizes revenues on off-the- shelf product and hardware sales as units are shipped. The Company permits the customer the right to return the courseware within 30 days of purchase. In the event that sales returns are material, the Company adjusts revenue accordingly. Revenues from sales of custom training programs that are developed and produced under specific contracts with customers, including contracts with affiliated joint ventures and limited partnerships, are recognized on the percentage of completion basis as related costs are incurred during the production period. Gross revenues from sales of affiliated joint venture and limited partnership copyrighted courseware are included in the Company's financial statements, as are related production, selling and distribution costs. Amounts due to co-owners of the affiliated venture/partnerships related to such courseware sales are reflected as royalties and included in cost of sales in the financial statements. The Company recognizes revenues from initial franchise fees when franchise agreements have been fully executed, the Company has substantially fulfilled all of its obligations to the franchisee under the agreement, and the non-refundable franchise fee has been paid. During 1995 and 1994, the Company recognized $210,000 and $450,000 of revenue from initial franchise fees. Such amounts have been included in courseware revenues in the accompanying consolidated statements of income. Although the Company conducts certain of its business in foreign markets, the Company mitigates its exposure to foreign currency risk by requiring payments in U.S. dollars. c) Deferred Program Development Costs ---------------------------------- Costs of developing and producing off-the-shelf courseware have been capitalized as deferred program development costs. Capitalized costs include direct labor, materials, product masters, subcontractors, consultants, and applicable overhead. These capitalized costs are amortized on a straight-line basis over the estimated useful lives of the related programs which range from 3 to 7 years. The net book value of the Company's deferred program development costs at 15 December 31, 1995 amount to $1,715,000, $915,000, $231,000, $1,997,000, and $1,083,000 for the Activ(R) "PC Skills Learning Library," the Activ(R) "Regulatory Training Learning Library," the Activ(R) "Basic Skills Learning Library" the Activ(R) "Technical Skills Learning Library," and the Activ(R) "Involve Instrumentation Learning Library," respectively. Periodically, the Company assesses the net realizable value of program development costs by reviewing past sales performances, current and planned future marketing activities, specific sales promotions and strategic distribution arrangements. Based on this assessment, the Company determines each product's prospects for future sales, and, if necessary, adjusts asset values to net realizable value. The related amortization expense is included in the cost of sales and amounts to approximately $2,197,000 and $1,325,000 in 1995 and 1994, respectively. d) Cash and Cash Equivalents ------------------------- Cash and cash equivalents include cash and other highly liquid investments having original maturities of less than three months. e) Inventories ----------- Inventories primarily consist of multimedia courseware and related computer hardware, and are stated at the lower of cost or market. Cost is determined using the average cost method. f) Property and Equipment ---------------------- Property, equipment and leasehold improvements are stated at cost. Depreciation on property and equipment is computed on a straight-line basis over estimated useful lives of three to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or estimated useful lives of the related assets. Depreciation and leasehold amortization expense amounted to approximately $535,000 and $366,000 in 1995 and 1994, respectively. g) Investments in Affiliates ------------------------- Investments in affiliated joint ventures and limited partnerships are accounted for using the equity method and, accordingly, the initial cost of the investments are adjusted for the Company's proportionate share of joint venture and partnership undistributed earnings or losses. h) Income Taxes ------------ The Company provides for income taxes using the liability method in accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred income taxes result primarily from differences between financial statement and income tax treatment of program development costs and net operating loss carryforwards. i) Net Income Per Common Share --------------------------- 16 Earnings per common share are based on the weighted average number of common shares actually outstanding plus the shares that would be outstanding assuming the exercise of dilutive stock options and warrants, all of which are considered to be common stock equivalents. j) Goodwill -------- The excess of purchase price over the fair value of net assets acquired related to an acquisition has been recorded as goodwill. Goodwill is being amortized using the straight-line method over an estimated useful life of fifteen years. Amortization expense for 1995 and 1994 amounted to approximately $140,000 and $166,000, respectively. During 1995 and 1994, the Company adjusted goodwill to reflect the utilization of the acquired tax benefits (see Note 8) and in 1994 to reflect adjustments to the value of net assets acquired. The net effect of these two adjustments was to decrease the amount of goodwill originally recorded by approximately $84,000 in 1995 and $27,000 in 1994. As part of its ongoing review, management takes into consideration any events and circumstances which might indicate an impairment to the carrying amount of goodwill. Factors that management uses, among other things, to evaluate the continuing value of goodwill include sales from the acquired product lines, development of the related distribution network and the value of contracts and agreements that were in place at the date of the acquisition. k) Stock Option Plans ------------------ In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation," which is effective for the Company's December 31, 1996 financial statements. The adoption of SFAS No. 123 will require additional footnote disclosures regarding the Company's stock-based compensation, but will not impact the financial position or the results of operations of the Company. l) Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the associated amounts of revenues and expenses during the reporting period; actual results could differ from the estimates. m) Reclassifications ----------------- Certain prior year amounts have been reclassified to conform to the current year presentation. 2) ACCOUNTS RECEIVABLE ------------------- Accounts receivable include the following at December 31:
1995 1994 ---- ---- Trade accounts receivable $ 4,619,145 $ 7,245,294 Unbilled contract receivables 291,311 242,279 Less allowance for doubtful accounts (190,047) (280,714) ------------ ------------ Trade accounts receivable, net 4,720,409 7,206,859 Other receivables 81,645 86,618 ------------ ------------ $ 4,802,054 $ 7,293,477 ============ ============
17 3) INVESTMENTS IN AND DUE TO AFFILIATES ------------------------------------ The Company is a participant in five separate limited partnerships with Industrial Training Partners, Ltd. (the ITP partnerships) and a joint venture with DynCorp. In all of the ITP partnerships, the Company is a 5% general partner and in certain partnerships the Company has acquired limited partnership interest as well. In the joint venture with DynCorp, the Company has a 50% ownership interest. The ITP partnerships and the DynCorp joint venture were formed to develop and produce various series of training programs. Under the contracts to market the programs for the partnerships and joint venture, ITC receives 50%-70% of the sales price for the costs of reproducing and marketing the training materials. In the case of the joint venture agreement, the Company also receives an additional 25% for its share of the joint venture profits. Sales of programs related to these affiliates were approximately $2,103,000 and $2,453,000 in 1995 and 1994, respectively. Additionally, in connection with the development of new off-the-shelf partnership programs, the Company billed certain of the ITP partnerships approximately $52,000 and $51,000 in 1995 and 1994, respectively. Amounts earned but not billed to the ITC partnerships totaling $256,000 are included in unbilled receivables at December 31, 1995. 4) LEASES ------ The Company has several noncancelable operating leases, primarily for office space and transportation equipment, that expire over the next five years and include purchase or renewal options at fair value at the time of renewal. Future minimum lease payments under noncancelable operating leases as of December 31, 1995 are as follows:
Year ending December 31: ------------------------ 1996 $ 438,000 1997 384,000 1998 381,000 1999 220,000 2000 and beyond 116,000 ---------- Total future minimum lease payments $1,539,000 ==========
Rental expenses for operating leases for the years ended December 31, 1995 and 1994 were approximately $532,000 and $489,000, respectively. 5) LINE OF CREDIT -------------- 18 At December 31, 1995, the Company had no amounts outstanding relating to its $2,500,000 revolving bank line of credit, which bears interest at prime plus 1/2% (9.0% at December 31, 1995). Borrowings under the line are collateralized by the Company's accounts receivable and inventory. The loan agreement includes certain covenants which limit borrowings and the ability to merge or dispose of assets, and requires the maintenance of minimum working capital and tangible net worth ratios. 6) LONG-TERM DEBT --------------
Long-term debt consists of the following at December 31: 1995 1994 ---- ---- Prime plus 1% (9.5% at December 31, 1995) note payable $ - $ 705,000 to financial institution due in monthly installments of $15,000 plus interest through November 1998; repaid in October of 1995. 8.0% note payable to financial institution due in 247,920 358,177 monthly principal and interest installments of $11,278 through December 1997, collateralized by the assignment of interest in the shares of the Company's common stock held by the ESOP, accounts receivable, inventory and property and equipment. Capital lease obligation - 38,286 ----------- ----------- Total long-term debt 247,920 1,101,463 Less current installments (117,175) (328,637) ----------- ----------- Long-term debt, excluding current installments $ 130,745 $ 772,826 =========== ===========
Interest paid on all debt amounted to approximately $154,000 and $191,000 in 1995 and 1994, respectively. 7) STOCK OPTIONS AND STOCK WARRANTS -------------------------------- At December 31, 1995, the Company had outstanding options to purchase common stock under three separate incentive stock option plans. Two of these plans, the 1992 Director Incentive Stock Option Plan and the 1992 Key Employee Incentive Stock Option Plan have effectively replaced the Company's 1982 Incentive Stock Option Plan. Options granted under the 1992 Director Incentive Stock Option Plan are non-qualified. From time to time, the Company also has granted other non- 19 qualified options to certain individuals. The Company also has outstanding 14,572 warrants to purchase common stock. These warrants are exercisable at $3.50 and expire in 1998. The following table summarizes option activity:
NON-QUALIFIED OPTIONS QUALIFIED OPTIONS --------------------- ----------------- No. of Exercise No. of Exercise Options Price Options Price ------- ----- ------- ----- Outstanding at January 1, 1994 31,400 $2.125-5.00 150,500 $1.994-6.75 Granted 30,000 30,000 Canceled or expired (10,400) (300) Exercised -- (5,700) -------- -------- Outstanding at December 31, 1994 51,000 $2.125-7.50 174,500 $1.994-6.75 Granted 75,000 20,000 Canceled or expired -- (2,000) Exercised (9,000) (65,500) -------- -------- Outstanding at December 31, 1995 117,000 $2.875-7.50 127,000 $2.875-10.05 ======== ========================================== Exercisable at December 31, 1995 87,000 $2.875-6.50 65,000 $2.875-6.50 ======== ========
Qualified options outstanding under the Company's stock option plans expire as follows: 26,000 options in 1996, 3,000 in 1997, and 98,000 in 1998 through 2002. There are 500 options available for additional grants. Outstanding non- qualified options expire as follows: 6,000 options in 1996 and 111,000 between 1999 and 2001. There are 29,000 options available for additional grants. 8) INCOME TAXES ------------ The components of income tax expense are as follows:
1995 1994 ---- ---- Current: Federal $ 438,500 $ 30,000 State 53,500 10,000 ----------- ------------ 492,000 40,000 Deferred: Federal 477,500 659,300 State 78,500 105,700 ----------- ------------ 556,000 765,000 ----------- ------------ $ 1,048,000 $ 805,000 =========== ============
20 The difference between income tax expense and the amount determined by applying the federal statutory rate is as follows:
1995 1994 ---- ---- Federal statutory rate $ 869,000 $ 668,000 State income taxes, net of federal benefit 87,000 75,500 Amortization of goodwill 52,000 62,000 Benefit of graduated tax rates - (12,000) Other 40,000 11,500 ------------ ------------ $ 1,048,000 $ 805,000 ============ ============
The following temporary differences give rise to the provision for deferred taxes at December 31:
1995 1994 ---- ---- Deferred program development costs $ 286,000 $ 74,500 Depreciation (19,000) 16,000 Allowance for doubtful accounts 34,000 (29,000) Inventory reserves - (9,000) Net operating loss and tax credit carryforwards 222,000 630,500 Accrued compensation 4,000 67,500 Other 29,000 14,500 ------------ ------------ $ 556,000 $ 765,000 ============ ============
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 are presented below.
1995 1994 ---- ---- Deferred tax assets: Allowance for doubtful accounts $ 71,000 $ 104,500 Inventory reserves 41,000 41,500 Accrued compensation 28,000 31,500 Net operating loss carryforwards 473,000 563,000 Alternative minimum tax and investment tax credit carryforwards - 65,000 Deferred lease obligation 39,000 44,500 Difference in depreciation 17,000 68,000 Other 16,478 16,478 ----------- ----------- Total deferred tax assets 685,478 934,478 Less valuation allowance (421,000) (505,000) ----------- ----------- Net deferred tax assets 264,478 429,478 ----------- ----------- Deferred tax liabilities: Product development costs, capitalized (1,873,000) (1,566,000) ----------- ----------- Total gross deferred tax liabilities (1,873,000) (1,566,000) ----------- ----------- Net deferred tax liabilities $(1,608,522) $(1,136,522) =========== ===========
21 For the years ended December 31, 1995 and 1994, the Company utilized $370,000 and $1,550,000 respectively, of available net operating loss carryforwards. At December 31, 1995, the Company had no net operating loss carryforwards available for income tax purposes, other than the prior net operating losses acquired, which are discussed below. As a result of an acquisition, the Company has available approximately $1,260,000 of additional net operating loss carryforwards that expire at varying dates through 2007. Pursuant to Section 382 of the Internal Revenue Code (the "Code"), the utilization of the net operating loss is limited to approximately $245,000 per year. During 1995, the Company utilized an aggregate of $225,000 of the acquired net operating loss carryforwards to offset taxable income. As a result, deferred taxes have been reduced by approximately $84,000. Due to the limitation on uses and other uncertainties relating to the utilization of the remaining tax benefit of these deductions, a valuation allowance has been recorded to substantially offset the net deferred tax asset related to the acquisition. The Company paid federal and state income taxes of $466,000 and $8,000 in 1995 and 1994 respectively. 9) COMMITMENTS ----------- The Company has entered into separate employment agreements with two of its officers which are subject to termination upon death (with $5,000 death benefit) or disability (as defined) or upon sixty days' notice by the Company (with 34 months of severance pay except where the Company is liquidating). In addition to basic salary, each of these officers is eligible to receive salary increases, bonuses, stock option grants, pension and profit-sharing arrangements, and other employee benefits which may from time to time be awarded or made available. If these officers resign, they must give the Company 12 months notice during which they continue to receive salary. The contracts also provide certain payments for other benefits. During October 1995, one of the officers gave notice of his resignation in accordance with the terms of the employment agreement. He will remain as an officer of the Company until October 1996. 10) STOCKHOLDERS' EQUITY -------------------- During 1995, the Company completed a public offering of 1,207,500 shares of its common stock including 175,000 shares being sold by certain Company shareholders. The net proceeds to the Company from the offering amounted to $9,048,000 (net of underwriters' commissions and approximately $314,000 of expenses paid directly by the Company). The Company used $1,763,000 of the net proceeds to reduce its long-term borrowing under two separate term loans. The Company intends to use the remaining net proceeds received from the offering to finance product development efforts, increase marketing efforts, finance potential acquisitions of compatible businesses, products or technologies, or for other working capital purposes. During 1994, the Company hired a new President for its franchise operations. At the date of hire, this executive executed a subscription agreement to purchase 100,000 shares of the Company's common stock at $4.125 per share, the fair market value of the Company's common stock on the effective date of the subscription agreement. As a result, during 1994, the Company issued 100,000 shares of Common Stock to the executive for an aggregate purchase price of $412,500. The Company instituted an Employee Stock Ownership Plan (ESOP) and Trust for the benefit of substantially all employees effective January 1, 1992. To establish the plan, ITC entered into a loan agreement with a bank and borrowed $637,500 for the purchase of 200,000 shares of ITC common stock from DynCorp. ITC pledged this stock to the bank to collateralize the loan. The provisions of the ESOP require that, on an annual basis, the greater of 33,334 shares or the amount of shares 22 equal to five percent of total compensation of eligible employees be allocated to employee accounts. Each participant then receives shares based on their relative annual compensation. The Company recognizes contribution expense which was $106,000 and $108,000 for 1995 and 1994, respectively, based on the cost of shares allocated for the period and any interest expense incurred. Contributions to the ESOP amounted to approximately $135,000 in both 1995 and 1994, including approximately $25,000 and $32,000 of interest in 1995 and 1994, respectively. The fair market value of the 66,666 unearned shares at December 31, 1995 amounted to approximately $583,000. 11) EMPLOYEE 401(K) PLAN -------------------- On January 1, 1991, the Company established a 401(k) Plan for the benefit of substantially all of its employees. Employees can contribute from 1% to 15% of their salary to the Plan subject to statutory limitations. At the discretion of the Board of Directors, the Company can elect to make a contribution to the Plan. During 1995, the Company made a $30,000 contribution to the 401(k) Plan. No contribution had been made by the Company prior to 1995. 12) QUARTERLY FINANCIAL DATA (UNAUDITED) ------------------------------------ Financial data for the interim periods of 1995 and 1994 were as follows (amounts in thousands except per share amounts):
NET Net Gross Net Income Revenue Margin Income Per Share 1994 Quarters First $ 4,168 $ 1,759 $ 111 $ .05 Second 5,266 2,090 290 .12 Third 5,497 2,009 262 .11 Fourth 7,406 2,850 497 .20 -------- -------- -------- -------- Total $ 22,337 $ 8,708 $ 1,160 $ .48 ======== ======== ======== ======== 1995 Quarters First $ 4,970 $ 2,177 $ 265 $ .10 Second 6,286 2,626 461 .18 Third 6,038 2,533 464 .18 Fourth 5,475 2,562 317 .08 -------- -------- -------- -------- TOTAL $ 22,769 $ 9,898 $ 1,507 $ .54 ======== ======== ======== ========
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NONE - ---- 23 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT (a) Identification of Directors ---------------------------
Name Age Year First Elected Year of Expiration ---- --- ------------------ ------------------ Daniel R. Bannister 65 1988 1996 Thomas M. Balderston 39 1993 1997 Philip J. Facchina 34 1995 1996 Steven L. Roden 45 1993 1997 John D. Sanders 57 1977 1998 Richard E. Thomas 69 1982 1998 James H. Walton 62 1977 1997 Chairman of the Board
(b) Identification of Executive Officers ------------------------------------
Name Age Year First Served As Officer ---- --- ---------------------------- Elaine H. Babcock 39 1984 Senior Vice President Frank A. Carchedi 38 1995 Vice President, Treasurer and Chief Financial Officer Philip J. Facchina 34 1992 President and Chief Operating Officer Anne J. Fletcher 33 1995 Secretary Gerald H. Kaiz 57 1977 Executive Vice President Steven L. Roden 45 1993 Executive Vice President Elizabeth E. Tomaszewicz 49 1994 Vice President Robert VanStry 45 1983 Vice President James H. Walton 62 1977 Chief Executive Officer
24 (c) Business Experience ------------------- ELAINE H. BABCOCK is Senior Vice President of ITC. Ms. Babcock is currently responsible for the Company's newly formed Multimedia Services division. During 1995, Ms. Babcock was responsible for all distribution of off-the-shelf product sales of the Company and its affiliates in North America, with the exception of sales through the ComSkill franchise network. Prior to January 1994, Ms. Babcock used her sales and management expertise to build ITC's Custom Services Department. Ms. Babcock joined the Company in 1978 as a Video Production Specialist with a Communications degree from the University of Maryland. THOMAS M. BALDERSTON, a director since 1993, has been a partner of TDH, a venture capital fund group, 1985 to present. He is also Director of Actronics, Inc., Lifecore, Inc., and Pocono Springs Company. Prior to TDH, he was Assistant Vice President of Middle Market Lending for the Bank of Boston. Mr. Balderston holds an M.B.A. from the Anderson School of Management at UCLA and a B.A. from Williams College. DANIEL R. BANNISTER, a Director since 1988, has been President and Chief Executive Officer of DynCorp, a leading professional and technical services firm, since 1985. He was Executive Vice President and Senior Vice President of its Technical Services Group from 1983 to 1984. FRANK A. CARCHEDI is Vice President, Treasurer and Chief Financial Officer of ITC. Prior to joining ITC in November of 1995, Mr. Carchedi was a consultant in the Merger and Acquisition group of Ernst & Young LLP. Mr. Carchedi was with Ernst & Young LLP for over 10 years, prior to which he held several other positions in private industry and public accounting. Mr. Carchedi holds a B.S. in Accounting from Wake Forest University and is a C.P.A. PHILIP J. FACCHINA is President and Chief Operating Officer of ITC. Prior to being named President and COO in October 1995, Mr. Facchina served as Vice President, Treasurer and Chief Financial Officer of ITC from October 1992 to October 1995. Prior to joining ITC in October 1992, Mr. Facchina served as Treasurer and Chief Financial Officer of Facchina Construction Company, Inc. Prior to then, Mr. Facchina served as Vice President of Finance and Administration for E. C. Ernst, Inc. and Assistant Treasurer and Secretary for The Philadelphia Bourse, Inc. Mr. Facchina holds an M.B.A. from the University of Pennsylvania's Wharton Business School and a B.S. in Accounting from the University of Maryland. ANNE J. FLETCHER is Secretary of ITC. Ms. Fletcher joined ITC in December 1994 as the Company's General Counsel. Prior to joining ITC, she was engaged in the private practice of law for six years in Fairfax, Virginia. Ms. Fletcher received her J.D. from George Mason University School of Law and a B.A. from the State University of New York, College at Oswego. GERALD H. KAIZ serves as Executive Vice President of ITC. Mr. Kaiz, a former director, has been an officer of ITC since 1977. Prior to the founding of ITC, Mr. Kaiz was Manager of Training Consulting for NUS Corporation, an engineering and consulting firm (1967-1977). Mr. Kaiz holds a B.S. degree in Physics and an M.S. degree in Nuclear Engineering from the Massachusetts Institute of Technology. STEVEN L. RODEN is Chief Executive Officer of ComSkill, Executive Vice President of ITC and Managing Director of Activ Training Ltd. Mr. Roden served as President and Chief Executive Officer of Comsell from 1987 until its liquidation into ITC in January 1995. Prior to Comsell, he was President of Digital Controls Video, Inc., Vice President of Coloney, Inc., and Vice President of First Florida 25 Bank Corp. Mr. Roden holds an M.B.A. in Finance and Marketing and a B.S. from Florida State University. JOHN D. SANDERS, a Director since 1977, is Chairman of Tech News Inc., publishers of Washington Technology newspaper. He is also a registered representative (inactive) with Wachtel & Co., Inc., an investment banking firm, a position held since 1968. Mr. Sanders is a member of the Boards of Directors of: Daedalus Enterprises, Inc., an electronics specialty consultant; and Information Analysis, Inc., a supplier of computer software services. He holds a B.E.E. from the University of Louisville, Kentucky, and an M.S. and Ph.D. in Electrical Engineering from Carnegie-Mellon University. RICHARD E. THOMAS, a Director since 1982, has been President of COMSAT RSI since 1994. Prior to that, he was Chairman of the Board, President and Chief Executive Officer of Radiation Systems, Inc. (RSI), a communications systems manufacturer, from 1978 until 1994, at which time RSI was merged into COMSAT Corporation. Mr. Thomas was originally employed by RSI as Vice President, Operations in 1966. ELIZABETH E. TOMASZEWICZ is a Vice President of ITC and President of ComSkill. Prior to joining the Company, Ms. Tomaszewicz served as Senior Vice President of Sales and Marketing of TRO Learning, Inc. ("TRO"), 1989 to 1993. Prior to TRO, she served as Executive Vice President, Marketing and Field Operations of Applied Learning International, Inc. Ms. Tomaszewicz holds a B.S. from the University of Massachusetts. ROBERT F. VANSTRY is a Vice President of ITC. Currently, Mr. VanStry is in charge of all of ITC's product and technology development. Mr. VanStry joined the Company in May 1978 as Senior Training Associate and subsequently fulfilled the responsibilities of Manager of Engineering Projects, Manager of Project Development, and Vice President of Training Services. JAMES H. WALTON is Chairman of the Board and Chief Executive Officer of ITC. Mr. Walton has been a Director and officer of ITC since 1977. Prior to the founding of ITC in 1977, he was responsible for audiovisual production at NUS Corporation, an engineering and consulting firm (1973-1977). Mr. Walton holds a B.S. and M.A. from the University of Nebraska. ITEM 10. EXECUTIVE COMPENSATION The information contained on pages 6, 7 and 8 of ITC's Proxy Statement dated March 11, 1996, with respect to executive compensation and transactions, is incorporated herein by reference in response to this item. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information contained on pages 2 and 3 of ITC's Proxy Statement dated March 11, 1996, with respect to security ownership of certain beneficial owners and management, is incorporated herein by reference in response to this item. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained on page 9 of ITC's Proxy Statement dated March 11, 1996, with respect to certain relationships and related transactions, is incorporated herein by reference in response to this item. 26 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) The following are filed as part of this Form 10-KSB: ---------------------------------------------------- 1. Financial Statements: See Part II, Item 7. 2. Exhibits: See exhibit index, which index is incorporated herein by reference. (b) Reports on Form 8-K: -------------------- The Company did not file any reports on Form 8-K during 1995. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INDUSTRIAL TRAINING CORPORATION (Registrant) BY /s/James H. Walton DATE March 15, 1996 --------------------------------- ------------------------- James H. Walton, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. BY /s/Philip J. Facchina DATE March 15, 1996 --------------------------------- ------------------------- Philip J. Facchina, President, Chief Operating Officer and Director BY /s/Gerald H. Kaiz DATE March 15, 1996 --------------------------------- ------------------------- Gerald H. Kaiz, Executive Vice President BY /s/Steven L. Roden DATE March 15, 1996 -------------------------------- ------------------------- 27 Steven L. Roden, Executive Vice President and Director BY /s/Frank A. Carchedi DATE March 15, 1996 ------------------------------------- ------------------------- Frank A. Carchedi, Vice President, Treasurer and Chief Financial Officer BY /s/Christopher E. Mack DATE March 15, 1996 ------------------------------------- ------------------------- Christopher E. Mack, Controller BY /s/Thomas M. Balderston DATE March 15, 1996 ------------------------------------- ------------------------- Thomas M. Balderston, Director BY /s/Daniel R. Bannister DATE March 15, 1996 ------------------------------------- ------------------------- Daniel R. Bannister, Director BY /s/John D. Sanders DATE March 15, 1996 ------------------------------------- ------------------------- John D. Sanders, Director BY /s/Richard E. Thomas DATE March 15, 1996 ------------------------------------- ------------------------- Richard E. Thomas, Director CORPORATE HEADQUARTERS STOCK REGISTRAR AND TRANSFER AGENT Industrial Training Corporation American Securities Transfer 13515 Dulles Technology Drive 938 Quail Street Herndon, VA 22071-3416 Suite 101 (800) 638-3757 Lakewood, CO 80215 (703) 713-3335 FAX: (703) 713-0065 STOCK LISTING National Market System NORTH AMERICAN SALES LOCATIONS NASDAQ/NMS Trading Symbol: ITCC Atlanta, GA (404) 264-8644 MARKET-MAKERS Boston, MA Koonce Securities, Inc. Ferris, Baker Watts, Incorporated 28 (508) 376-8118 Charlotte, NC (704) 364-1223 ANNUAL MEETING Chicago, IL The Annual Meeting of shareholders will (708) 205-2707 be held on May 7, 1996 at 4:00 pm at the Sheraton Reston Hotel, 11810 Houston, TX Sunrise Valley Drive, Reston, (713) 852-0601 Virginia 22091. New York, NY (212) 551-1400 SHAREHOLDER INQUIRIES Ottawa, Ontario Communications concerning transfer (613) 599-4646 requirements, lost certificates, and changes in address should be directed Pittsburgh, PA to the Stock Registrar and Transfer (814) 643-4116 Agent. Other inquiries may be directed to Frank A. Carchedi, CFO. Tampa, FL (813) 855-5201 PRINCIPAL BANK Washington, DC (301) 601-8799 Central Fidelity National Bank Alexandria, VA INTERNATIONAL SALES LOCATIONS London, England GENERAL COUNSELS 44 123 435-2307 Ginsburg, Feldman and Bress, Chartered Washington, DC Kirkpatrick & Lockhart LLP Washington, DC INDEPENDENT AUDITORS Ernst & Young LLP Vienna, VA 29 INDEX TO EXHIBITS EXHIBIT PAGE No. Description No. ----------------------------------------------------------------------------- 3.1 Amended Articles of Incorporation of the Company, incorporated by reference to the Company's Registration Statement on Form SB-2 filed July 28, 1995 with the Securities and Exchange Commission ("SEC") (Commission File No. 33-61393). 3.2 Restated By-Laws of the Company. 4.1 Specimen Certificate for ITC Common Stock, incorporated by reference to the Company's Registration Statement on Form SB-2 filed July 28, 1995 with the SEC (Commission File No. 33-61393). 10.1 Agreement and Plan of Merger, each dated September 30, 1993, between ITC and CI Acquisition Corporation, incorporated by reference to the Company's Form 8-K filed October 21, 1993 with the SEC (Commission File No. 0-13741). 10.2 Asset Purchase Agreement, Assignment and Bill of Sale, each dated February 17, 1995 between ITC and the Instrument Society of America, incorporated by reference to the Company's Registration Statement on Form SB-2 filed July 28, 1995 with the SEC (Commission File No. 33- 61393). 10.3 1992 Director Incentive Stock Option Plan, incorporated by reference to the Company's Form 10-KSB filed March 19, 1992 with the SEC (Commission File No. 0-13741). 10.4 1992 Key Employee Incentive Stock Option Plan, incorporated by reference to the Company's Form 10-KSB filed March 19, 1992 with the SEC (Commission File No. 0-13741). 10.5 Employee Stock Ownership Plan, incorporated by reference to the Company's Form 10-KSB filed March 19, 1992 with the SEC (Commission File No. 0-13741). 10.6 Employment Agreements with Management 30 (a) James H. Walton (b) Gerald H. Kaiz (c) Elaine H. Babcock (d) Steven L. Roden (e) Philip J. Facchina (f) Robert F. VanStry each incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement on Form SB-2, filed August 16, 1995 with the SEC (Commission File No. 33-61393). 10.7 Lease dated October 21, 1993 for commercial office space in Herndon, VA, as amended. 10.8 Lease dated November 30, 1995 for commercial office space in Atlanta, GA. 10.9 Lease dated February 10, 1995 for commercial office space in Millis, MA. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Ernst and Young LLP, independent auditors. 31 EX-3.2 2 BYLAWS RESTATED BY-LAWS OF INDUSTRIAL TRAINING CORPORATION (effective as of, and with amendments through, January 4, 1996) ARTICLE I - OFFICES ------------------- The principal office of the corporation shall be located in the State of Maryland. The Corporation may have such offices either within or without the State of incorporation, as the Board of Directors may designate or as the business of the corporation may from time to time require. ARTICLE II - STOCKHOLDERS ------------------------- 1. ANNUAL MEETING. The annual meeting of the stockholders shall be held on or before the 15th day of June in each year, beginning with the year 1978 at 10:00 a.m., for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday such meeting shall be held on the next succeeding business day. 2. SPECIAL MEETINGS. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called only as provided in the Articles of Incorporation. 3. PLACE OF MEETING. The directors may designate any place, either within or without the State unless otherwise prescribed by statute, as the place of meeting for any annual meeting or for any special meeting called by the Directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the corporation. 4. NOTICE OF MEETING. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than ninety (90) days before the date of the meeting, either personally or by mail, by or at the direction of the chairman and chief executive officer, or the secretary, or the officer or persons calling the meeting, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be 1 deemed to be delivered when deposited in the United States mail, addressed to the stockholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid. 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the directors of the corporation may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, ninety (90) days. If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders such books shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the stock transfer books, the directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than ninety (90) days and, in case of a meeting of stockholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of stockholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, or stockholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the directors declaring such dividend is adopted, as the case may be shall be the record date for such determination of stockholders. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof. 6. VOTING LISTS. The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten (10) days before each meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order with the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the principal office of the corporation and shall be subject to the inspection of any stockholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting. The original stock transfer book shall be prima facie evidence as to who are the stockholders entitled to examine such list or transfer books or to vote at the meeting of stockholders. 7. QUORUM. 2 At any meeting of stockholders a majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than said number of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. 8. PROXIES. At all meetings of stockholders a stockholder may vote by proxy executed in writing by the stockholder or by his duly authorized attorney in fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. 9. VOTING. Each stockholder entitled to vote in accordance with the terms and provisions of the certificate of incorporation and these by-laws shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholders. Upon the demand of any stockholder, the vote for directors and upon any question before the meeting shall be by ballot. All elections for directors shall be decided by plurality vote: all other questions shall be decided by majority vote except as otherwise provided by the Certificate of Incorporation or the laws of this state. 10. ORDER OF BUSINESS. The order of business at all meetings of the stockholders, shall be as follows: 1. Roll Call. 2. Proof of notice of meeting or waiver of notice. 3. Reading of minutes of preceding meeting. 4. Reports of Officers. 5. Reports of Committees. 6. Election of Directors. 7. Unfinished Business. 8. New Business. ARTICLE III - BOARD OF DIRECTORS -------------------------------- 1. GENERAL POWERS. 3 The business and affairs of the corporation shall be managed by its board of directors. The directors shall in all cases act as a board, and they may adopt such rules and regulations for the conduct of their meetings and the management of the corporation, as they may deem proper, not inconsistent with these by-laws and the laws of this state. 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the corporation and the terms of office of the directors shall be as provided in the Articles of Incorporation. 3. REGULAR MEETINGS. A regular meeting of the directors, shall be held without other notice than this by-law immediately after, and at the same place as, the annual meeting of stockholders. The directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution. 4. SPECIAL MEETINGS. Special meetings of the directors may be called by or at the request of the chairman and chief executive officer or any two directors. The person or persons authorized to call special meetings of the directors may fix the place for holding any special meeting of the directors called by them. 5. NOTICE. Notice of any special meeting shall be given at least 5 days previously thereto by written notice delivered personally, or by telegram or mailed to each director at his business address. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. 6. QUORUM. At any meeting of the directors a majority shall constitute a quorum for the transaction of business, but if less then said number is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. 7. MANNER OF ACTING. 4 Except as otherwise provided in the Articles of Incorporation or these bylaws, the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the directors. 8. INFORMAL ACTION BY DIRECTORS. Unless otherwise provided by law, any action required to be taken at a meeting of the directors, or any other action which may be taken at a meeting of the directors, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof. 9. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason shall be filled only as provided in the Articles of Incorporation. 10. REMOVAL OF DIRECTORS. Any or all of the directors may be removed only as provided in the Articles of Incorporation. 11. RESIGNATION. A director may resign at any time by giving written notice to the board, the chairman and chief executive officer or the secretary of the corporation. Unless otherwise specified in the notice, the resignation shall take effect upon receipt thereof by the board or such officer, and the acceptance of the resignation shall not be necessary to make it effective. 12. COMPENSATION. Directors shall not receive any stated salary for their service but, by resolution of the Board, outside directors may be allowed a quarterly retainer fee and/or a fixed sum for attendance at each regular or special meeting of the Board; provided that nothing containing herein shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefore. 13. PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the directors at which action on any corporate matter is taken shall be presumed to have assented to the action 5 taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. 14. EXECUTIVE AND OTHER COMMITTEES. The board, by resolution, may designate from among its members an executive committee and other committees, each consisting of three or more directors. Each such committee shall serve at the pleasure of the board. 15. INTERESTED DIRECTORS. Actions of the Board shall not be invalidated or otherwise affected by the fact that one or more of its members have a personal interest, beyond their role as directors of this corporation, in the particular action being voted upon, provided said interested directors disclose to the board their interests in the transaction. Interested directors shall be counted in determining whether a quorum exists at directors' meetings, may vote with the same effect as disinterested directors (subject to their having made the disclosures provided for herein), and shall be relieved from any liability that might otherwise arise by reason of their contracting with this corporation for the benefit of themselves or any firm or other corporation in which they are interested. 16. INDEMNIFICATION. In the absence of fraud or bad faith, the corporation shall indemnify its officers and directors, and every former officer and director, to the full extent authorized or permitted by the laws of the state of incorporation, against all liability and expenses (including, but not limited to, attorneys' fees, amounts of any judgment, fine, and amounts paid in settlement) actually and reasonably incurred by him in connection with or resulting from any action, suit or proceeding in which such person may become involved as a party or otherwise by reason of having been an officer or director of the corporation. 17. LIABILITY FOR DIVIDENDS ILLEGALLY DECLARED. A director shall not be liable for dividends illegally declared, distributions illegally made to shareholders, or any other action taken in reliance in good faith upon financial statements of the corporation represented to him to be correct by the president of the corporation or the officer having charge of its books of account, or certified by an independent public or certified accountant to fairly reflect the financial condition of the 6 corporation; nor shall he be liable if in good faith in determining the amount available for dividends or distributions he considers the assets to be of their book value. 7 ARTICLE IV - OFFICERS --------------------- 1. NUMBER. The officers of the corporation shall be a chairman and chief executive officer, the president, one or more vice presidents, a secretary and a treasurer, each of whom shall be elected by the directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the directors. 2. ELECTION AND TERM OF OFFICE. The officers of the corporation to be elected by the directors shall be elected annually at the first meeting of the directors held after each annual meeting of the stockholders. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. 3. REMOVAL. Any officer or agent elected or appointed by the directors may be removed by the directors whenever in their judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. 4. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the directors for the unexpired portion of the term. 5. CHAIRMAN AND CHIEF EXECUTIVE OFFICER. The chairman and chief executive officer shall be the principal executive officer of the corporation and, subject to the control of the directors, shall in general supervise and control all of the business and affairs of the corporation. He shall, when present, preside at all meetings of the stockholders and of the directors. He may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the directors, certificates for shares of the corporation, any deeds, mortgages, bonds, contracts or other instruments which the directors have authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the directors or by these by-laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of chairman and chief executive officer and such other duties as may be prescribed by the directors from time to time. 8 6. PRESIDENT. The president shall be the principal operating officer of the corporation and, subject to the control of the chairman and chief executive officer, shall in general manage all of the day-to-day operations of the corporation. He shall, in the absence of the chairman and chief operating officer, preside at all meetings of the stockholders and of the directors. He may sign, with any other proper officer of the corporation thereunto authorized by the directors, any deeds, mortgages, bonds, contracts or other instruments which the directors have authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the directors or by these by-laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the chairman and chief executive officer and directors from time to time. 7. VICE PRESIDENT. In the absence of the president or in the event of his death, inability or refusal to act, one of the vice presidents designated by the board of directors shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice president shall perform such other duties as from time to time may be assigned to him by the chairman and chief executive officer, the president or by the directors. 8. SECRETARY. The secretary shall keep the minutes of the stockholders' and of the directors' meetings in one or more books provided for that purpose, see that all notices are duly given in accordance with the provisions of these bylaws or as required, be custodian of the corporate records and of the seal of the corporation and keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder, have general charge of the stock transfer books of the corporation and in general perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the chairman and chief executive officer, president or by the directors. 9. TREASURER. If required by the directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the directors shall determine. He shall have charge and custody of and be responsible for all funds and securities of the corporation receive and give receipts for moneys due and payable to the 9 corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with these bylaws and in general perform all of the duties as from time to time may be assigned to him by the chairman and chief executive officer, president or by the directors. 10. SALARIES. The salaries of the officers shall be fixed from time to time by the directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation. ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS ------------------------------------------------- 1. CONTRACTS. Except as provided in the Articles of Incorporation, the directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the directors. Such authority may be general or confined to specific instances. 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the directors. 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the directors may select. ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER ------------------------------------------------------- 1. CERTIFICATES FOR SHARES. 10 Certificates representing shares of the corporation shall be in such form as shall be determined by the directors. Such certificates shall be signed by the chairman and chief executive officer and by the secretary or by such other officers authorized by law and by the directors. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the stockholders, the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled; except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the directors may prescribe. 2. TRANSFERS OF SHARES. a. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, and cancel the old certificate; every such transfer shall be entered on the transfer book of the corporation which shall be kept at its principal office. b. The corporation shall be entitled to treat the holder of record of any share as the holder in fact thereof, and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by the laws of this state. ARTICLE VII - FISCAL YEAR ------------------------- The fiscal year of the corporation shall begin on such date as may be determined by resolution of the Board of Directors. ARTICLE VIII - DIVIDENDS ------------------------ The directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law. ARTICLE IX - SEAL ----------------- 11 The directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation, the state of incorporation, year of incorporation and the words, "Corporate Seal". ARTICLE X - WAIVER OF NOTICE ---------------------------- Unless otherwise provided by law, whenever any notice is required to be given to any director of the corporation under the provisions of these by-laws or under the provisions of the Articles of Incorporation, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE XI - AMENDMENTS ----------------------- These by-laws may be altered, amended or repealed and new by-laws adopted only by a vote of the directors representing a majority of the entire Board of Directors. 12 EX-10.7 3 LEASE AGMT (REV. 9/21/93) (REV. 10/1/93) (REV. 10/8/93) (REV. 10/19/93) OFFICE LEASE THIS LEASE is made as of the 21 day of October, 1993, by and between Landlord and Tenant. WITNESSETH: ---------- 1. Terms and Definitions. For the purpose of this Lease, the following terms --------------------- shall have the following definitions and meanings: Annual Basic Rent: As of the Commencement Date, TWO HUNDRED TWENTY ----------------- EIGHT THOUSAND FIVE HUNDRED FIFTY-THREE DOLLARS AND FIFTY CENTS ($228,553.50) per annum, which is based on 21,767 rentable sq. ft. at the rate of $10.50 per rentable sq. ft. full service net of electric. Brokers: Landlord's Broker: Manekin/Virginia ------- Properties, Inc. Tenant's Broker: Julien J. Studley, Inc. Building: A one story office building located at 13515 Dulles -------- Technology Drive, Herndon, Virginia 22071, and known as Phase One, Building Two, which Building is located within the project (the "Project") known as Phase One consisting of three buildings, which is located within the office park (the "Office Park") known as Dulles Technology Center. Commencement Date: The Commencement Date of this ----------------- Lease shall be September 1, 1993. Land: The approximately two and six tenths (2.6) ---- acre site upon which the Building is situated. Landlord: Dulles Tech Center I, Ltd., a Virginia -------- Limited Partnership. Landlord's Address: Manekin/Virginia Properties, Inc. 1875 Campus ------------------ Commons Drive, Suite 200, Reston, Virginia 22091-1521 Lease Year: A period of twelve (12) consecutive months, commencing on ---------- the first day of the month immediately following the month in which the Commencement Date occurs, and each successive twelve (12) month period thereafter; in addition, the first Lease Year shall also include the period from Commencement Date until the first day of the following month. Leasehold Improvements: Tenant accepts the Premises in "As Is", "Where ---------------------- Is" condition. Landlord is under no obligation to make any alterations, decorations, improvements, or other changes in or to the Premises. Premises: Those certain premises located on the first floor(s) of the -------- Building. The Premises are outlined on the floor plan attached hereto as Exhibit A. The Premises contain approximately 21,767 square feet of rentable area. The Premises contains a common area electrical closet. The rentable area of the electric closet shall be prorated based on all tenants making use of the closet and the Tenant's total rentable square feet shall be adjusted accordingly. Deposit: (Intentionally Deleted) ------- Tenant: INDUSTRIAL TRAINING CORPORATION (ITC), a ------ Maryland Corporation Tenant's Proportionate Share: That percentage which is equal to a ---------------------------- fraction, the numerator of which is the number of rentable square feet in the Premises, and the denominator of which is the number of rentable square feet in the Building, which shall be confirmed by Landlord's Architect pursuant to "Premises" above. As of the Commencement Date, Tenant's Proportionate Share shall be as defined herein, calculated to be 68.19% of the total square feet area in the Building (31,923 SF); 1 22.73% of the total area of the Project (Three Phase One Buildings totalling 95,769 sq. ft.); and 1.339% of the office park (1,625,000 sq. ft.) 2. Premises and Common Areas Leased. -------------------------------- (a) Landlord hereby leases the Premises to Tenant, and Tenant hereby leases the Premises from Landlord. It is agreed that, as of the Commencement Date, The Premises contain approximately 21,767 square feet of rentable space. (b) Tenant shall have the nonexclusive right, in common with other tenants of the Building and members of the public, to use the common and public areas within the Building and the Office Park, subject to the Rules and Regulations referred to herein, but shall have no other rights no specifically set forth herein. The Lease is also subject to all covenants, conditions and restrictions of record. 3. Term. The term of this Lease (the "Lease Term") shall commence on the ---- Commencement Date and shall continue for a period of Seventy (70) consecutive calendar months thereafter, unless the Lease Term shall be sooner terminated as hereinafter provided. For the purpose of this Lease, the Lease Commencement Date shall be September 1, 1993, and the Lease shall expire on June 30, 1999. 4. Possession. Tenant currently occupies the Premises. These Premises will be ---------- accepted by Tenant in "As Is" condition. 5. Rent. ----- (a) Tenant agrees to pay to Landlord on an annual basis the Annual Basic Rent designated in Section 1 (subject to adjustment as hereinafter provided), in twelve (12) equal monthly installments, each in advance on the first day of each and every calendar month during the Lease Term. In the event the Lease Term commences on a day other than the first day of a calendar month or ends on a day other than the last day of the calendar month, then the rental for such periods shall be prorated in the proportion that the numbers of days this Lease is in effect during such months bears to thirty (30). (b) The Annual Basic Rent shall escalate during the Lease Term as indicated on the following schedule:
Lease Year Period Escalation Annual Basic Rent - ---------- ------ ---------- ------ ----- ---- 1 9/1/93-8/31/94 N/A $10.50/SF, N.O.E. 2 9/1/94-8/31/95 $1.55/SF $12.05/SF, N.O.E. 3 9/1/95-8/31/96 3% 12.41/SF, N.O.E. 4 9/1/96-8/31/97 3% 12.78/SF, N.O.E. 5 9/1/97-8/31/98 3% 13.17/SF, N.O.E. 6 9/1/98-6/30/99 3% 13.56/SF, N.O.E.
(c) All rent, additional rent and other sums payable by Tenant to Landlord hereunder shall be paid to Landlord at the address designated in Section 1 above or at such other address as Landlord may hereafter designate in writing. All rent and other sums shall be paid to Landlord without any prior demand therefor (except as expressly provided herein) and without any deduction or offset whatsoever, in lawful money of the United States of America, which shall be legal tender at the time of payment. Tenant shall have the right to offset rent for tenant improvements, rental concessions, cash allowances, brokerage commissions and other tenant obligations that Landlord has failed to perform within a reasonable period. All charges to be paid by Tenant hereunder, shall be considered additional rent for the purposes of the Lease, and the word "rent" in this Lease shall include such additional rent unless the context specifically or clearly implies that only the Annual Basic Rent is referenced. 6. Basic Operating Charges. ----------------------- (a) As additional rent for the Premises, Tenant shall pay to Landlord Its Proportionate Share of the amount by which the Basic Operating Charges incurred by Landlord in operation of the 2 Building and Land during any Lease Year exceed $4.40 per square foot (the "Base Index"). The computation of Basic Operating Charges and Tenant's Proportionate Share shall be computed on a calendar year (or portion thereof) and Tenant shall pay Tenant's Proportionate Share of the amount by which the Basic Operating Charges (averaged on a monthly basis in the case of a partial year) for the calendar year exceed the Base Index. (1) As used herein, the Basic Operating Charges shall mean the sum of all reasonable costs, payable by Landlord that are directly attributable to the owning, maintenance and operation of the Building, Land, and parking areas, including but not limited to the following, water, sewer, insurance; legal and accounting fees; Landlord's general and administrative expenses; management fees which shall not exceed four percent (4%) of the gross income of the Building, and personnel costs, including, but not limited to, salaries, wages, fringe benefits and other direct and indirect costs of engineers, superintendents, watchmen, security guards or services, porters and any other Building personnel; the cost of all service and maintenance contracts, including, but not limited to, chillers, boilers, controls, elevators, electrical components, mail chute, windows, janitorial, security and management; landscaping maintenance, including upgrades and replacements; all other maintenance and repair expenses and supplies which are deducted by Landlord in computing its Federal income tax liability; depreciation on a straight-line basis for capital expenditures made by Landlord which result in verifiable reduction of operating expenses; Real Estate Taxes (as hereinafter defined in Subsection 6(a)(2)); for non-capital equipment, materials and tools; assessments or charges imposed by an association now or hereafter established to maintain common areas of the Office Park; charges of any kind imposed by any governmental authority in connection with the use or occupancy of the Building, Land, or Premises, including any and all license, permit and inspection fees; any other costs and expenses incurred by Landlord in owning, maintaining or operating the Building; and the costs of any additional services not provided by Landlord in the prudent management of the Building. Basic Operating Charges shall not include: interest, amortization or other payments on loans to Landlord or any cost associated with refinancing such loans; depreciation except as specified otherwise herein; ground rents, if any; leasing commissions; tenant improvements, including architectural and engineering costs; advertising and marketing costs; services performed specifically for other tenants in the building; wages, salary or other compensation to any employees or officers, directly or indirectly, who are not actively involved in the management of the building; expenditures which are reimbursed or compensated by insurance or warranties; late charges incurred in paying any real estate taxes or assessments; Landlord's income taxes; capital expenditures, except to the extent such capital expenditures result in verifiable reductions in the cost of operating the building, cost of major structural repairs or of correction defects in initial design or construction; costs or maintaining and operating specialty improvements; costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the cost of the operation of the building and other reasonable and customary exclusions. The Basic Operating Charges shall be adjusted to reflect a on-hundred percent (100%) occupancy of the Building during any period in which the Building is not at least one-hundred percent (100%) occupied. The Basic Operating Charges shall not include electricity being paid directly by the Tenant. These utilities will be submetered and paid directly by the Tenant. (2) The term "Real Estate Taxes" shall mean (A) all real estate taxes, including general and specific assessments, if any, which are imposed upon Landlord or assessed against the Building and/or the Land, and (B) any other present or future taxes or governmental charges that are imposed upon Landlord, or assessed against the Building and/or the Land, including, but not limited to, any tax levied on or measured by the rents payable by tenants of the Building, which are in the nature of, or in substitution for, real estate taxes. Expenses (including attorney's fees, consulting and witness fees and similar costs) incurred by Landlord in monitoring or seeking a reduction of Real Estate Taxes, or in appealing any real estate tax assessment, whether or not such efforts or appeals are successful, shall be included in the amount of Real Estate Taxes. Real Estate taxes are to be projected as if fully assessed including tenant improvements. (3) Controllable operating expenses shall not increase more than seven point five percent (7.5%) per annum. Increases in these expenses above this cap shall not be passed through to Tenant for payment. Controllable operating expenses shall include: janitorial, grounds maintenance, extermination, irrigation, security, sprinkler service, and window cleaning. 3 (4) Tenant shall have the right to audit its operating expenses. In the event an audit shows operating expenses are overstated by more than three percent (3%), Landlord shall reimburse Tenant for the actual and reasonable costs associated with that audit. Reimbursements or refunds received by Landlord shall be deducted from operating expenses in the year they are received. (5) Any operating expenses which are attributable to services or facilities benefitting or shared by tenants of other buildings (or buildings built in subsequent phases), including personnel costs or employees whose time is divided between the Building and other buildings, shall be equitable prorated between this Building and the appropriate Buildings. Any reimbursements or refunds received by Landlord shall be deducted from operating expenses in the year the refunds are received. (b) Tenant shall make estimated monthly payments to Landlord on account of Tenant's Proportionate Share of the Basic Operating Charges during each calendar year falling entirely or partly within the term of this Lease. At the beginning of the Lease Term and at the beginning of each calendar year thereafter, Landlord shall submit to Tenant a statement setting forth Landlord's reasonable estimate of the amount of Tenant's Proportionate Share of the Basic Operating Charges that are expected to be incurred during such calendar year. (c) Within ninety (90) days after the expiration of each calendar year, Landlord shall submit to Tenant a statement showing (A) Tenant's Proportionate Share of the Basic Operating Charges actually incurred during the preceding calendar year and how these charges were calculated and (B) the aggregate amount of the estimated payments made by Tenant or abatement credited to Tenant pursuant 5(b) above on account thereof. If the aggregate amount of such estimated payments and abatement exceeds Tenant's actual liability for its Proportionate Share of Basic Operating Charges, Tenant shall deduct the net overpayment from its next estimated payment or payments on account of Tenant's Proportionate Share of Basic Operating Charges for the then current year. If Tenant's actual liability or such charges exceeds the estimated payments made by Tenant and abatement credited to Tenant on account thereof, then Tenant shall, within thirty (30) days after the presentment of a statement therefor, pay to Landlord the total amount of such deficiency as additional rent due hereunder. The failure by Landlord to submit to Tenant the statement required by this Subsection within the time required herein shall not constitute a waiver of Landlord's entitlement to seek and recover such amounts from Tenant. (d) Any statement provided by Landlord to Tenant pursuant to Subsection(c) above shall be conclusive and binding upon Tenant unless, within thirty (30) days after receipt of the statement, Tenant notifies Landlord that it disputes the correctness of the statement and specifies the respect in which the statement is claimed to be incorrect. Pending determination of any dispute, Tenant shall pay all amounts due pursuant to the disputed statement, but such payments shall be without prejudice to Tenant's position. Tenant and/or its representatives, upon at least ten (10) working days' notice to Landlord, during normal business hours and at Tenant's expense, shall have reasonable access to appropriate books and records of Landlord relating to the actual amount of any expenses covered by the disputed statement, for the purpose of verifying the statement. (e) Tenant's liability for its Proportionate Share of the Basic Operating Charges shall survive the expiration of the Lease Term. Similarly, Landlord's obligation to refund to Tenant the excess, if any, of the amount of Tenant's estimated payments on account of Tenant's actual liability therefor shall survive the expiration of the Lease Term. (f) In the event that any rental, sales, use, business or other taxes are now or hereafter levied upon Tenant's use or occupancy of the Premises or Tenant's business at the Premises or the rents payable under the Lease, and the mode of collection of such taxes is such that Landlord is responsible for collection or payment of such taxes, Tenant shall pay any and all such taxes to Landlord upon written demand from Landlord. (g) In the event the Lease Term commences on a day other than the first day of a calendar year, and/or terminates on a day other than the last day of a calendar year, Tenant's Proportionate 4 Share of the increases in the Basic Operating Charges for such calendar year shall be apportioned by multiplying the amount of Tenant's Proportionate Share thereof for the full calendar year by a fraction, the numerator of which is the number of days during such calendar year falling within the Lease Term, and the denominator of which is 365. 7. Option to Renew. Landlord hereby grants to Tenant the conditional right, --------------- exercisable at Tenant's option, to renew the term of this Lease for one (1) successive term of three (3) years. If exercised, and if the conditions applicable thereto have been satisfied, the first such renewal term (the "Renewal Term") shall commence immediately following the end of the initial Lease Term provided in Section 1 of this Lease. The rights of renewal herein granted to Tenant shall be subject to, and shall be exercised in accordance with, the following terms and conditions: (a) Tenant shall exercise its right of renewal with respect to the Renewal Term by giving Landlord written notice thereof not earlier than twelve (12) months not later than six (6) months prior to the expiration of the term of this Lease. The parties shall have one-hundred twenty (120) days after Landlord's timely receipt of such notice in which to agree on the base rent and escalation factor which shall be payable during the Renewal Term. For purpose regarding the Renewal Term the market rate base rent shall be inclusive of a new Base Index equal to base year actual operating expenses. The parties shall attempt to agree on a base rent payable during the Renewal Term which would equal ninety percent (90%) of the applicable market rate base rent. Among the factors to be considered by the parties during such negotiations shall be the general office R&D space market in Reston/Herndon, Virginia, the rental rate (including tenant concessions and rent abatement) then being quoted by Landlord to comparable tenants for comparable space in the Building, and the rents (including tenant concessions and rent abatement) being charged similar tenants for comparable space in multi-tenanted, first-class office R&D buildings. If during such one-hundred twenty (120) day period the parties are unable, for any reason whatsoever, to agree on such base rent and escalation factor payable, then within five (5) days thereafter the parties shall each appoint a real estate broker who shall be licensed in the Commonwealth of Virginia and who specializes in the leasing of commercial office space in the Northern Virginia market, has at least five (5) years of experience and is recognized within the field as being reputable and ethical. If one party does not timely appoint a broker, then the broker appointed by the other party shall promptly appoint a broker for such party. Such two individuals shall each determine within ten (10) days after their appointment such base rent and escalation factor (to be not less than the minimums specified in this Section). If such individuals cannot reach an agreement on such items, then the two individuals shall, within five (5) days, render separate written reports of their determination and together appoint a third similarly qualified individual having the qualifications described above. If the Board of Realtors is no longer in existence, the third broker shall be appointed by the President of its successor organization. If no successor organization is in existence, the third broker shall be appointed by the Chief Judge of the Circuit Court of Fairfax County, Virginia. The third individual shall within ten (10) days after his or her appointment make a determination of such base rent and escalation factor. The third individual shall determine which of the determinations that shall be final and binding upon the parties, and such determination may be enforced in any court of competent jurisdiction. Landlord and Tenant shall each bear the cost of its broker and shall share equally the cost of the third broker. Upon determination of the base rent and escalation factor payable pursuant to this Section, the parties shall promptly execute an amendment to this Lease stating the rent so determined. (b) If any renewal notice is not given timely, then Tenant's right of renewal with respect to the Renewal Term shall lapse and be of no further force or effect. (c) If Tenant is in default under this Lease on the date Tenant sends a renewal notice or any time thereafter until the Renewal Term is to commence, then, at Landlord's election, the Renewal Term shall not commence and the term of this Lease shall expire at the expiration of the then-current term of this Lease. (d) Except as provided in Subsection 7(f) below, if at any time fifty percent (50%) or more of the square feet of rentable area of the Premises has been terminated, subleased or assigned, then Tenant's rights pursuant to this Section shall lapse and be of no further force and effect. 5 (e) Tenant's rights of renewal under this Section may be exercised only by Tenant and may not be exercised by any transferee, sublessee or assignee of Tenant; provided, however that a permissible sublessee or assignee under Section 28 of this Lease of one hundred percent (100%) of the square footage of the Premises shall have the right to exercise the renewal rights set forth in this Section. (f) Promptly after the commencement of the Renewal Term, Landlord shall repaint and recarpet the Premises. 8. Use. Tenant shall use the Premises for general office purposes and other --- purposes as are permitted under the present I-4 zoning of the Property, and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord. Tenant shall not use or occupy the Premises in violation of any present or future applicable law, regulation or ordinance, or of the certificate of occupancy issued for the building, and shall immediately discontinue any use of the Premises which is declared by any governmental authority having jurisdiction to be a violation of law of said certificate or occupancy. Tenant shall comply with any direction of any governmental authority having jurisdiction which shall, by reason of the nature of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or Landlord with respect to the Premises or with respect to the use or occupation of the Premises. Tenant shall not do or permit to be done anything which will invalidate or increase the cost of any fire, extended coverage or any other insurance policy covering the Building and/or property located therein. Tenant shall promptly upon demand reimburse Landlord as additional rent for any additional premium charged for such policy by reason of Tenant's failure to comply with the provisions of this Section 9. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights or other tenants or occupants of the Building. Tenant shall not use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, or about the Premises. Tenant shall not commit or suffer to be committed any waste in or upon the Premises and shall keep the Premises in first class repair and appearance. If any present or future law, ordinance, regulation or order requires an occupancy permit for the Premises. Tenant shall obtain such permit at Tenant's own expense and shall promptly deliver a copy thereof to Landlord. 9. Notices. Any notice required or permitted to be given hereunder must be in ------- writing and may be given by personal delivery or by mail, and if given by mail shall be deemed sufficiently given if sent by registered or certified mail addressed to Tenant at the Building, or to Landlord at its address designated in Section 1. Either party may be written notice to the other specify a different address for notice purposes, except the Landlord may in any event use the Premises as Tenant's address for notice purposes. If more than one tenant is named under this Lease, service of any notice upon any one of said tenant shall be deemed to be service upon all of said tenants. 10. Brokers. The parties recognize that the brokers who negotiated this Lease ------- are the brokers whose names are stated in Section 1, and agree that Landlord shall be solely responsible for the payment of brokerage commissions to said brokers, and that Tenant has not responsibility therefor. If Tenant has dealt with any other person or real estate broker in respect of leasing or renting space in the Building, Tenant shall be solely responsible for the payment of any fee due said person or firm and Tenant shall hold Landlord free and harmless against any liability in respect thereto. 11. Holding Over. If Tenant fails to surrender possession of the Premises upon ------------ the expiration or earlier termination of the Lease Term, Tenant shall become a tenant at sufferance only, at a rental rate equal to 125% of the Annual Basic Rent in effect on the date of the expiration of the Lease Term and otherwise subject to the terms, covenants and conditions herein specified. Acceptance by Landlord of rent after such expiration or earlier termination date shall not constitute a holdover hereunder or result in a renewal of the Lease Term. If Tenant fails to surrender the Premises upon the expiration of 6 this Lease despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord harmless from all injury, loss, claims, expenses and liability, including without limitation, any claim made by any succeeding tenant and any attorney's fees, founded on or resulting from such failure to surrender. 12. Taxes on Tenant's Property. -------------------------- (a) Tenant shall be liable for and shall pay before delinquency, all taxes levied against any personal property or trade fixtures placed by Tenant in or about the Premises. If any such taxes on Tenant's personal property or trade fixtures are levied against Landlord or Landlord's property, or if the assessed value of the Premises is increased by the inclusion therein of a value placed upon such personal property or trade fixtures of Tenant, and if Landlord, after written notice to Tenant, pays the taxes based upon such increased assessments (which Landlord shall have the right to do regardless of the validity thereof, but under protest if requested by Tenant). Tenant shall upon demand repay to Landlord a sum equal to the taxes levied against Landlord or the portion of such taxes resulting from such increase in the assessment; provided that, in any such event, Tenant shall have the right, at Tenant's sole cost and expense, to bring suit to recover the amount of any such taxes so paid under protest, and any amount so recovered shall belong to Tenant. (b) If the Leasehold Improvements, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed as real property at a valuation higher than the valuation at which "Building Standard" improvements or typical office improvements in other space in the Building are assessed, then the real property taxes and assessments levied against Landlord or Landlord's property by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of Subsection 13(a) above. If the records of the County Assessor are not available or sufficiently detailed in Landlord's opinion to serve as a basis for making said determination, the actual cost of construction shall be used. 13. No Representations. Tenant acknowledges that except to the extent set forth ------------------ in this Lease neither Landlord nor any agent or employee of Landlord has made any representations or warranties with respect to the Premises, the Building or the Office Park or with respect to the suitability of same for the conduct of Tenant's business. The taking of possession of the Premises by Tenant shall conclusively establish that the Premises and the Building were at such time in good and sanitary order, condition and repair, and complete except as set forth in a punch list mutually agreed upon by Landlord and Tenant. 14. Alterations. ----------- (a) Tenant shall make no alternations, additions or improvements in or to the Premises, structural or otherwise, without Landlord's written consent, which consent shall not be unreasonably withheld, conditioned, or delayed. If Landlord consents, Landlord may impose any conditions it deems appropriate, including, without limitation, the prior approval by Landlord of plans and specifications, the prior approval by Landlord of the contractor or other persons who will perform the work, the obtaining of lien waivers from such contractors and other persons and the obtaining of specified completion and lien indemnity bonds and insurance. If any improvements are made without Landlord's prior written consent, Landlord shall have the right to remove such improvements and restore the Premises to their condition immediately prior thereto, and Tenant shall be liable for all expenses incurred by Landlord in connection therewith. All such work shall be done at such times and in such manner as Landlord may from time to time designate. Tenant covenants and agrees that all work done by Tenant shall be performed in full compliance with all laws, ordinances, regulations and requirements of all governmental and quasi- governmental authorities having jurisdiction. Tenant further covenants and agrees that any mechanic's lien filed against the Premises or against the Building for work claimed to have been done for, or materials claimed to have been furnished to Tenant will be discharged by Tenant, by bond or otherwise, within 7 ten (10) days after the filing thereof, at the sole cost and expense of Tenant. All alterations, decorations, additions or improvements upon the Premises, made by either party, including (without limiting the generality of the foregoing) all wallcovering, built-in cabinet work, paneling and the like, shall unless Landlord elects otherwise, become the property of Landlord, and shall remain upon and be surrendered with the Premises, as a part thereof, at the end of the Lease Term. (b) All articles of personal property and all business and trade fixtures, machinery and equipment, furniture and movable partitions installed by Tenant in the Premises at its sole expense shall be and remain the property of Tenant and may be removed by Tenant at any time during the Lease Term. provided Tenant is not in default hereunder, and provided further that Tenant shall repair any damage caused by such removal. Tenant's obligation to repair any damage to the Premises caused by such removal shall survive the expiration or earlier termination of the Lease Term. If Tenant shall fail to remove all of its effects from the Premises upon termination of this Lease for any cause whatsoever, Landlord may, at its option, remove the same in any manner that Landlord shall choose, and store said effects without liability to Tenant for loss thereof, and Tenant agrees to pay Landlord upon demand any and all expenses incurred in such removal, including court costs and attorneys' fees and storage charges on such effects for any length of time that the same shall be in Landlord's possession, or Landlord may, at its option, without notice, sell said effects, or any of the same, at private sale and without legal process, for such price as Landlord may obtain and apply the proceeds of such sale against any amounts due under this Lease from Tenant to Landlord and against the expenses incidental to the removal and sale of said effects . (c) The initial Leasehold improvements in and to the Premises shall be installed by Landlord in accordance with the Work Agreement. It is understood that Landlord is under no obligation to make any structural or other alterations, decorations, additions or improvements in or to the Premises, except as provided in the Work Agreement or as otherwise expressly provided in this Lease . 15. Repairs. ------- (a) By entry thereunder, Tenant accepts the Premises as being in good and sanitary order, condition and repair. Except for Landlord duties described elsewhere in this Lease, Tenant shall, at Tenant's sole cost and expense, maintain and preserve the Premises and all equipment located therein clean, safe and in first class condition and repair. Tenant shall, upon the expiration or sooner termination of the Lease Term, surrender the Premises to Landlord broom clean and in the same condition as when received, ordinary wear and tear excepted. (b) Landlord shall make structural repairs to the Building necessary for safety and tenant ability, and shall bear the cost thereof unless required by any negligence or willful misconduct of Tenant, its agents, employees or invitees. Landlord shall make such other repairs to the Premises and Building as may be necessary or desirable to maintain the Premises in a professional manner befitting a comparable first class office/R&D building in the Reston/Herndon area, and the cost of such repairs shall be included in the Basic Operation Charges. Landlord shall not be liable for any damage (including any consequential damages or lost profits) caused to the person or property of Tenant, its agents, employees or invitees, due to the Building or any part or appurtenances thereof being improperly constructed or being or becoming out of repair or arising from the leaking of gas, water, sewer or steam pipes, or from electricity or from any other cause whatsoever. Tenant agrees to report immediately in writing to Landlord any defection condition in or about the Demised Premises known to Tenant which Landlord is required to repair, and a failure to so report shall make Tenant liable to Landlord for any expense, damage or liability directly resulting from such failure to report. Tenant waives the right to make repairs at Landlord's expense under any law, statute or ordinance now or hereafter in effect unless such damage is caused by the gross negligence or willful misconduct of Landlord or its employees. If Tenant has given Landlord written notice of a defective condition, and if Landlord has not diligently pursued the repair such defective condition within thirty (30) days of receipt of Tenant's written notice, then Tenant may make said repair and Landlord will reimburse Tenant for its reasonable expenses incurred by such repair. 8 (c) Landlord reserves the right at any time and from time to time, as often as Landlord deems desirable, without the same constituting an actual or constructive eviction and without incurring any liability to Tenant or otherwise affecting Tenant's obligations under this Lease, to make such changes, alterations, additions, improvements, repairs, relocations or replacements in or to the Building (including the Premises if required by any applicable law or regulation) and the fixtures and equipment thereof, as well as in or to the street entrances, halls, passages, stairways and other common facilities thereof, and to change the name by which the Building is commonly known and/or the Building's address. Unless such address change is beyond the control of the Landlord, Landlord shall compensate Tenant for new letterhead, stationery, business cards, and labels, if such changes occur without Tenant's prior written agreement. Landlord reserves the right from time to time to install, use, maintain, repair and replace pipes, ducts, conduits, wires and appurtenant meters and equipment for service to other parts of the Building, above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas, and to relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment included in the Premises which are located elsewhere outside the Premises, and to expand the Building. Nothing contained herein shall be deemed to relieve Tenant of any duty, obligation or liability with respect to making any repair, replacement or improvement or complying with any law, order or requirement of any government or other authority and nothing contained herein shall be deemed or construed to impose upon Landlord any obligation, responsibility or liability whatsoever, for the care, supervision or repair of the Building or any part thereof, other than as expressly provided in this Lease. Landlord agrees to use reasonable efforts to schedule such work so as to cause minimum disruption to Tenant's business. (d) In the event that the Premises become unfit for use by Tenant because of safety, health, eminent domain, or other reasons, due to Landlord's failure to perform its obligations, Tenant may withhold from Landlord an amount of the current rent due in the next rental payment until such time as any such unfitness or defect is corrected. Other than Tenant's own business interruption insurance, this shall be the exclusive recourse of Tenant. 16. Liens. Tenant shall not permit any mechanic's, materialmen's or other liens ----- to be filed against the Building, the Premises, Tenant's leasehold interest in the Premises or any equipment therein. Landlord shall have the right to post and keep posted on the Premises any notices which it deems necessary for protection from such liens. If any such liens are filed, Landlord may cause such liens to be released by any means it deems proper, including payment in satisfaction of the claim giving rise to such lien. Tenant shall pay to the Landlord, promptly upon notice by Landlord, any sum paid by Landlord to remove such liens, together with interest from the date of such payment by Landlord at the Default Rate (as defined in Section 26). 17. Entry by Landlord. Landlord may upon reasonable notice to Tenant, enter the ----------------- Premises as reasonably required to inspect the same, to supply janitor service and any other service to be provided by Landlord to Tenant hereunder, to exhibit the Premises to prospective lenders, purchasers and tenants, and to alter, improve or repair the Premises or any other portion of the Building. Landlord may, in order to carry any construction, maintenance or repair work deemed necessary by Landlord to the Premises or the Building, erect scaffolding and other structures where reasonable required by the character of the work to be performed, provided that Landlord shall endeavor to perform its work in a manner that will minimize any interference with the business of the Tenant. Tenant shall furnish Landlord at all times with a key to unlock all of the doors in the Premises, and Landlord shall have the right to use such keys or any other means which Landlord may deem proper to open said doors in an emergency. No provision of this Lease shall be construed as obligating Landlord to perform any repairs, alterations or decoration, except as otherwise expressly agreed herein to be performed by Landlord. 18. Utilities and Services. Except as noted in this Section and elsewhere in ---------------------- this Lease regarding Tenant-paid utilities, Landlord will operate and maintain the building in a professional manner befitting a comparable first-class Office/R&D building in the Reston/Herndon area. Landlord shall furnish cleaning, lavatory supplies, and janitorial service after business hours. A separate electric 9 meter currently exists for the Premises. Tenant shall furnish its own electric to the premises and shall pay the entire cost thereof, and Landlord shall have no responsibility for providing any such electric utility. 19. Bankruptcy. ---------- (a) The following shall be Events of Bankruptcy under this Lease: (1) Tenant's becoming insolvent, that term is defined in Title 11 of the United States Code (the "Bankruptcy Code"), or under the insolvency laws of any state, district, commonwealth or territory of the United States (the "Insolvency Laws"); (2) The appointment of a receiver or custodian for any or all of Tenant's property or assets, or the institution of a foreclosure action upon any of Tenant's real or personal property and such action is not being defended by Tenant; (3) The filing of a voluntary petition under the provisions of the Bankruptcy Code or Insolvency Laws; (4) The filing of an involuntary petition against Tenant as the subject debtor under the Bankruptcy Code or Insolvency Laws, which either (A) is not dismissed within thirty (30) days of filing, or (b) results in the issuance of an order for relief against the debtor; or (5) Tenant's making or consenting to an assignment for the benefit of creditors or a common law composition of creditors. (b) Upon occurrence of an Event of Bankruptcy, Landlord shall have all rights and remedies available to Landlord pursuant to Section 25; provided, however that while a case in which Tenant is the subject debtor under the Bankruptcy Code is pending, Landlord shall not exercise its rights and remedies pursuant to Section 25 so long as (1) the Bankruptcy Code prohibits the exercise of such rights and remedies, and (2) Tenant or its Trustee in Bankruptcy (hereinafter referred to as "Trustee) (i) cures all defaults under this Lease, (ii)compensates Landlord for monetary damages incurred as a result of such defaults, (iii) provides adequate assurance of future performance on the part of Tenant as debtor in possession or on the part of the assignee tenant, and (iv) complies with all other requirements of the Bankruptcy Code. 20. Indemnification. Tenant shall indemnify Landlord and hold Landlord harmless --------------- from and against any and all injury, loss, damage, claims and expenses, including attorney's fees, arising from or related to Tenant's use of the Premises, the conduct of Tenant's business therein, the making by Tenant of any improvements thereto or any activity, work or thing done, permitted or suffered by Tenant in or about the Premises, and shall further indemnify Landlord and hold Landlord harmless from and against any and all injury, loss, damage, claims and expenses, including attorneys' fees, arising from or related to any breach or default in the performance of any of Tenant's obligations under this Lease, or arising from any act, neglect, fault or omission of Tenant, or of its agents, employees or invitees. Nowithstanding anything to the contrary contained in this Lease, Landlord shall indemnify Tenant and hold Tenant harmless from and against any injury, loss, damages, claims, and expenses, including attorneys' fees and court costs, arising from or relating to any breach or default in the performance of any of Landlord's obligations under this Lease, or arising from any act, neglect fault or omission of Landlord or its agents, employees and invitees. 21. Property at Tenant's Risk. Except as provided in this Lease to the ------------------------- contrary, Landlord shall not be liable to Tenant or Tenant's employees, agents or invitees for any damage, injury, loss or claim, including but not limited to business interruption claims, based on or arising out of any cause whatsoever, including but not limited to the following: Landlord's entry upon the Premises to inspect or show the same; janitorial access to the Premises at any time; repairs to, or interruption in the use of, the Premises, the Building or the Land; any damage resulting from the use, operation or malfunction of elevators or of the heating, cooling, electrical, plumbing or other equipment or systems; fire, theft, disappearance or other casualty; and any leakage in any part of the Building, or from water that may leak into, or flow from, any part of the Building, or from drains, pipes or plumbing fixtures bursting, leaking or overflowing in any part of the Building. Any property stored or placed by Tenant or its employees, agents or invitees in or about the Premises or the Building shall be at the sole risk of Tenant, and Landlord shall not in any manner be held responsible therefor. 10 22. Insurance. --------- (a) Tenant shall at all times during the term hereof, at its sole cost and expense, obtain, maintain and keep in full force and effect, with Tenant, Landlord and the mortgagees of Landlord named as insureds therein as their respective interests may appear, the following insurance: (i) Fire insurance, including extended coverage, vandalism and malicious mischief, upon property of every description and kind owned by Tenant and located in the Building or for which Tenant is legally liable or installed by or on behalf of Tenant including, without limitation, furniture, fittings, installations, fixtures and any other personal property, in an amount not less than ninety percent (90%) of the full replacement cost thereof. In the event that there shall be a dispute as to the amount which comprises full replacement cost, the decision of Landlord or the mortgagees of Landlord shall be conclusive. (ii) Comprehensive General Liability Insurance, coverage to include personal injury, bodily injury, broad form property damage, operations hazard, owner's protective coverage, contractual liability, products and completed operations liability in limits not less than FIVE MILLION DOLLARS ($5,000,000.00) inclusive. (iii) Business interruption insurance in such amounts will reimburse Tenant for direct and indirect loss of earnings attributable to all perils commonly insured against prudent tenants or attributable to prevention of access to the Premises or to the Building as a result of such perils. (iv) Workmen' s Compensation and Employer's Liability Insurance in form and amount required by applicable law. (v) Any other form or forms of insurance as Landlord or the mortgagees of Landlord may reasonably require from time to time, and such other insurance, in form, in amounts and for insurance risks, as a prudent Tenant would maintain to protect itself, consistent with sound business practices. (b) All policies shall be taken out with insurers reasonably acceptable to Landlord and in form reasonably satisfactory from time to time to Landlord. Tenant agrees that certificates of insurance on the Landlord's standard form, or, if required by Landlord or the mortgagees of Landlord, certified copies of each such insurance policy, will be delivered to Landlord as soon as practicable after the placing of the required insurance, but in no event later than ten (10) days after Tenant takes possession of or occupies all or any part of the Premises. All policies shall contain an undertaking by the insurers to notify Landlord and the mortgagees of Landlord in writing not less than thirty (30) days prior to any material change, reduction in coverage, cancellation or other termination thereof. (c) Tenant agrees that it will not keep, use, sell or offer for sale in or upon the Premises any article, or make any use of the Premises, which may be prohibited by any insurance policy in force from time to time covering the Building and Building Standard Work. In the event Tenant's occupancy or conduct of business in or on the Premises, whether or not Landlord has consented to the same, results in any increase in premiums for the insurance carried from time to time by Landlord with respect to the Building, Tenant shall pay any such increase in premiums as additional rent within ten (10) days after being billed therefor by Landlord. In determining whether increased premiums are a result of Tenant's use or occupancy of the Premises, a schedule issued by the organization computing the insurance rate on the Building or the Leasehold Improvements showing the various components of such rate shall be conclusive evidence of the several items and charges which make up such rate. Tenant shall promptly comply with all reasonable requirements of the insurance authority and of insurers now or hereafter in effect relating to the Premises. (d) If any insurance policy carried by Landlord shall be cancelled or cancellation shall be threatened or the coverage thereunder reduced or threatened to be reduced, in any way by reason of the use or occupation of the Premises or any part thereof by Tenant or by an assignee or sub-tenant of 11 Tenant or by anyone permitted by Tenant to be upon the Premises and, if Tenant fails to remedy the condition giving rise to cancellation, threatened cancellation or reduction of coverage within forty-eight (48) hours after notice thereof, Landlord may, at its option, either terminate this Lease or enter upon the Premises and attempt to remedy such condition, and Tenant shall forthwith pay the cost thereof to Landlord as additional rent. Landlord shall not be liable for any damage or injury caused as a result of such entry. in the event that Landlord shall be unable to remedy such condition, then Landlord shall have all of the remedies provided for in this Lease for a default by Tenant. Nowithstanding the foregoing, if Tenant fails to remedy such conditions as aforesaid, Tenant shall be in default of its obligation hereunder and Landlord shall have no obligations to attempt to remedy such default. (e) Any policy or policies of fire, extended coverage and other casualty and other insurance, which Tenant obtains in connection with the Premises, shall include a clause or endorsement whereby the insurer waives any rights or subrogation against Tenant or Landlord. Tenant or Landlord hereby waive their rights of recovery against each other to the extent any injury or loss either is covered by insurance maintained by either party, or is required to be covered by insurance. 23. Damage. ------ (a) If the Premises shall be damaged by fire or other cause, unless due to the gross negligence or willful misconduct of Tenant, its servants, employees, agents, visitors or licensees, the damage shall be diligently repaired within a reasonable time not to exceed 180 days by and at the expense of Landlord and the rent until such repairs shall have been made shall abate pro-rata according to the part of the Premises which is unusable by Tenant. Due allowances shall be made for reasonable delay which may arise by reason of adjustment of fire insurance by Landlord and for personnel delay on account of strike or labor disputes or any other cause beyond Landlord's control. If, however, the Premises are rendered wholly untenantable by fire or other cause and Landlord shall decide not to rebuild the same, or if the entire Building be so damaged that Landlord shall decide to demolish it or not to rebuild it, then or in any of such events, Landlord may, at its option, cancel and terminate this Lease by giving Tenant notice in writing of its intention to cancel this Lease, whereupon the term of this Lease shall terminate upon the thirtieth (30th) day after such notice is given and Tenant shall vacate the Premises and surrender the same to Landlord; provided however, all rent hereunder shall be abated from and after the date of destruction. Except for the foregoing abatement of Rent, Landlord shall not be liable to Tenant for any period during which the occupation of said Premises by Tenant may not be possible because of the matters herein above stated nor shall Landlord be liable for any damage incurred by Tenant other than Landlord's obligation to repair the Premises as aforesaid. Without limiting the foregoing, Landlord shall not be responsible for consequential damages, lost profits or any damage to Tenant's personal property. (b) Upon any termination of this Lease under any of the provisions of the Section 23, the parties shall be released thereby without further obligation to the other, from the date possession of the Premises is surrendered to Landlord, except for items which have theretofore accrued and are then unpaid. In the event the Premises are damage, Tenant shall pay to Landlord its insurance proceeds relating to the Leasehold Improvements and alterations in the Premises. (c) Notwithstanding anything to the contrary herein, if the Premises are damaged as a result of the negligence or willful misconduct of Tenant or Tenant's employees, agents or invitees, Landlord shall have no obligation to restore the Building or the Premises, Tenant shall pay to Landlord, as additional rent, the amount by which the cost of repairing any damage exceeds the amount of insurance proceeds received by Landlord on account of such damage. Notwithstanding anything to the contrary herein, if the Premises are damaged as a result of the willful misconduct of Landlord or Landlord's employees, agents, or invitees, Landlord shall restore and repair the Premises at Landlord's cost. (d) In the event that (1) damage is due to any cause other than fire or other peril fully covered by any extended coverage insurance maintained by Landlord, (2) the holder of any mortgage 12 secured by the Building fails or refuses to make insurance proceeds available for repair, restoration and reconstruction, (3) zoning or other laws or regulations applicable to the site upon which the Building was constructed do not permit Landlord to repair, restore or reconstruct on such site a building substantially similar to the Building, or (4) Landlord is delayed or prevented from repairing or restoring any damage to the Building or the Premises within one hundred eighty (180) days after the occurrence of such damage, by reason of acts of God, war, governmental restrictions, inability to procure the necessary labor or materials or other cause beyond the control of Landlord, Landlord or Tenant may elect to terminate this Lease by written notice to the other. (e) It is hereby understood that if Landlord is obligated or elects to repair or restore as herein provided, Landlord shall be obligated to make repairs or restoration only of those portions of the Building and the Premises which were originally provided at Landlord's expense, or for which the Landlord has received insurance proceeds and the repair and restoration of items not provided at Landlord's expense shall be the obligation of Tenant. In no event shall Landlord be obligated to repair or restore any trade fixtures, furnishings, equipment or personal property belonging to Tenant. (f) Notwithstanding anything to the contrary contained in this Section 23, Landlord shall not have any obligation whatsoever to repair, reconstruct or restore the Premises when the damage resulting from any casualty covered under this Section 23 occurs during the last twelve (12) months of the term of this Lease or any extension thereof. 24. Eminent Domain. In the event the whole or a substantial part of the -------------- Premises, the Building or the Land shall be taken for any public or quasi-public purpose by any lawful power or authority by exercise of the right of appropriation, condemnation or eminent domain, or sold to said authority to prevent such taking (collectively referred to herein as a "taking"), Landlord or Tenant (only with regard to a taking of the Premises), shall have the right to terminate this Lease effective as of the date possession is required to be surrendered to said authority, and rent shall be apportioned as of that date. For purposes of this Section, a substantial part of the Premises, the Building or the Land shall be considered to have been taken if, the taking shall render it undesirable for this Lease to continue or for Landlord to continue operating the Building. Tenant shall not assert any claim against Landlord or the taking authority for any compensation arising out of or related to such taking, and Landlord shall be entitled to receive the entire amount of any award without deduction for any estate or interest of Tenant. If Landlord does not elect to terminate this Lease, or if the taking is of less than a substantial part of the Premises, the Building, or the Land, the Annual Basic Rent and additional rent payable by Tenant pursuant to Sections 5 and 6 shall be adjusted (based on the ratio that the number of square feet of rentable area taken bears to the number of square feet in the Premises immediately prior to such taking) as of the date possession is required to be surrendered to said authority and Landlord shall repair actual damages resulting from the taking required to make the Premises tenantable. Nothing contained in this Section shall be deemed to give Landlord any interest in any award made to Tenant for the taking of personal property and fixtures belonging to Tenant, and for relocation, as long as such award is made in addition to and separately stated from any award made to Landlord for the Premises, the Building and the Land. Landlord shall have no obligation to contest any taking. 25. Defaults and Remedies. --------------------- (a) The occurrence of any one or more of the following events shall constitute a default hereunder by Tenant. (i) The failure by Tenant to make any payment or rent or additional rent or any other payment required to be made by Tenant hereunder, as and when due, where such failure shall continue for a period of ten (10) days after written notice from Landlord, provided however than after the 2nd such notice during the Lease term, any such failure to make a payment shall constitute a default by Tenant with no notice if payment is not received within ten (10) days after the date on which such payment is due. 13 (ii) The failure by Tenant to observe or perform any of the other express or implied covenants or provisions of this Lease to be observed or performed by Tenant, where such failure shall continue for a period of thirty (30) days after written notice thereof from Landlord to Tenant; provided, however, that if the nature of Tenant's default is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant shall commence such cure promptly and shall thereafter diligently pursue such cure to completion, which completion shall occur not later than ninety (90) days from the date of such notice from Landlord unless Tenant is diligently pursing to cure to completion, but the pursuit has been delayed beyond the control of the Tenant. (iii) Tenant's abandonment of the Premises for a period in excess of thirty (30) days, and failure to make rent payments due. Tenant's vacating and diligent efforts to sublet shall not be considered abandonment as long as Tenant's rental payments are current and Tenant continues to make rental payments. (iv) An Event of Bankruptcy as defined in Section 19. (b) Upon the occurrence of a default by Tenant, Landlord shall have the right, then or at any time thereafter: (1) Without demand or notice, to reenter and take possession of all or any part of the Premises, to expel Tenant and those claiming through Tenant and to remove any property therein, either by summary proceedings or by any other action at law, in equity or otherwise, with or without terminating this Lease, without being deemed guilty of trespass and without prejudice to any other remedies of Landlord for breach of this Lease, and/or (2) To give Tenant written notice of Landlord's intent to terminate this Lease, and on the date specified in Landlord's notice, Tenant's right to possession of the Premises shall cease and this Lease shall terminate. (c) In the event of any such default by Tenant, in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the immediate option to terminate this Lease and all rights of Tenant hereunder. In the event that Landlord shall elect to so terminate this Lease then Landlord may recover from Tenant: (i) the worth at the time of award of any unpaid rent which had been earned at the time of such termination; plus (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus (iii) the worth at the time of award of the amount of by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; plus (iv) any other amount necessary to compensate Landlord for all the harm and damages proximately and directly caused by Tenant's failure to perform its obligations under this Lease. (v) As used in Subparagraphs 25(c)(i) and (ii) above, the "worth at the time of award" is computed by allowing interest at the lesser of (i) the prime rate of interest announced from time to time by The Riggs National Bank of Washington, D.C., plus five percent (5%) per annum; or (ii) the maximum rate permitted by law per annum. As used in Subparagraph 25(c)(iii) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank of Richmond at the time of award. 14 (d) In the event of any such default by Tenant, Landlord shall also have the right, with or without terminating this Lease, to re-enter the Premises and remove all persons and property from the Premises; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant. No re-entry or taking possession of the Premises by Landlord pursuant to this Subparagraph 25 (d) shall be construed as an election to terminate this Lease unless a written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. (e) All rights, options and remedies of Landlord contained in this Lease shall be construed and held to be cumulative, and no one of them shall be exclusive of the other, and Landlord shall have the right to pursue any one or all of such remedies or any other remedy or relief which may be provided by law, whether or not stated in this Lease. No waiver or default of Tenant hereunder shall be implied from any acceptance by Landlord of any rent or other payments due hereunder or any omission by Landlord to take any action on account of such default if such default persists or is repeated, and no express waiver shall affect defaults other than as specified in said waiver. The consent or approval of Landlord to or of any act by Tenant requiring Landlord's consent or approval shall not be deemed to waive or render unnecessary Landlord's consent or approval to or of any subsequent similar acts by Tenant. 26. Assignment and Subletting. ------------------------- (a) Tenant shall have the right to fully assign or sublease all or any part of the Premises, or allow any other person or entity to occupy or use all or any part of the Premises, subject only to obtaining Landlord's prior written consent of the Subtenant, which consent will not be unreasonably withheld, conditioned, or delayed. Approval or consent shall not be required for a sublet or assignment to any related entity or affiliate or successor of Tenant. Any assignment, encumbrance or sublease without Landlord's prior written consent shall be void and shall constitute a default. No consent to any assignment, encumbrance or sublease shall constitute a waiver of the provision of this Section with respect to any subsequent assignment, encumbrance or sublease. Landlord shall have the right to require any subtenant which is not a Tenant related entity or affiliate, to establish a reasonable Security Deposit prior to Landlord consent. (b) If for any proposed assignment or sublease approved by Landlord, Tenant receives rent or other consideration, either initially or over the term of the assignment or sublease, in excess of the rent called for hereunder, or, in case of the sublease of a portion of the Premises, in excess of such rent fairly allocable to such portion, after appropriate adjustments to assure that all other payments called for hereunder are taken into account, Tenant shall pay to Landlord as additional rent hereunder fifty percent (50%) of the profit or other consideration received by Tenant promptly after its receipt, unless such subtenant or assignee is a Tenant related entity or affiliate in which case Tenant may keep one-hundred percent (100%) of the profit payments received by Tenant. Profits shall be defined as sublet revenue less sublet expenses which shall include by way of example and not limited to: rental abatement, operating expenses, construction/renovation costs, architectural and design fees, legal and accounting fees, brokerage commissions, marketing and advertising costs, moving allowances, rental paid to Landlord while actively subletting the Premises, cash payments or allowances, and other reasonable and customary expenses. (c) If Tenant is a corporation, then the sale, issuance or transfer of any voting capital stock of Tenant, by the person, persons or entities owning a majority interest therein as of the date of this Lease, which results in the majority interest of Tenant, shall be deemed an assignment within the meaning of this Section. If Tenant is a partnership, the sale or transfer of the partnership share, or any portion thereof, of any general partner shall be deemed an assignment of this Lease. Occupancy of all or part of the Premises by parent, subsidiary, or affiliated companies of Tenant shall not be deemed an assignment or subletting. Regarding this paragraph 26(c) and any change in Tenant's controlling interest as stated herein as of the date of this Lease, Tenant shall provide Landlord with financial or other reasonable information requested by Landlord, regarding any such change in Tenant's interest. Landlord's consent regarding any change in Tenant's controlling interest shall not be unreasonably 15 withheld, conditioned or delayed. Provided Tenant is not in default, Landlord shall not have the ability to recapture any subleased space during the initial or any extended term of the Lease. 27. Subordination. ------------- (a) This Lease is subject and subordinate to all ground or underlying leases and to all mortgages or deeds of trust which may now or hereafter affect or encumber the Building or the Land and to all renewals, modifications, consolidations, replacements or extensions thereof. This paragraph shall be self-operative and no further instrument of subordination shall be required. In confirmation of any such subordination, Tenant shall execute within ten (10) calendar days after receipt, any certificate or agreement that Landlord may reasonably request. Tenant covenants and agrees to attorn to Landlord or any successors to Landlord's interest in the Demised Premises, whether by sale, foreclosure or otherwise. Landlord and its mortgagee, New England Mutual Life Insurance Company, will enter into a subordination, non-disturbance and attornment agreement on mutually acceptable terms and conditions. (b) Notwithstanding the foregoing, in the event any such ground lessor or mortgagee shall elect to make the lien of this Lease prior to the lien of its ground lease, mortgage or deed of trust, then, upon such party, together with Landlord, giving Tenant written notice to such effect, this Lease shall be deemed to be prior in lien to the lien of such ground lease, mortgage or deed of trust, whether dated prior or subsequent thereto, and Tenant covenants and agrees to execute and deliver, upon demand by Landlord and in the form requested by Landlord, any additional documents evidencing the priority of this Lease with respect to any ground leases or underlying leases or the lien of any mortgage or deed of trust. 28. Estoppel Certificate. -------------------- (a) Within ten (10) business days following any written request which Landlord may make from time to time, Tenant shall execute and deliver to Landlord a statement certifying: (i) the date of commencement of this Lease; (ii) the fact that this Lease is unmodified and in full force and effect, (or, if there have been modifications hereto, that this Lease is in full force and effect, as modified, and stating the date and nature of such modifications); (iii) the date to which the rental and other sums payable under this Lease have been paid; (iv) the fact that there are not current defaults under this Lease by either Landlord or Tenant, except as specified in Tenant's statement; and (v) such other matters as may be requested by Landlord. Landlord and Tenant intend that any statement delivered pursuant to this Section 28 may be relied upon by any lender, prospective lender, purchaser or prospective purchaser with respect to the Building or any interest therein. (b) Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant (i) that this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) that there are no uncured defaults in Landlord's performance hereunder, and (iii) that not more than one (1) month's rental not including those months subject to rental abatement has been paid in advance. 29. Rules and Regulations. Tenant shall faithfully observe and comply with the --------------------- "Rules and Regulations," a copy of which is attached hereto, and all modifications thereof and additions thereto from time to time adopted by Landlord for the benefit of the operation of the Building. Landlord shall not be responsible to Tenant for the violation or non-performance by any other tenant or occupant of the Building or any of said Rules and Regulations. Landlord will use reasonable diligence to have all tenants comply with Rules and Regulations. 30. Conflict of Laws. This Lease shall be governed by and construed pursuant to ---------------- the laws of the jurisdiction in which the Premises are located. 16 31. Successors and Assigns. Except as otherwise provided in this Lease, all of ---------------------- the covenants, conditions and provisions of this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. 32. Surrender of Premises. The voluntary or other surrender of this Lease by --------------------- Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, operate as an assignment to it or any or all subleases or subtenancies. 33. Attorneys' Fees. --------------- (a) In the event that any action or proceeding is brought to enforce any term, covenant or condition of this Lease on the part of the Landlord or Tenant, the prevailing party in such litigation shall be entitled to reasonable attorney fees to be fixed by such action or proceeding. (b) Should Landlord be named as a defendant in any suit brought in connection with, arising out of, or related to Tenant's occupancy of the Building or the Premises hereunder, Tenant shall pay to Landlord its costs and expenses incurred in such suit, including reasonable and actual attorneys' fees, except for costs and expenses incurred in connection with a suit brought by Tenant against Landlord regarding Landlord's obligation under this Lease. (c) Should Tenant be named as a defendant in any such suit brought in connection with, arising out of, or related to Landlord's ownership of the Building or Premises hereunder, Landlord shall pay to Tenant its cost and expenses incurred in such suit, including reasonable and actual attorney's fees, except for costs and expenses incurred in connection with a suit brought by Landlord against Tenant regarding Tenant's obligation under this Lease. 34. Performance by Tenant. All covenants and agreements to be performed by --------------------- Tenant under any of the terms of this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any abatement of rent. If Tenant shall fail to pay any sum or money, other than Annual Basic Rent, required to be paid by it hereunder or shall fail to perform any other act on its part to be performed hereunder, Landlord may, without waiving or releasing Tenant from any obligations of Tenant (and without waiving its rights against Tenant on account of such default), but shall not be obligated to, make any such payment or perform any such other act on Tenant's part to be made or performed as in this Lease provided. All sums so paid by Landlord and all necessary incidental costs, together with interest thereon at the maximum rate permissible by law, from the date of such payment by Landlord, shall be payable to Landlord as additional rent. For each payment of rent hereunder which is more than 10 days later Tenant shall also pay to Landlord a service charge in the amount of three percent (3%) of the outstanding arrearage. Further, following each second payment of rent which is more than 10 days late in any six (6) month period, Landlord shall have the option to require that, beginning with the first payment of rent due following the date such late payment was due, rent shall be payable two (2) months in advance. 35. Mortgage Protection. In the event of any default on the part of Landlord, ------------------- Tenant will give notice by registered or certified mail to any beneficiary of a deed of trust or mortgage covering the Premises whose address shall have been furnished to Tenant, and shall offer such beneficiary or mortgagee a reasonable opportunity to cure the default, not to exceed however, thirty (30) days unless the nature of Landlord's default is such that more than thirty (30) days are reasonably required for its cure, then Landlord shall not be deemed in default if Landlord commenced such cure, promptly and thereafter diligently prosecuted such cure to completion. 36. Definition of Landlord. The term "Landlord" shall be limited to mean only ---------------------- the owner at the time in question, of the fee title of the Premises. In the event of any transfer, assignment or other 17 conveyance or transfers of any such title, Landlord herein named (and in case of subsequent transfers or conveyances, the then grantor) shall be automatically freed and relieved from and after the date of such transfer, assignment or conveyance of all liability as respects the performance of any covenants or obligations on the part of Landlord continued in this Lease thereafter to be performed in the event such transferee or assignee specifically assumes such obligations in writing, to the extent permitted by law, without further agreement, the transferee of such title shall be deemed to have assumed and agreed to observe and perform any and all such future obligations of Landlord hereunder during its ownership of the Premises. Landlord may transfer its interest in the Premises without the consent of Tenant and such transfer or subsequent transfer shall not be deemed in violation on Landlord's part of any of the terms and conditions of this Lease. 37. Waiver. The waiver by Landlord of any breach of any term, covenant or ------ condition herein contained shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition herein contained, nor shall any custom or practice which may grow up between the parties in the administration of the terms hereof be deemed a waiver of, or in any way affect, the right of either party to insist upon the performance by the other in strict accordance with said terms. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. 38. Parking. Tenant shall have the right to utilize at no charge 78 (or 3.6 per ------- 1,000 rentable square feet) spaces in the Building parking facilities on a nonexclusive basis with other tenants of the building upon such terms and conditions as may from time to time be established by Landlord. Landlord reserves the right in its absolute discretion to determine whether the parking facilities are becoming crowded and to allocate and assign parking spaces among Tenant and other tenants. It is understood and agreed that Landlord assumes no responsibility, and shall not be held liable, for any damage or loss to any automobiles parked in the parking facilities or to any personal property locate therein, or for any injury sustained by any person in or about the parking facilities. Landlord shall designate at Tenant's request visitor parking for Tenant's customers and invitees. 39. Terms and Headings. The words "Landlord" and "Tenant" as used ------------------ herein shall include the plural as well as the singular. Words used in any gender include other genders. The section headings of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part hereof. 40. Time. Time is of the essence with respect to the performance of every ---- provision of this Lease in which time or performance is a factor. 41. Prior Agreements: Amendments. This Lease contains all of the ---------------------------- agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior agreement or understanding pertaining to any such matter shall be effective for any purpose. This Lease may not be amended except by an agreement in writing signed by the parties hereto or their respective successors in interest. 42. Enforceability. -------------- (a) If any term or provision of this Lease or the application thereof to any person, entity or circumstance shall, to any extent, be held invalid or enforceable, the remaining terms and provisions of this Lease, and the application of such invalid or unenforceable term or provision to persons, entities and circumstances other than those as to which it is held invalid or enforceable, shall not be 18 affected thereby. Each term and provision of this Lease shall be valid and enforced to the fullest extend permitted by law. (b) In any case where this Lease provides for a rate of interest that is higher than the maximum rate permitted by law, the rate specified herein shall be deemed to equal, and the party designated as recipient of such interest shall be entitled to receive, the maximum rate of interest permitted by law. 43. Recording. Tenant shall not record this Lease or a short form memorandum --------- thereof without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. 44. Limitation. In consideration of the benefits accruing hereunder, Tenant and ---------- all successors and assigns of Tenant covenant and agree that, in the event of any actual or alleged failure, breach or default hereunder by Landlord: (a) The sole and exclusive remedy shall be against the partnership and its partnership assets; including the proceeds of any asset dispositions, insurance benefits or condemantion awrds; (b) No partner of Landlord shall be sued or named as party in any suit or action (except as may be necessary to secure jurisdiction of the partnership); (c) No service of process shall be made against any partner of Landlord (except as may be necessary to secure jurisdiction of the partnership); (d) Any judgment granted against any partner of Landlord may be vacated and set aside at any time as if such judgment had never been granted; (e) No writ of execution will ever be levied against the assets of any partner of Landlord; and (f) These covenants and agreements are enforceable both by Landlord and also by any partner of Landlord; and (g) These covenants and agreements are enforceable both by Landlord and also by any partner of Landlord. 45. Riders. Clauses, plats and riders, if any, signed by Landlord and Tenant ------ and affixed to this Lease are a part hereof. 46. Signs. No sign, advertisement or notice shall be inscribed, painted, ----- affixed or displayed on the windows or exterior walls of the Premises or on any public area of the Building, except the directories and the office doors, and then only in such places, numbers, sizes, color and style as are approved by Landlord and which conform to all applicable laws and/or ordinances. Any and all signage on, in or relating to the Premises shall be paid for by Tenant. Landlord, at Landlord's sole cost and expense, shall install Tenant's name on the existing monument sign, located on Fox Mill Road. In addition, Landlord shall make improvements to Tenant's current monument signage in order to reasonably improve the visibility of the Tenant's name from Dulles Technology Drive. Landlord shall also provide all code-required signage for the Building. Notwithstanding anything contained herein to the contrary, Landlord recognizes Tenant's right to display the Building signage which is currently mounted above the entrance to the Premises. 47. Modification for Lender. If, in connection with any construction, interim ----------------------- or permanent financing for the Building, any lender shall request reasonable modifications in this Lease as a condition to such financing, Tenant will not withhold, delay or defer its consent thereto, provided that such modifications do not: (1) materially increase the obligations of Tenant hereunder; (2) materially adversely affect the leasehold interest hereby created or Tenant's rights hereunder; or (3) increase Tenant's rental obligations. 48. Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a ----------------------- lesser amount than the rent payment herein stipulated shall be deemed to be other than on account of the rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment 19 without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy provided in this Lease. 49. Financial Statements. At any time during the term of this Lease, Tenant -------------------- shall no less frequently than annually, upon ten (10) days prior written notice from Landlord, provide Landlord with a current financial statement and if available, the financial statements of the two (2) years prior to the current financial statement year. Such statement shall be prepared in accordance with generally accepted accounting principles and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant. 50. Tenant Improvements. Landlord shall provide design, permitting, and ------------------- construction of the Premises in accordance with Exhibit B based on the space plan attached hereto as Exhibit B-1. Tenant shall comply with all code requirements relating to Tenant's operations and shall provide Landlord with a copy of any permits required by any federal, state or local government entity in order to operate. 51. First Right of Refusal. ----------------------- (a) If at any time during the term of this Lease, Landlord engages in discussions for the lease of any or all available space within the building which Landlord determines are "serious" in nature and may lead to the execution of a letter of intent or lease agreement (a "Serious Proposal"), Landlord shall provide Tenant notice of such Serious Proposal, such notice to consist of the location and size of the space which is the subject of the Serious Proposal, the rental rate for such space, the term of the lease, and any other information which Landlord deems relevant. Tenant shall have the right to negotiate with Landlord to lease all of the space which is the subject of the Serious Proposal by giving written notice of the exercise of such right within three (3) business days after receipt of the Landlord's notice by Tenant's authorized representative. Landlord and Tenant shall have fifteen (15) days after Landlord's receipt of Tenant's notice to negotiate a letter of intent setting for the terms upon which Tenant would lease all of the space which is the subject of the Serious Proposal provided however, the rental rate shall be the then escalated rental rate. If Landlord and Tenant do not execute a letter of intent setting forth the basic terms upon which Tenant would lease all of the space which is the subject of the Serious Proposal during such fifteen (15) day period, for any reason whatsoever, Landlord shall have no further obligation to negotiate with Tenant for the leasing of the space which is the subject of the Serious Proposal, and Tenant shall have no further obligation to lease such space pursuant to this Section except as provided in Section 51(b) below. If during such fifteen (15) day period Landlord and Tenant execute a letter of intent, Landlord and Tenant shall have ten (10) business days to negotiate and execute a lease for the space which is the subject of the Serious Proposal. If Landlord and Tenant do not execute a lease within such ten (10) business day period, for any reason whatsoever, Landlord shall have no further obligation to negotiate with Tenant for the leasing of such space, and Tenant shall have no further right to lease such space pursuant to this Section 51, except as provided in Section 51(b) below. Nothing set forth herein shall bar or prevent Landlord from continuing to market any portion of the Expansion Space while Landlord is negotiating with Tenant pursuant to the provisions of this Section. (b) Notwithstanding anything set forth in Section 51 (a) to the contrary, in the event that Landlord does not execute a lease with the party with which Landlord is negotiating a Serious Proposal, then Landlord shall again follow the procedure set forth in Subsection 51 (a) if Landlord receives another Serious Proposal for all or a portion of the space which was the subject to the previous Serious Proposal. (c) Tenant's rights under this Section are subject and subordinate to any and all rights granted by Landlord to any purchaser of the Building. Landlord shall notify Tenant of any sale of the building. If Tenant desires expansion space which cannot be provided by Landlord or the prospective purchaser, and Tenant informs Landlord in writing of its desire to expand with fifteen (15) days of 20 notice by Landlord to sell, the Tenant may cancel this Lease with one hundred-eighty (180) days notice to Landlord. (d) If Tenant is in default under this Lease on the date Landlord notifies Tenant of a Serious Proposal for all or a portion of available space or at any time thereafter prior to the date Tenant signs a lease for such space, then at Landlord's option, Tenant's rights pursuant to this Section shall lapse and be of no further force or effect. (e) Tenant's rights under this Section may only be exercised by Tenant and may not be exercised by any transferee, sublessee or assignee of Tenant provided, however, that a permissible sublessee or assignee under Section 26 of this Lease of one hundred percent (100%) of the square footage of the Premises shall have the right to exercise the expansion rights set forth in this Section 51; and further, provided, that the rights of any permissible sublease or assignee under Section 26 of this Lease of one hundred percent (100%) of the square footage of the Premises shall be subject to the matters described in Subsection 51(c). (f) Except as provided in Subsection 51(e) above, if at any time fifty percent (50%) or more of the square feet of rentable area of the Premises has been terminated, subleased, or assigned, the Tenant's rights pursuant to this Section shall lapse and be of no further force or effect. 52. Storage Space. Landlord will allow Tenant to use the area specified on ------------- Exhibit D (the "Storage Space"), consisting of 2,117 square feet for storage of records through March 31, 1994. Such Storage Space shall be made available to Tenant on a month-to-month basis and shall be cancelable by the Landlord in the event that the Storage Space has been leased to a third party, following ten (10) days prior written notice to Tenant. From October 1, 1993, through March 31, 1994, Tenant shall be able to use the Storage Space at no cost. Commencing April 1, 1994, Tenant may lease the Storage Space for one (1)-six (6) month term at a monthly cost of five hundred and 00/100 dollars ($500.00) per month, payable concurrently with Tenant's payments of Annual Basic Rent. Should Tenant opt not to lease the Storage Space for a six (6) month term as specified above, Tenant may continue to occupy the Storage Space on a month-to-month basis at a cost of eight hundred fifty and 00/100 dollars ($850.00) per month, payable concurrently with Tenant's payments of Annual Basic Rent. 53. Quiet Enjoyment. Landlord covenants that Tenant, upon paying the Basic Rent --------------- and the Additional Rent provided for in this Lease, and upon performing and observing all of the terms, covenants, conditions and provisions of this Lease on Tenant's part to be kept, observed and performed, shall quietly hold, occupy and enjoy the Leased Premises during the Term without hindrance, ejection or molestation by Landlord or any party lawfully claiming through or under Landlord. 21 IN WITNESS WHEREOF, the parties have executed this Lease the day and year first above written.
WITNESS/ATTEST: LANDLORD: DULLES TECH CENTER I, LTD. By: DTC Associates I, L.P. By: M.O.E./G.P., a Virginia Limited Partnership By: /s/ By: /s/ --------------------------------------- --------------------------------------- Title: Vice President Title: Vice President -------------- -------------- Date: October 21, 1993 Date: October 21, 1993 ---------------- ---------------- WITNESS/ATTEST: TENANT: INDUSTRIAL TRAINING CORPORATION, a Maryland Corporation By: /s/ By: /s/ --------------------------------------- --------------------------------------- Title: Vice President and Treasurer Title: Vice President and CFO ---------------------------- ---------------------- Date: October 20, 1993 Date: October 20, 1993 ---------------- ----------------
22 EXHIBIT A Floor Plan Dulles Technology Center Phase One, Building Two 13515 Dulles Technology Drive Herndon, Virginia 23 EXHIBIT B WORK AGREEMENT (INTENTIONALLY DELETED) 24 EXHIBIT C RULES AND REGULATIONS 1. No sign, advertisement, name or notice shall be installed or displayed on any part of the outside or inside of the Building except as noted elsewhere in this Lease without the prior written consent of Landlord which shall not be unreasonably withheld, conditioned or delayed. 2. No awning shall be permitted on any part of the Premises. Tenant shall not place anything (including but not limited to blinds, shades, screens, or hanging plants) against or near glass partitions or doors or windows which may appear unsightly from outside the Premises. 3. Tenant shall not obstruct or interfere with the rights of others to use any Building sidewalks, halls, exits, entrances, elevators or stairways. The common areas of the Building are not for the general public, and Landlord retains the right to control and prevent access thereto by all persons whose presence in the reasonable judgment of Landlord would be prejudicial to the safety, character, reputation and interests of the Building and its Tenants including any person who appears to Landlord to be intoxicated or under the influence of liquor or drugs; provided that nothing herein contained shall be construed to prevent such access to persons with whom any Tenant is dealing in the ordinary course of its business, unless such persons are engaged in illegal activities or unless such persons violate the terms of the Lease or Landlord's rules and regulations. No Tenant and no employee or invitee of any Tenant shall go upon the roof of the Building without Landlord's consent which will not be unreasonably withheld. 4. All cleaning and janitorial services for the Building and Premises shall be provided exclusively through Landlord. 5. Landlord will furnish Tenant, free of charge, with two keys to each door lock in the Premises. Landlord may make a reasonable charge for any additional keys. Tenant shall not alter any lock or install a new additional lock or bolt on any door of its Premises without Landlord's consent which shall not be unreasonably withheld. Tenant, upon the termination of its tenancy, shall deliver to Landlord all keys for all doors. 6. Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry. Landlord shall have the right to prescribed the weight, size and position of all safes and other heavy objects. Business machines and mechanical equipment which cause noise or vibration that may be transmitted to the structure of the Building or to any space therein to such a degree as to be objectionable to Landlord or to any Tenant in the Building, shall be placed and maintained by Tenant, at Tenant's expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration. 7. Tenant shall not use or keep in the Premises any kerosene, gasoline or inflammable or combustible fluid or material other than those limited quantities necessary for the operation or maintenance of office equipment and in no event shall any such combustible fluids be used for heating, warming or lighting. Tenant shall not use or permit to be used in the Premises any foul or noxious gas or substance, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors or vibrations, nor shall Tenant bring into or keep in or about the Premises any birds or animals (except for seeing eye dogs). 8. Tenant shall not use any method of heating or air-conditioning other than that supplied by Landlord, unless stated otherwise hearing, or with consent of the Landlord which will not be unreasonably withheld. 9. Tenant shall cooperate with Landlord to assure the effective operation of the Building's heating and air-conditioning systems and shall comply with any governmental energy saving rules, laws or regulations of which Tenant has notice. Tenant shall refrain from adjusting controls other 25 than room thermostats installed for Tenant's use. Tenant shall keep corridor doors closed, and shall close window coverings at the end of each business day. 10. Tenant shall close and lock the doors of the Premises and entirely shut off all water faucets or other water apparatus and electricity, gas and air outlets before Tenant and its employees leave the Premises. Tenant shall be responsible for any damage or injuries sustained as a result of noncompliance with this rule. 11. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the Tenant who, or whose employees or invitees, shall have caused it. 12. Tenant shall not sell or permit the sale at retail of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise to the general public in or on the Premises. Tenant shall not make any room-to-room solicitation of business from other tenants in the Building and Tenant acknowledges that canvassing and peddling of any kind in the Building are prohibited. 13. Tenant shall not install any radio or television antenna, loudspeaker or other device on the roof or exterior walls of the Building without Landlord' prior written consent which shall not be unreasonably withheld, conditioned, or delayed. Tenant shall not interfere with radio or television broadcasting or reception from or in the Building. 14. Landlord reserves the right to reasonably approve where and how telephone and telegraph wires are to be introduced to the Premises. Tenant shall not affix any floor covering to the floor of the Premises in any manner except as approved by Landlord. Tenant shall repair any damages resulting from holes cut or bored for wires or other noncompliance with this rule. 15. Tenant shall store all its trash and garbage within the Premises. Tenant shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with directions issued from time to time by Landlord. 16. The Premises shall not be used for the storage of merchandise held for sale to the general public, for lodging or for manufacturing of any kind. 17. Tenant shall not use in any space or in the public halls of the Building any hand trucks except those equipped with rubber tires and side guards or such other material-handling equipment as Landlord may approve. Tenant shall not bring any other vehicles of any kind into the Building without Landlord's consent. 18. Without the prior written consent of Landlord, Tenant shall not use the name of the Building in connection with or in promoting or advertising the business of Tenant except as Tenant's address. 19. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency having jurisdiction. 20. Tenant assumes reasonable responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed. 21. The requirements of Tenant will be attended to only upon appropriate application to the Office of the Building by an authorized individual. Employees of Landlord shall not perform any work or do anything outside their regular duties unless under special instructions from Landlord, and no employee of Landlord will admit any person (Tenant or otherwise) to any office without specific instructions from Landlord. 26 22. Tenant shall not park its vehicles in any parking areas designated by Landlord as areas for parking by visitors to the Building. Tenant shall not leave vehicles in the Building parking areas other than vehicles, motorcycles, motor-driven or non-motor-driving bicycles or four-wheeled trucks. Landlord shall not be responsible or have any liability for vehicles left in the project parking areas overnight. 23. Tenant shall be responsible for the observance of all the foregoing rules by Tenant's employees, agents, clients, customers, invitees and guests. Initials of: /s/ /s/ - ------------------------- -------------- Landlord Tenant 27 EXHIBIT D Floor Plan Indicating Storage Space Dulles Technology Center Phase One, Building Two 13515 Dulles Technology Drive Herndon, Virginia 28 FIRST AMENDMENT to Lease by and between Dulles Tech Center I, Ltd., as Landlord and Industrial Training Corporation, as Tenant THIS FIRST AMENDMENT TO LEASE ("First Amendment") is entered into this______day of______________, 1994 by and between Dulles Tech Center I, Ltd., a California limited partnership ("Landlord") and Industrial Training Corporation, a Maryland corporation ("Tenant"). R E C I T A L S: ---------------- WHEREAS, Landlord and Tenant are parties to a Lease dated October 21, 1993 for approximately 21,767 square feet of rentable area in an office building located at 13515 Dulles Technology Drive, Herndon, Virginia in an office park known as Dulles Technology Center; and WHEREAS, Tenant desires to lease from Landlord and Landlord is willing to demise and lease to Tenant approximately 4,457 additional rentable square feet, upon the terms, conditions, covenants and agreements set forth in this Addendum. W I T N E S S E T H: -------------------- NOW, THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid by each party to the other, the mutual promises herein contained, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, and intending to be legally bound, the parties agree as follows. 1. The recitals contained above are true to the best of the parties' knowledge and are incorporated by reference herein. 2. Any term used herein that is defined in the Lease shall have the same meaning as specified in the Lease unless otherwise specifically provided herein. 3. (c) Section 2 of the Lease is hereby amended by adding the following new Section 2(c): "In addition to the Original Premises, upon the execution of this First Amendment, Tenant shall have the right to use and occupy temporary storage space located as set forth on Exhibit A-l attached hereto and incorporated herein for all purposes (the "Temporary Space"). Tenant accepts the Temporary Space in its "AS IS WITH ALL FAULTS" condition, and Landlord will not be obligated to make any alterations, additions, changes or modifications to the Temporary Space. The Temporary Space shall be deemed part of the Premises for all purposes of the Lease until Tenant vacates and surrenders the Temporary Space to Landlord except for the payment of Annual Basic Rent and Tenant's Proportionate Share of Basic Operating Charges which shall be paid for the Temporary Space pursuant to this Section. Commencing on June 1, 1994, Tenant shall pay $371.42 per month as Annual Basic Rent for the Temporary Space and $1,385.38 per month for Basic Operating Charges for the Temporary Space. In addition, Tenant shall pay all costs of electricity for the Temporary Space which costs shall be deemed additional rent. On the Expansion Space Lease Commencement Date, Tenant shall vacate and surrender the Temporary Space and Tenant's failure to do so will be a default under the Lease. Tenant shall surrender the Temporary Space and Tenant's failure to do so will be a default under the Lease. Tenant shall surrender the Temporary Space to Landlord in broom clean and in good condition and repair, ordinary wear and tear excepted. Tenant shall indemnify and hold Landlord harmless from any and all damages, claims, costs, expenses, liabilities or causes of action (including attorneys' fees) arising from, connected to or related to Tenant's failure to vacate and surrender the Temporary Space to Landlord, including but not limited to any and all rent that Landlord might have received from any existing or prospective tenant who might have executed a lease for such Temporary Space with Landlord. In addition, Landlord and Tenant acknowledge and agree that the Annual Basic Rent referred to in Section 1 of the Lease and Tenant's Proportionate 29 Share referred to in Section 1 of the Lease are calculated for only the Original Premises and the Expansion Space, and therefore, in the event Tenant fails to vacate and surrender the Temporary Space on the Expansion Space Lease Commencement Date: (l) in addition to the Annual Basic Rent referred to in Section 1, Tenant shall commence paying Annual Basic Rent for the Temporary Space in the amount of Five and 75/100 Dollars ($5.75) per rentable square foot of the Temporary Space as adjusted pursuant to Section 5(b) of the Lease until the date Tenant vacates and surrenders the Temporary Space; and (2) Tenant's Proportionate Share shall be revised to include the Temporary Space. On Tenant's vacation and surrender of the Temporary Space to Landlord, the term "Premises" shall no longer include the Temporary Space and shall only mean the Original Premises and the Expansion Space." 4. Effective on the Expansion Space Lease Commencement Date, Tenant shall pay $371.42 per month as Annual Basic Rent for the Expansion Space and $1,385.38 per month for Basic Operating Charges for the Expansion Space up through October 31, 1994 and thereafter Tenant shall pay Annual Basic Rent for the Expansion Space pursuant to Section 5(b) of the Lease and Basic Operating Charges pursuant to Section 6 of the Lease. 5. Effective on the Expansion Space Lease Commencement Date, as hereinafter defined, Section 1 (Annual Basic Rent) of the Lease is hereby amended by ------ ----- ---- deleting it in its entirety and substituting in lieu thereof the following new Section 1 (Annual Basic Rent): ----------------- "Annual Basic Rent: As of the Commencement Date, TWO HUNDRED TWENTY EIGHT ----------------- THOUSAND FIVE HUNDRED FIFTY THREE AND 50/100 DOLLARS ($228,553.50) per annum, for the Original Premises which is based on 21,767 rentable square feet at the rate of $10.50 per rentable square feet full service net of electric which is subject to the increases set forth in the schedule pursuant to Section 5(b). As of the Expansion Space Lease Commencement Date, the Annual Basic Rent for the Expansion Space shall be as provided in the schedule pursuant to Section 5(b)." 6. Effective on the Expansion Space Lease Commencement Date, as hereinafter defined, Section 1 (Premises) of the Lease is hereby amended to provide that the -------- Premises shall include approximately 4,457 additional rentable square feet ("Expansion Space") as described on Exhibit A attached hereto and incorporated herein for all purposes. Effective on the Expansion Space Lease Commencement Date, the term "Premises" shall mean a total of approximately 26,224 square feet of space in the Building; the term "Original Premises" shall mean the original 21,767 square feet leased to Tenant, the term Temporary Space shall mean as previously defined and the term "Expansion Space" shall mean as previously defined. 7. The Expansion Space Lease Commencement Date shall be the date of Substantial Completion (as hereinafter defined) of the tenant improvements pursuant to the Plans as defined in Paragraph 12 of this First Amendment, whichever occurs later. Substantial Completion shall be that date, as determined by Landlord or Landlord's architect, when all the tenant improvements pursuant to the Plans have been completed except for minor punch-list items. In the event Tenant causes any delay due to (a) Tenant-initiated change orders to the Plans, (b) Tenant's request for long-lead materials, finishes, installations or specialty items, or (c) due to affirmative acts of Tenant, or any person, firm or corporation employed by Tenant, such as causing damages during any inspection of the tenant improvements (all of which are individually or collectively referred to as "Tenant Delays") then Substantial Completion shall be the date the Expansion Space would have been completed if such Tenant Delay had not occurred. Landlord shall endeavor to deliver the Expansion Space by November 1, 1994. It is understood and agreed that in the event that Landlord cannot deliver the Expansion Space on November 1, 1994, this First Amendment shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom. 8. On the Expansion Space Lease Commencement Date, the second sentence of Section 1 (Tenant's Proportionate Share) of the Lease is hereby deleted and the -------- ------------- ----- following new second sentence of Section 1 (Tenant's Proportionate Share) is -------- ------------- ----- hereby substituted in lieu thereof: 30 "As of the Expansion Space Lease Commencement Date, Tenant's Proportionate Share for the Original Premises shall be as defined herein, calculated to be 68.19% of the total square feet area in the Building (31,923 SF); 22.73% of the total area of the Project (Three Phase One Building totaling 95,769 sq. ft.); and 1.339% of the office park (1,625,000 sq. ft). As of the Expansion Space Lease Commencement Date, Tenant's Proportionate Share for the Expansion Space shall be as defined herein, calculated to be 13.96% of the total square feet area in the Building (31,923 SF); 4.65% of the total area of the Project (Three Phase One Buildings totaling 95,769 sq. ft.); and .274% of the office park (1,625,000 sq. ft.)" 9. Section 5(b) of the Lease is hereby amended by deleting Section 5(b) in its entirety and substituting in lieu thereof the following Section 5 (b): "(b) The Annual Basic Rent for the Original Premises shall escalate during the Lease Term as indicated on the following schedule:
Lease Year Period Escalation Annual Basic Rent 1 9/1/93-8/31/94 N/A $10.50/SF, N.O.E. 2 9/1/94-8/31/95 $1.55/SF $12.05/SF, N.O.E. 3 9/1/95-8/31/96 3% $12.41/SF, N.O.E. 4 9/1/96-8/31/97 3% $12.78/SF, N.O.E. 5 9/1/97-8/31/98 3% $13.17/SF, N.O.E. 6 9/1/98-6/30/99 3% $13.56/SF, N.O.E.
Commencing on November 1, 1994, Tenant shall pay to Landlord Annual Basic Rent for the Expansion Space in accordance with the following schedule:
Period Annual Base Annual Base Monthly Rent/SF Rent Installment 11/1/94- $5.75 $21,356.46 $2,135.65 8/31/95* 9/1/95- $5.92 $26,385.44 $2,198.79 8/31/96 9/1/96- $6.10 $27,187.70 $2,265.64 8/31/97 9/1/97- $6.28 $27,989.96 $2,332.50 8/31/98 9/1/98- $6.47 $24,030.66 $2,403.07 6/30/99*
*Period reflects ten (10) months. In the event the Expansion Space Lease Commencement Date is on a day other than the first day of a calendar month, then the rental for the month in which the Expansion Space Lease Commencement Date occurs shall be prorated in the proportion that the number of days this Lease is in effect during such month bears to thirty (30) days. Notwithstanding anything in this Section 5(b) to the contrary, Landlord agrees to abate all of the Annual Basic Rent (but not the additional rent) for the Expansion Space (but not the Original Premises) due for the first four (4) full calendar months (for November 1, 1994, December 1, 1994, January 1, 1995 and February 1, 1995) for a total rent abatement equal to Eight Thousand Five Hundred Forty-Two and 60/100 Dollars ($8,542.60)." 31 10. Effective on the Expansion Space Lease Commencement Date, Section 6(a) of the Lease is hereby amended by deleting the first two sentences and substituting the following language in lieu thereof: "(a) As additional rent for the Original Premises, Tenant shall pay to Landlord its Proportionate Share for the Original Premises of the amount by which the Basic Operating Charges incurred by Landlord in operation of the Building and Land during any Lease Year exceed $4.40 per square foot (the "Base Index"). The computation of Basic Operating Charges and Tenant's Proportionate Share for the Original Premises shall be computed on a calendar year (or portion thereof) and Tenant shall pay Tenant's Proportionate Share for the Original Premises of the amount by which the Basic Operating Charges (averaged on a monthly basis in the case of a partial year) for the calendar year exceed the Base Index. Commencing on November 1, 1994, as additional rent for the Expansion Space, Tenant shall pay to Landlord its Proportionate Share for the Expansion Space of the amount of Basic Operating Charges incurred by Landlord in operation of the Building and Land during any calendar year." 11. Effective on the Expansion Space Lease commencement Date, Section 18 of the Lease, Utilities and Services, is hereby amended by deleting it in its entirety --------- --- -------- and substituting the new Section 18 in lieu thereof: "18. Utilities and Services. Except as noted in this Section and elsewhere --------- --- -------- in this Lease regarding Tenant paid utilities, Landlord will operate and maintain the Building in a professional manner befitting a comparable first- class office/R&D building in the Reston/Herndon area. A separate electric meter currently exists for the Original Premises. Tenant shall furnish its own electricity to the Original Premises and shall pay the entire cost thereof, and Landlord shall have no responsibility for providing any such electric utility for the Original Premises. To the extent utilities for the Expansion Space are commonly metered, Tenant shall pay Landlord as additional rent one hundred percent (100%) of its Proportionate Share for such utilities. If Tenant's use of any such utilities is other than for normal office use and/or disproportionate to other office tenants of the Office Park, then Landlord and Tenant each have the right, at Tenant's sole cost and expense, to have a separate meter installed upon the Expansion Space. If a separate meter is installed upon the Expansion Space, Tenant will pay to the utility company (or, at Landlord's request, to Landlord) all charges for the Expansion Space on the basis of such meter readings. To the extent utilities for the Expansion Space are not commonly metered, Tenant agrees to pay promptly to the appropriate supplier all charges for water, gas, steam, electricity or other power source, and all other utility services used and/or supplied in connection with Tenant's use of the Expansion Space. Tenant shall also pay on a timely basis to the appropriate supplier all charges for telephone and all other communication services used, rendered and/or supplied upon or in connection with the Expansion Space." 12. The following new Section 54 is hereby added to the Lease as follows: "(a) Upon the execution of the First Amendment to Lease, Landlord agrees to construct the improvements to the Expansion Space pursuant to plans and specifications which shall be mutually agreed upon by Landlord and Tenant (the "Plans"'). If there are any changes requested by Tenant after Tenant's and Landlord's mutual approval of the Plans, then Tenant shall be responsible for all costs and expenses resulting from such changes if such costs and expenses exceed the Tenant Improvement Allowance (as hereinafter defined). No such changes shall be made without: Landlord's prior written approval. Landlord shall not responsible for delay in construction because of changes to the Plans after the mutual approval by Landlord and Tenant. Upon the completion of any necessary revised Plans, Landlord shall notify Tenant in writing of the cost which will be chargeable to Tenant by reason of such change(s) and Landlord's Expansion Space Lease Commencement Date due to such change, and Tenant shall, within five (5) days, notify Landlord whether it desires to proceed with such changes. If Tenant does not notify Landlord whether it desires such change within the aforesaid five (5) day period, Landlord shall not be obligated to continue work on the construction and may 32 suspend work until such notice is given by Tenant. In addition, if Tenant fails to pay Landlord the cost of such change if such cost shall exceed the Tenant Improvement Allowance, the Landlord may suspend work until Landlord receives Tenant's payment of such excess. (b) Landlord hereby grants to Tenant an allowance toward the cost of the tenant improvements to the Expansion Space in an amount not to exceed Twenty Seven Thousand Seventy-Nine and 00/100 Dollars ($27,079.00) (the "Tenant Improvement Allowance"). In the event that the cost of the tenant improvements for the Expansion Space exceed the Tenant Improvement Allowance (any such excess is hereby referred to as the "Allowance Excess"), then Tenant shall be liable for the Allowance Excess and shall reimburse Landlord within seven (7) business days of Tenant's receipt of Landlord's invoice for such Allowance Excess." 13. Except as amended hereby, all of the terms and provisions of the Lease shall be and remain in full force and effect including but not limited to the renewal option contained in Section 7. 33 IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Amendment under seal on the date first above written. WITNESS/ATTEST LANDLORD: DULLES TECH CENTER I, LTD. By: DTC Associates I, LP. By: M.O.R./G.P., a Virginia Limited Partnership By: RA & VA, Inc. By: /s/ ------------------------------ TITLE: SENIOR V.P. BY: --------------------------------- (Corporate Seal) WITNESS/ATTEST: TENANT: INDUSTRIAL TRAINING CORPORATION, a Maryland corporation By: /s/ ---------------------------------- Title: V.P. and CFO (Corporate Seal) BLP0107.94 5/16/94-10:27am 34 Exhibit A Floor Plan (Expansion Space) Dulles Technology Center 35 Exhibit A-1 Floor Plan (Temporary Space) 36 EX-10.8 4 LEASE AMGT JMB 102 (2/89) Base Years OFFICE LEASE THIS LEASE made as of the 30th day of November, 1995 , between Carlyle Real Estate Limited Partnership-XV an Illinois limited Partnership ("Landlord") and Industrial Training Corporation a Maryland corporation whose address is 13515 Dulles Technology Drive, Herndon. VA 22071 ("Tenant"). WITNESSETH: ARTICLE 1 PREMISES AND TERM Landlord hereby leases to Tenant and Tenant hereby leases from Landlord that certain space known as Suite(s) 590 ("Premises") described or shown on Exhibit A attached hereto, in the building known as the RiverEdge Place ("Building") located at 2000 River Edge Parkway, Atlanta, GA 30328 ("Property", as further described in Article 25), subject to the provisions herein contained. The term ("Term") of this Lease shall commence on the 1st day of February, 1996 ("Commencement Date"), and end on the 31st day of January, 2001 ("Expiration Date"), unless sooner terminated as provided herein. The Commencement Date shall be subject to adjustment as provided in Article 4. Landlord and Tenant agree that for purposes of this Lease the rentable area of the Premises is 3,405 square feet and the rentable area of the Property is 231,423 square feet. ARTICLE 2 BASE RENT Tenant shall pay Landlord monthly Base Rent of Four thousand eight hundred twenty-three and 75/100 Dollars ($4,823.75), in advance on or before the first day of each calendar month during the Term, except that Base Rent for the first full calendar month for which Base Rent shall be due. shall be paid when Tenant executes this Lease. If the Term commences on a day other than the first day of a calendar month, or ends on a day other than the last day of a calendar month, then the Base Rent for such month shall be prorated on the basis of 1/30th of the monthly Base Rent for each day of such month. ARTICLE 3 Additional Rent (A) Taxes. Tenant shall pay Landlord an amount equal to Tenant's Prorata Share of Taxes in excess of the amount of Taxes paid by Landlord during the calendar year 1996 ("Base Tax Year"). The terms "Taxes" and "Tenant's Prorata Share" shall have the meanings specified therefor in Article 25. (B) OPERATING EXPENSES. Tenant shall pay Landlord an amount equal to Tenant's Prorata Share of Operating Expenses in excess of the amount of Operating Expenses paid by Landlord during the calendar year 1996 ("Base Expense Year"). 1 The terms "Operating Expenses" and "Tenant's Prorata Share" shall have the meanings specified therefor in Article 25. (D) MANNER OF PAYMENT. Taxes, and Operating Expenses shall be paid in the following manner: (i) Landlord may reasonably estimate in advance the amounts Tenant shall owe for Taxes and Operating Expense for any full or partial calendar year of the Term. In such event, Tenant shall pay such estimated amounts, on a monthly basis, on or before the first day of each calendar month, together with Tenant's payment of Base Rent. Such estimate may be reasonably adjusted from time to time by Landlord. (ii) Within 120 days after the end of each calendar year, or as soon thereafter as practicable, Landlord shall provide a statement (the "Statement") to Tenant showing: (a) the amount of actual Taxes and Operating Expenses for such calendar year, with a listing of amounts for major categories of Operating Expenses, and such amounts for the Base Years, (b) any amount paid by Tenant towards Taxes and Operating Expenses during such calendar year on an estimated basis, (c) any revised estimate of Tenant's obligations for Taxes and Operating Expenses for the current calendar year. (iii) If the Statement shows that Tenant's estimated payments were less than Tenant's actual obligations for Taxes and Operating Expenses for such year, Tenant shall pay the difference. If the Statement shows an increase in Tenant's estimated payments for the current calendar year, Tenant shall pay the difference between the new and former estimates, for the period from January 1 of the current calendar year through the month in which the Statement is sent. Tenant shall make such payments within thirty (30) days after Landlord sends the Statement. (iv) If the Statement shows that Tenant's estimated payments exceeded Tenant's actual obligations for Taxes and Operating Expenses, Tenant shall receive a credit for the difference against payments of Rent next due. If the Term shall have expired and no further Rent shall be due, Tenant shall receive a refund of such difference, within thirty (30) days after Landlord sends the Statement. (vi) So long as Tenant's obligations hereunder are not materially adversely affected thereby, Landlord reserves the right to reasonably change, from time to time, the manner or timing of the foregoing payments. In lieu of providing one Statement covering Taxes, Operating Expenses, Landlord may provide separate statements at the same or different times. No delay by Landlord in providing the Statement (or separate statements) shall be deemed a default by Landlord or a waiver of Landlord's right to require payment of Tenant's obligations for actual or estimated Taxes or Operating Expenses. In no event shall a decrease in Taxes or Operating Expenses below the Base Year amounts, or a decrease in the CPI, ever decrease the monthly Base Rent, or give rise to a credit in favor of Tenant. (E) PRORATION. If the Term commences other than on January 1, or ends other than on December 31, Tenant's obligations to pay estimated and actual amounts towards Taxes and Operating Expenses for such first or final calendar years shall be prorated to reflect the portion of such years included in the Term. Such proration shall be made by multiplying the total estimated or actual (as the case may be) Taxes and Operating Expenses, for such calendar years. as well as the Base Year amounts, by a fraction, the numerator of which shall be the number of days of the Term during such calendar year, and the denominator of which shall be 365. 2 (F) LANDLORD'S RECORDS. Landlord shall maintain records respecting Taxes and Operating Expenses and determine the same in accordance with sound accounting and management practices, consistently applied. Although this Lease contemplates the computation of Taxes and Operating Expenses on a cash basis, Landlord shall make reasonable and appropriate accrual adjustments to ensure that each calendar year, including the Base Years, includes substantially the same recurring items. Landlord reserves the right to change to a full accrual system of accounting so long as the same is consistently applied and Tenant's obligations are not materially adversely affected. Tenant or its representative shall have the right to examine such records upon reasonable prior notice specifying such records Tenant desires to examine, during normal business hours at the place or places where such records are normally kept by sending such notice no later than forty- five (45) days following the furnishing of the Statement. Tenant may take exception to matters included in Taxes or Operating Expenses, or Landlord's computation of Tenant's Prorata Share of either, by sending notice specifying such exception and the reasons therefor to Landlord no later than thirty (30) days after Landlord makes such records available for examination. Such Statement shall be considered final, except as to matters to which exception is taken after examination of Landlord's records in the foregoing manner and within the foregoing times. Tenant acknowledges that Landlord's ability to budget and incur expenses depends on the finality of such Statement, and accordingly agrees that time is of the essence of this Paragraph. If Tenant takes exception to any matter contained in the Statement as provided herein, Landlord shall refer the matter to an independent certified public accountant, whose certification as to the proper amount shall be final and conclusive as between Landlord and Tenant. Tenant shall promptly pay the cost of such certification unless such certification determines that Tenant shall was overbilled by more than 2%. Pending resolution of any such exceptions in the foregoing manner, Tenant shall continue paying Tenant's Prorata Share of Taxes and Operating Expenses in the amounts determined by Landlord, subject to adjustment after any such exceptions are so resolved. (G) RENT AND OTHER CHARGES. Base Rent, Taxes, Operating Expenses, and any other amounts which Tenant is or becomes obligated to pay Landlord under this Lease or other agreement entered in connection herewith, are sometimes herein referred to collectively as "Rent,'' and all remedies applicable to the non-payment of Rent shall be applicable thereto. Rent shall be paid at any office maintained by Landlord or its agent at the Property, or at such other place as Landlord may designate. ARTICLE 4 Commencement of Term The Commencement Date set forth in Article 1 shall be delayed and Rent shall be abated to the extent that Landlord fails: (i) to substantially complete any improvements to the Premises required to be performed by Landlord under any separate agreement signed by both parties, or (ii) to deliver possession of the Premises for any other reason, including but not limited to holding over by prior occupants, except to the extent that Tenant, its contractors, agents or employees in any way contribute to either such failures. If Landlord so fails for a ninety (90) day initial grace period, or such additional time as may be necessary due to fire or other casualty, strikes, lock-outs or other labor troubles, shortages of equipment or materials, governmental requirements, power shortages or outages, acts or omissions of Tenant or other Persons, or other causes beyond Landlord's reasonable control, Tenant shall have the right to terminate this Lease by written notice to Landlord any time thereafter up until Landlord substantially 3 completes any such improvements and delivers the Premises to Tenant. Any such delay in the Commencement Date shall not subject Landlord to liability for loss or damage resulting therefrom, and Tenant's sole recourse with respect thereto shall be the abatement of Rent and right to terminate this Lease described above. Upon any such termination, Landlord and Tenant shall be entirely relieved of their obligations hereunder, and any Security Deposit and Rent payments shall be returned to Tenant. If the Commencement Date is delayed, the Expiration Date shall not be similarly extended, unless Landlord shall so elect (in which case, the parties shall confirm the same in writing). During any period that Tenant shall be permitted to enter the Premises prior to the Commencement Date other than to occupy the same (e.g., to perform alterations or improvements). Tenant shall comply with all terms and provisions of this Lease, except those provisions requiring the payment of Rent. If Tenant shall be permitted to enter the Premises prior to the Commencement Date for the purpose of occupying the same, Rent shall commence on such date, and if Tenant shall commence occupying only a portion of the Premises prior to the Commencement Date, Rent shall be prorated based on the number of rentable square feet occupied by Tenant. Landlord shall permit early entry, provided the Premises are legally available and Landlord has completed any work required under this Lease or any separate agreement entered in connection herewith. ARTICLE 5 Condition of Premises Tenant has inspected the Premises, Property, Systems and Equipment (as defined in Article 25), or has had an opportunity to do so, and agrees to accept the same "as is" without any agreements, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements except as expressly provided in any separate agreement that may be signed by the parties. ARTICLE 6 Use and Rules Tenant shall use the Premises for offices and no other purpose whatsoever, in compliance with all applicable Laws, and without disturbing or interfering with any other tenant or occupant of the Property. Tenant shall not use the Premises in any manner so as to cause a cancellation of Landlord's insurance policies, or an increase in the premiums thereunder. Tenant shall comply with all rules set forth in Rider One attached hereto (the "Rules"). Landlord shall have the right to reasonably amend such Rules and supplement the same with other reasonable Rules (not expressly inconsistent with this Lease) relating to the Property, or the promotion of safety, care, cleanliness or good order therein, and all such amendments or new Rules shall be binding upon Tenant after five (5) days notice thereof to Tenant. All Rules shall be applied on a non-discriminatory basis, but nothing herein shall be construed to give Tenant or any other Person (as defined in Article 25) any claim, demand or cause of action against Landlord arising out of the violation of such Rules by any other tenant, occupant, or visitor of the Property, or out of the enforcement or waiver of the Rules by Landlord In any particular instance. 4 ARTICLE 7 Services and Utilities Landlord shall provide the following services and utilities (the cost of which shall be included in Operating Expenses unless otherwise stated herein or in any separate rider hereto): (A) Electricity for standard office lighting fixtures, and equipment and accessories customary for offices (up to 280 hours per month) where: (1) the connected electrical load of all of the same does not exceed an average of 4 watts per square foot of the Premises (or such lesser amount as may be available, based on the safe and lawful capacity of the existing electrical circuit(s) and facilities serving the Premises), (2) the electricity will be at nominal 120 volts, single phase (or 110 volts, depending on available service in the Building), and (3) the safe and lawful capacity of the existing electrical circuit(s) serving the Premises is not exceeded. (B) Heat and air-conditioning to provide a temperature required, in Landlord's reasonable opinion and in accordance with applicable Law, for occupancy of the Premises under normal business operations, from 8:00 a.m. until 6:00 p.m. Monday through Friday, except on Holidays (as defined in Article 25). Landlord shall not be responsible for inadequate air-conditioning or ventilation to the extent the same occurs because Tenant uses any item of equipment consuming more than 500 watts at rated capacity without providing adequate air-conditioning and ventilation therefor. (C) Water for drinking, lavatory and toilet purposes at those points of supply provided for nonexclusive general use of other tenants at the Property. (D) Customary office cleaning and trash removal service Monday through Friday or Sunday through Thursday in and about the Premises. (E) Operatorless passenger elevator service (if the Property has such equipment serving the Premises) and freight elevator service (if the Property has such equipment serving the Premises, and subject to scheduling by Landlord) In common with Landlord and other tenants and their contractors, agents and visitors. (F) Landlord shall seek to provide such extra utilities or services as Tenant may from time to time request, if the same are reasonable and feasible for Landlord to provide and do not involve modifications or additions to the Property or existing Systems and Equipment (as defined in Article 25), and if Landlord shall receive Tenant's request within a reasonable period prior to the time such extra utilities or services are required. Landlord may comply with written or oral requests by any officer or employee of Tenant, unless Tenant shall notify Landlord of, or Landlord shall request, the names of authorized individuals (up to 3 for each floor on which the Premises are located) and procedures for written requests. Tenant shall, for such extra utilities or services, pay such charges as Landlord shall from time to time reasonably establish. All charges for such extra utilities or services shall be due at the same time as the installment of Base Rent with which the same are billed, or if billed separately, shall be due within twenty (20) days after such billing. Landlord may install and operate meters or any other reasonable system for monitoring or estimating any services or utilities used by Tenant in excess of those required to be provided by Landlord under this Article (including a system for Landlord's engineer to reasonably estimate any such excess usage). If such system indicates such excess services or utilities, Tenant shall pay Landlord's reasonable charges for installing and operating such system and any supplementary air-conditioning, ventilation, heat, electrical or other systems or equipment (or adjustments or modifications to the existing Systems and Equipment), and Landlord's reasonable charges for such amount of excess services or utilities used by Tenant. 5 Landlord does not warrant that any services or utilities will be free from shortages, failures, variations, or interruptions caused by repairs, maintenance, replacements, improvements, alterations, changes of service, strikes, lockouts, labor controversies, accidents, inability to obtain services, fuel, steam, water or supplies, governmental requirements or requests, or other causes beyond Landlord's reasonable control. None of the same shall be deemed an eviction or disturbance of Tenant's use and possession of the Premises or any part thereof, or render Landlord liable to Tenant for abatement of Rent, or relieve Tenant from performance of Tenant's obligations under this Lease. Landlord in no event shall be liable for damages by reason of loss of profits, business interruption or other consequential damages. ARTICLE 8 Alterations and Liens Tenant shall make no additions, changes, alterations or improvements (the "Work") to the Premises or the Systems and Equipment (as defined in Article 25) pertaining to the Premises without the prior written consent of Landlord. Landlord may impose reasonable requirements as a condition of such consent including without limitation the submission of plans and specifications for Landlord's prior written approval, obtaining necessary permits, posting bonds, obtaining insurance, prior approval of contractors, subcontractors and suppliers, prior receipt of copies of all contracts and subcontracts, contractor and subcontractor lien waivers, affidavits listing all contractors, subcontractors and suppliers, use of union labor (if Landlord uses union labor), affidavits from engineers acceptable to Landlord stating that the Work will not adversely affect the Systems and Equipment or the structure of the Property, and requirements as to the manner and times in which such Work shall be done. All Work shall be performed in a good and workmanlike manner and all materials used shall be of a quality comparable to or better than those in the Premises and Property and shall be in accordance with plans and specifications approved by Landlord, and Landlord may require that all such Work be performed under Landlord's supervision. If Landlord consents or supervises, the same shall not be deemed a warranty as to the adequacy of the design, workmanship or quality of materials, and Landlord hereby expressly disclaims any responsibility or liability for the same. Landlord shall under no circumstances have any obligation to repair, maintain or replace any portion of the Work. Tenant shall keep the Property and Premises free from any mechanic's, materialman's or similar liens or other such encumbrances in connection with any Work on or respecting the Premises not performed by or at the request of Landlord, and shall indemnify and hold Landlord harmless from and against any claims, liabilities, judgments, or costs (including attorneys' fees) arising out of the same or in connection therewith. Tenant shall give Landlord notice at least twenty (20) days prior to the commencement of any Work on the Premises (or such additional time as may be necessary under applicable Laws), to afford Landlord the opportunity of posting and recording appropriate notices of non- responsibility. Tenant shall remove any such lien or encumbrance by bond or otherwise within thirty (30) days after written notice by Landlord, and if Tenant shall fail to do so, Landlord may pay the amount necessary to remove such lien or encumbrance, without being responsible for investigating the validity thereof. The amount so paid shall be deemed additional Rent under this Lease payable upon demand, without limitation as to other remedies available to Landlord under this Lease. Nothing contained in this Lease shall authorize Tenant to do any act which shall subject Landlord's title to the Property or Premises to any liens or encumbrances whether claimed by operation of law or express or implied contract. Any claim to a lien or encumbrance upon the Property or Premises arising in connection with any Work on or respecting the Premises not performed by or at the request of Landlord shall be null and void, or at Landlord's option shall attach only 6 against Tenant's interest in the Premises and shall in all respects be subordinate to Landlord's title to the Property and Premises. ARTICLE 9 Repairs Except for customary cleaning and trash removal provided by Landlord under Article 7, and damage covered under Article 10, Tenant shall keep the Premises in good and sanitary condition, working order and repair (including without limitation, carpet, wall-covering, doors, plumbing and other fixtures, equipment, alterations and improvements whether installed by Landlord or Tenant). In the event that any repairs, maintenance or replacements are required, Tenant shall promptly arrange for the same either through Landlord for such reasonable charges as Landlord may from time to time establish, or such contractors as Landlord generally uses at the Property or such other contractors as Landlord shall first approve in writing, and in a first class, workmanlike manner approved by Landlord in advance in writing. If Tenant does not promptly make such arrangements, Landlord may, but need not, make such repairs, maintenance and replacements, and the costs paid or incurred by Landlord therefor shall be reimbursed by Tenant promptly after request by Landlord. Tenant shall indemnify Landlord and pay for any repairs, maintenance and replacements to areas of the Property outside the Premises, caused, in whole or in part, as a result of moving any furniture, fixtures, or other property to or from the Premises, or by Tenant or its employees, agents, contractors, or visitors (notwithstanding anything to the contrary contained in this Lease). Except as provided in the preceding sentence, or for damage covered under Article 10, Landlord shall keep the common areas of the Property in good and sanitary condition. working order and repair (the cost of which shall be included in Operating Expenses, as described in Article 25, except as limited therein). ARTICLE 10 Casualty Damage If the Premises or any common areas of the Property providing access thereto shall be damaged by fire or other casualty, Landlord shall use available insurance proceeds to restore the same. Such restoration shall be to substantiate the condition prior to the casualty, except for modifications required by zoning and building codes and other Laws or by any Holder (as defined in Article 25), any other modifications to the common areas, deemed desirable by Landlord (provided access to the Premises is not materially impaired), and except that Landlord shall not be required to repair or replace any of Tenant's furniture, furnishings, fixtures or equipment, or any alterations or improvements in excess of any work performed or paid for by Landlord under any separate agreement signed by the parties in connection herewith, Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's business resulting in any way from such damage or the repair thereof. However, Landlord shall allow Tenant a proportionate abatement of Rent during the time and to the extent the Premises are unfit for occupancy for the purposes permitted under this Lease and not occupied by Tenant as a result thereof (unless Tenant or its employees or agents caused the damage). Notwithstanding the foregoing to the contrary, Landlord may elect to terminate this Lease by notifying Tenant in writing of such termination within sixty (60) days after the date of damage (such termination notice to include a termination date providing at least ninety (90) days for Tenant to vacate the Premises), if the Property shall be materially damaged by Tenant or its employees or agents, or if the Property shall be damaged by fire or other casualty or cause such that: (a) repairs to the Premises and access thereto cannot reasonably be completed within 120 days after the 7 casualty without the payment of overtime or other premiums, (b) more than 25% of the Premises is affected by the damage, and fewer than 24 months remain in the Term, or any material damage occurs to the Premises during the last 12 months of the Term, (c) any Holder (as defined in Article 25) shall require that the insurance proceeds or any portion thereof be used to retire the Mortgage debt (or shall terminate the ground lease, as the case may be), or the damage is not fully covered by Landlord's insurance policies, or (d) the cost of the repairs, alterations, restoration or improvement work would exceed 25% of the replacement value of the Building, or the nature of such work would make termination of this Lease necessary or convenient. Tenant agrees that Landlord's obligation to restore, and the abatement of Rent provided herein, shall be Tenant's sole recourse in the event of such damage, and waives any other rights Tenant may have under any applicable Law to terminate the Lease by reason of damage to the Premises or Property. Tenant acknowledges that this Article represents the entire agreement between the parties respecting damage to the Premises or Property. ARTICLE 11 Insurance, Subrogation, and Waiver of Claims Tenant shall maintain during the Term comprehensive (or commercial) general liability insurance, with limits of not less than $1,000,000 combined single limit for personal injury, bodily injury or death, or property damage or destruction (including loss of use thereof) for any one occurrence. Tenant shall also maintain during the Term worker compensation insurance as required by statute, and primary, non-contributory, "all-risks" property damage insurance covering Tenant's personal property, business records, fixtures and equipment, for damage or other loss caused by fire or other casualty or cause including, but not limited to, vandalism and malicious mischief, theft, water damage of any type, including sprinkler leakage, bursting or stoppage of pipes, explosion, business interruption. and other insurable risks in amounts not less than the full insurable replacement value of such property and full insurable value of such other interests of Tenant (subject to reasonable deductible amounts). Landlord shall, as part of Operating Expenses, maintain during the Term comprehensive (or commercial) general liability insurance, with limits of not less than $1,000,000 combined single limit for personal injury, bodily injury or death, or property damage or destruction (including loss of use thereof) for any one occurrence. Landlord shall also, as part of Operating Expenses, maintain during the Term worker compensation insurance as required by statute, and primary, non-contributory, extended coverage or "all-risks" property damage insurance, in an amount equal to at least ninety percent (90%) of the full insurable replacement value of the Property (exclusive of the costs of excavation, foundations and footings, and such risks required to be covered by Tenant's insurance, and subject to reasonable deductible amounts), or such other amount necessary to prevent Landlord from being a co-insured, and such other coverage as Landlord shall deem appropriate or that may be required by any Holder (as defined in Article 25). Tenant shall provide Landlord with certificates evidencing such coverage (and, with respect to liability coverage, showing Landlord and such other parties as Landlord may designate from time to time as additional insureds) prior to Commencement Date, which shall state that such insurance coverage may not be changed or cancelled without at least twenty (20) days' prior written notice to Landlord, and shall provide renewal certificates to Landlord at least twenty (20) days prior to expiration of such policies. Landlord may periodically, but not more often than every five years, require that Tenant reasonably increase the aforementioned coverage. Except as provided to the contrary herein, any 8 insurance carried by Landlord or Tenant shall be for the sole benefit of the party carrying such insurance. Any insurance policies hereunder may be "blanket policies". All insurance required hereunder shall be provided by responsible insurers and Tenant's insurer shall be reasonably accepted to Landlord. By this Article, Landlord and Tenant intend that their respective property loss risks shall be borne by responsible insurance carriers to the extent above provided, and Landlord and Tenant hereby agree to look solely to, and seek recovery only from, their respective insurance carriers in the event of a property loss to the extent that such coverage is agreed to be provided hereunder. The parties each hereby waive all rights and claims against each other for such losses, and waive all rights of subrogation of their respective insurers, provided such waiver of subrogation shall not affect the right of the insured to recover thereunder. The parties agree that their respective insurance policies are now, or shall be, endorsed such that said waiver of subrogation shall not affect the right of the insured to recover thereunder, so long as no material additional premium is charged therefor. ARTICLE 12 CONDEMNATION If the whole or any material part of the Premises or Property shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or remodeling of any part of the Premises or Property, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation. Landlord shall have the option to terminate this Lease upon ninety (90) days notice, provided such notice is given no later than 180 days after the date of such taking, condemnation, reconfiguration, vacation, deed or other instrument. Tenant shall have reciprocal termination rights if the whole or any material part of the Premises is permanently taken, or if access to the Premises is permanently materially impaired. Landlord shall be entitled to receive the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant's personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Term, and for moving expenses (so long as such claim does not diminish the award available to Landlord or any Holder, and such claim is payable separately to Tenant). All rent shall be apportioned as of the date of such termination, or the date of such taking, whichever shall first occur. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Rent shall be proportionately abated. 9 ARTICLE 13 RETURN OF POSSESSION At the expiration or earlier termination of this Lease or Tenant's right of possession, Tenant shall surrender possession of the Premises in the condition required under Article 9, ordinary wear and tear excepted, and shall surrender all keys, any key cards, and any parking stickers or cards, to Landlord, and advise Landlord as to the combination of any locks or vaults then remaining in the Premises, and shall remove all trade fixtures and personal property. All improvements, fixtures and other items in or upon the Premises (except trade fixtures and personal property belonging to Tenant) whether installed by Tenant or Landlord, shall be Landlord's property and shall remain upon the Premises, all without compensation, allowance or credit to Tenant. However, if prior to such termination or within ten (10) days thereafter Landlord so directs by notice, Tenant shall promptly remove such of the foregoing items as are designated in such notice and restore the Premises to the condition prior to the installation of such items; provided, Landlord shall not require removal of customary office improvements installed pursuant to any separate agreement signed by both parties in connection with entering this Lease (except as expressly provided to the contrary therein), or installed by Tenant with Landlord's written approval (except as expressly required by Landlord in connection with granting such approval). If Tenant shall fail to perform any repairs or restoration, or fail to remove any items from the Premises required hereunder, Landlord may do so, and Tenant shall pay Landlord the cost thereof upon demand. All property removed from the Premises by Landlord pursuant to any provisions of this Lease or any Law may be handled or stored by Landlord at Tenant's expense, and Landlord shall in no event be responsible for the value, preservation or safekeeping thereof. All property not removed from the Premises or retaken from storage by Tenant within thirty (30) days after expiration or earlier termination of this Lease or Tenant's right to possession, shall at Landlord's option be conclusively deemed to have been conveyed by Tenant to Landlord as if by bill of sale without payment by Landlord. Unless prohibited by applicable Law, Landlord shall have a lien against such property for the costs incurred in removing and storing the same. ARTICLE 14 Holding Over Unless Landlord expressly agrees otherwise in writing, Tenant shall pay Landlord 150% of the amount of Rent then applicable (or the highest amount permitted by Law, whichever shall be less) prorated on per diem basis for each day Tenant shall retain possession of the Premises or any part thereof after expiration or earlier termination of this Lease, together with all damages sustained by Landlord on account thereof. The foregoing provisions shall not serve as permission for Tenant to hold-over, nor serve to extend the Term (although Tenant shall remain bound to comply with all provisions of this Lease until Tenant vacates the Premises, and shall be subject to the provisions of Article 13). Notwithstanding the foregoing to the contrary, at any time before or after expiration or earlier termination of the Lease, Landlord may serve notice advising Tenant of the amount of Rent and other terms required, should Tenant desire to enter a month-to-month tenancy (and if Tenant shall hold over more than one full calendar month after such notice, Tenant shall thereafter be deemed a month-to-month tenant, on the terms and provisions of this Lease then in effect, as modified by Landlord's notice, and except that Tenant shall not be entitled to any renewal or expansion rights contained in this Lease or any amendments hereto). 10 ARTICLE 15 No Waiver No provision of this Lease will be deemed waived by either party unless expressly waived in writing signed by the waiving party. No waiver shall be implied by delay or any other act or omission of either party. No waiver by either party of any provision of this Lease shall be deemed a waiver of such provision with respect to any subsequent matter relating to such provision, and Landlord's consent or approval respecting any action by Tenant shall not constitute a waiver of the requirement for obtaining Landlord's consent or approval respecting any subsequent action. Acceptance of Rent by Landlord shall not constitute a waiver of any breach by Tenant of any term or provision of this Lease. No acceptance of a lesser amount than the Rent herein stipulated shall be deemed a waiver of Landlord's right to receive the full amount due, nor shall any endorsement or statement on any check or payment or any letter accompanying such check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the full amount due. The acceptance of Rent or of the performance of any other term or provision from any Person other than Tenant, including any Transferee, shall not constitute a waiver of Landlord's right to approve any Transfer. ARTICLE 16 Attorneys' Fees and Jury Trial In the event of any litigation between the parties, the prevailing party shall be entitled to obtain, as part of the judgment, all reasonable attorneys' fees, costs and expenses incurred in connection with such litigation, except as may be limited by applicable Law. In the interest of obtaining a speedier and less costly hearing of any dispute, the parties hereby each irrevocably waive the right to trial by jury. ARTICLE 17 PERSONAL PROPERTY TAXES, RENT TAXES AND OTHER TAXES Tenant shall pay prior to delinquency all taxes, charges or other governmental impositions assessed against or levied upon Tenant's fixtures, furnishings, equipment and personal property located in the Premises, and any Work to the Premises under Article 8. Whenever possible, Tenant shall cause all such items to be assessed and billed separately from the property of Landlord. In the event any such items shall be assessed and billed with the property of Landlord, Tenant shall pay Landlord its share of such taxes, charges or other governmental impositions within thirty (30) days after Landlord delivers a statement and a copy of the assessment or other documentation showing the amount of such impositions applicable to Tenant's property. Tenant shall pay any rent tax or sales tax, service tax, transfer tax or value added tax, or any other applicable tax on the Rent or services herein or otherwise respecting this Lease. 11 ARTICLE 18 Reasonable Approvals Whenever Landlord's approval or consent is expressly required under this Lease (including Article 21) or any other agreement between the parties, Landlord shall not unreasonably withhold or delay such approval or consent (reasonableness shall be a condition to Landlord's enforcement of such consent or approval requirement, and not a covenant). except for matters affecting the structure, safety or security of the Property, or the appearance of the Property from any common or public areas. ARTICLE 19 Subordination, Attornment and Mortgagee Protection This Lease is subject and subordinate to all Mortgages (as defined in Article 25) now or hereafter placed upon the Property, and all other encumbrances and matters of public record applicable to the Property. If any foreclosure proceedings are initiated by any Holder or a deed in lieu is granted (or if any ground lease is terminated), Tenant agrees, upon written request of any such Holder or any purchaser at foreclosure sale, to attorn and pay Rent to such party and to execute and deliver any instruments necessary or appropriate to evidence or effectuate such attornment (provided such Holder or purchaser shall agree to accept this Lease and not disturb Tenant's occupancy, so long as Tenant does not default and fail to cure within the time permitted hereunder). However, in the event of attornment, no Holder shall be: (i) liable for any act or omission of Landlord, or subject to any offsets or defenses which Tenant might have against Landlord (prior to such Holder becoming Landlord under such attornment), (ii) liable for any security deposit or bound by any prepaid Rent not actually received by such Holder, or (iii) bound by any future modification of this Lease not consented to by such Holder. Any Holder (as defined in Article 25) may elect to make this Lease prior to the lien of its Mortgage, by written notice to Tenant, and if the Holder of any prior Mortgage shall require, this Lease shall be prior to any subordinate Mortgage. Tenant agrees to give any Holder by certified mail, return receipt requested, a copy of any notice of default served by Tenant upon Landlord, provided that prior to such notice Tenant has been notified in writing (by way of service on Tenant of a copy of an assignment of leases, or otherwise) of the address of such Holder. Tenant further agrees that if Landlord shall have failed to cure such default within the times permitted Landlord for cure under this Lease, any such Holder whose address has been provided to Tenant shall have an additional period of thirty (30) days in which to cure (or such additional time as may be required due to causes beyond such Holder's control, including time to obtain possession of the Property by power of sale or judicial action). Tenant shall execute such documentation as Landlord may reasonably request from time to time, in order to confirm the matters set forth in this Article in recordable form. 12 ARTICLE 20 Estoppel Certificate Tenant shall from time to time, within twenty (20) days after written request from Landlord, execute, acknowledge and deliver a statement (i) certifying that this Lease is unmodified and in full force and effect or, if modified, stating the nature of such modification and certifying that this Lease as so modified, is in full force and effect (or if this Lease is claimed not to be in force and effect, specifying the ground therefor) and any dates to which the Rent has been paid in advance, and the amount of any Security Deposit, (ii) acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed, and (iii) certifying such other matters as Landlord may reasonably request, or as may be requested by Landlord's current or prospective Holders, insurance carriers, auditors, and prospective purchasers. Any such statement may be relied upon by any such parties. If Tenant shall fail to execute and return such statement within the time required herein, Tenant shall be deemed to have agreed with the matters set forth therein. ARTICLE 21 Assignment and Subletting (A) TRANSFERS. Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, as further described below: (i) assign, mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, by operation of law or otherwise, (ii) sublet the Premises or any part thereof, or (iii) permit the use of the Premises by any Persons (as defined in Article 25) other than Tenant and its employees (all of the foregoing are hereinafter sometimes referred to collectively as "Transfers" and any Person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a "Transferee"). If Tenant shall desire Landlord's consent to any Transfer, Tenant shall notify Landlord in writing, which notice shall include: (a) the proposed effective date (which shall not be less than 30 nor more than 180 days after Tenant's notice), (b) the portion of the Premises to be Transferred (herein called the "Subject Space"), (c) the terms of the proposed Transfer and the consideration therefor, the name and address of the proposed Transferee, and a copy of all documentation pertaining to the proposed Transfer, and (d) current financial statements of the proposed Transferee certified by an officer, partner or owner thereof, and any other information to enable Landlord to determine the financial responsibility, character, and reputation of the proposed Transferee, nature of such Transferee's business and proposed use of the Subject Space, and such other information as Landlord may reasonably require. Any Transfer made without complying with this Article shall, at Landlord's option, be null, void and of no effect, or shall constitute a Default under this Lease. Whether or not Landlord shall grant consent, Tenant shall pay $300.00 towards Landlord's review and processing expenses, within thirty (30) days after written request by Landlord. (B) APPROVAL. Landlord will not unreasonably withhold its consent (as provided in Article 18) to any proposed Transfer of the Subject Space to the Transferee on the terms specified in Tenant's notice. The parties hereby agree that it shall be reasonable under this Lease and under any applicable Law for Landlord to withhold consent to any proposed Transfer where one or more of the following applies (without limitation as to other reasonable grounds for withholding consent): (i) the Transferee is of a character or reputation or engaged in a 13 business which is not consistent with the quality of the Property, or would be a significantly less prestigious occupant of the Property than Tenant, (ii) the Transferee intends to use the Subject Space for purposes which are not permitted under this Lease, (iii) the Subject Space is not regular in shape with appropriate means of ingress and egress suitable for normal renting purposes, (iv) the Transferee is either a government (or agency or instrumentality thereof) or an occupant of the Property, (v) the proposed Transferee does not have a reasonable financial condition in relation to the obligations to be assumed in connection with the Transfer. or (vi) Tenant has committed and failed to cure a Default at the time Tenant requests consent to the proposed Transfer. (C) TRANSFER PREMIUM. If Landlord consents to a Transfer, and as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay Landlord fifty percent (50%) of any Transfer Premium derived by Tenant from such Transfer. "Transfer Premium" shall mean all rent, additional rent or other consideration paid by such Transferee in excess of the Rent payable by Tenant under this Lease (on a monthly basis during the Term, and on a per rentable square foot basis, if less than all of the Premises is transferred), after deducting the reasonable expenses incurred by Tenant for any changes, alterations and improvements to the Premises, any other economic concessions or services provided to the Transferee, and any customary brokerage commissions paid in connection with the Transfer. If part of the consideration for such Transfer shall be payable other than in cash, Landlord's share of such non-cash consideration shall be in such form as is reasonably satisfactory to Landlord. The percentage of the Transfer Premium due Landlord hereunder shall be paid within ten (10) days after Tenant receives any Transfer Premium from the Transferee. (D) RECAPTURE. Notwithstanding anything to the contrary contained in this Article, Landlord shall have the option by giving written notice to Tenant within fifteen (15) days after receipt of Tenant's notice of any proposed Transfer, to recapture the Subject Space. Such recapture notice shall cancel and terminate this Lease with respect to the Subject Space as of the date stated in Tenant's notice as the effective date of the proposed Transfer (or at Landlord's option, shall cause the Transfer to be made to Landlord or its agent, in which case the parties shall execute the Transfer documentation promptly thereafter). If this Lease shall be cancelled with respect to less than the entire Premises, the Rent reserved herein shall be prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, this Lease as so amended shall continue thereafter in full force and effect, and upon request of either party, the parties shall execute written confirmation of the same. (E) TERMS OF CONSENT. If Landlord consents to a Transfer: (a) the terms and conditions of this Lease, including among other things, Tenant's liability for the Subject Space, shall in no way be deemed to have been waived or modified, (b) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (c) no Transferee shall succeed to any rights provided in this Lease or any amendment hereto to extend the Term of this Lease, expand the Premises, or lease additional space, any such rights being deemed personal to Tenant, (d) Tenant shall deliver to Landlord promptly after execution, an original executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, and (e) Tenant shall furnish upon Landlord's request a complete statement, certified by an independent certified public accountant, or Tenant's chief financial officer, setting forth in detail the computation of any Transfer Premium Tenant has derived and shall derive from such Transfer. Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records and papers of Tenant relating to any Transfer, and shall have the right to make copies thereof. If the Transfer Premium 14 respecting any Transfer shall be found understated, Tenant shall within thirty (30) days after demand pay the deficiency, and if understated by more than 2%, Tenant shall pay Landlord's costs of such audit. Any sublease hereunder shall be subordinate and subject to the provisions of this Lease, and if this Lease shall be terminated during the term of any sublease, Landlord shall have the right to: (i) treat such sublease as cancelled and repossess the Subject Space by any lawful means, or (ii) require that such subtenant attorn to and recognize Landlord as its landlord under any such sublease. If Tenant shall Default and fail to cure within the time permitted for cure under Article 23(A), Landlord is hereby irrevocably authorized, as Tenant's agent and attorney-in-fact, to direct any Transferee to make all payments under or in connection with the Transfer directly to Landlord (which Landlord shall apply towards Tenant's obligations under this Lease) until such Default is cured. (F) CERTAIN TRANSFERS. For purposes of this Lease, the term "Transfer" shall also include (a) if Tenant is a partnership, the withdrawal or change, voluntary, involuntary or by operation of law, of a majority of the partners, or a transfer of a majority of partnership interests, within a twelve month period, or the dissolution of the partnership, and (b) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through an exchange or over the counter), the dissolution, merger, consolidation or other reorganization of Tenant, or within a twelve month period: (i) the sale or other transfer of more than an aggregate of 50% of the voting shares of Tenant (other than to immediate family members by reason of gift or death) or (ii) the sale, mortgage, hypothecation or pledge of more than an aggregate of 50% of Tenant's net assets. ARTICLE 22 Rights Reserved By Landlord Except to the extent expressly limited herein, Landlord reserves full rights to control the Property (which rights may be exercised without subjecting Landlord to claims for constructive eviction, abatement of Rent, damages or other claims of any kind), including more particularly, but without limitation, the following rights: (A) To change the name or street address of the Property; install and maintain signs on the exterior and interior of the Property; retain at all times, and use in appropriate instances, keys to all doors within and into the Premises; grant to any Person the right to conduct any business or render any service at the Property, whether or not it is the same or similar to the use permitted Tenant by this Lease; and have access for Landlord and other tenants of the Property to any mail chutes located on the Premises according to the rules of the United States Postal Service. (B) To enter the Premises* at reasonable hours for reasonable purposes, including inspection and supplying cleaning service or other services to be provided Tenant hereunder, to show the Premises to current and prospective mortgage lenders, ground lessors, insurers, and prospective purchasers, tenants and brokers, at reasonable hours, and if Tenant shall abandon the Premises at any time, or shall vacate the same during the last 3 months of the Term, to decorate, remodel, repair, or alter the Premises. (C) To limit or prevent access to the Property, shut down elevator service, activate elevator emergency controls, or otherwise take such action or preventative measures deemed necessary by Landlord for the safety of tenants or other occupants of the Property or the protection of the Property and other property located thereon or therein, in case of fire, invasion, insurrection, riot, civil disorder, public excitement or other dangerous condition, or threat thereof. 15 (D) To decorate and to make alterations, additions and improvements, structural or otherwise, in or to the Property or any part thereof, and any adjacent building, structure, parking facility, land, street or alley (including without limitation changes and reductions in corridors, lobbies, parking facilities and other public areas and the installation of kiosks, planters, sculptures, displays, escalators, mezzanines, and other structures, facilities, amenities and features therein, and changes for the purpose of connection with or entrance into or use of the Property in conjunction with any adjoining or adjacent building or buildings, now existing or hereafter constructed). In connection with such matters, or with any other repairs, maintenance, improvements or alterations, in or about the Property, Landlord may erect scaffolding and other structures reasonably required, and during such operations may enter upon the Premises and take into and upon or through the Premises, all materials required to make such repairs, maintenance, alterations or improvements, and may close public entry ways, other public areas, restrooms, stairways or corridors. (E) To substitute for the Premises other premises (herein referred to as the "new premises") at the Property, provided: (i) the new premises shall be similar to the Premises in area, (ii) Landlord shall give Tenant at least thirty (30) days' written notice before making such change, and the parties shall execute an amendment to the Lease confirming the change within thirty (30) days after either party shall request the same; and iii) if Tenant shall already have taken possession of the Premises: (a) Landlord shall pay the direct, out-of-pocket, reasonable expenses of Tenant in moving from the Premises to the new premises and improving the new premises so that they are substantially similar to the Premises, and, (b) such move shall be made during evenings, weekends, or otherwise so as to incur the least inconvenience to Tenant. **see below In connection with entering the Premises to exercise any of the foregoing rights, Landlord shall: (a) provide reasonable advance written or oral notice to Tenant's on-site manager or other appropriate person (except in emergencies, or for routine cleaning or other routine matters), and (b) take reasonable steps to minimize any interference with Tenant's business. * PROVIDED LANDLORD HAS GIVEN TENANT REASONABLE NOTICE (UNLESS IT IS FOR AN EMERGENCY), ** If Tenant does not desire the new premises provided under this Article 22(E), Tenant may cancel this Lease by giving Landlord written notice within 10 days after Landlord's notice (with an effective date 60 days thereafter) unless Landlord revokes the relocation in writing 30 days after receipt of Tenant's cancellation notice. 16 ARTICLE 23 Landlord's Remedies (A) Default. The occurrence of any one or more of the following events shall constitute a "Default" by Tenant, which if not cured within any applicable time permitted for cure below, shall give rise to Landlord's remedies set forth in Paragraph (B), below: (i) failure by Tenant to make when due any payment of Rent, unless such failure is cured within ten (10) days after notice; (ii) failure by Tenant to observe or perform any of the terms or conditions of this Lease to be observed or performed by Tenant other than the payment of Rent, or as provided below, unless such failure is cured within thirty (30) days after notice, or such shorter period expressly provided elsewhere in this Lease (provided, if the nature of Tenant's failure is such that more time is reasonably required in order to cure, Tenant shall not be in Default if Tenant commences to cure within such period and thereafter reasonably seeks to cure such failure to completion): (iii) failure by Tenant to comply with the Rules, unless such failure is cured within five (5) days after notice (provided, if the nature of Tenant's failure is such that more than five (5) days time is reasonably required in order to cure, Tenant shall not be in Default if Tenant commences to cure within such period and thereafter reasonably seeks to cure such failure to completion); (iv) vacation of all or a substantial portion of the Premises for more than thirty (30) consecutive days, or the failure to take possession of the Premises within sixty (60) days after the Commencement Date; (v) (a) making by Tenant or any guarantor of this Lease ("Guarantor") of any general assignment for the benefit of creditors, (b) filing by or against Tenant or any Guarantor of a petition to have Tenant or such Guarantor adjudged a bankrupt or a petition for reorganization or arrangement under any Law relating to bankruptcy (unless, in the case of a petition filed against Tenant or such Guarantor, the same is dismissed within sixty (60) days), (c) appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located on the Premises or of Tenant's interest in this Lease, where possession is not restored to Tenant within thirty (30) days, (d) attachment, execution or other judicial seizure of substantially all of Tenant's assets located on the Premises or of Tenant's interest in this Lease, (e) Tenant's or any Guarantor's convening of a meeting of its creditors or any class thereof for the purpose of effecting a moratorium upon or composition of its debts, or (f) Tenant's or any Guarantor's insolvency or admission of an inability to pay its debts as they mature; (vi) any material misrepresentation herein, or material misrepresentation or omission in any financial statements or other materials provided by Tenant or any Guarantor in connection with negotiating or entering this Lease or in connection with any Transfer under Article 21; (vii) cancellation of any guaranty of this Lease by any Guarantor: (viii) failure by Tenant to cure within any applicable times permitted thereunder any default under any other lease for space at the Property or any other buildings owned or managed by Landlord or its affiliates, now or hereafter entered by Tenant (and any Default hereunder not cured within the times permitted for cure herein shall, at Landlord's election constitute a default under any such other lease or leases). Failure by Tenant to comply with the same term or condition of this Lease on three occasions during any twelve month period shall cause any failure to comply with such term or condition during the succeeding twelve month period, at Landlord's option, to constitute an incurable Default, if Landlord has given Tenant notice of each such failure within ten (10) days after each such failure occurs. The notice and cure periods provided herein are in lieu of, and not in addition to, any notice and cure periods provided by Law. 17 (B) REMEDIES. If a Default occurs and is not cured within any applicable time permitted under Paragraph (A), Landlord shall have the rights and remedies hereinafter set forth, which shall be distinct, separate and cumulative with and in addition to any other right or remedy allowed under any Law or other provisions of this Lease: (i) Landlord may terminate this Lease, repossess the Premises by detainer suit, summary proceedings or other lawful means, and recover as damages a sum of money equal to: (a) any unpaid Rent as of the termination date including interest at the Default Rate (as defined in Article 25), (b) any unpaid Rent which would have accrued after the termination date through the time of award including interest at the Default Rate, less such loss of Rent that Tenant proves could have been reasonably avoided, (c) any unpaid Rent which would have accrued after the time of award during the balance of the Term, less such loss of Rent that Tenant proves could be reasonably avoided, and (d) any other amounts necessary to compensate Landlord for all damages proximately caused by Tenant's failure to perform its obligations under this Lease, including without limitation all Costs of Re-letting (as defined in Paragraph F). For purposes of computing the amount of Rent herein that would have accrued after the time of award, Tenant's Prorata Share of Taxes and Operating Expenses, and CPI Escalation Amounts, shall be projected, based upon the average rate of increase, if any, in such items from the Commencement Date through the time of award. (ii) If applicable Law permits, Landlord may terminate Tenant's right of possession and repossess the Premises by detainer suit, summary proceedings or other lawful means, without terminating this Lease (and if such Law permits, and Landlord shall not have expressly terminated the Lease in writing, any termination shall be deemed a termination of Tenant's right of possession only). In such event, Landlord may recover: (a) any unpaid Rent as of the date possession is terminated, including interest at the Default Rate, (b) any unpaid Rent which accrues during the Term from the date possession is terminated through the time of award (or which may have accrued from the time of any earlier award obtained by Landlord through the time of award), including interest at the Default Rate, less any Net Re-Letting Proceeds (as defined in Paragraph F) received by Landlord during such period, and less such loss of Rent that Tenant proves could have been reasonably avoided, and (c) any other amounts necessary to compensate Landlord for all damages proximately caused by Tenant's failure to perform its obligations under this Lease, including without limitation, all Costs of Re-letting (as defined in Paragraph F). Landlord may bring suits for such amounts or portions thereof, at any time or times as the same accrue or after the same have accrued, and no suit or recovery of any portion due hereunder shall be deemed a waiver of Landlord's right to collect all amounts to which Landlord is entitled hereunder, nor shall the same serve as any defense to any subsequent suit brought for any amount not theretofor reduced to judgment. (C) MITIGATION OF DAMAGES. If Landlord terminates this Lease or Tenant's right to possession, Landlord shall use reasonable efforts to mitigate Landlord's damages, and Tenant shall be entitled to submit such proof of such failure to mitigate as a defense to Landlord's claims hereunder, if mitigation of damages by Landlord is required by applicable Law. If Landlord has not terminated this Lease or Tenant's right to possession, Landlord shall have no obligation to mitigate, and may permit the Premises to remain vacant or abandoned; in such case, Tenant may seek to mitigate damages by attempting to sublease the Premises or assign this Lease (subject to Article 21). 18 (D) SPECIFIC PERFORMANCE, COLLECTION OF RENT AND ACCELERATION. Landlord shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies available under Paragraph (B), above or any Law or other provision of this Lease), without prior demand or notice except as required by applicable Law: (i) to seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease, or restrain or enjoin a violation or breach of any provision hereof, and (ii) to sue for and collect any unpaid Rent which has accrued. Notwithstanding anything to the contrary contained in this Lease, to the extent not expressly prohibited by applicable Law, in the event of any Default by Tenant not cured within any applicable time for cure hereunder, Landlord may terminate this Lease or Tenant's right to possession and accelerate and declare that all Rent reserved for the remainder of the Term shall be immediately due and payable (in which event, Tenant's Prorata Share of Taxes and Operating Expenses, and CPI Escalation Amounts for the remainder of the Term shall be projected based upon the average rate of increase, if any, in such items from the Commencement Date through the date of such declaration); provided, Landlord shall, after receiving payment of the same from Tenant, be obligated to turn over to Tenant any actual Net Re-Letting Proceeds thereafter received during the remainder of the Term, up to the amount so received from Tenant pursuant to this provision. (E) Late Charges and Interest. Tenant shall pay, as additional Rent, a service charge of Two Hundred Dollars ($200.00) for bookkeeping and administrative expenses, if Rent is not received within five (5) days after its due date. In addition, any Rent paid more than five (5) days after due shall accrue interest from the due date at the Default Rate (as defined in Article 25), until payment is received by Landlord. Such service charge and interest payments shall not be deemed consent by Landlord to late payments, nor a waiver of Landlord's right to insist upon timely payments at any time, nor a waiver of any remedies to which Landlord is entitled as a result of the late payment of Rent. (F) CERTAIN DEFINITIONS. "Net Re-Letting Proceeds" shall mean the total amount of rent and other consideration paid by any Replacement Tenants, less all Costs of Re-Letting, during a given period of time. "Costs of Re-Letting" shall include without limitation, all reasonable costs and expenses incurred by Landlord for any repairs, maintenance, changes, alterations and improvements to the Premises, brokerage commissions, advertising costs, attorneys' fees, any customary free rent periods or credits, tenant improvement allowances, take-over lease obligations and other customary, necessary or appropriate economic incentives required to enter leases with Replacement Tenants, and costs of collecting rent from Replacement Tenants. "Replacement Tenants" shall mean any Persons (as defined in Article 25) to whom Landlord re-lets the Premises or any portion thereof pursuant to this Article. (G) Other Matters. No re-entry or repossession, repairs, changes, alterations and additions, re-letting, acceptance of keys from Tenant, or any other action or omission by Landlord shall be construed as an election by Landlord to terminate this Lease or Tenant's right to possession, or accept a surrender of the Premises, nor shall the same operate to release the Tenant in whole or in part from any of Tenant's obligations hereunder, unless express written notice of such intention is sent by Landlord or its agent to Tenant. To the fullest extent permitted by Law, all rent and other consideration paid by any Replacement Tenants shall be applied: first, to the Costs of Re-Letting, second, to the payment of any Rent theretofore accrued, and the residue, if any, shall be held by Landlord and applied to the payment of other obligations of Tenant to Landlord as the same become due (with any remaining residue to be retained by Landlord). Rent shall be paid without any prior demand or notice therefor (except as expressly provided herein) and without any deduction, set-off or counterclaim, or relief 19 from any valuation or appraisement laws. Landlord may apply payments received from Tenant to any obligations of Tenant then accrued, without regard to such obligations as may be designated by Tenant. Landlord shall be under no obligation to observe or perform any provision of this Lease on its part to be observed or performed which accrues after the date of any Default by Tenant hereunder not cured within the times permitted hereunder. The times set forth herein for the curing of Defaults by Tenant are of the essence of this Lease. Tenant hereby irrevocably waives any right otherwise available under any Law to redeem or reinstate this Lease. ARTICLE 24 Landlord's Right to Cure If Landlord shall fail to perform any term or provision under this Lease required to be performed by Landlord, Landlord shall not be deemed to be in default hereunder nor subject to any claims for damages of any kind, unless such failure shall have continued for a period of thirty (30) days after written notice thereof by Tenant: provided, if the nature of Landlord's failure is such that more than thirty (30) days are reasonably required in order to cure, Landlord shall not be in default if Landlord commences to cure such failure within such thirty (30) day period, and thereafter reasonably seeks to cure such failure to completion. The aforementioned periods of time permitted for Landlord to cure shall be extended for any period of time during which Landlord is delayed in, or prevented from, curing due to fire or other casualty, strikes, lock-outs or other labor troubles, shortages of equipment or materials, governmental requirements, power shortages or outages, acts or omissions by Tenant or other Persons, and other causes beyond Landlord's reasonable control. If Landlord shall fail to cure within the times permitted for cure herein, Landlord shall be subject to such remedies as may be available to Tenant (subject to the other provisions of this Lease); provided, in recognition that Landlord must receive timely payments of Rent and operate the Property, Tenant shall have no right of self-help to perform repairs or any other obligation of Landlord, and shall have no right to withhold, set-off, or abate Rent. ARTICLE 25 Captions, Definitions and Severability The captions of the Articles and Paragraphs of this Lease are for convenience of reference only and shall not be considered or referred to in resolving questions of interpretation. If any term or provision of this Lease shall be found invalid, void, illegal, or unenforceable with respect to any particular Person by a court of competent jurisdiction, it shall not affect, impair or invalidate any other terms or provisions hereof, or its enforceability with respect to any other Person, the parties hereto agreeing that they would have entered into the remaining portion of this Lease notwithstanding the omission of the portion or portions adjudged invalid, void, illegal, or unenforceable with respect to such Person. (A) "Building" shall mean the structure identified in Article I of this Lease. (B) "CPI" shall mean the Consumer Price Index for All Urban Consumers, All Items (Base year 1982-1984 = 100) published by the United States Department of Labor, Bureau of Labor Statistics (or if a separate index is published by the Bureau of Labor Statistics for a metropolitan area within 100 miles of the Property, then such metropolitan index). If the Bureau of Labor Statistics substantially revises the manner in which the CPI 20 is determined, an adjustment shall be made in the revised index which would produce results equivalent, as nearly as possible to those which would be obtained hereunder if the CPI were not so revised. If the 1982-1984 average shall no longer be used as an index of 100, such change shall constitute a substantial revision. If the CPI becomes unavailable to the public because publication is discontinued, or otherwise, Landlord shall substitute therefor a comparable index based upon changes in the cost of living or purchasing power of the consumer dollar published by a governmental agency, major bank, other financial institution, university or recognized financial publisher. If the CPI is available on a monthly (or alternating monthly) basis, the CPI for the months in which (or immediately preceding, as the case may be) the Commencement Date and Adjustment Date respectively occur shall be used. (C) "Default Rate" shall mean eighteen percent (18%) per annum, or the highest rate permitted by applicable Law, whichever shall be less. (D) "Holder" shall mean the holder of any Mortgage at the time in question, and where such Mortgage is a ground lease, such term shall refer to the ground lessor. (E) "Holidays" shall mean all federally observed holidays, including New Year's Day, President's Day, Memorial Day, Independence Day, Labor Day, Veterans' Day, Thanksgiving Day, Christmas Day, and to the extent of utilities or services provided by union members engaged at the Property, such other holidays observed by such unions. (F) "Landlord" and "Tenant" shall be applicable to one or more Persons as the case may be, and the singular shall include the plural, and the neuter shall include the masculine and feminine; and if there be more than one, the obligations thereof shall be joint and several. For purposes of any provisions indemnifying or limiting the liability of Landlord, the term "Landlord" shall include Landlord's present and future partners, beneficiaries, trustees, officers, directors, employees, shareholders, principals, agents, affiliates, successors and assigns. (G) "Law" shall mean all federal, state, county and local governmental and municipal laws, statutes, ordinances, rules, regulations, codes, decrees, orders and other such requirements, applicable equitable remedies and decisions by courts in cases where such decisions are considered binding precedents in the state in which the Property is located, and decisions of federal courts applying the Laws of such State. (H) "Mortgage" shall mean all mortgages, deeds of trust, ground leases and other such encumbrances now or hereafter placed upon the Property or Building, or any part thereof, and all renewals, modifications, consolidations, replacements or extensions thereof, and all indebtedness now or hereafter secured thereby and all interest thereon. (I) "Operating Expenses" shall mean all expenses, costs and amounts (other than Taxes) of every kind and nature which Landlord shall pay during any calendar year any portion of which occurs during the Term, because of or in connection with the ownership, management, repair, maintenance, restoration and operation of the Property, including without limitation, any amounts paid for: (a) utilities for the Property, including but not limited to electricity, power, gas, steam, oil or other fuel, water, sewer, lighting, heating, air conditioning and ventilating, (b) permits, licenses and certificates necessary to operate, manage and lease the Property, (c) insurance applicable to the Property, not limited to the amount of coverage Landlord is required to provide under this Lease, (d) supplies, tools, equipment and materials used in the operation, repair and maintenance of the Property, (e) accounting, legal, inspection, consulting, concierge and other services, (f) any equipment rental (or installment equipment purchase or equipment financing agreements), or management agreements (including the cost of any management fee actually paid thereunder and the fair rental value of any office space provided thereunder, up to customary and reasonable amounts), (g) wages, salaries and other compensation and benefits (including the fair value of any parking privileges provided) for all persons 21 engaged in the operation, maintenance or security of the Property, and employer's Social Security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages, salaries, compensation and benefits, (h) payments under any easement, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs in any planned development, and (i) operation, repair, and maintenance of all Systems and Equipment and components thereof (including replacement of components), janitorial service, alarm and security service, window cleaning, trash removal, elevator maintenance, cleaning of walks, parking facilities and building walls, removal of ice and snow, replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms and other common or public areas or facilities, maintenance and replacement of shrubs, trees, grass, sod and other landscaped items, irrigation systems, drainage facilities, fences, curbs, and walkways, re-paving and re-striping parking facilities, and roof repairs. If the Property is not fully occupied during all or a portion of any calendar year, Landlord may, in accordance with sound accounting and management practices, determine the amount of variable Operating Expenses (i.e. those items which vary according to occupancy levels) that would have been paid had the Property been fully occupied, and the amount so determined shall be deemed to have been the amount of variable Operating Expenses for such year. If Landlord makes such an adjustment, Landlord shall make a comparable adjustment for the Base Expense Year. Notwithstanding the foregoing, Operating Expenses shall not, however, include: (i) depreciation, interest and amortization on Mortgages, and other debt costs or ground lease payments if any; legal fees in connection with leasing, tenant disputes or enforcement of leases; real estate brokers' leasing commissions; improvements or alterations to tenant spaces; the cost of providing any service directly to and paid directly by, any tenant; any costs expressly excluded from Operating Expenses elsewhere in this Lease; costs of any items to the extent Landlord receives reimbursement from insurance proceeds or from a third party (such proceeds to be deducted from Operating Expenses in the year in which received); and (ii) capital expenditures, except those: (a) made primarily to reduce Operating Expenses, or to comply with any Laws or other governmental requirements, or (b) for replacements (as opposed to additions or new improvements) of nonstructural items located in the common areas of the Property required to keep such areas in good condition; provided, all such permitted capital expenditures (together with reasonable financing charges) shall be amortized for purposes of this Lease over the shorter of: (i) their useful lives, (ii) the period during which the reasonably estimated savings in Operating Expenses equals the expenditures, or (iii) three (3) years. (J) "Person" shall mean an individual, trust, partnership, joint venture, association, corporation, and any other entity. (K) "Property" shall mean the Building, and any common or public areas or facilities, easements, corridors, lobbies, sidewalks, loading areas, driveways, landscaped areas, skywalks, parking garages and lots, and any and all other structures or facilities operated or maintained in connection with or for the benefit of the Building, and all parcels or tracts of land on which all or any portion of the Building or any of the other foregoing items are located, and any fixtures, machinery, equipment, apparatus, Systems and Equipment, furniture and other personal property located thereon or therein and used in connection therewith, whether title is held by Landlord or its affiliates. Possession of areas necessary for utilities, services, safety and operation of the Property, including the Systems and Equipment (as defined in Article 25), fire stairways, perimeter walls, space between the finished ceiling of the Premises and the slab of the floor or roof of the Property thereabove, and the use thereof together with the right to install, maintain, operate, repair and replace the Systems and Equipment, including any of the same in, through, under or above the Premises in locations that will not materially interfere with 22 Tenant's use of the Premises, are hereby excepted and reserved by Landlord, and not demised to Tenant. If the Building shall be part of a complex, development or group of buildings or structures collectively owned or managed by Landlord or its affiliates or collectively managed by Landlord's managing agent, the Property shall, at Landlord's option also be deemed to include such other of those buildings or structures as Landlord shall from time to time designate, and shall initially include such buildings and structures (and related facilities and parcels on which the same are located) as Landlord shall have incorporated by reference to the total square footage of the Property In Article 1. (L) "Rent" shall have the meaning specified therefor in Article 3(G). (M) "Systems and Equipment" shall mean any plant, machinery, transformers, duct work, cable, wires, and other equipment, facilities, and systems designed to supply heat, ventilation, air conditioning and humidity or any other services or utilities, or comprising or serving as any component or portion of the electrical, gas, steam, plumbing, sprinkler. communications, alarm, security, or fire/life/safety systems or equipment, or any other mechanical, electrical, electronic, computer or other systems or equipment for the Property. (N) "Taxes" shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary (including without limitation real estate taxes, general and special assessments, transit taxes, water and sewer rents, taxes based upon the receipt of rent including gross receipts or sales taxes applicable to the receipt of rent or service or value added taxes (unless required to be paid by Tenant under Article 17), personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, Systems and Equipment, appurtenances, furniture and other personal property used in connection with the Property which Landlord shall pay during any calendar year, any portion of which occurs during the Term (without regard to any different fiscal year used by such government or municipal authority) because of or in connection with the ownership, leasing and operation of the Property. Notwithstanding the foregoing, there shall be excluded from Taxes all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to Landlord's general or net income (as opposed to rents, receipts or income attributable to operations at the Property). If the method of taxation of real estate prevailing at the time of execution hereof shall be, or has been altered, so as to cause the whole or any part of the taxes now, hereafter or heretofor levied, assessed or imposed on real estate to be levied, assessed or imposed on Landlord, wholly or partially, as a capital levy or otherwise, or on or measured by the rents received therefrom, then such new or altered taxes attributable to the Property shall be included within the term "Taxes," except that the same shall not include any enhancement of said tax attributable to other income of Landlord. Any expenses incurred by Landlord in attempting to protest, reduce or minimize Taxes shall be included in Taxes in the calendar year such expenses are paid. Tax refunds shall be deducted from Taxes in the year they are received by Landlord, but if such refund shall relate to taxes paid in a prior year of the Term, and the Lease shall have expired, Landlord shall mail Tenant's Prorata Share of such net refund (after deducting expenses and attorneys' fees), up to the amount Tenant paid towards Taxes during such year, to Tenant's last known address. If Taxes for the Base Tax Year are reduced as the result of protest, or by means of agreement, or as the result of legal proceedings or otherwise, Landlord may adjust Tenant's obligations for Taxes in all years following the Tax Base Year, and Tenant shall pay Landlord within 30 days after notice any additional amount required by such adjustment for any such years or portions thereof that have theretofor occurred. If Taxes for any period during the Term or any extension therof, shall be increased after payment thereof by Landlord, for any reason including without limitation error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord upon demand Tenant's Prorate Share of such increased Taxes. Tenant shall pay increased Taxes whether Taxes are increased as a result of increases in the assessments or valuation of the Property (whether based on a sale, change in ownership or refinancing of the Property or otherwise), increases in the 23 tax rates, reduction or elimination of any rollbacks or other deductions available under current law, scheduled reductions of any tax abatement, as a result of elimination, invalidity or withdrawal of any tax abatement, or for any other cause whatsoever. Notwithstanding the foregoing, if any Taxes shall be paid based on assessments or bills by a governmental or municipal authority using a fiscal year other than a calendar year, Landlord may elect to average the assessments or bills for the subject calendar year, based on the number of months of such calendar year included in each such assessment or bill. (O) "Tenant's Prorata Share" of Taxes and Operating Expenses shall be the rentable area of the Premises divided by the rentable area of the Property on the last day of the calendar year for which Taxes or Operating Expenses are being determined, excluding any parking facilities. Tenant acknowledges that the "rentable area of the Premises" under this Lease includes the usable area, without deduction for columns or projections, multiplied by a load or conversion factor, to reflect a share of certain areas, which may include lobbies, corridors, mechanical, utility, janitorial, boiler and service rooms and closets, restrooms, and other public, common and service areas. Except as provided expressly to the contrary herein, the "rentable area of the Property" shall include all rentable area of all space leased or available for lease at the Property, which Landlord may reasonably re-determine from time to time, to reflect re-configurations, additions or modifications to the Property. If the Property or any development of which it is a part, shall contain non-office uses, Landlord shall have the right to determine in accordance with sound accounting and management principles, Tenant's Prorata Share of Taxes and Operating Expenses for only the office portion of the Property or of such development, in which event, Tenant's Prorata Share shall be based on the ratio of the rentable area of the Premises to the rentable area of such office portion. Similarly, if the Property shall contain tenants who do not participate in all or certain categories of Taxes or Operating Expenses on a prorata basis, Landlord may exclude the amount of Taxes or Operating Expenses, or such categories of the same, as the case may be, attributable to such tenants, and exclude the rentable area of their premises, in computing Tenant's Prorata Share. If the Property shall be part of or shall include a complex, development or group of buildings or structures collectively owned or managed by Landlord or its affiliates or collectively managed by Landlord's managing agent, Landlord may allocate Taxes and Operating Expenses within such complex, development or group, and between such buildings and structures and the parcels on which they are located, in accordance with sound accounting and management principles. In the alternative, Landlord shall have the right to determine, in accordance with sound accounting and management principles, Tenant's Prorata Share of Taxes and Operating Expenses based upon the totals of each of the same for all such buildings and structures, the land constituting parcels on which the same are located, and all related facilities, including common areas and easements, corridors, lobbies, sidewalks, elevators, loading areas, parking facilities and driveways and other appurtenances and public areas, in which event Tenant's Prorata Share shall be based on the ratio of the rentable area of the Premises to the rentable area of all such buildings. ARTICLE 26 Conveyance by Landlord and Liability In case Landlord or any successor owner of the Property or the Building shall convey or otherwise dispose of any portion thereof in which the Premises are located, to another Person (and nothing herein shall be construed to restrict or prevent such conveyance or disposition), such other Person shall thereupon be and become landlord hereunder and shall be deemed to have fully assumed and be liable for all obligations of this Lease to be performed by Landlord which first arise after the date of conveyance, including the return of any Security Deposit, and Tenant shall attorn to such other Person, and Landlord or such successor owner shall, from and after the date of conveyance, be free of all liabilities and obligations hereunder not then incurred. The liability of Landlord to Tenant for 24 any default by Landlord under this Lease or arising in connection herewith or with Landlord's operation, management, leasing, repair, renovation, alteration, or any other matter relating to the Property or the Premises, shall be limited to the interest of Landlord in the Property (and the rental proceeds thereof). Tenant agrees to look solely to Landlord's interest in the Property (and the rental proceeds thereof) for the recovery of any judgment against Landlord, and Landlord shall not be personally liable for any such judgment or deficiency after execution thereon. The limitations of liability contained in this Article shall apply equally and inure to the benefit of Landlord's present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future general or limited partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust) have any liability for the performance of Landlord's obligations under this Lease. Notwithstanding the foregoing to the contrary, Landlord shall have personal liability for insured claims, beyond Landlord's interest in the Property (and rental proceeds thereof), to the extent of Landlord's liability insurance coverage available for such claims. ARTICLE 27 Indemnification Except to the extent arising from the intentional or grossly negligent acts of Landlord or Landlord's agents or employees, Tenant shall defend, indemnify and hold harmless Landlord from and against any and all claims, demands, liabilities, damages, judgments, orders, decrees, actions, proceedings, fines, penalties, costs and expenses, including without limitation, court costs and attorneys' fees arising from or relating to any loss of life, damage or injury to person property or business occurring in or from the Premises, or caused by or in connection with any violation of this Lease or use of the Premises or Property by, or any other act or omission of, Tenant, any other occupant of the Premises, or any of their respective agents, employees, contractors or guests. Without limiting the generality of the foregoing, Tenant specifically acknowledges that the indemnity undertaking herein shall apply to claims in connection with or arising out of any "Work" as described in Article 8, the installation, maintenance, use or removal of any "Lines" located in or serving the Premises as described in Article 29, and the transportation, use, storage, maintenance, generation, manufacturing, handling, disposal, release or discharge of any "Hazardous Material" as described in Article 30 (whether or not any of such matters shall have been theretofor approved by Landlord), except to the extent that any of the same arises from the intentional or grossly negligent acts of Landlord or Landlord's agents or employees. ARTICLE 28 Safety and Security Devices, Services and Programs The parties acknowledge that safety and security devices, services and programs provided by Landlord, if any, while intended to deter crime and ensure safety, may not in given instances prevent theft or other criminal acts, or ensure safety of persons or property. The risk that any safety or security device, service or program may not be effective, or may malfunction, or be circumvented by a criminal, is assumed by Tenant with respect to Tenant's property and interests, and Tenant shall obtain insurance coverage to the extent Tenant desires protection against such criminal acts and other losses, as further described in Article 11. Tenant agrees to cooperate in any reasonable safety or security program developed by Landlord or required by Law. 25 ARTICLE 29 Communications and Computer Lines Tenant may install, maintain, replace, remove or use any communications or computer wires, cables and related devices (collectively the "Lines") at the Property in or serving the Premises, provided: (a) Tenant shall obtain Landlord's prior written consent, use an experienced and qualified contractor approved in writing by Landlord, and comply with all of the other provisions of Article 8. (b) any such installation, maintenance, replacement, removal or use shall comply with all Laws applicable thereto and good work practices, and shall not interfere with the use of any then existing Lines at the Property, (c) an acceptable number of spare Lines and space for additional Lines shall be maintained for existing and future occupants of the Property, as determined in Landlord's reasonable opinion, (d) if Tenant at any time uses any equipment that may create an electromagnetic field exceeding the normal insulation ratings of ordinary twisted pair riser cable or cause radiation higher than normal background radiation, the Lines therefor (including riser cables) shall be appropriately insulated to prevent such excessive electromagnetic fields or radiation, (e) as a condition to permitting the installation of new Lines, Landlord may require that Tenant remove existing Lines located in or serving the Premises, (f) Tenant's rights shall be subject to the rights of any regulated telephone company, and (g) Tenant shall pay all costs in connection therewith. Landlord reserves the right to require that Tenant remove any Lines located in or serving the Premises which are installed in violation of these provisions, or which are at any time in violation of any Laws or represent a dangerous or potentially dangerous condition (whether such Lines were installed by Tenant or any other party), within three (3) days after written notice. Landlord may (but shall not have the obligation to): (i) install new Lines at the Property (ii) create additional space for Lines at the Property, and (iii) reasonably direct, monitor and/or supervise the installation, maintenance, replacement and removal of, the allocation and periodic re-allocation of available space (if any) for, and the allocation of excess capacity (if any) on, any Lines now or hereafter installed at the Property by Landlord, Tenant or any other party (but Landlord shall have no right to monitor or control the information transmitted through such Lines). Such rights shall not be in limitation of other rights that may be available to Landlord by Law or otherwise. If Landlord exercises any such rights, Landlord may charge Tenant for the costs attributable to Tenant, or may include those costs and all other costs in Operating Expenses under Article 25 (including without limitation, costs for acquiring and installing Lines and risers to accommodate new Lines and spare Lines, any associated computerized system and software for maintaining records of Line connections, and the fees of any consulting engineers and other experts); provided, any capital expenditures included in Operating Expenses hereunder shall be amortized (together with reasonable finance charges) over the period of time prescribed by Article 25. Notwithstanding anything to the contrary contained in Article 13, Landlord reserves the right to require that Tenant remove any or all Lines installed by or for Tenant within or serving the Premises upon termination of this Lease, provided Landlord notifies Tenant prior to or within thirty (30) days following such termination. Any Lines not required to be removed pursuant to this Article shall, at Landlord's option, become the property of Landlord (without payment by Landlord). If Tenant fails to remove such Lines as required by Landlord, or violates any other provision of this Article Landlord may, after twenty (20) days written notice to Tenant, remove such Lines or remedy such other violation, at Tenant's expense (without limiting Landlord's other remedies available under this Lease or applicable Law). Tenant shall not, without the prior written consent of Landlord in each instance, grant to any third party a security interest or lien in or on the 26 Lines, and any such security interest or lien granted without Landlord's written consent shall be null and void. Except to the extent arising from the intentional or negligent acts of Landlord or Landlord's agents or employees Landlord shall have no liability for damages arising from, and Landlord does not warrant that the Tenant's use of any Lines will be free from the following (collectively called "Line Problems"): (x) any eavesdropping or wire-tapping by unauthorized parties, (y) any failure of any Lines to satisfy Tenant's requirements, or (z) any shortages, failures, variations, interruptions, disconnections, loss or damage caused by the installation, maintenance, replacement, use or removal of Lines by or for other tenants or occupants at the Property, by any failure of the environmental conditions or the power supply for the Property to conform to any requirements for the Lines or any associated equipment, or any other problems associated with any Lines by any other cause. Under no circumstances shall any Line Problems be deemed an actual or constructive eviction of Tenant, render Landlord liable to Tenant for abatement of Rent, or relieve Tenant from performance of Tenant's obligations under this Lease. Landlord in no event shall be liable for damages by reason of loss of profits, business interruption or other consequential damage arising from any Line Problems. ARTICLE 30 HAZARDOUS MATERIALS Tenant shall not transport, use, store, maintain, generate, manufacture, handle, dispose, release or discharge any "Hazardous Material" (as defined below) upon or about the Property, or permit Tenant's employees, agents, contractors. and other occupants of the Premises to engage in such activities upon or about the Property. However, the foregoing provisions shall not prohibit the transportation to and from, and use, storage, maintenance and handling within, the Premises of substances customarily used in offices (or such other business or activity expressly permitted to be undertaken in the Premises under Article 6), provided: (a) such substances shall be used and maintained only in such quantities as are reasonably necessary for such permitted use of the Premises, strictly in accordance with applicable Law and the manufacturers' instructions therefor, (b) such substances shall not be disposed of, released or discharged on the Property, and shall be transported to and from the Premises in compliance with all applicable Laws, and as Landlord shall reasonably require, (c) if any applicable Law or Landlord's trash removal contractor requires that any such substances be disposed of separately from ordinary trash, Tenant shall make arrangements at Tenant's expense for such disposal directly with a qualified and licensed disposal company at a lawful disposal site (subject to scheduling and approval by Landlord), and shall ensure that disposal occurs frequently enough to prevent unnecessary storage of such substances in the Premises, and (d) any remaining such substances shall be completely, properly and lawfully removed from the Property upon expiration or earlier termination of this Lease. Tenant shall promptly notify Landlord of: (i) any enforcement, cleanup or other regulatory action taken or threatened by any governmental or regulatory authority with respect to the presence of any Hazardous Material on the Premises or the migration thereof from or to other property, (ii) any demands or claims made or threatened by any party against Tenant or the Premises relating to any loss or injury resulting from any Hazardous Material, (iii) any release, discharge or nonroutine, improper or unlawful disposal or transportation of any Hazardous Material on or from the Premises. and (iv) any matters where Tenant is required by Law to give a notice to any governmental or regulatory authority respecting any Hazardous Material on the Premises. Landlord shall have the right (but not the obligation) to join and participate as a party in any legal proceedings or actions affecting the Premises initiated in connection with any environmental, health or safety Law. At such times as Landlord may reasonably request, Tenant shall provide Landlord with a written list identifying any Hazardous Material then used, stored, or maintained upon the Premises, the use and approximate quantity of each 27 such material, a copy of any material safety data sheet ("MSDS") issued by the manufacturer therefor, written information concerning the removal, transportation and disposal of the same, and such other information as Landlord may reasonably require or as may be required by Law. The term "Hazardous Material" for purposes hereof shall mean any chemical, substance, material or waste or component thereof which is now or hereafter listed, defined or regulated as a hazardous or toxic chemical, substance, material or waste or component thereof by any federal, state or local governing or regulatory body having jurisdiction, or which would trigger any employee or community "right-to- know" requirements adopted by any such body, or for which any such body has adopted any requirements for the preparation or distribution of an MSDS. If any Hazardous Material is released, discharged or disposed of by Tenant or any other occupant of the Premises. or their employees, agents or contractors, on or about the Property in violation of the foregoing provisions, Tenant shall immediately, properly and in compliance with applicable Laws clean up and remove the Hazardous Material from the Property and any other affected property and clean or replace any affected personal property (whether or not owned by Landlord), at Tenant's expense. Such clean up and removal work shall be subject to Landlord's prior written approval (except in emergencies), and shall include, without limitation, any testing, investigation, and the preparation and implementation of any remedial action plan required by any governmental body having jurisdiction or reasonably required by Landlord. If Tenant shall fail to comply with the provisions of this Article within five (5) days after written notice by Landlord, or such shorter time as may be required by Law or in order to minimize any hazard to Persons or property, Landlord may (but shall not be obligated to) arrange for such compliance directly or as Tenant's agent through contractors or other parties selected by Landlord, at Tenant's expense (without limiting Landlord's other remedies under this Lease or applicable Law). If any Hazardous Material is released, discharged or disposed of on or about the Property and such release, discharge or disposal is not caused by Tenant or other occupants of the Premises, or their employees, agents or contractors, such release, discharge or disposal shall be deemed casualty damage under Article 10 to the extent that the Premises or common areas serving the Premises are affected thereby; in such case, Landlord and Tenant shall have the obligations and rights respecting such casualty damage provided under Article 10. ARTICLE 31 Miscellaneous (A) Each of the terms and provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, executors, administrators, guardians, custodians, successors and assigns, subject to the provisions of Article 21 respecting Transfers. (B) Neither this Lease nor any memorandum of lease or short form lease shall be recorded by Tenant. (C) This Lease shall be construed in accordance with the Laws of the state in which Property is located. (D) All obligations or rights of either party arising during or attributable to the period ending upon expiration or earlier termination of this Lease shall survive such expiration or earlier termination. (E) Landlord agrees that, if Tenant timely pays the Rent and performs the terms and provisions hereunder, and subject to all other terms and provisions of this Lease, Tenant 28 shall hold and enjoy the Premises during the Term, free of lawful claims by any Person acting by or through Landlord. (F) This Lease does not grant any legal rights to "light and air" outside the Premises nor any particular view or cityscape visible from the Premises. (G) If the Commencement Date is delayed in accordance with Article 4 for more than one year, Landlord may declare this Lease null and void, and if the Commencement Date is so delayed for more than seven years, this Lease shall thereupon become null and void without further action by either party. ARTICLE 32 Offer The submission and negotiation of this Lease shall not be deemed an offer to enter the same by Landlord, but the solicitation of such an offer by Tenant. Tenant agrees that its execution of this Lease constitutes a firm offer to enter the same which may not be withdrawn for a period of 30 days after delivery to Landlord (or such other period as may be expressly provided in any other agreement signed by the parties). During such period and in reliance on the foregoing, Landlord may, at Landlord's option (and shall, if required by applicable Law), deposit any security deposit and Rent, and proceed with any plans, specifications, alterations or improvements, and permit Tenant to enter the Premises, but such acts shall not be deemed an acceptance of Tenant's offer to enter this Lease, and such acceptance shall be evidenced only by Landlord signing and delivering this Lease to Tenant. 29 ARTICLE 33 Notices Except as expressly provided to the contrary in this Lease, every notice or other communication to be given by either party to the other with respect hereto or to the Premises or Property, shall be in writing and shall not be effective for any purpose unless the same shall be served personally or by national air courier service or United States certified mail, return receipt requested, postage prepaid, addressed, if to Tenant, at the address first set forth in this Lease, until the Commencement Date, and thereafter to the Tenant at the Premises, and if to Landlord, at the address at which the last payment of Rent was required to be made and to Heitman Properties, Ltd. at 180 North LaSalle Street, Chicago, lllinois 60601, Attn: Property Management, and to IMB Realty Corporation at 900 N. Michigan Ave., Chicago, lllinois 60611, Attn: Legal Department, or such other address or addresses as Tenant or Landlord may from time to time designate by notice as above provided. Every notice or other communication hereunder shall be deemed to have been given as of the third business day following the date of such mailing, (or as of any earlier date evidenced by a receipt from such national air courier service or the United States Postal Service) or immediately if personally delivered. Notices not sent in accordance with the foregoing, shall be of no force or effect until received by the foregoing parties at such addresses required herein. ARTICLE 34 Real Estate Brokers Tenant represents that Tenant has dealt only with Cushman & Wakefield of Georgia, Inc. and Bullock, Terrell and Mannelly (whose commission, if any, shall be paid by Landlord pursuant to separate agreement) as broker, agent or tinder in connection with this Lease and agrees to indemnify and hold Landlord harmless from all damages, judgments, liabilities and expenses (including reasonable attorneys' fees) arising from any claims or demands of any other broker, agent or finder with whom Tenant has dealt for any commission or fee alleged to be due in connection with its participation in the procurement of Tenant or the negotiation with Tenant of this Lease. ARTICLE 35 Security Deposit Tenant shall deposit with Landlord the amount of $4,823.75 ("Security Deposit"), upon Tenant's execution and submission of this Lease. The Security Deposit shall serve as security for the prompt, full and faithful performance by Tenant of the terms and provisions of this Lease. In the event that Tenant is in Default hereunder and fails to cure within any applicable time permitted under this Lease, or in the event that Tenant owes any amounts to Landlord upon the expiration of this Lease, Landlord may use or apply the whole or any part of the Security Deposit for the payment of Tenant's obligations hereunder. The use or application of the Security Deposit or any portion thereof shall not prevent Landlord from exercising any other right or remedy provided hereunder or under any Law and shall not, be construed as liquidated damages. In the event the Security Deposit is reduced by such use or application, Tenant shall deposit with Landlord within ten (10) days after written notice, an amount sufficient to restore the full amount of the Security Deposit. Landlord shall not be required to keep the Security Deposit separate from Landlord's general funds or pay interest on the Security Deposit. Any remaining portion of the Security Deposit shall be returned to Tenant within sixty (60) days after Tenant has vacated the Premises in accordance with Article 13. If the Premises shall be expanded at any time, or if 30 the Term shall be extended at an increased rate of Rent, the Security Deposit shall thereupon be proportionately increased. ARTICLE 36 Entire Agreement This Lease, together with Riders One through Two, and Exhibits A through ___ and the documents captioned Work Agreement/Landlord Performance/Improvement Allowance (WHICH COLLECTIVELY ARE HEREBY INCORPORATED WHERE REFERRED TO HEREIN AND MADE A PART HEREOF AS THOUGH FULLY SET FORTH), contains all the terms and provisions between Landlord and Tenant relating to the matters set forth herein and no prior or contemporaneous agreement or understanding pertaining to the same shall be of any force or effect, except any such contemporaneous agreement specifically referring to and modifying this Lease, signed by both parties. Without limitation as to the generality of the foregoing, Tenant hereby acknowledges and agrees that Landlord's leasing agents and field personnel are only authorized to show the Premises and negotiate terms and conditions for leases subject to Landlord's final approval, and are not authorized to make any agreements, representations, understandings or obligations, binding upon Landlord, respecting the condition of the Premises or Property, suitability of the same for Tenant's business, or any other matter, and no such agreements. representations, understandings or obligations not expressly contained herein or in such contemporaneous agreement shall be of any force or effect. Neither this Lease, nor any Riders or Exhibits referred to above may be modified, except in writing signed by both parties. WITNESSES; ATTESTATION LANDLORD: Carlyle Real (TWO FOR EACH SIGNATORY Estate Limited if Property is in Florida or Ohio): Partnership-XV, an Illinois limited partnership /s/ _________________________________ By: JMB Realty Corporation, a Delaware corporation, general partner _________________________________ /s/ ______________________________ ______________________________ ______________________________ /s/ _________________________________ TENANT: Industrial Training Corporation, A Maryland corporation BY: /s/ ________________________ NAME TYPED: Frank A. Carchedi TITLE: Vice President and Chief Financial Officer CERTIFICATE 31 (IF TENANT IS A CORPORATION) I, Anne J. Fletcher, Secretary Industrial Training Corporation, Tenant, hereby certify that the officer(s) executing the foregoing Lease on behalf of Tenant was duly authorized to act in his capacities as Vice President and Chief Financial Officer, and his action(s) are the action of Tenant. (Corporate Seal) Anne J. Fletcher Secretary IF TENANT PAYS FOR ALL ELECTRICITY IN PREMISES, OR FOR SEPARATE HVAC, E.G. BASED --- ON SUB-METERS, USE JMB RIDER 112, 112A OR 112B. RIDER ONE RULES (1) On Saturdays, Sundays and Holidays, and on other days between the hours of 6:00 P.M. and 8:00 A.M. the following day, or such other hours as Landlord shall determine from time to time, access to the Property and/or to the passageways, entrances, exits, shipping areas, halls, corridors, elevators or stairways and other areas in the Property may be restricted and access gained by use of a key to the outside doors of the Property, or pursuant to such security procedures Landlord may from time to time impose. All such areas, and all roofs, are not for use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence in the judgment of Landlord shall be prejudicial to the safety, character, reputation and interests of the Property and its tenants provided, however, that nothing herein contained shall be construed to prevent such access to persons with whom Tenant deals in the normal course of Tenant's business unless such persons are engaged in activities which are illegal or violate these Rules. No Tenant and no employee or invitee of Tenant shall enter into areas reserved for the exclusive use of Landlord, its employees or invitees. Tenant shall keep doors to corridors and lobbies closed except when persons are entering or leaving. (2) Tenant shall not paint, display, inscribe, maintain or affix any sign, placard, picture, advertisement, name, notice, lettering or direction on any part of the outside or inside of the Property, or on any part of the inside of the Premises which can be seen from the outside of the Premises without the prior consent of Landlord, and then only such name or names or matter and in such color, size, style, character and material as may be first approved by Landlord in writing. Landlord shall prescribe the suite number and identification sign for the Premises (which shall be prepared and installed by Landlord at Tenant's expense). Landlord reserves the right to remove at Tenant's expense all matter not so installed or approved without notice to Tenant. (3) Tenant shall not in any manner use the name of the Property for any purpose other than that of the business address of the Tenant, or use any picture or likeness of the Property, in any letterheads, envelopes, circulars, notices, advertisements, containers or wrapping material without Landlord's express consent in writing. (4) Tenant shall not place anything or allow anything to be placed in the Premises near the glass of any door, partition, wall or window which may be unsightly from outside the Premises, and Tenant shall not place or permit to be placed any article of any kind on any window ledge or on the exterior walls. Blinds, shades, awnings or other forms of inside or outside window ventilators or similar devices, shall not be placed in or about the outside windows in the Premises except to the extent, if any, that the character, shape, color, material and make thereof is first approved by the Landlord. 32 (5) Furniture, freight and other large or heavy articles, and all other deliveries may be brought into the Property only at times and in the manner designated by Landlord, and always at the Tenant's sole responsibility and risk. Landlord may impose reasonable charges for use of freight elevators after or before normal business hours. All damage done to the Property by moving or maintaining such furniture, freight or articles shall be repaired by Landlord at Tenant's expense. Landlord may inspect items brought into the Property or Premises with respect to weight or dangerous nature. Landlord may require that all furniture, equipment, cartons and similar articles removed from the Premises or the Property be listed and a removal permit therefor first be obtained from Landlord. Tenant shall not take or permit to b taken in or out of other entrances or elevators of the Property, any item normally taken, or which Landlord otherwise reasonably requires to be taken, in or out through service doors or on freight elevators. Tenant shall not allow anything to remain in or obstruct in any way, any lobby, corridor, sidewalk, passageway, entrance, exit, hall, stairway, shipping area, or other such area. Tenant shall move all supplies, furniture and equipment as soon as received directly to the Premises, and shall move all such items and waste (other than waste customarily removed by Property employees) that are at any time being taken from the Premises directly to the areas designated for disposal. Any hand-carts used at the Property shall have rubber wheels. (6) Tenant shall not overload any floor or part thereof in the Premises, or Property, including any public corridors or elevators therein bringing in or removing any large or heavy articles, and Landlord may direct and control the location of safes and all other heavy articles and require supplementary supports at Tenant's expense of such material and dimensions as Landlord may deem necessary to properly distribute the weight. (7) Tenant shall not attach or permit to be attached additional locks or similar devices to any door or window, change existing locks or the mechanism thereof, or make or permit to be made any keys for any door other than those provided by Landlord. If more than two keys for one lock are desired, Landlord will provide them upon payment therefor by Tenant. Tenant, upon termination of its tenancy, shall deliver to the landlord all keys of offices, rooms and toilet rooms which have been furnished Tenant or which the Tenant shall have had made, and in the event of loss of any keys so furnished shall pay Landlord therefor. (8) If Tenant desires signal, communication, alarm or other utility or similar service connections installed or changed. Tenant shall not install or change the same without the prior approval of Landlord, and then only under Landlord's direction at Tenant's expense. Tenant shall not install in the Premises any equipment which requires more electric current than Landlord is required to provide under this Lease, without Landlord's prior approval and Tenant shall ascertain from Landlord the maximum amount of load or demand for or use of electrical current which can safely be permitted in the Premises, taking into account the capacity of electric wiring in the Property and the Premises and the needs of tenants of the Property, and shall not in any event connect a greater load than such safe capacity. (9) Tenant shall not obtain for use upon the Premises ice, drinking water, towel, janitor and other similar services, except from Persons approved by the Landlord. Any Person engaged by Tenant to provide janitor or other services shall be subject to direction by the manager or security personnel of the Property. (10) The toilet rooms, urinals, wash bowls and other such apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this Rule shall be borne by the Tenant who, or whose employees or invitees shall have caused it. (11) The janitorial closets, utility closets, telephone closets, broom closets, electrical closets, storage closets, and other such closets, rooms and areas shall be used only for the purposes and in the manner designated by Landlord, and may not be used by tenants, or 33 their contractors, agents, employees, or other parties without Landlord's prior written consent. (12) Landlord reserves the right to exclude or expel from the Property any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of these Rules. Tenant shall not at any time manufacture, sell, use or give away, any spirituous, fermented, intoxicating or alcoholic liquors on the Premises, nor permit any of the same to occur (except in connection with occasional social or business events conducted in the Premises which do not violate any Laws nor bother or annoy any other tenants). Tenant shall not at any time sell, purchase or give away, food in any form by or to any of Tenant's agents or employees or any other parties on the Premises nor permit any of the same to occur (other than in lunch rooms or kitchens for employees as may be permitted or installed by Landlord, which does not violate any Laws or bother or annoy any other tenant). (13) Tenant shall not make any room-to-room canvass to solicit business or information or to distribute any article or material to or from other tenants or occupants of the Property and shall not exhibit, sell or offer to sell, use, rent or exchange any products or services in or from the Premises unless ordinarily embraced within the Tenant's use of the Premises specified in the Lease. (14) Tenant shall not waste electricity, water, heat or air conditioning or other utilities or services, and agrees to cooperate fully with Landlord to assure the most effective and energy efficient operation of the Property and shall not allow the adjustment (except by Landlord's authorized Property personnel) of any controls. Tenant shall keep corridor doors closed and shall not open any windows, except that if the air circulation shall not be in operation, windows which are openable may be opened with Landlord's consent. As a condition to claiming any deficiency in the air-conditioning or ventilation services provided by Landlord, Tenant shall close any blinds or drapes in the Premises to prevent or minimize direct sunlight. (15) Tenant shall conduct no auction, fire or "going out of business sale" or bankruptcy sale in or from the Premises, and such prohibition shall apply to Tenant's creditors. (16) Tenant shall cooperate and comply with any reasonable safety or security programs, including fire drills and air raid drills, and the appointment of "fire wardens" developed by Landlord for the Property, or required by Law. Before leaving the Premises unattended, Tenant shall close and securely lock all doors or other means of entry to the Premises and shut off all lights and water faucets in the Premises (except heat to the extent necessary to prevent the freezing or bursting of pipes). (17) Tenant will comply with all municipal, county, state, federal or other government laws, statutes, codes, regulations and other requirements, including without limitation, environmental, health, safety and police requirements and regulations respecting the Premises, now or hereinafter in force, at its sole cost, and will not use the Premises for any immoral purposes. (18) Tenant shall not (i) carry on any business, activity or service except those ordinarily embraced within the permitted use of the Premises specified in the Lease and more particularly, but without limiting the generality of the foregoing, shall not (ii) install or operate any internal combustion engine, boiler, machinery, refrigerating, heating or air conditioning equipment in or about the Premises, (iii) use the Premises for housing, lodging or sleeping purposes or for the washing of clothes, (iv) place any radio or television antennae other than inside of the Premises, (v) operate or permit to be operated any musical or sound producing instrument or device which may be heard outside the Premises, (vi) use any source of power other than electricity, (vii) operate any electrical or other device from which may emanate electrical or other waves which may interfere with or impair radio television, microwave, or other broadcasting or reception from or in the Property or elsewhere, (viii) bring or permit any bicycle or other vehicle or dog (except in the company of a blind person or except where specifically permitted) or other 34 animal or bird in the Property, (ix) make or permit objectionable noise or odor to emanate from the Premises, (x) do anything in or about the Premises tending to create or maintain a nuisance or do any act tending to injure the reputation of the Property, (xi) throw or permit to be thrown or dropped any article from any window or other opening in the Property, (xii) use or permit upon the Premises anything that will invalidate or increase the rate of insurance on any policies of insurance now or hereafter carried on the Property or violate the certificates of occupancy issued for the premises or the Property, (xiii) use the Premises for any purpose, or permit upon the Premises anything, that may be dangerous to persons or property (including but not limited to flammable oils, fluids paints, chemicals, firearms or any explosive articles or materials) nor (xiv) do or permit anything to be done upon the Premises in any way tending to disturb any other tenant at the Property or the occupants of neighboring property. (19) If the Property shall now or hereafter contain a building garage, parking structure or other parking area or facility, the following Rules shall apply in such areas or facilities: (i) Parking shall be available in areas designated generally for tenant parking, provided to Tenant at no charge. In all cases, parking for Tenant and its employees and visitors shall be on a "first come, first served," unassigned basis, with Landlord and other tenants at the Property, and their employees and visitors, and other Persons (as defined in Article 25 of the Lease) to whom Landlord shall grant the right or who shall otherwise have the right to use the same. all subject to these Rules. as the same may be amended or supplemented, and applied on a non-discriminatory basis. all as further described in Article 6 of the Lease. Notwithstanding the foregoing to the contrary, Landlord reserves the right to assign specific spaces, and to reserve spaces for visitors, small cars, handicapped individuals, and other tenants visitors of tenants or other Persons, and Tenant and its employees and visitors shall not park in any such assigned or reserved spaces. Landlord may restrict or prohibit full size vans and other large vehicles. (ii) In case of any violation of these provisions, Landlord may refuse to permit the violator to park. and may remove the vehicle owned or driven by the violator from the Property without liability whatsoever, at such violator's risk and expense. Landlord reserves the right to close all or a portion of the parking areas or facilities in order to make repairs or perform maintenance services, or to alter, modify, re-stripe or renovate the same, or if required by casualty, strike, condemnation, act of God, Law or governmental requirement, or any other reason beyond Landlord's reasonable control. In the event access is denied for any reason, any monthly parking charges shall be abated to the extent access is denied, as Tenant's sole recourse. Tenant acknowledges that such parking areas or facilities may be operated by an independent contractor not affiliated with Landlord, and Tenant acknowledges that in such event, Landlord shall have no liability for claims arising through acts or omissions of such independent contractor, if such contractor is reputable. (iii) Hours shall be 6 A.M. to 8 P.M., Monday through Friday, and 10:00 A.M. to 1:00 P.M. on Saturdays, or such other hours as may be reasonably established by Landlord or its parking operator from time to time; cars must be parked entirely within the stall lines, and only small cars may be parked in areas reserved for small cars; all directional signs and arrows must be observed; the speed limit shall be 5 miles per hour: spaces reserved for handicapped parking must be used only by vehicles properly designated; every parker is required to park and lock his own car: washing, waxing, cleaning or servicing of any vehicle is prohibited; parking spaces may be used only for parking automobiles; parking is prohibited in areas: (a) not striped or designated for parking, (b) aisles, (c) where "no parking" signs are posted, (d) on ramps, and (e) loading areas and other specially designated areas. Delivery trucks and vehicles shall use only those areas designated therefor. 35 JMB 109 (2/89) OFFICE RENT STEP-UPS RIDER TWO Notwithstanding anything to the contrary contained in the Lease. The parties agree as follows: The term "Lease Year" herein means each twelve month period or portion thereof during the Term commencing with the Commencement Date without regard to calendar years. A. Commencing with the second Lease Year, monthly Base Rent shall be increased to $4,968.46 B. Commencing with the third Lease Year, monthly Base Rent shall be increased to $5,117.52 C. Commencing with the fourth Lease Year, monthly Base Rent shall be increased to $5,271.04 D. Commencing with the fifth Lease Year, monthly Base Rent shall be Increased to $ 5,429.17 E. Commencing with the ____________Lease Year, monthly Base Rent shall be increased to $ ________ F Commencing with the ____________ Lease Year, monthly Base Rent shall be increased to $.________ G. Commencing with the _____________Lease Year, monthly Base Rent shall be Increased to $_______ H. Commencing with the _____________Lease Year, monthly Base Rent shall be increased to $________ I. Commencing with the _____________Lease Year, monthly Base Rent shall be increased to $_________ J. Commencing with the ______________Lease Year, monthly Base Rent shall be increased to $_________ LANDLORD: Carlyle Real Estate Limited Partnership-XV, an Illinois limited partnership By: JMB Realty Corporation a Delaware corporation, general partner /s/ ___________________________________________ TENANT: Industrial Training Corporation By: /s/ _______________________________________ 36 EXHIBIT A (Floor plan(s) showing Premises cross-hatched) 37 (2/89) WORK AGREEMENT Landlord Performance Improvement Allowance WORK AGREEMENT THIS AGREEMENT made as of the 30th day of November, 1995 between Carlyle Real Estate Limited Partnership-XV ("Landlord") and Industrial Training Corporation ("Tenant"). Reference is made to the lease or tenant expansion agreement dated November 30, 1995 (the "Lease") for premises known as Suite(s) 590 (the "Premises"), located in the property known as RiverEdge Place (the "Property"). The terms "Plans", "Work", "Space Plan", "Working Drawings", "Finish Selections" and "Landlord's Space Planner" are defined in Section XIV, below. I. BASIC TERMS. A. Space Planner: Hendrick Associates B. Date To Complete Planning: December 22, 1995 (including any Space Plan, Working Drawings and Finish Selections) C. Date To Substantially Complete Work: Commencement Date under the Lease. D. Improvement Allowance Provided by Landlord: $5.00 per square foot of the Premises. E. Number of Space Plan Revisions (including revisions prior hereto) at Landlord's Cost: one (1); provided, Landlord's cost for Space Plans shall not exceed in the aggregate $______ per square foot of the Premises (including the cost of the initial set of Space Plans and all revisions). F. Number of Working Drawing Revisions (including revisions prior hereto) at Landlord's Cost: one (1); provided, Landlord's cost for Working Drawings shall not exceed in the aggregate $ N/A per square foot of the Premises (including the cost of the initial set of Working Drawings and all revisions). II. BASIC AGREEMENT. On or before the "Date To Complete Planning" described above, Tenant shall: (a) provide Space Planner with all information concerning Tenant's requirements in order for Space Planner to prepare the Plans, and (b) arrange for Space Planner to prepare the Plans, and obtain Landlord's written approval thereof. However, Tenant shall not be responsible for delays caused by Landlord or Landlord's Space Planner, as further described in Section III, below. On or before the Commencement Date under the Lease, Landlord shall substantially complete the Work shown on the final approved Plans. However, Landlord shall not be responsible for delays caused by Tenant or Tenant's contractors, agents or employees and as further described in Section IV, below and in Article 4 of the Lease. Landlord shall bear the cost of the Plans (including any engineering reports, or other studies or tests in connection therewith, but excluding any furniture planning) up to the amounts specified above (provided, such amounts shall be reduced by ten (10%) if Tenant does not use Landlord's Space Planner to prepare the Plans); Tenant shall bear any costs of the Plans over such amounts and all costs in connection with designing non-building standard items. 38 Landlord shall bear the cost of the Work (including the cost of building permits and sales tax) up to the Improvement Allowance described above (if any), and Tenant shall bear any costs over such amounts. III. DELAYS IN PLANNING. The Commencement Date under the Lease shall be postponed for each day that final Plans are not prepared and approved by the "Date to Complete Planning" described above, including any revisions reasonably required by Landlord pursuant to Section V and revisions by Tenant to reduce Tenant's Cost pursuant to Section IX (collectively called "Delays in Planning"). However, the commencement of Rent shall be postponed only to the extent that substantial completion of the Work is delayed beyond the Commencement Date as a result of one or more of the following events (collectively called "Landlord Delays"): (a) Landlord takes more than seven (7) working days to approve or disapprove the Plans or revisions thereof after receiving the same (or such longer time as may be reasonably required in order to obtain any engineering or HVAC report or due to other special or unusual features of the Work or Plans), (b) Landlord's Space Planner takes more than seven (7) working days to meet with Tenant after receiving a written request for a meeting, or takes more than seven (7) working days to prepare or revise the Plans after meeting with Tenant and receiving all information from Tenant required in order to do so (provided this provision shall apply only if Tenant uses "Landlord's Space Planner" as described in Section XIV below to prepare the Plans), or (c) Landlord takes more than thirty (30) working days to provide Tenant with cost estimates after receiving Plans sufficiently detailed for such purposes (provided this provision (c) shall only apply if Landlord elects to provide cost estimates under Section IX below). IV. DELAYS IN CONSTRUCTION. The Commencement Date under the Lease shall be postponed for each day that Landlord fails to substantially complete the Work thereby as a result of strikes, acts of God, shortages of materials or labor, governmental approvals or requirements, the various causes set forth below, or any other causes beyond Landlord's reasonable control. In such case, the commencement of Rent shall be similarly postponed, except to the extent that delays occur as a result of one or more of the following (collectively called "Tenant Delays"): (a) Delays in Planning as described above (except for Landlord Delays), or (b) Tenant's requests for changes to the Work or Change Orders under Section Vll, or otherwise. (c) Tenant's failure to furnish an amount equal to Landlord's reasonable estimate of Tenant's Cost (if any) within 10 days, as described in Section IX (which shall give Landlord the absolute right to postpone the Work until such amount is furnished to Landlord), 39 (d) any upgrades, special work or other non-building standard items, or items not customarily provided by Landlord to office tenants, to the extent that the same involve longer lead times, installation times, delays or difficulties in obtaining building permits, requirements for any governmental approval, permit or action beyond the issuance of normal building permits (as described in Section Vl), or other delays not typically encountered in connection with Landlord's standard office improvements, (e) the performance by Tenant or Tenant's contractors, agents or employees of any work at or about the Premises or Property, or (f) any act or omission of Tenant or Tenant's contractors, agents or employees, or any breach by the Tenant of any provisions contained in this Agreement or in the Lease, or any failure of Tenant to cooperate with Landlord or otherwise act in good faith in order to cause the Work to be designed and performed in a timely manner. V. LANDLORD'S APPROVAL OF PLANS. Landlord shall either approve any Plans or revisions submitted pursuant to this Agreement or disapprove the same with suggestions for making the same acceptable within the time required under Section III. Landlord shall not unreasonably withhold approval, if the Plans provide for a customary office layout, with finishes and materials generally conforming to building standard finishes and materials currently being used by Landlord at the Property, are compatible with the Property's shell and core construction, and if no modifications will be required for the Property electrical, heating, air-conditioning, ventilation, plumbing, fire protection, life safety, or other systems or equipment, and will not require any structural modifications to the Property, whether required by heavy loads or otherwise Landlord may request that Tenant approve Landlord's suggested changes in writing (such approval not be unreasonably withheld), or Landlord may arrange directly with Space Planner for revised Plans to be prepared incorporating such suggestions (in which case, Tenant shall sign or initial the revised Plans and/or Landlord's notice concerning the suggested changes, if requested by Landlord). Landlord's approval of the Plans shall not be deemed a warranty as to the adequacy or legality of the design, and Landlord hereby disclaims any responsibility or liability for the same. VI. GOVERNMENTAL APPROVAL OF PLANS. Landlord shall apply for any normal building permits required for the Work which are issued pursuant to a local building code as a ministerial matter. If the Plans must be revised in order to obtain such building permits, Landlord shall promptly notify Tenant. In such case, Tenant shall promptly arrange for the Plans to be revised to satisfy the building permit requirements and shall submit the revised Plans to Landlord for approval as a Change Order under Section VII. Landlord shall have no obligation to apply for any zoning, parking or sign code amendments, approvals, permits or variances, or any other governmental approval, permit or action (except normal building permits as described above). If any such other matters are required, Tenant shall promptly seek to satisfy such requirements or revise the Plans to eliminate such requirements. Delays in substantially completing the Work by the Commencement Date as a result of requirements for building permits or other governmental approvals, permits or actions shall affect the Commencement Date and commencement of Rent to the extent provided in Section IV (except that any delays in obtaining normal building permits as a result of errors or omissions of Landlord's Space Planner in preparing the Plans shall postpone the commencement of Rent to the extent that substantial completion of the Work is delayed thereby beyond the Commencement Date, and Tenant shall not be obligated to bear the cost of Plan revisions to correct the same, notwithstanding anything to the contrary contained in this Agreement). 40 VII. CHANGES AFTER PLANS ARE APPROVED. If Tenant shall desire any changes, alterations, or additions to the final Plans after they have been approved by Landlord. Tenant shall submit a detailed written request or revised Plans (the "Change Order") to Landlord for approval. If reasonable and practicable and generally consistent with the Plans thereto for approved, Landlord shall not unreasonably withhold approval, but all costs in connection therewith, including without limitation construction costs, permit fees, and any additional plans, drawings and engineering reports or other studies or tests, or revisions of such existing items, shall be paid for by Tenant as a Tenant's Cost under Section IX. VIII. UNUSED IMPROVEMENT ALLOWANCE. If all or any portion of any Improvement Allowance shall not be used, Landlord shall be entitled to the savings and Tenant shall receive no credit therefor.* IX. TENANT'S COST; ESTIMATES (IF APPLICABLE). Any amounts that Tenant is required to pay under this Agreement shall be referred to as "Tenant's Cost" herein. Tenant's Cost shall be deemed additional "Rent" under the Lease. Landlord may at any time reasonable estimate Tenant's Cost in advance, in which case, Tenant shall deposit such estimated amount with Landlord within 10 days after requested by Landlord. If such estimated amounts exceeds the actual amount of Tenant's Cost, Tenant shall receive a refund of the difference, and if the actual amount shall exceed the estimated amount, Tenant shall pay the difference to Landlord within 10 days after requested by Landlord. *, except that Tenant may utilize any unused portion of the Improvement Allowance (up to an aggregate total of $5,107.50) for directly related moving expenses, provided Tenant submits to Landlord invoices from vendors detailing such expense(s). 41 In connection with submitting any Plans to Landlord for approval, Tenant may request that Landlord obtain a written estimate from Landlord's contractor concerning Tenant's Cost Landlord shall not have an obligation to obtain such estimates. However, If Landlord elects to obtain such estimates, and if any such estimates are unacceptable to Tenant, Tenant may eliminate or substitute items in order to reduce the estimated Tenant's Cost in connection with preparing a revised version of the Plans. In connection with submitting any cost estimates to Tenant under this Section, Landlord may request Tenant's written approval of such estimates. Tenant shall not unreasonably withhold such approval, and shall approve or disapprove the same in writing within five (5) days after requested by Landlord. If Tenant reasonably disapproves any such estimate. Tenant shall meet with the Space Planner and eliminate or substitute items in order to reduce Tenant's Cost as described in the preceeding paragraph. Any cost estimates based on a Space Plan or so-called "pricing plan" will be preliminary in nature, and may not be relied on by Tenant. However, Landlord agrees that any written estimate of Tenant's Cost based on the approved Working Drawings will not be exceeded by more than twenty percent (20%), except to the extent that: (a) Tenant thereafter makes changes in the Working Drawings or the Work, (b) overtime labor is required in order to substantially complete the Work by the Work Completion Date, (c) concealed conditions are encountered on the job site, (d) new legal requirements become effective following preparation of the estimate, or (e) there are strikes, acts of God, shortages of materials or labor, or other causes beyond Landlord's reasonable control. X. Completion. A. Landlord shall be deemed to have "substantially completed" the Work for purposes hereof if Landlord has caused all of the Work to be completed substantially except for so-called "punchlist items," e.g. minor details of construction or decoration or mechanical adjustments which do not substantially interfere with Tenant's occupancy of the Premises, or Tenant's ability to complete any improvements to the Premises to be made by Tenant. If there is any dispute as to whether Landlord has substantially completed the Work, the good faith decision of Landlord's Space Planner shall be final and binding on the parties. B. If Landlord notifies Tenant in writing that the Work is substantially completed, and Tenant fails to object thereto in writing within seven (7) days thereafter specifying in reasonable detail the items of work needed to be performed in order for substantial completion, Tenant shall be deemed conclusively to have agreed that the Work is substantially completed, for purposes of commencing the Commencement Date and Rent under the Lease. C. Substantial completion shall not prejudice Tenant's rights to require full completion of any remaining items of Work. However, if Landlord notifies Tenant in writing that the Work is fully completed, and Tenant fails to object thereto In writing within fifteen (15) days thereafter specifying in reasonable detail the items of work needed to be completed and the nature of work needed to complete said items, Tenant shall be deemed conclusively to have accepted the Work as fully completed (or such portions thereof as to which Tenant has not so objected). D. Landlord reserves the right to substitute comparable or better materials and items for those shown in the Plans, so long as they do not materially and adversely affect the appearance of the Premises. XI. WORK PERFORMED BY TENANT. Landlord, at Landlord's discretion, may permit Tenant and Tenant's agents and contractors to enter the Premises prior to completion of the Work in order to make the Premises ready for Tenant's use and occupancy. If Landlord permits such entry prior to completion of the Work, then such permission is conditioned upon Tenant and Tenant's agents, contractors, 42 workmen, mechanics, suppliers and invitees working in harmony and not interfering with Landlord and Landlord's contractors in doing the Work or with other tenants and occupants of the Building. If at any time such entry shall cause or threaten to cause such disharmony or interference, Landlord shall have the right to withdraw such permission upon twenty-four (24) hours oral or written notice to Tenant. Tenant agrees that any such entry Into the Premises shall be deemed to be under all of the terms, covenants, conditions and provisions of the Lease (including, without limitation, all insurance requirements), except as to the covenant to pay Rent thereunder, and further agrees that Landlord shall not be liable in any way for any injury, loss or damage which may occur to any items of work constructed by Tenant or to other property of Tenant that may be placed in the Premises prior to completion of the Work, the same being at Tenant's sole risk. XII. Signage. Landlord shall cause signage of building standard material and design to be placed on or adjacent to the door of the Premises and Tenant shall pay the cost thereof to Landlord upon demand. The amount due from Tenant therefor shall be deemed "Rent" under the Lease. Tenant shall promptly advise Landlord in writing of the name or names Tenant wishes for said signage. The content of all signage shall be subject to Landlord's prior approval. XIII. LIABILITY. The parties acknowledge that Landlord is not an architect or engineer, and that the Work will be designed and performed by independent architects, engineers and contractors. Accordingly, Landlord does not guarantee or warrant that the Plans will be free from errors or omissions, nor that the Work will be free from defects, and Landlord shall have no liability therefor, provided that such architects, engineers and contractors are licensed and reputable (except as provided in Section VI). In the event of such errors, omissions, or defects, Landlord shall cooperate In any action Tenant desires to bring against such parties. XIV. Certain Definitions. A. "Work" herein means the construction of the improvements shown on the final approved Plans, and any demolition, preparation or other work required in connection therewith, including without limitation, any work required to be performed outside the Premises in order to obtain building permits for the work to be performed within the Premises (if Landlord elects to perform such work outside the Premises). B. "Landlord's Space Planner" herein means the space planner (if any) regularly used by Landlord and with whom Landlord has a written contractual arrangement for space planning services at the Property. C. "Finish Selections" herein means the type and color of floor and wall- coverings, wall paint and any other finishes. D. "Plans" hereln means. collectively, any Space Plan, Working Drawings, or other plans drawings or specifications and Finish Selections (and in the event of any inconsistency between any of the same, or revisions thereto, the latest dated item approved by Landlord shall control). The Plans shall be signed or initialed by Tenant, If requested by Landlord and any Working Drawings shall include at least three (3) mylar sepias (or such other quantity as Landlord may reasonably require). E. "Space Plan" herein means a preliminary floor plan, generally showing demising walls, corridor doors, interior partition walls and interior doors. The term "Space Plan" for purposes of this Agreement shall also refer to any so- called pricing plan", i.e. a more detailed Space Plan, drawn to scale, showing: (l) any special walls, glass partitions or corridor doors, (2) any restrooms, kitchens, computer rooms, file rooms and other special 43 purpose rooms, and any sinks or other plumbing facilities, or other special facilities or equipment (3) communications system, indicating telephone and computer outlet locations, and (4) any other details or features reasonably required in order to obtain a preliminary cost estimate as described in Section IX, above, or otherwise reasonably requested by Landlord or Landlord's Space Planner. F. "Working Drawings" herein means fully dimensioned architectural construction drawings and specifications, and any required engineering drawings (including mechanical, electrical, plumbing, air-conditioning, ventilation and heating). and shall include any applicable items described above for the Space Plan, and if applicable: (l) electrical outlet locations circuits and anticipated usage therefor, (2) reflected ceiling plan, including lighting, switching, and any special ceiling specifications, (3) duct locations for heating, ventilating and air-conditioning equipment, (4) details of all millwork, (5) dimensions of all equipment and cabinets to be built in, (6) furniture plan showing details of space occupancy, (7) keying schedule, (8) lighting arrangement, (9) location of print machines, equipment in lunch rooms, concentrated file and library loadings and any other equipment or systems (with brand names wherever possible) which require special consideration relative to air-conditioning, ventilation, electrical, plumbing, structural, fire protection, life-fire-safety system, or mechanical systems, (10) special heating, ventilating and air conditioning equipment and requirements, (11) weight and location of heavy equipment, and anticipated loads for special usage rooms, (12) demolition plan, (13) partition construction plan, (14) Finish Selections, and any other details or features reasonably required in order to obtain a more firm cost estimate as described in Section IX, above, or otherwise reasonably requested by Landlord or Landlord's Space Planner. XV. Taxes. Tenant shall pay prior to delinquency all taxes, charges or other governmental impositions (including without limitation, any real estate taxes or assessments, sales tax or value added tax) assessed against or levied upon Tenant's fixtures, furnishings, equipment and personal property located in the Premises and the Work to the Premises under this Agreement. Whenever possible, Tenant shall cause all such items to be assessed and billed separately from the property of Landlord. In the event any such items shall be assessed and billed with the property of Landlord, Tenant shall pay its share of such taxes, charges or other governmental impositions to Landlord within thirty (30) days after Landlord delivers a statement and a copy of the assessment or other documentation showing the amount of such impositions applicable to Tenant. 44 XVI. Incorporation Into Lease Default. THE PARTIES AGREE THAT THE PROVISIONS OF THIS WORK AGREEMENT ARE HEREBY INCORPORATED BY THIS REFERENCE INTO THE LEASE FULLY AS THOUGH SET FORTH THEREIN. In the event of any express inconsistencies between the Lease and this Work Agreement, the latter shall govern and control. Any default by a party hereunder shall constitute a default by that party under the Lease and said party shall be subject to the remedies and other provisions applicable thereto under the Lease. LANDLORD: Carlyle Real Estate Limited Partnership-XV, an Illinois limited partnership By: JMB Realty Corporation, a Delaware corporation, general partner /s/ ______________________________________________________ TENANT: Industrial Training Corporation By: /s/ __________________________________________________ 45 EX-10.9 5 COMMERCIAL LEASE STANDARD FORM COMMERCIAL LEASE Member Greater Boston Real Estate Board 1. PARTIES: Ellen Realty Trust 2 Milliston Road Millis, MA 02054 LESSOR, which expression shall include its heirs, successors, and assigns where the context so admits, does hereby lease to: Industrial Training Corp. 13515 Dulles Technology Drive Herndon, VA 22071 LESSEE, which expression shall include its successors, executors, administrators, and assigns where the context so admits, and the LESSEE hereby leases the following described premises: 2. PREMISES: 2 Milliston Road Millis, MA 02054 Floor 1, Suite D 950+/- Square Feet together with the right to use in common, with others entitled thereto, the hallways, stairways, and elevators, necessary for access to said leased premises, and lavatories nearest thereto. 3. TERM: The term of this lease shall be for One (1) Year commencing on April 1, 1995 and ending on March 31, 1996 4. RENT: The LESSEE shall pay to the LESSOR rent at the rate of $10,374.00 + 1,900.00 CAM ** dollars per year, payable in advance in monthly installments of $864.50 + 158.33 = $1,022.83 . 5. SECURITY DEPOSIT: Upon the execution of this lease, the LESSEE has paid to the LESSOR the amount of $791.67 dollars, which has been held as a security for the LESSEE's performance as herein provided and refunded to the LESSEE at the end of this lease subject to the LESSEE's satisfactory compliance with the conditions hereof. 6. RENT ADJUSTMENT: Intentionally Deleted A. TAX ESCALATION: Intentionally Deleted B. OPERATING COST ESCALATION: Intentionally Deleted C. CONSUMER PRICE ESCALATION: Intentionally Deleted 1 [THIS PAGE IS INTENTIONALLY BLANK] 2 7. UTILITIES: The LESSEE shall pay, as they become due, all bills for electricity and other utilities (whether they are used for furnishing heat or other purposes) that are furnished to the leased premises and presently separately metered, and all bills for fuel furnished to a separate tank servicing the leased premises exclusively. The LESSOR agrees to provide all other utility service and to furnish reasonably hot and cold water and reasonable heat and air conditioning* (except to the extent that the same are furnished through separately metered utilities or separate fuel tanks as set forth above) to the leased premises, the hallways, stairways, elevators, and lavatories during normal business hours on regular business days of the heating and air conditioning* seasons of each year, to furnish elevator service and to light passageways and stairways during business hours, and to furnish such cleaning service as is customary in similar buildings in said city or town, all subject to interruption due to any accident, to the making of repairs, alterations, or improvements, to labor difficulties, to trouble in obtaining fuel electricity, service, or supplies from the sources from which they are usually obtained for said building, or to any cause beyond the LESSOR's control. LESSOR shall have no obligation to provide utilities or equipment other than the utilities and equipment within the premises as of the commencement date of this lease. In the event LESSEE requires additional utilities or equipment, the installation and maintenance thereof shall be the LESSEE's sole obligation, provided that such installation shall be subject to the written consent of the LESSOR. * delete "air conditioning" if not applicable 8. USE OF LEASED PREMISES: The LESSEE shall use the leased premises only for the purpose of Sales office for a full service training company 9. COMPLIANCE WITH LAWS: The LESSEE acknowledges that no trade or occupation shall be conducted in the leased premises or use made thereof which will be unlawful, improper, noisy or offensive, or contrary to any law or any municipal by-law or ordinance in force in the city or town in which the premises are situated. 10. FIRE INSURANCE: The LESSEE shall not permit any use of the leased premises which will make voidable any insurance on the property of which the leased premises are a part, or on the contents of said property or which shall be contrary to any law or regulation from time to time established by the New England Fire Insurance Rating Association, or any similar body succeeding to its powers. The LESSEE shall on demand reimburse the LESSOR, and all other tenants, all extra insurance premiums caused by the LESSEE's use of the premises. 11. MAINTENANCE: The LESSEE agrees to maintain the leased A. LESSEE'S premises in good condition, damage by fire and OBLIGATIONS other casualty only excepted, and whenever necessary, to replace plate glass a nd other glass therein, acknowledging that the leased premises are now in good order and the glass whole. The LESSEE shall not permit the leased premises to be overloaded, damaged, stripped, or defaced, nor suffer any waste. LESSEE shall obtain written consent of LESSOR before erecting any sign on the premises. B. LESSOR'S The LESSOR agrees to maintain the structure of OBLIGATIONS the building of which the leased premises are a part in the same condition as it is at the commencement of the term or as it may be put in during 3 the term of this lease, reasonable wear and tear, damage by fire and other casualty only excepted, unless such maintenance is require because of the LESSEE or those for whose conduct the LESSEE is legally responsible. 12. ALTERATIONS -- ADDITIONS: The LESSEE shall not make structural alterations or additions to the leased premises, but may make non-structural alterations provided the LESSOR consents thereto in writing, which consent shall not be unreasonably withheld or delayed. All such allowed alterations shall be at LESSEE's expense and shall be in quality at least equal to the present construction. LESSEE shall not permit any mechanics' liens, or similar liens, to remain upon the leased premises for labor and material furnished to LESSEE or claimed to have been furnished to LESSEE in connection with work of any character performed or claimed to have been performed at the direction of LESSEE and shall cause any such lien to be released of record forthwith without cost to LESSOR. Any alterations or improvements made by the LESSEE shall become the property of the LESSOR at the termination of occupancy as provided herein. 13. ASSIGNMENT -- SUBLEASING: The LESSEE shall not assign or sublet the whole or any part of the leased premises without LESSOR's prior written consent. Notwithstanding such consent, LESSEE shall remain liable to LESSOR for the payment of all rent and for the full performance of the covenants and conditions of this lease. 14. SUBORDINATION: This lease shall be subject and subordinate to any and all mortgages, deeds of trust and other instruments in the nature of a mortgage, now or at any time hereafter, a lien or liens on the property of which the leased premises are a part and the LESSEE shall, when requested, promptly execute and deliver such written instruments as shall be necessary to show the subordination of this lease to said mortgages, deeds of trust or other such instruments in the nature of a mortgage. 15. LESSOR'S ACCESS: The LESSOR or agents of the LESSOR may, at reasonable times, enter to view the leased premises and may remove placards and signs not approved and affixed as herein provided, and make repairs and alterations as LESSOR should elect to do and may show the leased premises to others, and at any time within three (3) months before the expiration of the term, may affix to any suitable part of the leased premises a notice for letting or selling the leased premises or property of which the leased premises are a part and keep the same so affixed without hindrance or molestation. 16. INDEMNIFICATION AND LIABILITY: The LESSEE shall save the LESSOR harmless from all loss and damage occasioned by the use or escape of water or by the bursting of pipes, as well as from any claim or damage resulting from neglect in not removing snow and ice from the roof of the building or from the sidewalks bordering upon the premises so leased, or by any nuisance made or suffered on the leased premises, unless such loss is caused by the neglect of the LESSOR. The removal of snow and ice from the sidewalks bordering upon the leased premises shall be Lessor's responsibility. 4 17. LESSEE'S LIABILITY INSURANCE: The LESSEE shall maintain with respect to the leased premises and the property of which the leased premises are a part comprehensive public liability insurance in the amount of $500,000.00 with property damage insurance in limits of $300,000.00 in responsible companies qualified to do business in Massachusetts and in good standing therein insuring the LESSOR as well as LESSEE against injury to persons or damage to property as provided. The LESSEE shall deposit with the LESSOR certificates for such insurance at or prior to the commencement of the term, and thereafter within thirty (30) days prior to the expiration of any such policies. All such insurance certificates shall provide that such policies shall not be canceled without at least ten (10) days prior written notice to each assured named therein. 18. FIRE, CASUALTY -- EMINENT DOMAIN: Should a substantial portion of the leased premises, or of the property of which they are apart, be substantially damaged by fire or other casualty, or be taken by eminent domain, the LESSOR may elect to terminate this lease. When such fire, casualty, or taking renders the leased premises substantially unsuitable for their intended use, a just and proportionate abatement of rent shall be made, and the LESSEE may elect to terminate this lease if: (a) The LESSOR fails to give written notice within thirty (30) days of intention to restore leased premises, or (b) The LESSOR fails to restore the leased premises to a condition substantially suitable for their intended use within ninety (90) days of said fire, casualty or taking. The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights which the LESSEE may have for damages or injury to the leased premises for any taking by eminent domain, except for damage to the LESSEE's fixtures, property, or equipment. 19. DEFAULT AND BANKRUPTCY: In the event that: (a) The LESSEE shall default in the payment of any installment of rent or other sum herein specified and such default shall continue for ten (10) days after written notice thereof; or (b) The LESSEE shall default in the observance or performance of any other of the LESSEE's covenants, agreements, or obligations hereunder and such default shall not be corrected within thirty (30) days after written notice thereof; or (c) The LESSEE shall be declared bankrupt or insolvent according to law, or, if any assignment shall be made of LESSEE's property for the benefit of creditors, then the LESSOR shall have the right thereafter, while such default continues, to re-enter and take complete possession of the leased premises, to declare the term of this lease ended, and remove the LESSEE's effects, without prejudice to any remedies which might be otherwise used for arrears of rent or other default. The LESSEE shall indemnify the LESSOR against all loss of rent and other payments which the LESSOR may incur by reason of such termination during the residue of the term. If the LESSEE shall default, after reasonable notice thereof, in the observance or performance of any conditions or covenants on LESSEE's part to be observed or performed under or by virtue of any of the provisions in any article of this lease, the LESSOR, without being under any obligation to do so and without thereby waiving such default, may remedy such default for the account and at the expense of the LESSEE. If the LESSOR makes any expenditures or incurs any obligations for the payment of money in connection therewith, including but not limited to, reasonable attorney's fees in instituting, prosecuting or defending any action or proceeding, such sums paid or obligations insured, with interest at the rate of _____ per cent per annum and costs, shall be paid to the LESSOR by the LESSEE as additional rent. 20. NOTICE: Any notice from the LESSOR to the LESSEE relating to the leased premises or to the occupancy thereof, shall be deemed duly served, if left at the leased premises addressed to the LESSEE, or if mailed to the leased premises, registered 5 or certified mail, return receipt requested, postage prepaid, addressed to the LESSEE. Any notice from the LESSEE to the LESSOR relating to the leased premises or to the occupancy thereof, shall be deemed duly served, if mailed to the LESSOR by registered or certified mail, return receipt requested, postage prepaid, addressed to the LESSOR at such address as the LESSOR may from time to time advise in writing. All rent notices shall be paid and sent to the LESSOR at 2 Milliston Road, Millis, MA 02054 21. SURRENDER: The LESSEE shall at the expiration or other termination of this lease remove all LESSEE's goods and effects from the leased premises, (including, without hereby limiting the generality of the foregoing, all signs and lettering affixed or painted by the LESSEE, either inside or outside the leased premises). LESSEE shall deliver to the LESSOR the leased premises and all keys, locks thereto, and other fixtures connected therewith and all alterations and additions made to or upon the leased premises, in good condition, damage by fire or other casualty only excepted. In the event of the LESSEE's failure to remove any of LESSEE's property from the premises, LESSOR is hereby authorized, without liability to LESSEE for loss of damage thereto, and at the sole risk of LESSEE, to remove and store any of the property at LESSEE's expense, or to retain same under LESSOR's control or to sell at public or private sale, without notice any or all of the property not so removed and to apply the net proceeds of such sale to the payment of any sum due hereunder, or to destroy such property. 22. BROKERAGE: The Broker(s) named herein --NO BROKER--warrant(s) that he (they) is (are) duly licensed as such by the Commonwealth of Massachusetts, and join(s) in this agreement and become(s) a party hereto, insofar as any provisions of this agreement expressly apply to him (them), and to any amendments or modifications of such provisions to which he (they) agree(s) in writing. LESSOR agrees to pay the above-named Broker upon the term commencement date a fee for professional services of or pursuant to Broker's attached commission schedule. 23. OTHER PROVISIONS: It is also understood and agreed that LESSOR is to provide services and operating expenses that include but is not limited to the following, which will be billed to the LESSEE monthly at $2.00/square foot. - Real estate taxes - Landscaping - Grounds maintenance - Cleaning - Common utilities - Trash removal - Snow removal - Maintenance - Insurance. - Water/sewer 6 24. Option: Intentionally Deleted IN WITNESS WHEREOF, the said parties hereunto set their hands and seals this 10th day of February, 1995. /s/ /s/ ________________________________ ___________________________ LESSEE Industrial Training Corp. LESSOR Ellen Realty Trust, Ellen Rosenfeld Trustee ________________________________ BROKER(S) 7 EX-21.1 6 SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT The following lists all subsidiaries of Industrial Training Corporation as required by Item 21. Name State/Country of Incorporation ---- ------------------------------ 1. ComSkill Learning Centers, Inc. Georgia 2. Activ Training, Ltd. England/Wales EX-23.1 7 CONSENT CONSENT OF INDEPENDENT AUDITORS ------------------------------- We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-45036) pertaining to the 1982 Incentive Stock Option Plan, the Registration Statement (Form S-8 No. 33-60138) pertaining to the 1992 Director Incentive Stock Option Plan and the Registration Statement (Form S-8 No. 33- 60128) pertaining to the 1992 Key Employee Stock Option Plan of Industrial Training Corporation of our report dated February 16, 1996, with respect to the consolidated financial statements of Industrial Training Corporation included in the Annual Report (Form 10-KSB) for the year ended December 31, 1995. Vienna, Virginia Ernst & Young LLP February 27, 1996 EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANTS 10-KSB AS FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1995 DEC-31-1995 10,348,762 0 4,992,101 (190,047) 871,072 16,293,791 4,352,492 (3,036,918) 25,774,147 3,019,542 130,745 0 0 355,643 20,556,731 25,774,147 22,768,664 22,768,664 12,870,896 12,870,896 7,342,660 (90,667) 0 2,555,108 1,048,000 1,507,108 0 0 0 1,507,108 0.54 0
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